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HSBC
HSBC
#45
Rank
HK$2.395 T
Marketcap
๐Ÿ‡ฌ๐Ÿ‡ง United Kingdom
Country
HK$697.63
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1.49%
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82.87%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. HSBC
  2. Annual Reports (20-F)
  3. Financial Year 2023

HSBC - 20-F annual report 2023


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of event requiring this shell company report ____________
For the transition period from N/A to N/A
Commission file number: 001-14930
HSBC Holdings plc
(Exact name of Registrant as specified in its charter)
N/A
United Kingdom
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
8 Canada Square
London E14 5HQ
United Kingdom
(Address of principal executive offices)
Jonathan Bingham
8 Canada Square
London E14 5HQ
United Kingdom
Tel +44 (0) 20 3268 4840
Email jonathan.bingham@hsbc.com
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Ordinary Shares, nominal value US$0.50 each (GB0005405286)
HSBA
London Stock Exchange
5
Hong Kong Stock Exchange
HSBC.BH
Bermuda Stock Exchange
HSBC
New York Stock Exchange
*
American Depository Shares, each representing 5 Ordinary
Shares of nominal value US$0.50 each (US4042804066)
HSBC
New York Stock Exchange
7.625% Subordinated Notes due 2032 (US404280AF65)
HSBC/32A
New York Stock Exchange
7.35% Subordinated Notes due 2032 (US404280AE90)
HSBC/32B
New York Stock Exchange
6.5% Subordinated Notes 2036 (US404280AG49)
HSBC36
New York Stock Exchange
6.5% Subordinated Notes 2037 (US404280AH22)
HSBC37
New York Stock Exchange
6.8% Subordinated Notes Due 2038 (US404280AJ87)
HSBC38
New York Stock Exchange
6.100% Senior Unsecured Notes due 2042 (US404280AM17)
HSBC42
New York Stock Exchange
4.250% Subordinated Notes due 2024 (US404280AP48)
HSBC24
New York Stock Exchange
5.250% Subordinated Notes due 2044 (US404280AQ21)
HSBC44
New York Stock Exchange
4.250% Subordinated Notes due 2025 (US404280AU33)
HSBC25
New York Stock Exchange
4.300% Senior Unsecured Notes due 2026 (US404280AW98)
HSBC26
New York Stock Exchange
3.900% Senior Unsecured Notes due 2026 (US404280BB43)
HSBC26A
New York Stock Exchange
4.375% Subordinated Notes due 2026 (US404280BH13)
HSBC26B
New York Stock Exchange
4.041% Fixed Rate/Floating Rate Senior Unsecured Notes due
2028 (US404280BK42)
HSBC28
New York Stock Exchange
4.583% Fixed Rate/Floating Rate Senior Unsecured Notes due
2029 (US404280BT50)
HSBC29
New York Stock Exchange
Floating Rate Senior Unsecured Notes due 2026
(US404280BW89)
HSBC26D
New York Stock Exchange
4.292% Fixed Rate/Floating Rate Senior Unsecured Notes due
2026 (US404280BX62)
HSBC26C
New York Stock Exchange
3.803% Fixed Rate/Floating Rate Senior Unsecured Notes due
2025 (US404280BZ11)
HSBC25A
New York Stock Exchange
Floating Rate Senior Unsecured Notes due 2025
(US404280CA50)
HSBC25B
New York Stock Exchange
3.000% Resettable Senior Unsecured Notes due 2028
(XS1961843171)
HSBC28A
New York Stock Exchange
3.973% Fixed Rate/Floating Rate Senior Unsecured Notes due
2030 (US404280CC17)
HSBC30
New York Stock Exchange
3.00% Resettable Senior Unsecured Notes due 2030
(XS2003500142)
HSBC30A
New York Stock Exchange
2.633% Fixed Rate/Floating Rate Senior Unsecured Notes due
2025 (US404280CE72)
HSBC25C
New York Stock Exchange
4.950% Fixed Rate Senior Unsecured Notes due 2030
(US404280CF48)
HSBC30B
New York Stock Exchange
2.099% Fixed Rate/Floating Rate Senior Unsecured Notes due
2026
(US404280CG21)
HSBC26E
New York Stock Exchange
2.848% Fixed Rate/Floating Rate Senior Unsecured Notes due
2031
(US404280CH04)
HSBC31
New York Stock Exchange
1.645% Fixed Rate/Floating Rate Senior Unsecured Notes due
2026
(US404280CJ69)
HSBC26F
New York Stock Exchange
2.357% Fixed Rate/Floating Rate Senior Unsecured Notes due
2031
(US404280CK33)
HSBC31A
New York Stock Exchange
2.013% Fixed Rate/Floating Rate Senior Unsecured Notes due
2028
(US404280CL16)
HSBC28B
New York Stock Exchange
1.589% Fixed Rate/Floating Rate Senior Unsecured Notes due
2027
(US404280CM98)
HSBC27
New York Stock Exchange
1.750% Fixed Rate/Floating Rate Senior Unsecured Notes due
2027
(XS2322315727)
HSBC27A
New York Stock Exchange
0.976% Fixed Rate/Floating Rate Senior Unsecured Notes due
2025
(US404280CS68)
HSBC25
New York Stock Exchange
2.804% Fixed Rate/Floating Rate Senior Unsecured Notes due
2032
(US404280CT42)
HSBC32
New York Stock Exchange
2.206% Fixed Rate/Floating Rate Senior Unsecured Notes due
2029
(US404280CV97)
HSBC29A
New York Stock Exchange
1.162% Fixed Rate/Floating Rate Senior Unsecured Notes due
2024
(US404280CW70)
HSBC24D
New York Stock Exchange
2.251% Fixed Rate/Floating Rate Senior Unsecured Notes due
2027
(US404280CX53)
HSBC27B
New York Stock Exchange
2.871% Fixed Rate/Floating Rate Senior Unsecured Notes due
2032
(US404280CY37)
HSBC32A
New York Stock Exchange
Floating Rate Senior Unsecured Notes due 2024
(US404280CZ02)
HSBC24E
New York Stock Exchange
2.999% Fixed Rate/Floating Rate Senior Unsecured Notes due
2026 (US404280DA42)
HSBC26G
New York Stock Exchange
Floating Rate Senior Unsecured Notes due 2026
(US404280DB25)
HSBC26H
New York Stock Exchange
4.762% Fixed Rate/Floating Rate Subordinated Unsecured Notes
due 2033 (US404280DC08)
HSBC33
New York Stock Exchange
4.180% Fixed Rate/Floating Rate Senior Unsecured Notes due
2025 (US404280DE63)
HSBC25E
New York Stock Exchange
4.755% Fixed Rate/Floating Rate Senior Unsecured Notes due
2028 (US404280DF39)
HSBC28C
New York Stock Exchange
5.210% Fixed Rate/Floating Rate Senior Unsecured Notes due
2028 (US404280DG12)
HSBC28D
New York Stock Exchange
5.402% Fixed Rate/Floating Rate Senior Unsecured Notes due
2033 (US404280DH94)
HSBC33A
New York Stock Exchange
7.35% Subordinated Notes due 2032 (US404280DJ50)
HSBC32B
New York Stock Exchange
7.625% Subordinated Notes due 2032 (US404280DK24)
HSBC32C
New York Stock Exchange
6.5% Subordinated Notes Due 2036 (US404280DL07)
HSBC36A
New York Stock Exchange
6.5% Subordinated Notes Due 2037 (US404280DM89)
HSBC37A
New York Stock Exchange
6.8% Subordinated Notes Due 2038 (US404280DN62)
HSBC38A
New York Stock Exchange
7.336% Fixed Rate/Floating Rate Senior Unsecured Notes due
2026 (US404280DQ93)
HSBC26I
New York Stock Exchange
7.390% Fixed Rate/Floating Rate Senior Unsecured Notes due
2028 (US404280DR76)
HSBC28E
New York Stock Exchange
8.113% Fixed Rate/Floating Rate Subordinated Unsecured Notes
due 2033 (US404280DS59)
HSBC33B
New York Stock Exchange
6.161% Fixed Rate/Floating Rate Senior Unsecured Notes due
2029
(US404280DU06)
HSBC29B
New York Stock Exchange
6.254% Fixed Rate/Floating Rate Senior Unsecured Notes due
2034
(US404280DV88)
HSBC34
New York Stock Exchange
6.332% Fixed Rate/Floating Rate Senior Unsecured Notes due
2044
(US404280DW61)
HSBC44A
New York Stock Exchange
6.547% Fixed Rate/Floating Rate Subordinated Unsecured Notes
due 2034 (US404280DX45)
HSBC34A
New York Stock Exchange
5.887% Fixed Rate/Floating Rate Senior Unsecured Notes due
2027
(US404280DZ92)
HSBC27C
New York Stock Exchange
Floating Rate Senior Unsecured Notes due 2027
(US404280DY28)
HSBC27D
New York Stock Exchange
6.800% Fixed Rate/Floating Rate Senior Unsecured Notes due
2031
(XS2685873908)
HSBC31B
New York Stock Exchange
7.399% Fixed Rate/Floating Rate Subordinated Unsecured Notes
due 2034 (US404280EC98)
HSBC34B
New York Stock Exchange
*Not for trading, but only in connection with the registration of American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the annual report:
Ordinary Shares, nominal value US$0.50 each 19,262,728,193
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨
No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes þ No
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an
emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.:
Large accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
¨
Emerging growth company
¨
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards† provided pursuant to Section 13(a) of the Exchange Act.
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this
filing:
U.S. GAAP
¨
International Financial Reporting Standards
þ
Other
¨
as issued by the International Accounting Standards Board
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the
registrant has elected to follow. ¨ Item 17 ¨ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). ¨ Yes þ No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
¨ Yes ¨ No
Opening up a world of opportunity
Our ambition is to be the preferred
international financial partner for our clients.
Our purpose, ambition and values reflect our
strategy and support our focus on execution.
Read more on our values and
Footnote Arrow.jpg
    strategy on pages 4 and 11.
Contents
Strategic report
1 Performance in 2023
1a Cautionary statement regarding
forward-looking statements
1b Additional cautionary statement
regarding ESG data, metrics and
forward-looking statements
1d Approach to ESG reporting
1f Insurance manufacturing alternative
performance measures
1f Certain defined terms
2 Highlights
4 Who we are
6 Group Chairman’s statement
8 Group Chief Executive’s review
11 Our strategy
14 ESG overview
24 Remuneration
25 Financial overview
30 Global businesses
37 Risk overview
Environmental, social and
governance (‘ESG’) review
42 Our approach to ESG
44 Environmental
75 Social
87 Governance
Financial review
100 Financial summary
124 Global businesses and geographical
regions
145 Reconciliation of alternative
performance measures
150 Other information
Risk review
159 Our approach to risk
163 Top and emerging risks
168 Risk factors
181 Our material banking risks
Corporate governance report
275 Biographies of Directors and senior
management
298 Board committees
315 Directors’ remuneration report
Financial statements
354 Report of Independent Registered
Public Accounting Firm to the Board of
Directors and Shareholders of HSBC
Holdings plc (PCAOB ID 876)
356 Financial statements
368 Notes on the financial statements
Additional information
462 Shareholder information
473 Abbreviations
This Strategic Report was approved by
the Board on 21 February 2024.
Mark E Tucker
Group Chairman
A reminder
The currency we report in is US dollars.
Our approach to ESG reporting
We embed our ESG reporting and Task
Force on Climate-related Financial
Disclosures (‘TCFD’) within this Form 20-F
for the year ended 31 December 2023 (the
‘Form 20-F’). Our TCFD disclosures are
highlighted with the following symbol: TCFD
Constant currency performance
We supplement our IFRS Accounting
Standards figures with non-IFRS Accounting
Standards measures used by management
internally that constitute alternative
performance measures under European
Securities and Markets Authority guidance
and non-GAAP financial measures defined in
and presented in accordance with US
Securities and Exchange Commission rules
and regulations. These measures are
highlighted with the following symbol:
adjusted symbol.jpg
Further explanation may be found on page
Footnote Arrow.jpg
29.
IFRS 17 ‘Insurance Contracts’
From 1 January 2023, we adopted IFRS 17
‘Insurance Contracts’, which replaced IFRS 4
‘Insurance Contracts’. Comparative data
have been restated. For further details of our
adoption of IFRS 17, see page 100.
None of the websites referred to in this Form
20-F (including where a link is provided), and
none of the information contained on such
websites, are incorporated by reference in
this report.
HSBC Holdings plc
Performance in 2023
HSBC is one of the world’s leading
international banks.
We have a clear strategy to deliver revenue
and profit growth, enhance customer service
and improve returns to shareholders.
Financial performance
indicators
Our financial performance indicators
demonstrate our continued focus on the
delivery of sustainable returns for our
shareholders and providing a strengthened
platform for growth. They also provide
insight into the performance that has driven
the outcomes of our financial targets.
Read more on our financial performance in 2023
Footnote Arrow.jpg
on pages 2 and 27.
For an explanation of performance against our key
Footnote Arrow.jpg
Group financial targets, see page 25.
For a reconciliation of our target basis operating
Footnote Arrow.jpg
expenses to reported operating expenses, see page
148.
For our financial targets we define medium term
Footnote Arrow.jpg
as three to four years and long term as five to six
years, commencing 1 January 2024.
Return on average tangible equity
adjusted symbol.jpg
14.6%
(2022: 10.0%)
Profit before tax
$30.3bn
(2022: $17.1bn)
Operating expenses
$32.1bn
Target basis operating expenses up 6% to
$31.6bn
(2022: $32.7bn)
Common equity tier 1 capital ratio
14.8%
(2022: 14.2%)
Dividend per share
$0.61
(2022 dividend per share: $0.32)
Strategic performance
indicators
Our strategy supports our ambition of being
the preferred international financial partner
for our clients.
We are committed to building a business for
the long term, developing relationships that
last.
Read more on our strategy on pages 11 to 13.
Footnote Arrow.jpg
Read more on multi-jurisdictional client revenue
Footnote Arrow.jpg
on page 124.
Read more on how we set and define our ESG
Footnote Arrow.jpg
metrics on page 16.
Read more on our definition of sustainable finance
Footnote Arrow.jpg
and investment on page 49.
We no longer report the metric ‘Asia as a
Footnote Arrow.jpg
percentage of Group tangible equity’.
Net new invested assets
$84bn
Generated in 2023, of which $47bn were in
Asia.
(2022: $80bn generated, of which $59bn
were in Asia)
Wholesale multi-jurisdictional client
revenue
adjusted symbol.jpg
61%
Wholesale client revenue generated by
clients banking with us across multiple
markets.
Digitally active Commercial Banking
customers
83%
(2022: 78%)
Gender diversity
34.1%
Women in senior leadership roles.
(2022: 33.3%)
Sustainable finance and investment
$294.4bn
Cumulative total provided and facilitated
since January 2020.
(2022: $210.7bn)
HSBC Holdings plc 1
Cautionary statement regarding forward-looking statements
This Form 20-F contains certain forward-
looking statements with respect to HSBC’s
financial condition; results of operations and
business, including the strategic priorities;
financial, investment and capital targets; and
ESG targets, commitments and ambitions
described herein.
Statements that are not historical facts,
including statements about HSBC’s beliefs and
expectations, are forward-looking statements.
Words such as ‘may’, ‘will’, ‘should’, ‘expects’,
‘targets’, ‘anticipates’, ‘intends’, ‘plans’,
‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and
‘reasonably possible’, or the negative thereof,
other variations thereon or similar expressions
are intended to identify forward-looking
statements. These statements are based on
current plans, information, data, estimates and
projections, and therefore undue reliance
should not be placed on them. Forward-looking
statements speak only as of the date they are
made. HSBC makes no commitment to revise
or update any forward-looking statements to
reflect events or circumstances occurring or
existing after the date of any forward-looking
statements. Written and/or oral forward-looking
statements may also be made in the periodic
reports to the US Securities and Exchange
Commission, summary financial statements to
shareholders, proxy statements, offering
circulars and prospectuses, press releases and
other written materials, and in oral statements
made by HSBC’s directors, officers or
employees to third parties, including financial
analysts. Forward-looking statements involve
inherent risks and uncertainties. Readers are
cautioned that a number of factors could cause
actual results to differ, in some instances
materially, from those anticipated or implied in
any forward-looking statement. These include,
but are not limited to:
–changes in general economic conditions in
the markets in which we operate, such as
new, continuing or deepening recessions,
prolonged inflationary pressures and
fluctuations in employment levels and the
creditworthiness of customers beyond
those factored into consensus forecasts;
the Russia-Ukraine war and the Israel-
Hamas war and their impact on global
economies and the markets where HSBC
operates, which could have a material
adverse effect on (among other things) our
financial condition, results of operations,
prospects, liquidity, capital position and
credit ratings; deviations from the market
and economic assumptions that form the
basis for our ECL measurements (including,
without limitation, as a result of the Russia-
Ukraine war and the Israel-Hamas war,
inflationary pressures, commodity price
changes, and ongoing developments in the
commercial real estate sector in mainland
China);
–potential changes in HSBC’s dividend
policy; changes and volatility in foreign
exchange rates and interest rates levels,
including the accounting impact resulting
from financial reporting in respect of
hyperinflationary economies; volatility in
equity markets; lack of liquidity in
wholesale funding or capital markets, which
may affect our ability to meet our
obligations under financing facilities or to
fund new loans, investments and
businesses; geopolitical tensions or
diplomatic developments producing social
instability or legal uncertainty, such as the
Russia-Ukraine war or the Israel-Hamas war
(including the continuation and escalation
thereof) and the related imposition of
sanctions and trade restrictions, supply
chain restrictions and disruptions, sustained
increases in energy prices and key
commodity prices, claims of human rights
violations, diplomatic tensions, including
between China and the US, the UK, the EU,
India and other countries, and
developments in Hong Kong and Taiwan,
alongside other potential areas of tension,
which may adversely affect HSBC by
creating regulatory, reputational and market
risks; the efficacy of government,
customer, and HSBC’s actions in managing
and mitigating ESG risks, in particular
climate risk, nature-related risks and human
rights risks, and in supporting the global
transition to net zero carbon emissions,
each of which can impact HSBC both
directly and indirectly through our
customers and which may result in
potential financial and non-financial impacts;
illiquidity and downward price pressure in
national real estate markets; adverse
changes in central banks’ policies with
respect to the provision of liquidity support
to financial markets; heightened market
concerns over sovereign creditworthiness
in over-indebted countries; adverse
changes in the funding status of public or
private defined benefit pensions; societal
shifts in customer financing and investment
needs, including consumer perception as to
the continuing availability of credit;
exposure to counterparty risk, including
third parties using us as a conduit for illegal
activities without our knowledge; the
discontinuation of certain key Ibors and the
transition of the remaining legacy Ibor
contracts to near risk-free benchmark rates,
which continues to expose HSBC to some
financial and non-financial risks; and price
competition in the market segments we
serve;
–changes in government policy and
regulation, including the monetary, interest
rate and other policies of central banks and
other regulatory authorities in the principal
markets in which we operate and the
consequences thereof (including, without
limitation, actions taken as a result of the
–impact of the Russia-Ukraine war on
inflation); initiatives to change the size,
scope of activities and interconnectedness
of financial institutions in connection with
the implementation of stricter regulation of
financial institutions in key markets
worldwide; revised capital and liquidity
benchmarks, which could serve to
deleverage bank balance sheets and lower
returns available from the current business
model and portfolio mix; changes to tax
laws and tax rates applicable to HSBC,
including the imposition of levies or taxes
designed to change business mix and risk
appetite; the practices, pricing or
responsibilities of financial institutions
serving their consumer markets;
expropriation, nationalisation, confiscation
of assets and changes in legislation relating
to foreign ownership; the UK’s relationship
with the EU, which continues to be
characterised by uncertainty and political
disagreement, despite the signing of the
Trade and Cooperation Agreement
between the UK and the EU, particularly
with respect to the potential divergence of
UK and EU law on the regulation of financial
services; changes in government approach
and regulatory treatment in relation to ESG
disclosures and reporting requirements,
and the current lack of a single
standardised regulatory approach to ESG
across all sectors and markets; changes in
UK macroeconomic and fiscal policy, which
may result in fluctuations in the value of the
pound sterling; general changes in
government policy that may significantly
influence investor decisions; the costs,
effects and outcomes of regulatory
reviews, actions or litigation, including any
additional compliance requirements; and
the effects of competition in the markets
where we operate including increased
competition from non-bank financial
services companies; and
–factors specific to HSBC, including our
success in adequately identifying the risks
we face, such as the incidence of loan
losses or delinquency, and managing those
risks (through account management,
hedging and other techniques); our ability to
achieve our financial, investment, capital
and ESG targets, commitments and
ambitions (including the positions set forth
in our thermal coal phase-out policy and our
energy policy and our targets to reduce our
on-balance sheet financed emissions and,
where applicable, facilitated emissions in
our portfolio of selected high-emitting
sectors), which may result in our failure to
achieve any of the expected benefits of our
strategic priorities; evolving regulatory
requirements and the development of new
technologies, including artificial intelligence,
affecting how we manage model risk;
model limitations or failure, including,
1a
HSBC Holdings plc
–
–Cautionary statement regarding forward-looking statements continued
–without limitation, the impact that high
inflationary pressures and rising interest
rates have had on the performance and
usage of financial models, which may
require us to hold additional capital, incur
losses and/or use compensating controls,
such as judgemental post-model
adjustments, to address model limitations;
changes to the judgements, estimates and
assumptions we base our financial
statements on; changes in our ability to
meet the requirements of regulatory stress
tests; a reduction in the credit ratings
assigned to us or any of our subsidiaries,
which could increase the cost or decrease
the availability of our funding and affect our
liquidity position and net interest margin;
changes to the reliability and security of our
data management, data privacy, information
and technology infrastructure, including
threats from cyber-attacks, which may
impact our ability to service clients and may
result in financial loss, business disruption
and/or loss of customer services and data;
the accuracy and effective use of data,
including internal management information
that may not have been independently
verified; changes in insurance customer
behaviour and insurance claim rates; our
dependence on loan payments and
dividends from subsidiaries to meet our
obligations; changes in our reporting
frameworks and accounting standards,
which have had and may continue to have a
material impact on the way we prepare our
financial statements; our ability to
successfully execute planned strategic
acquisitions and disposals; our success in
adequately integrating acquired businesses
into our business, including the integration
of SVB UK into our CMB business; changes
in our ability to manage third-party, fraud,
financial crime and reputational risks
inherent in our operations; employee
misconduct, which may result in regulatory
sanctions and/or reputational or financial
harm; changes in skill requirements, ways
of working and talent shortages, which may
affect our ability to recruit and retain senior
management and diverse and skilled
personnel; and changes in our ability to
develop sustainable finance and ESG-
related products consistent with the
evolving expectations of our regulators, and
our capacity to measure the environmental
and social impacts from our financing
activity (including as a result of data
limitations and changes in methodologies),
which may affect our ability to achieve our
ESG ambitions, targets and commitments,
including our net zero ambition, our targets
to reduce on-balance sheet financed
emissions and, where applicable, facilitated
emissions in our portfolio of selected high-
emitting sectors and the positions set forth
in our thermal coal phase-out policy and our
energy policy, and increase the risk of
greenwashing. Effective risk management
depends on, among other things, our ability
through stress testing and other techniques
to prepare for events that cannot be
captured by the statistical models it uses;
our success in addressing operational, legal
and regulatory, and litigation challenges;
and other risks and uncertainties we
identify in ‘Top and emerging risks’ on
pages 163 to 167.
This Form 20-F contains a number of
images, graphics, infographics, text boxes
and illustrative case studies and credentials
which aim to give a high-level overview of
certain elements of our disclosures and to
improve accessibility for readers. These
images, graphics, infographics, text boxes
and illustrative case studies and credentials
are designed to be read within the context of
the Form 20-F as a whole.
Additional cautionary statement regarding ESG data, metrics and forward-
looking statements
This Form 20-F contains a number of
forward-looking statements (as defined
above) with respect to HSBC’s ESG targets,
commitments, ambitions, climate-related
pathways, processes and plans, and the
methodologies and scenarios we use, or
intend to use, to assess our progress in
relation to these (‘ESG-related forward-
looking statements’).
In preparing the ESG-related information
contained in this Form 20-F, HSBC has made
a number of key judgements, estimations
and assumptions, and the processes and
issues involved are complex. We have used
ESG (including climate) data, models and
methodologies that we consider, as of the
date on which they were used, to be
appropriate and suitable to understand and
assess climate change risk and its impact, to
analyse financed emissions - and operational
and supply chain emissions, to set ESG-
related targets and to evaluate the
classification of sustainable finance and
investments. However, these data, models
and methodologies are often new, are
rapidly evolving and are not of the same
standard as those available in the context of
other financial information, nor are they
subject to the same or equivalent disclosure
standards, historical reference points,
benchmarks or globally accepted accounting
principles. In particular, it is not possible to
rely on historical data as a strong indicator of
future trajectories in the case of climate
change and its evolution. Outputs of models,
processed data and methodologies are also
likely to be affected by underlying data
quality, which can be hard to assess and we
expect industry guidance, market practice,
and regulations in this field to continue to
change. We also face challenges in relation
to our ability to access data on a timely
basis, lack of consistency and comparability
between data that is available and our ability
to collect and process relevant data.
Consequently, the ESG-related forward-
looking statements and ESG metrics
disclosed in this Form 20-F carry an
additional degree of inherent risk and
uncertainty.
Due to the unpredictable evolution of climate
change and its future impact and the
uncertainty of future policy and market
response to ESG-related issues and the
effectiveness of any such response, HSBC
may have to re-evaluate its progress towards
its ESG ambitions, commitments and targets
in the future, update the methodologies it
uses or alter its approach to ESG (including
climate) analysis and may be required to
amend, update and recalculate its ESG
disclosures and assessments in the future, as
market practice and data quality and
availability develop. 
No assurance can be given by or on behalf of
HSBC as to the likelihood of the achievement
or reasonableness of any projections,
estimates, forecasts, targets, commitments,
ambitions, prospects or returns contained
herein. Readers are cautioned that a number
of factors, both external and those specific to
HSBC, could cause actual achievements,
results, performance or other future events
or conditions to differ, in some cases
materially, from those stated, implied and/or
reflected in any ESG-related forward-looking
statement or metric due to a variety of risks,
uncertainties and other factors (including
without limitation those referred to below):
HSBC Holdings plc
1b
Additional cautionary statement regarding ESG data, metrics and forward-
looking statements continued
–Climate change projection risk: this
includes, for example, the evolution of
climate change and its impacts, changes
in the scientific assessment of climate
change impacts, transition pathways and
future risk exposure and limitations of
climate scenario forecasts;
–ESG projection risk: ESG metrics are
complex and are still subject to
development. In addition, the scenarios
employed in relation to them, and the
models that analyse them have limitations
that are sensitive to key assumptions and
parameters, which are themselves subject
to some uncertainty, and cannot fully
capture all of the potential effects of
climate, policy and technology-driven
outcomes;
–Changes in the ESG regulatory landscape:
this involves changes in government
approach and regulatory treatment in
relation to ESG disclosures and reporting
requirements, and the current lack of a
single standardised regulatory approach to
ESG across all sectors and markets; 
–Variation in reporting standards: ESG
reporting standards are still developing
and are not standardised or comparable
across all sectors and markets, new
reporting standards in relation to different
ESG metrics are still emerging; 
–Data availability, accuracy, verifiability and
data gaps: our disclosures are limited by
the availability of high quality data in some
areas and our own ability to timely collect
and process such data as required. Where
data is not available for all sectors or
consistently year on year, there may be an
impact to our data quality scores. While
we expect our data quality scores to
improve over time, as companies continue
to expand their disclosures to meet
growing regulatory and stakeholder
expectations, there may be unexpected
fluctuations within sectors year on year,
and/or differences between the data
quality scores between sectors. Any such
changes in the availability and quality of
data over time, or our ability to collect and
process such data, could result in
revisions to reported data going forward,
including on financed emissions, meaning
that such data may not be reconcilable or
comparable year-on year;
–Developing methodologies and scenarios:
the methodologies and scenarios HSBC
uses to assess financed emissions and set
ESG-related targets may develop over
time in line with market practice,
regulation and/or developments in
science, where applicable. Such
developments could result in revisions to
reported data, including on financed
emissions or the classification of
sustainable finance and investments,
meaning that data outputs may not be
reconcilable or comparable year-on year;
and
–Risk management capabilities: global
actions, including HSBC’s own actions,
may not be effective in transitioning to net
zero and in managing relevant ESG risks,
including in particular climate, nature-
related and human rights risks, each of
which can impact HSBC both directly and
indirectly through our customers, and
which may result in potential financial and
non-financial impacts to HBSC. In
particular:
–we may not be able to achieve our ESG
targets, commitments and ambitions
(including with respect to the positions set
forth in our thermal coal phase-out policy
and our energy policy, and our targets to
reduce our on-balance sheet financed
emissions and, where applicable,
facilitated emissions in our portfolio of
selected high-emitting sectors), which
may result in our failure to achieve some
or all of the expected benefits of our
strategic priorities; and
–we may not be able to develop sustainable
finance and ESG-related products
consistent with the evolving expectations
of our regulators, and our capacity to
measure the environmental and social
impacts from our financing activity may
diminish (including as a result of data and
model limitations and changes in
methodologies), which may affect our
ability to achieve our ESG targets,
commitments and ambitions, including our
net zero ambition, our targets to reduce
our on-balance sheet financed emissions
and, where applicable, facilitated
emissions in our portfolio of selected high-
emitting sectors and the positions set
forth in our thermal coal phase-out policy
and energy policy, and increase the risk of
greenwashing.
Any forward-looking statements made by or
on behalf of HSBC speak only as of the date
they are made. HSBC expressly disclaims
any obligation to revise or update these ESG
forward-looking statements, other than as
expressly required by applicable law.
Written and/or oral ESG-related forward-
looking statements may also be made in our
periodic reports to the US Securities and
Exchange Commission, summary financial
statements to shareholders, proxy
statements, offering circulars and
prospectuses, press releases and other
written materials, and in oral statements
made by HSBC’s Directors, officers or
employees to third parties, including financial
analysts.
Our data dictionaries and methodologies for
preparing the above ESG-related metrics and
third-party limited assurance reports can be
found on: www.hsbc.com/who-we-are/esg-
and-responsible-business/esg-reporting-
centre.
1c
HSBC Holdings plc
Approach to ESG reporting
The information set out in the ESG review on
pages 41 to 98, taken together with other
information relating to ESG issues included
in this Form 20-F, aims to provide key ESG
information and data relevant to our
operations for the year ended 31 December
2023. The data is compiled for the financial
year 1 January to 31 December 2023 unless
otherwise specified. Measurement
techniques and calculations are explained
next to data tables where necessary. There
are no significant changes from the previous
reporting period in terms of scope, boundary
or measurement of our reporting of ESG
matters. Where relevant, rationale is
provided for any restatement of information
or data that has been previously published.
We have also considered our obligations
under the Environmental, Social and
Governance Reporting Guide contained in
Appendix C2 to The Rules Governing the
Listing of Securities on the Stock Exchange
of Hong Kong Limited (‘ESG Guide’) and
under LR9.8.6R(8) of the Financial Conduct
Authority’s (‘FCA’) Listing Rules. We will
continue to develop and refine our reporting
and disclosures on ESG matters in line with
feedback received from our investors and
other stakeholders, and in view of our
obligations under the ESG Guide and the
FCA’s Listing Rules.
ESG Guide
We comply with the ‘comply or explain’
provisions in the ESG Guide, save for certain
items, which we describe in more detail
below:
–A1(b) on relevant laws/regulations relating
to air and greenhouse gas emissions,
discharges into water and land, and
generation of hazardous and non-
hazardous waste, and on emissions:
taking into account the nature of our
business, we do not believe that there are
relevant laws and regulations in these
areas that have significant impacts on our
operations. Nevertheless, we are fully
compliant with our publication of
information regarding scope 1 and 2
carbon emissions, while we only partially
publish information on scope 3 carbon
emissions, as the data required for that
publication is not yet fully available.
–A1.3 on total hazardous waste produced,
A1.4 on total non-hazardous waste
produced: Taking into account the nature
of our business, we do not consider
hazardous waste to be a material issue for
our stakeholders. As such, we report only
on total waste produced, which includes
hazardous and non-hazardous waste.
–A1.6 on handling hazardous and non-
hazardous waste: Taking into account the
nature of our business, we do not
consider this to be a material issue for our
stakeholders. Notwithstanding this, we
continue to focus on the reduction and
recycling of all waste. Building on the
success of our previous operational
environmental strategy, we are continuing
to seek to identify key opportunities
where we can lessen our wider
environmental impact, including waste
management. For further details, please
see our ESG review on page 63.
–A2.4 on sourcing water issue and water
efficiency target: Taking into account the
nature of our business, we do not
consider this to be a material issue for our
stakeholders. Notwithstanding this, we
have implemented measures to further
reduce water consumption through the
installation of flow restrictors, auto-taps
and low or zero flush sanitary fittings and
continue to track our water consumption.
–A2.5 on packaging material, B6(b) on
issues related to health and safety and
labelling relating to products and services
provided, B6.1 on percentage of total
products sold or shipped subject to recalls
for safety and health reasons and B6.4 in
recall procedures: Taking into account the
nature of our business, we do not
consider these to be material issues for
our stakeholders.
This is aligned with the materiality reporting
principle that is set out in the ESG Guide. See
‘How we decide what to measure’ on page
43 for further information on how we
determine what matters are material to our
stakeholders.
HSBC Holdings plc
1d
Approach to ESG reporting continued
TCFD recommendations and recommended disclosures
As noted on page 17, we have considered
our ‘comply or explain’ obligation under both
the UK’s Financial Conduct Authority’s
Listing Rules and Sections 414 CA and
414CB of the UK Companies Act 2006, and
confirm that we have made disclosures
consistent with the TCFD Recommendations
and Recommended Disclosures, including its
annexes and supplemental guidance, save
for certain items, which we summarise
below:
Targets setting
Metrics and targets (c) relating to short-term
targets: For financed emissions we do not
plan to set 2025 targets. We set targets in
line with the Net-Zero Banking Alliance
(‘NZBA‘) guidelines by setting 2030 targets.
While the NZBA define 2030 as intermediate,
we use different time horizons for climate
risk management. We define short term as
time periods up to 2025; medium term is
between 2026 and 2035; and long term is
between 2036 and 2050. In 2023, we
disclose interim 2030 financed emissions
targets for seven sectors comprising five on-
balance sheet and two combined financed
emissions targets, as we outline on page 18.
For the shipping sector, we have taken a
decision not to set a standalone financed
emissions target. The decision follows a
reduction in our exposure to the sector after
the strategic sale of part of our European
shipping portfolio. This aligns with NZBA
guidelines on sector inclusion for target
setting. We have now set combined on-
balance sheet financed emissions and
facilitated emissions targets for two
emissions-intensive sectors: oil and gas, and
power and utilities, and report the combined
progress for both sectors. We intend to
review the financed emissions baselines and
targets annually and restate where relevant,
to help ensure that they are aligned with
market practice and current climate science.
For further details on the restatements and
targets and progress of financed emissions,
see section ’Our approach to financed
emissions recalculations’ and ’Targets and
Progress’ on page 56 and 57.
Metrics and targets (c) relating to capital
deployment target: We do not currently
disclose a target for capital deployment. In
relation to capital deployment, since 2015,
we have issued more than $2bn of our own
green bonds and structured green bonds
with the capital invested into a variety of
green projects, including: green buildings,
renewable energy and clean transportation
projects. In 2023, we further progressed our
internal review and enhancement of the
green bond framework, with further
refinement including internal and external
review to be undertaken in 2024. This will be
subject to continuous review and monitoring
to ensure that they remain up to date and
reflect updated standards, taxonomies and
best practices. Any such developments in
standards, taxonomies and best practices
over time could result in revisions in our
reporting going forward and lead to
differences year-on-year as compared to
prior years. See the HSBC Green Bond
Report for further information.
Metrics and targets (c) relating to internal
carbon pricing target: We do not currently
disclose internal carbon pricing target due to
transitional challenges such as developing
the appropriate systems and processes, but
we considered carbon prices as an input for
our climate scenario analysis exercise. We
expect to further enhance the disclosure in
the medium term as more data becomes
available.
Impacts on financial planning and
performance
Strategy (b) relating to financial planning and
performance: We have used climate scenarios
to inform our organisation’s business, strategy
and financial planning. In 2023, we continued
to incorporate certain aspects of sustainable
finance and financed emissions within our
financial planning process. We do not fully
disclose impacts from climate-related
opportunities on financial planning and
performance including on revenue, costs and
the balance sheet, quantitative scenario
analysis, detailed climate risk exposures for all
sectors and geographies or physical risk
metrics. This is due to transitional challenges in
relation to data limitations, although nascent
work is ongoing in these areas. We expect
these data limitations to be addressed in the
medium term as more reliable data becomes
available and technology solutions are
implemented.
Strategy (b) related to transition plan: We
published our Group-wide net zero transition
plan in January 2024. In this plan, we
provided an overview of our approach to net
zero and the actions we are taking to help
meet our ambitions. We want to be clear
about our approach, the change underway
today and what we plan to do in the future.
We also want to be transparent about where
there are still unresolved issues and
uncertainties. We are still developing our
disclosures, including considerations of
possible additional data in relation to our
financial plans, budgets, and related financial
approach for the implementation of the
transition plan in the medium term (e.g.
amount of capital and other expenditures
supporting our decarbonisation strategy).
Metrics and targets (a) relating to internal
carbon prices and climate-related
opportunities metrics: We do not currently
disclose internal carbon prices due to
transitional challenges such as data
challenges. But we considered carbon prices
as an input for our climate scenario analysis
exercise. In addition, we do not currently
fully disclose the proportion of revenue or
proportion of assets, capital deployment or
other business activities aligned with
climate-related opportunities, including
revenue from products and services
designed for a low-carbon economy,
forward-looking metrics consistent with our
business or strategic planning time horizons.
In relation to sustainable finance revenue
and assets we are disclosing certain
elements. We expect the data and system
limitations related to financial planning and
performance, and climate-related
opportunities metrics to be addressed in the
medium term as more reliable data becomes
available and technology solutions are
implemented. We expect to further enhance
this disclosure in the medium term.
Impacts of transition and physical risk
Strategy (c) relating to quantitative scenario
analysis: We do not currently fully disclose the
impacts of transition and physical risk
quantitatively, due to transitional challenges
including data limitations and evolving science
and methodologies. In 2023, we have disclosed
the impairment impacts for our wholesale, retail
and commercial real estate portfolios in
different climate scenarios. In addition, we have
disclosed losses on our retail mortgage book
under three scenarios and flood depths for
specific markets. For our wholesale book, we
have disclosed potential implications on our
expected credit losses for 11 sectors under two
scenarios. We have also disclosed a heat map
showing how we expect the risks to evolve
over time.
Metrics and targets (a) relating to detailed
climate-related risk exposure metrics for
physical and transition risks: We do not fully
disclose metrics used to assess the impact of
climate-related physical (chronic) and
transitions (policy and legal, technology and
market) risks on retail lending, parts of
wholesale lending and other financial
intermediary business activities (specifically
credit exposure, equity and debt holdings, or
trading positions, each broken down by
industry, geography, credit quality and average
tenor). We are aiming to develop the
appropriate systems, data and processes to
provide these disclosures in future years. We
disclose the exposure to six high transition risk
wholesale sectors and the flood risk exposure
and Energy Performance Certificate breakdown
for the UK portfolio.
Metrics and targets (c) on targets related to
physical risk: We do not currently disclose
targets used to measure and manage
physical risk. This is due to transitional
challenges including data limitations of
physical risk metrics. For retail, we do not
use targets to measure and manage physical
risk. In 2023 we introduced internally a
global ‘soft trigger’ monitoring and review
process for physical risk exposure where a
market reaches or exceeds a set threshold,
as this ensures markets are actively
considering their balance sheet risk exposure
to peril events. We also consider physical
and transition risk as an input for our climate
scenario analysis exercise.
1e
HSBC Holdings plc
Approach to ESG reporting continued
We expect to further enhance our
disclosures as our data, quantitative scenario
analysis, risk metrics and physical risk
targets evolve, and technology solutions are
implemented in the medium term.
Scope 3 emissions disclosure
Metrics and targets (b) relating to scope 3
emissions metrics: We currently disclose
partial scope 3 greenhouse gas emissions
including business travel, supply chain and
financed emissions. We currently disclose
four out of 15 categories of scope 3
greenhouse gas emissions including
business travel, supply chain and financed
emissions. In relation to financed emissions,
we publish on-balance sheet financed
emissions for a number of sectors as
detailed on page 18. We also publish
facilitated emissions for the oil and gas, and
power and utilities sectors. Future
disclosures on financed emissions and
related risks are reliant on our customers
publicly disclosing their greenhouse gas
emissions, targets and plans, and related
risks. We recognise the need to provide early
transparency on climate disclosures but
balance this with the recognition that
existing data and reporting processes require
significant enhancements.
Other matters
Strategy (b) relating to access to capital: We
have considered the impact of climate-
related issues on our businesses, strategy
and financial planning. Our access to capital
may be impacted by reputational concerns
as a result of climate action or inaction. In
addition, if we are perceived to mislead
stakeholders on our business activities or if
we fail to achieve our stated net zero
ambitions, we could face reputational
damage, impacting our revenue-generating
ability and potentially our access to capital
markets. We expect to further enhance the
disclosure in the medium term as more data
becomes available.
To manage these risks we have integrated
climate risk into our existing risk taxonomy,
and incorporated it within the risk
management framework through the policies
and controls for the existing risks where
appropriate.
Metrics and targets (c) relating to water
usage target: We have described the targets
used by the organisation to manage climate-
related risks and opportunities and
performance against targets. However,
taking into account the nature of our
business, we do not consider water usage to
be a material target for our business and,
therefore, we have not included a target in
this year’s disclosure.
With respect to our obligations under
LR9.8.6R(8) of the FCA’s Listing Rules, as
part of considering what to measure and
publicly report, we perform an assessment to
ascertain the appropriate level of detail to be
included in the climate-related financial
disclosures that are set out in our Annual
Report and Accounts. Our assessment takes
into account factors such as the level of our
exposure to climate-related risks and
opportunities, the scope and objectives of
our climate-related strategy, transitional
challenges, and the nature, size and
complexity of our business. See ‘How we
decide what to measure’ on page 43 for
further information.
Insurance manufacturing alternative performance measures
In addition to IFRS Accounting Standards
based results, HSBC also discloses Insurance
manufacturing value of new business
(‘Insurance Manufacturing VNB’) and
Insurance manufacturing proxy embedded
value (“Insurance Manufacturing PEV’) as
alternative performance measures within its
filings to the London Stock Exchange and
Hong Kong Stock Exchange.
Insurance Manufacturing VNB provides
information about value generation from new
business sold during the period. It is
calculated as the sum of the IFRS 17 new
business CSM and loss component adjusted
for:
–a full attribution of expenses incurred within
our manufacturing operations. IFRS 17
considers only directly attributable
acquisition expenses within the new
business CSM measurement; and
–long-term asset spreads expected to be
generated over the contract term. Under
IFRS 17, new business CSM is in contrast
calculated on a market consistent risk
neutral basis. This also necessitates
changes to the underlying economic
scenario models used in the valuation of
policyholder guarantees to reflect this
basis.
Insurance Manufacturing VNB is measured
before tax and after inclusion of the impact
of reinsurance.
Insurance Manufacturing PEV provides
information about the value of the insurance
manufacturing operations. It is calculated as
total shareholders’ equity plus CSM net of
tax adjusted for:
–a full attribution of expenses incurred
within our manufacturing operations, net
of tax. IFRS 17 considers only directly
attributable acquisition expenses within the
CSM measurement; and
–long-term asset spreads expected to be
generated over the contract term, net of
tax. Under IFRS 17, CSM is in contrast
calculated on a market consistent risk
neutral basis. This also necessitates
changes to the underlying economic
scenario models used in the valuation of
policyholder guarantees to reflect this
basis.
Insurance Manufacturing PEV is measured
after tax and after inclusion of the impact of
reinsurance.
Certain defined terms
Unless the context requires otherwise,
‘HSBC Holdings’ means HSBC Holdings plc
and ‘HSBC’, the ‘Group’, ‘we’, ‘us’ and ‘our’
refer to HSBC Holdings together with its
subsidiaries. Within this document the Hong
Kong Special Administrative Region of the
People’s Republic of China is referred to as
‘Hong Kong’.
When used in the terms ‘shareholders’
equity’ and ‘total shareholders’ equity’,
‘shareholders’ means holders of HSBC
Holdings ordinary shares and those
preference shares and capital securities
issued by HSBC Holdings classified as
equity. The abbreviations ‘$m’, ‘$bn’ and
‘$tn’ represent millions, billions (thousands
of millions) and trillions of US dollars,
respectively.
HSBC Holdings plc
1f
Highlights
Financial performance reflected net interest income growth, and we continued to make
progress against our four strategic pillars.
Financial performance (vs 2022)
–Profit before tax rose by $13.3bn to
$30.3bn, primarily reflecting revenue
growth. This included a favourable year-on-
year impact of $2.5bn relating to the sale of
our retail banking operations in France,
which completed on 1 January 2024, and a
$1.6bn provisional gain recognised on the
acquisition of Silicon Valley Bank UK
Limited (‘SVB UK‘) in 2023. These were
partly offset by the recognition of an
impairment charge in 2023 of $3.0bn
relating to the investment in our associate,
Bank of Communications Co., Limited
(‘BoCom’), which followed the
reassessment of our accounting value-in-
use. On a constant currency basis, profit
before tax increased by $13.8bn to
$30.3bn. Profit after tax increased by
$8.3bn to $24.6bn.
–Revenue rose by $15.4bn or 30% to
$66.1bn, including growth in net interest
income (‘NII’) of $5.4bn, with rises in all of
our global businesses due to the higher
interest rate environment. Non-interest
income increased by $10.0bn, reflecting a
rise in trading and fair value income of
$6.4bn, mainly in Global Banking and
Markets. The associated funding costs
reported in NII grew by $6.2bn. The
increase also included the impact of the
strategic transactions referred to above,
partly offset by disposal losses of $1.0bn
relating to repositioning and risk
management activities in our hold-to-
collect-and-sell portfolio.
–Net interest margin (‘NIM’) of 1.66%
increased by 24 basis points (‘bps’),
reflecting higher interest rates.
–Expected credit losses and other credit
impairment charges (‘ECL’) were $3.4bn,
a reduction of $0.1bn. The net charge in
2023 primarily comprised stage 3 charges,
notably related to mainland China
commercial real estate sector exposures. It
also reflected continued economic
uncertainty, rising interest rates and
inflationary pressures. ECL were 33bps of
average gross loans, including a 3bps
reduction due to the inclusion of loans and
advances classified as held for sale.
–Operating expenses fell by $0.6bn or 2%
to $32.1bn, mainly due to the non-
recurrence of restructuring and other
related costs following the completion of
our cost to achieve programme at the end
of 2022. This more than offset higher
technology costs, inflationary pressures and
an increase in performance-related pay. We
also incurred a higher UK bank levy and a
charge relating to the Federal Deposit
Insurance Corporation (‘FDIC’) special
assessment in the US. Target basis
operating expenses rose by 6%. This is
measured on a constant currency basis,
excluding notable items and the impact of
the acquisition of SVB UK and related
investments internationally. It also excludes
the impact of retranslating the prior year
results of hyperinflationary economies at
constant currency.
–Customer lending balances rose by
$15bn on a reported basis, but fell by
$3bn on a constant currency basis.
Growth included a $7.8bn reclassification of
secured loans in France from held for sale,
an addition of $8bn from the acquisition of
SVB UK, and higher mortgage balances in
HSBC UK and Hong Kong. These increases
were more than offset by a reduction in
wholesale term lending, notably in Asia,
and from business divestments in Oman
and New Zealand.
–Customer accounts rose by $41bn on a
reported basis, and $13bn on a constant
currency basis, primarily in Wealth and
Personal Banking, reflecting growth in Asia,
partly offset by reductions in HSBC UK,
reflecting cost of living pressures and the
competitive environment, despite an
increase of $6bn from the acquisition of
SVB UK. There was also a reduction due to
the sale of our business in Oman.
–Common equity tier 1 (‘CET1’) capital
ratio of 14.8% rose by 0.6 percentage
points, as capital generation was partly
offset by dividends and share buy-backs.
–The Board has approved a fourth interim
dividend of $0.31 per share, resulting in
a total for 2023 of $0.61 per share. We
also intend to initiate a share buy-back of
up to $2.0bn, which we expect to
complete by our first quarter 2024 results
announcement.
Outlook
–We continue to target a return on
average tangible equity (‘RoTE’) in the
mid-teens for 2024, excluding the impact
of notable items (see page 25 for
information on our RoTE target for 2024).
Our guidance reflects our current outlook
for the global macroeconomic environment,
including customer and financial markets
activity.
–Based upon our current forecasts, we
expect banking NII of at least $41bn for
2024. This guidance reflects our current
modelling of a number of market
dependent factors, including market-implied
interest rates (as of mid-February 2024), as
well as customer behaviour and activity
levels, which we would also expect to
impact our non-interest income. We do not
reconcile our forward guidance on banking
NII to reported NII.
–While our outlook for loan growth remains
cautious for the first half of 2024, we
continue to expect year-on-year
customer lending percentage growth in
the mid-single digits over the medium to
long term.
–Given continued uncertainty in the forward
economic outlook, we expect ECL charges
as a percentage of average gross loans
to be around 40bps in 2024 (including
customer lending balances transferred to
held for sale). We continue to expect our
ECL charges to normalise towards a range
of 30bps to 40bps of average loans over
the medium to long term.
–We retain a Group-wide focus on cost
discipline. We are targeting cost growth
of approximately 5% for 2024 compared
with 2023, on a target basis. This target
reflects our current business plan for 2024,
and includes an increase in staff
compensation, higher technology spend
and investment for growth and efficiency,
in part mitigated by cost savings from
actions taken during 2023.
–Our cost target basis for 2024 excludes the
impact of the disposal of our retail banking
business in France and the planned
disposal of our banking business in Canada
from the 2023 baseline. Our cost target
basis is measured on a constant currency
basis and excludes notable items and the
impact of retranslating the prior year results
of hyperinflationary economies at constant
currency. We do not reconcile our forward
guidance on target basis costs to reported
operating expenses.
–We intend to continue to manage the
CET1 capital ratio within our medium-
term target range of 14% to 14.5%.
–Our dividend payout ratio target
remains at 50% for 2024, excluding
material notable items and related impacts.
We have announced a further share buy-
back of up to $2.0bn. Further buy-backs
remain subject to appropriate capital levels.
2 HSBC Holdings plc
Strategic transactions
–During 2023, we continued to acquire
businesses that allow us to build scale and
enhance our capabilities. In March, we
acquired SVB UK, and subsequently
launched HSBC Innovation Banking,
which includes SVB UK and new teams in
the US, Hong Kong and Israel, as well as in
Denmark and Sweden, to deliver a globally
connected, specialised banking proposition
to support innovation businesses and their
investors.
–As part of our ambition to be a leading
wealth provider in Asia, we entered into an
agreement to acquire Citi’s retail wealth
management portfolio in mainland
China. This acquisition comprised the
assets under management and deposits,
and the associated wealth customers. We
also announced a partnership with the
fintech Tradeshift to launch a joint
venture focusing on embedded finance
solutions and financial services
applications.
–We continue to make good progress on
our strategic disposals. The planned sale
of our banking business in Canada received
government approval and is expected to
complete in the first quarter of 2024. We
completed the sale of our retail banking
operations in France on 1 January 2024, as
we reshape the organisation to focus on
our international customer base. In addition,
we announced the planned sale of our retail
business in Mauritius, and also completed
the sale of our operations in Greece, the
merger of HSBC Bank Oman with Sohar
International, and the sale of our New
Zealand retail mortgage loan portfolio.
–While we remain committed to the sale of
our business in Russia, the sale became
less certain. As a result, the business is no
longer classified as held for sale, the
previously recognised loss has been
reversed, and a broadly offsetting charge
relating to recoverability was recognised in
the fourth quarter of 2023.
–We remain committed to consider the
payment of a special dividend of $0.21
per share as a priority use of the
proceeds from the sale of our banking
business in Canada in the first half of
2024. The remaining proceeds will accrue
into CET1 capital in consideration for
organic growth and investment, and we
intend to use any excess capital to
supplement share buy-backs. Upon
completion, the sale is expected to result in
an initial increase in the CET1 ratio of
approximately 1.2 percentage points.
ESG highlights
Transition to net zero
–In January 2024, we published our first net
zero transition plan, which is an important
milestone in our journey to achieving our
net zero ambition – helping our people,
customers, investors and other
stakeholders to understand our long-
term vision, the challenges,
uncertainties and dependencies that
exist, the progress we are making and what
we plan to do in the future. The plan
includes details on our sectoral approach,
and on our implementation plan to embed
net zero across key areas of our
organisation.
–Our net zero transition plan provides an
overview of the progress we have made to
date and what we plan to do next, although
we acknowledge there is still much
more to do. It will form the basis of further
work on our journey to net zero over time,
and we expect to review and update it
periodically.
–Following the recent launch of the
Partnership for Carbon Accounting
Financials (‘PCAF’) accounting standard for
capital markets, we have now set
combined on-balance sheet financed
emissions and facilitated emissions
targets for two emissions-intensive
sectors: oil and gas, and power and
utilities, and report the combined progress
for both sectors. We recognise that data,
methodologies and standards for
measuring emissions and for target setting
will continue to evolve.
–Since 2020, we have provided and
facilitated $294.4bn of sustainable
finance and investment, which was an
increase of $83.7bn in the past year. Of our
sustainable finance and investment
progress to 31 December 2023, $258.3bn
related to green and sustainable activities
and $36.1bn related to social activities.
–Within our own operations, we have
made a 57.3% reduction in our absolute
greenhouse gas emissions from a 2019
baseline.
Build inclusion and resilience
–In 2023, 34.1% of senior leadership roles
were held by women. We have a target to
achieve 35% by 2025, which we are on
track to achieve, although we recognise
that progress in the past year has not
been as fast paced as we would like. We
also continued to work towards meeting
our ethnicity goals.
–We continue to make the banking
experience more accessible in both
physical and digital spaces. We are
working to ensure that our digital channels
are usable by everyone, regardless of
ability. We also expanded our efforts to
support customers with disabilities in our
branch spaces.
Act responsibly
–We aim to be a top-three bank for customer
satisfaction. In 2023, we were ranked as a
top three bank against our competitors
in 58% of our six key markets across
Wealth and Personal Banking and
Commercial Banking, but we still have
work to do to improve our rank position
against competitors.
–We published guides to help our buyers
and our suppliers better understand our
net zero ambitions. The guides provide
further details to support suppliers in
understanding our sustainability
expectations, as set out in our supplier
code of conduct.
–We continued to raise awareness and
develop our understanding of our salient
human rights issues. In 2023, we provided
practical guidance and training, where
relevant, to our colleagues across the
Group, on how to identify and manage
human rights risk.
HSBC Holdings plc 3
Who we are
HSBC is one of the largest banking and financial services organisations in the world.
We aim to create long-term value for our shareholders and capture opportunity.
Our values
Our values help define who we are as an organisation, and are key to our long-term success.
We value difference
Seeking out different
perspectives
We succeed together
Collaborating across boundaries
We take responsibility
Holding ourselves accountable
and taking the long view
We get it done
Moving at pace and making
things happen
Our strategy
Our strategy supports our ambition of being the preferred international financial partner for our clients, centred
around four key areas.
Focus 
–Maintain leadership in scale
markets
–Double-down on international
connectivity
–Diversify our revenue
–Maintain cost discipline and
reshape our portfolio
Digitise
–Deliver seamless customer
experiences
–Ensure resilience and security
–Embrace disruptive
technologies and partner with
innovators
–Automate and simplify at scale
Energise
–Inspire leaders to drive
performance and delivery
–Unlock our edge to enable
success
–Deliver a unique and
exceptional colleague
experience
–Prepare our workforce for the
future
Transition
–Support our customers
–Embed net zero into the way
we operate
–Partner for systemic change
–Become net zero in our own
operations and supply chain by
2030, and our financed
emissions by 2050
For further details on progress made in each of our strategic areas, see pages 11 to 13.
Footnote Arrow.jpg
Our global reach
Our global businesses serve around 42 million customers worldwide through a network that covers 62 countries
and territories.
Our customers range from individual
savers and investors to some of the
world’s biggest companies,
governments and international
organisations. We aim to connect them
to opportunities and help them to
achieve their ambitions.
Assets of
$3.0tn
Operations in
62
Countries and territories
Approximately
42m
Customers bank with us
We employ approximately
221,000
Full-time equivalent staff
For further details of our customers and approach to geographical information, see page 112.
Footnote Arrow.jpg
4 HSBC Holdings plc
Our global         We serve our customers through three global businesses.
businesses
On pages 30 to 36 we provide an
overview of our performance in
2023 for each of our global
businesses, as well as our
Corporate Centre.
WPB who page.jpg
Wealth and Personal Banking
(’WPB’)
We help millions of our
customers look after their day-to-
day finances and manage,
protect and grow their wealth.
For further details, see page 30.
Footnote Arrow.jpg
In each of our global businesses,
we focus on delivering growth in
areas where we have distinctive
capabilities and have significant
opportunities.
CMB who page.jpg
Commercial Banking (‘CMB’)
Our global reach and expertise
help domestic and international
businesses around the world
unlock their potential.  
For further details, see page 32.
Footnote Arrow.jpg
Each of the chief executive
officers of our global businesses
reports to our Group Chief
Executive, who in turn reports to
the Board of HSBC Holdings plc.
GBM who page.jpg
Global Banking and Markets
(’GBM’)
We provide a comprehensive
range of financial services and
products to corporates,
governments and institutions.
For further details, see page 34.
Footnote Arrow.jpg
Revenue by global
business1
Wealth and Personal
Banking
3848290700093
Commercial Banking
3848290700345
Global Banking and
Markets
3848290700268
1 Calculation is based on revenue of our global businesses excluding Corporate Centre. Corporate Centre had negative revenue of $199m in 2023.
Our stakeholders    Building strong relationships with our stakeholders helps enable us to deliver
              our strategy in line with our long-term values, and operate the business in a   
              sustainable way.
Our stakeholders are the people
who work for us, bank with us,
own us, regulate us, and live in
the societies we serve and the
planet we all inhabit. These
human connections are complex
and overlap.
ESG_icons_row.jpg
Many of our employees are
customers and shareholders,
while our business customers are
often suppliers. We aim to serve,
creating value for our customers
and shareholders.
Our size and global reach mean
our actions can have a significant
impact. We are committed to
doing business responsibly, and
thinking for the long term. This is
key to delivering our strategy.
For further details of how we are engaging with our stakeholders, see page 15.
Footnote Arrow.jpg
HSBC Holdings plc 5
Group Chairman’s statement
Mark-tucker-4582x3055_RGB_new_BG.jpg
Mark E Tucker
Group Chairman
Against a challenging global economic and political
backdrop, HSBC’s strategy has delivered improved financial
performance and increased returns for shareholders
The global economy performed better
than expected in 2023, but growth
remained sluggish and the economic
environment was challenging for many
of our customers. Although inflation fell
globally, core inflation levels and
interest rates remained elevated. There
was also significant variability in growth
from market to market and increased
volatility within the banking sector. Our
core purpose of ‘opening up a world of
opportunity’ underlines our focus on
helping our customers and clients to
navigate this complexity and access
growth, wherever it is.
Many of our customers and colleagues are
living through very difficult times. Higher
interest rates have had a significant impact
on businesses and households, and we will
remain conscious of this with interest rates
expected to begin to fall back in 2024. The
wars between Russia and Ukraine, and now
between Israel and Hamas, are absolutely
devastating. Our thoughts are with all those
impacted, including our colleagues in those
parts of the world, and their families and
friends. Their resilience, professionalism and
care for one another during these most
testing of times has been, and is,
exceptional.
Progress and performance
Turning to our performance, I want to again
pay tribute to my colleagues. The record
profit performance that we delivered in 2023
was supported by the impact of interest
rates on our strong balance sheet, but it was
also testament to the tireless efforts of our
people around the world. I would like to
thank them sincerely for their hard work,
dedication and commitment to serving our
customers.
In 2023, reported profit before tax was
$30.3bn, which was an increase of $13.3bn
compared with 2022. This was due mainly to
higher revenue and a number of notable
items. Our three global businesses delivered
good revenue growth, and we ended the
year with strong capital, funding and liquidity
positions.
We remain committed to sharing the
benefits of our improved performance with
our shareholders. The Board approved a
fourth quarterly dividend of $0.31 per share,
bringing the total dividend for 2023 to $0.61
per share. Furthermore, in 2023 we
announced three share buy-backs worth a
total of $7bn and, today, have announced a
further share buy-back of up to $2bn.
The planned sale of our banking operations
in Canada received final approval from the
Canadian government at the end of last year.
Subject to completion of the transaction,
which is expected in the first quarter of 2024,
the Board will consider a special dividend of
$0.21 per share, to be paid in the first half of
2024, as a priority use of the proceeds.
With this anticipated transaction and the
completion of the sale of our retail banking
business in France last month, our focus has
moved to investing for growth, while
maintaining efficiency. Two examples of
growth opportunities last year were the
agreed acquisition of Citi’s retail wealth
business in mainland China, which will help
accelerate our Wealth strategy, and the
acquisition of SVB UK, following the
difficulties experienced by its US parent
entity. Acquiring SVB UK was opportunistic,
but the deal made excellent strategic sense
for HSBC, and it also helped to protect
clients, safeguard jobs and maintain financial
stability.
Technology and sustainability are two of the
trends transforming banking and the world
around us. The opportunities from generative
AI are among the most transformative within
my working life. We are actively exploring a
number of use cases, while also working to
manage the associated risks.
Meanwhile the global climate challenge is
becoming increasingly acute. Our presence
in many of the sectors and markets where
the need to reduce emissions is the greatest
provides us with an opportunity to work with
our clients to help address it. This is set out
in our first net zero transition plan. The Board
discussed and contributed to the net zero
transition plan in depth. We believe that it is
a realistic and ambitious assessment of the
long-term journey ahead, as we continue to
work with our clients on their transitions to a
low-carbon future. It is clear there will be
many uncertainties and dependencies, and
that our approach will need to continue to
evolve with the real world around us.
6 HSBC Holdings plc
"Acquiring SVB UK was
opportunistic, but the
deal made excellent
strategic sense for HSBC,
and it also helped to
protect clients, safeguard
jobs and maintain
financial stability."
Board operations
Our work on sustainability was one of the
many topics discussed with our shareholders
at our 2023 Annual General Meeting (‘AGM’)
in May. Ahead of that, Noel and I were
pleased to meet with Hong Kong
shareholders at our Informal Shareholders’
Meeting. At both meetings, we also
discussed the resolutions that were
requisitioned by shareholders on the Group’s
strategy and dividend policy. Shareholders
expressed strong support for the Group’s
current strategy by voting overwhelmingly
with the Board and against these resolutions
at the AGM. This enabled the Board, my
colleagues and our shareholders to focus on
our shared objectives of serving our
customers, driving stronger performance,
and creating more value for our investors.
In 2023, the Board held meetings in London,
Birmingham, Hong Kong, Paris, New York,
Mumbai and Delhi. We also returned to
Beijing and Shanghai last month. On each
occasion, the Board engaged with clients,
colleagues, government officials and
regulators – with these discussions
underlining that HSBC continues to have a
key role connecting the world’s trade and
finance hubs.
There were a number of changes to the
composition of the Board last year. At the
2023 AGM, we said farewell to Jackson Tai,
who made an important, extensive and
lasting contribution to the success of HSBC
during his time as a non-executive Director.
His leadership in strengthening risk and
conduct governance and oversight was
particularly critical through a period of
significant change. We also announced in
December that David Nish intends to retire
from the Board at the 2024 AGM. David has
made an invaluable contribution to the Board
over the past eight years, particularly in
recent years as Chair of the Group Audit
Committee and as Senior Independent
Director. I would like to thank him warmly for
his consistent counsel and guidance.
I am pleased that Kalpana Morparia, Ann
Godbehere, Brendan Nelson and Swee Lian
Teo joined the Board during 2023. Each of
them brings experience and expertise that is
an asset to the Board. Specifically, Ann’s
extensive public-listed company board
experience means that she is ideally placed
to take over as Senior Independent Director,
while Brendan’s UK and international
financial expertise and significant experience
as audit chair at UK-listed companies will be
particularly valuable as he takes over
leadership of the Group Audit Committee.
Macroeconomic outlook
Looking ahead, 2024 is likely to be another
eventful year. The slowing of inflation in the
second half of 2023 means that monetary
tightening now appears to be coming to an
end. However, current inflation levels in
many economies remain above their targets.
As central banks continue to try to bridge
this gap, voters head to the polls in a
significant number of countries across the
globe. The timing and outcomes of these
elections will impact the decision making of
governments and have geopolitical, as well
as fiscal, implications. We will monitor the
results closely, and take a long-term view of
strategy, purpose and capital allocation,
while cognisant of any short-term
challenges.
Among these potential challenges are the
increased uncertainties due to wars in
Europe and the Middle East, and disruption
to global trade and supply chains caused by
these and attacks on shipping in the Red
Sea. However, we remain cautiously
optimistic about economic prospects for
2024. We expect growth to slow in the first
half of the year and recover thereafter. We
also expect the variable economic growth
that has characterised recent years to
continue.
The economies of south and south-east Asia
carry good economic momentum into 2024.
India and Vietnam are currently among the
fastest-growing economies in the world,
benefiting from competitive labour costs,
supportive policies and changing supply
chains. Chinese companies are among those
increasingly looking towards these and other
markets, as China’s economic 
transformation towards high-quality growth
and domestic consumption continues.
China’s recovery after reopening was
bumpier than expected, but its economy
grew in line with its annual target of around
5% in 2023. We expect this to be maintained
in 2024, with recently announced policy
measures to support the property sector and
local government debt gradually flowing
through to the wider economy. Hong Kong’s
growth has moved along at a slower but
healthy pace and is likely to remain in line
with pre-pandemic levels.
As Asia continues to grow, a significant
opportunity is emerging to connect it to
another high-growth region. The Middle East
region performed very well economically in
2023 and the outlook remains strong for
2024, notwithstanding the risks arising from
conflicts in the region. As countries like
Saudi Arabia and the UAE continue to
diversify their economies, new opportunities
are created to connect them to Asia, and
Asia to them.
The US economy grew more quickly than
expected in 2023 in the face of higher
interest rates. Growth is likely to be lower in
2024, although it should remain higher than
in Europe where growth remains subdued.
The UK economy, which entered a technical
recession at the end of 2023, has
nonetheless been resilient. Headline inflation
should fall in the first half of the year, with
core inflation following by the end of 2024.
This will of course determine the pace of
interest rate cuts.
I would like to end by reiterating my thanks
to my colleagues for all that they have done,
and all that they continue to do, for HSBC.
Their tireless efforts are reflected by our
improved financial performance and
increased returns for shareholders in 2023 -
and I look forward to them securing the
foundations for our future success.
Mark E Tucker
Group Chairman
21 February 2024
HSBC Holdings plc 7
Group Chief Executive’s review
4.5.1.6 Noel-quinn-a-3055x4582_FLAT RGB-topaz-standard-2x Fogra 52.jpg
Noel Quinn
Group Chief Executive
Our record profit performance in 2023 reflected the hard
work of the last four years and the inherent strength of our
balance sheet, supported by interest rates.
Return on average tangible equity
adjusted symbol.jpg
14.6%
(2022: 10%)
Profit before tax
$30.3bn
(2022: $17.1bn)
2023 was a very good year for HSBC. I
would like to start by paying tribute to
my colleagues for all that they did last
year, and in the preceding three years.
As I have said before, they have fully
embraced our core purpose of ‘opening
up a world of opportunity’ in all they do
– from helping clients and customers to
expand to new markets or move
overseas, to digitising our business and
helping our people to be their best, to
our ongoing work on the transition to
net zero.
Our performance last year was great credit
to them. We delivered strong revenue
growth across all three global businesses,
supported by higher interest rates, which
enabled us to deliver our best return on
average tangible equity in more than a
decade. As well as improving financial
performance, our strategy is increasing
shareholder returns. I am pleased that we
have rewarded our shareholders for their
loyalty with the highest full-year dividend per
share since 2008, as well as three share buy-
backs in 2023 totalling $7bn. In total, we
returned $19bn to shareholders by way of
dividend and share buy-backs in respect of
2023. In addition, we have today announced
a further share buy-back of up to $2bn.
As we move into 2024, I am confident that
there are opportunities ahead for us and our
clients that can help us to sustain our good
performance going into the next phase of the
interest rate cycle.
The environment does, however, remain
challenging. The wars in Europe and the
Middle East are beyond comprehension on a
human level, and my thoughts remain with
all those impacted. Both conflicts also still
have the potential to escalate further. That
would first and foremost deepen the
humanitarian crisis, but also likely lead to
another wave of market and economic
turmoil. Interest rates are expected to fall this
year, which we believe should in turn help to
increase economic activity. The outlook
currently remains uncertain, however, and
many of our customers remain concerned
about their finances. In the midst of these
challenges, we will stay focused on what we
are here to do – which is to serve our
customers and clients, and help them with
any financial difficulties they face.
Financial performance
Our results are a testament to the way we
stayed focused in 2023. Reported profit
before tax was $30.3bn, which was $13.3bn
higher than in 2022. This included a number
of notable items, including a favourable year-
on-year impact of $2.5bn relating to the sale
of our retail banking operations in France
and a $1.6bn provisional gain on the
acquisition of SVB UK. These were offset by
a valuation adjustment of $3.0bn relating to
our investment in BoCom, which followed
the reassessment of our accounting value-in-
use in line with recent market developments
in mainland China. This adjustment has no
material impact on our capital, capital ratio
and distribution capacity, and therefore no
impact on our share buy-backs or dividends.
We remain confident in the resilience of the
Chinese economy, and the growth
opportunities in mainland China over the
medium to long term.
Reported revenue grew by 30% or $15.4bn,
driven by an increase in net interest income
of $5.4bn from all three global businesses.
Non-interest income increased by $10bn,
reflecting increased trading and fair value
income of $6.4bn, mainly in Global Banking
and Markets, and the favourable year-on-
year impact from the impairment relating to
the sale of our retail banking operations in
France and provisional gain on the
acquisition of SVB UK.
In 2023, we delivered a return on average
tangible equity of 14.6%, or 15.6% excluding
strategic transactions and the impairment on
our investment in BoCom.
8 HSBC Holdings plc
“I am confident that there
are opportunities ahead
for us and our clients that
can help us to sustain our
good performance going
into the next phase of the
interest rate cycle.“
Our three global businesses performed well.
In Commercial Banking, profit before tax was
up by 76% to $13.3bn on a constant
currency basis, driven by revenue increases
across all our main legal entities. Within this,
Global Payments Solutions revenue
increased by 78% or $5.4bn on a constant
currency basis, driven by higher margins
reflecting higher interest rates and repricing.
Fee income increased by 4% due to growth
in transaction banking and higher volumes in
cards and international payments, while our
trade business performed well relative to the
market and we increased our market share.
Global Banking and Markets delivered profit
before tax of $5.9bn, up 26% compared with
2022, on a constant currency basis. Revenue
grew by 10% on a constant currency basis,
due to higher net interest income in Global
Payments Solutions and Securities Services.
In Wealth and Personal Banking, profit
before tax of $11.5bn was $6.1bn higher
than in 2022, on a constant currency basis.
Revenue was up by 31% or $6.4bn on a
constant currency basis, reflecting growth in
Personal Banking and in Wealth, as well as
the positive year-on-year impact relating to
the sale of our French retail banking
business. Within this, Wealth revenue of
$7.5bn was up 8% or $0.6bn on a constant
currency basis, with good growth in private
banking and asset management.
Reported costs for 2023 were down by 2%
compared with the previous year, as lower
restructuring costs offset higher technology
spending, inflation, higher performance-
related pay and levies. On a target basis,
costs increased by 6%, which was 1% higher
than previously guided due to levies
including a charge relating to the FDIC
special assessment levy in the US. Our
reported cost-efficiency ratio improved to
48.5% from 64.6% in 2022, supported by
higher net interest income.
Our 2023 reported ECL charge of $3.4bn
was $0.1bn lower than in 2022. This
primarily comprised stage 3 net charges,
notably related to mainland China
commercial real estate sector exposures, and
reflected the continued uncertainty within
the global economy. After good capital
generation in 2023, we ended the year with a
CET1 ratio of 14.8%. We are able to pay a
fourth interim dividend of $0.31 per share,
bringing the total 2023 dividend to $0.61 per
share, which is the highest since 2008.
From transform to sustain and grow
Looking forward, supportive interest rates
and good underlying business growth have
given us strong momentum. We continue to
target a mid-teens return on average tangible
equity. We are also, however, mindful of the
interest rate cycle and the subsequent
impact on net interest income. In 2023, we
increased the size and duration of our
structural hedges to reduce the sensitivity of
banking net interest income to interest rate
movements and help stabilise future
earnings. We also see a number of growth
opportunities within our strategy that play to
our strengths.
The first is to further grow our international
businesses, which remains our biggest
differentiator and growth opportunity.
International expansion remains a core
strategy for corporates and institutions
seeking to develop and expand, especially
the mid-market corporates that HSBC is very
well-positioned to serve. Rather than de-
globalising, we are seeing the world re-
globalise, as supply chains change and intra-
regional trade flows increase. Our
international network and presence in
markets that are benefiting like the ASEAN
region and Mexico help us to capitalise on
these trends. As a result, our market-leading
trade franchise facilitated more than $850bn
of trade in 2023, while we are the second
biggest payments company by revenue and
we processed around $500tn of payments
electronically in 2023. This helped to grow
wholesale multi-jurisdictional client revenue
from customers who bank with us in more
than one market, by 29% in 2023. With
multi-jurisdictional corporate customers in
Commercial Banking generating around five
times as much client revenue as an average
domestic customer, we continue to focus on
growing this further, especially in the mid-
market segment where we have a
competitive advantage and there is still
potential to further extend our market
leadership.
The second is to diversify our revenue.
Building our wealth business to meet the
rising demand for wealth management
services, especially in Asia, has been a
strategic priority. Last year, we attracted net
new invested assets of $84bn, following
$80bn in 2022 and $64bn in 2021,
underlining the traction that we have gained.
Our agreement to acquire Citi’s retail wealth
management portfolio in mainland China
helps accelerate our plans. Another trend is
the increasing demand for seamless,
integrated, cross-border banking services,
which innovation is helping us to deliver. We
now have 1.3 million Global Money
customers, up from 550,000 in 2022, and
grew revenue from Wealth and Personal
Banking international customers by 41% last
year, from $7.2bn to $10.2bn. Critically, there
was a 43% increase in new-to-bank
international customers compared with
2022, driven by the new international
proposition that we launched and continue
to develop. As in wholesale, these
international customers generate higher
revenue, bringing in around three times as
much as average domestic-only customers.
The third is continued growth in our two
home markets. Our business is built on two
very deep pools of liquidity in Hong Kong
and the UK, which underpin our exceptional
balance sheet strength and, therefore, all
that we do as a business. Hong Kong and
the UK are both also very profitable, well-
connected markets. We are well positioned
to capitalise on our positions as the number
one bank in Hong Kong and a leading bank
in the UK. Hong Kong’s connectivity, both
globally and to mainland China, are helping
us to grow our franchise. We have increased
our market share in trade in Hong Kong by
6.6 percentage points over the last three
years, according to HKMA data. Meanwhile
new-to-bank customers in Hong Kong
increased by 36% over the same period as
we have capitalised on the return of visitors
from mainland China. In the UK, we have
good traction in Commercial Banking and
continue to grow market share in Wealth and
Personal Banking. We are the leading bank
for UK large corporates, with more than 70%
market penetration last year, according to
Coalition Greenwich. Euromoney also named
us as the best bank in the UK for small and
medium-sized enterprises, as digitisation
helped to grow new-to-bank clients through
Kinetic. We also increased our market share
of UK mortgage stock, from 7.4% in 2020 to
8% in 2023, according to Bank of England
data. As economic conditions improve and
we continue to invest, we are confident in
our ability to grow further in these critical
markets.
HSBC Holdings plc 9
Future growth levers
In 2023, we continued to build in areas
we expect to drive future growth.
We brought in
$84bn
of net new invested assets in wealth.
We grew multi-jurisdictional wholesale
revenue by
29%
from $15.8bn in 2022 to $20.4bn in 2023.
We have also continued to diversify our
profit generation geographically across
multiple markets. The positions that we have
as a leading foreign bank in mainland China,
India, Singapore, the UAE, Saudi Arabia and
Mexico – all of which are also well
connected to our international network –
mean we are well placed to capture
opportunities in these fast-growing
economies. This was again evident as they
all grew reported profits significantly in 2023,
with mainland China (excluding associates),
India, and Singapore each contributing in
excess of $1bn of profits to the Group.
It is critical that we maintain tight cost
discipline. This was challenging in 2023 in a
high inflation environment, and will likely
remain so in 2024. At the same time, we
need to invest in growth, so we remain very
focused on maintaining tight underlying
costs. The sale of our French retail banking
operations completed on 1 January 2024,
and the planned sale of our banking business
in Canada remains due to complete in the
first quarter of 2024. A number of smaller
exits remain underway as we continue to
look at opportunities to reshape our portfolio.
At the same time, our acquisition of SVB UK
enabled us to create a bigger, new
proposition in HSBC Innovation Banking,
which combines deep sector specialisms
with our balance sheet strength and global
reach, ensuring we continue our long history
of supporting entrepreneurs.
Driving cost savings enables us to invest in
technology, which is the fourth opportunity.
The digitisation of our business continues to
improve customer experience and increase
efficiency. Using AI to help price complex
structural options in our Foreign Exchange
business has cut execution times down from
hours to minutes. We have also identified
hundreds of opportunities to leverage
generative AI, and will focus our efforts on
use cases with tangible benefits for the
Group and our customers.
Innovation also creates new avenues for
growth. We recently launched Zing, which is
our open market mobile platform focused on
cross-border payments, initially available in
the UK. It offers similar capabilities as Global
Money does to our international Wealth and
Personal Banking customers, but is targeted
at non-HSBC customers and allows us to
drive growth beyond our traditional customer
footprint.
Underpinning all of this is our work to build a
stronger performance culture, improve
colleague experience and prepare our
workforce for the future. This is important
because achieving our ambitions depends on
our 220,000 colleagues feeling motivated
and believing in our strategy. In our most
recent staff survey, I was pleased that the
number of colleagues seeing the positive
impact of our strategy in 2023 was up 11
percentage points on 2020, which is also
above the financial services sector
benchmark.
Finally, helping to finance the substantial
investment needs of our customers in the
transition to net zero is a growing
commercial opportunity, as well as a
necessity to mitigate rising financial and
wider societal risks. Our first net zero
transition plan shows how we intend to
finance and support the transition to net zero
and collaborate globally to help enable
change at scale. It also sets out our roadmap
for implementing net zero, which we will do
by supporting our customers, embedding net
zero into the way we operate and partnering
for systemic change. We understand that our
approach – including our own transition plan
– will need to evolve over time to keep pace
with both the evolving science and real
economy decarbonisation across the sectors
and geographies we serve.
Thank you
On a personal note, one of the most
enjoyable parts of 2023 for me was spending
time with many of my colleagues around the
world. Reconnecting with them, and seeing
first-hand their passion for serving our
customers, pride in HSBC and ambitions for
the future, was energising and inspiring.
Leading HSBC is a privilege, and my
colleagues are the main reason why.
2023 was a very good year for HSBC. We
now have an opportunity to ensure that it
becomes part of a longer-term trend of
ongoing good performance and to secure
the foundations for future success. I am
confident that we have the opportunities, the
platform and the team to enable us to get it
done.
Noel Quinn
Group Chief Executive
21 February 2024
10 HSBC Holdings plc
Our strategy
We are implementing our strategy across the four strategic pillars
aligned to our purpose, values and ambition.
Our strategy remains anchored around our
four strategic pillars: ‘Focus’, ‘Digitise’,
‘Energise’ and ‘Transition’.
We delivered a good set of results in 2023
supported by the interest rate environment
and the execution of our strategy. Our
reported profit before tax was $30.3bn and
we achieved a reported return on tangible
equity of 14.6%, or 15.6% excluding the
impact of strategic transactions and the
impairment of our investment in BoCom. In
our global businesses, WPB revenue
increased by 31% on a constant currency
basis, including a favourable year-on-year
impact relating to the sale of our retail
banking business in France. In CMB,
revenue increased by 40% on a constant
currency basis, including a provisional gain
on the acquisition of SVB UK. In addition,
revenue in GBM increased by 10% on a
constant currency basis.
Focus
Wholesale – double down on leadership in international connectivity
Our strength in international connectivity
remains one of our key differentiators. We
seek to partner with our clients as they
expand internationally, and capitalise on
opportunities arising from the
reconfiguration of global supply chains.
In 2023, we grew wholesale multi-
jurisdictional client revenue1 by 29% since
2022, supported by the interest rate
environment. These customers also generate
more revenue with us. In CMB, multi-
jurisdictional corporate clients generate
approximately five times the revenue of a
domestic-only corporate customer.
In addition, there was increased
collaboration across markets. In GBM, cross-
border client revenue from clients managed
in the West and booked in the East increased
by 39% from 2022.
Our ambition is to maintain strong, resilient
returns through the interest rate cycle. As
such, we are prioritising growing capital-
light, fee-income generating businesses,
such as transaction banking. In 2023, we
processed around $500tn electronic payment
transactions, ranking second by Global
Payments Solutions revenue in the first half
of 20232. We also facilitated over $850bn in
trade and have been ranked first in revenue
since 20182.
1 For further information and the basis of preparation
for multi-jurisdictional client revenue, see page 149.
2 Global Payments Solutions and trade revenue
rankings sourced from Coalition Greenwich.
Strategy pies WSL.jpg
WPB – build our international and wealth propositions
We continued to build our international and
wealth propositions, taking advantage of the
growth of wealth assets globally but
especially in Asia. We amassed $84bn in net
new invested assets in 2023, bringing total
wealth invested assets to $1,191bn, an
increase of 17% from 2022.
In 2023, our international strategy generated
good results. We continued to attract
international customers, who are either multi-
jurisdictional, non-resident or resident
foreigners, from our top 11 markets1. We
increased new-to-bank customers2 in this
segment by 43% since 2022, bringing total
international customers to 6.7 million. These
customers also each generated approximately
three times the income compared with
domestic customers. As a result, we increased
revenue in this segment by 41% compared
with 2022.
Customers increasingly demand seamless
banking across geographies. We continued
to enhance Global Money, our mobile
proposition that allows customers to spend
and send money in multiple currencies. The
product gained traction with more than
750,000 new customers in 2023, taking total
customers to over 1.3 million.
1 Top 11 markets include the UK, Hong Kong,
Mexico, the US, India, Singapore, Malaysia, the
UAE, Australia, mainland China and the Channel
Islands and the Isle of Man.
2 New-to-bank customers includes both new to
bank customers and those customers who have
opened an account in a new market, including those
who already bank with us in one or more other
markets.
Strategy pies WPB.jpg
HSBC Holdings plc 11
Focus continued
Maintain leadership in scale markets
We continued to take advantage of our
strengths, especially our leading positions in
our scale markets: Hong Kong and the UK.
Hong Kong
We have a well established business in Hong
Kong, with $544bn in customer deposits and
market leadership in a number of product
areas1. 
In 2023, profit before tax was $10.7bn, an
increase of 80% on a reported basis. In our
wholesale businesses, we focused on
maintaining our leading position across
multiple products. In trade finance, our
market share was 25.7%, an increase of 6.6
percentage points from 20202. We also
continued to solidify our leadership position
and grow our WPB business through the
launch of a new Premier Elite proposition
and acquisition of new customers, with new-
to-bank WPB customers increasing by 36%
from 2020, reaching 634,500 in 2023.
HSBC UK
HSBC UK has a universal franchise with
$340bn in customer deposits. We are a
market leader across multiple CMB products,
including trade finance and cash
management, according to Euromoney and
Coalition Greenwich. We aim to take
advantage of our international network to
maintain this position in CMB and grow our
international presence in WPB.
Profit before tax was $8.3bn in 2023, an
increase of 84% on a reported basis,
including a $1.6bn provisional gain on the
acquisition of SVB UK. We continued to
grow our CMB business and achieved a
market penetration of more than 70% within
the large corporate banking segment in
20233. In our WPB business, we opened over
1 million new current accounts and
continued to grow our mortgage stock
market share in the UK, reaching 8.0% in
2023, an increase of 0.6 percentage points
since 20204.
634,500
New-to-bank WPB customers in Hong
Kong
25.7%
Share of the trade finance market in Hong
Kong2
>70%
UK large corporate banking market
penetration in 20233
8.0%
HSBC UK’s mortgage stock market share4
1 Including deposits, assets, card spend and insurance. Source: Hong Kong Monetary Authority (‘HKMA’), Hong Kong Insurance Authority.
2 Source: HKMA, 31 December 2023.
3 Source: Coalition Greenwich Voice of Client – 2023 European Large Corporate Cash Management Study.
4 Source: Bank of England.
Diversify our revenue
In addition to Hong Kong and the UK, five
markets in particular represent growth
opportunities for us. We aim to be the leader
within the affluent and international
customer segments in mainland China, India,
Singapore and the UAE, and we are a market
leader within retail banking in Mexico. These
markets delivered strong results in 2023,
with mainland China excluding BoCom, India
and Singapore each delivering over $1bn in
profit before tax. The UAE and Mexico each
delivered profit before tax of over $0.8bn.
Mainland China
We have a strong client franchise in
mainland China capitalising on our role as a
bridge to support clients’ international needs.
We were ranked number one in foreign
exchange by FX Markets Asia in 2023. We
entered into an agreement to acquire Citi’s
retail wealth management portfolio, and
supported by our expanded onshore Global
Private Banking and our Pinnacle
proposition, we grew our wealth invested
assets by 53% compared with 2022.
India
We aim to continue growing our wholesale
franchise by taking advantage of corporate
supply chains. In 2023, we were ranked
number one by Euromoney in cash
management in India. We are also tapping
into the wealth pools of the Indian diaspora
with the launch of onshore Global Private
Banking. In 2023, we were the top foreign
bank for non-resident Indians in wealth1.
Singapore
Our ambition is to be the primary wholesale
offshore booking centre and wealth hub
within the ASEAN region. In 2023, we were 
recognised by AsiaMoney as the Best
International Bank in Singapore. Additionally,
we grew our retail franchise, with a 76%
increase in new-to-bank WPB international
customers compared with 2022, supported
by the launch of our new customer
onboarding journey.
UAE
We are growing our institutional and
international wholesale business from a
strong foundation. In 2023, we were ranked
number one in equity and debt capital
markets in MENAT2. Within wealth,
following the launch of onshore Global
Private Banking, we grew our wealth
invested assets by 35% from 2022. We also
grew international new-to-bank customers
by 51% since 2022.
Mexico
Within our wholesale businesses, we
continue to capitalise on trade flows
between Mexico and North America. In
2023, we were ranked number one by
Euromoney within trade finance in Mexico. In
our wealth and retail businesses, we remain
focused on delivering improved customer
experience and growing our Global Private
Banking business. In addition, over half of
WPB client acquisitions in 2023 were
referred by the wholesale businesses
through our Employee Banking Solutions
proposition.
1st
Foreign exchange ranking in mainland
China                                                                                 
Source: FX Markets Asia
1st
Cash management ranking in India                                                 
Source: Euromoney
76%
Increase in new-to-bank WPB international
customers in Singapore compared with
2022
35%
Increase in wealth invested assets in the
UAE compared with 2022
51%
WPB client acquisition from wholesale
referrals in Mexico
1 Source: Indian Mutual Fund Industry
2 Source: Dealogic
12 HSBC Holdings plc
Focus continued
Maintain cost discipline and reshape our portfolio
In 2023, our costs were up by 6% on a target
basis. Our aim is to maintain cost discipline by
driving efficiencies in our operations and
reinvesting cost savings in areas that will drive
future growth. We are prioritising investments
in transaction banking, wealth and international
propositions, and product innovation. At the
same time, we continue to reshape our
portfolio through exits and bolt-on acquisitions.
We completed our exit from our retail banking
operations in France, our WPB business in New
Zealand, and our businesses in Greece and
Oman. Further exits from Canada, Russia and
Armenia are underway as well as in our retail
banking business in Mauritius.
These exits will pave the way for investments in
growth and efficiency areas such as HSBC
Innovation Banking, which was launched after
the acquisition of SVB UK. We also entered into
an agreement to acquire Citi’s retail wealth
management portfolio in mainland China in
August 2023, and completed our purchase of
SilkRoad Property Partners, a real estate fund
manager in January 2024, which will be
integrated into our asset management
business.
Digitise
Improve customer experience and efficiency while investing in innovation
In 2023, we made progress on our goal to
become a digital-first bank, and our customers
have been increasingly adopting our digital
services. In CMB, 83% of customers were
digitally active, an increase of 5 percentage
points since 2022. Our net promoter score for
onboarding wholesale international clients in
the last quarter of 2023 improved by 12 points
when compared with the first three months of
the year. At 54%, more than half of WPB
customers were mobile active, an increase of 6
percentage points from 2022. Furthermore, a
total of 75% of WPB’s international customer
accounts were opened digitally in 2023, an
increase of 30 percentage points from 2022.
We are also focused on building future-ready
business models by investing in open-market
propositions. In 2023, we announced a
partnership with Tradeshift to launch a new
embedded finance solution in the first half of
2024, which will provide payment and financial
services embedded into trade, e-commerce
and marketplace experiences. In January 2024,
in the UK we launched Zing, a mobile platform
enabling cross-border payments available to
non-HSBC consumers.
We are also investing in innovative
technologies for the future. In 2024, we plan to
both concentrate our efforts and increase
our investment in artificial intelligence (‘Al’). At
present, we employ Al in areas such as fraud
detection and transaction monitoring.
We also launched Al Markets, a digital service
that utilises natural language processing to
enrich the way investors interact with global
markets. Additionally, we are in the process of
piloting numerous generative Al use cases in
areas like developer augmentation, creative
content generation and knowledge
management, and have identified hundreds
more potential opportunities.
Energise
Inspire a dynamic culture
We are opening up a world of opportunity for
our colleagues by building an inclusive
organisation that empowers and energises
them. We intend to accomplish this by building
a stronger performance culture, improving
colleague experience and preparing a
workforce for the future.
Our success is underpinned by our colleagues.
In a changing world, we empower our
colleagues by providing clarity of our strategy
and opportunities for them to develop and have
fulfilling careers. Our 2023 employee Snapshot
survey showed that 73%
of our colleagues see the positive impact of our
strategy, a 3 percentage point increase from
2022, and a 11 percentage point improvement
from 2020. The survey also showed that 81%
of our colleagues feel confident about HSBC’s
future, a 4 percentage point increase from
2022, and also a 11 percentage point
improvement over 2020.
We remain focused on creating a diverse and
inclusive environment. In 2023, 34.1% of
senior leadership roles were held by women,
and we are on track to achieve our ambition of
35% by 2025. We also set a Group-wide
ethnicity strategy to better represent the
communities we serve, with 3.0% of leadership
roles in the UK and US held by colleagues of
Black heritage in 2023, against our ambition of
3.4% by 2025. Additionally, in 2023, over
37.8% of our senior leaders have identified as
being from an Asian heritage background.
In the following ‘ESG overview‘ section, we outline
Footnote Arrow.jpg
how we put our purpose and values into practice.
Transition
Support the transition to net zero
In 2020, we set out our ambition to become a
net zero bank by 2050. Since then, we have
taken a number of steps to execute on our
ambition and manage climate risks. In January
2024, we published our first net zero transition
plan, which provides an overview of the
progress we have made to date and the
actions being taken and planned to embed our
net zero ambition across HSBC. It sets out how
we intend to harness our strengths and
capabilities in the areas where we believe we
can support large-scale emissions reduction:
transitioning industry, catalysing the new
economy, and decarbonising trade and supply
chains.
To support our customers through the
transition to net zero and to a sustainable
future, in 2020, we set out an ambition to
provide and facilitate $750bn to $1tn of
sustainable finance and investments by 2030.
In 2023, we provided and facilitated $83.7bn of
sustainable finance and investments, bringing
our cumulative total since January 2020 to
$294.4bn.
As part of our ambition to align our financed
emissions to achieve net zero by 2050, we
have set on-balance sheet or combined
financed emissions targets for a number of
emission-intensive sectors.
Work continues on the integration of ESG and
climate analysis into HSBC Asset
Management’s actively managed product
offerings to help ensure the ESG risks faced by
companies are considered when making
investment decisions and to assess ESG risks
and opportunities that could impact investment
performance.
We also made progress in our ambition to
become net zero in our own operations and
supply chain by 2030. In 2023, we reduced our
absolute greenhouse gas emissions in our
operations to 293,333 tonnes CO2e, which
represents a 57.3% reduction from our 2019
baseline.
For further details on our climate ambition, see
Footnote Arrow.jpg
the following ‘ESG overview’ section.
HSBC Holdings plc 13
ESG overview
We are taking steps to incorporate environmental, social and governance principles
throughout the organisation, supporting the success of our customers, people and other
stakeholders.
Our approach
We are guided by our purpose: to open up a
world of opportunity for our customers,
colleagues and communities. Our purpose is
underpinned by our values: we value
difference; we succeed together; we take
responsibility; and we get it done.
Our approach to ESG is shaped by our
purpose and values and a desire to create
sustainable long-term value for our
stakeholders. As an international bank with
significant breadth and scale, we understand
that our economies, societies, supply chains
and people’s lives are interconnected. We
recognise we can play an important role in
helping to tackle ESG challenges. We focus
our efforts on three areas: the transition to
net zero, building inclusion and resilience,
and acting responsibly.
Transition to net zero
In 2020, we set an ambition to become a net
zero bank by 2050. Since then, we have
made progress in support of this ambition –
including providing and facilitating
sustainable finance and investment for our
customers, updating several of our
sustainability and investment risk policies,
and setting 2030 targets for financed
emissions in a range of high-emitting
sectors.
We recognise both the commercial
opportunity of taking action to transition to
net zero and the potential risks of inaction by
society at large. In our net zero transition
plan, we provide an overview of the actions
we are taking and plan to take to support our
customers, embed net zero into the way we
operate and partner for systemic change. We
also set out how we are starting to work to
integrate nature and just transition
considerations into our net zero approach.
We set out in more detail the steps we are
taking on our climate ambitions in the ESG
review on page 41.
Build inclusion and resilience
To help create long-term value for all
stakeholders, we focus on fostering inclusion
and building resilience for our colleagues,
our customers and the communities we
operate within.
For colleagues, we focus on creating an
inclusive, healthy and rewarding
environment as this helps us to attract,
develop and retain the best talent, and we
support their resilience through well-being
and learning resources. We continue to
make progress towards our goals for gender
and ethnic diversity.
We strive to provide an inclusive and
accessible banking experience for our
customers. We do this by providing
resources that help them manage their
finances, and services that help them protect
what they value.
We are developing an updated global
philanthropy strategy that aligns with our
ESG areas of focus: ‘transition to net zero’
and ‘building inclusion and resilience’.
Act responsibly
We are focused on operating a strong and
sustainable business that puts the customer
first, values good governance, and gives our
stakeholders confidence in how we do what
we do. Our conduct approach guides us to
do the right thing and to focus on the impact
we have on our customers and the financial
markets in which we operate. Customer
experience is at the heart of how we operate.
We aim to act responsibly and with integrity
across the value chain.
On page 15, we have set out ways that we
have supported our stakeholders through a
challenging year.
ESG disclosure map and directory
Transition to
net zero
Our approach to the transition
Read more on our approach to the transition to net zero
Page 45
Footnote Arrow.jpg
Supporting our customers
Read more on our progress made against our $750bn to
$1tn sustainable finance and investment ambition
Page 49
Footnote Arrow.jpg
Read more on our progress made against our ambition to
achieve net zero in our financed emissions by 2050
Page 53
Footnote Arrow.jpg
Embedding net zero into the way we
operate
Read more on our ambition to achieve net zero in our own
operations and supply chain by 2030
Page 63
Footnote Arrow.jpg
Partnering for systemic change
Read more on how we partner externally in support of
systemic change
Page 68
Footnote Arrow.jpg
Detailed Task Force on Climate-related
Financial Disclosures (‘TCFD’)
We make disclosures consistent with Task Force on
Climate-related Financial Disclosures (‘TCFD’)
recommendations, highlighted with the symbol: TCFD
Page 69
Footnote Arrow.jpg
Build
inclusion and
resilience
Diversity and inclusion disclosures
Read more on how we are building an inclusive
environment that reflects our customers and communities,
and our latest pay gap statistics
Page 76
Footnote Arrow.jpg
Pay gap disclosures
Page 77
Footnote Arrow.jpg
Act
responsibly
How we govern ESG
Read more on our approach to ESG governance and
human rights
Page 88
Footnote Arrow.jpg
Page 89
Footnote Arrow.jpg
Human rights and modern slavery
disclosures
How our ESG targets link to executive
remuneration
Read more on our ESG targets embedded in executive
remuneration
Page 16
Footnote Arrow.jpg
Pages 320 to 335
Footnote Arrow.jpg
ESG Data Pack
Detailed ESG information
Our ESG Data Pack provides more granular ESG
information, including the breakdown of our sustainable
finance and investment progress, and complaints volumes
www.hsbc.com/esg
14 HSBC Holdings plc
Engaging with our stakeholders and our material ESG topics
We know that engaging with our stakeholders is core to being a responsible business. To determine material topics that our stakeholders are
interested in, we conduct a number of activities throughout the year, including engagements outlined in the table below. Disclosure standards
such as the TCFD, World Economic Forum (‘WEF’) Stakeholder Capitalism Metrics and Sustainability Accounting Standards Board (‘SASB’),
as well as the ESG Guide under the Hong Kong Stock Exchange Listing Rules and other applicable rules and regulations, are considered as
part of the identification of material issues and disclosures.
Our stakeholders
How we engage
Material topics highlighted by the
engagement1
Customers
Customers.jpg
Our customers’ voices are heard through our interactions with
them, surveys and by listening to their complaints.
–Customer advocacy
–Cybersecurity
–Employee training
–Diversity and inclusion
–Employee engagement
–Supporting our customers – financed
emissions
–Embedding net zero into the way we
operate
–Sustainability risk policies, including
thermal coal phase-out policy and energy
policy
–Net zero transition plan
–Financial inclusion and community
investment
–Climate risk
–Anti-bribery and corruption
–Conduct and product responsibility
–Supply chain management
–Human rights
Employees
Employees.jpg
Our colleagues’ voices are heard through our annual Snapshot
survey, Exchange meetings, global jams, townhalls, leadership
summits, and our ‘speak-up’ channels, including our global
whistleblowing platform, HSBC Confidential.
Investors 
Investors.jpg
We engage with our shareholders through our AGMs, virtual and
in-person meetings, investor roadshows, conferences and our
annual investor survey.
Communities
Communities.jpg
We engage with non-governmental organisations (‘NGOs’),
charities and other civil society groups through forums, summits
and roundtables supporting ESG causes such as COP28. We
engage directly on specific issues by taking part in working groups.
Regulators and
governments
Regs and Gov.jpg
We proactively engage with regulators and governments to build
strong relationships through virtual and in-person meetings and by
responding to consultations individually and jointly via industry
bodies.
Suppliers 
suppliers.jpg
Our code of conduct sets out our ambitions, targets and
commitments on the environment, diversity and human rights, and
outlines the minimum standards we expect of our suppliers. We
engage with key suppliers in real estate, technology and other
sectors through meetings.
1 These form part of our ESG disclosures suite together with other requirements, and are not exhaustive or exclusive to one stakeholder group. For further details of our
disclosures, see our ESG review and ESG Data Pack, as well as our ESG reporting centre at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-
reporting-centre.
Supporting our customers in challenging
economic times
We know that many of our customers
continue to face difficult financial
circumstances due to cost of living
pressures, and we are working to support
them. As the rising cost of living has been
particularly high in the UK, one of our largest
markets, most of our initiatives focused on
supporting our UK personal and business
customers. We have enhanced our range of
digital resources available on our website
and we are proactively approaching those
most in need – both personal and business
customers – to offer targeted support and
help build their financial resilience.
Proactive support
For personal customers in financial difficulty,
we have developed our digital services with
improvements to the ‘Rising cost of living’
hub on our public website in the UK. Use of
segmentation data has enabled us to take a
proactive approach to supporting customers
and offering targeted solutions to those who
are identified as being most in need.
We have engaged with vulnerable customer
groups through cost of living calls, targeted
emails and direct mail. In 2023, we also:
–offered customers the option to switch
mortgage rates early, extend their
mortgage term with an option to reverse it
at a later date, or pay interest only for six
months, as part of our commitment to the
new UK Mortgage Charter;
–offered a temporary reduction of fees on
arranged overdrafts to help those most in
need pay less;
–held over 1,000 financial well-being
webinars, including 227 cost of living
sessions for 50,000 customers and
colleagues;
–helped more than 37,000 customers
identify £2.9m in potential benefits by
providing access to a benefits calculator
tool via our website; and
–helped more than 130,000 customers
generate a financial fitness score, and
obtain tips on how to improve their financial
resilience using our online financial fitness
tool.
In the UK, CMB has continued to support
commercial banking clients exhibiting signs of
financial vulnerability. We reviewed client
needs on a case-by-case basis and provided
solutions including repayment holidays,
extending loan repayments and offering
extensions to collection periods. The use of
data and front-line insights has improved our
ability to identify financially vulnerable
customers.
In 2023, we contacted targeted clients to
help improve awareness of the support
available, including communicating with over
178,000 SMEs and proactively making over
43,000 outbound calls.
Increasing understanding of fraud and scam
risk and education on how to protect against
becoming a victim continues to be another
key area of focus. In 2023, we also:
–held fraud and scam awareness webinars
to highlight recent trends and case studies,
attended by approximately 4,300
customers;
–sent 2.1 million emails and 300,000 letters
in quarterly campaigns to share our insights
and enhance understanding of key fraud
topics and trends; and
–published 44 articles and alerts on the
HSBC Fraud and Cyber Awareness mobile
app, covering a broad range of topics as
well as any emerging threats and trends.
For further details of our work to support
Footnote Arrow.jpg
vulnerable communities and customers see page 85.
For further details on our conduct and product
Footnote Arrow.jpg
responsibilities, see the ESG review on page 96.
HSBC Holdings plc 15
Our ESG ambitions, metrics and targets
TCFD
We have established ambitions and targets
that guide how we do business, including
how we operate and how we serve our
customers. These include targets designed
to help track our progress against our
environmental and social sustainability
goals. They also help us to improve
employee advocacy and the diversity of
senior leadership, as well as strengthen our
market conduct. The targets for these
measures are linked to the pillars of our ESG
strategy: transition to net zero, building
inclusion and resilience, and acting
responsibly.
To help us achieve our ESG ambitions, a
number of measures are included in the
annual incentive and long-term incentive
scorecards of the Group Chief Executive,
Group Chief Financial Officer and Group
Executives that underpin the ESG metrics in
the table below.
For a summary of how all financial and non-
financial metrics link to executive
remuneration, see pages 320 to 335 of the
Directors’ remuneration report.
The table below sets out some of our key
ESG metrics that we use to measure our
progress against our ambitions. For further
details of how we are doing, see the ESG
review on page 41.
Environmental:
Transition to net
zero1
Sustainable finance and investment2
Net zero in our own operations3
Financed emissions4
$294.4bn
57.3%
7 sectors
Cumulative total provided and facilitated
since January 2020.
(2022: $210.7bn)
Ambition: Provide and facilitate
$750bn to $1tn of sustainable
finance and investment by 2030.
Reduction in absolute operational
greenhouse gas emissions from
2019 baseline.
(2022: 58.5%)
Ambition: To be net zero in our own
operations and supply chain by
2030.
Number of sectors where we
have set financed emissions
targets, comprising five on-
balance sheet and two combined
financed emissions targets.
Ambition: Align our financed
emissions to achieve net zero by
2050.
Social:
Build inclusion
and resilience
Gender diversity5
Black heritage5
Employee engagement6
34.1%
3.0%
77%
Senior leadership roles held by women.                                   
(2022: 33.3%)                   
Ambition: Achieve 35% senior
leadership roles held by women by
2025.
Senior leadership roles held by
Black heritage colleagues in the UK
and US combined (2022: 2.5% )                 
Ambition: 3.4% of senior leadership
roles held by Black heritage
colleagues in the UK and US
combined by 2025.
Employee engagement score.
(2022: 74%)                           
Ambition: Maintain 72% in the
employee Snapshot engagement
index.
Governance:
Acting
responsibly
Conduct training7
Customer satisfaction8
98%
3 out of 6
5 out of 6
Employees who completed conduct
training in 2023.
(2022: 98%)
Target: At least 98% of employees
complete conduct and financial crime
training each year.
WPB markets that sustained top-
three rank and/or improved in
customer satisfaction.
(2022: 4 out of 6)
Target: To be ranked top three and/
or improve customer satisfaction
rank.
CMB markets that sustained top-
three rank and/or improved in
customer satisfaction.
(2022: 5 out of 6)
Target: To be ranked top three
and/or improve customer
satisfaction rank
1 For further details of our approach to transition to net zero, methodology and third -party limited assurance reports on financed emissions, sustainable finance and
investment progress, and our own operations’ scope 1, 2 and 3 (business travel and supply chain) greenhouse gas emissions data, see www.hsbc.com/who-we-are/
esg-and-responsible-business/esg-reporting-centre.
2 In October 2020, we announced our ambition to provide and facilitate between $750bn to $1tn of sustainable finance and investment by 2030. For further details
and breakdown, see the ESG review on page 49. For details of how this target links with the scorecards, see page 320.
3 This absolute greenhouse gas emission figure covers scope 1, scope 2 and scope 3 business travel emissions. For further details of how this target links with the
scorecards, see page 320. 
4 See page 53 for further details of our targets, which include combined on-balance sheet financed emissions and facilitated emission targets for two emissions-
intensive sectors: oil and gas, and power and utilities. The remaining five sectors for which we have set on-balance sheet financed emissions targets are: cement; iron,
steel and aluminium; aviation; automotive; and thermal coal mining.
5 Senior leadership is classified as those at band 3 and above in our global career band structure. For further details, see the ESG review on page 77. For details of
how this target links with the scorecards, see page 320. Colleagues in Canada are excluded from this disclosure to align with scorecards.
6 For further details, see the ESG review on page 79. For details of how this target links with the scorecards, see page 320.
7 The completion rate shown relates to the ‘Fighting financial crime’ training module in 2023 and covers permanent and non-permanent employees. The latest global
conduct training ‘Conduct matters and taking responsibility – 2023’ was launched in December 2023 and will run through the first quarter.
8 The markets where we report rank positions for WPB and CMB – the UK, Hong Kong, mainland China, India, Mexico and Singapore – are in line with the annual
executive scorecards. Our WPB NPS ranking in mainland China is based on 2022 results. Due to data integrity challenges, we are unable to produce a 2023 ranking.
For further details of customer satisfaction, see the ESG review on page 91. For further details of how this target links with the scorecards, see page 320.
16 HSBC Holdings plc
Task Force on Climate-related Financial Disclosures (‘TCFD’)
TCFD
The Financial Stability Board’s Task Force on
Climate-related Financial Disclosures
(‘TCFD’) recommendations set an important
framework for understanding and analysing
climate-related risks, and we are committed
to regular and transparent reporting to help
communicate and track our progress. We
will advocate the same from our customers,
suppliers and the industry.
We have set out our key climate-related
financial disclosures throughout the Annual
Report and Accounts 2023 and related
disclosures. We recognise that further work
lies ahead as we continue to develop our
management and reporting capabilities. In
2023, we made certain enhancements to our
disclosures. These include enhancing our
merger and acquisition process to consider
potential climate and sustainability-related
targets, net zero transition plans and climate
strategy, and how this relates to HSBC. In
addition, we published our net zero transition
plan.
We have considered our ‘comply or explain’
obligation under both the UK’s Financial
Conduct Authority’s Listing Rules and
Sections 414CA and 414CB of the UK
Companies Act 2006, and confirm that we
have made disclosures consistent with the
TCFD Recommendations and Recommended
Disclosures, including its annexes and
supplemental guidance, save for certain
items, which we summarise below.
–For financed emissions we do not plan to
set 2025 targets. We set targets in line
with the Net-Zero Banking Alliance (‘NZBA‘)
guidelines by setting 2030 targets. While
the NZBA defines 2030 as intermediate, we
use different time horizons for climate risk
management. For climate, we define short
term as time periods up to 2025; medium
term is between 2026 and 2035; and long
term is between 2036 and 2050. These
time periods align to the Climate Action
100+ disclosure framework. In 2023, we
disclosed interim 2030 targets for financed
emissions for a number of sectors as we
outline on page 18. Following this, we have
now set combined on-balance sheet
financed emissions and facilitated
emissions targets for two emissions-
intensive sectors: oil and gas, and power
and utilities.
–The methodology and data used for
financed emissions is evolving and we
expect industry guidance, market practice,
data availability, scenarios and regulatory
disclosure requirements to continue to
change, along with the shape of our own
business. We expect to periodically review
and, if required, update our methodologies,
baselines, scenarios, and targets to reflect
real economy decarbonisation and evolving
guidance and data.
–We do not fully disclose impacts from
climate-related opportunities on financial
planning and performance including on
revenue, costs and the balance sheet,
quantitative scenario analysis, detailed
climate risk exposures for all sectors and
geographies or physical risk metrics. This is
due to transitional challenges in relation to
data limitations, although nascent work is
ongoing in these areas. We expect these
data limitations to be addressed in the
medium term as more reliable data
becomes available and technology solutions
are implemented.
–We currently disclose four out of 15
categories of scope 3 greenhouse gas
emissions including business travel, supply
chain and financed emissions. In relation to
financed emissions, we publish on-balance
sheet financed emissions for a number of
sectors as detailed on page 18. We also
publish facilitated emissions for the oil and
gas, and power and utilities sectors. Future
disclosures on financed emissions and
related risks are reliant on our customers
publicly disclosing their greenhouse gas
emissions, targets and plans, and related
risks. We recognise the need to provide
early transparency on climate disclosures
but balance this with the recognition that
existing data and reporting processes
require significant enhancements.
For a full summary of our TCFD disclosures,
Footnote Arrow.jpg
including detailed disclosure locations for additional
information, see pages 69 to 74. The additional
information section on page 1e provides further
detail.
HSBC Holdings plc 17
How we measure our net zero progress
TCFD
We are helping the transition to a net zero
economy by transforming ourselves, and
supporting our customers to make their own
transitions. Our ambition is to align our
financed emissions to net zero by 2050 or
sooner.
Our net zero transition plan sets out how we
intend to harness our strengths and
capabilities in areas where we believe we
can support large-scale emissions reduction:
transitioning industry, catalysing the new
economy, and decarbonising trade and
supply chains. The plan also provides details
on our sectoral approach, and on our
implementation plan to embed net zero into
the way we operate.
We continue to track our progress against
our ambition to provide and facilitate $750bn
to $1tn of sustainable finance and
investment by 2030, aligned to our published
data dictionary, and our ambition to achieve
net zero in our own operations and supply
chain by 2030. We also recognise that green
and sustainable finance and investment
taxonomies are not consistent globally, and
evolving taxonomies and practices could
result in revisions in our sustainable finance
reporting going forward.
To date, we have set 2030 financed
emissions targets across energy, heavy
industry and transport, specifically for the
following sectors: oil and gas; power and
utilities; cement; iron, steel and aluminium;
aviation; automotive; and thermal coal
mining.
Following a reduction in our exposure to the
shipping sector after the strategic sale of part
of our European shipping portfolio in 2023,
and work undertaken to assess the
materiality of our remaining portfolio from a
financed emissions perspective, we have
concluded that the remaining exposure as of
year-end 2023 is not material enough to
warrant setting a stand-alone target. This
aligns with NZBA guidelines on sector
inclusion for target setting. Due to ongoing
data availability and quality challenges, we
continue to assess our financed emissions
for our real estate and agriculture sectors.
We recognise that there is a significant
amount of uncertainty and complexity
related to the transition, and that progress in
the real economy will depend heavily on
external factors including the policy and
regulatory landscape across markets, the
speed of technological innovation and
growth, and economic and geopolitical
events. In addition, climate science and the
availability and quality of climate data
continue to evolve, and the net zero-aligned
scenarios upon which we have based our
approach will also update over time to keep
pace with real economy developments.
Emissions and broader customer data is also
expected to improve, as well as approaches
and standards for greenhouse gas
accounting and target setting. As a result of
this, we expect to regularly refine and update
our analysis as well as data collection and
consolidation processes to accommodate
new data sources and updated
methodologies and scenarios, and intend to
be transparent on any changes we make and
why. As an example, our ESG review
includes recalculated 2019 and 2020
financed emissions figures for the oil and
gas, and power and utilities sectors. In
addition, periodic updates to published net
zero-aligned scenarios mean that it will be
important that our net zero-aligned reference
scenario choice, and by extension our target-
setting approach, remain in step with the
evolving real economy context and is
informed by the latest science.
In the following table, we set out our metrics
and indicators and assess our progress
against them.
For further details of our approach to measuring
Footnote Arrow.jpg
financed emissions, including scope, methodology,
assumptions and limitations, see page 53.
Net zero implementation plan
Metrics and indicators
Progress to date
Supporting our customers
Sustainable finance and
investment provided and
facilitated ($bn)1
$294.4bn cumulative progress since 2020 (for further breakdown see
page 49)
Number of sectors analysed for
financed emissions2
We have set seven financed emissions targets, comprising five on-balance
sheet and two combined financed emissions targets so far (see pages 53 to
62)
Thermal coal financing
exposures2, 3
Our thermal coal financing drawn balance exposure was approximately
$1bn as at 31 December 2020 (for further details, see page 67)
Embedding net zero into the
way we operate
Percentage of absolute
operational greenhouse gas
emissions reduced4
57.3% reduction in absolute greenhouse gas emissions from 2019 baseline
(see page 63)
Percentage of renewable
electricity sourced across our
operations
Increase from 48.3% in 2022 to 58.4% (see page 63)
Percentage of energy
consumption reduced
26.3% reduction in energy consumption from 2019 baseline (see page 63)
Partnering for systemic
change
Philanthropic investment in
climate innovation ventures,
renewable energy, and nature-
based solutions
Committed $105m to our NGO partners since 2020, as part of the Climate
Solutions Partnership (see page 68)
1 The detailed definitions of the contributing activities for sustainable finance and investment are available in our revised Sustainable Finance and Investment Data
Dictionary 2023. For this, together with our ESG Data Pack and third-party limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/
esg-reporting-centre.
2 For further details of our financed emissions methodology, exclusions and limitations, see our Financed Emissions and Thermal Coal Exposures Methodology at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
3 Data is subject to independent third-party limited assurance in accordance with ISAE 3000/ISAE 3410. For further details, see our Financed Emissions and Thermal
Coal Exposures Methodology and independent third-party limited assurance report at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-
centre.
4 Our reported scope 3 greenhouse gas emissions of our own operations in 2023 are related to business travel. For further details on scope 1, 2 and 3, and our
progress on greenhouse gas emissions and renewable energy targets, see page 64 and our ESG Data Pack at www.hsbc.com/esg. For further details of our
methodology and independent third-party limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
18 HSBC Holdings plc
Responsible business culture
We have a responsibility to help protect our
customers, our communities and the
integrity of the financial system.
Employee matters
We are building a responsible business
culture that values difference, takes
responsibility, seeks different perspectives
and upholds good standards of conduct.
There may be times when our colleagues
need to speak up about behaviours in the
workplace. In the first instance we
encourage colleagues to speak to their line
manager, and our annual Snapshot survey
showed that 86% of colleagues have trust in
their direct manager. HSBC Confidential is
our whistleblowing channel, which allows
colleagues past and present to raise
concerns confidentially and, if preferred,
anonymously (subject to local laws). Our
Snapshot survey showed that 80% of
colleagues feel able to speak up when they
see behaviours they consider to be wrong.
We promote an environment where our
colleagues are treated with dignity and
respect and we act where we find
behaviours that fall short. Our inclusion index
measures our colleagues’ sense of belonging
and psychological safety within the
organisation, and in 2023 this increased to
78%. 
We aspire to be an organisation that is
representative of the communities in which
we serve. We have committed to achieving a
35% representation of women in senior
leadership roles (classified as those at band 3
and above in our global career band
structure) by 2025. We remain on track,
having achieved 34.1% in 2023.
We aspire to achieve a 3.4% representation
of Black heritage colleagues in senior
leadership roles across the UK and US
combined by 2025. We are on track to
achieve this, having increased our
representation to 3.0% this year. We
continue to make progress but we know
there is more to be done.
To ensure we set representation goals that
are locally relevant, we enable our
employees to self-disclose ethnicity data. We
have enabled 91% of our colleagues to
disclose their ethnicity, with 62% currently
choosing to do so, where this is legally
permissible.
The table below outlines high-level diversity
metrics.
3848290852954
3848290852969
3848290852975
1 Senior leadership is classified as those at band 3
and above in our global career band structure.
For further details of how we look after our people,
Footnote Arrow.jpg
including our diversity targets, how we encourage
our employees to speak up, and our approach to
employee conduct, see the Social section of the ESG
review on page 75.
Listening to our customers
We continue to listen, learn and act on our
customers’ feedback. We have implemented
the net promoter system, enabling us to
share customer feedback with our front-line
teams and allowing them to respond directly
to customers. We also have dedicated global
forums to promote continuous improvement
of our customers’ experience.
Social matters
We invest in the long-term prosperity of the
communities where we operate. We aim to
provide people, especially those in
marginalised and vulnerable communities,
with the skills and knowledge needed to
thrive through the transition to a sustainable
future. For this reason, we focus our support
on programmes that help build inclusion and
resilience. We also support climate solutions
and innovation, and contribute to disaster
relief when needed. For examples of our
programmes, see the ‘Communities’ section
of the ESG review on page 86.
Human rights
As set out in our Human Rights Statement,
we recognise the role of business in
respecting human rights. Our approach is
guided by the UN Guiding Principles on
Business and Human Rights (‘UNGPs’) and
the OECD Guidelines for Multinational
Enterprises on Responsible Business
Conduct. Our Human Rights Statement, and
annual statements under the UK’s Modern
Slavery Act, are available on
www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
For further details of our approach, see the
‘Human rights’ section of the ESG review on
page 89.
Anti-corruption and anti-bribery
We are required to comply with all applicable
anti-bribery and corruption laws in every
market and jurisdiction in which we operate
while focusing on the spirit of relevant laws
and regulations to demonstrate our
commitment to ethical behaviours and
conduct as part of our environmental, social
and corporate governance.
Environmental matters
For details of our climate ambition and
carbon emission metrics, see the ESG review
on page 44.
Group non-financial and sustainability
information statement
This section primarily covers Group non-
financial and sustainability information as
required by applicable regulations. Other
related information can be found as
follows:
For further details of our key performance
Footnote Arrow.jpg
indicators, see page 1.
For further details of our business model, see
Footnote Arrow.jpg
page 4.
For further details of our principal risks and how
Footnote Arrow.jpg
they are managed, see pages 37 to 39.
  For further details of our TCFD disclosures,
Footnote Arrow.jpg
including alignment with sections 414CA and
414CB of the Companies Act 2006, see pages 69
to 74.
Training colleagues and partners on digital accessibility
With ‘Digitise’ being one of our strategic pillars, we are committed to improving how our customers can
access our online and mobile services. We review against the Web Content Accessibility Guidelines for
our websites in 23 markets and mobile apps in 18 markets, and engaged with more than 10,000
colleagues, partners and companies through our digital accessibility training and awareness programme
in 2023. To share best practice externally, HSBC sponsored and hosted AbilityNet’s Techshare Pro at our
head office in the UK. Our work on digital accessibility was recognised through 11 awards in 2023,
including in Hong Kong, where we were the only financial services provider to be recognised for our core
banking apps.
HSBC Holdings plc 19
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20 HSBC Holdings plc
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HSBC Holdings plc 23
Remuneration
The Group’s financial and strategic performance is reflected in remuneration outcomes for
colleagues.
Our reward principles and commitments to colleagues
Our goal is to deliver a unique and
exceptional experience to colleagues so that
we sustain our performance in competitive
markets. Our reward principles and
commitments centre on rewarding
colleagues responsibly, recognising their
success and supporting colleagues to grow.
Pay is a critical part of our proposition. We
were encouraged by a nine percentage point
improvement to 52% in colleagues’
perceptions they are paid fairly because of
actions we took through 2022. The Group
Remuneration Committee remain very
focused on the need to improve this further.
For 2024, we are putting more structure in
place to improve transparency and clarity
about how we make pay decisions.
Rewarding colleagues responsibly
Fixed pay increases for 2024 were
determined based on consistent principles to
help address wage inflation in the markets
where we operate.
As part of the 2023 pay review we
introduced fixed pay ranges to help
managers make fair and competitive fixed
pay decisions and improve clarity for
colleagues.
We will award an overall global fixed pay
increase of 4.4% in 2024, compared with
5.5% for the previous year, reflecting lower
wage inflation in many markets.
The level of increases vary by market,
depending on the economic situation and
individual roles.
To ensure fixed pay levels provide financial
security to colleagues, we established Living
Wage benchmarks for every market and
have been certified by the Fair Wage
Network as a global Living Wage employer
for 2024. This is an important commitment
we make to our employees and the
communities in which we operate to help
ensure we pay responsibly and provide
financial security.
More than 95% of colleagues have private
medical insurance, a retirement plan and life
insurance.
.
Recognising colleagues’ success
The Group Remuneration Committee
determined an overall variable pay pool for
Group employees of $3,774m (2022:
$3,359m). This followed a review of our
performance against financial and non-
financial metrics set out in the Group risk
framework.
Individual variable pay outcomes varied
significantly depending on role, business
area and performance. Our highest
performers and those who role-model our
values-aligned behaviours received the
largest increases in variable pay compared
with the previous year.
Variable pay pool
($m)
321057395490684
From 2024, we will introduce a new variable
pay structure for over 150,000 junior and
middle management colleagues, providing
more clarity around the variable pay levels
for on-target performance, while retaining
flexibility to differentiate outcomes for
performance.
Supporting colleagues to grow
Guided by data and colleague feedback, the
pillars of our well-being programme are
mental, physical, financial and social well-
being.
In our 2023 employee Snapshot survey, 83%
of employees said their mental health was
positive, while all measures of physical well-
being (exercise, sleep, nutrition) have
improved. For the second year running,
HSBC has been ranked top tier for mental
health in the global CCLA Corporate Mental
Health Benchmark.
For details of how the Group Remuneration
Footnote Arrow.jpg
Committee sets the pool, see page 315.
Remuneration for our executive Directors
Variable pay for our executive Directors is
driven by achievement against performance
scorecards set by the Group Remuneration
Committee at the start of the year to align
pay outcomes with the delivery of our
strategy and plan.
The Committee considered carefully the
impact of strategic transactions and one-offs
on the Group’s financial performance in
2023. Consistent with the approach in prior
years, the Committee judged that it was
appropriate to assess financial performance
for the purpose of the annual scorecard
excluding these items, to ensure that out-
turns were not impacted by one-offs.
Reflecting on the overall risk management in
the year and in respect of the PRA Notice
relating to compliance with the UK Financial
Services Compensation Scheme and related
Depositor Protection rules, the Committee
applied a downward adjustment of 7.5% to
Noel Quinn’s annual incentive outcome.
The Committee also carefully considered the
executive Directors’ pay outcomes in the
context of pay decisions made for the wider
workforce and determined that these were
an appropriate reflection of Group, business
and individual performance delivered in
2023.
Details of the current executive Directors’
Footnote Arrow.jpg
remuneration policy can be found on pages 257 to
265 of our Annual Report and Accounts 2021.
Executive Directors’ scorecard outcomes
(% of maximum opportunity)
2023 annual incentive
Group Chief Executive
70.24%
Group Chief Financial Officer
76.75%
2021–2023 long-term incentive1
Group Chief Executive
75.00%
1The current Group Chief Financial Officer did not
participate in the 2021–2023 long-term incentive.
For details of Directors’ pay and performance for 2023, see the Directors’ remuneration report on page 320.
Footnote Arrow.jpg
24 HSBC Holdings plc
Financial overview
In assessing the Group’s financial performance, management uses a range
of financial measures that focus on the delivery of sustainable returns for
our shareholders and maintaining our financial strength.
Executive summary
Our financial performance demonstrates the
execution of our strategy and the strengthened
platform for growth, and in 2023 it was
favourably impacted by a higher global interest
rate environment.
This section sets out our key Group financial
targets and the progress we made towards
these in 2023, and – where relevant – our
expectations for 2024 and beyond. We also
include a more detailed table covering further
key financial metrics that we consider insightful
for understanding the Group’s performance.
The Group financial results that follow provide
more detailed insight into the performance that
has driven the outcomes of our financial
targets. It covers income statement
performance on both a reported and constant
currency basis, and the main factors impacting
the strength of our balance sheet, capital and
liquidity position.
Group financial targets
Return on average tangible equity
adjusted symbol.jpg
14.6%
(2022: 10.0%)
In 2023, RoTE was 14.6%, an increase of 4.6
percentage points from 2022. Excluding the
impact of strategic transactions and the
impairment of our investment in BoCom,
RoTE was 15.6%.
From 2024, we intend to revise the
adjustments made to RoTE to exclude all
notable items, improving alignment with the
treatment of notable items in our other
income statement disclosures. On this basis,
we continue to target a RoTE in the mid-
teens for 2024. .
Our guidance reflects our current outlook for
the global macroeconomic environment,
including customer and financial markets
activity.
Target basis operating expenses
adjusted symbol.jpg
$31.6bn
(2022: $29.8bn)
In 2023, the Group targeted cost growth of
approximately 3% on a target basis. Our
target basis excluded the impact of foreign
currency translation differences, notable
items and the impact of retranslating the
2022 results of hyperinflationary economies
at constant currency, as well as cost growth
from our acquisition of SVB UK and related
investments internationally.
In 2023, target basis cost growth was 6%
compared with 2022. In addition to our
targeted growth of 3%, there was an
incremental rise of approximately 1%, primarily
due to technology expenditure, which we did
not mitigate. We also increased performance-
related pay, which resulted in a further rise of
around 1%. Costs grew by an additional 1%,
primarily due to a charge relating to the FDIC
special assessment.
In 2024, we will target growth of approximately
5% compared with 2023, on a target basis
(2023: $31.1bn). This target reflects our
current business plan for 2024, and includes
an increase in staff compensation, higher
technology spend and investment for growth
and efficiency, in part mitigated by cost
savings from actions taken during 2023.
Our cost target basis for 2024 excludes the
direct cost impact of the disposal in France and
the planned disposal in Canada from the 2023
baseline. It is measured on a constant currency
basis and excludes notable items and the
impact of retranslating the prior year results of
hyperinflationary economies at constant
currency.
Capital and dividend policy
CET1 ratio 
14.8%
Dividend payout ratio
50%
At 31 December 2023, our CET1 capital ratio
was 14.8%, which was higher than our
medium-term target range of 14% to 14.5%.
We intend to continue to manage the CET1
ratio to within this range.
The total dividend per share in 2023 of $0.61
resulted in a dividend payout ratio of 50% of
earnings per share. For the purposes of
computing our dividend payout ratio, we
exclude from earnings per share material
notable items and related impacts. See page
146 for our calculation of earnings per share.
We aim to retain our dividend payout ratio of
50% for 2024, excluding material notable
items and related impacts. From 2024 this
will be disclosed as our ‘dividend payout
ratio target basis’.
Interest rate management strategy
Our ambition is to maintain strong, resilient
returns through the interest rate cycle. As
part of our balance sheet structural
hedging and risk management strategy we
continue to seek opportunities to stabilise
future earnings and mitigate downside risk
from interest rate movements. During
2023, we took actions to increase the size
and duration of our structural hedge. This
has the effect of stabilising our future
earnings and contributed to a reduction in
the sensitivity of banking net interest
income (‘NII’), a new alternative
performance measure introduced in 2023,
from changes in interest rates.
Banking NII adjusts our NII, primarily for
the impact of funding trading and fair value
activities reported in interest expense. It
represents the Group’s banking revenue
that is directly impacted by changes in
interest rates. To supplement banking NII,
we also provide banking NII sensitivity to
demonstrate our revenue sensitivity to
interest rate movements. Management
uses these measures to determine the
deployment of our surplus funding, and to
help optimise our structural hedging and
risk management actions.
HSBC Holdings plc 25
Key financial metrics
For the year ended
Reported results
2023
20221
2021
Profit before tax ($m)
30,348
17,058
18,906
Profit after tax ($m)
24,559
16,249
14,693
Cost efficiency ratio (%)
48.5
64.6
69.9
Net interest margin (%)
1.66
1.42
1.20
Basic earnings per share ($)
1.15
0.72
0.62
Diluted earnings per share ($)
1.14
0.72
0.62
Dividend per ordinary share (in respect of the period) ($)
0.61
0.32
0.25
Dividend payout ratio (%)2
50
44
40
Alternative performance measures
adjusted symbol.jpg
Constant currency profit before tax ($m)
30,348
16,541
17,400
Constant currency cost efficiency ratio (%)
48.5
64.8
70.0
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans
and advances to customers (%)
0.36
0.36
(0.07)
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans
and advances to customers, including held for sale (%)
0.33
0.35
(0.07)
Basic earnings per share excluding material notable items and related impacts ($)
1.22
N/A
N/A
Return on average ordinary shareholders’ equity (%)
13.6
9.0
7.1
Return on average tangible equity (%)
14.6
10.0
8.3
Return on average tangible equity excluding strategic transactions and impairment of BoCom (%)
15.6
11.3
N/A
Target basis operating expenses ($m)
31,614
29,811
N/A
At 31 December
Balance sheet
2023
20221
2021
Total assets ($m)
3,038,677
2,949,286
2,957,939
Net loans and advances to customers ($m)
938,535
923,561
1,045,814
Customer accounts ($m)
1,611,647
1,570,303
1,710,574
Average interest-earning assets ($m)
2,161,746
2,143,758
2,209,513
Loans and advances to customers as % of customer accounts (%)
58.2
58.8
61.1
Total shareholders’ equity ($m)
185,329
177,833
198,250
Tangible ordinary shareholders’ equity ($m)
155,710
146,927
158,193
Net asset value per ordinary share at period end ($)
8.82
8.01
8.76
Tangible net asset value per ordinary share at period end ($)
8.19
7.44
7.88
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)3
14.8
14.2
15.8
Risk-weighted assets ($m)3,4
854,114
839,720
838,263
Total capital ratio (%)3,4
20.0
19.3
21.2
Leverage ratio (%)3,4
5.6
5.8
5.2
High-quality liquid assets (liquidity value) ($m)4,5
647,505
647,046
688,209
Liquidity coverage ratio (%)4,5
136
132
139
Net stable funding ratio (%)4,5
133
136
N/A
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions)
19,006
19,739
20,073
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary
shares (millions)
19,135
19,876
20,189
Average basic number of $0.50 ordinary shares outstanding (millions)
19,478
19,849
20,197
For reconciliation and analysis of our reported results on a constant currency basis, including lists of notable items, see page 124. Definitions and calculations of other
alternative performance measures are included in ‘Reconciliation of alternative performance measures’ on page 145.
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year ended 31
December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2 In 2023, our dividend payout ratio was adjusted for material notable items and related impacts, including all associated income statement impacts relating to those
items. In 2022, our dividend payout ratio was adjusted for the loss on classification to held for sale of our retail banking business in France, items relating to the
planned sale of our banking business in Canada, and the recognition of certain deferred tax assets. No items were adjusted for in 2021.
3 Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the
time. References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK‘s version of such regulation or
directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under UK law.
4 Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those submitted in
regulatory filings. Where differences are significant, we may restate in subsequent periods.
5 The liquidity coverage ratio is based on the average value of the preceding 12 months. The net stable funding ratio is based on the average value of four preceding
quarters.
26 HSBC Holdings plc
Basis of presentation
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, HSBC adopted IFRS 17
‘Insurance Contracts’. As required by the
standard, the Group applied the
requirements retrospectively with
comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from
the 1 January 2022 transition date.
For further details, see ‘Changes to
presentation from 1 January 2023’ on
page 100.
Changes to our reporting framework
On 1 January 2023, we updated our financial
reporting framework. We no longer report
‘adjusted’ results, which excluded the impact
of both foreign currency translation
differences and significant items. Instead, we
compute constant currency performance by
adjusting comparative reported results only
for the effects of foreign currency translation
differences between the relevant periods.
Constant currency performance
Constant currency performance is computed
by adjusting reported results of comparative
periods for the effects of foreign currency
translation differences, which distort period-
on-period comparisons.
We consider constant currency performance
to provide useful information for investors by
aligning internal and external reporting, and
reflecting how management assesses
period-on-period performance.
The results of our global businesses are
presented on a constant currency basis,
which is consistent with how we manage
and assess global business performance.
Notable items
We separately disclose ‘notable items‘,
which are components of our income
statement that management would consider
as outside the normal course of business and
generally non-recurring in nature.
The tables on pages 125 to 126 and pages
138 to 143 detail the effects of notable items
on each of our global business segments
and legal entities during 2023, 2022 and
2021.
Material notable items are a subset of
notable items, which are excluded from our
earnings per share measure for the purposes
of calculating our dividend payout ratio, and
from 2024 will be referred to as on a
‘dividend payout ratio target basis’.
Categorisation as a material notable is
dependent on the nature of each item in
conjunction with the financial impact on the
Group’s income statement.
Management view of revenue on a
constant currency basis
Our global business segment commentary
includes tables that provide breakdowns of
revenue on a constant currency basis by
major product. These reflect the basis on
which revenue performance of the
businesses is assessed and managed.
Comparative periods
Unless otherwise stated, all performance
commentary that follows compares our
results in 2023 with those of 2022.
Reported results (vs 2022)
Reported profit
Reported profit before tax of $30.3bn was
$13.3bn higher. This was driven by a
$15.4bn increase in revenue, primarily due to
growth in net interest income, reflecting the
impact of interest rate rises. The increase
also included a provisional gain of $1.6bn
recognised on the acquisition of SVB UK in
2023, as well as a year-on-year favourable
impact of $2.5bn associated with the sale of
our retail banking operations in France. This
reflected an initial impairment loss of $2.3bn
following the initial classification of these
operations as held for sale in 2022, a reversal
of $2.1bn in the first quarter of 2023 as the
sale became less certain, and a subsequent
impairment loss of $2.0bn as we reclassified
these operations as held for sale in the fourth
quarter of 2023.
These increases were in part offset by an
impairment charge in 2023 of $3.0bn relating
to our investment in BoCom. This
impairment reflected a reduction to the
accounting value-in-use in line with recent
market-wide developments in mainland
China. For further details, see page 101. This
impairment will have no material impact on
HSBC’s capital, capital ratios or distribution
capacity and therefore no impact on
dividends or share buy-backs. Reported
operating expenses decreased, primarily
reflecting a reduction in restructuring and
other related costs following the completion
of our cost-saving programme at the end of
2022, which mitigated growth notably from
higher technology spend, an increase in the
performance-related pay accrual and the
impact of inflation. Reported ECL of $3.4bn
decreased by $0.1bn and included charges
of $1.0bn relating to exposures in the
commercial real estate sector in mainland
China.
Reported profit after tax of $24.6bn was
$8.3bn higher than in 2022. This included a
higher tax expense, in part from the non-
recurrence of a $2.2bn gain in 2022 resulting
from the recognition of a deferred tax asset
from historical tax losses in HSBC Holdings.
Reported revenue
Reported revenue of $66.1bn was $15.4bn or
30% higher, which included a $2.5bn year-
on-year favourable impact relating to the sale
of our retail banking operations in France,
and the recognition of a $1.6bn provisional
gain on the acquisition of SVB UK in 2023, as
mentioned above.
The remaining growth primarily reflected the
impact of interest rate rises, mainly in Global
Payments Solutions (‘GPS’) in CMB and
GBM, Personal Banking and Global Private
Banking in WPB, as well as Securities
Services in GBM. There were also good
performances in Capital Markets and
Advisory and Securities Financing in GBM,
as well as in life insurance and asset
management in WPB. An increase in
revenue in Corporate Centre was driven by
Central Treasury, mainly due to the non-
recurrence of adverse fair value movements
on financial instruments, and valuation gains
on structural hedging.
These increases were partly offset by lower
Credit and Lending revenue in CMB and
GBM, mainly driven by a fall in balances and
margin compression, and a decline in
revenue in Equities in GBM, reflecting
weaker client demand and softer market
conditions.
Revenue reduced in Markets Treasury due to
the impact of rising interest rates on our
funding costs and flattening yield curves,
partly offset by increases from dynamic risk
management and redeployment of asset
disposals. We incurred losses on asset
disposals of $1.0bn relating to repositioning
and risk management activities in our hold-
to-collect-and-sell portfolio in certain key
legal entities. These actions are accretive to
net interest income and reduce the
consumption of the Group‘s financial
resources. This revenue is allocated to our
global businesses.
Revenue in 2023 was also adversely affected
by a $1.4bn impact of hyperinflationary
accounting in Argentina, including the
devaluation of the Argentinian peso,
compared with a $0.4bn adverse impact in
2022.
HSBC Holdings plc 27
Reported results continued
2023
2022
2021
2023 vs 2022
Impact of
FX
Reported results
$m
$m
$m
$m
%
%
Net operating income before change in expected credit
losses and other credit impairment charges (‘revenue’)
66,058
50,620
49,552
15,438
30
(2)
ECL
(3,447)
(3,584)
928
137
4
1
Net operating income
62,611
47,036
50,480
15,575
33
(2)
Total operating expenses
(32,070)
(32,701)
(34,620)
631
2
(1)
Operating profit
30,541
14,335
15,860
16,206
>100
(6)
Share of profit in associates and joint ventures less impairment
(193)
2,723
3,046
(2,916)
>(100)
—
Profit before tax
30,348
17,058
18,906
13,290
78
(6)
Tax expense
(5,789)
(809)
(4,213)
(4,980)
>(100)
Profit after tax
24,559
16,249
14,693
8,310
51
2023
2022
2021
Notable items
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
1,298
(2,737)
—
Fair value movements on financial instruments1
14
(618)
(221)
Restructuring and other related costs
—
(247)
(307)
Disposal losses on Markets Treasury repositioning
(977)
—
—
Currency translation on revenue notable items
—
(105)
—
Operating expenses
Disposals, acquisitions and related costs
(321)
(18)
—
Impairment of non-financial items
—
—
(587)
Restructuring and other related costs
136
(2,882)
(1,836)
Currency translation on operating expenses notable items
—
(31)
113
Share of profit in associates and joint ventures less impairment
Impairment of interest in associate
(3,000)
—
—
1  Fair value movements on non-qualifying hedges in HSBC Holdings.
Reported ECL
Reported ECL of $3.4bn were $0.1bn or 4%
lower. The charge in 2023 primarily
comprised stage 3 net charges, notably
related to mainland China commercial real
estate sector exposures. ECL charges in this
sector were $1.0bn in 2023. The charge in
2023 also reflected the impact of continued
economic uncertainty, rising interest rates
and inflationary pressures. The charge in
2022 included $1.3bn of charges related to
mainland China commercial real estate
exposures.
For further details of the calculation of ECL, see
Footnote Arrow.jpg
pages 192 to 204.
Reported operating expenses
Reported operating expenses of $32.1bn
were $0.6bn or 2% lower, primarily driven by
lower restructuring and other related costs of
$3.0bn following the completion of our cost
to achieve programme, which concluded at
the end of 2022. The reduction also included 
favourable foreign currency translation
differences between the periods of $0.4bn, a
$0.2bn reduction due to a reversal of
historical asset impairments, and the effects
of our continued cost discipline. There was
also a favourable impact of $0.2bn due to the
impact of hyperinflationary accounting in
Argentina in 2023.
These reductions were partly offset by
increases in technology costs, the impacts of
inflation, a higher performance-related pay
accrual and severance payments. There was
also an increase in the UK bank levy of
$0.3bn, including adjustments relating to prior
years, and we incurred a $0.2bn charge in the
US relating to the FDIC special assessment.
The number of employees expressed in full-
time equivalent staff (‘FTE’) at 31 December
2023 was 220,861, an increase of 1,662
compared with 31 December 2022. The
number of contractors at 31 December 2023
was 4,676, a decrease of 1,371 due to the
completion of our cost-saving programme.
Reported share of profit from associates
and joint ventures less impairment
Reported share of profit from associates and
joint ventures included an impairment charge
of $3.0bn relating to our investment in
BoCom due to a reduction to the accounting
value-in-use of the investment, resulting in a
loss of $0.2bn in 2023. This compared with a
profit of $2.7bn in 2022. The impact of the
impairment in 2023 was partly offset by an
increase in the share of profit from Saudi
Awwal Bank (‘SAB’).
Tax expense
The effective tax rate for 2023 of 19.1% was
higher than the 4.7% in 2022. The effective
tax rate for 2023 was increased by 2.3
percentage points by the non-deductible
impairment of investments in associates, and
reduced by 1.6 percentage points by the
release of provisions for uncertain tax
positions and reduced by 1.5 percentage
points by the non-taxable bargain purchase
gain on the acquisition of SVB UK. The
effective tax rate for 2022 was reduced by
12.8 percentage points by the recognition of
a deferred tax asset on historical tax losses
of HSBC Holdings as a result of improved
profit forecasts for the UK tax group.
Excluding these items, the effective tax rates
were 19.9% for 2023 and 17.5% for 2022.
28 HSBC Holdings plc
Constant currency results
2023
2022
2021
2023 vs 2022
Results – on a constant currency basis
adjusted symbol.jpg
$m
$m
$m
$m
%
Revenue
66,058
49,871
46,079
16,187
32
ECL
(3,447)
(3,630)
758
183
5
Total operating expenses
(32,070)
(32,302)
(32,244)
232
1
Operating profit
30,541
13,939
14,593
16,602
>100
Share of profit in associates and joint ventures less impairment
(193)
2,602
2,807
(2,795)
>(100)
Profit before tax
30,348
16,541
17,400
13,807
83
Profit before tax of $30.3bn was $13.8bn
higher than in 2022 on a constant currency
basis, primarily driven by higher revenue.
Revenue increased by $16.2bn or 32% on a
constant currency basis, which included a
$2.6bn year-on-year favourable impact
relating to the sale of our retail banking
operations in France, and a provisional gain
of $1.6bn recognised on the acquisition of
SVB UK in 2023. The remaining increase in
revenue was primarily due to growth in net
interest income from the impact of global
interest rate rises. There was also a good
performance from Capital Markets and
Advisory in GBM and higher revenue in
Corporate Centre.
Revenue reduced in Markets Treasury due
to the impact of rising interest rates on our
funding costs and flattening yield curves,
partly offset by increases from dynamic risk
management and the deployment of asset
disposals. Markets Treasury also incurred
losses on asset disposals of $1.0bn relating
to repositioning and risk management
activities in our hold-to-collect-and-sell
portfolio in certain key legal entities. These
actions are accretive to net interest income
and reduce the consumption of the Group‘s
financial resources. This revenue is allocated
to our global businesses.
ECL were $0.2bn or 5% lower on a constant
currency basis. The charge in 2023 primarily
comprised stage 3 net charges, notably related
to mainland China commercial real estate
sector exposures. ECL charges in this sector
were $1.0bn in 2023. The charge in 2023 also
reflected the impact of continued economic
uncertainty, rising interest rates and inflationary
pressures.
Operating expenses were $0.2bn or 1%
lower on a constant currency basis, as
reduced restructuring and other related costs
following the completion of our cost-saving
programme were broadly offset by increases
in technology costs, the impacts of inflation,
and a higher performance-related pay
accrual. There was also an increase in the UK
bank levy, including adjustments relating to
prior years, and a charge in the US relating to
a special assessment of the FDIC.
Share of profit in associates and joint
ventures less impairment included a $3.0bn
impairment of our investment in BoCom due
to a revision to the accounting value-in-use
of the investment, resulting in a loss of
$0.2bn in 2023. This compared with a share
of profit of $2.6bn in 2022 on a constant
currency basis. The impact of the impairment
was partly offset by an increase in the share
of profit from SAB.
Balance sheet and capital
Balance sheet strength
Total assets of $3.0tn were $89bn higher than
at 31 December 2022 on a reported basis, and
included the favourable effects of foreign
currency translation differences of $58bn.
Within total assets, there were $114bn of
assets held for sale, mainly related to our retail
banking operations in France and our banking
operations in Canada, which was broadly
unchanged compared with 2022.
On a constant currency basis, total assets rose
by $31bn, mainly from an increase in financial
investments and higher trading balances, while
cash and balances at central banks and
derivative asset balances fell.
Reported loans and advances to customers
increased by $15bn. On a constant currency
basis, loans and advances fell by $3bn, which
included an increase in secured home loans,
previously classified as held for sale in France.
There was mortgage balance growth in our
main legal entity in Hong Kong and in HSBC
UK, although lending fell in CMB and GBM in
our main entity in Hong Kong, including a
reduction in commercial real estate lending.
Reported customer accounts of $1.6tn
increased by $41bn. On a constant currency
basis, they grew by $13bn, notably from
growth in WPB in our main legal entity in Asia
and CMB in Europe.
Loans and advances to customers as a
percentage of customer accounts was 58.2%,
compared with 58.8% at 31 December 2022.
Distributable reserves
The distributable reserves of HSBC Holdings
at 31 December 2023 were $30.9bn, a
$4.3bn decrease since 2022, primarily driven
by $18.6bn in ordinary dividend, additional
tier 1 coupon and share buy-back payments,
offset by profits generated and other reserve
movements of $14.3bn. Distributable
reserves are sensitive to impairments of
investments in subsidiaries to the extent they
are not offset by the realisation of related
reserves. The impairment of BoCom in 2023
did not impact distributable reserves, as its
intermediate parent and direct subsidiary of
HSBC Holdings, HSBC Asia Holdings
Limited, was not impaired.
Capital position
We actively manage the Group’s capital
position to support our business strategy and
meet our regulatory requirements at all
times, including under stress, while
optimising our capital efficiency. To do this,
we monitor our capital position using a
number of measures. These include our
capital ratios and the impact on our capital
ratios as a result of stress.
Our CET1 ratio at 31 December 2023 was
14.8%, up 0.6 percentage points from 2022,
mainly driven by capital generation net of
dividends, share buy-backs and regulatory
adjustments, which was partly offset by an
increase in risk-weighted assets (‘RWAs’)
during the year.
Liquidity position
We actively manage the Group’s liquidity
and funding to support the business strategy
and meet regulatory requirements at all
times, including under stress. To do this, we
monitor our position using a number of risk
appetite measures, including the liquidity
coverage ratio and the net stable funding
ratio. During 2023, the average high-quality
liquid assets we held was $647.5bn. This
excludes high-quality liquid assets in legal
entities which are not transferable due to
local restrictions.
For further details, see page 242.
Footnote Arrow.jpg
Total assets ($bn)
$3,039bn
(2022: $2,949bn)
Common equity tier 1 ratio (%)
14.8%
(2022:14.2%)
HSBC Holdings plc 29
Wealth and Personal Banking
We serve 41 million customers globally, including
6.7 million who are international, from retail customers
to ultra high net worth individuals and their families.
Contribution to Group profit before tax
adjusted symbol.jpg
11544872309474
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
To meet our customers’ needs, we offer
a full suite of products and services
across transactional banking, lending
and wealth.
WPB continued to invest in our key strategic
priorities of expanding our Wealth franchise,
developing our transactional banking and
lending capabilities, and addressing our
customers’ international needs.
Results – on a constant
currency basis
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Net operating income
27,275
20,884
20,972
6,391
31
ECL
(1,058)
(1,186)
195
128
11
Operating expenses
(14,738)
(14,248)
(15,338)
(490)
(3)
Share of profit in associates
and JVs
65
30
36
35
>100
Profit before tax
11,544
5,480
5,865
6,064
>100
RoTE (annualised)1 (%)
28.5
13.8
1 RoTE (annualised) in 2022 included a 4.7 percentage point adverse impact from the impairment losses
relating to the sale of our retail banking operations in France.
Divisional highlights
$84bn
WPB net new invested assets in 2023, up
6% compared with 2022.
Constant currency profit before tax
adjusted symbol.jpg
($bn)
$11.5bn
11544872310235
International customers are those who bank with us in our 11 key markets, excluding Canada, and who
Footnote Arrow.jpg
bank in more than one market, those whose address is different from the market we bank them in and
customers whose nationality, or country of birth for non-resident Indians and overseas Chinese, is different to
the market we bank them in. Customers may be counted more than once when banked in multiple countries.
Performance in 2023 benefited from rising
interest rates and balance sheet growth,
including Wealth deposits. There was also
positive growth in Wealth, including strong
sales in insurance and net new invested
assets growth. The results included a broadly
stable ECL charge, despite ongoing
macroeconomic uncertainty.
6.7 million
International customers at 31 December
2023, an increase of 12% compared with
2022.
Constant currency net operating income
($bn)
$27.3bn
                               
11544872311465
30 HSBC Holdings plc
Management view of revenue
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Wealth
7,524
6,970
8,812
554
8
–  investment distribution
2,528
2,469
3,367
59
2
–  Global Private Banking
2,252
2,016
1,777
236
12
    net interest income
1,155
965
630
190
20
    non-interest income
1,097
1,051
1,147
46
4
–  life insurance (IFRS 17)1
1,462
1,354
—
108
8
–  life insurance manufacturing (IFRS 4)1
2,512
–  asset management
1,282
1,131
1,156
151
13
Personal Banking
20,463
15,939
11,648
4,524
28
–  net interest
19,124
14,631
10,298
4,493
31
–  non-interest income
1,339
1,308
1,350
31
2
Other2
(712)
(2,025)
512
1,313
65
–  of which: impairment (loss)/reversal relating to the sale of our retail banking
operations in France3
4
(2,354)
—
2,358
>100
Net operating income4
27,275
20,884
20,972
6,391
31
1 From 1 January 2023 we adopted IFRS 17 and have restated 2022 financial data. Data for 2021 is not restated, and ‘Life insurance manufacturing’ is disclosed on
the basis of preparation prevailing in 2021, which includes our manufacturing business only. Insurance distribution of $518m is presented in ‘investment distribution’.
2 ‘Other’ includes Markets Treasury, HSBC Holdings interest expense and hyperinflation. It also includes the distribution and manufacturing (where applicable) of
retail and credit protection insurance, disposal gains and other non-product-specific income.
3 The amounts associated with the sale of our retail banking operations in France include all related impacts disclosed in notable items, which are presented across
various lines in our consolidated income statement.
4 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
2023
2022
2021
Notable items
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
4
(2,212)
—
Restructuring and other related costs
—
98
14
Disposal losses on Markets Treasury repositioning
(391)
—
—
Currency translation on revenue notable items
—
(142)
(5)
Operating expenses
Disposals, acquisitions and related costs
(53)
(7)
—
Impairment of non-financial items
—
—
(587)
Restructuring and other related costs
20
(357)
(296)
Currency translation on operating expenses notable items
—
—
4
Financial performance
Profit before tax of $11.5bn was $6.1bn
higher than in 2022 on a constant currency
basis. The growth in revenue reflected
growth in both Personal Banking and
Wealth. The increase also reflected a $2.4bn
year-on-year impact relating to the sale of
our retail banking operations in France. ECL
remained broadly stable and operating
expenses grew by $0.5bn.
Revenue of $27.3bn was $6.4bn or 31%
higher on a constant currency basis.
In Wealth, revenue of $7.5bn was up $0.6bn
or 8%.
–Global Private Banking revenue was $0.2bn
or 12% higher due to rising interest rates
and deposit growth of $11bn or 15%.
–Asset management revenue was $0.2bn or
13% higher, driven by an increase in assets
under management of 15%, and from
positive market movements.
–Life insurance revenue rose by $0.1bn or
8%, mainly driven by an increase of $0.2bn
in contractual service margin (‘CSM’)
earnings and favourable net investment
returns of $0.1bn, partly offset by a $0.3bn
loss from corrections to historical valuation
estimates. There was strong growth in the
new business CSM, up $0.6bn or 47%,
mainly in Hong Kong.
In Personal Banking, revenue of $20.5bn was
up $4.5bn or 28%.
–Net interest income was $4.5bn or 31%
higher due to rising interest rates and
balance sheet growth. Mortgage lending
balances rose in Hong Kong by $6bn and in
HSBC UK by $5bn. Unsecured lending
balances increased by $3bn, notably in
HSBC UK, Mexico and Hong Kong. In
addition, there was an increase of $7.8bn
from a reclassification of secured loans in
France from held for sale. Deposit balances
remained broadly stable as growth in Asia
was partly offset by outflows, mainly in
HSBC UK due to higher cost of living and
competitive pressures, and in our main
entity in the US.
Other revenue increased by $1.3bn, mainly
due to a $2.4bn year-on-year impact relating
to the sale of our retail banking operations in
France. This was partly offset by a $0.7bn
reduction in Markets Treasury allocated
revenue, including disposal losses on
repositioning and an adverse impact of
$0.5bn due to hyperinflationary accounting.
ECL were $1.1bn in 2023, down $0.1bn on a
constant currency basis, as credit
performance remained resilient, despite a
rise in inflationary pressures.
Operating expenses of $14.7bn were $0.5bn
or 3% higher on a constant currency basis,
mainly due to continued investments,
notably in wealth in Asia, higher technology
spend, higher performance-related pay and
the impact of higher inflation. These
increases were partly offset by a reduction in
restructuring and other related costs
following the completion of our cost-saving
programme at the end of 2022 and ongoing
cost discipline.
HSBC Holdings plc 31
Commercial Banking
We operate in more than 50 markets, serving around 1.3 million customers, ranging from
small enterprises to large companies operating globally including those in the new innovation
economy.
Contribution to Group profit before tax
adjusted symbol.jpg
11544872259406
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
We partner with businesses around the
world, supporting every stage of their
growth, their international ambitions
and their sustainability transitions. We
deliver value to our clients through our
international network, financing
strength, digital capabilities and our
universal banking capabilities, including
our industry leading global trade and
payments solutions.
Results – on a constant
currency basis
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Net operating income
22,867
16,283
12,699
6,584
40
ECL
(2,062)
(1,862)
339
(200)
(11)
Operating expenses
(7,524)
(6,894)
(6,691)
(630)
(9)
Share of profit/(loss) in
associates and JVs
(1)
—
1
(1)
—
Profit before tax
13,280
7,527
6,348
5,753
76
RoTE (annualised)1 (%)
23.4
13.7
1 RoTE (annualised) in 2023 included a 3.1 percentage point favourable impact of the provisional gain
recognised on the acquisition of SVB UK.
Divisional highlights
78%
Increase in GPS revenue. 
adjusted symbol.jpg
Constant currency profit before tax
adjusted symbol.jpg
($bn)
$13.3bn
11544872262916
We aim to be a leader in the innovation
economy, with the launch of HSBC
Innovation Banking in 2023 enhancing our
proposition to clients in the technology and
healthcare sectors. During 2023, we
delivered a strong revenue performance,
notably in Global Payments Solutions (‘GPS’)
and in collaboration revenue from GBM
products.
10%
Increase in collaboration income from the
sale of GBM products to CMB clients. 
adjusted symbol.jpg
Constant currency net operating income
adjusted symbol.jpg
($bn)
$22.9bn
11544872263347
32 HSBC Holdings plc
Management view of revenue
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Global Trade and Receivables Finance
2,025
2,075
1,832
(50)
(2)
Credit and Lending
5,343
5,745
5,752
(402)
(7)
Global Payments Solutions
12,381
6,966
3,411
5,415
78
Markets products, Insurance and Investments and Other1
3,118
1,497
1,704
1,621
>100
–  of which: share of revenue for Markets and Securities Services and Banking
products
1,299
1,182
1,008
117
10
–  of which: provisional gain on the acquisition of Silicon Valley Bank UK Limited
1,591
—
—
1,591
>100
Net operating income2
22,867
16,283
12,699
6,584
40
–  of which: transaction banking3
15,393
9,940
5,971
5,453
55
1 Includes CMB’s share of revenue from the sale of Markets and Securities Services and Banking products to CMB customers. GBM’s share of revenue from the sale
of these products to CMB customers is included within the corresponding lines of the GBM management view of revenue. Also includes allocated revenue from
Markets Treasury, HSBC Holdings interest expense and hyperinflation.
2 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
3 Transaction banking comprises Global Trade and Receivables Finance, Global Payments Solutions and CMB’s share of Global Foreign Exchange (shown within ‘share
of revenue for Markets and Securities Services and Banking products’).
2023
2022
2021
Notable items
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
1,591
—
—
Restructuring and other related costs
—
(16)
(3)
Disposal losses on Markets Treasury repositioning
(316)
—
—
Currency translation on revenue notable items
—
1
(6)
Operating expenses
Disposals, acquisitions and related costs
(55)
—
—
Restructuring and other related costs
32
(266)
(83)
Currency translation on operating expenses notable items
—
(5)
7
Financial performance
Profit before tax of $13.3bn was $5.8bn or
76% higher than in 2022 on a constant
currency basis. This was driven by an
increase in revenue in all our main legal
entities, primarily from a $5.3bn increase in
GPS net interest income. It also included a
provisional gain of $1.6bn from HSBC UK’s
acquisition of SVB UK. These increases were
partly offset by a rise in operating expenses
as a result of the SVB UK acquisition and
increases in technology costs.
Revenue of $22.9bn was $6.6bn or 40%
higher on a constant currency basis.
–In GPS, revenue increased by $5.4bn, with
growth in all main legal entities. The
increase was driven by higher margins,
reflecting interest rate rises and repricing
actions, which were partly offset by lower
average balances notably due to a market-
wide reduction in the UK. There was a 6%
increase in fee income, as business
initiatives drove growth in transaction
banking, with higher volumes in cards and
international payments.
–In Global Trade and Receivables Finance
(‘GTRF‘), revenue decreased by $0.1bn or
2%, driven by lower average balances in
our main legal entities in Asia and Europe,
primarily reflecting the softer trade cycle,
partly offset by wider margins in our legal
entities in Latin America and the UK. In
addition, there was a $28m or 3% increase
in fee income.
–In Credit and Lending, revenue decreased
by $0.4bn or 7%, notably in our main legal
entities in Asia and Europe, primarily due to
margin compression. It also reflected lower
balances due to softer demand from
customers across these markets, and
reduced exposures in the commercial real
estate sector, notably in mainland China
and the US.
–In GBM products, Insurance and
Investments and Other, revenue increased
by $1.6bn, driven by incremental revenue
from HSBC Innovation Banking of $2.1bn,
which included the provisional gain of
$1.6bn on the acquisition of SVB UK. There
was also an increase in collaboration
revenue from GBM products of $0.1bn,
notably in Foreign Exchange. These
increases were partly offset by a reduction
in Markets Treasury allocated income of
$0.6bn, including disposal losses on
portfolio repositioning and the adverse
impacts of hyperinflationary accounting of
$0.6bn. The remaining increase in revenue
reflected higher interest on capital held in
the business, partly offset by higher HSBC
Holdings interest expense.
ECL were a charge of $2.1bn, compared
with a charge of $1.9bn in 2022 on a
constant currency basis. The increase of
$0.2bn was mainly driven by higher stage 3
charges in the UK, and included provisions
from HSBC Innovation Banking, and charges
in the Middle East. ECL in both periods
reflected charges relating to the commercial
real estate sector in mainland China,
although they were lower in 2023.
Operating expenses of $7.5bn were higher
by $0.6bn on a constant currency basis. The
increase reflected incremental costs in HSBC
Innovation Banking of $0.3bn including the
acquisition and integration of SVB UK, higher
performance-related pay, ongoing
investment in technology and inflationary
impacts. These increases were in part
mitigated by the impact of continued cost
discipline and a reduction in restructuring
and other related costs following the
completion of our cost-saving programme at
the end of 2022.
HSBC Holdings plc 33
Global Banking and Markets
We support multinational corporates, financial institutions and institutional
clients, as well as public sector and government bodies.
Contribution to Group profit before tax
adjusted symbol.jpg
11544872261162
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
We are a leader in facilitating global
trade and payments, particularly into
and within Asia and the Middle East,
helping to enable our clients in the East
and West to achieve their objectives by
accessing our expertise and
geographical reach. Our product
specialists deliver a comprehensive
range of transaction banking, financing,
capital markets and advisory, and risk
management services.
Results – on a constant
currency basis
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Net operating income
16,115
14,602
13,086
1,513
10
ECL
(326)
(573)
221
247
43
Operating expenses
(9,865)
(9,338)
(9,255)
(527)
(6)
Share of profit/(loss) in
associates and JVs
—
(2)
—
2
100
Profit before tax
5,924
4,689
4,052
1,235
26
RoTE (annualised) (%)
11.4
9.8
Divisional highlights
11.4%
RoTE in 2023, up 1.6 percentage points
compared with 2022. 
adjusted symbol.jpg
Constant currency profit before tax
adjusted symbol.jpg
($bn)
$5.9bn
11544872264327
Profit before tax increased in 2023,
reflecting a strong revenue performance due
to rising interest rates and from Capital
Markets and Advisory. This was partly offset
by weaker client activity in our Equities
business. We continued to invest in
technology to modernise our infrastructure,
innovate product capabilities and support
our clients.
56%
Increase in GPS revenue.
Constant currency net operating income
adjusted symbol.jpg
($bn)
$16.1bn
11544872264667
34 HSBC Holdings plc
Management view of revenue
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Markets and Securities Services
9,008
8,874
7,684
134
2
–  Securities Services
2,411
2,022
1,776
389
19
–  Global Debt Markets
823
697
819
126
18
–  Global Foreign Exchange
4,133
4,137
3,097
(4)
—
–  Equities
552
1,003
1,156
(451)
(45)
–  Securities Financing
1,116
918
827
198
22
–  Credit and funding valuation adjustments
(27)
97
9
(124)
>(100)
Banking
8,540
6,721
5,858
1,819
27
–  Global Trade and Receivables Finance
669
678
626
(9)
(1)
–  Global Payments Solutions
4,483
2,879
1,581
1,604
56
–  Credit and Lending
1,970
2,231
2,332
(261)
(12)
–  Capital Markets and Advisory
1,033
731
1,180
302
41
–  Other1
385
202
139
183
91
GBM Other
(1,433)
(993)
(456)
(440)
(44)
–  Principal Investments
(4)
55
372
(59)
>(100)
–  Other2
(1,429)
(1,048)
(828)
(381)
(36)
Net operating income3
16,115
14,602
13,086
1,513
10
–  of which: transaction banking4
11,696
9,716
7,080
1,980
20
1 Includes portfolio management, earnings on capital and other capital allocations on all Banking products.
2 Includes notional tax credits and Markets Treasury, HSBC Holdings interest expense and hyperinflation.
3 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
4 Transaction banking comprises Securities Services, Global Foreign Exchange (net of revenue shared with CMB), Global Trade and Receivables Finance and Global
Payments Solutions.
2023
2022
2021
Notable items
$m
$m
$m
Revenue
Restructuring and other related costs
—
(184)
(395)
Disposal losses on Markets Treasury repositioning
(270)
—
—
Currency translation on revenue notable items
—
3
25
Operating expenses
Disposals, acquisitions and related costs
3
—
—
Restructuring and other related costs
21
(252)
(195)
Currency translation on operating expenses notable items
—
(4)
20
Financial performance
Profit before tax of $5.9bn was $1.2bn or
26% higher than in 2022 on a constant
currency basis. This was driven by an
increase in revenue of $1.5bn or 10%,
notably from higher net interest income in
GPS and Securities Services. ECL fell by
$0.2bn, while operating expenses increased
by $0.5bn or 6%.
Revenue of $16.1bn was $1.5bn or 10%
higher on a constant currency basis.
In Markets and Securities Services (‘MSS’),
revenue was marginally higher by $0.1bn or
2%.
–Securities Services revenue grew by
$0.4bn or 19%, from higher net interest
income as global interest rates rose.
–Global Debt Markets revenue increased by
$0.1bn or 18%, from favourable primary
market conditions and higher client trading
volumes as the market environment
normalised. The 2022 performance was
impacted by lower primary activity and
client flow due to uncertainty and
challenging market conditions.
–Global Foreign Exchange revenue was
largely in line with 2022 and reflected
continued elevated client activity and
trading facilitation, as we captured the
benefit of market-wide volatility relating to
interest rate and inflation differentials.
–Equities revenue fell by $0.5bn or 45%,
due to lower client activity as a result of
reduced market volatility.
–Securities Financing revenue rose by
$0.2bn or 22%, driven by higher client
flows, growth in prime finance and the
onboarding of new clients.
In Banking, revenue increased by $1.8bn or
27%.
–GPS revenue increased by $1.6bn or 56%,
driven by margin growth as a result of the
rising global interest rate environment and
business pricing actions.
–Capital Markets and Advisory revenue rose
by $0.3bn or 41%, primarily from increased
financing activities and higher interest
rates, against a backdrop of a smaller
global market fee pool.
–Credit and Lending revenue decreased by
$0.3bn or 12%, due to weaker client
demand.
–Banking Other revenue increased by
$0.2bn or 91%, from higher interest on
capital held in the business.
In GBM Other, there was a $0.4bn reduction
in revenue, mainly due to lower Markets
Treasury allocated revenue, including
disposal losses on repositioning, higher
HSBC Holdings interest expense and the
adverse impacts of hyperinflationary
accounting.
ECL of $0.3bn were $0.2bn lower on a
constant currency basis, reflecting a
favourable credit performance, including
lower charges in the commercial real estate
sector in mainland China.
Operating expenses of $9.9bn increased by
$0.5bn or 6% on a constant currency basis
due to the impact of higher inflation and
strategic investments, which was in part
mitigated by business actions and a
reduction in restructuring and other related
costs following the completion of our cost-
saving programme at the end of 2022.
HSBC Holdings plc 35
Corporate Centre
The results of Corporate Centre primarily comprise the share of profit from our interests in our
associates and joint ventures and related impairments. It also includes Central Treasury,
stewardship costs and consolidation adjustments.
Corporate Centre performance in 2023
reflected the recognition of an impairment in
our investment in our associate BoCom.
Additionally, the non-recurrence of
restructuring and other related costs
following the completion of our cost-saving
programme at the end of 2022 resulted in
lower operating expenses, while higher
revenue included the non-recurrence of
adverse fair value movements on financial
instruments and the impacts of restructuring
our business in Europe.
Financial performance
Loss before tax of $0.4bn was $0.8bn or
65% lower than the loss in 2022, on a
constant currency basis. This reflected lower
restructuring and other related costs and
higher revenue, partly offset by the impact of
an impairment of our investment in BoCom.
This impairment reflects a reduction to the
accounting value-in-use in line with recent
market-wide developments in mainland
China. For further details, see page 101.
Revenue was $1.7bn or 90% higher than in
2022 on a constant currency basis. The
increase was primarily from the non-
recurrence of adverse fair value movements
on financial instruments in Central Treasury
and structural hedges, together with the
non-recurrence of losses and charges
associated with the disposals of our branch
operations in Greece and our French retail
banking business, the planned disposal of
our business in Russia, and legacy portfolios.
These favourable year-on-year impacts were
partly offset by adverse fair value
movements in 2023 on foreign exchange
hedges related to the planned sale of our
banking business in Canada.
Operating expenses decreased by $1.9bn on
a constant currency basis, primarily driven by
the non-recurrence of restructuring and other
related costs following the completion of our
cost-saving programme at the end of 2022.
These were partly offset by the recognition of
a charge related to the FDIC special
assessment, costs associated with the
disposal of our retail banking operations in
France and the planned disposal of our
banking business in Canada, and a higher
allocation of the UK bank levy, including
adjustments related to prior years. Since
2021, the UK bank levy and any related
adjustments have been allocated across our
global businesses and Corporate Centre,
primarily to GBM.
Share of profit in associates and joint
ventures in 2023 included an impairment
charge of $3.0bn in 2023 relating to our
investment in BoCom due to a reduction of
the accounting value-in-use of our
investment, resulting in a loss of $0.3bn. This
compared with a share of profit of $2.6bn in
2022. The impact of the impairment was
partly offset by growth of $0.2bn, mainly
driven by an increase in the share of profits
from SAB.
Results – on a constant
currency basis
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Net operating income
(199)
(1,898)
(678)
1,699
90
ECL
(1)
(9)
3
8
89
Operating expenses
57
(1,822)
(960)
1,879
>100
Share of profit in associates
and joint ventures less
impairment
(257)
2,574
2,770
(2,831)
>(100)
–  of which: impairment loss
relating to our investment in
BoCom
(3,000)
—
—
(3,000)
Profit/(loss) before tax
(400)
(1,155)
1,135
755
65
RoTE (annualised) (%)
(1.0)
2.8
Management view of revenue
adjusted symbol.jpg
2023
2022
2021
2023 vs 2022
$m
$m
$m
$m
%
Central Treasury1
99
(742)
(324)
841
>100%
Legacy portfolios
3
(174)
(54)
177
>100%
Other2,3
(301)
(982)
(300)
681
69
Net operating income4
(199)
(1,898)
(678)
1,699
90
1 Central Treasury comprises valuation differences on issued long-term debt and associated swaps and fair
value movements on financial instruments.
2 Other comprises consolidation adjustments, funding charges on property and technology assets,
revaluation gains and losses on investment properties and property disposals, gains and losses on certain
planned disposals, including charges relating to our business in Russia, and other revenue items not
allocated to global businesses.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense and hyperinflation are allocated out
to the global businesses, to align them better with their revenue and expense. The total Markets Treasury
revenue component of this allocation for 2023 was $(139)m (2022: $1,431m; 2021: $2,142m).
4 ’Net operating income’ means net operating income before change in expected credit losses and other
credit impairment charges (also referred to as ‘revenue’).
2023
2022
2021
Notable items
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
(297)
(525)
—
Fair value movements on financial instruments
14
(618)
(221)
Restructuring and other related costs
—
(145)
77
Disposal losses on Markets Treasury repositioning
—
—
—
Currency translation on revenue notable items
—
33
(16)
Operating expenses
Disposals, acquisitions and related costs
(216)
(11)
—
Restructuring and other related costs
63
(2,007)
(1,262)
Currency translation on operating expenses notable
items
—
(22)
81
Impairment of interest in associate
(3,000)
—
—
36 HSBC Holdings plc
Risk overview
Active risk management helps us to achieve our strategy, serve our customers and
communities and grow our business safely.
Managing risk
The global economy proved more resilient in
2023 than had been expected, supported by
strong growth in the US, and a stabilisation
in China’s economy, although there
continues to be uncertainty and weakness in
Europe. In most key markets, a fall in energy
prices and other commodity prices facilitated
a decrease in inflation. Central banks in most
developed markets are expected to have
concluded monetary policy tightening in the
second half of 2023 and to start reducing
interest rates in 2024. Certain emerging
market central banks began reducing interest
rates during 2023. However, interest rates in
the medium term are likely to remain
materially higher than in recent years. 
Geopolitical tensions are a source of
significant risk, including the ongoing Russia-
Ukraine and Israel-Hamas wars. Both could
have significant global economic and
political consequences. The Israel-Hamas
war has led to renewed volatility in energy
prices, and recent attacks on commercial
shipping in the Red Sea and the counter-
measures taken to improve security have
begun to disrupt supply chains. These
developments have the potential to halt or
reverse the recent decline in inflation
especially in Europe and North America.
Sanctions and trade restrictions are complex,
novel and evolving. In particular, the US, the
UK and the EU, as well as other countries,
have imposed significant sanctions and trade
restrictions against Russia. In December
2023, the US established a new secondary
sanctions regime, providing itself broad
discretion to impose severe sanctions on
non-US banks that are knowingly or even
unknowingly engaged in certain transactions
or services involving Russia’s military-
industrial base. This creates challenges
associated with the detection or prevention
of third-party activities beyond HSBC’s
control. The imposition of such sanctions
against any non-US HSBC entity could result
in significant adverse commercial,
operational and reputational consequences
for HSBC.
The relationships between China and several
other countries, including the US and the UK,
remain complex. Supply chains remain
vulnerable to a deterioration in these
relationships and this has resulted in efforts
to de-risk certain sectors by reshoring
manufacturing activities. The US, the UK, the
EU and other countries have imposed
various sanctions and trade restrictions on
Key risk appetite metrics
Component
Measure
Risk
appetite
2023
Capital
CET1 ratio – end point basis
≥13.0%
14.8%
Change in
expected credit
losses and other
credit impairment
charges
Change in expected credit losses and other credit
impairment charges as a % of advances: (WPB)
≤0.50%
0.21%
Change in expected credit losses and other credit
impairment charges as a % of advances:
wholesale (GBM, CMB)
≤0.45%
0.40%
Chinese persons and companies. The
approach of countries to strategic
competition and engagement with China
continues to develop. In response, China has
imposed sanctions, trade restrictions and law
enforcement measures. Further sanctions or
counter-sanctions may adversely affect the
Group, its customers and various markets.
Fiscal deficits are expected to remain large in
both developed and emerging markets, as
public spending on social welfare, defence
and climate transition initiatives is expected
to remain high. In many countries, the fiscal
response to the Covid-19 pandemic has also
left a very high public debt burden. Against a
backdrop of slower economic growth and
high interest rates, elevated borrowing costs
could increase the strains on highly indebted
sovereigns.
Political changes may also have implications
for policy. Many countries are expected to
hold elections in 2024. This may result in
uncertainty in some markets in response to
domestic political priorities.
Sectoral risks are also a focus, and the real
estate sector in particular faces challenges in
many of our major markets. In mainland
China, commercial real estate conditions
remain distressed and signs of a material or
sustained recovery are yet to emerge.
Market data continues to reflect reduced
investment and weak sentiment in the short
term, although authorities are expanding
fiscal and monetary support to the economy
including specific measures to support
developers and stimulate housing demand.
We continue to closely monitor this sector,
and take action to manage our commercial
real estate portfolio risk.
The impact of the rising cost of living on
retail customers is a key risk for our society.
Our primary concern is to ensure that we
offer the right support to customers in line
with regulatory, government and wider
stakeholder expectations. This follows our
adoption of the UK government’s Mortgage
Charter released in June 2023.
We engage closely with regulators to help
ensure that we continue to meet their
expectations regarding financial institutions’
activities to support economies during times
of market volatility.
Our approach to macroeconomic scenarios
in relation to IFRS 9 ‘Financial Instruments’
remained unchanged in the fourth quarter of
2023 compared with the corresponding
period in 2022. Adjustments to the design
and narrative of the most severe downside
scenario were made to reflect increased
geopolitical risks.
In addition, management adjustments to ECL
were applied to reflect persisting uncertainty
in certain sectors, driven by inflation, interest
rate sensitivity and other macroeconomic
risks, which were not fully captured by our
models.
We continue to monitor, and seek to
manage, the potential implications of all the
above developments on our customers and
our business. While the financial
performance of our operations varies by
geography, our balance sheet and liquidity
remained strong.
For further details of our Central and other
Footnote Arrow.jpg
scenarios, see ‘Measurement uncertainty and
sensitivity analysis of ECL estimates’ on page 192.
HSBC Holdings plc 37
Managing risk continued
Our risk appetite
Our risk appetite defines our desired forward-
looking risk profile and informs the strategic
and financial planning process. It provides an
objective baseline to guide strategic decision
making, helping to ensure that planned
business activities provide an appropriate
balance of return for the risk assumed, while
remaining within acceptable risk levels. Risk
appetite supports senior management in
allocating capital, funding and liquidity
optimally to finance growth, while monitoring
exposure to non-financial risks.
At 31 December 2023, our CET1 ratio and
ECL charges were within their defined risk
appetite thresholds. Our CET1 capital ratio at
31 December 2023 was 14.8%, up 0.6
percentage points from 2022, mainly driven
by capital generation net of dividends, share
buy-backs and regulatory adjustments, partly
offset by an increase in RWAs during the
year. For further details of the key drivers of
the overall CET1 ratio, see ‘Own funds
disclosure’ on page 243. Wholesale ECL
charges during the year reflected the default
of several mainland China commercial real
estate developer clients. Wholesale ECL
charges fell outside of appetite in the first
half of 2023, although returned within
appetite during the second half of 2023, due
to relatively lower defaults in the UK and
most other markets. During 2023, we
enhanced the coverage of interest rate risk
metrics in the banking book within the
Group’s appetite statement.
Stress tests
We regularly conduct stress tests to assess
the resilience of our balance sheet and our
capital adequacy, as well as to provide
actionable insights into how key elements of
our portfolios may behave during a crisis.
We use the outcomes to calibrate our risk
appetite to review and calibrate as required
our strategic and financial plans, helping to
improve the quality of management’s
decision making. The results from the stress
tests also drive recovery and resolution
planning to help enhance the Group’s
financial stability under various
macroeconomic scenarios. The selection of
stress scenarios is based upon the
identification and assessment of our top
risks, emerging risks and our risk appetite.
In January 2023, HSBC Holdings and HSBC
UK, its UK ring-fenced bank, submitted the
internally modelled results of the Bank of
England’s (‘BoE‘) 2022–2023 annual cyclical
scenario to the regulator. The BoE uses the
annual cyclical scenario stress test to
determine the banking sector‘s ability to
withstand an adverse scenario and continue
to serve UK households and businesses.
The results were published on 12 July 2023
by the BoE in its Financial Stability Report
and indicated that both HSBC Holdings and
HSBC UK are sufficiently capitalised with a
CET1 capital ratio remaining well above the
regulatory reference rate on both an IFRS 9
transitional basis and on a non-transitional
basis. 
During the second half of 2023, the Group-
wide internal stress test was completed
alongside testing of the Group’s strategy.
The concluding results of the Group-wide
internal stress test provided updates to the
Group Risk Committee in support of its
assessment of adequacy of HSBC Holdings
capital levels. The underlying conclusions
drawn from this exercise will also be
included in the Group internal capital
adequacy assessment process (‘ICAAP‘) in
the first quarter of 2024.
Climate risk
Climate risk relates to the financial and non-
financial impacts that may arise as a
consequence of climate change and the
move to a net zero economy. Climate risk
can impact us either directly or through our
relationships with our clients. These include
the potential risks arising as a result of our
net zero ambition, which could lead to
reputational concerns, and potential legal
and/or regulatory action if we are perceived
to mislead stakeholders on our business
activities or if we fail to achieve our stated
net zero targets.
We seek to manage climate risk across all
our businesses in line with our Group-wide
risk management framework and are
incorporating climate considerations within
our traditional risk types.
  For further details of our approach to climate risk
Footnote Arrow.jpg
management, see ‘Climate risk‘ on page 257.
  For further details of our TCFD disclosures, see
Footnote Arrow.jpg
the ‘ESG review‘ on page 42.
Climate stress tests
To support the requirements for assessing
the impacts of climate change, we continue
to develop a set of capabilities to execute
climate stress testing and scenario analysis.
These are used to help improve our
understanding of risk exposures for
managing risk and business decision
making.
In the second half of 2023, we ran further
internal climate scenario analyses. The
outcomes were used to identify challenges
and opportunities to our net zero strategy,
inform capital planning and risk appetite, as
well as to respond to climate stress tests for
regulators, including the Hong Kong
Monetary Authority and the Central Bank of
the United Arab Emirates.
For further details of our approach to climate risk
Footnote Arrow.jpg
stress testing, see ‘Insights from scenario analysis’ on
page 261.
Our operations
We remain committed to investing in the
reliability and resilience of our IT systems
and critical services, including those
provided by third parties, which support all
parts of our business. We do so to help
protect our customers, affiliates and
counterparties, and to help ensure that we
minimise any disruption to services. In our
approach to defending against these threats,
we invest in business and technical controls
to help us detect, manage and recover from
issues in a timely manner.
We are working to ensure that we balance
the opportunity AI presents to accelerate
delivery of our strategy with the need to
ensure appropriate controls are in place to
mitigate the associated risks. HSBC is
committed to using AI ethically and
responsibly. We continue to refine and
embed robust and effective governance and
controls into our risk management processes
to help meet the Group’s needs and
increasing regulatory expectations for when
AI is both developed internally and enabled
through third parties.
We continue to focus on improving the
quality and timeliness of the data used to
inform management decisions, and are
progressing with the implementation of our
strategic and regulatory change initiatives to
help deliver the right outcomes for our
customers, people, investors and
communities.
  For further details of our risk management
Footnote Arrow.jpg
framework and risks associated with our banking
and insurance manufacturing operations, see pages
160 and 181, respectively.
Top and emerging risks
Our top and emerging risks report identifies
forward-looking risks so that they can be
considered in determining whether any
incremental action is needed to either
prevent them from materialising or to limit
their effect. Top risks are those that have the
potential to have a material adverse impact
on the financial results, reputation or
business model of the Group. We actively
manage and take actions to mitigate our top
risks. Emerging risks are those that, while
they could have a material impact on our risk
profile were they to occur, are not
considered immediate and are not under
active management. Our suite of top and
emerging risks is subject to regular review by
senior governance forums. During 2023, we
removed Ibor transition as a top risk given
the cessation of the publication of US dollar
Libor in June 2023. We continue to monitor
closely the identified risks and ensure
management actions are in place, as
required.
38 HSBC Holdings plc
Risk
Trend
Description
Externally driven
Geopolitical and
macroeconomic
risks
~
Our operations and portfolios are subject to risks associated with political instability, civil unrest and military
conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to
our assets. Conflict in certain regions and geopolitical tensions are creating a more complicated business
environment. Despite expected reductions, global interest rates are nevertheless likely to remain high in 2024,
which could slow the growth of the global economy and affect our credit portfolio.
Technology and
cybersecurity risk
}
There is a risk of service disruption or loss of data resulting from technology failures or malicious activities by
internal or external threats. We continue to monitor changes to the threat landscape, including those arising
from ongoing geopolitical and macroeconomic events, and the impact this may have on third-party risk
management. We operate a continuous improvement programme to help protect our technology operations
and counter a fast-evolving cyber threat environment.
Environmental,
social and
governance (‘ESG’)
risks
~
We are subject to ESG risks including in relation to climate change, nature and human rights. These risks have
increased owing to the pace and volume of regulatory developments globally, increasing frequency of severe
weather events, and due to stakeholders placing more emphasis on financial institutions’ actions and
investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in
financial and non-financial risks, including reputational, legal and regulatory compliance risks.
Financial crime risk
~
We are exposed to financial crime risk from our customers, staff and third parties engaging in criminal activity.
The financial crime risk environment is heightened due to increasingly complex geopolitical challenges, the
macroeconomic outlook, the complex and dynamic nature of sanctions compliance, evolving financial crime
regulations, rapid technological developments, an increasing number of national data privacy requirements
and the increasing sophistication of fraud. As a result, we will continue to face the possibility of regulatory
enforcement and reputational risk.
Digitalisation and
technological
advances
~
Developments in technology and changes in regulations continue to enable new entrants to the banking
industry and new products and services offered by competitors. This challenges us to continue to innovate
with new digital capabilities and adapt our products, to attract, retain and best serve our customers. Along
with opportunities, new technology, including generative AI, can introduce risks and we seek to ensure these
are understood and managed with appropriate controls.
Evolving regulatory
environment risk
}
The regulatory and compliance risk environment remains complex, in part due to the UK’s Financial Conduct
Authority’s (‘FCA’) implementation of its Consumer Duty in July 2023. There continues to be an intense
regulatory focus on ESG matters, including on ‘green’ products. Regulatory scrutiny of financial institutions
following recent banking failures may result in new or additional regulatory requirements impacting the Group
in the short to medium term.
Internally driven
Data risk
}
We use data to serve our customers and run our operations, often in real-time within digital experiences and
processes. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet
regulatory requirements could be impacted. We seek to ensure that non-public data is kept confidential, and
that we comply with the growing number of regulations that govern data privacy and cross-border movement
of data.
Risks arising from
the receipt of
services from third
parties
~
We procure goods and services from a range of third parties. Due to the current macroeconomic and
geopolitical climate, the risk of service disruption in our supply chain has heightened. We continue to
strengthen our controls, oversight and risk management policies and processes to select and manage third
parties, including our third parties’ own supply chains, particularly for key activities that could affect our
operational resilience.
Model risk
~
Model risk arises whenever business decision making includes reliance on models. We use models in both
financial and non-financial contexts, as well as in a range of business applications. Evolving regulatory
requirements are driving material changes to the way model risk is managed across the banking industry, with
a particular focus on capital models. New technologies, including AI and generative AI, are driving a need for
enhanced model risk controls.
Change execution
risk
}
Failure to effectively prioritise, manage and/or deliver transformation across the organisation impacts our
ability to achieve our strategic objectives. We continue to monitor, manage and oversee change execution risk
to try to ensure that our change portfolios and initiatives deliver the right outcomes for our customers, people,
investors and communities.
Risks associated
with workforce
capability, capacity
and environmental
factors with
potential impact on
growth
Ä
Our businesses, functions and geographies are exposed to risks associated with employee retention and talent
availability, and compliance with employment laws and regulations. While high employee attrition has
continued to ease generally, a small number of markets still experience heightened inflation, turnover and
labour market difficulties. Failure to manage these risks may impact the delivery of our strategic objectives or
lead to regulatory sanctions or legal claims.
~ Risk heightened during 2023      } Risk remained at the same level as 2022      Ä Risk decreased during 2023 
HSBC Holdings plc 39
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40 HSBC Holdings plc
Environmental,
social and
governance
review
Our ESG review sets out our approach to
our environment, customers, employees
and governance. It explains how we
aim to achieve our purpose, deliver
our strategy in a way that is sustainable,
and build strong relationships
with all of our stakeholders.
42Our approach to ESG
44Environmental
75Social
87Governance
How we present our TCFD disclosures
Our overall approach to TCFD can be found on page 17 and additional
information is included on pages 69 and 1e. Further details have been
embedded in this section and the Risk review section on pages 257 to
266. Our TCFD disclosures are highlighted with the following symbol:
TCFD
HSBC Holdings plc41
Our approach to ESG
We continue to work to incorporate environmental, social and
governance principles throughout the organisation and to embed sustainability into the way
we operate.
About the ESG review
Our purpose is: ‘Opening up a world of
opportunity’.
Our purpose is guided by our values: we
value difference; we succeed together; we
take responsibility; and we get it done.
Our approach to ESG is shaped by our purpose
and values and a desire to create sustainable
long-term value for our stakeholders. We
collaborate and aim to build strong
relationships with all of our stakeholders, which
include the people who work for us, bank with
us, own us, regulate us, and live in the societies
we serve and on the planet we all inhabit to
deliver the ESG approach.
Transition to net zero
We have continued to take steps to
implement our climate ambition to become
net zero in our operations and our supply
chain by 2030, and align our financed
emissions to net zero by 2050. In January
2024, we published our net zero transition
plan, which is an important milestone in our
journey to achieving our net zero ambition.
The plan will help our people, customers,
investors and other stakeholders to
understand our long-term vision, the
challenges, uncertainties and dependencies
that exist, the progress we are making
towards our own transition and what we
plan to do in the future.
In this ESG review, we publish on-balance
sheet financed emissions for thermal coal
mining, in addition to other sectors we have
already been reporting on, noting the challenge
of evolving methodologies and data limitations.
We also publish combined on-balance sheet
financed and facilitated emissions for the oil
and gas, and power and utilities sectors. We
expect to iterate and mature our approach to
supporting sector transitions over time. We also
continue to work on improving our data
management processes.
We continue to review policy
implementation as we apply our policies in
practice, and our operationalisation of such
policies continues to be enhanced. We take
a risk-based approach when identifying
transactions and clients to which our energy
and thermal coal phase-out policies apply,
and when reporting on relevant exposures,
adopting approaches proportionate to risk
and materiality.
We are also working with peers and industry
bodies to help mobilise the systemic change
needed to deliver action on climate change,
nature and the just transition.
Environmental – Transition to net zero
–In January 2024, we published our net zero transition plan. This provides an overview of the
progress we have made to date and what we plan to do next, although we acknowledge
there is still much more to do.
–We have now set combined on-balance sheet financed emissions and facilitated emissions
targets for two emissions-intensive sectors: oil and gas, and power and utilities, and report
the combined progress for both sectors.
Read more in the Environmental section on page 44.
Footnote Arrow.jpg
Social – Building inclusion and resilience
–In 2023, 34.1% of senior leadership roles were occupied by women, with a target to achieve
35% by 2025, although progress has not been as fast paced as we would have liked. We
also continued on a journey to meet our ethnicity goals.
–Employee engagement, which is our headline measure, increased by three points in 2023
and is now seven points ahead of the external financial services benchmark.
  Read more in the Building inclusion and resilience section on page 75.
Footnote Arrow.jpg
Governance – Acting responsibly
–We continue to raise awareness and develop our understanding of our salient human rights
issues. In 2023, we provided practical guidance and training, where relevant, to our
colleagues across the Group on how to identify and manage human rights risk.
–We were ranked as a top three bank against our competitors in 58% of our key six markets,
although we still have work to do to improve our rank positions.
  Read more in the Governance section on page 87.
Footnote Arrow.jpg
Building inclusion and resilience
Our social approach is centred around
fostering inclusion and building resilience for
our colleagues, our customers, and in the
communities we serve.
We are building a workforce that is
representative of the communities that we
serve and we have targets and programmes
in place to ensure fair and inclusive
recruitment and to support the equitable
progression of under-represented groups.
We also strive to create an inclusive and
accessible banking experience for all of our
customers, and to help them access the
finance they need without unnecessary
barriers.
Employee resilience is central to our success,
so we provide a wide range of resources to
support colleagues’ mental, physical and
financial well-being, as well as training and
support so that they are equipped with the
skills they need to further their careers. We
support customer resilience with products,
services and education that build their
capabilities so that they can understand their
finances and manage them effectively.
Acting responsibly
Our governance approach focuses on acting
responsibly and recognises topics such as
human rights, conduct and data integrity.
Our policies and procedures help us to
provide the right outcomes for customers,
including those with enhanced care needs,
which in 2023 took into account pressures
from the increased cost of living. Customer
experience is at the heart of how we operate
and is measured through customer
satisfaction and customer complaints.
We are continuing our journey to embed
ESG principles across the organisation,
including incorporating climate risks within
the risk management framework, training
our workforce, incorporating climate-related
targets within executive scorecards, and
engaging with customers and suppliers.
42 HSBC Holdings plc
How we decide what to measure
We listen to our stakeholders in a number of
different ways, which we set out in more
detail within the ‘ESG overview’ on page 14.
We use the information they provide us to
identify the issues that are most important to
them and consequently also matter to our
own business.
Our ESG Committee and other relevant
governance bodies regularly discuss the new
and existing themes and issues that matter
to our stakeholders. Our management team
then uses this insight, alongside the
framework of the ESG Guide (which refers to
our obligations under the Environmental,
Social and Governance Reporting Guide
contained in Appendix C2 to The Rules
Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited), and
the LR9.8.6R(8) of the Financial Conduct
Authority’s (‘FCA’) Listing Rules, and other
applicable laws and regulations to choose
what we measure and publicly report in this
ESG review. Under the ESG Guide,
’materiality’ is considered to be the threshold
at which ESG issues become sufficiently
important to our investors and other
stakeholders that they should be publicly
reported. Our approach to materiality also
considers disclosure standards and other
applicable rules and regulations as part of
our materiality assessment for specific ESG
topics and relevant disclosures.
Given the recent developments in the ESG
regulatory environment across various
jurisdictions in which we operate, combined
with the relative immaturity of processes,
systems, data quality and controls, our focus
remains on supporting a globally consistent
set of mandatory sustainability standards.
We aim to continue to evolve our reporting
to recognise market developments, such as
the International Sustainability Standard
Board (‘ISSB’) or the Corporate Sustainability
Reporting Directive (‘CSRD’), and support
the efforts to harmonise the disclosures. In
this Form 20-F, we continue to report against
the core World Economic Forum (‘WEF’)
Stakeholder Capitalism Metrics and
Sustainability Accounting Standards Board
(‘SASB’) metrics, and will continue to review
our approach as the regulatory landscape
evolves.
Consistent with the scope of financial
information presented in this Form 20-F, the
ESG review covers the operations of HSBC
Holdings plc and its subsidiaries. Given the
relative immaturity of ESG-related data and
methodologies in general, we are on a
journey towards improving completeness
and robustness.
For further details of our material ESG topics, see
Footnote Arrow.jpg
‘Engaging with our stakeholders and our material
ESG topics’ on page 15.
For further details of our approach to reporting,
Footnote Arrow.jpg
see ‘Additional information’ on page 1d.
Our reporting around ESG
We report on ESG matters throughout this Form 20-F, including the ’ESG overview’ section of the Strategic Report (pages 14 to 19), this ESG
review (pages 41 to 98), and the ‘Climate risk’ and ‘Insights from climate scenario analysis’ sections of the Risk review (pages 257 to 266). In
addition, we have other supplementary materials, including our ESG Data Pack, which provides a more granular breakdown of ESG
information.
Detailed data
Additional reports
ESG Data Pack 2023, including
SASB Index 2023 and WEF
Index 2023
UK Pay Gap Report 2023
Modern Slavery and Human Trafficking Statement 2023
Green Bond Report 2023
HSBC UN Sustainable Development Goals Bond and Sukuk Report 2023
For further details of our supplementary materials, see our ESG reporting centre at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Footnote Arrow.jpg
Assurance relating to ESG data
TCFD
HSBC Holdings plc is responsible for
preparation of the ESG information and all
the supporting records, including selecting
appropriate measurement and reporting
criteria, in this Form 20-F, ESG Data Pack
and the additional reports published on our
website.
We recognise the importance of ESG
disclosures and the quality of data
underpinning them. We also acknowledge
that our internal processes to support ESG
disclosures are in the process of being
developed and currently rely on manual
sourcing and categorisation of data. Certain
aspects of our ESG disclosures are subject to
enhanced verification and assurance
procedures including the first, second and
third line of defence. Assurance assists in
reducing the risk of restatement, although it
cannot be fully eliminated given the
challenges in data, evolving methodologies
and emerging standards. We aim to continue
to enhance our approach in line with external
expectations.
For 2023, ESG data is subject to stand-alone
independent limited third-party assurance in
accordance with International Standard on
Assurance Engagements 3000 (Revised)
‘Assurance Engagements other than Audits
or Reviews of Historical Financial
Information’ and, in respect of the
greenhouse gas emissions, in accordance
with International Standard on Assurance
Engagements 3410 ‘Assurance
Engagements on Greenhouse Gas
Statements’, issued by the International
Auditing and Assurance Standards Board, on
the following specific ESG-related
disclosures and metrics:
–our Green Bond Report 2023 (published in
December 2023);
–our progress towards our ambition to
provide and facilitate $750bn to $1tn of
sustainable finance and investment by 2030
(see page 49);
–our on-balance sheet financed emissions
for 2021 and 2022 for six sectors, our on-
balance sheet financed emissions for 2020
for thermal coal mining, and our facilitated
emissions for two sectors for 2019 to 2022
(see page 61);
–our thermal coal financing drawn balance
exposures for 2020 (see page 67); and
–our own operations’ scope 1, 2 and 3
(business travel) greenhouse gas emissions
data (see page 64), as well as supply chain
emissions data.
The work performed for independent limited
assurance is substantially less than the work
performed for a reasonable assurance
opinion, like those provided over financial
statements.
Our data dictionaries and methodologies for
preparing the above ESG-related metrics and
independent third-party limited assurance
reports can be found at www.hsbc.com/
who-we-are/esg-and-responsible-business/
esg-reporting-centre.
HSBC Holdings plc43
Environmental
TCFD
Transition to net zero
We support the transition of our customers, industries and markets to a net zero and a
sustainable future, while moving to net zero ourselves.
At a glance
Our approach to transition to net zero
Our net zero ambition represents one of our
four strategic pillars. In January 2024, we
published our net zero transition plan. It
provides an overview of our approach to net
zero and the actions we are taking to help
meet our ambition. It sets out how we are
working to embed net zero across key areas
of our organisation to help ensure that we
can play a role in the transition to net zero in
the markets we serve.
Supporting our customers
To help achieve the scale and speed of
change required to transition to net zero, we
know we need to support our customers not
just with finance, but with the services,
insights and tools to help them to transition.
In 2023, we continued to provide sustainable
financing and investment to our customers
in line with our ambition to provide and
facilitate $750bn to $1tn by 2030. We report
our progress against our 2030 financed
emissions targets and our wider progress
towards net zero by 2050, including how we
plan to engage with customers in high-
emitting sectors.
Embedding net zero into the way we
operate
We take a risk-based, proportionate and
iterative approach to embedding net zero
into our organisation, focusing our efforts on
where we can help drive material and
implementable change, and applying
learnings as we go along. Our approach will
continue to mature over time with evolving
science, methodologies, industry standards
and regulatory requirements, and
improvements in data and in technology
infrastructure.
Partnering for systemic change
Our ability to achieve our own net zero
ambition is heavily reliant on the mobilisation
of all stakeholders, public and private, across
multiple geographies. We continue to
support systemic change through new and
existing partnerships, and we engage
through industry alliances and initiatives to
help build a supportive enabling
environment.
Impact on reporting and financial
statements
We have assessed the impact of climate risk
on our balance sheet and have concluded
that there is no material impact on the
financial statements for the year ended 31
December 2023. The effects of climate
change are a source of uncertainty. We
capture known and observable potential
impacts of climate-related risks in our asset
valuations and balance sheet calculations.
These are considered in relevant areas of our
balance sheet, including expected credit
losses, classification and measurement of
financial instruments, goodwill and other
intangible assets; and in making the long-
term viability and going concern assessment.
As part of assessing the impact on our
financial statements we conducted scenario
analysis to understand the impact of climate
risk on our business (see page 65). For
further details of our climate risk exposures,
see page 257.
For further details of how management
Footnote Arrow.jpg
considered the impact of climate-related risks on its
financial position and performance, see ‘Critical
estimates and judgements’ on page 370.
In this section
Overview
Our approach to the
transition
We aim to achieve net zero in our financed emissions by 2050, and in our own
operations and supply chain by 2030.
Page 45
Footnote Arrow.jpg
Understanding our
climate reporting
To achieve our climate ambition we need to be transparent on the
opportunities, challenges, related risks and progress we make.
Page 46
Footnote Arrow.jpg
Supporting our
customers
Sustainable finance
and investment
Our ability to help finance the transformation of businesses and infrastructure is
key to building a sustainable future for our customers and society.
Page 49
Footnote Arrow.jpg
Financed emissions
We aim to align our financed emissions to achieve net zero by 2050 and
support our clients on their transition.
Page 53
Footnote Arrow.jpg
Embedding net
zero into the
way we operate
Net zero in our own
operations
Part of our ambition to be a net zero bank is to achieve net zero carbon
emissions in our operations and supply chain by 2030.
Page 63
Footnote Arrow.jpg
Managing climate risk
We manage climate risk across all our businesses in line with our Group-wide
risk management framework. Enhancing our climate change stress testing and
scenario analysis capability is crucial in identifying and understanding climate-
related risks and opportunities.
Page 65
Footnote Arrow.jpg
Sustainability risk
policies
Our sustainability risk policies seek to ensure that the financial services that we
provide to customers do not result in unacceptable impacts on people or the
environment.
Page 66
Footnote Arrow.jpg
Partnering for
systemic change
Supporting systemic
change to deliver net
zero
We collaborate with a range of partners to support the development of an
enabling environment and mobilise finance for nature and climate.
Page 68
Footnote Arrow.jpg
Our approach to
climate reporting
Task Force on
Climate-related
Financial Disclosures
(‘TCFD’)
Our TCFD index provides our responses to each of the 11 recommendations
and summarises where additional information can be found.
Page 69
Footnote Arrow.jpg
44 HSBC Holdings plc
Overview
TCFD
Our approach to the transition
The Paris Agreement aims to limit the rise in
global temperatures to well below 2°C,
preferably to 1.5°C, compared with pre-
industrial levels. To limit the rise to 1.5°C, the
global economy would need to reach net
zero greenhouse gas emissions by 2050. We
are working to achieve a 1.5°C-aligned
phase-down of financed emissions from our
portfolio.
In October 2020, we announced our
ambition to become a net zero bank by 2050
and in 2021 we included the transition to net
zero as one of the four key pillars of our
corporate strategy.
Our starting point in the transition to net zero
is one of a heavy financed emissions
footprint. Our history means our balance
sheet is weighted towards the sectors and
regions which matter the most in terms of
emissions, and whose transitions are
therefore key to the world’s ability to reach
net zero on time. This means we will have a
complex transition, with markets and sectors
at different starting points and moving at
different speeds. However, it also provides
us with an opportunity to work with our
customers to help make an impact – in both
the emissions challenge and the financing
challenge.
Responding to the challenges and
opportunities presented by net zero requires
us to work across HSBC to implement and
embed our net zero approach, to manage
associated risks, and to help sustain and
grow value for our customers, our
shareholders and our wider stakeholders.
We want to make financing, facilitating and
investment choices that can lead to a
meaningful impact on emissions reduction in
the real economy, not just in our portfolio.
This requires engaging with our customers
on their transitions to help finance
decarbonisation in the sectors and
geographies with the most change ahead.
In January 2024, we published our net zero
transition plan. It provides an overview of our
approach to net zero and the actions we are
taking to help meet our ambition. It sets out
how we intend to use our strengths as an
organisation to help deliver a broader impact
on decarbonisation, how we are working to
embed net zero across key areas of our
organisation, and the principles that we aim
to use to guide the implementation of our
approach.
Our net zero strengths
We aim to rebalance our capital deployment
towards achieving net zero over the coming
decades. We believe we can do this best by
promoting change in three key areas that
play to our strengths as an organisation:
transitioning industry; catalysing the new
economy; and decarbonising trade and
supply chains. 
Our implementation plan
We are working to embed net zero across
our organisation. This includes embedding
net zero into: the way that we support our
customers, both through customer
engagement and the provision of financing
solutions; the way that we operate as an
organisation, including risk management,
policies, governance and own operations;
and how we partner externally in support of
systemic change. It also means focusing first
on the sectors and customers with the
highest emissions and transition risks, and
evolving and expanding our efforts over
time.
Our net zero principles
In implementing our approach to net zero,
we aim to be guided by a set of principles
which are aligned with our core values:
science-based, transparent and accountable;
integrating nature; and just and inclusive.
For further details of our approach to the
Footnote Arrow.jpg
transition, see our Net Zero Transition Plan 2024 at
www.hsbc.com/who-we-are/our-climate-strategy/
our-net-zero-transition-plan.
Our net zero strengths
Where we believe we can best
promote change
Transitioning industry
Catalysing the
new economy
Decarbonising trade
and supply chains
Our implementation plan
Embedding net zero into how
we engage, operate and
collaborate
Supporting
our customers
Embedding net zero into
the way we operate
Partnering for
systemic change
HSBC Holdings plc45
Understanding our climate reporting
The availability of high-quality climate-related
data, transparent reporting standards and
consistent methodology will play a vital role
in helping deliver the economic
transformation required to limit global
warming to 1.5°C at the speed and scale that
is needed. We understand that our existing
data, systems, controls and processes
require significant enhancements to drive
effective change, but we recognise the
necessity to balance this with providing early
transparency on climate disclosures.
Our stakeholder dependency
Critical to our approach is a recognition that
as a bank we cannot do this alone. Our
ability to transition relies on decarbonisation
in the real economy – both the supply and
demand side – happening at the necessary
pace. Our customers and the industries and
markets we serve will need to transition
effectively, supported by strong government
policies and regulation, and substantially
scaled investment. Engagement and
collaboration are therefore key to how we
respond.
We acknowledge that to achieve our climate
ambition we need to be transparent about
the opportunities, challenges, related risks
we face and progress we make. Our
reporting must evolve to keep pace with
market developments, and we will aim to
work through challenges and seek to
improve consistency across different
markets. Standard setters and regulators will
play a critical role. Some of the limitations
and challenges that our organisation, and the
wider industry, currently face with regard to
climate reporting are highlighted on pages
47 to 48.
Explaining scope 1, 2 and 3 emissions
To measure and manage our greenhouse gas emissions, we follow the Greenhouse Gas
Protocol global framework, which identifies three scopes of emissions. Scope 1
represents the direct emissions we create. Scope 2 represents the indirect emissions
resulting from the use of electricity and energy to run a business. Scope 3 represents
indirect emissions attributed to upstream and downstream activities. Our upstream
activities include business travel and emissions from our supply chain including
transport, distribution and waste. Our downstream activities include those related to
investments and including financed emissions.
Under the protocol, scope 3 emissions are also broken down into 15 categories, of which
we provide reporting emissions data for three related to upstream activities. These are:
purchased goods and services (category 1); capital goods (category 2); and business
travel (category 6). We also report data on downstream activities for financed emissions
(category 15).
> For further breakdown of our scope 1, 2 and 3 emissions, see our ESG Data Pack at
www.hsbc.com/esg.
HSBC ESG Report - Scope 1, 2 and 3 diagram design_RESIZE_NEW_3_SD_V4.jpg
1 Our analysis of financed emissions comprises ‘on-balance sheet financed emissions’ and ‘facilitated
emissions’.
46 HSBC Holdings plc
Understanding our climate reporting continued
Keeping up-to-date with real economy
progress 
Net zero-aligned scenarios are dynamic by
nature; they are typically updated every few
years to incorporate significant shifts that
have occurred in the real economy. Key
drivers of this include changes in the
economic environment, new data on
technology deployment across sectors and
geographies, new policies, and increased
investment in clean energy and/or in fossil
fuels.
The reference scenario we have selected to
date for our published 2030 targets, for on-
balance sheet and facilitated emissions, is the
International Energy Agency’s (‘IEA’) NZE 2021
scenario, which is 1.5°C-aligned with limited
overshoot. In September 2023, the IEA’s NZE
2023 scenario was published as an update to
reflect developments since 2021. As outlined in
our net zero transition plan, going forwards we
intend to review each updated set of 1.5°C-
aligned scenarios to further develop and
enhance our understanding of the latest
outlooks for evolving pathways to achieve net
zero by 2050. This will help us to consider
whether, how and when to iterate and update
our approach to scenario selection and target
setting, portfolio alignment, and policies to
keep pace with the latest science and real-
world developments. We anticipate standard
setter and industry guidance on the treatment
of updated scenarios in target setting to
emerge.
We recognise that the so-called ‘hard-to-
abate’ sectors, such as cement, iron, steel
and aluminium, and aviation have a large
dependence on nascent technologies and
the presence (or not) of enabling policies and
regulations. We may consider tracking
progress relative to 1.5°C-aligned ambition
ranges for these sectors in the future, which
could include industry-specific scenarios
alongside the IEA NZE scenario.
Critical dependencies
Progress in the real economy towards net
zero will likely be non-linear and will depend
heavily on external factors including the policy
and regulatory landscape, the speed of
technological innovation, major economic
shifts and geopolitical events. There is also a
risk of government or customer net zero
pledges or transition plans not turning into the
necessary emissions reductions in the coming
decade, or in the case of hard-to abate
sectors, being pared back if technologies do
not scale in time. In addition, climate science,
the quality of data, and the scenarios upon
which we have based our approach will
change. We recognise that while we have
limited control of these external
dependencies, we can be clear on where we
intend to focus our efforts to help drive
meaningful change, and that we expect to
iterate and mature our approach over time.
Our internal and external data
challenges
Our climate ambition requires us to continue
to enhance our capabilities including
governance, processes, systems and
controls. In addition, there is a heightened
need for subject matter experts for climate-
related topics as well as upskilling of key
colleague groups who are supporting
customers through their net zero transition.
We also need new sources of data, some of
which may be difficult to assure using
traditional verification techniques. This
challenge, coupled with diverse external data
sources and structures, further complicates
data consolidation. Our internal data on
customer groups used to source financial
exposure and emissions data is based on
credit and relationship management
attributes, and is not always aligned to the
data needed to analyse emissions across
sector value chains. As a consequence, this
can result in an inconsistent basis in our
financed emissions calculations.
We continue to invest in our climate
resources and skills. Our activities are
underpinned by efforts to develop our data
and analytics capabilities and to help ensure
that we have the appropriate processes,
systems, controls and governance in place to
support our transition.
We continue to increase automation of our
processes, with a particular focus on
developing our ESG data capabilities to help
address data gaps and improve consistency.
This includes sourcing more reliable data
from external providers. We are also
developing our processes, systems, controls
and governance to meet the demands of
future ESG reporting. Certain aspects of our
reporting rely on manual sourcing and
categorisation of data that is not always
aligned with how our businesses are
managed. We also have a dependency on
emissions data from our clients. Given the
manual nature of the process, enhanced
verification and assurance procedures are
performed on a sample basis over this
reporting, including the first and second line
of defence. Our climate models undergo
independent review by an internal model
review group, and we obtain limited
assurance on our financed emissions and
sustainable finance disclosures from external
parties, including our external auditors.
Policy implementation
We continue to review policy
implementation as we apply our policies in
practice, and our operationalisation of such
policies continues to be enhanced. We take
a risk-based approach when identifying
transactions and clients to which our energy
and thermal coal phase-out policies apply,
and when reporting on relevant exposures,
adopting approaches proportionate to risk
and materiality. This helps to focus our
efforts on areas where we believe we can
help drive meaningful change, while taking
into account experience from policy
implementation over time.
An evolving approach to embedding net
zero
We acknowledge that our assessment of
client transition plans - which to date has
focused on clients in scope of our thermal
coal phase-out and energy policies - is at an
early stage with initial learnings on
methodology and client engagement. We are
also at the early stages of embedding
transition plans alongside financed
emissions into transaction and portfolio level
business and risk processes. Our net zero
transition plan provides further details of
work underway and planned.
Limited alignment on sustainable finance taxonomies
Sustainable finance metrics, taxonomies and best practices lack global consistency. As standards
develop over time and as the regulatory guidance around them evolves across jurisdictions, our
methodologies, disclosures and targets may need to evolve. This could lead to differences in
year-on-year reporting and restatements.
We continue to engage with standard setters in different regions to support the development of
transparent and consistent taxonomies to best incentivise science-based decarbonisation,
particularly in high transition risk sectors. We aim to align to enhanced industry standards as they
are further developed, and increase transparency across the different types of green and
sustainable finance and investment categories going forward.
HSBC Holdings plc47
Understanding our climate reporting continued
Financed emissions reporting challenges
The methodologies and data used to assess
financed emissions and set targets continue
to evolve alongside changes to industry
guidance, market practice and regulation.
We plan to refine our analysis using
appropriate data sources and current
methodologies available for the sectors we
analyse. We have developed an internal
recalculation policy (see page 56) to define
the circumstances under which a
recalculating of financed emissions is
necessary to help support the consistency,
comparability and relevance of our reported
emissions data over time.
We have now set combined on-balance
sheet financed emissions and facilitated
emissions targets for two emissions-
intensive sectors: oil and gas, and power and
utilities, and report the combined progress
for both sectors. We continue to report on-
balance sheet financed emissions and
targets for cement, iron, steel and
aluminium, aviation, automotive and in 2023
we added thermal coal mining financed
emissions.
Emissions related to our insurance business
are partially captured within the disclosures
of HSBC Asset Management, which
manages the vast majority of our insurance
assets. The Partnership for Carbon
Accounting Financials (‘PCAF’) standard for
insurance associated emissions (part C) is
not applicable to our insurance business as
HSBC Insurance focuses on the
manufacturing of life insurance products.
In November 2023, our asset management
business updated its 2022 thermal coal
phase-out policy and released a new energy
policy. It continues to focus on its portfolios’
scope 1 and scope 2 decarbonisation target
for 2030 with the aim of aligning with net
zero emissions by 2050 or sooner. The
commitment covers listed equity and
corporate fixed income where data is most
reliable and methodologies are most mature.
In January 2023, we withdrew our
commitment to the Science Based Targets
initiative (‘SBTi’), which we had made in
2016, because we determined that it would
not be feasible for us to meet SBTi’s
requirement to submit a complete set of
sector targets for validation by its deadline.
We continue to engage with SBTi on
guidance for financial institutions and we
participated in SBTi’s consultation process on
its revised standards during the year.
Disclosure revisions
We are committed to timely and transparent
reporting. However, we recognise that
challenges on data sourcing, as well as the
evolution of our processes and industry
standards, may result in us having to restate
certain disclosures. In 2023, there has been
an impact on certain climate disclosures, as
follows:
–Financed emissions: we improved our
methodology for calculating financed
emissions using more granular product
identification to isolate exposure in scope,
more consistent emission factors for
estimates, and a revised aggregation
method for emission intensity. Previously
reported on-balance sheet numbers
included non-lending exposures for market
products in error. The more granular
product identification will help ensure these
are not included in future.
–Financed emissions: to reflect these
enhancements we have set out the
recalculated metrics for the oil and gas, and
power and utilities sectors in the financed
emissions section. The oil and gas baseline
for on-balance sheet financed emissions is
now 28.4 million tonnes of carbon dioxide
equivalent (‘Mt CO2e’) for 2019 versus
33.0 Mt CO2e reported in the Annual
Report and Accounts 2022. The power and
utilities baseline for on-balance sheet
financed emissions is now 537.5 tonnes of
carbon dioxide equivalent per gigawatt
hour (‘tCO2e/GWh’) for 2019 versus 589.9
tCO2e/GWh reported in the Annual Report
and Accounts 2022. For other sectors,
changes were not material enough to
warrant a recalculation.
–Thermal coal exposures: we have now
revised the basis of preparation for our
thermal coal exposures. Aligned with our
thermal coal phase-out policy, we applied a
risk-based approach to identify clients and
report on relevant exposures. Our thermal
coal financing drawn balance exposure was
approximately $1bn† as at 31 December
2020.  We continue to work on our 2021
and 2022 numbers based on our revised
basis of preparation and expect to report on
these in future disclosures.
–Thermal coal power financed emissions:
we have discontinued separate tracking and
reporting of thermal coal power financed
emissions. A review of the counterparties
included within the on-balance sheet
financed emissions calculation showed that
the majority of thermal coal power entities
in scope are included in other financed
emission sector targets. We previously set
separate targets to reduce on-balance
sheet financed emissions for thermal coal
power and thermal coal mining aligned to
our thermal coal phase-out policy. We plan
to maintain a financed emissions target for
thermal coal mining only, and have set an
absolute on-balance sheet reduction target
for 2030 from a 2020 baseline. We used
2020 as a baseline to align with those
applied to our drawn balance exposure
targets. These targets reflect the
percentage reduction that the IEA indicates
in its net zero emissions scenario for global
emissions to 2030.
–Shipping: following a reduction in our
exposure to the shipping sector after the
strategic sale of part of our European
shipping portfolio in 2023, and work
undertaken to assess the materiality of our
remaining portfolio from a financed
emissions perspective, we have concluded
that the remaining exposure as of year-end
2023 is not material enough to warrant
setting a stand-alone target. This aligns
with Net-Zero Banking Alliance (‘NZBA’)
guidelines on sector inclusion for target
setting.
Continuing to evolve our climate
disclosures
We understand the need to provide early
transparency on climate disclosures but
we must balance this with the recognition
that our existing data and reporting
processes require significant
enhancements. Due to ongoing data
availability and quality challenges, we
continue to assess our financed emissions
for our real estate and agriculture sectors.
We are engaging with standard setters to
support the development of transparent
and consistent climate-related industry
standards in areas such as product
labelling, sustainability disclosures,
sustainable finance taxonomy and
emissions accounting. Voluntary industry
initiatives can also help shape action and
collaboration, and often form the basis of
future climate policy and regulation. For
example, we supported the TCFD, which
is now referenced in climate disclosure
rules around the world.
In 2024, we will continue to review our
approach to disclosures, and enhance as
appropriate.
For details of assurance over our ESG data, see
Footnote Arrow.jpg
page 43.
For details of our approach to calculating financed
Footnote Arrow.jpg
emissions and the relevant data and methodology
limitations, see page 55.
For details of our sustainable finance and
Footnote Arrow.jpg
investment ambition, see page 49.
For details of our approach to thermal coal
Footnote Arrow.jpg
financing exposures, see page 67.
For further details of our asset management
Footnote Arrow.jpg
policies, see page 67.
† Data is subject to independent limited third-party
assurance in accordance with ISAE 3000/ ISAE
3410. For further details, see our Financed Emissions
and Thermal Coal Exposures Methodology and
independent third-party limited assurance report,
which are available at www.hsbc.com/who-we-are/
esg-and-responsible-business/esg-reporting-centre.
48 HSBC Holdings plc
Supporting our customers
Sustainable finance and investment
TCFD
We recognise that we have an important role
to play in supporting the transition to a net
zero global economy. As a global
organisation with a presence in the regions
and sectors where most significant change is
needed, we are well placed to help transition
industry and catalyse the new economy to
reach net zero.
Progress on our sustainable finance and
investment ambition
We aim to help our customers transition to
net zero and a sustainable future by
providing and facilitating between $750bn
and $1tn of sustainable finance and
investment by 2030. Our sustainable finance
and investment ambition aims to help
promote green, sustainable and socially-
focused business and sustainable investment
products and solutions.
Since 1 January 2020, we have provided and
facilitated $267.8bn of sustainable finance
and $26.6bn of ESG and sustainable
investing, as defined in our Sustainable
Finance and Investment Data Dictionary 2023.
This included 38% where the use of
proceeds were dedicated to green financing,
12% to social financing, and 15% to other
sustainable financing. It also included 26% of
sustainability-linked financing and 9% of net
new investment flows managed and
distributed on behalf of investors. In 2023,
our underwriting of green, social,
sustainability and sustainability-linked bonds
for clients decreased over the year,
measured on a proportional share basis, in
line with the wider bond market
environment, although it remained at 15% of
our total bond underwriting. On-balance
sheet sustainable lending transactions
increased by 7% compared with 2022. In
2023, transactions totalling $0.7bn were
identified as no longer fulfilling our eligibility
criteria. These were declassified and
removed from the cumulative progress total,
and reported as a negative entry in 2023.
Continued progress towards achieving our
sustainable finance and investment ambition
is dependent on market demand for the
products and services set out in our
Sustainable Finance and Investment Data
Dictionary 2023.
Sustainable finance and investment summary1
2023 
($bn)
2022   
($bn)
2021   
($bn)
2020   
($bn)
Cumulative
progress since
2020       
($bn)
Balance sheet-related transactions provided
42.7
42.2
26.0
10.4
121.3
Capital markets/advisory (facilitated)
33.3
34.5
48.7
30.0
146.5
ESG and sustainable investing (net new flows)
7.7
7.5
7.7
3.7
26.6
Total contribution2
83.7
84.2
82.4
44.1
294.4
Sustainable finance and investment classification by theme
Green use of proceeds3,4
37.1
29.0
27.1
18.9
112.1
Social use of proceeds3
8.4
6.7
11.3
9.7
36.1
Other sustainable use of proceeds3,5
10.7
12.6
11.7
8.3
43.3
Sustainability-linked6
19.8
28.4
24.6
3.5
76.3
ESG and sustainable investing7
7.7
7.5
7.7
3.7
26.6
Total contribution2,8
83.7
84.2
82.4
44.1
294.4
1 The 2023 data in this table has been prepared in accordance with our Sustainable Finance and Investment Data Dictionary 2023, which includes green, social and
sustainability activities. The amounts provided and facilitated include: the limits agreed for balance sheet-related transactions provided, the proportional share of
facilitated capital markets/advisory activities and the net new flows of sustainable investments within assets under management.
2 The $294.4bn cumulative progress since 2020 is subject to independent third-party limited assurance in accordance with International Standard on Assurance
Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. For our Sustainable Finance and Investment
Data Dictionary 2023 and independent third-party limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
3 For green, social and other sustainable use of proceeds, the capital markets products are aligned to the International Capital Markets Association's ('ICMA') Green
Bond Principles, Social Bond Principles or Sustainability Bond Guidelines or the Climate Bonds Initiative as applicable. The lending labelled products are aligned to the
Green Loan Principles (‘GLP’) or Social Loan Principles of the Loan Market Association ('LMA'), Asia-Pacific Loan Market Association (‘APLMA’) and the Loan
Syndications and Trading Association (‘LSTA’) as applicable; or for our sustainable trade instruments, are aligned to HSBC’s internal sustainable trade instrument
principles which are based on the GLP and reference the UN SDGs. Also included are facilities where HSBC identifies that the use of proceeds would meet eligibility
criteria as defined and approved by appropriate governance committees but these are not labelled or marketed as green or social.
4 Included within the total cumulative contribution towards our ambition are transactions to customers within the six high transition risk sectors (i.e. automotive,
chemicals, construction and building materials, metal and mining, oil and gas, and power and utilities) as described on page 259. Of which approximately $37bn is
defined as green use of proceeds in line with the Sustainable Finance and Investment Data Dictionary 2023.
5 Sustainable use of proceeds can be used for green, social or a combination of green and social purposes.
6 Our sustainability-linked labelled products are aligned to either the ICMA Sustainability-Linked Bond Principles or the Sustainability-Linked Loan Principles of the
LMA, APLMA and the LSTA as applicable. The coupon or interest rate is dependent on whether the borrower achieves predefined sustainability performance targets.
The funds can be used for general purposes.
7 Net new flows of both HSBC-owned (Asset Management) sustainable investment funds and Wealth and Global Private Banking investments assessed against the
Sustainable Finance and Investment Data Dictionary 2023.
8 Additional detailed information on our sustainable finance and investment progress can be found in the ESG Data Pack at www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
HSBC Holdings plc49
Sustainable finance and investment continued
Sustainable finance and investment
definitions
Our data dictionary defining our sustainable
finance and investment continues to evolve,
and is reviewed annually to take into account
the evolving standards, taxonomies and
practices we deem appropriate. This involves
reviewing and strengthening our product
definitions, where appropriate, adding and
deleting qualifying products, making
enhancements to our internal standards, and
developing our reporting and governance.
Industry and regulatory guidance on
definitions for sustainable finance continue
to evolve. In 2023, the Glasgow Financial
Alliance for Net Zero (‘GFANZ’), NZBA and
the UK government released work-in-
progress definitions of transition finance. We
will continue to monitor these and other
developments in sustainable finance
definitions.
Our progress will be published each year,
and we will seek to continue for it to be
independently assured.
Mobilising capital to support our
customers
In 2023, we continued to focus on providing
our customers with products, services and
initiatives to help enable emissions reduction
in the real economy.
For example, we increased our funding from
$5bn to $9bn for our sustainable finance
scheme that supports businesses of all sizes
in China’s Greater Bay Area to transition to
low-carbon operations. The scheme,
launched in 2022, provides successful loan
applicants access to a range of additional
services including training, subsidised third-
party assessments and assistance from a
team with sustainable financing expertise.
For our Wealth and Personal Banking
customers, we launched green mortgages in
Mexico, electric vehicle loans in India and a
referral service to our electric vehicle leasing
partner in the UK.
In 2023, we introduced an internal briefing 
series called Net Zero in Practice, which
covers new technologies relevant to the net
zero transition, drawing on expertise from
across the organisation and highlighting
financing opportunities and case studies.
We continue to be a participant in the Just
Energy Transition Partnerships (‘JETPs‘) in
Indonesia and Vietnam, and in the Nexus for
Water, Food and Energy in Egypt. These
initiatives aim to play a catalytic role in
mobilising finance to accelerate the energy
transition. For further details of our
involvement with the JETPs, see page 68.
In 2023, we won three awards at the
Environmental Finance Bond Awards. We
retained the Euromoney award for Best Bank
for Sustainable Finance in Asia for the sixth
year in a row, and won the global award for
Best Bank for Public Sector Clients in
recognition of our innovation in sustainability
and tokenised public-sector bonds.
Our sustainable finance and
investment data dictionary
We define sustainable finance and
investment as any form of financial
service that integrates ESG criteria into
business or investment decisions. This
includes financing, investing and advisory
activities that support the achievement of
UN Sustainable Development Goals
(‘SDGs’), including but not limited to the
aims of the Paris Agreement on climate
change.
Details of our revised definitions of the
contributing activities for sustainable
finance and investment and how we
calculate the amounts we count are
available in our Sustainable Finance and
Investment Data Dictionary 2023.
For our ESG Data Pack and Sustainable
Finance and Investment Data Dictionary,
see www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-
centre.
50 HSBC Holdings plc
Sustainable finance and investment continued
Responsible and sustainable investment
We offer a broad suite of ESG capabilities
across asset management, global markets,
wealth, private banking and securities
services, to help institutional and individual
investors to generate financial returns,
manage risk and pursue ESG-related
opportunities.
Our Asset Management business is
committed to further developing our
sustainable product range across asset
classes, as well as enhancing our existing
product suite for ESG and climate-related
criteria where it is in the investors’ interests
to do so. In 2023, we launched 10 funds
within our ESG and sustainable strategies,
which adhere to, and are classified within,
our Sustainable Finance and Investment Data
Dictionary 2023.
HSBC Asset Management managed over
$684bn assets at the end of 2023, of which
$73.3bn comprise assets of funds and
mandates invested in our ESG and
sustainable strategies.
Our ESG and sustainable investing approach
across different investment products can
include but is not limited to the UN SDGs,
including climate. For the avoidance of
doubt, assets invested pursuant to, or
considered to be in alignment with, HSBC’s
ESG and sustainable investing approach do
not necessarily qualify as ‘sustainable
investments’ as defined by the EU
Sustainable Finance Disclosures Regulation
(‘SFDR’) or other relevant regulations. Our
ESG and sustainable investing approach is
an HSBC internal classification approach
used to establish our own ESG and
sustainable investing criteria (recognising the
subjectivity inherent in such an approach
and the variables involved). It is also used to
promote consistency across asset classes
and business lines where relevant, and
should not be relied on externally to assess
the sustainability characteristics of any given
product. There is no single global standard
definition of, or measurement criteria for,
ESG and sustainable investing or the impact
of ESG and sustainable investing products.
We seek to take an active stewardship role
to help drive positive change in the
companies on our priority list in which we
invest on behalf of our customers. The
priority list, which is defined in our Global
Stewardship Plan, can be found at:
www.assetmanagement.hsbc.co.uk/en/
institutional-investor/about-us/responsible-
investing/-/media/files/attachments/uk/
policies/stewardship-plan-uk.pdf.
HSBC Asset Management’s fixed income,
equity and stewardship teams held over
2,000 meetings with companies in its
portfolios. This included engaging with
companies on the priority list across several
thematic priorities, such as climate change,
human rights, public health, inclusive growth
and shared prosperity, biodiversity and
nature, trusted technology and data, and
diversity, equity and inclusion.
For our private banking and wealth
customers, we expanded our investment
offering with the launch of eight ESG and
sustainable investing mutual funds and
exchange-traded funds in 2023. We also
enhanced our ESG and sustainable investing
structured products offering linked to indices
such as the MSCI World Islamic ESG Select
8% Risk Control Index. Throughout 2023, we
published regular ESG and sustainability-
related market insights and updates such as
#WhyESGMatters and Learning about ESG
to help clients better understand the
implications for their investments.
HSBC Life, our insurance business,
continues to expand the availability of ESG
investment fund options within its
investment-linked products. In 2023, eight
new ESG funds were introduced across
Hong Kong, France and Singapore with a
range of investment themes, including
environmental, circular economy and
sustainable energy.
In June, under the United Nations
Environment Programme Finance Initiative
(‘UNEP FI’) Principles for Sustainable
Insurance, HSBC Life co-led a team of
insurance organisations to publish an
industry position paper focused on the role
and opportunity for life and health insurers to
help build a more inclusive and preventative
healthcare model. This included examples of
good industry practice to: help insurers
improve access to healthcare; close the
health protection gap; drive better health
outcomes across populations; and mitigate
potential health risks due to climate change
and other environmental factors.
For further details of our asset management policies,
see page 67.
Helping customers to
understand ESG in their
investments
We have launched new metrics to help
our Global Private Banking and Wealth
customers understand the ESG
performance of their investments. In
selected markets in 2023, we also
introduced a sustainability preference
questionnaire to help identify and
understand our customers’ sustainable
investing objectives and ambitions. By
improving clarity on ESG performance,
which traditional financial metrics fail to
capture, we aim to provide customers
with meaningful insights to enable them
to make informed investment decisions.
Examples of these metrics, available on
digital platforms in selected markets, are:
–‘ESG rating and score’, which measures
a company’s resilience to material long-
term, industry ESG risks and
opportunities, with data provided by
MSCI.
–‘Carbon intensity’, which measures a
company’s carbon emissions per million
of revenue, with data provided by S&P
Trucost.
In addition, we have also introduced
‘HSBC ESG and sustainable investing
classifications’, which help customers to
understand and identify ESG and
sustainable investing products in their
investment portfolio according to HSBC’s
definition.
HSBC Holdings plc51
Sustainable finance and investment continued
TCFD
Unlocking climate solutions and
innovation
We recognise the need to find new solutions
and increase the pace of change for the
world to achieve the Paris Agreement goal of
being net zero by 2050.
We are working with a range of partners to
accelerate investment in sustainable
infrastructure, natural resources and climate
technology to help reduce emissions and
address climate change.
Sustainable infrastructure
Addressing climate change requires the
rapid development of a new generation of
sustainable infrastructure.
HSBC continues to support the FAST-Infra
Initiative, which we helped conceive,
working with the IFC, OECD, the World
Bank’s Global Infrastructure Facility and the
Climate Policy Initiative, under the auspices
of the One Planet Lab. In 2023, the initiative,
which aims to mobilise large-scale financing
to develop sustainable infrastructure, invited
pilot photovoltaic and wind power projects
around the world to apply for the provisional
FAST-Infra label. The label is awarded to
projects that meet specific sustainability
criteria. HSBC is supporting the introduction
and widespread adoption of the labelling
system as a standard for sustainable
infrastructure assets globally.
Natural capital as an emerging asset
class
Climate Asset Management, a joint venture
we launched with climate investment and
advisory firm Pollination in 2020, continues
to create investment opportunities for
investors to help protect biodiversity and
support the transition to net zero.
It offers two investment strategies that aim
to build resilience across landscapes while
generating returns. Its nature-based carbon
strategy targets nature restoration and
conservation projects in developing
economies, prioritising community benefits
while generating high-quality carbon credits.
Its natural capital strategy invests in
agriculture, forestry and environmental
assets and aims to deliver impact at scale
alongside long-term financial returns.
Backing new technology and
innovation
At the COP28 Summit in the UAE, HSBC
pledged its support for the Energy
Transition Accelerator Financing Platform,
which aims to scale up the development
of renewable energy projects in
developing countries. Established in 2021
with initial support from the Abu Dhabi
Fund for Development and the
International Renewable Energy Agency,
the platform brings together public and
private institutions. HSBC signed
alongside the European Bank for
Reconstruction and Development, the
International Finance Corporation and the
Multilateral Investment Guarantee
Agency. We will work with platform
partners to expand the pipeline of
investable projects in core HSBC markets,
including in Asia and the Middle East,
bringing financing solutions that support
the transition to net zero.
We also became a founding member of
the Global Climate Finance Centre, a
newly launched UAE-based think tank
created to connect public and private
finance to help accelerate the transition to
net zero.
HSBC Alternatives made direct
investments in assets that help to
promote the transition to a net zero
climate. The venture capital strategy
invests across four themes: power
transformation, transport electrification,
supply chain sustainability and climate
risk mitigation. The strategy raised
additional funds from institutional and
private wealth clients over the course of
2023.
52 HSBC Holdings plc
Financed emissions
TCFD
We announced our ambition to become a
net zero bank in October 2020, including an
aim to align our financed emissions to net
zero by 2050 or sooner. We have published
initial financed emissions targets for 2030,
and plan to review them in five-year
increments thereafter.
Our analysis of financed emissions
comprises ‘on-balance sheet financed
emissions’ and ‘facilitated emissions’, which
we distinguish where necessary in our
reporting. Our on-balance sheet financed
emissions include emissions related to on-
balance sheet lending, such as project
finance and direct lending. Our facilitated
emissions include emissions related to
financing we help clients to raise through
capital markets activities. Our analysis
covers financing from Global Banking and
Markets, and Commercial Banking.
Financed emissions link the financing we
provide to our customers and their activities
in the real economy, and provide an
indication of the associated greenhouse gas
emissions. They form part of our scope 3
emissions, which include emissions
associated with the use of a company’s
products and services.
In 2021, we started measuring financed
emissions for oil and gas, and power and
utilities. Following the December 2023
release of the PCAF Global GHG Accounting
Standard for capital markets, we now
include facilitated emissions for these
sectors, in recognition of our role as service
provider when customers issue debt and
equity to investors. For target setting we
now track the combined progress for on-
balance sheet financed and facilitated
emissions.
In 2022, we disclosed the on-balance sheet
financed emissions targets for the following
additional sectors: cement; iron, steel and
aluminium; aviation; and automotive. We
also set a target, and now measure, on-
balance sheet financed emissions for the
thermal coal mining sector. As part of our
financial reporting, we present the progress
for these sectors against the financed
emissions baselines that we now measure
ourselves against.
Following a reduction in our exposure to the
shipping sector after the strategic sale of
part of our European shipping portfolio in
2023, and work undertaken to assess the
materiality of our remaining portfolio from a
financed emissions perspective, we have
concluded that the remaining exposure as of
year-end 2023 is not material enough to
warrant setting a stand-alone target. This
aligns with NZBA guidelines on sector
inclusion for target setting.
We have announced a number of planned
business disposals in recent years, and we
will continue to consider how these may
impact future disclosures, including
recalculations.
For all sectors other than oil and gas and
thermal coal mining, we have set emissions
intensity targets. These targets are linked to
real world production and help us to deploy
capital towards decarbonisation solutions.
Our approach to financed emissions
In our approach to assessing our financed
emissions, our key methodological decisions
were shaped in line with industry practices
and standards. We recognise these are still
developing.
Coverage of our analysis
For each sector, our analysis focuses on the
parts of the value chain where we believe the
majority of emissions are produced to help
reduce double counting of emissions. By
estimating emissions and setting targets for
customers that directly account for, or
indirectly influence, the majority of emissions
in each industry, we can focus our
engagement and resources where we
believe the potential for change is highest.
For each sector, our reported emissions now
typically include all the major greenhouse
gases, including carbon dioxide, methane
and nitrous oxide, among others. These are
reported as tonnes of CO2 equivalent, in line
with NZBA guidelines.
To calculate annual on-balance sheet
financed emissions, we use drawn balances
as at 31 December in the year of analysis
related to wholesale credit and lending,
which include business loans and project
finance as the value of finance provided to
customers. We excluded products that were
short term by design, and typically less than
12 months in duration, consistent with
guidance from the PCAF, to reduce volatility.
For facilitated emissions we considered all
capital market transactions in scope for the
year of analysis. These included debt and
equity capital markets, and syndicated loans.
For further details of our financed emissions
Footnote Arrow.jpg
methodology, exclusions, and limitations, see our
Financed Emissions and Thermal Coal Exposures
Methodology at www.hsbc.com/who-we-are/esg-
and-responsible-business/esg-reporting-centre.
The chart below shows the scope of our financed emissions analysis of the seven sectors, including upstream, midstream and downstream
activities within each sector. The allocation of companies to different parts of the value chain is highly dependent on expert judgement and
data available on company revenue streams. As data quality improves, this will be further refined.
Sector
Scope of
emissions
Value chain in scope
Coverage of
greenhouse
gases (‘GHGs’)
Oil and gas
1, 2 and 3
Upstream
(e.g. extraction)
Midstream
(e.g. transport)
Downstream
(e.g. fuel use)
Integrated/
diversified
All GHGs
Power and utilities
1 and 2
Upstream
(e.g. generation)
Midstream
(e.g. transmission and distribution)
Downstream
(e.g. retail)
All GHGs
Cement
1 and 2
Upstream (e.g. raw
materials,
extraction)
Midstream
(e.g. clinker and cement manufacturing)
Downstream
(e.g. construction)
All GHGs
Iron, steel and
aluminium
1 and 2
Upstream (e.g. raw
materials,
extraction)
Midstream
(e.g. ore to steel)
Downstream
(e.g. construction)
All GHGs
Aviation
1 for airlines
3 for aircraft lessors
Upstream (e.g.
parts
manufacturers)
Midstream
(e.g. aircraft manufacturing)
Downstream
(e.g. airlines and
air lessors)
All GHGs
Automotive
1, 2 and 3
Upstream
(e.g. suppliers)
Midstream
(e.g. motor vehicle manufacture)
Downstream
(e.g. retail)
All GHGs
Thermal coal mining
1, 2 and 3
Upstream
(e.g. extraction)
Midstream
(e.g. processing)
Downstream
(e.g. retail)
All GHGs
Key:
Included in analysis
HSBC Holdings plc53
Financed emissions continued
Setting our targets
Our target-setting approach to date, for on-
balance sheet financed emissions and
facilitated emissions, has been to utilise a
single net zero reference scenario (IEA NZE
2021) to underpin both energy supply-related
sectors (oil and gas, power and utilities, and
thermal coal mining) and our published
targets for demand-side sectors in transport
and heavy industry.
The impact of our capital markets activities is
now reflected in our combined financed
emissions targets for the oil and gas, and
power and utilities sectors. Our facilitated
emissions, included in our combined metrics,
are weighted at 33%, in accordance with the
PCAF standard. This approach dampens
volatility, apportions responsibility between
underwriters and asset owners, and allows
for flexibility in deploying on and off-balance
sheet financing in line with clients’ needs. To
further reduce the inherent volatility in
facilitated emissions, we apply a three-year
moving average across transactions for our
target metric, building up from 2019 data.
This means that transactions facilitated in
2028 and 2029 will still have an impact on
the 2030 progress number and will need to
be taken into consideration as we manage
progress towards our target. We aim to
achieve our target in 2030 notwithstanding
the application of a three-year average.
Our approach for financed emissions
accounting does not rely on purchasing
offsets to achieve any financed emissions
targets we set.
An evolving approach
We believe methodologies for calculating
financed emissions and setting targets
should be transparent and comparable, and
should provide science-based insights that
focus engagement efforts, inform capital
allocation and support the development of
solutions that are both timely and impactful.
We continue to engage with regulators,
standard setters and industry bodies to help
shape our approach to measuring financed
emissions and managing portfolio alignment
to net zero. We also work with data
providers and our clients to help us gather
data from the real economy to improve our
analysis.
Scenarios used in our analysis are modelled
on assumptions of the available carbon
budget and actions that need to be taken to
limit the long-term increase in average global
temperatures to 1.5°C with limited
overshoot. We expect that the scenarios we
use will be updated periodically. We plan to
refine our own analysis of financed
emissions as industry guidance on scenarios,
data and methodologies more broadly evolve
in the years ahead.
Agriculture
For the agriculture sector, due to ongoing
data availability and quality challenges, and
lack of developed methodologies, we are not
in a position to report our financed emissions
or set a target at this time. We aim to build
data availability and continue to work with
partners and industry bodies to develop data
and methodologies across a wider section of
the agriculture value chain – such as farm-
related and downstream emissions,
including from the food and beverage sector
– while assessing the make-up of our
portfolio.
Residential real estate
For residential real estate, where our
customers are consumers not corporates,
our approach needs to consider financial
inclusivity, and our ability to provide
customers access to suitable mortgages in
addition to decarbonisation aims. We expect
to measure and report our residential real
estate financed emissions in future
disclosures. We continue to consider our
approach to setting an appropriate target to
measure our contribution to helping the
sector transition.
Commercial real estate
For commercial real estate, we continue to
work towards outlining a baseline and a
2030 financed emissions ambition or
ambition range, starting with our major
markets and where sufficient data is
available to track decarbonisation progress.
We expect to review our approach and
coverage periodically in line with evolving
data, methodologies, scenarios and real-
world progress. Methodologies for
embedded carbon need to be developed
given the materiality of financing new
property development within our portfolio,
from a financed emissions perspective.
54 HSBC Holdings plc
Financed emissions continued
Data and methodology limitations
Our financed emissions estimates and
methodological choices are shaped by the
availability of data for the sectors we analyse.
–We are members of the PCAF, which defines
and develops greenhouse gas accounting
standards for financial institutions. Its Global
GHG Accounting and Reporting Standards for
Financed Emissions and for Facilitated
Emissions provide detailed methodological
guidance to measure and disclose financed
and facilitated emissions.
–We have found that data quality scores vary
across the different sectors and years of
our analysis, although not significantly.
While we expect our data quality scores to
improve over time, as companies continue
to expand their disclosures to meet
growing regulatory and stakeholder
expectations, there may be fluctuations
within sectors year on year, and/or
differences in the data quality scores
between sectors due to changes in data
availability.
–The majority of our clients do not yet report
the full scope of greenhouse gas emissions
included in our analysis, in particular scope
3 emissions. In the absence of client-
reported emissions, we estimated
emissions using proxies based on company
production and revenue figures. Although
we sought to minimise the use of non-
company-specific data, we applied industry
averages in our analysis where company-
specific data was unavailable through our
vendor datasets. As data improves,
estimates will be replaced with reported
figures.
–Third-party datasets that feed into our
analysis may have up to a two-year lag in
reported emissions figures, and we are
working with data providers to help reduce
this. Mapping external datasets to our
internal client entities is challenging due to
complex company ownership structures.
–The methodology and data used to assess
financed emissions and set targets are new
and evolving, and we expect industry
guidance, market practice, and regulations
to continue to change. We plan to refine
our analysis using appropriate data sources
and current methodologies available for the
sectors we analyse.
–We remain conscious that the attribution
factor used in the financed emissions
calculation is sensitive to changes in drawn
amounts or market fluctuations, and we
plan to be transparent around drivers for
change to portfolio financed emissions
where possible.
–To calculate sector-level baselines and
annual updates, our portfolio-level
emissions intensity was previously
weighted by the ratio of our financing in
relation to the value of the financed
company. We believe this introduced
volatility. We have now calculated sector
level emissions intensity metrics using a
portfolio-weighted approach. Due to data
limitations, we are unable to obtain
production data for all of our clients. We
therefore calculate an emissions intensity
figure using the 75th percentile to meet
this data gap.
–The classification of our clients into sectors
is performed with inputs from subject
matter experts, and will also continue to
evolve with improvements to data and our
sector classification approach. Our internal
data on customer groups used to source
financial exposure and emissions data is
based on credit and relationship
management attributes and is not always
aligned to the data needed to analyse
emissions across sector value chains. As a
consequence, this can result in an
inconsistent basis in our financed
emissions calculations. As the sub-sector,
and therefore the value chain classification
is based on judgement, this may be revised
as better data becomes available.
Emissions are calculated at a counterparty
group level and each client is mapped to a
single sector. Companies with multiple
activities such as conglomerates, with near
to equal business activity split across
multiple sectors, are excluded as these can
have different activities covered by multiple
sector targets. Once we define a
methodology for conglomerates these may
be covered according to their activity split.
–The operating environment for climate
analysis and portfolio alignment is maturing.
We continue to work to improve our data
management processes, and are
implementing steering mechanisms to align
our provision of finance with the goals and
timelines of the Paris Agreement.
For further details of our financed emissions
Footnote Arrow.jpg
methodology, see our Financed Emissions and
Thermal Coal Exposures Methodology at
www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre.
HSBC Holdings plc55
Financed emissions continued
Our approach to financed emissions recalculations
The PCAF recommends that financial
institutions should, in line with the
Greenhouse Gas Protocol Corporate Value
Chain (Scope 3) Accounting and Reporting
Standard requirement, establish a
recalculation policy. To adhere to this
recommendation, we have defined the
circumstances under which we consider a
recalculation of baseline and/or progress
against financed emissions target metrics is
necessary to help ensure the consistency,
comparability and relevance of the reported
greenhouse gas emissions data
over time. Our recalculation policy covers
revisions of metrics linked to the targets due
to changes in financed emissions
accounting, such as changes to
methodology, errors, and improvements to
data. We expect our recalculation policy to
evolve with further industry guidance.
The table below outlines the action we take
when key areas of change, individually or in
aggregate, breach our defined significance
thresholds for the baseline year metric linked
to the target. Enhancements to internal or
external data, such as changes to the
classification of the population to a different
business activity type or more, or improved
quality data reported by clients, would not
constitute a change to the financed
emissions estimation methodology or an
error.
Key reasons for change
What we expect to disclose
Changes to the financed
emissions methodology
such as changes to design
choices
–The reasons why applying the new metrics provides reliable and more relevant information
–The actions being taken to remediate same or similar errors in the future
–The nature of the change(s) and errors in financed emissions accounting impacting the baseline progress
metric and all prior year progress metrics disclosed as far as is practicable
–The aggregate amount of any adjustments impacting the baseline progress metric and all prior year progress
metrics disclosed as far as is practicable
–The change in financed emissions accounting baseline progress metric and all prior year progress metrics
disclosed as far as is practicable
Errors such as a failure to
carry out our methodology
or errors in internal financial
data
In 2023, we improved our methodology for
calculating financed emissions using more
granular product identification to isolate
exposure in scope, more consistent emission
factors for estimates, and a revised
aggregation method for emissions intensity.
Previously some reported on-balance sheet
numbers included non-lending exposures for
market products in error. The more granular
product identification will help ensure these
are not included in future.
To reflect these enhancements we have set
out the recalculated metrics for the oil and
gas, and power and utilities sectors in the
table below. For other sectors, changes were
not material enough to warrant a
recalculation.
The oil and gas baseline for on-balance sheet
financed emissions is now 28.4 million
tonnes of carbon dioxide equivalent (‘Mt
CO2e’) for 2019 versus 33.0 Mt CO2e
reported in the Annual Report and Accounts
2022. Of this change, 62% (2.9 Mt CO2e)
was related to the inclusion of non-lending
products in error and the remaining 38% (1.8
Mt CO2e) was due to the enhanced product
mapping and streamlined approach for
emissions estimates.
The power and utilities baseline for on-
balance sheet financed emissions is now
537.5 tonnes of carbon dioxide equivalent
per gigawatt hour (‘tCO2e/GWh’) for 2019
versus 589.9 tCO2e/GWh reported in the
Annual Report and Accounts 2022. This
change reflects the implementation of the
revised aggregation method and enhanced
product mapping.
Revisions
Reporting metrics
Previously reported
Recalculated metrics
Percentage change
Sector
2019
2020
2019
2020
2019
2020
Oil and gas
On-balance sheet financed - Mt CO2e
33.0
30.1
28.4
25.0
(14)%
(17)%
Facilitated (100% weighting) - Mt CO2e
29.5
N/A
43.2
N/A
47%
N/A
Power and utilities
On-balance sheet financed - tCO2e/GWh
589.9
509.6
537.5
511.1
(9)%
—%
Facilitated (100% weighting) - tCO2e/GWh
360.0
N/A
420.7
N/A
17%
N/A
56 HSBC Holdings plc
Financed emissions continued
Targets and progress
We have set out in the table below our
combined on-balance sheet financed and
facilitated emissions targets for the oil and
gas, and power and utilities sectors. These
show the revised baselines.
For facilitated emissions, we track progress
to target using a three-year average moving
window (average of 2020, 2021 and 2022 for
the 2022 progress number) and figures
weighted at 33%. This means that
transactions facilitated in 2028 and 2029 will
still have an impact on the 2030 progress
number and will need to be taken into
consideration as we manage progress
towards our target. We aim to achieve our
target in 2030 notwithstanding the
application of a three-year average.
The facilitated emissions values total 17.5 Mt
CO2e in 2021 and 14.4 Mt CO2e in 2022 for
the oil and gas sector, and 398.3 tCO2e/
GWh for 2021 and 377.6 tCO2e/GWh in
2022 for the power and utilities sector. These
values are then combined with the on-
balance sheet numbers for the relevant year
to track progress to target. We set out the
annual figures before the application of the
three-year average in the facilitated
emissions table on page 61.
We have also set out our defined targets for
the on-balance sheet financed emissions of
the following sectors: cement; iron, steel and
aluminium; aviation; automotive; and
thermal coal mining. We disclose emissions
in 2021 and 2022 and progress achieved in
2022 versus baseline for each sector.
We have implemented a revised approach to
calculate the sector-level intensity metric in
2023, which has been applied for the
recalculated power and utilities baseline
metric, and for 2021 and 2022 actual data
for all intensity-based sectors. Emissions
intensity is a weighted average according to
the portfolio weight of each investment, as a
proportion of the total portfolio value.
The progress figures show the trend in
financed emissions before targets were set.
Targets were set for oil and gas, and power
and utilities in February 2022, for thermal
coal mining in December 2022, and for the
other sectors in February 2023. On the
following pages, we provide more granular
details of our financed emissions within
these sectors.
When assessing the changes from 2019 to
2022, it is important to emphasise the long-
term commitment that is needed to meet our
2030 interim targets, and how changes to
exposure and market fluctuations impact
yearly updates. Movement from one year to
the next may not reflect future trends for the
financed emissions of our portfolio. In the
hard-to-abate sectors, where
decarbonisation progress is expected to be
slower, we are taking steps to engage with
clients on their transition plans.
As we are at the beginning of our journey to
track and measure progress, we believe it
would be premature to infer future trends
from the 2019 to 2022 progress at this stage.
Sector 1
Baseline
2021
2022
2022 %
change vs.
baseline
2030 target
Unit2
Target scenario
Combined on-balance sheet financed and facilitated emissions at 33%, with three-year moving average
Oil and gas
42.6 in 2019
37.9
31.9
(25)%
(34)%
Mt CO2e
IEA NZE 2021
Power and utilities
513.4 in 2019
405.1
396.8
(23)%
138.0
tCO2e/GWh
IEA NZE 2021
On-balance sheet financed emissions
Cement
0.64 in 2019
0.70
0.71
10%
0.46
tCO2e/t cement
IEA NZE 2021
Iron, steel and aluminium
1.8 in 2019
2.4
2.5
38%
1.05 (1.43)3
tCO2e/t metal
IEA NZE 2021
Aviation
84.0 in 2019
85.9
86.5
3%
63.0 4
tCO2e/million rpk
IEA NZE 2021
Automotive
191.5 in 2019
215.7
216.6
13%
66.0
tCO2e/million vkm
IEA NZE 2021
Thermal coal mining
4.0 in 2020
N/A
N/A
N/A
(70)%5
Mt CO2e
IEA NZE 2021
1 Our absolute and intensity emission metrics and targets are measured based on the drawn exposures of the counterparties in scope for each sector. For oil and gas;
and power and utilities, the baseline, 2021, 2022 and target type figures represent revised combined on-balance sheet financed and facilitated emissions. For iron,
steel and aluminium; cement; aviation; automotive; and thermal coal mining, the baseline, 2021, 2022 and target type figures represent on-balance sheet financed
emissions (no revisions applied).
2 For the oil and gas sector, absolute emissions are measured in million tonnes of carbon dioxide equivalent (‘Mt CO2e’); for the power and utilities sector, intensity is
measured in tonnes of carbon dioxide equivalent per gigawatt hour (‘tCO2e/GWh’); for the cement sector, intensity is measured in tonnes of carbon dioxide equivalent
per tonne of cement (‘tCO2e/t cement’); for the iron, steel and aluminium sector, intensity is measured in tonnes of carbon dioxide equivalent per tonne of metal
(‘tCO2e/t metal’); for the aviation sector, intensity is measured in tonnes of carbon dioxide equivalent per million revenue passenger kilometres (‘tCO2e/million rpk’); for
the automotive sector, intensity is measured in tonnes of carbon dioxide equivalent per million vehicle kilometres ('tCO2e/million vkm’); and for the thermal coal mining
sector, absolute emissions are measured in million tonnes of carbon dioxide equivalent (‘Mt CO2e’).
3 While the iron, steel and aluminium 2030 target is aligned with the IEA NZE 2021 scenario, we also reference the Mission Possible Partnership Technology
Moratorium scenario, whose 2030 reference range is shown in parentheses.
4 Our aviation unit includes passenger and cargo tonnes, converted into revenue passenger kilometre (‘rpk‘), to align with our target pathway. This is comparable to
revenue tonne kilometre (rtk) using a 100kg per passenger conversion factor as we already include belly and dedicated cargo in our production figures. The conversion
factor changed from 95kg per passenger in the previous disclosure to align with industry practice.
5 The thermal coal mining scope differs from the other sectors. We include solely emissions from thermal coal production and coal power generation, rather than the
total emissions of a counterparty within a sector, to reflect the absolute financed emissions reduction thermal coal mining sector target.
HSBC Holdings plc57
Financed emissions
continued
We plan to report financed emissions and
progress against our targets annually and to
be transparent in our disclosures about the
methodologies applied and any challenges or
dependencies. However, financed emissions
figures may not be reconcilable or
comparable year on year in future, and
baselines and targets may require
recalibration as data, methodologies and
reference scenarios develop.
Consistent with PCAF guidance on financed
emissions accounting, we only consider the
outstanding drawn financing amount given
this has a direct link to real economy
emissions.
A number of clients have material undrawn
balances that, if drawn, could significantly
increase the financed emissions related to
those clients. We expect to assess how to
manage these exposures on a forward-
looking basis as we progress towards our
2030 targets. In addition, for the intensity-
based sectors, the emissions intensity is
sensitive to material clients and changes to
drawn balances year on year can therefore
influence the trend.
We are developing portfolio modelling
capabilities that integrate risk, profitability
and financed emissions to inform decision
making and determine how to best steer our
portfolios to meet our financed emissions
targets and commercial and strategic
ambitions. As part of this we are testing and
developing an analytics capability that will
provide an up-to-date view of our position
relative to our 2030 targets and an indication
of the financed emissions impact of a
transaction to consider alongside risk-return
metrics.
Oil and gas
For the oil and gas sector, our analysis
included scope 1, 2 and 3 emissions,
including carbon dioxide and methane, for
upstream and integrated companies. We
revised our baseline for 2019 and progress
figures to reflect combined on-balance sheet
financed and facilitated emissions and our
revised approach.
We have set a target to reduce absolute on-
balance sheet financed emissions and
facilitated emissions for our oil and gas
portfolio by 34% by 2030 relative to a 2019
baseline. This is consistent with a global
1.5°C-aligned pathway as defined by the IEA
NZE 2021 scenario. This target is unchanged
with the inclusion of facilitated emissions.
We plan to update our target following the
periodic release of new 1.5°C-aligned
scenarios in the years ahead to reflect shifts
in the real economy.
Our core approach as we progress towards
our portfolio decarbonisation targets is to
engage with major oil and gas customers to
understand their transition plans and to help
support and accelerate those efforts. This is
in line with the Group’s energy policy, which
supports the phasing down of fossil fuel
sources with the highest emission intensity
as well as financing restrictions for projects
relating to new oil and gas fields, and
infrastructure.
In 2022, absolute combined on-balance
sheet financed and facilitated emissions
decreased by 25% to 31.9 Mt CO2e relative
to the 2019 baseline, and by 16% from 2021
to 2022. This decline was achieved through a
risk-weighted assets reduction strategy and
aided by market conditions, with stronger oil
and gas cash flows and higher interest rates
resulting in reduced demand for bank debt
and capital markets financing. Market
dynamics will continue to create volatility in
future years as we make progress towards
our financed emissions target.
Oil and gas
Mt CO2e 
2022 progress
from baseline
(25)%
69269232619176
Power and utilities
For the power and utilities sector, our
analysis included scope 1 and 2 emissions
for upstream power generation companies.
Although scope 1 emissions are most
material for the sector, most companies
report scope 1 and 2 emissions together
making it challenging to split out the data.
We revised our baseline for 2019 and
progress figures to reflect combined on-
balance sheet financed and facilitated
emissions and our revised approach.
We have set a target to reduce the financed
emissions intensity of our on-balance sheet
and facilitated power and utilities portfolio to
138 tCO2e/GWh by 2030. This target is
unchanged with the inclusion of facilitated
emissions. We have chosen an intensity-
based target as electricity demand is
expected to more than double by 2050 due
to both population growth and electrification
required to decarbonise mobility, buildings,
and industry. We have focused on power
generation companies because they control
sector output. By engaging with them, we
believe we can help drive the most material
emissions impact in the real economy. Our
target is consistent with a global 1.5°C-
aligned pathway, as defined by the IEA NZE
2021 scenario. We plan to refresh our target
following the periodic release of new 1.5°C-
aligned scenarios in the years ahead.
In 2022, our combined on-balance sheet
financed and facilitated emissions intensity
decreased by 23% to 396.8 tCO2e/GWh
relative to the 2019 baseline. This reduction
was driven by an increase in financing of
renewable energy projects and companies,
and a decrease in financing of high
emissions intensity clients. Over the period
from 2022 to 2021 the fall in sector portfolio
financed emissions was a more modest 2%.
Over the reported period, the average
emissions intensity of clients for whom we
helped raise funds in the capital markets was
lower than for clients financed directly on our
balance sheet. This means the combined on-
balance sheet financed and facilitated
emissions intensity from 2019 to 2022 was
lower than for on-balance sheet financing
alone.
Power and utilities
tCO2e/GWh
2022 progress
from baseline
(23)%
69269232619179
58 HSBC Holdings plc
Financed emissions
continued
Cement
For the cement sector, our analysis included
scope 1 and 2 emissions for midstream
companies with clinker and cement
manufacturing facilities.
In line with the IEA NZE 2021 scenario, we
target an on-balance sheet financed
emissions intensity of 0.46 tonnes of carbon
dioxide equivalent per tonne of cement
(‘tCO2e/t cement’) by 2030, using 2019 as
our baseline. While some emissions
reductions can be achieved through energy
efficiency, we believe that to significantly
reduce fuel and process emissions from
cement manufacturing, and to meet our
targets, large-scale investments are required
in new technologies, including clinker
substitution, alternative fuel use such as
bioenergy, and carbon capture use and
storage.
Our 2022 emissions intensity was 10%
higher than the 2019 baseline due to higher
drawn balances for emissions intensive
clients, but at 0.71 tCO2e/t cement in 2022,
it was marginally up by 1% from 2021.
Our cement portfolio is relatively
concentrated in customer numbers, and
even where customers have set science-
based targets there is still a risk of pledges
not turning into the necessary emissions
reductions if technologies do not scale in
time. It will be important, therefore, to
regularly review progress on technology
scaling across the industry over the years
ahead to 2030. For cement and the other
intensity-based sectors we plan to integrate
net zero considerations into our transaction
processes and controls and we expect this to
help guide our activities towards progressive
alignment of the portfolio with our 2030
targets.
Cement 
tCO2e/t cement
2022 progress
from baseline
10%
69269232619184
Iron, steel and aluminium
We covered scope 1 and 2 for midstream
iron, steel and aluminium production in our
analysis. Due to the low significance of the
aluminium sector’s financed emissions
within our portfolio, we combined them with
our iron and steel financed emissions. In the
event that aluminium becomes a more
material part of our portfolio in the future, we
may consider creating a separate target for
aluminium production given the varied
decarbonisation pathway for this metal.
For the iron, steel and aluminium sector, we
target an on-balance sheet financed
emissions intensity of 1.05 tonnes of carbon
dioxide equivalent per tonne of metal
(‘tCO2e/t metal’) by 2030, using the IEA NZE
2021 scenario as our core scenario and 2019
as our baseline. Due to the challenges of
decarbonising this hard-to-abate sector, we
also outline an alternative scenario from the
Mission Possible Partnership (‘MPP’).
The emissions intensity in 2022 rose by 38%
to 2.5 tCO2e/t metal against our 2019
baseline and by 4% versus 2021. This was
due to increased financing to the aluminium
sector, which has a higher carbon intensity
than that of steel.
We aim to actively manage our portfolio to
achieve our 2030 financed emissions target
for our iron, steel and aluminium portfolio,
taking into account the actions our
customers are taking to achieve emissions
reductions.
Iron, steel and aluminium
tCO2e/t metal
2022 progress
from baseline
38%
69269232623083
Aviation
In the aviation sector, we included passenger
airlines’ scope 1 and aircraft lessors‘ scope 3
downstream emissions. We excluded
military and dedicated cargo flights as the
emissions intensity of such cargo flights is
different to that of passenger airlines. This
approach is in line with industry practice to
ensure consistency of financed emissions
measurement and target setting.
Aligned with the IEA NZE 2021 scenario, we
target an on-balance sheet financed
emissions intensity of 63.0 tonnes of carbon
dioxide equivalent per million revenue
passenger kilometres (‘tCO2e/million rpk’) by
2030, using 2019 as our baseline. To reach
these intensity levels and help meet our
targets, we believe the sector needs
significant policy support, investments in
alternative fuels, such as sustainable aviation
fuel, and new aircraft to reduce emissions.
The industry is also adopting the unit of
revenue tonne kilometre (‘rtk’) to take into
account the transport of cargo for airlines in
scope of the target. We will consider this as
part of our methodology enhancement.
At 86.5 tCO2e/million rpk in 2022, the
emissions intensity increased by 3% versus
the 2019 baseline and was marginally up by
1% from 2021. In 2020 there was a peak in
emissions intensity due to the impact of the
Covid-19 pandemic, as planes carried fewer
passengers.
We plan to engage with our major
customers on their transition plans, as well
as integrate financed emissions implications
into transaction and portfolio management
for the sector.
Aviation
tCO2e/million rpk
2022 progress
from baseline
3%
69269232623086
HSBC Holdings plc59
Financed emissions continued
Automotive
For the automotive sector, we looked at
scope 1, 2 and 3 emissions from the
midstream manufacturing of vehicles, and
tank-to-wheel exhaust pipe emissions for
light-duty vehicles. We excluded heavy-duty
vehicles from our analysis as the target
pathway derived from the IEA excludes
them, as they have a different
decarbonisation pathway relative to light-
duty vehicles. This approach is in line with
industry practice to ensure consistency of
financed emissions measurement and target
setting. We will consider including heavy-
duty vehicle manufacturers as well as heavy-
duty vehicle production at a later stage of
our analysis, as data and methodologies
develop.
We target an on-balance sheet financed
emissions intensity of 66.0 tonnes of carbon
dioxide equivalent per million vehicle
kilometres (‘tCO2e/million vkm’) by 2030
using 2019 as our baseline. This is in line
with the IEA NZE 2021 scenario, which is a
1.5C° aligned pathway, modified to match
the share of new in-year vehicle sales for
light-duty vehicles. Decarbonisation of the
automotive sector, and therefore our ability
to meet our targets, needs large-scale
investments in new electric vehicle and
battery manufacturing plants, widespread
charging infrastructure, and government
policies to support electric vehicles.
Our 2022 emissions intensity rose by 13% to
216.6 tCO2e/million vkm against our 2019
baseline and stayed level with 2021. This
increase, after an 8% reduction in 2020
versus 2019, was caused by a shift in the
portfolio towards companies producing more
emissions-intensive vehicles. This can be the
case for manufacturers that produce more
sports utility vehicles or fewer electric
vehicles.
Automotive
tCO2e/million vkm
2022 progress
from baseline
13%
69269232623090
Thermal coal mining
For the thermal coal mining sector, our
analysis focused on scope 1, 2 and 3
emissions in upstream companies, including
those involved in extraction. The majority of
our financed emissions relate to scope 3
emissions associated with coal mining.
We set an absolute on-balance sheet
reduction target of 70% for 2030, from an
absolute 2020 baseline measure of 4.0 Mt
CO2e. We used 2020 as a baseline to align
with the baseline used for our drawn balance
exposure targets in the thermal coal phase-
out policy. The financed emissions target is
aligned with the IEA NZE 2021 scenario. 
When calculating our financed emissions
from thermal coal mining, we focused on
thermal coal extraction and processing
companies, and diversified mining
companies. We aim to measure and focus
on our customers with the most material
thermal coal-related emissions in order to
help drive a meaningful impact in the real
economy.
Thermal coal mining
Mt CO2e
2022 progress
from baseline
N/A
69269232623093
60 HSBC Holdings plc
Financed emissions continued
On-balance sheet financed emissions
The table below summarises the results of our assessment of on-balance sheet financed emissions using 2021 and 2022 data. For thermal
coal mining, disclosures commenced in 2020 to align with thermal coal exposure reporting metrics. The PCAF data quality score has not
improved for 2022 due to limited availability of actual reported emissions from our customers.
On-balance sheet financed emissions – wholesale credit lending and project finance1,2
Sector
Year
Scope 1–2
(Mt COe2)†
Scope 3 (Mt
CO2e)†
Emissions
intensity4
PCAF data quality score3,†
Scope 1 and 2
Scope 3
Oil and gas
2021
2.1
18.4
N/A
2.8
2.9
2022
1.3
16.2
N/A
3.2
3.2
Power and utilities
2021
8.1
N/A
407.0
2.9
N/A
2022
7.6
N/A
401.7
3.3
N/A
Cement
2021
2.2
N/A
0.70
2.8
N/A
2022
4.5
N/A
0.71
2.9
N/A
Iron, steel and aluminium
2021
2.0
N/A
2.4
3.0
N/A
2022
2.7
N/A
2.5
3.0
N/A
Aviation
2021
2.7
0.16
85.9
3.0
3.3
2022
2.6
0.15
86.5
3.3
2.4
Automotive
2021
0.07
3.6
215.7
2.8
2.9
2022
0.12
5.4
216.6
2.7
2.9
Thermal coal mining
2020
0.17
3.8
N/A
3.0
3.0
Facilitated emissions
The table below summarises the results of our assessment of facilitated emissions from 2019 to 2022 for the oil and gas, and power and
utilities sectors.
Applying a 100% weighting, the oil and gas values for scope 1 to 3 emissions decreased from 43.2 Mt CO2e in 2019 to 15.2 Mt CO2e in 2022.
For the power and utilities sector, the values for scope 1 and 2 emissions fell from 8.5 Mt CO2e in 2019 to 3.8 Mt CO2e in 2022. For all 100%-
weighted facilitated values, please refer to the ESG Data Pack. The total capital markets activity analysed applying a 100% weighting in 2019
was $22.6bn, representing 5.5% of capital markets activity at 31 December 2019. In 2020, it was $26.0bn, representing 6.2% of capital
markets activity at 31 December 2020. In 2021, it was $18.1bn, representing 4.1% of capital markets activity at 31 December 2021. In 2022, it
was $10.4bn representing 3.2% of capital markets activity at 31 December 2022.
Facilitated emissions – ECM, DCM and syndicated loans (33% weighting)
Sector
Year5
Scope 1-2
(Mt CO2e)†
Scope 3 (Mt
CO2e)†
Emissions
intensity4
PCAF Data quality score3,†
Scope 1 and 2
Scope 3
Oil and gas
2019
1.6
12.7
N/A
2.3
2.7
2020
2.7
24.0
N/A
2.0
2.1
2021
0.90
10.5
N/A
2.9
3.1
2022
0.36
4.7
N/A
3.3
3.3
Power and utilities
2019
2.8
N/A
420.7
2.5
N/A
2020
2.1
N/A
410.1
2.5
N/A
2021
1.5
N/A
364.1
2.9
N/A
2022
1.2
N/A
358.7
2.9
N/A
1 The total amount of short-term finance excluded for the thermal coal mining sector was $0.37bn in 2020; for all other sectors it was $7.0bn in 2021 and $8.5bn in
2022.
2 The total loans and advances analysed in 2020 for the thermal coal mining sector were $2.89bn, representing 0.28% of total loans and advances to customers at 31
December 2020. For all other sectors in 2021, they were $24.1bn representing 2.3% of total loans and advances to customers at 31 December 2021 and in 2022, they
were $23.6bn representing 2.6% of total loans and advances to customers at 31 December 2022. The total loans and advances analysed for the purpose of the
financed emissions calculation and reporting have not been adjusted for assets held for sale.
3 PCAF scores where 1 is high and 5 is low. This is a weighted average score based on financing for on-balance sheet financed emissions.
4 Emissions intensity under the new aggregation method.
5 Due to timing differences the approach for calculating 2021-2022 facilitated emissions has been enhanced compared to that of 2019-2020. Enhancements are
mainly data and process-related for the later years to include more consistent and higher quality data sources and are therefore applied prospectively in line with
our recalculation policy. Small methodology changes were applied as well but these do not materially change our 2019-2020 numbers.
† Data is subject to independent limited third-party assurance in accordance with ISAE 3000/ ISAE 3410. For further details, see our Financed Emissions and Thermal
Coal Exposures Methodology and independent third-party limited assurance report, which are available at www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre.
HSBC Holdings plc61
Financed emissions continued
Integrating net zero into transaction and portfolio decision making
In 2023, we began to embed net zero factors
alongside standard risk-return and other
considerations when evaluating specific
transactions starting with oil and gas, power
and utilities, and thermal coal mining
sectors.
We have been testing and developing an
analytics capability that, where relevant,
begins to provide front-line business teams
and management with insight on the up-to-
date on-balance sheet financed emissions
and facilitated emissions position of a sector,
the impact of a transaction where material,
and implications relative to pathways in line
with our 2030 targets.
We continued our efforts to design and
implement a differentiated approach to
understand and assess the transition plans
and risks of our corporate customers,
including state-owned enterprises. These
assessments help us to identify
opportunities, manage climate risks and
define areas to drive strategic engagement
with each corporate customer.
In 2023, we completed assessments for
most customers in scope of our thermal coal
phase-out policy. We also completed
assessments for customers that make the
most material contribution to our financed
emissions in the oil and gas, and power and
utilities sectors.
Once completed, these assessments can be
used to support business decisions in
relation to our financed emissions portfolio
management and alignment, and our climate
risk management efforts.
Our processes and controls will continue to
evolve as we look at net zero considerations
for sectors, customers and deals with higher
climate impact and risk. These
considerations include: adherence with our
sustainability risk policies; climate-related
credit risk; customer transition plan
assessment outcomes (where relevant);
reputational risk considerations; and
financed and, where applicable, facilitated
emissions implications (where transactions
are in scope of our financed emissions
disclosures and 2030 targets). We have
dedicated governance, with escalation
pathways for deals deemed high risk,
including in terms of financed emissions
implications and reputation risk.
Reducing emissions in our assets under management
In July 2021, our asset management business, HSBC Asset Management, signed up to the Net Zero Asset Managers initiative, which
encourages investment firms to commit to managing assets in line with achieving net zero emissions by 2050 or sooner. HSBC Asset
Management continues to work towards its ambition of reducing scope 1 and 2 financed emissions intensity by 58% by 2030 for 38% of
its total assets under management. These listed equity and corporate fixed income assets amounted to $193.9bn at 31 December 2019.
We use 2019 as the baseline year for our calculations. Implementation of the net zero targets remains subject to consultation with
stakeholders including investors, fund boards and regulators.
In 2023, HSBC Asset Management worked to develop solutions for clients to address climate ambitions while investing. Further data
science expertise will be added to support sustainability through the creation of a Sustainable Investment Solutions Lab. HSBC Asset
Management reported an update through the Principles for Responsible Investment annual submission, as required under its Net Zero
Asset Managers commitment. As part of its thermal coal policy, it fulfilled a commitment to initiate engagement with all listed issuers held
in active fundamental portfolios with more than 10% revenue exposure to thermal coal.
62 HSBC Holdings plc
Embedding net zero into the way we operate
Net zero in our own operations 
TCFD
Part of our ambition to be a net zero bank is
to achieve net zero carbon emissions in our
operations and supply chain by 2030.
Reduce, replace and remove
We have three elements to our strategy:
reduce, replace and remove. We plan to first
focus on reducing carbon emissions from
consumption, and then replacing remaining
emissions with low-carbon alternatives in
line with the Paris Agreement.
We plan to remove the remaining emissions
that cannot be reduced or replaced by
procuring, in accordance with prevailing
regulatory requirements, high-quality offsets
at a later stage. We are working on our
carbon credits strategy by engaging with a
range of market participants.
Our energy consumption
In October 2020, we announced our
ambition to reduce our energy consumption
by 50% by 2030, against a 2019 baseline,
and in 2023 we achieved 26.3%. We
continue to work to do this by optimising the
use of our real estate portfolio, and carrying
out a strategic reduction in our office space
and data centres. We are using new
technology and emerging products to make
our spaces more energy efficient.
As part of our ambition to achieve 100%
renewable electricity across our operations
by 2030, we continue to look for
opportunities to procure green electricity in
each of our markets. In 2023, our fourth UK
renewable power purchase agreement
(’PPA’) went live in Sorbie, Scotland. A key
challenge remains the limited opportunity to
pursue PPAs or green tariffs in key markets
due to regulations.
Business travel
Our ambition is to halve travel emissions by
2030, compared with pre-pandemic levels. In
2023, our travel emissions remained below
50% of our 2019 baseline, despite the lifting
of international travel restrictions. We are
closely managing the gradual resumption of
travel through internal reporting and review
of emissions, internal carbon budgets and
the introduction of emissions information at
the point of booking. With hybrid working
embedded across the organisation, the use
of virtual working practices has reduced the
need for our colleagues to travel to meet
with other colleagues and customers.
We continue to focus on reducing the
environmental impact from the vehicles we
use in our global markets, and accelerate the
use of electric vehicles. In 2023, we reduced
the company car fleet size by 9% compared
with 2022. We are now aiming to ensure that
all new vehicles ordered are fully electric or
hybrid vehicles where possible.
Engaging with our supply chain
Our supply chain is critical to achieving our
net zero ambitions, and we are partnering
with our suppliers on this journey. Since
2020, we have been encouraging our largest
suppliers to make their own carbon
commitments, and to disclose their
emissions via the CDP (formerly the Carbon
Disclosure Project) supply chain programme.
In 2023, suppliers representing 70.6% of
total supplier spend completed the CDP
questionnaire, compared with 63.5% in
2022.
We will continue to engage with our supply
chain through CDP, and through direct
discussions with our suppliers on how they
can further support our transition to net zero.
In 2023, we launched our supplier net zero
guides, providing further details to support
suppliers in understanding our net zero
ambitions, as set out in our supplier code of
conduct. We are developing internal
decarbonisation plans for the highest-
emitting procurement categories (IT
hardware, real estate, data centre and
servers, and telecom services), to be
included in category strategies and to
support future supplier selection.
Focus on natural resources
Alongside our net zero operations ambition,
our aim is to be a responsible consumer of
natural resources. Through design,
construction and operational standards, we
strive to ensure that, wherever possible, our
premises do not adversely affect the
environment or natural resources. We have
identified specific focus areas including
waste, paper and sustainable diets, and are
exploring key opportunities to reduce our
wider environmental impact over the coming
decade.
Our presence in environmentally
sensitive areas
As a global organisation, our branches,
offices and data centres may be located in
areas of high or very high water stress and/
or protected areas of biodiversity, as we
support our customers and communities in
these locations.
Approximately 55% of our global offices,
branches and data centres are located in
areas identified as being subject to high and
very high water stress, accounting for 50%
of our annual water consumption. These are
predominantly urban or city centre locations
with large, concentrated populations. Our
industry is a low user of potable water, and
we have implemented measures to further
reduce water consumption through the
installation of flow restrictors, auto-taps and
low or zero flush sanitary fittings.
In addition, 0.9% of our global office, branch
and data centre portfolio lies in protected
areas of biodiversity. We strive through our
design, construction and operational
standards to ensure that, where possible, our
premises do not adversely affect the
environment or natural resources in these
areas.
Our environmental and sustainability management policies
Our buildings policy recognises that regulatory and environmental requirements vary across
geographies and may include environmental certification. The policy is supported by
Corporate Services procedures on environmental and sustainability management, seeking to ensure that
HSBC’s properties continually reduce their overall direct impact on the environment. Detailed
design considerations documented in our Global Engineering Standards aim to reduce or
avoid depletion of critical resources, such as energy, water, land and raw materials. Suppliers are
required to adhere to strict environmental management principles and reduce their impact on
the environment in which they operate.
HSBC Holdings plc63
Net zero in our own operations continued
Emissions from our energy and travel
We report our emissions following the
Greenhouse Gas Protocol, which
incorporates the scope 2 market-based
emissions methodology. We report
greenhouse gas emissions resulting from the
energy used in our buildings and employees’
business travel. Due to the nature of our
primary business, carbon dioxide is the main
type of greenhouse gas applicable to our
operations. While the amount is immaterial,
our current reporting also incorporates
methane and nitrous oxide for completeness.
Our environmental data for our own
operations is based on a 12-month period to
30 September.
In 2023, we reduced emissions from our
energy consumption and travel to 293,333 
tonnes CO2e, which represents a 57.3% 
reduction compared with our 2019 baseline.
This was mainly attributed to:
–travel volumes remaining low compared
with pre-pandemic levels;
–an increase in our consumption of
renewable electricity to 58.4%; and
–the reduction of energy consumption as a
result of strategic footprint reductions and
the implementation of over 450 energy
conservation measures, which amounted to
an estimated energy avoidance in excess of
12 million kWh.
Emissions from business travel increased
compared with 2022, due to the easing of
pandemic-related travel restrictions which
resulted in a return to travel. A decrease in
scope 1 emissions was partly attributed to a
correction in the classification of road-based
business travel in the UK and India from
scope 1 to scope 3.
In 2023, we collected data on energy use
and business travel for our operations in 34
countries and territories, which accounted
for approximately 96.0% of our full-time
employees (‘FTEs’). To estimate the
emissions of our operations in entities where
we have operational control and a small
presence, we scale up the emissions data
from 96.0% to 100%. We then apply
emission uplift rates to reflect uncertainty
concerning the quality and coverage of
emission measurement and estimation. This
is consistent with both the
Intergovernmental Panel on Climate
Change’s Good Practice Guidance and
Uncertainty Management in National
Greenhouse Gas Inventories and our internal
analysis of data coverage and quality.
Energy and travel greenhouse gas emissions in tonnes CO2e
2023
2022
2019
baseline
Scope 11
Ä
16,918
19,329
22,066
Scope 2 (market-based)1
Ä
167,174
223,334
392,270
Scope 3
~
1,090,280
1,052,264
1,139,260
  Category 1: Purchased goods and services1,2
Ä
859,256
865,747
829,635
  Category 2: Capital goods1,2
Ä
121,783
144,232
37,617
  Category 6: Business travel1
~
109,241
42,285
272,008
Total
Ä
1,274,372
1,294,927
1,553,596
Included energy UK
Ä
5,909
9,264
10,432
1 Our data is now presented on an absolute value basis and not rounded values. Data in 2023 is subject to an
independent third-party limited assurance in accordance with International Standard on Assurance
engagements 3410 (Assurance Engagements on Greenhouse Gas Statements). For further details, see GHG
Reporting Guidance 2023 and third-party limited assurance report at www.hsbc.com/our-approach/esg-
information/esg-reporting-and-policies. In respect of data in 2019 and 2022, see our relevant Annual Report
and Accounts.
2 Supply chain emissions calculated using a combination of supplier emissions data and industry averages. A
data quality score is applied to this calculation where 1 is high and 5 is low, based on the quality of emissions
data. This is a weighted average score based on HSBC supplier spend and is in line with HSBC’s financed
emissions reporting methodology. Data quality scores can be found in the ESG Data Pack.
For further details of our methodologies, our independent third-party limited assurance reports and relevant
Footnote Arrow.jpg
environment key facts, see our ESG Data Pack at www.hsbc.com/esg.
Greenhouse gas emissions in tonnes
CO2e per FTE
Energy consumption in kWh in 000s
2023
2022
2019
baseline
2023
2022
2019
baseline
Scope 1, 2 and 3
(Category 6)
~
1.3
1.3
2.9
Total
Ä
772,736
797,264
913,556
Scope 1, 2 and 3
(Category 1, 2
and 6)
Ä
5.8
5.9
6.6
UK only
Ä
209,939
222,322
281,271
Emissions from our supply chain
Our calculation methodology uses supplier
emissions data where we have it from
suppliers, through CDP. Where we do not
have actual emissions data, we use industry
average carbon intensities and spend data to
determine their contribution to our supply
chain emissions. As more of our suppliers
report their emissions, we should be able to
include more accurate data and fewer
industry averages in the calculation. We
have applied a data quality score to the
sources of data we used to determine
counterparty emissions. For further details,
see our GHG (Greenhouse Gas) Reporting
Guidance at www.hsbc.com/esg.
In 2022, we disclosed our supply chain
emissions for the first time, using supplier
emissions data and industry averages where
actual data was not available. This approach
is heavily dependent on external data
sources to calculate estimates of our supply
chain emissions.
In 2023, emissions from our supply chain
reduced by 3% compared with 2022. This is
due to a reduction in spend and an increase
in the availability of actual emissions data
from our suppliers. Emissions have increased
by 13% compared with 2019, as industry
averages remain significantly elevated. Due
to volatility in industry average data, we will
undertake a review of our data sources and
methodology during 2024. As supplier
emissions reporting matures, we will be able
to include more actual data and fewer
industry averages in the methodology. Our
initial supply chain emission figures may
require updating as data availability changes
over time and methodologies and climate
science evolve.
For further details of our methodologies and
Footnote Arrow.jpg
relevant environmental key facts, see the ESG Data
Pack at www.hsbc.com/esg.
64 HSBC Holdings plc
Managing climate risk
TCFD
Climate risk relates to the financial and non-
financial impacts that may arise as a result of
climate change and the move to a net zero
economy. We manage climate risk across all
our businesses and are incorporating climate
considerations within our traditional risk
types in line with our Group-wide risk
management framework.
Our material exposure to climate risk relates
to wholesale and retail client financing
activity within our banking portfolio. We are
also exposed to climate risk in relation to
asset ownership by our insurance business
and employee pension plans. Our clients are
exposed to climate-related investment risk in
our asset management business.
In the table below, we set out our duties to
our stakeholders in our four most material
roles.
For further details of our approach to climate risk,
Footnote Arrow.jpg
see ‘ESG risk’ on page 164 and ‘Climate risk’ on
page 257.
Banking
We manage the climate risk in our
banking portfolios through our risk
appetite and policies for financial
and non-financial risks.
Employee pensions
Our pension plans manage
climate risk in line with their
fiduciary duties towards members
and local regulatory requirements.
Asset management
Climate risk management is a key
feature of our investment decision
making and portfolio management
approach.
Insurance
We consider climate risk in our
portfolio of assets.
Climate risk
This helps enable us to identify
opportunities to support our
customers, while continuing to
meet stakeholder expectations.
Customers.jpg
Investors.jpg
Regs and Gov.jpg
We monitor climate risk exposure
internally for our largest plans
based on asset sector allocation
and carbon emissions data where
available. 
Employees.jpg
Regs and Gov.jpg
We also engage with companies
on topics related to climate
change.
Customers.jpg
Investors.jpg
Regs and Gov.jpg
We have established an evolving
ESG programme to meet
changing external expectations
and customer demands.
Customers.jpg
Investors.jpg
Regs and Gov.jpg
Banking
Our banking business is well positioned to
support our customers managing their own
climate risk through financing. For our
wholesale customers, we use our transition
engagement questionnaire to understand
clients’ climate strategies and risks. We have
set out a suite of policies to guide our
management of climate risk. We continue to
develop our climate risk appetite and metrics
to help manage climate exposures in our
wholesale and retail portfolios. We also
develop and use climate scenario analysis to
gain insights on the long-term effects of
transition and physical risks across our
wholesale and retail banking portfolios (for
further details, see page 261).
Asset management
HSBC Asset Management recognises that
climate risk may manifest as transition and
physical risks over the short, medium and
long term. The impact of climate-related risk
will vary depending on characteristics such
as asset class, sector, business model and
geography. Where applicable and relevant,
HSBC Asset Management incorporates
climate-related indicators, such as carbon
intensity and management of carbon
emissions, into investment decisions as well
as insights from its climate-related
engagement.
Work continues on the integration of ESG
and climate analysis into HSBC Asset
Management’s actively managed product
offerings to help ensure the climate risks
faced by companies are considered when
making investment decisions and to assess
ESG risks and opportunities that could
impact investment performance.
HSBC Asset Management engages with
investee companies on a priority list as
defined in its Global Stewardship Plan, and
votes at company general meetings,
including on the topic of climate change. It
also works with collaborative engagement
initiatives such as Climate Action 100+ and
Nature Action 100.
For further details of the HSBC Global Asset
Footnote Arrow.jpg
Management (UK) Limited’s annual TCFD Report,
see www.assetmanagement.hsbc.co.uk/-/media/
files/attachments/uk/common/tcfd-report-2022.pdf.
Employee pensions
The Trustee of the HSBC Bank (UK) Pension
Scheme, our largest plan with $36bn assets
under management, aims to achieve net zero
greenhouse gas emissions across its defined
benefit and defined contribution assets by
2050. To help achieve this, it is targeting an
interim emissions reduction of 50% by 2030,
from 2019 levels, for its equity and corporate
bond mandates. This commitment was
made in the context of wider efforts to
manage the impact of climate change on the
Scheme’s investments and the consequent
impact on the financial interests of members.
The Scheme, which has reported emission
reductions for its listed equity and corporate
bond mandate portfolios between 2019 and
2022 through its annual TCFD Report, will
continue to report against the 2030 targets
and aims to widen the coverage of its
assessment and reporting over time. In 2023,
its asset managers were formally notified of
the Trustee’s ESG risk mitigation priorities
and encouraged to develop commensurate
risk mitigation strategies. The manager
monitoring and selection processes now
explicitly include assessment of these
strategies where financially material.
For further details of the HSBC Bank (UK) Pension
Footnote Arrow.jpg
Scheme’s annual TCFD statements and climate
action plan, see http://futurefocus.staff.hsbc.co.uk/
active-dc/information-centre/other-information.
Insurance
In 2023, our Insurance business updated its
sustainability procedures to align with the
Group’s updated energy and thermal coal-
phase out policies. We also delivered ESG
product marketing guidelines with insurance
examples and training.
In response to various ESG regulatory
initiatives and developments, HSBC’s
insurance manufacturing entities in the EU,
which are in Malta and France, have
continued to implement key disclosure-
related regulatory requirements, including
pre-contractual reporting, client periodic
reporting and sustainable investment impact
statements. Related requirements for the UK
are expected to be introduced in 2024. 
HSBC Holdings plc65
Sustainability risk policies
TCFD
Our sustainability risk policies help to set out
our appetite for financing and advisory
activities in certain sectors. Our policies are
important mechanisms for delivering our net
zero ambitions, as well as for managing
sustainability risks.
Our policies
Our sustainability risk policies comprise our
core net zero-aligned policies – thermal coal
phase-out and energy – and our broader
sustainability risk policies covering:
agricultural commodities, chemicals,
forestry, mining and metals, and World
Heritage Sites and Ramsar-designated
wetlands. We also apply the Equator
Principles when financing relevant projects.
Our sustainability risk policies focus on
mitigating the negative impacts of specific
sectors on people and the environment. Our
net zero policies, including energy and
thermal coal phase-out, also support our
ambition to transition to net zero. Engaging
with customers on their transition plans is a
key aspect of our net zero policy approach.
These policies aim to provide clear signals to
our customers on how our appetite and
expectations for different activities are
changing, as well as how we will consider
their plans for the future.
We continue to review policy
implementation as we apply our policies in
practice, and our operationalisation of such
policies continues to be enhanced. We take
a risk-based approach when identifying
transactions and clients to which our energy
and thermal coal phase-out policies apply,
and when reporting on relevant exposures,
adopting approaches proportionate to risk
and materiality. This helps to focus our
efforts on areas where we believe we can
help drive meaningful change, while taking
into account experience from policy
implementation over time.
We regularly review our policies,
incorporating feedback and building on
experience from policy implementation over
time.
Where we identify activities that could cause
material negative impacts, we expect
customers to demonstrate that they are
identifying and mitigating risks responsibly,
and we will look to take required actions as
outlined in our policies, which may include
applying financing restrictions or enhanced
due diligence.
For further details of how we manage
Footnote Arrow.jpg
sustainability risk, as well as our full policies, see
www.hsbc.com/our-approach/risk-and-
responsibility/sustainability-risk.
Governance and implementation
Our Group Risk and Compliance function has
specialists who review and support
implementation of our sustainability risk
policies. Our relationship managers are the
primary point of contact for many of our
business customers and are responsible for
managing customers’ adherence to the
sustainability risk policies. They are
supported by sustainability risk managers
across the Group who have local or regional
responsibility for advising on, and
overseeing, the management of risks as
outlined in the policies. Where considered
appropriate, policy matters are escalated to
relevant internal governance committees.
Oversight of the development and
implementation of policies is the
responsibility of relevant governance
committees comprising senior members of
the Group Risk and Compliance function and
global businesses.
Biodiversity and natural capital-related
policies
Our sustainability risk policies impose
restrictions on certain financing activities
that may have material negative impacts on
nature. While a number of our sustainability
risk policies have such restrictions, our
forestry and agricultural commodities
policies focus specifically on a key nature-
related impact: deforestation. These policies
require customers involved with major
deforestation-risk commodities to operate in
accordance with sustainable business
principles. We also require palm oil
customers to obtain certification under the
Roundtable on Sustainable Palm Oil, and
commit to ‘No Deforestation, No Peat and
No Exploitation’ (see ‘Our respect for human
rights’ on page 89).
Our energy policy
Our energy policy covers the broader energy
system, including upstream oil and gas,
fossil fuel power generation, hydrogen,
renewables and hydropower, nuclear,
biomass and waste-to-energy sectors.
The policy seeks to balance three objectives:
driving down global greenhouse gas
emissions; enabling an orderly transition that
builds resilience in the long term; and
supporting a just and affordable transition,
recognising the local realities in all the
communities we serve.
The energy policy was first published in
December 2022 and updated in January
2024. We review the policy annually to help
ensure that it remains aligned with our net
zero by 2050 ambition and strategic
objectives.
For further details of our oil and gas, and power
Footnote Arrow.jpg
and utilities financed emissions targets, see the
'Targets and progress’ section in ‘Financed emissions
on page 57.
For further details of our energy policy, see
Footnote Arrow.jpg
www.hsbc.com/our-approach/risk-and-
responsibility/sustainability-risk.
66 HSBC Holdings plc
Sustainability risk policies continued
Our thermal coal phase-out policy
As set out in the thermal coal phase-out
policy, we are committed to phasing out the
financing of thermal coal-fired power and
thermal coal mining in EU and OECD
markets by 2030, and globally by 2040.
Our policy aims to support thermal coal
phase-out aligned to science-based
timeframes, recognising the different pace
between advanced and emerging
economies. In turn our policy supports
progress towards our financed emissions
targets for the power and utilities and
thermal coal mining sectors.
The policy was first published in December
2021 and is reviewed annually, with the most
recent update in January 2024, to help
ensure that it remains aligned with our
commitments and takes into consideration
relevant changes in external factors.
For our thermal coal phase-out policy, see
Footnote Arrow.jpg
www.hsbc.com/-/files/hsbc/our-approach/risk-and-
responsibility/pdfs/240125-hsbc-thermal-coal-
phase-out-policy.pdf.
For further details of our thermal coal phase-out
Footnote Arrow.jpg
policy January 2024 update, see page 71 of our Net
Zero Transition Plan 2024, which is available at
www.hsbc.com/who-we-are/our-climate-strategy/
our-net-zero-transition-plan.
Thermal coal financing exposures
We intend to reduce thermal coal financing
drawn balance exposure from a 2020
baseline by at least 25% by 2025 and aim to
reduce it by 50% by 2030.
In our Annual Report and Accounts 2022, we
acknowledged that our processes, systems,
controls and governance were not yet
designed to fully identify and disclose
thermal coal exposures and that we planned
to reassess the reliability of our data and
review our basis of preparation to help
ensure that we are reporting all relevant
thermal coal exposures aligned to our
thermal coal phase-out policy.
We have now revised the basis of
preparation for our thermal coal exposures.
Aligned with our thermal coal phase-out
policy, we applied a risk-based approach to
identify clients and report on relevant
exposures. This includes the use of globally
recognised third-party data sources to screen
clients and applies materiality considerations
to product type, customer type and exposure
type, which informs inclusion and exclusion
requirements.
Specifically, for product types, short-term
lending exposures are excluded from our
thermal coal financing exposures reporting in
line with our financed emissions
methodology. For customer types,
exclusions are applied for certain customer
types such as sovereigns and individuals. For
exposure types, a threshold of $15m for
drawn balances is applied for thermal coal
financing exposures reporting. For the
avoidance of doubt, the $15m threshold
applies only to exposure reporting analysis
and does not apply to the application of the
thermal coal phase-out policy.
For further details of our Financed Emissions and
Footnote Arrow.jpg
Thermal Coal Exposures Methodology, see
www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre.
Considering materiality criteria helps us to
focus our efforts on areas where we believe
we can help drive meaningful change, while
taking into account experience from policy
implementation over time.
Applying our revised basis of preparation,
our thermal coal financing drawn balance
exposure was approximately $1bn† as at 31
December 2020. We continue to work on our
2021 and 2022 numbers based on our
revised basis of preparation and expect to
report on these in future disclosures.
For further details of our approach to financed
Footnote Arrow.jpg
emissions, see 'Our Approach to financed emissions’
on page 53.
† Data is subject to independent third party limited
assurance  in accordance with ISAE 3000/ISAE
3410. For further details, see our Financed Emissions
and Thermal Coal Exposures Methodology and
independent third-party limited assurance report,
which are available at www.hsbc.com/who-we-are/
esg-and-responsible-business/esg-reporting-centre.
Asset Management policy
HSBC Asset Management published its own policy on thermal coal in September 2022, and its own energy policy in November 2023. As
an asset manager, it is subject to separate regulatory and legal obligations to deliver customers’ investment interests and deliver fair
outcomes.
Under its thermal coal policy, HSBC Asset Management will not hold listed securities of issuers with more than de minimis revenue
exposure to thermal coal in its actively managed funds beyond 2030 for EU and OECD markets, and globally by 2040. The policy also
includes enhanced due diligence on the transition plans of investee companies with thermal coal exposure. Companies held in investment
portfolios that do not develop credible plans to transition away from thermal coal could face voting sanctions and ultimately a divestment
of holdings.
Under its energy policy, HSBC Asset Management will engage with — and assess the transition plans of — oil and gas, and power and
utilities companies held in its portfolios. For its active fundamental sustainable named funds, it will exclude listed issuers whose overall
operations are substantially in unconventional oil and gas, subject to data availability, and with the level and scope of exclusions to be set
out in fund prospectuses. In its alternatives business, it will not undertake new direct investments in projects associated with the energy-
related activities identified as excluded from new finance or advisory services under the Group energy policy. HSBC Asset Management’s
policy work will continue to support the Group’s sustainability objectives and the commitment made under the Net Zero Asset Managers
initiative to support investing aligned with net zero by 2050. We continue on the journey of policy implementation, including engaging with
the companies in which we invest, and improving the data we rely on to monitor the policies.
For further details of the energy policy, see www.assetmanagement.hsbc.lu/-/media/files/attachments/common/energy-policy-en.pdf.                         
Footnote Arrow.jpg
For further details of the thermal coal policy, see www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/coal-policy-en.pdf.
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HSBC Holdings plc67
Partnering for systemic change
Supporting systemic change to deliver net zero
We recognise that collective action is critical
to achieve net zero. We seek to collaborate
with a range of partners to develop a
supportive environment for achieving net
zero and mobilising finance for climate
action and nature-based solutions. Our
partnerships vary in scope and form
depending on the sector and geography, as
well as our presence in local markets. We
act independently and voluntarily in our
decision making, based on our own business
interests, priorities and objectives, and in
accordance with the laws and regulations of
the markets in which we operate.
Working with the public sector
We engage with governments and public
bodies to support the implementation of
policies and regulations, including promoting
good practice to develop globally consistent
approaches to nature and climate-related
financial regulation. In 2023, this included:
–working with the UK Net Zero Council, a
cross-government business partnership, to
help address market barriers to delivering
net zero, including high start-up costs for
renewable energy projects, regulatory
challenges and uncertainty around policy
frameworks; and
–continuing to engage with Just Energy
Transition Partnerships contributing to
Indonesia’s comprehensive investment and
policy plan and Vietnam’s resource
mobilisation plan, which provide roadmaps
for minimising the negative impact on local
communities of phasing out fossil fuels and
how banks can support the transition.
Working with industry
We participate in cross-industry alliances
and initiatives to stimulate industry
engagement in nature and climate-related
issues, and improve consistency in global
financial standards, guidance and
frameworks to accelerate implementation. In
2023, these included:
–We are supporting the widespread adoption
of the GFANZ net zero transition plan
framework, as a member of its Principals
Group. We also jointly led a working group
to develop guidance for financial institutions
on financing the managed phase-out of
coal-fired power plants in Asia-Pacific.
–As Chair of the Sustainable Markets
Initiative’s (‘SMI’) Financial Services
Taskforce, we have been actively involved
in the publication of industry guidance to
help encourage investment in critical
ecosystems and sustainable agricultural
practices. These include sponsorship of a
report by Pollination on financing coastal
nature-based solutions, as well as
contributing to the Mangrove Breakthrough
initiative’s financial roadmap and the SMI
Agribusiness Task Force's blended finance
framework for regenerative farming.
–As a member of the Taskforce on Nature-
related Financial Disclosures (‘TNFD’), we
have piloted the TNFD beta framework to
better understand our exposure to nature-
related risks, including on subsets of
customers. We are currently focused on
assessing and preparing for mandatory
nature-related disclosure requirements, and
we continue to engage with TNFD and
explore ways it can help us and our clients
to strengthen nature-related reporting.
In 2023, we also supported financial product
development to help mobilise the allocation
of capital towards halting and reversing
nature loss:
–We worked with the ICMA to help develop
global guidance for issuers launching blue
bonds – debt instruments that raise capital
to finance sustainable marine and ocean-
based projects – including eligibility
criteria, standards for evaluating the
impact of projects, and the steps needed
to build the integrity of the blue economy
and mobilise investment.
–We partnered with Earth Security to 
explore the barriers, opportunities and
design options for creating a ‘mangrove
bond’ in Queensland, Australia to help
generate funding to enhance mangrove
ecosystems. This led to the publication of a
practical blueprint for investors, banks,
corporates and governments to develop
new sustainable fixed income and
investment product opportunities.
Working with civil society and non-
governmental organisations
As part of our global philanthropy, we have
partnered with a range of organisations to
support the acceleration of climate action
and investments in nature.
Our five-year Climate Solutions Partnership
initiative with the World Resources Institute,
WWF and over 50 local partners, continues
to support the scaling up of nature-based
solutions and the transition of the energy
sector in Asia. This includes engaging with
local enterprises across Asia to make climate
commitments and take corporate action.
Under the Asia Sustainable Palm Oil Links
programme, we are working closely with
smallholders and traders to transition to
more sustainable practices and reduce
nature-related losses.
We have also established several new
partnerships focused on transitioning
industry, decarbonising global trade and
catalysing the new economy. These include:
–a three-year partnership with the Apparel
Impact Institute to mobilise blended finance
for projects to reduce supply chain
emissions in the global fashion industry;
–a founding membership of the Capacity-
building Alliance for Sustainable
Investment, a global platform providing
local capacity building services and
technical assistance to support growth of
transition financing in emerging markets
and developing economies; and
–a two-year partnership with Repower, a
global non-profit initiative analysing the
technical and commercial feasibility of
various options for repowering and
repurposing coal-fired power plants to
accelerate the transition to clean energy.
68 HSBC Holdings plc
Our approach to climate reporting
TCFD
Task Force on Climate-related Financial Disclosures (‘TCFD’)
The table below sets out the 11 TCFD recommendations and summarises where additional information can be found.
We have considered our ‘comply or explain’ obligation under both the UK’s Financial Conduct Authority’s Listing Rules and Sections 414CA
and 414CB of the UK Companies Act 2006, and confirm that we have made disclosures consistent with the TCFD Recommendations and
Recommended Disclosures, including its annexes and supplemental guidance, save for certain items, which we summarise below and in the
additional information section on page 1e.
Recommendation
Response
Disclosure
location
Governance
a) Describe the Board’s oversight of climate-related risks and opportunities (Companies Act 2006 - Sections 414CA and 414CB
2A (a))
Process, frequency and
training
–The Board takes overall responsibility for ESG strategy, overseeing executive management in developing the
approach, execution and associated reporting. It considered ESG at eight meetings during the year.
–Board members receive ESG-related training as part of their induction and ongoing development, and seek out further
opportunities to build their skills and experience in this area.
Pages 88
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and 292
Page 88
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Sub-committee
accountability,
processes and
frequency
–The Group Audit Committee (‘GAC’) considered ESG and climate reporting matters at eight meetings during 2023.
Furthermore, as an area of expanded assurance, the GAC, supported by the executive-level ESG Committee, provided
close oversight of the disclosure risks in relation to ESG and climate reporting, amid rising stakeholder expectations.
–The Group Risk Committee (‘GRC’) received reports on climate risk management, energy and thermal coal phase-out
policies, while maintaining oversight of delivery plans to ensure that the Group develops robust climate risk
management capabilities. It considered ESG risk at five meetings in 2023.
–The diagram on page 88 provides an illustration of our ESG governance process, including how the Board’s strategy
on climate is cascaded and implemented throughout the organisation. It identifies examples of forums that manage
both climate-related opportunities and risks, along with their responsibilities and the responsible chair.
Page 303
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Pages 311
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and 314
Page 88
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Examples of the Board
and relevant Board
committees taking
climate into account
–The Board considered whether to establish a Board committee dedicated to ESG issues, but instead decided that the
best way to support the oversight and delivery of the Group’s climate ambition and ESG strategy was to retain
governance at Board level.
–In 2023, the Board oversaw the implementation of ESG strategy through regular dashboard reports and detailed
updates including: review and approval of the net zero transition plan, deep dives on the sustainability execution
programme, reviews of net zero-aligned policies and climate-aligned financing initiatives.
Page 290
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Page 290
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b) Describe management’s role in assessing and managing climate-related risks and opportunities  (Companies Act 2006 -
Sections 414CA and 414CB 2A (a))
Who manages climate-
related risks and
opportunities
–The ESG Committee supports the development and delivery of our ESG strategy, key policies and material
commitments by providing oversight, coordination and management of ESG commitments and initiatives. It is co-
chaired by the Group Chief Sustainability Officer and the Group Chief Financial Officer.
–In 2023, we enhanced our ESG governance with the establishment of a new Sustainability Execution Committee,
which focuses on defining and measuring the success of our climate ambition, and developing commercial
opportunities that support it through the sustainability execution programme.
–The Group Chief Risk and Compliance Officer is the senior manager responsible for the management of climate risk
under the UK Senior Managers Regime, which involves holding overall accountability for the Group’s climate risk
programme.
Page 258
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Page 88
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Page 258
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How management
reports to the Board
–The Board delegates day-to-day management of the business and implementation of strategy to the Group Chief
Executive. The Group Chief Executive is supported in his management of the Group by recommendations and advice
from the Group Executive Committee, an executive forum comprising members of senior management that include
chief executive officers of the global businesses, regional chief executive officers and functional heads.
–The Group Executive Committee further enhanced its governance model of ESG matters with the introduction of a
new Sustainability Execution Committee and supporting forums. These support senior management in the
operationalisation of the Group's sustainability strategy, through the oversight of the sustainability execution
programme.
Page 286
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Page 290
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Processes used to
inform management
–The Group Risk Management Meeting oversees the enterprise-wide management of all risks, including updates
relating to the Group’s climate risk profile and risk appetite, top and emerging climate risks, and key climate initiatives.
–The Environmental Risk Oversight Forum oversees global risk activities relating to environmental risk management,
including the transition and physical risks from climate change. Equivalent forums have been established at regional
level, where appropriate.
Page 88
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Page 88
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HSBC Holdings plc69
Recommendation
Response
Disclosure
location
Strategy
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term 
(Companies Act 2006 - Sections 414CA and 414CB 2A (d))
Processes used to
determine material
risks and opportunities
–To support the requirements for assessing the impacts of climate change, we continue to develop a set of capabilities
to execute climate stress testing and scenario analysis. These are used to improve our understanding of our risk
exposures for risk management and business decision making. 
–We also develop and use climate scenario analysis to gain insights on the long-term effects of transition and physical
risks across our wholesale and retail banking portfolios.
–Our sustainable finance and investment ambition aims to help promote green, sustainable and socially-focused
business and sustainable investment products and solutions.
Page 37
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Page 65
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Page 50
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Relevant short-,
medium-, and long-
term time horizons
–We have continued to take steps to implement our climate ambition to become net zero in our operations and our
supply chain by 2030, and align our financed emissions to net zero by 2050. 
–In 2023, we continued to provide sustainable financing and investment to our customers in line with our ambition to
provide and facilitate $750bn to $1tn by 2030. 
–Our assessment of climate risks covers three distinct time periods, comprising: short term, which is up to 2025;
medium term, which is between 2026 and 2035; and long term, which is between 2036 and 2050. These time periods
are aligned to the Climate Action 100+ framework v1.2.
Page 42
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Page 44
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Page 164
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Transition or physical
climate-related issues
identified
–We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030. Our sustainable finance data dictionary includes a
detailed definition of contributing activities.
–For transition risk, we have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six
high transition risk sectors. As at 31 December 2023, the overall exposure to six high transition risk sectors was
$112bn. Our relationship managers engage with our key wholesale customers through a transition engagement
questionnaire (formerly the transition and physical risk questionnaire) to gather information and assess the alignment
of our wholesale customers’ business models to net zero and their exposure to physical and transition risks. We use
the responses to the questionnaire to create a climate risk score for our key wholesale customers.
–We measure the impacts of climate and weather events to our buildings on an ongoing basis using historical, current
and scenario modelled forecast data. In 2023, there were 27 major storms that had a minor impact on five premises
with no impact on the availability of our buildings.
Page 50
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Page 259
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Page 265
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Risks and opportunities
by sector and/or
geography
–For transition risk, we have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six
high transition risk sectors. These are automotive, chemicals, construction and building materials, metals and mining,
oil and gas, and power and utilities.
–Within our mortgage portfolios, properties or areas with potentially heightened physical risk are identified and
assessed locally, and potential exposure is monitored through quarterly metrics. We have also set risk appetite
metrics for physical risk in our largest mortgage markets, the UK and Hong Kong, as well as those with local
regulatory requirements, including Singapore.
–We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030. For a detailed breakdown of our sustainable finance
progress, see the ESG Data Pack.
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Concentrations of
credit exposure to
carbon-related assets
(supplemental
guidance for banks)
–We report our exposure to the six high transition risk sectors in the wholesale portfolio. For details, see the ESG Data
Pack.
–The UK is our largest mortgage market, which at September 2023 made up 40.0% of our global mortgage portfolio.
We estimate that 0.2% of our UK retail mortgage portfolio is at very high risk of flooding and 3.5% is at high risk. This
is based on approximately 94.2% climate risk data coverage by value of our UK portfolio as at September 2023.
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Climate-related risks
(transition and physical)
in lending and other
financial intermediary
business activities
(supplemental
guidance for banks)
–Our material exposure to climate risk relates to wholesale and retail client financing activity within our banking
portfolio.
–We are also exposed to climate risk in relation to asset ownership by our insurance business and employee pension
plans.
–HSBC Asset Management recognises that climate risk may manifest as transition and physical risks over the short,
medium and long term. The impact of climate-related risk will vary depending on characteristics such as asset class,
sector, business model and geography. Where applicable and relevant, HSBC Asset Management incorporates
climate-related indicators, such as carbon intensity and management of carbon emissions, into investment decisions
as well as insights from its climate-related engagement. 
–In climate scenario analysis on page 263, we show the relative size of exposures at default in 2023 and the increase in
cumulative ECL under each scenario compared with a counterfactual scenario by 2035 (expressed as a multiple).
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70 HSBC Holdings plc
Recommendation
Response
Disclosure
location
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning (Companies
Act 2006 - Sections 414CA and 414CB 2A (e))
Impact on strategy,
business, and financial
planning
–Our net zero ambition represents one of our four strategic pillars. We aim to achieve net zero in our financed emissions by
2050, and in our own operations and supply chain by 2030.
–Scenario analysis supports our strategy by assessing our potential exposures to risks and vulnerabilities under a range of
climate scenarios. It helps to build our awareness of climate change, plan for the future and meet our growing regulatory
requirements. Developments in climate science, data, methodology and scenario analysis techniques will help us shape our
approach further. We therefore expect this view to change over time.
–We continue to enhance our climate scenario analysis exercises so that we can have a more comprehensive understanding
of climate headwinds, risks and opportunities to support our strategic planning and actions.
–We have used climate scenarios to inform our organisation’s business, strategy and financial planning. In 2023, we continued
to incorporate certain aspects of sustainable finance and financed emissions within our financial planning process.
–We do not fully disclose impacts from climate-related opportunities on financial planning and performance including on
revenue, costs and the balance sheet, quantitative scenario analysis, detailed climate risk exposures for all sectors and
geographies or physical risk metrics. This is due to transitional challenges in relation to data limitations, although
nascent work is ongoing in these areas. We expect these data limitations to be addressed in the medium term as
more reliable data becomes available and technology solutions are implemented.
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Impact on products
and services
–We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030.
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Impact on supply chain
and/or value chain
–We will continue to engage with our supply chain through CDP, and through direct discussions with our suppliers on how
they can further support our transition to net zero.
–We recognise that collective action is critical to achieve net zero. We seek to collaborate with a range of partners to develop
a supportive environment for achieving net zero and mobilising finance for climate action and nature-based solutions. Our
partnerships vary in scope and form depending on the sector and geography, as well as our presence in local markets.
–HSBC Asset Management engages with investee companies on a priority list as defined in its Global Stewardship Plan, and
votes at company general meetings, including on the topic of climate change.
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Impact on adaptation
and mitigation activities
–In October 2020, we announced our ambition to reduce our energy consumption by 50% by 2030, against a 2019
baseline. As part of our ambition to achieve 100% renewable electricity across our operations by 2030, we continue to
look for opportunities to procure green electricity in each of our markets. In 2023, our fourth UK renewable PPA went
live in Sorbie, Scotland. A key challenge remains the limited opportunity to pursue PPAs or green tariffs in key markets
due to regulations.
–We regularly review and enhance our building selection process and global engineering standards and will continue to
assess historical claims data to help ensure our building selection and design standards address the potential impacts
of climate change.
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Impact on operations
–We have three elements to our strategy: reduce, replace and remove. We plan to first focus on reducing carbon
emissions from consumption, and then replacing remaining emissions with low-carbon alternatives in line with the
Paris Agreement. We plan to remove the remaining emissions that cannot be reduced or replaced by procuring, in
accordance with prevailing regulatory requirements, high-quality offsets at a later stage.
–We use stress testing to evaluate the potential for impact on our owned or leased premises. Our scenario stress test,
conducted in 2023, analysed how eight climate change-related hazards could impact 1,000 of our critical and important
buildings. These hazards were coastal inundation, extreme heat, extreme winds, wildfires, riverine flooding, pluvial
flooding, soil movement due to drought, and surface water flooding.
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Impact on investment
in research and
development
–Throughout 2023, we published regular ESG and sustainability-related market insights and updates such as
#WhyESGMatters and Learning about ESG to help clients better understand the implications for their investments.
–We recognise the need to find new solutions and increase the pace of change for the world to achieve the Paris
Agreement goal of being net zero by 2050. We are working with a range of partners to accelerate investment in
sustainable infrastructure, natural resources and climate technology to help reduce emissions and address climate
change.
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Impact on acquisitions
or divestments
–We have updated our merger and acquisition process to consider potential climate and sustainability-related targets,
net zero transition plans and climate strategy, and how this relates to HSBC.
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Impact on access to
capital
–We have considered the impact of climate-related issues on our businesses, strategy and financial planning. Our
access to capital may be impacted by reputational concerns as a result of climate action or inaction. In addition, if
we are perceived to mislead stakeholders on our business activities or if we fail to achieve our stated net zero
ambitions, we could face reputational damage, impacting our revenue-generating ability and potentially our access
to capital markets. We expect to further enhance the disclosure in the medium term as more data becomes
available. To manage these risks we have integrated climate risk into our existing risk taxonomy, and incorporated it
within the risk management framework through the policies and controls for the existing risks where appropriate.
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Transition plan to a
low-carbon economy
–We published our Group-wide net zero transition plan in January 2024. In this plan, we provided an overview of our
approach to net zero and the actions we are taking to help meet our ambitions. We want to be clear about our
approach, the change underway today and what we plan to do in the future. We also want to be transparent about
where there are still unresolved issues and uncertainties. We are still developing our disclosures, including
considerations of possible additional data in relation to our financial plans, budgets, and related financial approach for
the implementation of the transition plan in the medium term (e.g. amount of capital and other expenditures
supporting our decarbonisation strategy). The UK Transition Plan Taskforce published its final transition plan
disclosure framework in October 2023. We will continue to evolve our transition plan disclosures to take into account
new and evolving regulatory developments.
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HSBC Holdings plc71
Recommendation
Response
Disclosure
location
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower
scenario  (Companies Act 2006 - Sections 414CA and 414CB 2A (f))
Embedding climate into
scenario analysis
–Scenario analysis supports our strategy by assessing our potential exposures to risks and vulnerabilities under a range
of climate scenarios. It helps to build our awareness of climate change, plan for the future and meet our growing
regulatory requirements.
–In our 2023 climate scenario analysis exercises, we explored five scenarios that were created to examine the potential
impacts from climate change for the Group and its entities.
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Key drivers of
performance and how
these have been taken
into account
–Climate scenario analysis allows us to model how different potential climate pathways may affect and impact the
resilience of our customers and our portfolios, particularly in respect of credit losses. Under the Current Commitments
scenario, we expect lower levels of losses relating to transition risks, although we would expect an increase in the
effects of climate-related physical risks over the longer term.
–Scenario analysis results have been used to support the Group’s ICAAP. This is an internal assessment of the capital
the Group needs to hold to meet the risks identified on a current and projected basis, including climate risk.
–In addition, scenario analysis informs our risk appetite statement metrics. As an example, it supports the calibration of
physical risk metrics for our retail mortgage portfolios and it is used to consider climate impact in our IFRS 9
assessment.
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Scenarios used and
how they factored in
government policies
–Our scenarios are: the Net Zero scenario, the Current Commitments scenario, the Delayed Transition Risk scenario, the
Downside Physical Risk scenario and the Near Term scenario.
–Our scenarios reflect different levels of physical and transition risks over a variety of time periods. The scenario assumptions
include varying levels of governmental climate policy changes, macroeconomic factors and technological developments.
However, these scenarios rely on the development of technologies that are still unproven, such as global hydrogen
production to decarbonise aviation and shipping.
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How our strategies
may change and adapt
–The nature of the scenarios, our developing capabilities, and limitations of the analysis lead to outcomes that are
indicative of climate change headwinds, although they are not a direct forecast.
–Developments in climate science, data, methodology and scenario analysis techniques will help us shape our approach
further. We therefore expect this view to change over time.
–Climate scenario analysis plays a crucial role helping us to identify and understand the impact of climate-related risks
and potential opportunities as we navigate the transition to net zero.
–Our target-setting approach to date, for on-balance sheet financed emissions and facilitated emissions, has been to
utilise a single net zero reference scenario (IEA NZE 2021) to underpin both energy supply-related sectors (oil and gas,
power and utilities, and thermal coal mining) and our published targets for demand-side sectors in transport and heavy
industry.
–We recognise that the so-called ‘hard-to-abate’ sectors, such as cement, iron, steel and aluminium, and aviation have a
large dependence on nascent technologies and the presence (or not) of enabling policies and regulations. We may
consider tracking progress relative to 1.5°C-aligned ambition ranges for these sectors in the future, which could
include industry-specific scenarios alongside the IEA NZE scenario.
–We do not currently fully disclose the impacts of transition and physical risk quantitatively, due to transitional challenges
including data limitations and evolving science and methodologies. In 2023, we have disclosed the impairment impacts for
our wholesale, retail and commercial real estate portfolios in different climate scenarios. In addition, we have disclosed
losses on our retail mortgage book under three scenarios and flood depths for specific markets. For our wholesale book, we
have disclosed potential implications on our expected credit losses for 11 sectors under two scenarios. We have also
disclosed a heat map showing how we expect the risks to evolve over time.
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Risk management
a) Describe the organisation’s processes for identifying and assessing climate-related risks (Companies Act 2006 - Sections 414CA and 414CB
2A (b))
Process
–We continue to integrate climate risk into policies, processes and controls across many areas of our organisation, and
we will continue to update these as our climate risk management capabilities mature over time.
–We updated our climate risk management approach to incorporate net zero alignment risk and developed guidance on how
climate risk should be managed for non-financial risk types. While we have made progress in enhancing our climate risk
framework, further work remains. This includes the need to develop additional metrics and tools to measure our exposure to
climate-related risks, and to incorporate these tools within decision making.
–In 2023, we enhanced our internal climate scenario analysis exercise by focusing our efforts on generating more granular
insights for key sectors and regions to support core decision-making processes, and to respond to our regulatory
requirements. In climate scenario analysis, we consider, jointly, both physical risks and transition risks.
–We continue to review policy implementation as we apply our policies in practice, and our operationalisation of such policies
continues to be enhanced. We take a risk-based approach when identifying transactions and clients to which our energy and
thermal coal phase-out policies apply, and when reporting on relevant exposures, adopting approaches proportionate to risk
and materiality.
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Integration into policies
and procedures
–We continue to integrate climate risk into policies, processes and controls across many areas of our organisation, and we will
continue to update these as our climate risk management capabilities mature over time.
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Consider climate-
related risks in
traditional banking
industry risk categories
(supplementary
guidance for banks)
–We provide further details of how we have embedded the management of climate risk across key risk types, including
wholesale credit risk, retail credit risk, treasury risk, traded risk, reputational risk, regulatory compliance risk, resilience
risk, model risk, and financial reporting risk.
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72 HSBC Holdings plc
Recommendation
Response
Disclosure
location
b) Describe the organisation’s processes for managing climate-related risks  (Companies Act 2006 - Sections 414CA and 414CB 2A (b))
Process and how we
make decisions
–The Group Risk Management Meeting and the Group Risk Committee receive regular updates on our climate risk
profile and progress of our climate risk programme.
–The Environmental Risk Oversight Forum (formerly the Climate Risk Oversight Forum) oversees risk activities relating
to climate and sustainability risk management, including the transition and physical risks from climate change.
Equivalent forums have been established at a regional level.
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c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk
management framework  (Companies Act 2006 - Sections 414CA and 414CB 2A (c))
How we have aligned
and integrated our
approach
–Our climate risk approach is aligned to our Group-wide risk management framework and three lines of defence model,
which sets out how we identify, assess and manage our risks.
–We are developing our climate risk capabilities across our businesses, by prioritising sectors, portfolios and
counterparties with the highest impacts.
–In 2023, we updated our climate risk materiality assessment, to understand how climate risk may impact across
HSBC’s risk taxonomy.
–In addition to this assessment, we also consider climate risk in our emerging risk reporting and scenario analysis
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How we take into
account
interconnections
between entities and
functions
–Our climate risk approach is aligned to our Group-wide risk management framework and three lines of defence model,
which sets out how we identify, assess and manage our risks.
–Through our climate risk programme, we continued to embed climate considerations throughout the organisation,
including through risk policy updates and the completion of our annual climate risk materiality assessment. We also
developed risk metrics to monitor and manage exposures, and further enhanced our internal climate scenario analysis.
–We continue to make progress in enhancing our climate risk capabilities, and recognise it is a long-term iterative
process. This includes updating our approach to reflect how the risks associated with climate change continue to
evolve in the real world, and maturing how we embed climate risk factors into strategic planning, transactions and
decision making across our businesses.
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Metrics and targets
a) Disclose the metrics used by the organisation to assess climate-related risk and opportunities in line with its strategy and risk management
process (Companies Act 2006 - Sections 414CA and 414CB 2A (h))
Metrics used to assess
the impact of climate-
related risks on our
loan portfolio
–We have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six high transition
risk sectors. As at 31 December 2023, the overall exposure to six high transition risk sectors was $112bn.
–The UK is our largest mortgage market, which at September 2023 made up 40.0% of our global mortgage portfolio.
We estimate that 0.2% of our UK retail mortgage portfolio is at very high risk of flooding, and 3.5% is at high risk. This
is based on approximately 94.2% climate risk data coverage by value of our UK portfolio as at September 2023.
–In 2023, we further developed our risk metrics to monitor our performance against our net zero targets for both
financed emissions and own operations.
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Metrics used to assess
progress against
opportunities
–We continue to track our progress against our ambition to provide and facilitate $750bn to $1tn of sustainable finance
and investment by 2030, aligned to our published data dictionary. For a detailed breakdown of our sustainable finance
progress, see the ESG Data Pack.
–We do not currently fully disclose the proportion of revenue or proportion of assets, capital deployment or other
business activities aligned with climate-related opportunities, including revenue from products and services designed
for a low-carbon economy, forward-looking metrics consistent with our business or strategic planning time horizons. In
relation to sustainable finance revenue and assets we are disclosing certain elements. We expect the data and system
limitations related to financial planning and performance, and climate-related opportunities metrics to be addressed in
the medium term as more reliable data becomes available and technology solutions are implemented. We expect to
further enhance this disclosure in the medium term.
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Board or senior
management
incentives
–To help us achieve our ESG ambitions, a number of measures are included in the annual incentive and long-term incentive
scorecards of the Group Chief Executive, Group Chief Financial Officer and Group Executives.
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Internal carbon price
–We do not currently disclose internal carbon prices due to transitional challenges such as data challenges. But we considered
carbon prices as an input for our climate scenario analysis exercise. We expect to further enhance this disclosure in the
medium term.
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Metrics used to assess
the impact of climate
risk on lending and
financial intermediary
business (supplemental
guidance for banks)
–As part of our 2023 internal climate scenario analysis, we completed a detailed climate risk assessment for the UK,
Hong Kong, mainland China and Australia, which together represent 75% of the balances in our global retail mortgage
portfolio. Our analysis shows that over the longer term, we expect minimal losses to materialise when considering the
Current Commitments scenario.
–In insights from climate scenario analysis on page 263, we showed the relative size of exposures at default in 2023
and the increase in cumulative ECL under each scenario compared with a counterfactual scenario by 2035 (expressed
as a multiple).
–We do not fully disclose metrics used to assess the impact of climate-related physical (chronic) and transitions (policy
and legal, technology and market) risks on retail lending, parts of wholesale lending and other financial intermediary
business activities (specifically credit exposure, equity and debt holdings, or trading positions, each broken down by
industry, geography, credit quality and average tenor). We are aiming to develop the appropriate systems, data and
processes to provide these disclosures in future years. We disclose the exposure to six high transition risk wholesale
sectors and the flood risk exposure and Energy Performance Certificate breakdown for the UK portfolio.
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HSBC Holdings plc73
Recommendation
Response
Disclosure
location
b) Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas emissions and the related risks (Companies Act 2006 - Sections 414CA and
414CB 2A (h))
Our own operations
–We report greenhouse gas emissions resulting from the energy used in our buildings and employees’ business travel. In 2023,
we also continue to disclose our scope 3 (category 1 and category 2) supply chain emissions. Our initial supply chain emission
figures may require updating as data availability changes over time and methodologies and climate science evolve.
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Greenhouse gas
emissions for lending
and financial
intermediary business
(supplemental
guidance for banks)
–Our analysis of financed emissions comprises ‘on-balance sheet financed emissions’ and ‘facilitated emissions’. Our on-
balance sheet financed emissions include emissions related to on-balance sheet lending, such as project finance and direct
lending. Our facilitated emissions include emissions related to financing we help clients to raise through capital markets
activities.
–Work continues on the integration of ESG and climate analysis into HSBC Asset Management’s actively managed product
offerings to help ensure the climate risks faced by companies are considered when making investment decisions and to
assess ESG risks and opportunities that could impact investment performance.
–We currently disclose four out of 15 categories of scope 3 greenhouse gas emissions including business travel, supply chain
and financed emissions. In relation to financed emissions, we publish on-balance sheet financed emissions for a number of
sectors as detailed on page 18. We also publish facilitated emissions for the oil and gas, and power and utilities sectors.
Future disclosures on financed emissions and related risks are reliant on our customers publicly disclosing their greenhouse
gas emissions, targets and plans, and related risks. We recognise the need to provide early transparency on climate
disclosures but balance this with the recognition that existing data and reporting processes require significant enhancements.
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c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets (Companies
Act 2006 - Sections 414CA and 414CB 2A (g))
Details of targets set
and whether they are
absolute or intensity
based
–We continue to track our progress against our ambition to provide and facilitate $750bn to $1tn of sustainable finance and
investment by 2030, aligned to our published data dictionary.
–We have continued to take steps to implement our climate ambition to become net zero in our operations and our supply
chain by 2030, and align our financed emissions to net zero by 2050.
–For financed emissions we do not plan to set 2025 targets. We set targets in line with the Net-Zero Banking Alliance (‘NZBA‘)
guidelines by setting 2030 targets. While the NZBA defines 2030 as intermediate, we use different time horizons for climate
risk management. For climate, we define short term as time periods up to 2025; medium term is between 2026 and 2035;
and long term is between 2036 and 2050. These time periods align to the Climate Action 100+ disclosure framework. In
2023, we disclosed interim 2030 targets for financed emissions for a number of sectors as we outline on page 18.
–We do not currently disclose a target for capital deployment. In relation to capital deployment, since 2015, we have issued
more than $2bn of our own green bonds and structured green bonds with the capital invested into a variety of green
projects, including: green buildings, renewable energy and clean transportation projects. In 2023, we further progressed our
internal review and enhancement of the green bond framework, with further refinement including internal and external
review to be undertaken in 2024. This will be subject to continuous review and monitoring to ensure that they remain up to
date and reflect updated standards, taxonomies and best practices. Any such developments in standards, taxonomies and
best practices over time could result in revisions in our reporting going forward and lead to differences year-on-year as
compared to prior years. See the HSBC Green Bond Report for further information.
–We do not currently disclose internal carbon pricing target due to transitional challenges such as developing the appropriate
systems and processes, but we considered carbon prices as an input for our climate scenario analysis exercise. We expect
to further enhance the disclosure in the medium term as more data becomes available.
–We do not currently disclose targets used to measure and manage physical risk. This is due to transitional challenges
including data limitations of physical risk metrics. For retail, we do not use targets to measure and manage physical risk. In
2023 we introduced internally a global ‘soft trigger’ monitoring and review process for physical risk exposure where a market
reaches or exceeds a set threshold, as this ensures markets are actively considering their balance sheet risk exposure to peril
events. We also consider physical and transition risk as an input for our climate scenario analysis exercise. We expect to
further enhance our disclosures as our data, quantitative scenario analysis, risk metrics and physical risk targets evolve, and
technology solutions are implemented in the medium term.
–We have described the targets used by the organisation to manage climate-related risks and opportunities and performance
against targets. However, taking into account the nature of our business, we do not consider water usage to be a material
target for our business and, therefore, we have not included a target in this year’s disclosure.
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Other key performance
indicators used
–In October 2020, we announced our ambition to reduce our energy consumption by 50% by 2030, against a 2019
baseline, and in 2023 we achieved 26.3%.
–As part of our ambition to achieve 100% renewable electricity across our operations by 2030, we continue to look for
opportunities to procure green electricity in each of our markets. In 2023, our fourth UK renewable PPA went live in
Sorbie, Scotland.
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74 HSBC Holdings plc
Social
Building inclusion and resilience
We play an active role in opening up a world of opportunity for our customers, colleagues and
communities by connecting across our international networks to help build a more inclusive
and resilient society.
At a glance
Inclusion is key to opening up a world of
opportunity. It involves a commitment to
identifying and addressing barriers that may
stop people from accessing opportunities
because of who they are or where they are
from.
Inclusion goes hand in hand with resilience.
We aim to help people build the capabilities
they need to achieve their goals and to deal
with the challenges they face, so we are
focused on delivering products, services and
education that support our colleagues,
customers and communities.
Colleagues
We believe that an inclusive, healthy and
rewarding workplace helps the whole Group
succeed. We are focused on recruiting and
retaining diverse talent by offering fair pay
and career progression so we can ensure our
colleagues – and particularly our leadership –
are representative of the communities we
serve. We do this by setting meaningful
goals and tracking and monitoring our
progress. In 2023, we continued to make
progress against all of our goals, although
the progress we are making with women in
senior leadership roles has not been as fast
paced as we would like.
Employee well-being is essential. We offer all
colleagues a wide range of resources that
help support their mental, physical and
financial well-being so they can thrive in and
out of work. We are working to ensure that
our offices, branches and digital spaces are
accessible and safe for all.
We also help our colleagues build resilience
by ensuring that they are equipped with the
skills and knowledge they need to progress
their careers during a period of significant
economic transformation.
Customers
We are committed to helping our customers
access the financial services they need. They
should not find it more difficult to access
finance because of their gender, their
ethnicity, their sexual orientation, their
neurodiversity or their disability. Our 
ambition is to create a welcoming, inclusive
and accessible banking experience for all our
customers.
We build resilience by creating products and
services that simplify the banking
experience, so customers can manage and
grow their wealth more easily. We also help
protect what people value most – their
health, families, homes and belongings. We
also build resilience by providing education
so customers can understand how to
manage their finances more effectively.
Communities
We are developing an updated global
philanthropy strategy that allows us to work
alongside the communities we operate
within, and which aligns with our ESG areas
of focus – ‘transition to net zero’ and
‘building inclusion and resilience’.
We believe that fostering inclusion and
building resilience helps us to create long-
term value and growth. By removing
unnecessary barriers and striving to be a fair
and equitable organisation, we can attract
and retain the best talent, support a wider
customer base to achieve their goals and
stimulate growth in our communities. This is
how we open up a world of opportunity for
our colleagues, our customers and our
communities.
In this section
Promoting
diversity and
fostering inclusion
Our approach to
diversity and inclusion
We value diversity of thought and we are building an inclusive
environment that reflects our customers and communities.
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Creating a diverse
environment
Fostering an inclusive
culture
Building a healthy
workplace
Listening to our
colleagues
We run a Snapshot survey and report insights to our Group Executive
Committee and the Board.
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Being a great place to
work
We aim to create a great workplace that will help in attracting, retaining
and motivating our colleagues so they can deliver for our customers across
countries and territories.
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Developing skills,
careers and
opportunities
Learning and skills
development
We aim to build a dynamic, inclusive culture where colleagues can develop
skills and experiences that help them fulfil their potential.
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Energising our
colleagues for growth
We are committed to offering colleagues the chance to develop their skills
while building pipelines of talented colleagues to support the achievement
of our strategic priorities.
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Building customer
inclusion and
resilience
Our approach to
customer inclusion and
resilience
We aim to support financial well-being and remove barriers people can face
in accessing financial services.
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Engaging with our
communities
Building a more
inclusive and resilient
world
We focus on a number of priorities where we can make a difference to the
community and support sustainable growth.
Page 86
Footnote Arrow.jpg
HSBC Holdings plc75
Promoting diversity and fostering inclusion
Our approach to diversity and inclusion
Our purpose, ‘Opening up a world of
opportunity’, explains why we exist as an
organisation, and is the foundation of our
diversity and inclusion strategy. Inclusion is
an enabler for our ‘energise’ strategic pillar,
and is embedded in the values of our
organisation. By valuing difference and
seeking different perspectives, we can more
accurately reflect the societies we serve,
creating better outcomes for customers and
colleagues.
Our data-driven strategy enables us to set
aspirational goals to track and monitor our
progress. We remain focused on specific
Group-wide priorities for which we hold
senior executives accountable. Some
executives also have local priorities, which
ensures our diversity and inclusion agenda
remains locally relevant.
How we hold ourselves to account
We set meaningful goals
Our executive Directors and Group
Executives are accountable for
progressing our agenda through a series
of diversity and inclusion aspirational
goals that align to three public
commitments that we have made. In
2023, we continued to make progress
against our three goals by:
–achieving a 34.1% representation of
women in senior leadership roles, with
a goal of achieving 35% by 2025;
–attaining a 3.0% representation of
Black heritage colleagues in senior
leadership in the UK and US combined,
against a goal to achieve 3.4% by
2025; and
–increasing our Inclusion index as
measured in our Snapshot survey, to
78% against a 2023 target of 75%.
We report and track progress
Measuring our performance ensures we
consistently and accurately monitor the
progress made against our aspirational
goals. Our data-backed approach tracks
this through:
–an inclusion dashboard, which
monitors progress against goals with
trend data on hiring, promotion and
exit ratios, is reported to the Group
Executive Committee on a quarterly
basis; and
–semi-annual review meetings where
our Head of Inclusion meets each
Group Executive to review data, their
progress against their aspirational
goals, and to support further progress.
We benchmark our performance
External disclosures and benchmarks
allow us to measure the progress that we
are making and identify opportunities for
future prioritisation. In 2023, we:
–scored 87.2% in the Bloomberg
Gender-Equality Index measuring our
gender-related data transparency and
performance;
–maintained our Stonewall Gold
standard and rank as a top global
LGBTQ+ inclusion employer; and
–ranked as a Top 75 employer in the UK
Social Mobility Index in our first year of
entering a submission.
A data-driven approach to inclusion
We are evolving our data-driven approach by enabling more of our colleagues to self-identify across a range of data points. This data
has enabled us to set locally relevant priorities and identify areas of our organisation where we need to focus our attention. We invite
colleagues to self-identify on a broad range of data points where we can, although given the international nature of our business,
there are some jurisdictions where we are unable to invite colleagues to share their diversity data with us. We have enabled 91% of
our colleagues to disclose their ethnic background, with 62% of colleagues choosing to do so, where this is legally permissible.
Our approach goes beyond ethnic heritage and considers broader representation within the workplace. We have enabled 90% of the
workforce to share whether they have a disability, 71% of our workforce to share their sexual orientation, and all UK-based
colleagues to share their socio-economic background.
Our approach to Asian heritage representation
Our roots as an organisation trace back over 150 years to Hong Kong, where HSBC opened its
doors to serve clients with international needs. Asia remains a strategic focus for us today.
To better reflect the communities we serve, we have a focus on increasing representation across
our global workforce, including Asian heritage representation. Defining Asian heritage can be
complex due to the vast range of ethnicities and identities across the region. In 2023, 37.8% of
our senior leaders were able to self-identify as being from an Asian heritage background. To
deliver our international strategy it is vital that we are both representative of our local
communities, and able to mobilise leaders with global perspective and diverse heritage
backgrounds across our international network.
76 HSBC Holdings plc
Creating a diverse environment
Women in senior leadership
Since achieving our ambition of having 30%
of senior leadership positions held by women
in 2020, we set a new goal to reach 35% by
2025. We remain on track, with 34.1% of
senior leadership roles held by women at the
end of 2023, excluding our Canada business,
which is planned for sale in 2024. Progress in
the past year has not been as fast paced as
we would like. A total of 37.7% of all external
appointments into senior positions were
female, compared with 35.7% in 2022, and
women represented 39.6% of all promotions
into senior leadership roles in 2023.
Development programmes, including our
Accelerating Female Leaders initiative, have
helped to increase the visibility, sponsorship
and network of our high performing, senior
women. Since the start of the programme in
2017, 24% of participants have been
promoted and 2% have taken a lateral move
to develop their careers. We have also
retained over 79% of colleagues who
completed the programme.
In our 2023 Accelerating into Leadership
programme, which prepares high potential,
mid-level colleagues for leadership roles,
43% of participants were women. More than
5,200 women also participated in our
Coaching Circles programme, which
matches senior leaders with a small group of
colleagues to provide advice and support on
the development of leadership skills and
network building.
Our succession planning for key leadership
roles includes an assessment of the diversity
of our succession plans. We are improving
the gender diversity of those roles critical to
our organisation and the successors to those
roles. In 2023, 40% of the succession pool
for these roles were women, compared with
36% in 2022.
Black colleagues in senior leadership
We remain on track to double the number of
Black colleagues in senior leadership roles
globally by 2025, having increased the
number of Black senior leaders by 62% since
2020.
In 2022, we set a new Group-wide ethnicity
strategy, which is overseen by a senior
working group and led by our Group Chief
Risk and Compliance Officer. The aim of the
strategy is to ensure we accurately reflect
the communities we serve and the societies
in which we operate. We continue to identify
challenges colleagues from diverse
backgrounds face in achieving their
aspirations at HSBC.
We have continued to focus on the
development of Black heritage colleagues
through the delivery of dedicated
development programmes. Using data
analytics, we have identified that in the UK,
Black heritage female colleagues are less
likely to hold positions as people managers.
To address this, we introduced the Solaris
programme to provide coaching and
development for our UK-based Black
heritage female colleagues. Forty women
have successfully completed the programme
and 29% have been promoted.
We also partnered with Vivida, a virtual
reality firm, to launch an immersive learning
programme designed to bring to life the
experiences of Black heritage and ethnic
minority colleagues, highlighting the
pressures, barriers and biases faced by these
communities. The programme has been
completed by 11,900 colleagues, and was
nominated for awards at the 2023 European
Diversity Awards and as finalists at The 2024
Learning Awards.
In 2023 EmpowHER was launched, a
programme created by Black heritage
women for Black heritage women at mid-
management levels across the UK business.
The programme encourages participants to
support each other with the tools and shared
experiences to structure their careers,
expand their network and seek job
opportunities. It also helps to create
improved visibility of talent to senior
leadership.
Gender diversity data
162177965285348
1 Combined Group Executives and direct reports
includes HSBC Group Executives and their direct
reports (excluding administrative staff) as of 31
December 2023.
2 Directors (or equivalent) of subsidiary companies
that are included in the Group’s consolidated
financial statements, excluding corporate directors.
3 In our leadership structure, we classify senior
leadership as those at career band 3 and above;
middle management as those at global career band
4; and junior management as those at global career
bands 5 and 6.
Representation and pay gaps
We publish this data annually to ensure both transparency and a maintained focus on addressing representation gaps within the
organisation. Our gender and ethnicity pay gap reporting shows the difference in average pay between two groups of people (regardless of
roles or seniority). We have reported our UK gender representation and pay gap data since 2017 in line with reporting regulations, and
have voluntarily extended this to include the US, mainland China, Hong Kong, India, Mexico, Singapore and the UAE, alongside ethnicity
data for the UK and US. In 2023, we also included gender pay gap data for Argentina and Malaysia, covering approximately 80% of our
workforce (excluding our Canada business held for sale). In 2023, our mean aggregate UK-wide gender pay gap was 43.2%, compared
with 45.2% in 2022, and the ethnicity pay gap was 4.5%, compared with 0.4% in 2022. Our UK gender pay gap is driven by several factors
including the shape of our workforce, where there are more men than women in senior higher-paid roles, and more women than men in
junior roles. While we are confident in our approach to pay equity, until women and ethnic minority colleagues are proportionately
represented across all areas and levels of the organisation we will continue to see gaps in average pay. We are committed to paying
colleagues fairly regardless of their gender or ethnicity and have processes to ensure that remuneration is free from bias. We review our
pay practices and undertake a pay equity review annually, including a regular independent third-party review of equal pay in major
markets. If pay differences are identified that are not due to objective, tangible reasons such as performance, skills or experience, we make
adjustments.
For further details of our representation data, pay gap data, and actions, see www.hsbc.com/diversitycommitments and the ESG Data Pack at
Footnote Arrow.jpg
www.hsbc.com/esg.
HSBC Holdings plc 77
Fostering an inclusive culture
Our inclusion strategy seeks to make HSBC
an organisation in which every colleague can
feel like they belong, and are empowered to
contribute their perspectives and ideas. Our
strategy sits above a range of diversity and
inclusion strands from gender, ethnicity and
faith to disability and socio-economic
background – we want to ensure that all
colleagues are able to realise their full
potential.
We use the Inclusion index in our annual
Snapshot survey to measure the extent to
which our colleagues feel a sense of
belonging and psychological safety within
the organisation, alongside their perception
of fairness and trust. In 2023, we achieved a
score of 78%, which is three percentage
points ahead of our annual aspirational goal,
and two percentage points ahead of the
financial services industry benchmark.
Analysis of our Inclusion index allows us to
measure engagement levels of specific
colleague groups in greater detail, in
particular different diversity strands, to better
understand the experiences of our
colleagues globally. We found that scores
from colleagues who identify as male and
female were broadly in line with the overall
Group-wide result, at 79% and 77%
respectively. From an ethnicity perspective,
our Black heritage colleagues were four
percentage points below the Group-wide
average, while our Asian heritage
colleagues’ results were on a par with the
overall score, at 78%.
Our employee resource groups
Our employee resource groups (‘ERGs’)
foster an inclusive culture and contribute
significantly to the experience of tens of
thousands of colleagues. They operate
globally and are led by colleagues with a
range of shared values, identities, interests
and goals, including disability, LGBTQ+,
ethnicity, faith and gender.
Each of our non-executive Directors and
most Group Executives are aligned with one
of our global ERGs, ensuring there is a direct
link between senior leadership and our
colleagues. The non-executive Director
dedicated to workforce engagement is
closely aligned to our diversity and inclusion
strategy and has attended events such as
our 2023 Global ERG Summit.
In 2023, our ERGs led numerous initiatives
and events, including the Ability network
hosting a global summit aimed at driving
cultural change to build confidence for
colleagues with a disability. Our Nurture
ERG, which supports working parents and
carers, launched the #LeaveLoudly
Campaign globally. Its aim is to drive
engagement by counteracting
‘presenteeism’, acknowledging that
everyone has multifaceted lives, and to show
that leaders across HSBC support a healthy
work-life balance.
Looking to the future on disability
Enhancing the experience of our employees,
particularly those with disabilities, is a vital
part of our commitment to build an inclusive
organisation. A key initiative has been a
targeted career development programme to
empower colleagues with confidence to
drive their careers forward.
Recognising the pivotal role of line
managers, we have introduced a learning
plan through our Degreed platform to help
managers support team members with
physical, sensory, long-term, and mental
health conditions, as well as those who
identify as neurodiverse. Our Ability ERG has
hosted support sessions globally, where
colleagues shared their experiences and
raised awareness for disability inclusion, and
the support provided by HSBC.
In collaboration with PurpleSpace, the
disability network and professional
development hub, we sponsored and
published a Leadership Model resource for
employee groups. In 2023, we also
sponsored the UK Business Disability
Forum’s roundtable and conference. We
have enhanced the support we provide to
colleagues through our workplace
adjustment programme partnering with
Microlink, extending the availability of this
service to almost 37,790 colleagues in our
global service centres and technology
centres in India.
UK socio-economic diversity
We believe that no-one should be limited by
their socio-economic background and are
committed to driving socio-economic
inclusion within our workforce.
In 2022, we began exploring the impact
socio-economic background has on our
colleagues, working with them, and internal
and external stakeholders to develop our
understanding on socio-economic diversity.
In 2023, we entered the Social Mobility Index
for the first time and gained recognition as a
top 75 employer. Our Strive ERG, sponsored
by the Group Chief Human Resources
Officer, now has over 1,000 members. We
have continued to be an active member of
Progress Together, focused on helping
members progress and retain a socio-
economically diverse workforce, including
taking part in the largest financial services
study of socio-economic diversity.
We launched a career development
programme through the Strive ERG, enabling
colleagues from different backgrounds to
lead with impact and build career
confidence.
We continue to improve the socio-economic
diversity data we collect by running
campaigns encouraging our colleagues and
job applicants to share their socio-economic
background. In 2023, we extended our
socio-economic focus to Asia, with an initial
data collection pilot in Singapore through our
employee engagement survey. We also
launched a new learning plan, available for
all employees to better understand what
socio-economic diversity is and why it
matters.
Supporting colleagues experiencing menopause
Many of our female colleagues will experience menopause symptoms during their career. We do
not want menopause to be a silent struggle and we have put in place the right support so it does
not need to be. In 2023, we launched a new global framework centred around three principles of:
creating awareness; removing barriers; and being adaptable. These form the basis of our
menopause toolkit, which is available to all colleagues, and includes guidance on how to access
menopause support and guidance for line managers on how to best support those in need.
We recognise that there is much more we can do to support those who are experiencing
menopause and those who are supporting others experiencing it. Senior sponsorship is helping
to raise awareness and our first step is to provide access to dedicated resources on menopause.
78 HSBC Holdings plc
Building a healthy workplace
Listening to our colleagues
Listening to our colleagues is an essential
part of building a healthy workplace at
HSBC. We capture employee feedback in a
variety of ways to understand how our
colleagues feel about HSBC and to help us
improve the employee experience.
How we listen
Our annual Snapshot survey runs every
September and gives all HSBC employees
the opportunity to share their experiences of
working at the organisation. Our 2023 survey
achieved a record response rate of 85%, up
from 78% in 2022, with nearly 180,000
colleagues choosing to share their views.
The results of Snapshot are discussed at all
levels. Our record participation has enabled
us to put more data directly in the hands of
our people managers, with more than 11,000
teams able to access their results, while
maintaining the confidentiality of individual
employees’ responses. Managers are
supported by a guided action planning tool
to help them understand and interpret
insights relevant to their team, while
directing them towards support resources for
them and their teams to explore. Results are
also shared with executive leadership teams
across the Group, with detailed reporting
provided to our Group People Committee
and the Board.
We complement the Snapshot survey with
our annual Performance and Reward survey,
which runs every March. Open to all
employees, it captures feedback on our
annual performance and pay review cycle,
providing valuable insight into how well we
are meeting our colleagues’ needs and
expectations on compensation, development
and professional growth.
We also run targeted listening activities for
employees at key moments in their careers,
capturing detailed feedback from new
joiners, internal movers and voluntary
leavers.
Employee conduct and harassment
We expect all our employees to treat each
other with respect and dignity, and we do
not tolerate or condone harassment or
bullying in any form. We continually strive to
improve awareness and education around
such behaviours, and strengthen our
understanding and response to these issues
across all levels of the organisation. In 2023,
our overall Snapshot Speak up index
improved slightly to 76%, up one percentage
point from 2022.
We encourage our colleagues to speak up
about poor behaviour or things that do not
seem right, and we have included bullying,
harassment, discrimination and retaliation in
our 2023 Global Mandatory Training
curriculum. Our Snapshot survey revealed an
increase in colleagues able to state their
opinion without fear of negative
consequences, with 72% of colleagues
feeling able to do so, up from 70% in 2022.
In 2023, we launched our global code of
conduct which is supported by our global
anti-bullying and harassment code. This
continues to help us to maintain high
standards of conduct across the Group.
We have mandatory procedures, both
globally and locally, for handling and
investigating employee concerns, which
include those for bullying and harassment.
Cases are continually monitored from our
speak-up channels, and data is reported to
management committees to ensure there is
visibility at leadership level.
In 2023, we had a total of 834 concerns
raised relating to bullying, harassment,
discrimination and retaliation. Where the
concerns were substantiated following an
investigation, appropriate action was taken,
which included termination of services,
where appropriate. In 2023, 38% of concerns
raised were either partly or fully
substantiated and 24 colleagues were
dismissed in relation to bullying, harassment,
discrimination or retaliation.
We are committed to addressing this type of
behaviour and will continue to take action
where we find that an employee has
breached our values and high standards of
conduct.
Employee engagement:
77%
Employee engagement score
(2022: 74%)
81%
Of colleagues who feel confident about this
company’s future
(2022: 77%)
85%
Of colleagues who completed our annual
Snapshot survey
(2022: 78%)
Promoting mental health awareness
A poll posted by a senior leader on our intranet revealed that 94% of colleagues said they trust
leadership more when they open up about their own mental health.
To build on this sentiment, we celebrated World Mental Health Day by running a global
awareness campaign ‘The Big Mental Health Conversation’ in October 2023. We encouraged
leaders to post questions on our intranet to gather feedback from colleagues on their experiences
and how we can improve mental health support. We surveyed our colleagues during the
campaign and half said they were very satisfied with the mental health support HSBC offers.
Supporting the mental health of our colleagues continues to be a priority, including ensuring that
we continue to signpost how colleagues can access available support. Throughout 2023, we also
held over 200 virtual events, featuring internal and external experts providing advice on mental
health and topics related to well-being.
HSBC Holdings plc 79
Listening to our colleagues continued
Employee engagement
We use eight Snapshot indices to measure key areas of focus and compare against peer institutions. The table below sets out how we
performed.
Index
Score1
vs 20222
HSBC vs
benchmark3
Questions that make up the index
Employee
engagement
77%
+3
+7
I am proud to say I work for this company.
Right now, I feel motivated by this organisation to do the best job I can.4
I would recommend this company as a great place to work.
Employee
focus
76%
+4
+4
I generally look forward to my work day.
My work gives me a feeling of personal accomplishment.
My work is challenging and interesting.
Strategy
78%
+3
+5
I have a clear understanding of this company’s strategic objectives.
I am seeing the positive impact of our strategy.
I feel confident about this company’s future.
Change
leadership
76%
0
+4
Leaders in my area set a positive example.
My line manager does a good job of communicating reasons behind important
changes that are made.
Senior leaders in my area communicate openly and honestly about changes to the
business.
Speak up
76%
+1
0
I believe my views are genuinely listened to when I share my opinion.5
I feel able to speak up when I see behaviour which I consider to be wrong.
I can state my opinion without the fear of negative consequences.6
Trust
78%
+1
0
I trust my direct manager.
I trust senior leadership in my area.
Where I work, people are treated fairly.
Career
71%
+3
+6
I feel able to achieve my career objectives at this company.
I believe that we have fair processes for moving/promoting people into new roles.
My line manager actively supports my career development.
Inclusion
78%
+2
+2
I feel a genuine sense of belonging to my team.
I feel able to achieve my career objectives at this company.
I feel able to be myself at work.
I trust my direct manager.
Where I work, people are treated fairly.
I can state my opinion without the fear of negative consequences.6
1 Each index comprises constituent questions, with the average of these questions forming the index score.
2 We revised the questions that comprise some of our indices to ensure the reliability of external benchmark data. New questions were trialled in 2022 so comparisons
are all reported on a like-for-like basis; as such, historical comparison figures differ slightly from those reported last year.
3 We benchmark Snapshot results against a peer group of global financial services institutions, provided by our research partner, Ipsos Karian and Box. Scores for each
question are calculated as the percentage of employees who agree to each statement. For further details of the constituent questions and past results, see the ESG
Data Pack at www.hsbc.com/esg.
4 Previously: I feel valued at this company.
5 Previously: My company is genuine in its commitment to encourage colleagues to speak up.
6 Previously: Where I work, people can state their opinion without fear of negative consequences.
For further details of well-being, see page 82, and for further details of inclusion, see page 76.
Footnote Arrow.jpg
What employees told us
Seven of our eight Snapshot indices
improved in 2023, while our change
leadership index remained static. Our
headline measure of employee engagement
captures how employees feel about HSBC:
whether they are proud to say they work
here, whether they would recommend
working at HSBC, and how motivated they
feel to do their best work. Employee
engagement increased by three percentage
points compared with 2022, and seven
percentage points above the external
financial services benchmark. Our employee
focus index, which measures how
employees feel about their day-to-day work,
increased by four percentage points to put
HSBC four points ahead of the industry
benchmark.
Analysis of the key drivers of our
engagement scores showed that engaged
colleagues are more likely to feel positive
about their career, our strategy and our
leadership. Our free text responses also
showed that training and progression
opportunities was the most cited reason for
recommending HSBC, followed by our
approach to flexible and hybrid working and
the strength of our management.
Negative comments continued to focus
around pay and benefits but were mentioned
less than in 2022. For further details of our
approach to being a great place to work,
including pay transparency, see page 81.
Our Snapshot survey showed that 67% of
employees plan to stay at HSBC for five or
more years, a two percentage point increase
since 2022. This aligned with a drop in
voluntary turnover in 2023 to 9.3%,
compared with 14.1% in 2022, and reflects
trends in the wider employment market.
Results from our listening channels
continued to show that career opportunities
and competitive reward packages remain the
two key drivers behind our ability to attract
and retain talented colleagues.
We are committed to building on our high
levels of engagement and feedback
throughout 2024.
80 HSBC Holdings plc
Being a great place to work
To deliver our purpose, ambition and
strategy we need the best people,
performing at their best. Creating a great
workplace helps us attract, retain and
motivate our colleagues so they can deliver
for our customers.
Underpinning this is our reward strategy,
which we updated in 2022 to create an
environment where the best people want to
work. Our workforce proposition is rooted in
our purpose and values, and the principles of
rewarding colleagues responsibly,
recognising colleagues’ success and
supporting our colleagues to grow.
Rewarding colleagues responsibly
We believe in rewarding our colleagues
responsibly, which means ensuring that our
pay and benefits provide financial security
for all. Our annual Performance and Reward
survey measures several factors, including
how colleagues feel about our reward
proposition. In 2023, seven key performance
indicators related to our year-end review
improved by four or more percentage points,
including a nine percentage point increase in
colleagues who feel they are paid fairly for
the work they do.
As part of our commitment to rewarding
colleagues responsibly, we went beyond
compliance in assessing statutory minimum
wages, to ensure that all colleagues are paid
at least a living wage.
A living wage should be sufficient to cover
an adequate standard of living considering
the cost of goods and services in each
country and territory in which we operate. In
2023, we worked with the Fair Wage
Network, which provided an independent
source of wage levels. As a result, HSBC
achieved accreditation as a global living
wage employer in 2024. We will continue to
review our pay levels to ensure that no
colleague falls below a living wage level.
For further details of our approach to colleague
Footnote Arrow.jpg
remuneration, see page 326.
Increasing social connection in the office
Since the Covid-19 pandemic and the return of colleagues to the office, we identified the need for
changes to improve team cohesion and a sense of belonging among our colleagues in Hong
Kong. To help address, this we created a new type of work and social space at the HSBC Centre
office in Kowloon, Hong Kong.
‘The Hub’ is a flexible informal space that can be adapted to accommodate a range of different
group activities and number of people, from large social events to smaller team training sessions.
It is also designed to be a multi-level and interconnected space, with a central social meeting
point to enhance the sense of community, improve levels of engagement and encourage greater
social connection between colleagues.
Recognising colleagues’ success
We are committed to recognising the
achievements of our colleagues’ success.
Variable pay, which forms part of total
compensation alongside fixed pay, allows us
to recognise the performance and
behaviours of our colleagues.
At the beginning of each year, we ask
colleagues to set goals with support from
their line managers to ensure they are
aligned with the overall Group strategy and
business priorities. As a result, 87% of
colleagues said they have a clear
understanding of what is expected of them
throughout the year.
We expect our people managers to hold
regular performance and development
conversations to review progress,
incorporate feedback and discuss well-being.
In 2023, our Snapshot survey revealed that
81% of colleagues said they had regular
performance conversations with their
manager, while 63% had them at least once
a month, up from 57% in 2022. These
conversations also provide an opportunity for
colleagues to regularly revisit any goals set
to maintain the right level of challenge in
their day-to-day work.
At year-end, employees are rated on both
performance and behaviour. In our Pay and
Benefits survey, 72% of colleagues said their
year-end performance assessment fairly
reflected their performance and 83% agreed
that rating decisions were determined in an
unbiased way, regardless of any protected
characteristics or work patterns. In our
Snapshot survey, 81% of employees said
they receive feedback that helps them
improve their performance, compared with
74% in 2022, and 81% feel motivated to do
the best job they can, up from 78% last year.
We have continued to enhance our ‘At Our
Best’ platform that allows colleagues to
recognise each other’s contributions, by
providing mobile access to encourage real-
time acts of appreciation. In 2023,
colleagues made more than 1.4 million At
Our Best recognitions, an increase of 13%
from 2022.
Managers are encouraged to recognise
colleagues’ service anniversaries every five
years up to 40 years of service. This also
includes the presentation of a special
commemorative HSBC medallion. The At
Our Best platform supports the global
service recognition programme, which in
2023 helped to celebrate more than 30,000
service anniversaries.
Share plans are another way to empower
colleagues to participate in the Group’s
success and to have a share in the rewards.
In 2023, we expanded our global share plan
to include the Philippines, making it available
to 91% of colleagues globally. Our 2020
three-year Sharesave plan, in which 42% of
UK employees took part, matured in
November 2023. The share price at maturity
represented more than double the option
price, providing employees with significant
share price growth. We ran information
webinars, attended by more than 11,000
colleagues, and offered support resources to
help our colleagues understand tax
considerations and the choices available to
them at maturity.
Supporting our colleagues to grow
To help our colleagues to grow personally
and professionally, we are committed to
providing flexibility and choice around how,
when and where they work, supporting their
well-being, and helping them develop skills.
The sections on the next page detail the
ways in which we support our colleagues.
For further details of our approach to skills
and career development, see page 83.
HSBC Holdings plc 81
Being a great place to work continued
Social well-being and flexible working
In 2023, we focused on embedding hybrid
working across the Group and helping
colleagues strike the right balance of office
and remote working.
Our colleagues continue to embrace hybrid
working, with 78% now splitting their time
between home and the workplace,
compared with 58% in 2022. To support
managers and colleagues to continue to find
the right balance between individual
flexibility and social connection, we have
refreshed our training to equip managers
with skills to lead flexible teams. In 2023,
hybrid workers spent approximately 47% of
their time in the workplace, compared with
36% in 2022.
We know that getting the balance right has a
positive effect on our colleagues. Colleagues
who spend around 40% of their time in the
workplace reported the highest positive
sentiment across key employee indices,
including engagement, trust and inclusion.
We track and measure responses from our
Snapshot survey to ensure our broader
approach to flexibility works for our
customers and teams. A total of 81% of
colleagues said they feel a genuine sense of
belonging to their team, a two percentage
point increase from 2022. A new question in
the survey also found that 87% of new
joiners feel they receive the right level of
face-to-face support in order to succeed.
In the same survey, 76% of colleagues said
they are able to integrate their work and
personal life positively, a slight increase
compared with 75% in 2022. To help the
work-life balance of our colleagues, in
Australia, we have introduced 20-weeks
paid, gender-neutral parental leave for when
a child joins their family. Longer periods of
paid parental leave have also been
introduced in Mexico, Singapore, South
Korea, Taiwan and Thailand.
Mental well-being
Supporting the mental health of our
colleagues remains a top priority. Cost-of-
living pressures and global crises continue to
increase mental health challenges in many
countries and territories. Our Snapshot
survey revealed a slight decrease in mental
well-being, with 83% of colleagues rating
their mental health as positive, compared
with 84% in 2022. However, it also found
that 74% of colleagues feel comfortable
talking to their manager about their mental
health, and 77% said they know how to
access mental health support at work. Both
increased one percentage point compared
with 2022.
We have continued to make the meditation
app Headspace and counselling services
available to all colleagues globally.
More than 200,000 colleagues took part in
mental health awareness training as part of
global mandatory training. Our voluntary
mental health education modules have been
completed by 31,000 employees, with
people managers making up 74% of the
completions. Our network of mindfulness
champions, who are specially trained
colleagues who volunteer to run mindfulness
sessions, community events and courses for
the benefit of fellow colleagues, has almost
200 members with representation in 22
countries and territories. In 2023, we held
1,400 mindfulness sessions, a 26% increase
compared with 2022, and these were
attended by 25,000 colleagues.
Physical well-being
The Snapshot survey also revealed an
increase in physical well-being, with 74% of
colleagues rating their physical health as
positive, compared with 71% in 2022.
In February 2023, our Pay and Benefits
survey showed that 69% of colleagues highly
valued the health benefits we offer, and 34%
of colleagues wanted more support with
physical activity and exercise. In response,
we launched a platform called Virgin Pulse,
which incentivises colleagues to set and
track health goals, and to take part in active
challenges. Since launching globally in
November 2023, more than 5,700 colleagues
have downloaded the app and more than 30
activity challenges have been run.
We have continued to provide access to
private medical insurance as well as
telemedicine healthcare services in the
majority of our countries and territories,
covering 98% of permanent employees. In
certain countries and territories, we also
provide on-site medical centres that the
majority of colleagues can access.
Financial well-being
We recognise that financial challenges
remain a concern for colleagues, caused by
increases in the cost of living globally. Our
Snapshot survey revealed a slight increase in
financial well-being, with 61% of colleagues
reporting positively, compared with 60% in
2022. Just over half (56%) of colleagues said
they have at least three months of essential
outgoings saved, the same as in 2022.
In 2023, we ran campaigns in all regions to
raise awareness of financial education and
tools, and more than 1,000 colleagues
attended our seminars on psychology and
spending habits. We continue to offer
retirement or longer-term savings plans to
95% of permanent employees, and our life
insurance cover is available to 99.9% of
colleagues to help provide financial security
for their families.
Awards
CCLA Global 100 Mental Health Benchmark
–Ranked number 1 global employer for the
second consecutive year
Prioritising benefits that
matter most to
colleagues
For a second year our Pay and Benefits
survey showed that 59% of colleagues
feel their benefits meet their needs and
those of their family ‘well’. To improve
sentiment, we have focused on
enhancing benefits in areas that
colleagues tell us are most important
including health, saving for the future and
time off.
Cancer checks were made available to all
UK colleagues, as early detection can
result in higher survival rates. In the US,
we have enhanced our fertility, adoption
and surrogacy benefits to support
colleagues starting a family. We also
expanded our gender dysphoria benefits
for LGBTQ+ colleagues in the UK.
Carer leave of five paid working days has
also been introduced in the UAE, Egypt,
Algeria, Bahrain, Kuwait, Qatar, Türkiye,
Saudi Arabia and Mexico.
To help employees plan for their
retirement, we became the first
international bank to launch a defined
contribution pension plan in Vietnam. We
also implemented a new defined
contribution plan in Guernsey and
enhanced our retirement savings plan in
Egypt, to support employees to plan for
retirement with the benefit of employer
contributions.
82 HSBC Holdings plc
Developing skills, careers and opportunities
Learning and skills development
We aim to build a dynamic environment
where our colleagues can develop skills and
undertake experiences that help them fulfil
their potential. Our approach helps us meet
our key strategic priorities and support our
colleagues to achieve their career goals.
Our learning and skills platforms
We continue to evolve the opportunities to
learn and develop at HSBC. We use a range
of skill development platforms, learning
courses and resources to help colleagues
take ownership of their development and
career, including:
–HSBC University, our home for learning
and skills accessed online and through a
network of training centres, where
learning is organised through technical
academies on topics of strategic
importance;
–Degreed, our learning experience platform
that provides access to internal and
external learning content and courses,
where colleagues can share, collaborate
and learn with individuals and in groups
via learning pathways;
–Talent Marketplace, our online platform
that uses artificial intelligence (‘AI’) to
match colleagues interested in developing
specific skills or career goals with
opportunities that exist throughout our
global network; and
–Careers at HSBC, which enables all
employees to set alerts and search for
internal career opportunities.
Our learning fundamentals
We expect all colleagues, regardless of their
contract type, to complete global mandatory
training each year. This training plays a
critical role in shaping our culture, ensuring
a focus on the issues that are fundamental
to our work, such as sustainability, financial
crime risk and our intolerance of bullying
and harassment. New joiners attend our
Global Discovery programme, which is
designed to build their knowledge of the
organisation and engage with our purpose,
values and strategy.
As the risks and opportunities our business
faces change, our global academies adapt
to offer general and targeted development.
Our Risk Academy provides learning for
every employee in traditional areas of risk
management such as financial crime risk,
and also offers more specific development
for those in senior leadership, high-risk roles
and learning for colleagues on emerging
issues such as ESG risk, terrorist financing,
proliferation financing and sanctions.
We have continued to deliver targeted skills
programmes, including our Vision 27
programme that aims to ensure we are
attracting, developing and retaining critical
technology talent. We have also expanded
our Accelerating Wealth Programme, which
prioritises hiring for transferable skills rather
than experience. For further details of how
we are achieving our wealth goals in Asia,
see page 84.
Building skills with Talent Marketplace
Our people capability teams partner with
businesses and functions to identify the key
skills we need now and in the future. We
also continue to support colleagues to
develop new skills that achieve their career
aspirations.
We have helped colleagues identify
opportunities to enhance their skills through
our Talent Marketplace. More than 38,000
colleagues have created a profile on the
platform to help identify their existing skills
and those they would like to develop. In
2023, it matched colleagues to a number of
projects and networking opportunities
unlocking over 123,000 hours of skills
development.
Projects centred around Cloud computing,
data analytics, software development and
project management have created
opportunities for colleagues to work on in-
demand skills.
Training at HSBC
In 2023, we continued to enable colleagues
to learn via a range of channels including
digital and on-the-job learning. This is
reflected in a reduction in overall learning
hours as colleagues access different
learning channels.
5.3 million
Training hours by our colleagues in 2023.
(2022: 6.3 million)
23.9 hours
Training hours per FTE in 2023.                       
(2022: 28.8 hours)
Identifying and retaining
future talent
The need for talent is greater than ever. In
2023, a further 9,000 managers
completed our compulsory inclusive
hiring training, promoting cognitive
awareness of bias. Our targeted talent
programmes and enterprise-wide
solutions are designed to support
employees transitioning to more complex
roles, and provide wider career
opportunities and career growth.
Our recruitment programmes are a key
enabler of achieving our broader diversity
goals (see page 76). In 2023, we
welcomed more than 720 graduates and
651 interns to the organisation. The
graduate intake represented 48
nationalities, over 25 ethnic backgrounds,
and 51% were women. In 2023, we
continued to broaden our emerging talent
programmes beyond traditional graduate
and internship programmes, developing
early access schemes for those in school
and first year of university, as well as
expanding our apprenticeship scheme
(see page 84).
We continually refresh all our talent
programmes to ensure they remain
aligned to HSBC’s strategic priorities. Our
key programmes include:
–Accelerating Female Leaders, which
has been re-designed in partnership
with Cranfield School of Management.
This programme supports female
colleagues with learning materials,
coaching and senior sponsorship to
help them prepare for leadership roles;
and
–Accelerating into Leadership, which
aims to improve role mobility and
retention, and supports colleagues
identified as having the capacity,
interest and drive to succeed in more
complex roles.
HSBC Holdings plc 83
Energising our colleagues for growth
We aspire to offer colleagues the opportunity
to develop their skills while ensuring we
build a pipeline of talent to support our
strategic priorities. It is vital that we
demonstrate the right leadership and create
the right environment to energise our
colleagues for growth.
Skilling the transition to net zero
The Sustainability Academy was launched in
2022 to support our net zero ambitions. As
the academy has evolved we have shifted
the focus from knowledge building to
capability building across key colleague
groups who are supporting customers on
their transition to net zero. In 2023, we
applied four main activities to support this
effort:
–supplying on-demand learning modules
based on role, region and client-base for
colleagues who support customers with
core transition activities;
–creating advanced workshops across our
global businesses and functions to build
colleagues’ knowledge and develop
practical skills to achieve business
outcomes;
–encouraging external certifications and
qualifications, where required, to deepen
colleagues’ expertise; and
–designing a 16-week sustainability
leadership programme, in partnership with
Imperial College London, which combines
education on core sustainability concepts
with change management, purpose and
leadership principles. In 2023, the
programme was completed by more than
170 senior leaders. Additional net zero
learning opportunities were also provided
to the Board and 100 of our most senior
leaders.
We need to build strong leadership and
develop our colleagues’ capabilities to
navigate the transition to net zero and
achieve our climate goals. In 2023, we
worked with our internal experts from the
Sustainability Centre of Excellence to provide
more advanced skills training in key
transition areas such as energy transition,
climate technology and financed emissions,
alongside other core sustainability topics
such as biodiversity.
Supporting our Asia wealth strategy
Our ambition is to become the preferred
international financial partner for clients, and
the expansion of our wealth management
services particularly in Asia, sits at the heart
of this ambition.
To help achieve this, we have continued to
expand our Accelerating Wealth Programme,
which offers a skills-based development plan
for colleagues who are looking to pursue a
career as a relationship manager in wealth
management. The programme enables
HSBC to develop talent from within and hire
talented people with different career
backgrounds from outside the business. In
2023, we extended the programme to
external applicants in Hong Kong and to
internal applicants in mainland China, India
and Singapore. We will continue to add new
countries and territories in 2024 to provide a
sustainable hiring channel for front-line roles.
Technology transformation
We are committed to delivering better
customer outcomes through digital
transformation. Our technology
transformation skills programme aims to
ensure we attract, develop and retain the
skilled talent we need to execute our
strategy.
In 2023, our technology colleagues
completed more than 800,000 hours of
learning and gained over 950 certifications in
software development, cyber, AI, data
processes, Cloud computing and app
development, among others. Our new
Principle Engineer and Principle Architecture
accelerator programmes have equipped
colleagues with advanced technical
knowledge and skills, enhancing their ability
to innovate in their roles.
Leadership development
We continue to strengthen the training and
development opportunities we offer our
leaders at all levels of the Group, to ensure
they are equipped with the clarity, alignment
and capability with our goals to drive the
performance of our organisation. In 2023, we
significantly increased investment in the
development of our leadership population.
For senior leaders, our Executive and
Managing Director Leadership Programmes
helped bring our purpose and strategy to life
through innovative flagship courses,
masterclasses and strategy briefing sessions.
We recognise the importance of people
managers in shaping the experience of our
colleagues. In 2023, we re-designed our
People Management Excellence programme
to better support managers at all levels. The
face-to-face and virtual training includes a
focus on the role and expectations of
managers, how to design and organise work,
and how to nurture a productive team
environment. In 2023, over 3,800 colleagues
attended this programme.
Supporting UK emerging talent
We continue to extend our emerging talent programmes beyond traditional graduate and
internship schemes to support our socio-economic diversity ambitions (see page 78). In 2023, we
awarded more than 100 apprenticeships to external and internal applicants. Our degree
apprenticeship programmes provided an alternative to the traditional university route for 47
individuals, and we launched a disability apprenticeship programme for our Marketing function.
We have also offered over 460 structured work placements to secondary school students and
continued to support the #merkybook financial literacy programme for young people.
HSBC has funded 30 University of Cambridge scholarships for Black and socially disadvantaged
students through our Stormzy partnership, and will invest a further £2m to achieve 60
scholarships by 2026 to support underrepresented groups. In 2023, Black heritage representation
in our graduate and summer internship programmes was 10% of job applicants and 11% of new
hires.
84 HSBC Holdings plc
Building customer inclusion and resilience
Our approach to customer inclusion and resilience
We believe that financial services, when
accessible and fair, can reduce inequality
and help more people access opportunities.
We are playing an active role in opening up a
world of opportunity for individuals by
supporting their financial well-being, and
removing the different barriers that people
can face in accessing financial services.
Access to products and services
We provide innovative solutions to help
improve customer access to products and
services. HSBC UK and HSBC Hong Kong
provide no-cost accounts for customers who
do not qualify for a standard account or who
might need additional support due to social
or financial vulnerability. In 2023, HSBC
Egypt ran a campaign that allowed new
customers to open bank accounts with no
minimum balance required and no account
opening fees. In the UK, we continue to
make our branches more accessible by
providing ‘safe spaces’ for domestic abuse
victims, where they can seek specialist
support and advice. In 2023, we also
launched a specialist training programme to
raise awareness among our colleagues of
modern slavery and human trafficking. This
has been completed by more than 5,300 UK
colleagues. In addition, our strategic
partnership with housing and homelessness
charity Shelter UK aims to support those in
crisis and build financial resilience solutions
to help prevent homelessness in the future.
Making banking accessible
Number of no-cost accounts held for
customers who do not qualify for a standard
account or who might need additional
support due to social or financial
vulnerability.
28587302326962
Supporting financial knowledge and
education
We continue to invest in financial education
content and features across different
channels to help customers, colleagues and
communities be confident users of financial
services.
Since 2020, we received over 6.6 million
unique visitors to our global digital financial
education content. We continue to help
customers expand their financial capabilities
through our personal financial management
tools. In 2023, HSBC UK launched new
capabilities on our app enabling customers
to manage their budgets, see their spending
insights and view financial fitness content.
This new tab on the app has attracted over
4.5 million unique visitors. We also added
investment pots and goals to help motivate
customers to save for the future.
In 2022, we launched our ‘Well+’ reward
programme on the HSBC HK Mobile Banking
app to help customers improve the health of
their body, money and mind. Reward points
are earned by completing a series of simple
activities, such as building their financial
knowledge. In 2023, we added new
capabilities, such as bonus badges, and
more than 212,000 customers have engaged
with Well+ in Hong Kong since launch.
To help customers understand complex
products and make informed decisions,
HSBC Life UK launched a series of quick
video guides to explain the key benefits,
exclusions and underwriting process of
critical illness cover.
To support Hong Kong customers with
special educational needs, we launched
simple step-by-step guides, which were
shared with our partners, to explain how to
access basic banking services.
We also support programmes that help
expand the financial knowledge of children
and young people to ensure future resilience.
HSBC Egypt partnered with Injaz Al-Arab, a
member of JA Worldwide, to deliver its
‘building a financially capable generation’
programme to students in seven schools in
Cairo. In Mexico, we created a podcast,
targeted at developing the financial
capabilities of young people with each
episode covering a specific theme, to
enhance their basic financial knowledge.
We continued to build on our financial
literacy programmes for young people in the
UK, with the launch of the first financial
capability skills module for the Duke of
Edinburgh’s Award.
Creating an inclusive banking
experience
We aim to ensure that our banking products
and services are designed to be accessible
for customers experiencing either temporary
or permanent challenging circumstances,
such as disability, impairment or a major life
event.
A simplified version of the HSBC HK Mobile
Banking app aims to continue to enhance
digital inclusion for all, including seniors. The
app is the first of its kind among Hong Kong
banks and has attracted more than 477,000
unique users since launch.
We are committed to improving accessibility
experiences across our digital channels and
continuously review our browser-based
websites in 23 markets, and our mobile
banking services in 18 markets, against the
WCAG 2.0 AA standards. We also share our
digital accessibility expertise with partners,
companies and colleagues. More than
10,000 people and 66 companies have taken
advantage of our specialised training
programmes. To further share our best
practice externally, HSBC sponsored and
hosted AbilityNet’s Techshare Pro event in
our Group head office in London. Our work
on digital accessibility was recognised with
11 awards in 2023.
Support for customers extends beyond our
digital channels and we recognise that not all
disabilities are visible or immediately obvious
to others. We have expanded our
commitment to the Hidden Disabilities
Sunflower Lanyard Scheme, rolling it out
across the UK, Hong Kong, the Channel
Islands and Australia. The lanyard indicates
that an individual may need a little more
help, support or time. HSBC UK is also
making use of virtual reality tools, such as
EBOX (Empathy Box), to give colleagues the
opportunity to experience vulnerability from
the perspective of the customer.
In 2023, HSBC UK was awarded the UK
Construction Industry Council’s Inclusive
Environments Recognition at the
Organisational Level certification. This
recognises the strong organisation and
design processes HSBC has put in place to
support accessible and inclusive design.
Supporting women
HSBC UAE and HSBC Singapore have
collaborated with digital financial education
provider Sophia, to create a programme
designed specifically to help female
customers build their financial knowledge. It
covers a range of topics, including
budgeting, ways to invest and investment
strategies.
In Mexico, our Mujeres Al Mundo
programme continues to support women as
customers through products, services,
education and networking. In 2023, we also
supported female-owned businesses through
our $1bn Female Entrepreneur Fund,
alongside hosting bespoke Pitch Day events
for a number of female entrepreneurs
seeking investment.
HSBC Holdings plc 85
Engaging with our communities
Building a more inclusive and resilient world
We have a long-standing commitment to
support the communities in which we
operate. We aim to empower people and
communities to develop the skills and
knowledge needed to thrive in the future.
Through the global reach of our charitable
partnerships we bring together diverse
people, ideas and perspectives that help us
open up opportunities and build a more
inclusive world.
Building community and future skills
We work with charity partners to initiate
programmes that help people and
communities respond to opportunities and
challenges as global economies transition
towards a low-carbon future. In 2023, these
included:
–launching a three-year partnership with the
British Council in Brazil, Mexico, India,
Indonesia and Vietnam, and extending The
Prince’s Trust programmes in Australia,
Canada, India and Malaysia, to help young,
marginalised people develop the skills they
need to thrive in the green economy;
–partnering with the Guangdong Lvya Rural
Women Development Foundation in China
to help equip women in remote mountain
areas with sustainable farming skills; and
–partnering with the Ghabbour Foundation
in Egypt to help provide technicians with
specialist skills training to work in the
electric vehicle market.
We also work with our charity partners
around the world to strengthen the resilience
of disadvantaged communities:
–In Hong Kong, we announced a three-year
partnership with Food Angel to increase its
capacity to provide meals to
underprivileged elderly groups.
–In the US, we expanded our workforce
development programme with Feeding
America to support communities to find
meaningful employment, especially
mothers and Black, Indigenous People of
Colour women.
–In the UK, we announced a three-year
partnership with Shelter to help develop
the homeless charity’s training, guidance,
tools and support within local communities
to help build financial resilience.
–In France, we continued our work with
Article 1 to help young people from
deprived communities succeed in higher
education through mentoring
programmes.
–We supported disaster relief agency
response to humanitarian needs, including
those in Israel, Libya, Morocco, the
Palestinian territories, Türkiye, and the
Hawaiian island of Maui.
Community engagement and
volunteering
We offer paid volunteering days, and
encourage our people to offer their time,
skills and knowledge to causes within their
communities. In 2023, our colleagues gave
over 181,800 hours to community activities
during work hours.
Awards
–National CSR Fund 2023 UAE - Platinum
Impact Seal
–Charitable giving by HSBC in China
received recognition from the China
Philanthropy Times
Charitable giving in 2023 (%)
162727720945565
Total cash giving towards charitable
programmes
$107.3m
Hours volunteered during work time
>181,800
People projected to be reached through
our Future Skills programme
1.25m
Advancing financing and digital literacy
Over the past five years, HSBC worked with three microfinance networks to advance financial
and digital literacy of women from unbanked and underbanked communities in India. The
programme has engaged with more than 550,000 women to build awareness and understanding
of digital payment platforms, and enhance their ability to access banking services, such as
savings, credit and insurance, as well as government welfare schemes. By the end of 2023,
56,000 women had undertaken loan repayments worth $521,000 via digital channels. Insights
from the initiative will be shared with financial institutions and the National Payment Corporation
of India, set up by the banking regulator to oversee retail payments and settlement systems in
India, to increase unbanked households’ access to financial services and products.
86 HSBC Holdings plc
Governance
Acting responsibly
We remain committed to high standards of governance.
We work alongside our regulators and recognise our
contribution to building healthy and sustainable societies.
At a glance
Our relationship
We act on our responsibility to run our
business in a way that upholds high
standards of corporate governance.
Customer experience is at the heart of how
we operate. It is imperative that we treat our
customers well, that we listen, and that we
act to resolve complaints quickly and fairly.
We measure customer satisfaction through
net promoter scores across each of our
global businesses, listen carefully to
customer feedback so we know where we
need to improve, and take steps to do this.
Our customer satisfaction performance
improved in many markets in which we
operate, although we still have work to do to
improve our rank position against
competitors.
We are committed to working with our
regulators to manage the safety of the
financial system, adhering to the spirit and
the letter of the rules and regulations
governing our industry.
We strive to meet our responsibilities to
society, including through being transparent
in our approach to paying taxes. We also
seek to ensure we respect global standards
on human rights in our workplace and our
supply chains, and continually work to
improve our compliance management
capabilities.
For further details of our corporate governance,
Footnote Arrow.jpg
see our corporate governance report on page 274.
In this section
Setting high
standards of
governance
How ESG is governed
We expect that our approach to ESG governance is likely to continue to
develop, in line with our evolving approach to ESG matters and
stakeholder expectations.
Page 88
Footnote Arrow.jpg
Human rights
Our respect for human
rights
We have continued to raise awareness and develop our understanding of
our salient human rights issues.
Page 89
Footnote Arrow.jpg
Customer
experience
Customer satisfaction
While we are ranked in the top three banks against our competitors in
58% of our key markets across WPB and CMB, we still have work to do
to improve our rank position against competitors
Page 91
Footnote Arrow.jpg
How we listen
We aim to be open and transparent in how we track, record and manage
complaints.
Page 92
Footnote Arrow.jpg
Integrity, conduct
and fairness
Safeguarding the
financial system
We have continued our efforts to combat financial crime and reduce its
impact on our organisation, customers and communities that we serve.
Page 94
Footnote Arrow.jpg
Whistleblowing
Our global whistleblowing channel, HSBC Confidential, allows our
colleagues and other stakeholders to raise concerns confidentially.
Page 94
Footnote Arrow.jpg
A responsible approach to
tax
We seek to pay our fair share of tax in all jurisdictions in which we
operate.
Page 95
Footnote Arrow.jpg
Conduct: Our product
responsibilities
Our conduct approach guides us to do the right thing and to focus on the
impact we have on our customers and the geographies in which we
operate.
Page 96
Footnote Arrow.jpg
Our approach with
our suppliers
We require suppliers to meet our third-party risk compliance standards
and we assess them to identify any financial stability concerns.
Page 96
Footnote Arrow.jpg
Safeguarding data
Data privacy
We are committed to protecting and respecting the data we hold and
process, in accordance with the laws and regulations of the markets in
which we operate.
Page 97
Footnote Arrow.jpg
Cybersecurity
We invest in our business and technical controls to help prevent, detect
and mitigate cyber threats.
Page 98
Footnote Arrow.jpg
HSBC Holdings plc 87
Setting high standards of governance TCFD
How ESG is governed
The Board takes overall responsibility for
ESG strategy, overseeing executive
management in developing the approach,
execution and associated reporting. Progress
against our ESG ambitions is reviewed
through Board discussion and review of key
topics such as updates on customer
experience and employee sentiment. The
Board is regularly provided with specific
updates on ESG matters, including the
financed emissions sector targets, human
rights and employee well-being. Board
members receive ESG-related training as
part of their induction and ongoing
development, and seek out further
opportunities to build their skills and
experience in this area. For further details of
Board members’ ESG skills and experience,
see page 275. For further details of their
induction and training in 2023, see page 289.
Given the wide-ranging remit of ESG
matters, the governance activities are
managed through a combination of specialist
governance infrastructure and regular
meetings and committees, where
appropriate. These include the Group
Disclosure and Controls Committee and
Group Audit Committee, which provide
oversight for the scope and content of ESG
disclosures, and the Group People
Committee, which provides oversight
support for the Group’s approach to
performance management. For some areas,
such as climate where our approach is more
advanced, dedicated governance activities
exist to support the wide range of activities,
including climate risk management in the
Environmental Risk Oversight Forum.
The Group Chief Risk and Compliance Officer
and the chief risk officers of our PRA-
regulated businesses are the senior
managers responsible for climate financial
risks under the UK Senior Managers Regime.
Climate risks are considered in the Group
Risk Management Meeting and the Group
Risk Committee, with scheduled updates
provided, as well as detailed reviews of
material matters, such as climate-related
stress testing exercises.
The diagram on the right provides an
illustration of our ESG governance process,
including how the Board’s strategy on
climate is cascaded and implemented
throughout the organisation. It identifies
examples of forums that manage both
climate-related opportunities and risks, along
with their responsibilities and the responsible
chair. The structure of the process is similar
for the escalation of problems, with issues
either resolved in a given forum or raised to
the appropriate level of governance with
appropriate scope and authority.
In 2023, we enhanced our ESG governance
with the establishment of a new
Sustainability Execution Committee, which
focuses on defining and measuring the
success of our climate ambition, and
developing commercial opportunities that
How HSBC’s climate
strategy is cascaded
Opportunities
Risks
Board level governance
Group Executive
Committee
Group Audit Committee
Group Risk Committee
Management level governance
ESG Committee
Has oversight of ESG strategy, policy,
material commitments and external
disclosure. Oversees and monitors
progress against ESG strategy, policies,
plans, targets, commitments and
execution processes. Reports to the
Board of progress on the commitments,
deliverables and targets under the
sustainability execution programme.
Co-Chairs: Group Chief Financial
Officer, and Group Chief Sustainability
Officer
Group Risk Management Meeting
Oversees the enterprise-wide management
of all risks, including updates relating to the
Group’s climate risk profile and risk appetite,
top and emerging climate risks, and key
climate initiatives.
Chair: Group Chief Risk and Compliance
Officer
Supporting governance
Sustainability Execution Committee
Has oversight of environmental strategy,
including commercial execution and
operationalisation through the
sustainability execution programme.
This included financed and facilitated
emissions targets and commitments,
implementation and execution of
transition plans, and delivery of $750bn
to $1tn sustainable finance and
investment by 2030.
Chair: Group Head of Commercial
Banking, and Group Chief
Sustainability Officer
Environmental Risk Oversight Forum
Oversees risk activities relating to climate
and sustainability risk management,
including the transition and physical risks
from climate change. Equivalent forums have
been established at a regional level, where
appropriate.
Chair: Senior adviser, ESG Risk
Regional, global business and global functions
Examples of ESG-related management governance
The following governance bodies support management in its delivery of ESG activities.
Digital Business Services
Executive Committee
Oversees the global delivery
of ESG activities within our
own operations, services
and technology elements of
our strategy.
Chair: Group Chief
Operating Officer
Group Reputational Risk
Committee
Provides recommendations
and advice on significant
reputational risk matters
with impact across the
Group.
Chair: Group Chief Risk and
Compliance Officer
Human Rights Steering
Committee
Oversees the Group’s
evolving approach to
human rights and provides
enhanced governance.
Chair: Group Chief Risk and
Compliance Officer
support it through the sustainability
execution programme.
We expect that our approach to ESG
governance is likely to continue to develop,
in line with our evolving approach to ESG
matters and stakeholder expectations.
88 HSBC Holdings plc
Human rights
Our respect for human rights
As set out in our Human Rights Statement,
we recognise the role of business in
respecting human rights. Our approach is
guided by the UN Guiding Principles on
Business and Human Rights (‘UNGPs’) and
the OECD Guidelines for Multinational
Enterprises on Responsible Business
Conduct.
Our salient human rights issues
We continue to raise awareness and develop
our understanding of our salient human
rights issues. These are the human rights at
risk of the most severe negative impact
through our business activities and
relationships.
An extensive review of our salient human
rights issues conducted in 2022 identified
five human rights risks inherent to HSBC’s
business globally, and five types of activity
through which such risks might arise. These
are represented in the adjacent table.
In 2023, building on this assessment, we
provided practical guidance and training,
where relevant, to our colleagues across the
Group on how to identify and manage
human rights risk.
We are now focusing on translating this into
risk management enhancements in two key
areas of activity. These are the services we
provide to business customers and the
goods and services we buy from third
parties.
Managing risks to human rights
In 2023, we continued the process of
adapting our risk management procedures to
reflect what we learned from our work on
salient human rights issues and related
guidance.
We continued to embed and build on the
Sustainable Procurement Mandatory
Procedure, which sets out the minimum
sustainability requirements for procurement
activity.  This included enhanced procedures
for human rights risk identification through
the introduction of a human rights residual
risk questionnaire for suppliers as part of our
global onboarding assessment process, and
human rights supplier audit pilots in our
Asia-Pacific and Latin America regions to
assess the potential need for further supplier
audits in the future.
New approaches to identifying and
managing human rights risk in respect of our
business customers have also been piloted.
These included screening for indicators of
potential negative impacts on people,
including media monitoring and other
relevant third-party data.
Our salient human rights issues
Illustration of HSBC Group’s inherent human rights risks mapped to business activities.
Inherent human rights risks
HSBC activities
Employer
Buyer
Provider of products
and services
Investor1
Personal
customers
Business
customers
Right to decent
work
Freedom from
forced labour
u
u
u
Just and
favourable
conditions of work
u
u
u
u
Right to health
and safety at work
u
u
u
u
u
Right to equality and freedom from
discrimination
u
u
u
u
u
Right to privacy
u
u
u
Cultural and land rights
u
u
u
Right to dignity and justice
u
u
u
u
u
1 Investor includes our activities in HSBC Asset Management.
We continued to develop our in-house
capability on human rights with the launch of
further online resources for all staff and
bespoke human rights training for colleagues
in key roles, including those managing
relationships with suppliers, and those with
responsibility for overseeing risk
management processes.
The actions we are taking to address these
salient human rights issues are consistent
with our values and will help us to meet our
commitments on diversity and inclusion, and
those we have made under the UN Global
Compact and WEF metrics on risk for
incidents of child, forced or compulsory
labour.
For further details of the actions taken to respect
Footnote Arrow.jpg
the right to decent work, see our 2023 Annual
Statement under the UK Modern Slavery Act at
www.hsbc.com/modernslaveryact.
For further details of the actions taken to respect
Footnote Arrow.jpg
the right to equality and freedom from
discrimination, see ’Our approach to diversity and
inclusion’ on page 76.
Sustainability risk policies
Some of our business customers operate in
sectors where the risk of adverse human
rights impact is high. Our sustainability risk
policies for agricultural commodities, energy,
forestry, mining and metals consider human
rights issues such as forced labour, harmful
or exploitative child labour and land rights.
They also consider the rights of indigenous
peoples such as ‘free prior and informed
consent’, workers’ rights, and the health and
safety of communities.
Through our membership of international
certification schemes such as the Forestry
Stewardship Council, the Roundtable on
Sustainable Palm Oil and the Equator
Principles, we support standards aimed at
respecting human rights.
Our sustainability risk policies are reviewed
periodically to ensure they reflect our
priorities.
For further details, see our sustainability risk
Footnote Arrow.jpg
policies at www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/sustainability-
risk.
Financial crime controls
The risk of us causing, contributing or being
linked to adverse human rights impacts is
also mitigated by our financial crime risk
framework, which includes our global
policies and associated controls.
For further details of how we fight financial crime,
Footnote Arrow.jpg
see www.hsbc.com/who-we-are/esg-and-
responsible-business/fighting-financial-crime.
HSBC Holdings plc 89
Our respect for human rights continued
Driving change
We continued to participate in industry
forums, including the Thun Group of Banks,
which is an informal group that seeks to
promote understanding of the UNGPs within
the sector, and the UN Global Compact
Human Rights Working Group.
HSBC has been a member of the Mekong
Club since 2016. We are a participant of its
monthly financial services working group,
and we use its informative typological
toolkits, infographics, and other multimedia
resources covering current and emerging
issues. Our Compliance teams regularly
collaborate and engage with the Mekong
Club in designing Group-wide knowledge
sharing and training sessions.
Investments
Since 2022, HSBC Asset Management has
published an annual Global Stewardship Plan
outlining its approach to engagement,
prioritisation of investee companies,
objective-setting and escalation procedures.
The plan also highlights its thematic priorities
including human rights.
HSBC Asset Management recognises
collaborative engagement as a tool to
promote change. It participates in investor-
led joint engagement initiatives where it
believes these can have a positive influence.
It is a signatory to the Principles for
Responsible Investment Advance initiative to
promote active stewardship on human rights
and social issues. It has also actively
contributed to other sector-specific
initiatives, including engaging with
technology firms on digital rights and
responsible AI, and working with ESG data
providers to promote higher quality human
rights data set.
HSBC Asset Management has also
incorporated human rights and modern
slavery considerations into its Global Voting
Guidelines. This helps to identify non-
compliance with UN Global Compact
principles, as well as a company’s
competency in human rights management
and disclosures. Where a company falls
below expectations, HSBC Asset
Management may vote against the re-
election of the board chair or relevant board
director.
As a signatory to the Net Zero Asset
Management Initiative, HSBC Asset
Management is taking steps to reduce the
carbon exposure of its portfolios and engage
with issuers on their climate strategies. It
also recognises the impact that the climate
transition can have on workers,
communities, consumers and other
stakeholders, and has published its
perspectives on a just transition.
For the Global Stewardship Plan, see
Footnote Arrow.jpg
www.assetmanagement.hsbc.co.uk/-/media/files/
attachments/uk/policies/stewardship-plan-uk.pdf.
For further details of the Net Zero Asset
Footnote Arrow.jpg
Management Initiative, see
www.assetmanagement.hsbc.co.uk/en/institutional-
investor/about-us/road-to-net-zero/a-transition-for-
everyone.
Monitoring effectiveness
Metric
2023
2022
Contracted suppliers who either confirmed adherence to the code of
conduct or provided their own alternative that was accepted by our Global
Procurement function
95%
93%
Employees who have received training on human rights
8,176
520
Votes by HSBC Asset Management against management for reasons
including human rights1
213
87
1 The figure represents the number of resolutions at investee company shareholder meetings (including AGMs)
where votes were cast against management for reasons related to human rights.
Supporting those impacted and those
potentially at risk
We continued to expand our Survivor Bank
programme, which has now supported over
3,000 survivors of modern slavery and
human trafficking in the UK, and is a model
for making financial services more accessible
to vulnerable communities worldwide.
We built on this experience in developing
access to banking services for customers
with no fixed abode in the UK and in Hong
Kong, providing over 5,700 accounts under
these programmes.
For further details of our work to support
Footnote Arrow.jpg
vulnerable communities, see page 86.
Effectiveness
The table below includes some indicative
metrics we use to measure year-on-year
continual improvement to our human rights
processes.
For further diversity and inclusion metrics, see
Footnote Arrow.jpg
page 76 in this ESG review, as well as Section 4 of
the 2023 Annual Statement under the UK Modern
Slavery Act, which is available at www.hsbc.com/
who-we-are/esg-and-responsible-business/modern-
slavery-act.
Working for a just transition
Just Energy Transition Partnerships are becoming increasingly popular bringing key stakeholders
together to enable a clean, fair energy transition in emerging economies that rely heavily on coal.
Essentially, they are multilateral financial agreements aimed at accelerating the phase-out of fossil fuels,
in a way that addresses the social consequences of doing so.
For further details on HSBC’s role in Just Energy Transition Partnerships with Indonesia and Vietnam,
see www.hsbc.com/news-and-views/views/hsbc-views/jetps-powering-a-faster-energy-transition.
Read more on Just Energy Transition Partnerships on page 68 of this ESG Review.
90 HSBC Holdings plc
Customer experience
We remain committed to improving
customers’ experiences. In 2023, we
gathered feedback from over one million
customers across our three global
businesses to help us understand our
strengths and the areas we need to focus on.
We were ranked among the top three banks
against our competitors in 58% of our six key
markets across WPB and CMB1. This was
lower than in 2022 when we were ranked
among the top three banks against our
competitors in 66% of our key markets.
Customer satisfaction
Listening to drive improvement
We have continued to embed our feedback
system so we can better listen, learn and act
on our customers’ feedback. We use the net
promoter score (‘NPS’) to provide a
consistent measure of our performance. NPS
is measured by subtracting the percentage
of ‘detractors’ from the percentage of
‘promoters’. ‘Detractors’ are customers who
provide a score of 0 to 6, and ‘promoters’ are
customers who provide a score of 9 to 10 to
the question: ‘On a scale on 0 to 10, how
likely is it that you would recommend HSBC
to a friend or colleague’.
We run studies that allow us to benchmark
ourselves against other banks. We try to
make it as easy as possible for customers to
give us feedback, accelerating our use of
digital real-time surveys to capture insight.
By sharing this and other feedback with our
front-line teams, and allowing them to
respond directly to customers, we are
improving how we address issues and
realise opportunities.
In 2023, we launched the CMB Customer
Impact Forum, a dedicated global forum set
up to provide oversight of our business and
corporate customers’ experiences and
promote continuous improvement. This,
alongside our WPB ‘Customer in the room’
programme launched in 2022, helps ensure
we use feedback in all aspects of how we
run our business and prioritise initiatives that
matter most to our customers.
How we fared
In WPB, our NPS increased in four of our six
key markets, which were Hong Kong,
Mexico, India and Singapore. Our NPS in the
UK declined slightly, largely among our mass
affluent customers. In Hong Kong, we
remained first overall against our
competitors, driven by our mass affluent
customers. In India we ranked in first place,
driven by increased digitalisation. We
introduced digital self-service solutions for
updating customer details and downloading
key documents, and digitised our
onboarding process. We were also a top
three bank in mainland China, based on 2022
data (see footnote 3 in the adjacent table).
In our private bank, our global NPS increased
to 42 points, compared with 25 points in
2022. This was largely due to increased
customer satisfaction in Asia, with improved
scores in Hong Kong, Singapore, Taiwan and
mainland China. This was driven by
relationship manager engagement and
enhancements to our digital services.
In CMB, we were ranked among the top
three banks against our competitors in four
of our six key markets. We ranked first in
Hong Kong and as a top three bank in
mainland China, Singapore and Mexico. In
India and the UK, we were ranked outside
the top three. Our NPS rank improved in the
UK, driven by our business banking
customers and our top three ranking among
UK corporate customers. Our NPS declined
slightly among our mid-market enterprise
customers.
In GBM, we had one of the highest NPS
scores in the market against our
competitors, including the quality of our
digital trade finance platforms and for
satisfaction with our digital capabilities.
Number of markets in top three or improving
rank 1, 2
2023
WPB 3
3 out of 6
CMB
5 out of 6
1 The six markets comprise: the UK, Hong Kong,
Mexico, mainland China, India and Singapore. Rank
positions are provided using data gathered through
third-party research agencies.
2. We benchmark our NPS against our key
competitors to create a rank position in each market.
This table is based is on the number of markets
where we are in the top three or have improved rank
from the previous year.
3 Our WPB NPS ranking in mainland China is based
on 2022 results. Due to data integrity challenges, we
are unable to produce a 2023 ranking. The next
mainland China results will be in 2024.
Acting on feedback
We have continued to focus on developing our products and services, and enhancing our digital capabilities to improve customer
experience.
In WPB, we redesigned our international products and services to make it quicker and easier to bank internationally. This involved the
launch of six products and services across 10 international markets. International customers can open an international account digitally
pre-departure, gain access to a credit card in their new market, and make use of cross-border payment solutions with 24/7 global support
to manage their international needs.
In CMB, we introduced a new credit application system, the Digital Credit Portal, in 15 markets. It uses internal and external data combined
with automation to streamline credit journeys. In Hong Kong, the portal also integrates with a credit decision engine to automate credit
decisions for qualifying customers, reducing the assessment time on loan approvals from days to as little as a few minutes. Our digital
onboarding tool, SmartServe, has been implemented in 21 markets to support international and domestic account opening. We have
onboarded 89% of eligible customers through the digital platform, with 72% of customers rating this experience as ‘easy’.
In GBM, we continued to execute our strategy and refine the client coverage model. In 2023, we accelerated our ‘originate-to-distribute’
model, providing clients with an effective capital efficiency strategy. We have refinanced our in-country and cross-border coverage model
in mainland China and refreshed our growth plans in India based on client feedback. We also launched growth initiatives against our Asia-
MENAT corridor to better service our clients.
HSBC Holdings plc 91
How we listen
To improve how we serve our customers, we
must be open to feedback and acknowledge
when things go wrong. We continue to
adapt at pace to provide support for
customers facing new challenges, new ways
of working and those that require enhanced
care needs.
We aim to be open and consistent in how
we track, record and manage complaints,
although as we serve a wide range of
customers – from personal banking and
wealth customers to large corporates,
institutions and governments – we tailor our
approach in each of our global businesses.
As the table on the right demonstrates, we
have a consistent set of principles that
enable us to remain customer-focused
throughout the complaints process.
For further details of complaints volumes by
Footnote Arrow.jpg
geography, see our ESG Data Pack at
www.hsbc.com/esg.
How we handle complaints
Our principles
Our actions
Making it easy for
customers to
complain
Customers can complain through the channel that best suits them. We
provide a point of contact along with clear information on next steps and
timescales.
Acknowledging
complaints
All colleagues welcome complaints as opportunities and exercise
empathy to acknowledge our customers’ issues. Complaints are
escalated if they cannot be resolved at first point of contact.
Keeping the
customer up to
date
We set clear expectations and keep customers informed throughout the
complaint resolution process through their preferred channel.
Ensuring fair
resolution
We thoroughly investigate all complaints to address concerns and ensure
the right outcome for our customers.
Providing available
rights
We provide customers with information on their rights and the appeal
process if they are not satisfied with the outcome of the complaint.
Undertaking root
cause analysis
Complaint causes are analysed on a regular basis to identify and address
any systemic issues and to inform process improvements.
Wealth and Personal Banking (‘WPB’)
In 2023, we received approximately 1.2
million complaints from customers. The ratio
of complaints per 1,000 customers per
month in our large markets remained stable
at around 2.3.
In the UK, complaints fell 19%. In 2023, we
applied the new UK Consumer Duty rules to
our complaint handling processes and
invested in root cause analysis to ensure
good outcomes and avoid instances of
foreseeable harm. We will continue to focus
on enhancing our processes and on training
complaint handlers to improve the customer
experience and reduce our complaint
volumes further.
The decrease in complaints in Hong Kong
was primarily driven by improvements in our
digital capabilities to make it easier for
customers to connect with us. Regular
reviews, analysis of customer feedback and
greater collaboration across business lines to
address emerging customer pain points also
contributed to the fall in complaints.
In response to an increase in credit and debit
card fraud attacks in Mexico during the first
quarter of 2023, we focused on
strengthening our monitoring and fraud
detection capabilities to help protect our
customers. In October, we also released the
new Visa Account Attack Intelligence tool to
mitigate foreign e-commerce attacks on
customer debit cards. As a result of these
efforts, average monthly complaints in
Mexico for the last nine months of the year
decreased by 20.5% compared with the first
quarter.
In our private bank, we received 507
complaints, an increase of 176 compared
with 2022. This was largely due to growth in
our customer base since establishing new
private banking operations in the UAE and
Mexico, along with an increase in complaints
in the US. This led to an increase in
administration and service issues, a high
proportion of which were attributable to
delays and errors in processing client
instructions. Overall, the private bank
resolved 465 complaints. Complaint data for
the new private banking operation in India
was reported within the WPB figures,
pending system development to separately
report the complaint figures.
WPB complaint volumes1
(per 1,000 customers per month)
2023
2022
Total2
2.3
2.3
UK3
q
1.1
1.4
Hong Kong3
q
0.9
1.0
Mexico3
p
5.2
5.1
1 A complaint is any expression of dissatisfaction
about WPB’s activities, products or services where a
response or resolution is explicitly or implicitly
expected.
2 Markets included: Hong Kong, mainland China,
France, the UK, UAE, Mexico, Canada and the US.
3 The UK, Mexico and Hong Kong make up 86% of
total complaints.
Acting on feedback
In 2023, we continued to develop and embed tools and capabilities across our business to deliver improved experiences for our customers
around the world. Through our measurement of customer experience, we identify opportunities for improvement, develop agile customer
experience plans and track and measure our progress. As a result of standardising our approach to customer experience globally, we have
strengthened our capability to listen, understand and act on what our customers are telling us on a regular basis.
92 HSBC Holdings plc
How we listen continued
Commercial Banking (‘CMB’)
In 2023, we received 45,899 customer and
client complaints, a decrease of 27% from
2022. Of the overall volumes, 33,777 came
from HSBC UK and 7,354 from Asia-Pacific.
The most common complaint related to
servicing and transactions, with the largest
volume of complaints globally coming from
business banking customers, which
represented 87% of our total complaints.
We attribute the overall decrease in our
complaint volumes to enhanced training of
our front-line colleagues to ensure they can
identify the differences between a complaint,
query and feedback. We also focused on
addressing the root causes of the complaint
trends, as well on improvements to our
systems, processes and advice to our clients.
We resolved 47,812 complaints globally in
2023. The average resolution time for
complaints was 24 days, which was just
above our global target of 20 days.
CMB complaint volumes1
(000s)
2023
2022
Total
46
63
UK
q
33.8
49.2
Hong Kong
q
6.5
8.1
Acting on feedback
In 2023, we focused on improvements to our governance of complaints, creating regular forums in key markets to ensure that analysis of
the root cause of issues and trends are prioritised to enhance our understanding of pain points for our customers. Since the Covid-19
pandemic, there has been increased efforts Group-wide to identify customers who are more exposed to harm or declare as vulnerable. In
2023, we focused on identifying these complaint types to ensure that we can offer adjustments and support within our processes. This
new process helps to improve our understanding and support of clients at risk of financial or non-financial harm to ensure our banking
services are accessible to all.
Global Banking and Markets (‘GBM’)
In 2023, we received 1,552 customer
complaints in Global Banking, a decrease of
27% from 2022. Of the overall complaint
volumes, 49% came from Europe and 23%
came from the Middle East, North Africa and
Türkiye. The most common complaint, at
38% of total complaints, related to servicing,
which was in line with previous years.
In Markets and Securities Services (‘MSS’) 
complaints increased by 21% to 354. We
attribute some of the increase to
improvements in our data reporting
processes globally. The majority of
complaints were operational in nature and
resolved in a timely manner. Of the overall
MSS complaints, 47% came from Europe
and 34% from Asia, our two largest markets.
GBM complaint volumes1
2023
2022
Total
1,906
2,419
Global Banking2
q
1,552
2,127
Global Markets and
Securities Services3
p
354
292
Acting on feedback
We have continued to invest in our client feedback tool to create a more consistent and streamlined experience for colleagues across GBM
and our wholesale businesses globally. In 2023, we introduced additional automation to improve the process of logging complaints, and
simplified our procedures to make it easier for front-line colleagues to record feedback. We have also introduced mandatory training
around conduct and complaints to ensure our people are acting on the feedback they receive and are consistent in how they evaluate
queries and complaints. 
1 Globally, a complaint is any expression of dissatisfaction, whether justified or not, relating to the provision of, or failure to provide, a specific product or service or
service activity. Within the UK, a complaint is any expression of dissatisfaction – whether justified or not – about our products, services or activities which suggests we
have caused (or might cause) financial loss, or material distress or material inconvenience.
2 Global Banking also includes Global Payments Solutions (previously known as Global Liquidity and Cash Management) and complaints relating to payment
operations, which is part of Digital Business Services.
3 Contains Global Research complaint volumes.
HSBC Holdings plc 93
Integrity, conduct and fairness
Safeguarding the financial system
We have continued our efforts to combat
financial crime and reduce its impact on our
organisation, customers and the
communities that we serve. Financial crime
includes fraud, bribery and corruption, tax
evasion, sanctions and export control
violations, money laundering, terrorist
financing and proliferation financing.
We manage financial crime risk because it is
the right thing to do to protect our
customers, shareholders, staff, the
communities in which we operate, as well as
the integrity of the financial system on which
we all rely. We have a financial crime risk
management framework that is applicable
across all global businesses and functions,
and in all countries and territories in which
we operate. The financial crime risk
framework, which is overseen by the Board,
is supported by our financial crime policy
that is designed to enable adherence to
applicable laws and regulations globally.
Annual global mandatory training is provided
to all colleagues, with additional targeted
training tailored to certain individuals. We
carry out regular risk assessments to identify
where we need to respond to evolving
financial crime threats, as well as to monitor
and test our financial crime risk management
programme.
We continue to invest in new technology,
including through the deployment of a
capability to monitor correspondent banking
activity. We are also enhancing our fraud
monitoring capability and our trade
screening controls, and investing in the
application of machine learning to improve
the accuracy and timeliness of our detection
capabilities.
These new technologies should enhance our
ability to respond effectively to unusual
activity and be more granular in our risk
assessments. This helps us to protect our
customers, the organisation and the integrity
of the global financial system against
financial crime.
Our anti-bribery and corruption policy
Our global financial crime policy requires
that all activity must be: conducted without
intent to bribe or corrupt; reasonable and
transparent; considered to not be lavish nor
disproportionate to the professional
relationship; appropriately documented with
business rationale; and authorised at an
appropriate level of seniority. There were no
concluded legal cases regarding bribery or
corruption brought against HSBC or its
employees in 2023. Our global financial
crime policy requires that we identify and
mitigate the risk of our customers and third
parties committing bribery or corruption.
Among other controls, we use customer due
diligence and transaction monitoring to
identify and help mitigate the risk that our
customers are involved in bribery or
corruption. We perform anti-bribery and
corruption risk assessments on third parties
that expose us to this risk.
The scale of our work
Each month, on average, we monitor
over 1.35 billion transactions for signs of
financial crime. In 2023, we filed
over 96,000 suspicious activity reports
to law enforcement and regulatory
authorities where we identified potential
financial crime. We perform daily
screening of 125 million customer records
for sanctions exposure. In 2022, we
reported screened customer records as a
monthly average, although screening
was, and continues to be, performed on a
daily basis.
98%
Total percentage of permanent and non-
permanent employees who received financial
crime training, including on anti-bribery and
corruption.
Whistleblowing
We want colleagues and stakeholders to
have confidence in speaking up when they
observe unlawful or unethical behaviour. We
offer a range of speak-up channels to listen
to the concerns of individuals and have a
zero tolerance policy for acts of retaliation.
Listening through whistleblowing
channels
Our global whistleblowing channel, HSBC
Confidential, is one of our speak-up channels,
which allows colleagues and other stakeholders
to raise concerns confidentially and, if
preferred, anonymously (subject to local laws).
In most of our markets, HSBC Confidential
concerns are raised through an independent
third party, offering 24/7 hotlines and a web
portal in multiple languages. We also provide
and monitor an external email address for
concerns about accounting, internal financial
controls or auditing matters
(accountingdisclosures@hsbc.com). Concerns
are investigated proportionately and
independently, with action taken where
appropriate. This can include disciplinary
action, such as dismissal and adjustments to
variable pay and performance ratings, or
operational actions including changes to
policies and procedures.
We actively promote our full range of speak-
up channels to colleagues to help ensure
their concerns are handled through the most
effective route. In 2023, 4% fewer concerns
were raised through HSBC Confidential
compared with 2022. Of the concerns
investigated through the HSBC Confidential
channel in 2023, 81% related to individual
behaviour and personal conduct, 14% to
security and fraud risks, 4% to compliance
risks and less than 1% to other categories.
The Group Audit Committee has oversight of
the Group’s whistleblowing arrangements,
and the Chair of the Group Audit Committee
acts as HSBC’s Whistleblowers’ Champion
with responsibility for ensuring and
overseeing the integrity, independence and
effectiveness of the Group’s policies and
procedures. 
Regulatory Compliance sets the
whistleblowing policy and procedures, and
provides the Group Audit Committee with
periodic updates on their effectiveness.
Specialist teams and investigation functions
own whistleblowing controls, with
monitoring in place to determine control
effectiveness.
For further details of the role of the Group Audit
Footnote Arrow.jpg
Committee in relation to whistleblowing, see page 306.
HSBC Confidential concerns raised in
2023:
1,746
(2022: 1,817)
Substantiation rate of concerns
investigated through HSBC Confidential
in 2023:
41%
(2022: 41%)
94 HSBC Holdings plc
A responsible approach to tax
We seek to pay our fair share of tax in all
jurisdictions in which we operate, and to
minimise the likelihood of customers using
our products and services to evade or
inappropriately avoid tax. We also abide by
international protocols that affect our
organisation. Our approach to tax and
governance processes is designed to achieve
these goals.
Through adoption of the Group’s risk
management framework, we seek to ensure
that we do not adopt inappropriately tax-
motivated transactions or products, and that
tax planning is scrutinised and supported by
genuine commercial activity. HSBC has no
appetite for using aggressive tax structures.
With respect to our own taxes, we are
guided by the following principles:
–We are committed to applying both the
letter and spirit of the law. This includes
adherence to a variety of measures arising
from the OECD Base Erosion and Profit
Shifting initiative including the ‘Pillar Two’
global minimum tax rules which will apply
to the Group from 2024. These rules seek
to ensure that the Group pays tax at a
minimum rate of 15% in each jurisdiction
in which it operates. We have identified 12
jurisdictions that may have an effective tax
rate below 15% in 2024. We continually
monitor the number of active subsidiaries
within each jurisdiction as part of our
ongoing entity rationalisation programme.
–We seek to ensure that our entities active
in nil or low tax jurisdictions have clear
business rationale for why they are based
in these locations and appropriate
transparency over their activities.
–We seek to have open and transparent
relationships with all tax authorities. Given
the size and complexity of our organisation,
which operates across over 60 jurisdictions,
a number of areas of differing interpretation
or disputes with tax authorities exist at any
point in time. We cooperate with the
relevant local tax authorities to mutually
agree and resolve these in a timely
manner.
With respect to our customers’ taxes, we are
guided by the following principles:
–We have made considerable investments
to support external tax transparency
initiatives and reduce the risk of banking
services being used to facilitate customer
tax evasion. Initiatives include the US
Foreign Account Tax Compliance Act, the
OECD Standard for Automatic Exchange of
Financial Account Information (‘Common
Reporting Standard’), and the UK legislation
on the corporate criminal offence of failing
to prevent the facilitation of tax evasion.
–We implement processes that aim to
ensure that inappropriately tax-motivated
products and services are not provided to
our customers.
Our tax contributions
The effective tax rate for the year of 19.1%
was higher than in the previous year (2022:
4.7%). The effective tax rate for the year was
increased by 2.3% from the non-taxable
impairment of the Group’s interest in
BoCom, and reduced by 1.6% by the release
of provisions for uncertain tax positions and
by 1.5% by the non-taxable provisional gain
on the acquisition of SVB UK. Further details
are provided on page 396.
The UK bank levy charge for 2023 of $339m
was higher than the charge of $13m in 2022,
mainly due to adjustments arising upon filing
prior year returns, which represented a credit
in 2022 and a charge in 2023.
As highlighted below, in addition to paying
$6.8bn of our own tax liabilities during 2023,
we collected taxes of $10.8bn on behalf of
governments around the world. A more
detailed geographical breakdown of the
taxes paid in 2023 is provided in the ESG
Data Pack.
5
8
10
1Other duties and levies includes property taxes of $91m (2022: $94m)
HSBC Holdings plc 95
Conduct: Our product responsibilities
Our conduct approach guides us to do the
right thing and to focus on the impact we
have for our customers and the financial
markets in which we operate. It is embedded
into the way we design, approve, market and
manage products and services, with a focus
on five clear outcomes:
–We understand our customers’ needs.
–We provide products and services that offer
a fair exchange of value.
–We service customers’ ongoing needs and
put it right if we make a mistake.
–We act with integrity in the financial
markets we operate in.
–We operate resiliently and securely to avoid
harm to customers and markets.
We train all our colleagues on our approach
to customer and market conduct, helping to
ensure our conduct outcomes are part of
everything we do.
Designing products and services
Our approach to product development is set
out in our policies and provides a clear basis
on which informed decisions can be made.
Our policies require that products must be
fit-for-purpose throughout their existence,
meeting regulatory requirements and
associated conduct outcomes.
Our approach includes:
–designing products to meet identified
customer needs;
–managing products through governance
processes, helping to ensure they meet
customers’ needs and deliver a fair
exchange of value;
–periodically reviewing products to help
ensure they remain relevant and perform in
line with expectations we have set; and
–improving, or withdrawing from sale,
products which do not meet our
customers’ needs or no longer meet our
high standards.
Meeting our customers’ needs
Our policies and procedures set standards to
ensure that we consider and meet customer
needs. These include:
–enabling customers to understand the key
features of products and services;
–enabling customers to make informed
decisions before purchasing a product or
service; and
–ensuring processes are in place for the
provision of advice to customers.
They help us provide the right outcomes for
customers, including those with enhanced
care needs. This helps us to support
customers who are more vulnerable to
external impacts, including the current cost
of living crisis (see ‘Supporting our
customers in challenging economic times‘
on page 15).
Financial promotion
Our policies help to ensure that in the sale of
products and services, we use marketing
and product materials that support customer
understanding and fair customer outcomes.
This includes providing information on
products and services that is clear, fair and
not misleading. We also have controls in
place to ensure our cross-border marketing
complies with relevant regulatory
requirements.
Product governance
Our product management policy covers
the entire lifecycle of the product. This
helps ensure that our products meet our
requirements before we sell them and
allows continued risk-based oversight of
product performance against the intended
customer outcomes.
When we decide to withdraw a product
from sale, we aim to consider the
implications for our existing customers
and agree actions to help them achieve a
fair outcome where appropriate.
Our approach with our suppliers
We maintain global standards and
procedures for the onboarding and use of
third-party suppliers. We require suppliers to
meet our third-party risk compliance
standards and we assess them to identify
any financial stability concerns.
Sustainable procurement
Supporting and engaging with our supply
chain is vital to the development of our
sustainable procurement processes. In 2023:
–We published net zero guides to help
buyers and suppliers understand our net
zero ambitions. The guides explain our
carbon reduction requirements and provide
practical advice for meeting these
ambitions, as laid out in our supplier code
of conduct.
–We began developing decarbonisation
plans for high-emitting procurement
categories, including real estate services,
telecommunications, data centres and
servers, and computer hardware.
Engagement with suppliers has given us a
better understanding of their
decarbonisation efforts and the challenges
and opportunities of achieving net zero in
these categories. As a result, strategies for
these procurement categories will include
decarbonisation plans from 2024 onwards.
–We completed analysis to understand the
impacts and dependencies of our supply
chain on biodiversity. The analysis will
inform the development of a biodiversity
strategy for global procurement in 2024, to
reduce supply chain biodiversity impacts.
–We launched the supplier diversity portal in
the UK and US. The portal enables small
and medium-sized enterprises or
businesses, which are majority-owned,
operated and controlled by historically
underrepresented groups, to register
interest in becoming an HSBC supplier. For
further details, see www.hsbc.com/our-
approach/risk-and-responsibility/working-
with-suppliers.
Supplier code of conduct
Our supplier code of conduct sets out our
ambitions, targets and commitments on the
environment, diversity and human rights,
and outlines the minimum standards we
expect of our suppliers on these issues. We
seek to formalise adherence to the code with
clauses in our supplier contracts, which
support the right to audit and act if a breach
is discovered. At the end of 2023, 95% of
approximately 10,400 contracted suppliers
had either confirmed adherence to the
supplier code of conduct or provided their
own alternative that was accepted by our
Global Procurement function.
For further details of the number of suppliers in
Footnote Arrow.jpg
each geographical region, see the ESG Data Pack
at www.hsbc.com/esg.
96 HSBC Holdings plc
Safeguarding data
Data privacy
We are committed to protecting and
respecting the data we hold and process, in
accordance with the laws and regulations of
the markets in which we operate.
Our approach rests on having the right
talent, technology, systems, controls,
policies and processes to ensure appropriate
management of privacy risk. Our Group-wide
privacy policy and principles provide a
consistent global approach to managing
data privacy risk, and must be applied by all
our global businesses and functions. Our
privacy principles are available at
www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/
operational-risk.
We conduct regular employee training and
awareness sessions on data privacy and
security issues throughout the year. This
includes mandatory training for all our
colleagues globally, with additional training
sessions, where needed, to keep up to date
with new developments in this space.
We provide transparency to our customers
and stakeholders on how we collect, use and
manage their personal data, and their
associated rights. Where relevant, we work
with third parties to help ensure adequate
protections are provided, in line with our
data privacy policy and as required under
data privacy law. We offer a broad range of
channels in the markets where we operate,
through which customers and stakeholders
can raise concerns about the privacy of their
data.
Our dedicated privacy teams report to the
highest level of management on data privacy
risks and issues, and oversee our global data
privacy programmes. We review data
privacy regularly at multiple governance
forums, including at Board level, to help
ensure appropriate challenge and visibility
for senior executives. Data privacy laws and
regulations continue to evolve globally. We
continually monitor the regulatory
environment to ensure we respond
appropriately to any changes.
As part of our three lines of defence model,
our Global Internal Audit function provides
independent assurance as to whether our
data privacy risk management approaches
and processes are designed and operating
effectively. In addition, we have established
data privacy governance structures, and
continue to embed accountability across all
businesses and functions.
We continue to implement industry practices
for data privacy and security. Our privacy
teams work closely with our data protection
officers, industry bodies and research
institutions to drive the design,
implementation and monitoring of privacy
solutions. We conduct regular reviews and
privacy risk assessments, and continue to
develop solutions to strengthen our data
privacy controls.
We continue to enhance our internal data
privacy tools to improve accountability for
data privacy. We have procedures to
articulate the actions needed to deal with
data privacy considerations. These include
notifying regulators, customers or other data
subjects, as required under applicable
privacy laws and regulations, in the event of
a reportable incident occurring.
Intellectual property rights practices
We have a group intellectual property risk
policy, supported by controls and guidance,
to manage risk relating to intellectual
property. This is to help ensure that
commercially and strategically valuable
intellectual property is identified and
protected appropriately, including by
applying to register trademarks and patents
and enforcing our intellectual property rights
against unauthorised use by third parties.
Our intellectual property framework also
helps us avoid infringement of third-party
intellectual property rights, supporting our
consistent and effective management of
intellectual property risk in line with our risk
appetite.
Data Privacy Day
In January 2023, we held a hybrid
roundtable event for our colleagues to
mark International Data Privacy Day. The
event was hosted by our Global Head of
Data Legal, and guest speakers included
the former UK Information Commissioner
and industry specialists from an external
law firm, with HSBC’s own data privacy
experts in attendance.
The event covered privacy-related
developments likely to have the greatest
impact across the Group. Key themes
included upcoming data privacy reforms
in the UK and the implications for global
organisations, and trends in enforcement
of data privacy laws and regulations. We
also reviewed the impact, successes and
challenges of General Data Protection
Regulation (‘GDPR’) implementation
globally.
The ethical use of data and AI
Artificial intelligence and other emerging technologies provide the opportunity to process and
analyse data at a depth and breadth not previously possible. While these technologies offer
significant potential benefits for our customers, they also pose potential ethical risks for the
financial services industry and society as a whole. We have a set of principles to help ensure we
consider and address the ethical issues that could arise. HSBC’s Principles for the Ethical Use of
Data and Artificial Intelligence are available at www.hsbc.com/who-we-are/esg-and-responsible-
business/our-conduct.
We continue to develop and enhance our approach to, and oversight of, AI, taking into
consideration the fast-evolving regulatory landscape, market developments and best practice.
HSBC Holdings plc 97
Cybersecurity
The threat of cyber-attacks remains a
concern for our organisation, as it does
across the financial sector and other
industries. As cyber-attacks continue to
evolve, failure to protect our operations may
result in the loss of sensitive data, disruption
for our customers and our business, or
financial loss. This could have a negative
impact on our customers and our reputation,
among other risks.
We continue to monitor ongoing geopolitical
events and changes to the cyber threat
landscape and take proactive measures with
the aim to reduce any impact to our
customers.
Prevent, detect and mitigate
We invest in business and technical controls
to help prevent, detect and mitigate cyber
threats. Our cybersecurity controls follow a
’defence in depth’ approach, making use of
multiple security layers, recognising the
complexity of our environment. Our ability to
detect and respond to attacks through
round-the-clock security operations centre
capabilities is intended to help reduce the
impact of attacks.
We have a cyber intelligence and threat
analysis team, which proactively collects and
analyses internal and external cyber
information to continuously evaluate threat
levels for the most prevalent attack types
and their potential outcomes. We actively
participate in the broader cyber intelligence
community, including by sharing technical
expertise in investigations, alongside others
in the financial services industry and
government agencies around the world.
In 2023, we further strengthened our cyber
defences and enhanced our cybersecurity
capabilities with the objective to help reduce
the likelihood and impact of unauthorised
access, security vulnerabilities being
exploited, data leakage, third-party security
exposure, and advanced malware. These
defences build upon a proactive data
analytical approach to help identify advanced
targeted threats and malicious behaviour.
We work with our third parties, including
suppliers, financial infrastructure bodies and
other non-traditional third parties, in an effort
to help reduce the threat of cyber-attacks
impacting our business services.
We have a third-party security risk
management process in place to assess,
identify and manage the risks associated
with cybersecurity threats with supplier and
other third-party relationships. The process
includes risk-based cybersecurity due
diligence reviews that assess third parties’
cybersecurity programmes against our
standards and requirements.
Policy and governance
We have a robust suite of cybersecurity
policies, procedures and key controls
designed to help ensure that the organisation
is well managed, with effective oversight and
control. This includes but is not limited to
defined information security responsibilities
for employees, contractors and third parties,
as well as standard procedures for cyber
incident identification, investigation,
mitigation and reporting.
We operate a three lines of defence model,
aligned to the enterprise risk management
framework, to help ensure oversight and
challenge of our cybersecurity capabilities
and priorities. In the first line of defence, we
have risk owners within global businesses
and functions who are accountable for
identifying and managing cyber risk. They
work with cybersecurity control owners to
apply the appropriate risk treatment in line
with our risk appetite. Our controls are
designed to be executed in line with our
policies and are reviewed and challenged by
our risk stewards representing the second
line of defence. They are independently
assured by the Global Internal Audit function,
the third line of defence. The assessment
and management of our cybersecurity risk is
led and coordinated by a Global Chief
Information Security Officer, who has
extensive experience in financial services,
security and resilience, as well as in strategy,
governance, risk management and
regulatory compliance. The Global Chief
Information Security Officer is supported by
regional and business level chief information
security officers. In the event of incidents,
the Global Chief Information Security Officer
and relevant supporting officers are informed
by our security operations team and are
engaged in alignment with our cybersecurity
incident response protocols.
Key performance indicators, control
effectiveness and other matters related to
cybersecurity, including significant cyber
incidents, are presented on a regular basis to
various management risk and control
committees including to the Board, the
Group Risk Management Meeting and
across global businesses, functions and
regions. This is done to ensure ongoing
awareness and management of our
cybersecurity position.
Our cybersecurity capabilities are regularly
assessed against the National Institute of
Standards and Technology framework by
independent third parties, and we proactively
collaborate with regulators to participate in
regular testing activities. HSBC also engages
external independent third parties to support
our penetration and threat-led penetration
testing, which help to identify vulnerabilities
to cyber threats and test security resilience.
Cyber training and awareness
We understand the important role our people
play in protecting against cybersecurity
threats. Our aim is to equip every colleague
with the appropriate tools and behaviours
they need to keep our organisation and
customers’ data safe. We provide
cybersecurity training and awareness to our
people, ranging from our top executives to IT
developers to front-line relationship
managers around the world.
Over 94% of our IT developers hold at least
one of our enhanced security certifications to
help ensure we build secure systems and
products.
We host an annual Cyber Awareness Month
for all colleagues, covering topics such as
online safety at home, social media safety,
safe hybrid working, and cyber incidents and
response. Our dedicated cybersecurity
training and awareness team provides a
wide range of education and guidance to
both customers and our colleagues about
how to identify and prevent online fraud.
Over 99%
Employees completed mandatory
cybersecurity training on time.
Over 94%
IT developers hold at least one of our internal
secure developer certifications.
Over 90
Cybersecurity education events were held
globally.
Over 96%
Of survey respondents to cybersecurity
education events said they have a better
understanding of cybersecurity following
these events.
98 HSBC Holdings plc
Financial       
review
The financial review gives detailed
reporting of our financial performance at
Group level as well as across our
different global businesses and legal
entities.
Financial summary
Global businesses and legal entities
Reconciliation of alternative performance measures
Other information
HSBC Holdings plc
99
Financial summary
Contents
Changes to presentation from 1 January 2023
Use of alternative performance measures
Critical estimates and judgements
Impact of hyperinflationary accounting
Consolidated income statement
Income statement commentary
Supplementary table for planned disposals
2022 compared with 2021
Consolidated balance sheet
Average balance sheet
Changes to presentation from
1 January 2023
Changes to our reporting framework
On 1 January 2023, we updated our financial reporting framework.
We no longer report ‘adjusted’ results, which excluded the impact of
both foreign currency translation differences and significant items.
Instead, we compute constant currency performance by adjusting
comparative reported results only for the effects of foreign currency
translation differences between the relevant periods. This will enable
users to understand the impact of foreign currency translation
differences on the Group’s performance. We separately disclose
‘notable items‘, which are components of our income statement that
management would consider as outside the normal course of
business and generally non-recurring in nature. While our primary
segmental reporting by global business remains unchanged, effective
from 1 January 2023, the Group changed the supplementary
presentation of results from geographical regions to main legal
entities to better reflect the Group’s structure.
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As
required by the standard, the Group applied the requirements
retrospectively with comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022
transition date. As required by IAS 1 ‘Presentation of Financial
Statements’ a third statement of financial position as at the transition
date of 1 January 2022 has been disclosed (for further details, see
page 358). Under IFRS 17 there is no present value of in-force
business (‘PVIF’) asset recognised up front. Instead the measurement
of the insurance contract liability takes into account fulfilment cash
flows and a contractual service margin (‘CSM’) representing the
unearned profit. In contrast to the Group’s previous IFRS 4 accounting
where profits are recognised up front, under IFRS 17 they are
deferred and systematically recognised in revenue as services are
provided over the expected coverage period. The CSM also includes
directly attributable costs, which had previously been expensed as
incurred and which are now incorporated within the insurance liability
measurement and recognised over the expected coverage period.
In conjunction with the implementation of IFRS 17, the Group has
made use of the option to re-designate to fair value through profit or
loss assets that were previously held at amortised cost totalling
$55.1bn, and eligible assets previously held at fair value through other
comprehensive income totalling $1.1bn. The re-designation of
amortised cost assets generated a net increase to assets of $4.9bn
because the fair value measurement on transition was higher than the
previous amortised cost carrying amount.
The impact of the transition was a reduction of $1.1bn on the Group’s
full-year 2022 reported revenue and a reduction of $0.5bn on full-year
2022 reported profit before tax. The Group’s total equity at 1 January
2022 reduced by $10.5bn to $196.3bn on the transition, and tangible
equity reduced by $2.4bn to $146.9bn. For further details of our
adoption of IFRS 17, see Note 38 ‘Effects of adoption of IFRS 17’ on
page 449.
Cost target
At our full-year 2022 results, we set a target for our ‘adjusted‘
operating expenses of growth for 2023 compared with 2022. Under
our new reporting framework we no longer present ‘adjusted‘ results.
The exception to this is for operating expenses, where our ‘target
basis’ will adjust reported results for notable items and the period-on-
period effects of foreign currency translation differences. We also
exclude the impact of retranslating comparative period financial
information at the latest rates of foreign exchange in hyperinflationary
economies, which is not within our control. We consider that this
measure provides useful information to investors by quantifying and
excluding the items that management considered when setting and
assessing cost-related targets. In our target basis, we also exclude
the costs related to the acquisition of SVB UK and related
investments internationally, which are expected to add approximately
1% to our cost growth compared with 2022.
Our 2022 baseline for operating expenses on this basis is $29.8bn,
which has been retranslated at the average rates of foreign exchange
for 2023.
Resegmentation
In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers’
respective needs, a portfolio of our Global Banking customers within
our entities in Latin America was transferred from GBM to CMB for
reporting purposes. Comparative data have been re-presented
accordingly. Similar smaller transfers from GBM to CMB were also
undertaken within our entities in Australia and Indonesia, where
comparative data have not been re-presented.
Banking NII
At our interim 2023 results, we introduced banking net interest
income. This alternative performance measure is reconciled on
page 104, and deducts from Group reported net interest income: the
impact of the cost of funding reported in net interest income used to
fund trading and fair value net assets; the impact of foreign exchange
swaps in Markets Treasury, where an offsetting income or loss is
recorded in trading and fair value income, and third-party net interest
income from our insurance business.
This resulting measure is intended to approximate the Group’s
banking revenue that is directly impacted by changes in interest rates.
Use of alternative performance
measures
Our reported results are prepared in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board (‘IFRS Accounting Standards’),
as detailed in the financial statements starting on page 356.
To measure our performance, we supplement our IFRS Accounting
Standards figures with non-IFRS Accounting Standards measures,
which constitute alternative performance measures under European
Securities and Markets Authority guidance and non-GAAP financial
measures defined in and presented in accordance with US Securities
and Exchange Commission rules and regulations. These measures
include those derived from our reported results that eliminate factors
that distort year-on-year comparisons. The ‘constant currency
performance’ measure used throughout this report is described
below. Definitions and calculations of other alternative performance
measures are included in our ‘Reconciliation of alternative
performance measures’ on page 145. In addition, an insurance-
specific non-GAAP measure ‘Insurance equity plus CSM net of tax‘, is
provided on pages 129 to 130, together with its definition and
reconciliation to GAAP measures. All alternative performance
measures are reconciled to the closest reported performance
measure.
Financial summary
100
HSBC Holdings plc
The global business segmental results are presented on a constant
currency basis in accordance with IFRS 8 ‘Operating Segments’ as
detailed in Note 10 ‘Segmental analysis’ on page 399.
Constant currency performance
Constant currency performance is computed by adjusting reported
results for the effects of foreign currency translation differences,
which distort year-on-year comparisons.
We consider constant currency performance to provide useful
information for investors by aligning internal and external reporting,
and reflecting how management assesses year-on-year performance.
Notable items
We separately disclose ‘notable items’, which are components of our
income statement that management would consider as outside the
normal course of business and generally non-recurring in nature.
The tables on pages 125 to 126 and pages 138 to 143 detail the
effects of notable items on each of our global business segments,
legal entities and selected countries/territories in 2023, 2022 and
2021.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the
US dollar against most major currencies during 2023.
We exclude them to derive constant currency data, allowing us to
assess balance sheet and income statement performance on a like-
for-like basis and to better understand the underlying trends in the
business.
Foreign currency translation differences for 2023 are computed by
retranslating into US dollars for non-US dollar branches, subsidiaries,
joint ventures and associates:
–the income statements for 2022 and 2021 at the average rates of
exchange for 2023; and
–the balance sheets at 31 December 2022 and 31 December 2021
at the prevailing rates of exchange on 31 December 2023.
No adjustment has been made to the exchange rates used to
translate foreign currency-denominated assets and liabilities into the
functional currencies of any HSBC branches, subsidiaries, joint
ventures or associates. The constant currency data of HSBC’s
Argentina subsidiaries have not been adjusted further for the impacts
of hyperinflation. Since 1 June 2022, Türkiye has been deemed a
hyperinflationary economy for accounting purposes. HSBC has an
operating entity in Türkiye and the constant currency data have not
been adjusted further for the impacts of hyperinflation.
When reference is made to foreign currency translation differences in
tables or commentaries, comparative data reported in the functional
currencies of HSBC’s operations have been translated at the
appropriate exchange rates applied in the current period on the basis
described above.
Critical estimates and judgements
The results of HSBC reflect the choice of accounting policies,
assumptions and estimates that underlie the preparation of HSBC’s
consolidated financial statements. The material accounting policies,
including the policies which include critical estimates and judgements,
are described in Note 1.2 on the financial statements. The accounting
policies listed below are highlighted as they involve a high degree of
uncertainty and have a material impact on the financial statements:
–Impairment of amortised cost financial assets and financial assets
measured at fair value through other comprehensive income
(‘FVOCI’): The most significant judgements relate to defining what
is considered to be a significant increase in credit risk, determining
the lifetime and point of initial recognition of revolving facilities,
selecting and calibrating the probability of default (‘PD’), the loss
given default (‘LGD’) and the exposure at default (‘EAD’) models,
as well as selecting model inputs and economic forecasts, making
assumptions and estimates to incorporate relevant information
about late-breaking and past events, current conditions and
forecasts of economic conditions, and selecting applicable
recovery strategies for certain wholesale credit-impaired loans. A
high degree of uncertainty is involved in making estimations using
assumptions that are highly subjective and very sensitive to the
risk factors. See Note 1.2(i) on page 375.
–Deferred tax assets: The most significant judgements relate to
those made in respect of recoverability, which are based on
expected future profitability. See Note 1.2(l) on page 380.
–Valuation of financial instruments: In determining the fair value of
financial instruments a variety of valuation techniques are used,
some of which feature significant unobservable inputs and are
subject to substantial uncertainty. See Note 1.2(c) on page 372.
–Impairment of investment in subsidiaries: Impairment testing,
including testing for reversal of impairment, involves significant
judgement in determining the value in use, and in particular
estimating the present values of cash flows expected to arise from
continuing to hold the investment, based on a number of
management assumptions. See Note 1.2(a) on page 370.
–Impairment of interests in associates: Impairment testing,
including testing for reversal of impairment, involves significant
judgement in determining the value in use, and in particular
estimating the present values of cash flows expected to arise from
continuing to hold the investment, based on a number of
management assumptions. The most significant judgements relate
to the impairment testing of our investment in Bank of
Communications Co., Limited (‘BoCom’). See Note 1.2(a) on
page 370.
–Impairment of goodwill and non-financial assets: A high degree of
uncertainty is involved in estimating the future cash flows of the
cash-generating units (‘CGUs’) and the rates used to discount
these cash flows. See Note 1.2(a) on page 370 and Note 1.2(n) on
page 380.
–Provisions: Significant judgement may be required due to the high
degree of uncertainty associated with determining whether a
present obligation exists, and estimating the probability and
amount of any outflows that may arise. See Note 1.2(m) on
page 380.
–Post-employment benefit plans: The calculation of the defined
benefit pension obligation involves the determination of key
assumptions including discount rate, inflation rate, pension
payments and deferred pensions, pay and mortality. See
Note 1.2(k) on page 379.
–Non-current assets and disposal groups held for sale:
Management judgement is required in determining the likelihood
of the sale to occur, and the anticipated timing in assessing
whether the held for sale criteria have been met. See Note 1.2(o)
on page 381.
Given the inherent uncertainties and the high level of subjectivity
involved in the recognition or measurement of the items above, it is
possible that the outcomes in the next financial year could differ from
the expectations on which management’s estimates are based,
resulting in the recognition and measurement of materially different
amounts from those estimated by management in these financial
statements.
Impact of hyperinflationary
accounting
We continue to treat Argentina and Türkiye as hyperinflationary
economies for accounting purposes. The impact of applying IAS 29
‘Financial Reporting in Hyperinflationary Economies’ and the
hyperinflation provisions of IAS 21 ’The Effects of Changes in Foreign
Exchange Rates’ in the current period for our operations in both
Argentina and Türkiye was a decrease in the Group’s profit before tax
of $1,297m (2022: $548m), comprising a decrease in revenue,
including loss on net monetary position, of $1,586m (2022: $541m)
and a decrease in ECL and operating expenses of $289m
(2022: increase of $7m). The CPI at 31 December for Argentina was
3,576, with an increase in the year of 2,429.13 (2022: 563.92
increase). The CPI for Türkiye was 1,859 with an increase in the year
of 730.89 (2022: 359.94 increase).
HSBC Holdings plc
101
Consolidated income statement
Summary consolidated income statement
2023
20221
2021
2020
2019
$m
$m
$m
$m
$m
Net interest income
35,796
30,377
26,489
27,578
30,462
Net fee income
11,845
11,770
13,097
11,874
12,023
Net income from financial instruments held for trading or managed on a fair value basis
16,661
10,278
7,744
9,582
10,231
Net income/(expense) from assets and liabilities of insurance businesses, including related
derivatives, measured at fair value through profit or loss
7,887
(13,831)
4,053
2,081
3,478
Net insurance premium income
—
—
10,870
10,093
10,636
Insurance finance (expense)/income
(7,809)
13,799
—
—
—
Insurance service result
1,078
809
—
—
—
Gain on acquisition2
1,591
—
—
—
—
(Impairment)/reversal of impairment relating to the sale of our retail banking operations in
France3
150
(2,316)
—
—
—
Other operating (expense)/income4
(1,141)
(266)
1,687
1,866
4,194
Total operating income
66,058
50,620
63,940
63,074
71,024
Net insurance claims and benefits paid and movement in liabilities to policyholders
—
—
(14,388)
(12,645)
(14,926)
Net operating income before change in expected credit losses and other
credit impairment charges5
66,058
50,620
49,552
50,429
56,098
Change in expected credit losses and other credit impairment charges
(3,447)
(3,584)
928
(8,817)
(2,756)
Net operating income
62,611
47,036
50,480
41,612
53,342
Total operating expenses excluding impairment of goodwill and other intangible assets
(32,355)
(32,554)
(33,887)
(33,044)
(34,955)
Impairment of goodwill and other intangible assets
285
(147)
(733)
(1,388)
(7,394)
Operating profit
30,541
14,335
15,860
7,180
10,993
Share of profit in associates and joint ventures
2,807
2,723
3,046
1,597
2,354
Impairment of interest in associate
(3,000)
—
—
—
—
Profit before tax
30,348
17,058
18,906
8,777
13,347
Tax expense
(5,789)
(809)
(4,213)
(2,678)
(4,639)
Profit for the year
24,559
16,249
14,693
6,099
8,708
Attributable to:
–  ordinary shareholders of the parent company
22,432
14,346
12,607
3,898
5,969
–  preference shareholders of the parent company
—
—
7
90
90
–  other equity holders
1,101
1,213
1,303
1,241
1,324
–  non-controlling interests
1,026
690
776
870
1,325
Profit for the year
24,559
16,249
14,693
6,099
8,708
Five-year financial information
2023
20221
2021
2020
2019
$
$
$
$
$
Basic earnings per share
1.15
0.72
0.62
0.19
0.3
Diluted earnings per share
1.14
0.72
0.62
0.19
0.3
Dividends per ordinary share (paid in the period)6
0.53
0.27
0.22
—
0.51
%
%
%
%
%
Dividend payout ratio7
50
44
40
79
100
Post-tax return on average total assets
0.8
0.5
0.5
0.2
0.3
Return on average ordinary shareholders’ equity
13.6
9.0
7.1
2.3
3.6
Return on average tangible equity
14.6
10.0
8.3
3.1
8.4
Effective tax rate
19.1
4.7
22.3
30.5
34.8
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the years ended 31 December 2021, 2020 and 2019 are prepared on
an IFRS 4 basis.
2  Provisional gain recognised in respect of the acquisition of SVB UK.
3  In the fourth quarter of 2023, an impairment loss of $2.0bn was recognised relating to the sale of our retail banking operations in France. This largely
offset the $2.1bn recognised in the first quarter of 2023 on the reversal of the held for sale classification at that time. In 2023, a total net $0.1bn of
credit was recognised in other operating income, reflecting the net asset value disposed under the final terms of sale. The $0.4bn impairment of
goodwill recognised in the third quarter in 2022 has not been reversed.
4Other operating (expense)/income includes a loss on net monetary positions of $1,667m (2022: $678m; 2021: $576m) as a result of applying IAS 29
‘Financial Reporting in Hyperinflationary Economies’ and disposal losses on capitalised markets treasury repositioning of $977m in 2023.
5Net operating income before change in expected credit losses and other credit impairment charges also referred to as revenue.
6Includes dividend paid during the period, which consisted of a second interim dividend of $0.23 per ordinary share in respect of the financial year
ended 31 December 2022 paid in April 2023 and the first, second and third interim dividends of $0.30 per ordinary share in respect of the financial year
ending 31 December 2023.
7In 2023, our dividend payout ratio was adjusted for material notable items and related impacts. In 2022, our dividend payout ratio was adjusted for the
loss on classification to held for sale of our retail banking business in France, items relating to the planned sale of our banking business in Canada, and
the recognition of certain deferred tax assets. No items were adjusted for in 2021, 2020 or 2019.
Unless stated otherwise, all tables in the Form 20-F are presented on a reported basis.
For a summary of our financial performance in 2023, see page 27.
For further financial performance data for each global business and legal entity, see pages 124 to 127 and 135 to 145 respectively. The global
business segmental results are presented on a constant currency basis in accordance with IFRS 8 ‘Operating Segments’ as set out in Note 10:
Segmental analysis on page 399.
Financial summary
102
HSBC Holdings plc
Income statement commentary
The following commentary compares Group financial performance for the year ended 2023 with 2022, unless otherwise stated.
Net interest income
Year ended
Quarter ended
31 Dec
31 Dec
31 Dec
31 Dec
30 Sep
31 Dec
2023
20221
2021
2023
2023
20221
$m
$m
$m
$m
$m
$m
Interest income
100,868
52,826
36,188
26,714
27,198
18,957
Interest expense
(65,072)
(22,449)
(9,699)
(18,430)
(17,950)
(9,971)
Net interest income
35,796
30,377
26,489
8,284
9,248
8,986
Average interest-earning assets
2,161,746
2,143,758
2,209,513
2,164,324
2,157,370
2,116,018
%
%
%
%
%
%
Gross interest yield2
4.67
2.46
1.64
4.90
5.00
3.55
Less: gross interest payable2
(3.47)
(1.24)
(0.53)
(3.83)
(3.80)
(2.21)
Net interest spread3
1.20
1.22
1.11
1.07
1.20
1.34
Net interest margin4
1.66
1.42
1.20
1.52
1.70
1.68
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Gross interest payable is the average
annualised interest cost as a percentage of average interest-bearing liabilities.
3Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the
average annualised interest rate payable on average interest-bearing funds.
4Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Summary of interest income by type of asset
2023
20221
2021
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
$m
$m
%
$m
$m
%
$m
$m
%
Short-term funds and loans and advances to banks
403,674
14,770
3.66
445,659
5,577
1.25
450,678
1,105
0.25
Loans and advances to customers
957,717
47,673
4.98
1,022,320
32,543
3.18
1,060,658
26,071
2.46
Reverse repurchase agreements – non-trading2
240,263
14,391
5.99
231,058
4,886
2.11
206,246
1,019
0.49
Financial investments
407,363
16,858
4.14
372,702
7,704
2.07
438,840
6,729
1.53
Other interest-earning assets
152,729
7,176
4.70
72,019
2,116
2.94
53,091
1,264
2.38
Total interest-earning assets
2,161,746
100,868
4.67
2,143,758
52,826
2.46
2,209,513
36,188
1.64
Summary of interest expense by type of liability
2023
20221
2021
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
$m
$m
%
$m
$m
%
$m
$m
%
Deposits by banks3
60,392
2,401
3.98
75,739
770
1.02
75,671
198
0.26
Customer accounts4
1,334,803
34,162
2.56
1,342,342
10,903
0.81
1,362,580
4,099
0.30
Repurchase agreements – non-trading2
146,605
10,858
7.41
118,308
3,085
2.61
114,201
363
0.32
Debt securities in issue – non-trading
184,867
11,223
6.07
179,775
5,607
3.12
193,137
3,603
1.87
Other interest-bearing liabilities
146,216
6,428
4.40
87,965
2,084
2.37
70,929
1,436
2.02
Total interest-bearing liabilities
1,872,883
65,072
3.47
1,804,129
22,449
1.24
1,816,518
9,699
0.53
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a
lower net balance reported for repurchase agreements and thus higher cost.
3Including interest-bearing bank deposits only.
4Including interest-bearing customer accounts only.
Net interest income (‘NII’) for 2023 was $35.8bn, an increase of
$5.4bn or 18% compared with 2022. This reflected higher average
interest rates across major currencies compared with 2022.
Excluding the unfavourable impact of foreign currency translation
differences, net interest income increased by $6.0bn or 20%.
NII for the fourth quarter of 2023 was $8.3bn, down 10% compared
with the previous quarter, and down 8% compared with the fourth
quarter of 2022. The decrease was predominantly driven by the
impact of higher funding costs across our liabilities, which included
the impact of deposit migration in our main legal entities in Asia and
Europe. In addition, the fourth quarter of 2023 included an adverse
impact of $0.2bn, relating to the first nine months of 2023, due to
reclassifications to NII from ‘net income from financial instruments
held for trading or managed on a fair value basis’ related to hedges in
Canada that will not recur given the expected sale of the business.
The impact of hyperinflation in Argentina on NII in 2023 was an
adverse movement of $0.5bn, with an associated impact on NIM of
2bps. The impact in the fourth quarter of 2023 was an adverse
movement of $0.5bn, with an associated impact on NIM of 9bps. This
compared with minimal movements in the equivalent periods in 2022.
The increase in hyperinflationary accounting impacts in 2023 was
notably due to the impact of the devaluation of the Argentinian peso.
Net interest margin (‘NIM’) for 2023 of 1.66% was 24bps higher
compared with 2022, as the rise in the yield on average interest-
earning assets (‘AIEA’) of 220bps was partly offset by the rise in the
funding costs of average interest-bearing liabilities of 196bps.
HSBC Holdings plc
103
The increase in NIM in 2023 included the unfavourable impact of
foreign currency translation differences. Excluding this, NIM increased
by 27bps.
NIM for the fourth quarter of 2023 was 1.52%, down 18bps
compared with the previous quarter, and down 16bps compared with 
the fourth quarter of 2022. The decreases were predominantly driven
by a rise in funding costs of average interest-bearing liabilities, which
included the impact of customer deposit migration in our main legal
entities in Asia and Europe, as well as the Argentina hyperinflation
impact as noted above, partly offset by an increase in the yield on
AIEA.
Interest income for 2023 of $100.9bn increased by $48.0bn
compared with 2022. Interest income of $26.7bn in the fourth quarter
of 2023 was down $0.5bn compared with the previous quarter, and
up $7.8bn compared with the fourth quarter of 2022. The respective
increases of $48.0bn and $7.8bn were predominantly driven by the
impact of higher market interest rates. The decrease of $0.5bn
compared with the previous quarter was predominantly due to
hyperinflation in Argentina.
The change in interest income in 2023 compared with 2022 included
an adverse impact of foreign currency translation differences of
$1.2bn. After excluding foreign currency translation differences,
interest income increased by $49.2bn.
Interest expense for 2023 of $65.1bn increased by $42.6bn
compared with 2022. This reflected an increase in funding costs of
223bps, mainly due to the impact of higher interest rates on our
liabilities including customer deposit migration, notably in Asia and
Europe. Within interest expense was the effect of higher funding
costs associated with supporting our trading and fair value activities,
as explained below in banking net interest income.
The rise in interest expense included the favourable effects of foreign
currency translation differences of $0.6bn. Excluding this, interest
expense increased by $43.2bn.
Interest expense of $18.4bn in the fourth quarter of 2023 was up
$0.5bn compared with the third quarter of 2023, and up $8.5bn
compared with the fourth quarter of 2022. The increase was
predominantly driven by the impact of higher market interest rates,
and the impact of deposit migration.
Banking net interest income
Year ended
Quarter ended
31 Dec
31 Dec
31 Dec
30 Sep
31 Dec
2023
2022
2023
2023
2022
$bn
$bn
$bn
$bn
$bn
Net interest income
35.8
30.4
8.3
9.2
9.0
Banking book funding costs used to generate ‘net income from financial instruments
held for trading or managed on a fair value basis’
8.7
2.5
2.5
2.4
1.3
Third-party net interest income from insurance
(0.4)
(0.4)
(0.1)
(0.1)
(0.1)
Banking net interest income
44.1
32.5
10.7
11.5
10.2
Banking net interest income is an alternative performance measure,
and is defined as Group reported net interest income after deducting:
–the internal cost to fund trading and fair value net assets for which
associated revenue is reported in ‘Net income from financial
instruments held for trading or managed on a fair value basis’, also
referred to as ‘trading and fair value income’. These funding costs
reflect proxy overnight or term interest rates as applied by internal
funds transfer pricing;
–the funding costs of foreign exchange swaps in Markets Treasury,
where an offsetting income or loss is recorded in trading and fair
value income. These instruments are used to manage foreign
currency deployment and funding in our entities; and
–third-party net interest income in our insurance business.
In our segmental disclosures, the funding costs of trading and fair
value net assets are predominantly recorded in GBM in ‘net income
from financial instruments held for trading or managed on a fair value
basis’. On consolidation, this funding is eliminated in Corporate
Centre, resulting in an increase in the funding costs reported in net
interest income with an equivalent offsetting increase in ‘net income
from financial instruments held for trading or managed on a fair value
basis’ in this segment. In the second quarter of 2023 we
implemented a consistent reporting approach across our most
material entities that contribute to our trading and fair value net
assets, which resulted in an increase to the first half of 2023
associated funding costs reported through the intersegment
elimination in Corporate Centre of approximately $0.4bn, recognised
in the second quarter of 2023. In the consolidated Group results, the
cost to fund these trading and fair value net assets is reported in net
interest income.
The internally allocated funding cost of $8.7bn, which was incurred in
2023 to generate trading and fair value income, related to trading, fair
value and associated net asset balances predominantly in GBM. At 31
December 2023, these stood at approximately $164bn.
Net fee income of $11.8bn was $0.1bn higher than in 2022, and
included an adverse impact from foreign currency translation
differences of $0.1bn. The rise in net fee income in CMB and WPB
was partly offset by a reduction in GBM.
In CMB, net fee income increased by $0.2bn driven by higher fees
from credit facilities, notably in Europe and the UK due to an increase
in trade products. Fee income also grew in account services,
reflecting greater client activity in transaction banking, mainly in Global
Payments Solutions (‘GPS’), and in cards, as spending increased
compared with 2022. These increases were partly offset by a
reduction in fees from funds under management and broking
activities.
In WPB, net fee income increased by $0.1bn. The rise was mainly
due to higher cards income, mainly in our legal entities in Hong Kong
and in Mexico, as customer spending increased. However, income
from broking fell, notably in Hong Kong, due to weaker equity markets
and muted customer sentiment. The rise in cards activity resulted in
higher fee expenses.
In GBM, net fee income decreased by $0.2bn. This was driven by
higher fee expense, notably in our main entities in Hong Kong, mainly
relating to GBM products sold to customers in other global
businesses. In Europe, fee expense grew in our private credit
business, and we incurred higher interbank and clearing fee expense.
There was a decrease in corporate finance fee income, reflecting
lower client activity in Europe, and a fall in broking income due to
lower equity turnover. Global custody income also fell. This was partly
offset by an increase in underwriting income, from an increase in
syndicated fees in Europe and a rise in fees in the US following
historical lows in 2022.
Net income from financial instruments held for trading or
managed on a fair value basis of $16.7bn was $6.4bn higher
compared with 2022. This reflected a rise in income, primarily relating
to trading activities in GBM, for which the associated funding costs
are reported in net interest income, notably in our main legal entities
in Hong Kong and Europe. The rise also included a favourable
movement on non-qualifying hedges of $0.5bn due to the non-
recurrence of fair value losses in 2022. These increases were partly
offset by an adverse fair value movement on foreign exchange
hedges related to the planned sale of our banking business in Canada.
Net income from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through
profit or loss of $7.9bn compared with a net expense of $13.8bn in
2022. This increase reflected favourable movements on debt
Financial summary
104
HSBC Holdings plc
securities, due to movements in interest rates, and equities. The
increases were notably in our portfolios in Hong Kong and France.
This favourable movement resulted in a corresponding movement in
insurance finance expense, which has an offsetting impact for the
related liabilities to policyholders.
Insurance finance expense of $7.8bn compared with an income of
$13.8bn in 2022, reflecting the impact of investment returns on
underlying assets on the value of liabilities to policyholders, which
moves inversely with ‘net income from assets and liabilities of
insurance businesses, including related derivatives, measured at fair
value through profit or loss’.
Insurance service result of $1.1bn increased by $0.3bn compared
with 2022, primarily due to an increase in the release of the
contractual service margin (‘CSM’). This primarily reflected a higher
CSM balance from higher new business written and favourable
assumption updates, primarily from updates to lapse rate
assumptions. The increase also reflected a reduction in losses from
onerous contracts. Under IFRS 17, the measurement of the insurance
contract liability takes into account fulfilment cash flows and a CSM
representing the unearned profit. In contrast to the Group’s previous
IFRS 4 accounting where profits are recognised up front, under IFRS
17 they are deferred and systematically recognised in revenue as
services are provided over the life of the contract. The CSM also
includes attributable cost, which had previously been expensed as
incurred and which is now incorporated within the insurance liability
measurement and recognised over the life of the contract.
Gain on acquisition of $1.6bn related to the provisional gain
recognised in respect of the acquisition of Silicon Valley Bank UK
Limited.
Impairment loss relating to the sale of the retail banking
operations in France was a net impairment reversal of $0.2bn in
2023, compared with an impairment of $2.3bn in 2022.
In accordance with IFRS 5 ‘Non-current Assets Held for Sale and
Discontinued Operations’, the disposal group was classified as held
for sale on 30 September 2022, at which point the Group recognised
the estimated impairment of $2.3bn, which included impairment of
goodwill of $0.4bn and related transaction costs. In the first quarter of
2023, $2.1bn of this impairment loss was reversed as the sale
became less certain. It was reinstated in the fourth quarter of 2023 as
we reclassified these operations as held for sale and remeasured the
disposal group at the lower of carrying value and fair value less costs
to sell, resulting in a $2.0bn impairment loss, reflecting the final terms
of the sale. The sale completed on 1 January 2024.
Other operating expense of $1.1bn was $0.9bn higher than in 2022.
The increase primarily related to losses in 2023 in Markets Treasury
on asset disposals of $1.0bn relating to repositioning and risk
management activities in our hold-to-collect-and-sell portfolio in
certain key legal entities. These actions are accretive to net interest
income and reduce the consumption of the Group‘s financial
resources.
The increased expense also included a loss of $0.3bn in 2023 relating
to corrections to historical valuation estimates in our life insurance
business, and losses related to the disposal of our New Zealand retail
mortgage loan portfolio and the merger of HSBC Bank Oman in 2023
with Sohar International. These were partly offset by losses in 2022
relating to the disposal of our branch operations in Greece and the
planned disposal of our business in Russia.
Change in expected credit losses and other credit impairment
charges (‘ECL’) were a charge of $3.4bn, a decrease of $0.1bn or 4%
compared with 2022.
The charge in 2023 primarily comprised stage 3 net charges, notably
related to mainland China commercial real estate sector exposures.
ECL charges in this sector were $1.0bn in 2023. The charge in 2023
also reflected the impact of continued economic uncertainty, rising
interest rates and inflationary pressures. The charge in 2022 of $3.6bn
included charges related to mainland China commercial real estate
exposures of $1.3bn.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of the economic scenarios and
management judgemental adjustments, see pages 192 to 204.
Operating expenses
Year ended
2023
2022¹
2021
$m
$m
$m
Gross employee compensation and benefits
19,623
19,288
19,612
Capitalised wages and salaries
(1,403)
(1,285)
(870)
Goodwill impairment
—
—
587
Property and equipment
4,285
4,949
5,145
Amortisation and impairment of intangibles
1,827
1,701
1,438
UK bank levy
339
13
116
Legal proceedings and regulatory matters
188
246
106
Other operating expenses2
7,211
7,789
8,486
Reported operating expenses
32,070
32,701
34,620
Currency translation
—
(399)
(2,376)
Constant currency operating expenses
32,070
32,302
32,244
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Other operating expenses includes professional fees, contractor costs, transaction taxes, marketing and travel. The decrease was driven by favourable
currency translation differences and lower restructuring and other related costs following the completion of our cost-saving programme at the end of
2022.
Staff numbers (full-time equivalents)1
2023
2022
2021
Global businesses
Wealth and Personal Banking
128,399
128,764
130,185
Commercial Banking
45,884
43,640
42,969
Global Banking and Markets
46,241
46,435
46,166
Corporate Centre
337
360
377
At 31 Dec
220,861
219,199
219,697
1  Represents the number of full-time equivalent people with contracts of service with the Group who are being paid at the reporting date.
HSBC Holdings plc
105
Operating expenses of $32.1bn were $0.6bn or 2% lower than in
2022, including a favourable impact of $0.4bn from foreign currency
translation differences.
This was driven by lower restructuring and other related costs
following the completion of our cost to achieve programme, which
concluded at the end of 2022, as well as a $0.2bn reduction due to a
reversal of historical asset impairments, and the effects of our
continued cost discipline. There was also a favourable impact of
$0.2bn due to the impact of hyperinflationary accounting in Argentina
in 2023.
These reductions were partly offset by an increase in technology
costs, the impacts of inflation, a higher performance-related pay
accrual and severance payments. In addition, the UK bank levy
increased by $0.3bn, which included adjustments related to prior
years, and we incurred a $0.2bn charge in the US relating to the FDIC
special assessment.
The number of employees expressed in full-time equivalent staff
(‘FTE’) at 31 December 2023 was 220,861, an increase of 1,662
compared with 31 December 2022. The number of contractors at
31 December 2023 was 4,676, a decrease of 1,371.
Share of profit in associates and joint ventures of $2.8bn was
$0.1bn or 3% higher than in 2022, reflecting an increase in the share
of profit from Saudi Awwal Bank (‘SAB’).
Impairment of interest in associate of $3.0bn related to our
investment in BoCom.
We maintain a 19.03% interest in BoCom. Since our investment in
2004, BoCom has grown its business significantly to the extent that it
has recently been designated as a global systemically important bank
(‘GSIB’). 
For accounting purposes, the balance sheet carrying value attributed
to BoCom represents our share of its net assets. We perform
quarterly impairment tests incorporating a value-in-use calculation,
recognising the gap between this carrying value and the fair value
(based on the list share price). We have previously disclosed that the
excess of the value-in-use calculation over its carrying value has been
marginal in recent years, and that reasonably possible changes in
assumptions could generate an impairment.
Recent macroeconomic, policy and industry factors resulted in a
wider range of reasonably possible value-in-use outcomes for our
BoCom valuation. At 31 December 2023, the Group performed an
impairment test on the carrying value which resulted in an impairment
of $3.0bn, as the recoverable amount as determined by a value-in-use
calculation was lower than the carrying value. Our value-in-use
calculation uses both historical experience and market participant
views to estimate future cash flows, relevant discount rates and
associated capital assumptions.  
This impairment will have no material impact on HSBC’s capital,
capital ratios or distribution capacity, and therefore no impact on
dividends or share buy-backs. The insignificant impact on HSBC’s
capital and CET1 ratio is due to the compensating release of
regulatory capital deductions to offset the impairment charge.
We remain strategically committed to mainland China as
demonstrated by our recent announcements to acquire Citi’s retail
wealth management portfolio and the investments made into
mainland China in recent years. BoCom remains a strong partner in
China, and we remain focused on maximising the mutual value of our
partnership. Our positive views on the medium- and long-term
structural growth opportunities in mainland China are unchanged.
For further details, see Note 18: Interests in associates and joint
ventures on page 418.
Tax expense
Year ended
2023
2022
$m
$m
Tax (charge)/credit
Reported
(5,789)
(809)
Currency translation
—
160
Constant currency tax (charge)/credit
(5,789)
(649)
Notable items
Year ended
2023
2022
$m
$m
Tax
Tax (charge)/credit on notable items
207
1,026
Recognition of losses
—
2,333
Uncertain tax positions
427
(142)
Tax expense
The effective tax rate for 2023 of 19.1% was higher than the 4.7% in
2022. The effective tax rate for 2023 was increased by 2.3 percentage
points by the non-deductible impairment of investments in associates,
and reduced by 1.6 percentage points by the release of provisions for
uncertain tax positions and reduced by 1.5 percentage points by the
non-taxable accounting gain on the acquisition of SVB UK. The
effective tax rate for 2022 was reduced by 12.8 percentage points by
the recognition of a deferred tax asset on historical tax losses of
HSBC Holdings as a result of improved profit forecasts for the UK tax
group. Excluding these items, the effective tax rates were 19.9% for
2023 and 17.5% for 2022.
Return on average tangible equity
In 2023, RoTE was 14.6%, compared with 10.0% in 2022. Excluding
the impact of strategic transactions and the impairment of BoCom,
RoTE was 15.6%.
Supplementary table for planned
disposals
The income statements and selected balance sheet metrics for the
year ended 31 December 2023 of our banking business in Canada and
our retail banking operations in France are shown below.
The asset and liability balances relating to these planned disposals are
reported on the Group balance sheet within ‘Assets held for sale’ and
‘Liabilities of disposal groups held for sale’, respectively, as at
31 December 2023.
Income statement and selected balance sheet metrics of disposal
groups held for sale
Year ended 2023
Canada1
France
retail2
$bn
$bn
Revenue
2.0
0.3
ECL
—
—
Operating expenses
(1.0)
(0.6)
of which: costs expected to be exited
(0.7)
(0.4)
Profit before tax
0.9
(0.2)
Loans and advances to customers
56.1
16.9
Customer accounts
63.0
22.3
RWA3
31.9
4.1
1  Under the terms of the sale agreement, the pre-tax profit on sale will
be recognised through a combination of the consolidation of HSBC
Canada’s results into the Group’s financial statements from 30 June
2022 until completion, and the remaining gain on sale recognised at
completion.
2  France retail includes the transferring of the retail banking business,
HSBC SFH and associated supporting services. For further details, see
Note 23: Assets held for sale and liabilities of disposal groups held for
sale on page 428.
3  Includes $3.5bn in Canada in respect of operational risk RWAs, and
$0.6bn associated with our retail banking business in France.
Financial summary
106
HSBC Holdings plc
2022 compared with 2021
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As required by the standard, the Group applied the requirements
retrospectively with comparative data previously published under IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022 transition date.
Comparative data for 2021 has not been restated.
Net interest income (‘NII’) for 2022 was $30.4bn, an increase of
$3.9bn or 15% compared with 2021. The 2022 figure has been
restated to reflect the impact of the adoption of IFRS 17 ‘Insurance
contracts‘ on 1 January 2023, which resulted in a reduction in net
interest income of $2.2bn.
The  increase in NII reflected the benefit of rising global interest rates,
while actively managing our pricing strategy and funding
requirements, with growth in all regions, notably in Asia and the UK.
NII for the fourth quarter of $9.0bn, which included an adverse impact
from the IFRS 17 restatement of $0.6bn, was $2.2bn of 33% higher
than in the fourth quarter of 2021. The increase was driven by higher
interest rates and management of our funding costs, with growth in
all legal entities, notably in Asia and the UK.
Net interest margin (‘NIM’) for 2022 of 1.42% included an adverse
impact of the IFRS 17 restatement of 6bps. The remaining increase of
28 basis points (‘bps’), was due to an increase in the gross yield on
AIEA due to the rising interest rate environment. This was partly
offset by a rise in the funding cost of average interest-bearing
liabilities.
NIM for the fourth quarter of 2022 was 1.68%, up 49bps year on
year, which included an adverse impact of 6bps due to the IFRS 17
restatement. The increase was driven by the impact of higher market
interest rates.
Interest income for 2022 of $52.8bn, which included an adverse
impact of $2.3bn from the IFRS 17 restatement, increased by $16.6bn
or 46%. This was primarily due to higher average interest rates
compared with 2021, as the yield on AIEA rose, mainly driven by
loans and advances to customers, short-term funds, loans and
advances to banks, and reverse repurchase agreements. However,
mortgage yields rose more modestly due to competitive pressures
and market factors in the UK and Hong Kong.
Interest income of $19.0bn in the fourth quarter, which included an
adverse impact of $0.6bn from the IFRS 17 restatement, was up
$9.7bn compared with the fourth quarter of 2021. The increase was
driven by the impact of higher interest rates, resulting in improved
yields on loans and advances to customers and reverse repurchase
agreements.
Interest expense for 2022 of $22.4bn increased by $12.8bn
compared with 2021. This reflected the increase in funding cost of
71bps, mainly arising from higher interest rates paid on interest-
bearing customer accounts, repurchase agreements and debt
securities in issue.
Included within net interest income in 2022 was a $2.5bn interest
expense representing a component of centrally allocated funding
costs associated with generating ‘net income from financial
instruments held for trading or managed on a fair value basis’. This
compared with an interest expense of $0.4bn in 2021.
Interest expense of $10.0bn in the fourth quarter of 2022 was up
$7.5bn year on year, and up $3.9bn compared with the previous
quarter. The steep rise in interest expense was mainly driven by
higher funding cost on customer accounts as interest rates increased,
particularly in Asia and Europe.
Net fee income of $11.8bn was $1.3bn lower than in 2021, and
included an adverse impact from foreign currency translation
differences of $0.6bn. Net fee income fell in WPB and GBM, although
it increased in CMB.
In WPB, reported net fee income decreased by $0.6bn. The reduction
was mainly in Wealth, as adverse market sentiment resulted in lower
customer demand, mainly in Hong Kong. Fee income fell due to lower
sales of unit trusts and from subdued customer demand in funds
under management, as well as from lower broking income. Cards
income grew as spending increased compared with 2021. This also
resulted in higher fee expense.
In GBM, reported net fee income decreased by $0.9bn. This was
driven by lower fee income from underwriting, in line with the
reduction in the global fee pool. Fee income also decreased in credit
facilities and in corporate finance, reflecting subdued client demand.
In CMB, reported net fee income increased by $0.1bn. Fee income
grew in cards, as spending increased compared with 2021, and in
account services, reflecting greater client activity in transaction
banking, notably Global Payments Solutions (‘GPS’).
Net income from financial instruments held for trading or
managed on a fair value basis of $10.3bn was $2.5bn higher
compared with 2021. This primarily reflected a strong trading
performance in Global Foreign Exchange due to increased client
activity, driven by elevated levels of market volatility. This was partly
offset by adverse fair value movements on non-qualifying hedges of
$0.5bn
Net expense from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through
profit or loss of $13.8bn compared with a net income of $4.1bn in
2021. This reduction included a $10.4bn impact on the transition to
IFRS 17 following the re-designation of financial assets supporting
policyholder liabilities to fair value through profit or loss classification.
Under IFRS 17, the offsetting increase in the carrying value of
insurance contracts is reported within the ‘insurance finance income/
(expense)‘ line described below.
The remaining reduction reflected unfavourable equity market
performances in Hong Kong and France. This compared with 2021,
which benefited from favourable equity markets.
On the implementation of IFRS 17, new income statement lines
associated with insurance accounting were introduced. Consequently,
the previously reported IFRS 4 line items ‘Net insurance premium
income‘ and ‘Net insurance claims and benefits paid and
movement in liabilities to policyholders‘ were removed.
Insurance finance income of $13.8bn represents the change in the
carrying amount of insurance contracts arising from the effect of, and
changes in, the time value of money and financial risk. For variable fee
approach contracts, which represent more than 90% of HSBC’s
insurance contracts, the insurance finance income/(expense) includes
the changes in the fair value of underlying items (excluding additions
and withdrawals). It therefore has an offsetting impact to investment
income earned on underlying assets supporting insurance contracts.
This includes an offsetting impact to the gains and losses on assets
re-designated on transition to fair value through profit or loss, and
which is now included in ‘Net expense from assets and liabilities of
insurance businesses, including related derivatives, measured at fair
value through profit or loss’.
Insurance service result of $0.8bn mainly relates to the release of
the contractual service margin (’CSM’), which comprises the
insurance service income associated with insurance contracts held
during the period.
Impairment losses related to the planned sale of our retail
banking operations in France was $2.3bn. In accordance with IFRS
5 ‘Non-current Assets Held for Sale and Discontinued Operations’, the
disposal group was classified as held for sale on 30 September 2022,
at which point the Group recognised the estimated impairment of
$2.3bn, which included impairment of goodwill of $0.4bn and related
transaction costs.
Other operating income was an expense of $0.3bn compared with
an income of $1.7bn in 2021. The reduction reflected lower
revaluation gains of $0.6bn in our Principal Investments business in
GBM, losses of $0.4bn related to the planned sales of our branch
operations in Greece and our business in Russia in 2022, as well as
the non-recurrence of a prior year gain on the sale of a property in
Germany. In addition, there were also lower gains on the disposal of
debt securities in Market Treasury. These reductions were partly
HSBC Holdings plc
107
offset by a gain of $0.1bn on the completion of our acquisition of AXA
Singapore.
Following the implementation of IFRS 17, we no longer recognise a
PVIF asset and the associated revenue is no longer reported,
including the value of new business and changes to in-force book
PVIF from valuation adjustments and experience variances. PVIF gains
of $0.1bn were recognised in 2021 with no equivalent amount
reported in 2022, as PVIF is no longer recognised following the
transition to IFRS 17.
Changes in expected credit losses and other credit impairment
charges (‘ECL’) were a charge of $3.6bn, compared with a net
release of $0.9bn in 2021.
The charges in 2022 reflected stage 3 charges of $2.2bn, in part
relating to exposures to the commercial real estate sector in mainland
China. We also recognised stage 1 and stage 2 charges in all global
businesses, reflecting a deterioration in the macroeconomic
environment, with many markets experiencing increased interest
rates, continued inflation, supply chain risks and heightened
recessionary risks. These economic conditions also contributed to the
increase in stage 3 charges, mainly in CMB and GBM. These
increases were in part mitigated by the release of most of our
remaining Covid-19-related allowances.
The charge in 2022 compared with a net release in 2021, primarily
relating to Covid-19-related allowances previously built up in 2020.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of alternative/additional scenarios and
management judgemental adjustments, see pages 185 to 194 of the
HSBC Holdings plc 20-F for the year ended 31 December 2022.
Operating expenses of $32.7bn were $1.9bn or 6% lower than in
2021, primarily as foreign currency translation differences resulted in
a favourable impact of $2.0bn, and due to the non-recurrence of a
2021 goodwill impairment of $0.6bn related to our WPB business in
Latin America.
Reported operating expenses also reflected the impact of ongoing
cost discipline across the Group. This helped mitigate growth from
increased investment in technology of $0.5bn, which included
investments in our digital capabilities, the impact of business volume
growth, and inflation. Restructuring and other related costs increased
by $1.0bn.
In 2022, cost to achieve spend, included within restructuring and
other related costs, was $2.9bn. This three-year programme ended on
31 December 2022 with a total spend of $6.5bn and cumulative gross
saves realised of $5.6bn.
The number of employees expressed in full-time equivalent staff
(‘FTE’) at 31 December 2022 was 219,199, a decrease of 498
compared with 31 December 2021. The number of contractors at
31 December 2022 was 6,047, a decrease of 145 compared with
31 December 2021.
Share of profit in associates and joint ventures of $2.7bn was
$0.3bn lower, primarily as 2021 included a higher share of profit from
Business Growth Fund in the UK due to the recovery in asset
valuations. This was partly offset by an increase in the share of profit
from Saudi Awwal Bank (‘SAB‘).
In relation to Bank of Communications Co., Limited (‘BoCom’), we
continued to be subject to a risk of impairment in the carrying value of
our investment. We performed an impairment test on the carrying
amount of our investment and confirmed there was no impairment at
31 December 2022.
For more information on the key assumptions in our VIU calculation,
including the sensitivity of the VIU to each key assumption, see Note
18 on the financial statements of the HSBC Holdings plc 20-F for the
year ended 31 December 2022.
Tax expense The effective tax rate for 2022 of 4.7% was lower than
the 22.3% in 2021. Tax in 2022 included a $2.2bn credit arising from
the recognition of a deferred tax asset from historical tax losses in
HSBC Holdings, which was recognised as a significant item (from 1
January 2023, termed a notable item). This was a result of improved
profit forecasts for the UK tax group, which accelerated the expected
utilisation of these losses and reduced uncertainty regarding their
recoverability. We also benefited from other deferred tax asset
reassessments during 2022. Excluding these, the effective tax rate
for 2022 was 19.2%, which was 3.1 percentage points lower than in
2021. The effective tax rate for 2022 was also decreased by the
remeasurement of deferred tax balances following the substantive
enactment in the first quarter of 2022 of legislation to reduce the rate
of the UK banking surcharge from 8% to 3% from 1 April 2023.
Further details are provided in Note 7 on the financial statements of
the HSBC Holdings plc 20-F for the year ended 31 December 2022.
Financial summary
108
HSBC Holdings plc
Consolidated balance sheet
Five-year summary consolidated balance sheet
2023
20221
2021
2020
2019
$m
$m
$m
$m
$m
Assets
Cash and balances at central banks
285,868
327,002
403,018
304,481
154,099
Trading assets
289,159
218,093
248,842
231,990
254,271
Financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
110,643
100,101
49,804
45,553
43,627
Derivatives
229,714
284,159
196,882
307,726
242,995
Loans and advances to banks
112,902
104,475
83,136
81,616
69,203
Loans and advances to customers
938,535
923,561
1,045,814
1,037,987
1,036,743
Reverse repurchase agreements – non-trading
252,217
253,754
241,648
230,628
240,862
Financial investments
442,763
364,726
446,274
490,693
443,312
Assets held for sale
114,134
115,919
3,411
299
123
Other assets
262,742
257,496
239,110
253,191
229,917
Total assets at 31 Dec
3,038,677
2,949,286
2,957,939
2,984,164
2,715,152
Liabilities
Deposits by banks
73,163
66,722
101,152
82,080
59,022
Customer accounts
1,611,647
1,570,303
1,710,574
1,642,780
1,439,115
Repurchase agreements – non-trading
172,100
127,747
126,670
111,901
140,344
Trading liabilities
73,150
72,353
84,904
75,266
83,170
Financial liabilities designated at fair value
141,426
127,321
145,502
157,439
164,466
Derivatives
234,772
285,762
191,064
303,001
239,497
Debt securities in issue
93,917
78,149
78,557
95,492
104,555
Insurance contract liabilities
120,851
108,816
112,745
107,191
97,439
Liabilities of disposal groups held for sale
108,406
114,597
9,005
—
—
Other liabilities
216,635
212,319
190,989
204,019
194,876
Total liabilities at 31 Dec
2,846,067
2,764,089
2,751,162
2,779,169
2,522,484
Equity
Total shareholders’ equity
185,329
177,833
198,250
196,443
183,955
Non-controlling interests
7,281
7,364
8,527
8,552
8,713
Total equity at 31 Dec
192,610
185,197
206,777
204,995
192,668
Total liabilities and equity at 31 Dec
3,038,677
2,949,286
2,957,939
2,984,164
2,715,152
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
A more detailed consolidated balance sheet is contained in the financial statements on page 358.
HSBC Holdings plc
109
Five-year selected financial information
2023
20221
2021
2020
2019
$m
$m
$m
$m
$m
Called up share capital
9,631
10,147
10,316
10,347
10,319
Capital resources2
171,204
162,423
177,786
184,423
172,150
Undated subordinated loan capital
18
1,967
1,968
1,970
1,968
Preferred securities and dated subordinated loan capital3
36,413
29,921
28,568
30,721
33,063
Risk-weighted assets
854,114
839,720
838,263
857,520
843,395
Total shareholders’ equity
185,329
177,833
198,250
196,443
183,955
Less: preference shares and other equity instruments
(17,719)
(19,746)
(22,414)
(22,414)
(22,276)
Total ordinary shareholders’ equity
167,610
158,087
175,836
174,029
161,679
Less: goodwill and intangible assets (net of tax)
(11,900)
(11,160)
(17,643)
(17,606)
(17,535)
Tangible ordinary shareholders’ equity
155,710
146,927
158,193
156,423
144,144
Financial statistics
Loans and advances to customers as a percentage of customer accounts
58.2%
58.8%
61.1%
63.2%
72.0%
Average total shareholders’ equity to average total assets
6.01%
5.97%
6.62%
6.46%
6.97%
Net asset value per ordinary share at year-end ($)4
8.82
8.01
8.76
8.62
8.00
Tangible net asset value per ordinary share at year-end ($)5
8.19
7.44
7.88
7.75
7.13
Tangible net asset value per fully diluted share at year-end ($)
8.14
7.39
7.84
7.72
7.11
Number of $0.50 ordinary shares in issue (millions)
19,263
20,294
20,632
20,694
20,639
Basic number of $0.50 ordinary shares outstanding (millions)
19,006
19,739
20,073
20,184
20,206
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary
shares (millions)
19,135
19,876
20,189
20,272
20,280
Closing foreign exchange translation rates to $:
$1: £
0.784
0.830
0.739
0.732
0.756
$1: €
0.903
0.937
0.880
0.816
0.890
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
2Capital resources are regulatory total capital, the calculation of which is set out on page 242.
3 Including perpetual preferred securities, details of which can be found in Note 29: Subordinated liabilities on page 433.
4 The definition of net asset value per ordinary share is total shareholders’ equity, less non-cumulative preference shares and capital securities, divided
by the number of ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.
5 The definition of tangible net asset value per ordinary share is total ordinary shareholders’ equity excluding goodwill, PVIF (for 2021, 2020 and 2019)
and other intangible assets (net of deferred tax), divided by the number of basic ordinary shares in issue, excluding own shares held by the company,
including those purchased and held in treasury.
Combined view of customer lending and customer deposits
2023
2022
$m
$m
Loans and advances to customers
938,535
923,561
–  of which: HSBC Innovation Bank
Limited (formerly SVB UK)
7,955
—
Loans and advances to customers of
disposal groups reported in ‘Assets held
for sale’
73,285
80,576
–banking business in Canada
56,129
55,197
–retail banking operations in France
16,902
25,029
–other
254
350
Non-current assets held for sale
92
112
Combined customer lending
1,011,912
1,004,249
Currency translation
—
20,454
Combined customer lending at
constant currency
1,011,912
1,024,703
Customer accounts
1,611,647
1,570,303
–  of which: HSBC Innovation Bank
Limited (formerly SVB UK)
6,019
—
Customer accounts reported in ‘Liabilities
of disposal groups held for sale’
85,950
85,274
–banking business in Canada
63,001
60,606
–retail banking operations in France
22,307
22,348
–other
642
2,320
Combined customer deposits
1,697,597
1,655,577
Currency translation
—
30,773
Combined customer deposits at
constant currency
1,697,597
1,686,350
Balance sheet commentary compared with
31 December 2022
At 31 December 2023, total assets of $3.0tn were $89bn or 3%
higher on a reported basis and increased by $31bn or 1% on a
constant currency basis.
Reported loans and advances to customers as a percentage of
customer accounts was 58.2% compared with 58.8% at
31 December 2022. The movement in this ratio reflected a higher
growth in customer accounts than in lending.
Assets
Cash and balances at central banks decreased by $41bn or 13%,
which included a $13bn favourable impact of foreign currency
translation differences. The decrease was mainly in HSBC UK,
reflecting a reduction in customer accounts and repurchase
agreements, as well as an increase in the deployment of our cash
surplus into financial investments. Cash fell in HSBC Bank plc as our
European branches managed liquidity requirements and due to the
completion of the sale of our retail banking operations in France. Cash
also decreased in the UK as we deployed our commercial surplus into
reverse repurchase agreements and financial investments.
Trading assets increased by $71bn or 33%, mainly as we captured
increased client activity in equity and debt securities, particularly in
Hong Kong and HSBC Bank plc. The increase in trading assets also
reflected the use of surplus liquidity to fund trading activities given
the subdued demand for customer lending.
Derivative assets decreased by $54bn or 19%, mainly in Europe,
reflecting adverse revaluation movements on interest rate contracts
due to a stabilisation and downward shift in long-term yield curve
rates in most major markets. Foreign exchange contracts also fell,
primarily in HSBC Bank plc, as a result of reduced volatility in foreign
exchange rate movements in 2023. The decrease in derivative assets
was consistent with the decrease in derivative liabilities, as the
underlying risk is broadly matched.
Financial summary
110
HSBC Holdings plc
Loans and advances to customers of $939bn increased by $15bn or
2% on a reported basis. This included a favourable impact of foreign
currency translation differences of $18bn.
On a constant currency basis, loans and advances to customers fell
by $3bn, reflecting the following movements.
In WPB, customer lending increased by $21bn, reflecting growth in
mortgage balances, notably in our main legal entities in Hong Kong
(up $6bn), the UK (up $5bn), Mexico (up $1bn) and Australia (up
$1bn). There was an increase of $7.8bn in secured lending in our main
entity in Europe following the reclassification of a portfolio of home
loans previously classified as assets held for sale, relating to the sale
of our retail banking operations in France. The increase also included
growth of $3bn in credit card balances, mainly in our entities in Hong
Kong, the UK and Mexico. These increases were partly offset by
reductions due to business divestments in Oman and New Zealand.
In GBM, lending fell by $16bn due to a reduction in term lending,
primarily in our main legal entities in Hong Kong, including a reduction
in the commercial real estate sector, and in Europe, reflecting muted
client demand. Lending also fell by $1bn due to the merger of our
operations in Oman with Sohar International. In addition there was a
transfer of GBM customers to CMB in Australia and Indonesia,
resulting in a $3bn reduction.
In CMB, customer lending was $7bn lower, mainly in our main legal
entities in Hong Kong, including in the commercial real estate sector,
and in the US, as well as in HSBC Bank plc, reflecting weaker client
demand in a higher interest rate environment. Lending also fell by
$1bn due to the sale of our business in Oman. In HSBC UK, lending
grew by $4bn, as an increase from the acquisition of SVB UK of $8bn
partly mitigated reductions from clients repaying their facilities. The
transfer of customers to CMB from GBM in Australia and Indonesia,
referred to above, led to an increase of $3bn.
Financial investments increased by $78bn or 21%, mainly in Asia
and Europe from the purchase of debt securities, treasury and other
eligible bills, as we redeployed our commercial surplus to benefit from
higher yield curves and enhance our hedging activities on net interest
income. The increase was across both debt instruments held at fair
value through other comprehensive income and instruments held at
amortised cost.
Assets held for sale of $114bn primarily comprised the assets
relating to the sale of our retail banking operations in France and the
planned sale of our banking business in Canada. This balance was
broadly stable compared with 2022, as a decrease of $8bn relating to
the transfer to loans and advances to customers of a portfolio of
secured home loans in France was largely offset by a transfer of cash
into assets held for sale, related to the completion of the sale of our
retail banking operations there.
Liabilities
Customer accounts of $1.6tn increased by $41bn or 3% on a
reported basis. This included a favourable impact of foreign currency
translation differences of $28bn.
On a constant currency basis, customer accounts increased by $13bn,
reflecting the following movements.
In WPB, customer accounts grew by $12bn, reflecting higher interest-
bearing term and money market deposit balances, as interest rates
rose, primarily in our main legal entity in Asia, notably Hong Kong (up
$10bn, or 3%), Singapore (up $5bn, or 15%), Australia (up $3bn, or
19%), mainland China (up $3bn, or 19%) and Taiwan up ($2bn, or
34%). However, customer accounts fell by $14bn in HSBC UK,
reflecting cost of living and competitive pressures. There was also a
reduction due to the sale of our business in Oman.
In CMB, customer accounts increased by $3bn. The growth included
an increase of $6bn related to our acquisition of SVB UK, as well as
increases in our entities in Asia, excluding Hong Kong, and in
continental Europe, mainly in term and money market deposits. In
addition, a transfer of customers from GBM to CMB in Australia and
Indonesia resulted in a rise of $4bn. These increases mitigated
reductions in our main entities in Hong Kong and the UK and a
reduction of $2bn due to the sale of our business in Oman.
In GBM, customer accounts were marginally lower, falling $2bn.
Balances fell in Hong Kong and the UK, although there was growth in
continental Europe and Singapore. Balances fell by $1bn following the
sale of our business in Oman, and by $4bn due to the transfer of
customers from GBM to CMB in Australia and Indonesia.
Repurchase agreements – non-trading increased by $44bn or 35%,
notably in HSBC Bank plc, reflecting higher client demand, and in our
main entity in Asia due to a higher requirement for short-term funding.
Derivative liabilities decreased by $51bn or 18%, which is
consistent with the reduction in derivative assets, since the
underlying risk is broadly matched.
Debt securities in issue increased by $16bn or 20%, due to a net
increase in debt issuances.
Liabilities of disposal groups held for sale of $108bn primarily
comprised the liabilities relating to the sale of our retail banking
operations in France and the planned sale of our banking business in
Canada.
Equity
Total shareholders’ equity, including non-controlling interests,
increased by $7bn or 4% compared with 31 December 2022.
Shareholders’ equity was increased by profits generated of $25bn and
net gains through other comprehensive income (‘OCI’) of $5bn. These
increases were partly offset by the impact of dividends paid of $12bn,
the redemption of perpetual subordinated contingent convertible
capital securities of $4bn and the impact of our $7bn share buy-back
activities in 2023.
The net gains through OCI of $5bn included favourable movements of
$3bn on financial instruments designated as hold-to-collect-and-sell,
which are held as hedges to our exposure to interest rate
movements. The favourable movement was a result of the fall in long-
term market yield curves in 2023. The net gain also included a
favourable movement on cash flow hedges of $3bn and from the
effects of hyperinflation of $2bn. These gains were partly offset by
fair value losses on liabilities related to changes in own credit risk of
$1bn, as well as other smaller losses.
Financial investments
As part of our interest rate hedging strategy, we hold a portfolio of
debt instruments, reported within financial investments, which are
classified as hold-to-collect-and-sell. As a result, the change in value of
these instruments is recognised through ‘debt instruments at fair
value through other comprehensive income’ in equity.
At 31 December 2023, we recognised a pre-tax cumulative unrealised
loss reserve through other comprehensive income of $3.9bn related
to these hold-to-collect-and-sell positions. This reflected a $2.6bn pre-
tax gain in 2023, inclusive of movements on related fair value hedges.
The gain in 2023 included a reduction in unrealised losses due to the
disposal of securities as part of repositioning actions taken in this
portfolio of $1.0bn. Overall, the Group is positively exposed to rising
interest rates through net interest income, although there is an
adverse impact on our capital base in the early stages of a rising
interest rate environment due to the fair value of hold-to collect-and-
sell instruments.
Over time, these adverse movements will unwind as the instruments
reach maturity, although not all will necessarily be held to maturity.
We also hold a portfolio of financial investments measured at
amortised cost, which are classified as hold-to-collect. At
31 December 2023, there was a cumulative unrealised loss of $1.7bn,
although the unrealised loss is not reflected on our balance sheet.
This included $1.0bn that related to debt instruments held to manage
our interest rate exposure, representing a $0.8bn improvement during
2023.
HSBC Holdings plc
111
Risk-weighted assets
Risk-weighted assets (‘RWAs’) totalled $854.1bn at 31 December
2023, a $14.4bn increase since 2022, including foreign currency
translation differences of $2.0bn. This was mainly due to:
–a $26.2bn increase in asset size, which was mostly attributed to
WPB lending growth and a rise in operational risk RWAs, offset by
reduced lending in CMB and GBM;
–a $6.2bn increase from acquisitions, mainly from SVB UK, partly
offset by a disposal of our Oman business; and
–a $19.9bn decrease in RWAs due to changes in methodology and
policy.
Customer accounts by country/territory
2023
20221
$m
$m
Hong Kong
543,504
542,543
UK
508,181
493,028
US
99,607
100,404
Singapore
73,547
61,475
Mainland China
56,006
56,948
France1
42,666
33,726
Australia
32,071
28,506
Germany
30,641
28,949
Mexico
29,423
25,531
UAE
24,882
23,331
India
24,377
22,636
Taiwan
16,949
15,316
Malaysia
15,983
16,008
Switzerland
8,047
5,167
Egypt
5,858
6,045
Indonesia
5,599
5,840
Türkiye
3,510
3,497
Other2
90,796
101,353
At 31 Dec
1,611,647
1,570,303
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
2At 31 December 2023, customer accounts of $86bn (2022: $85bn) met the criteria to be classified as held for sale and are reported within ‘Liabilities
of disposal groups held for sale’ on the balance sheet, of which $63bn (2022: $61bn) and $22bn (2022: $22bn) belongs to the planned sale of the
banking business in Canada and sale of our retail banking operations in France, respectively. Refer to Note 23 on page 428 for further details.
Loans and advances, deposits by currency
At
31 Dec 2023
$m
USD
GBP
HKD
EUR
CNY
Others1
Total
Loans and advances to banks
33,231
15,632
7,106
4,688
8,772
43,473
112,902
Loans and advances to customers
170,274
284,261
213,079
68,655
49,594
152,672
938,535
Total loans and advances
203,505
299,893
220,185
73,343
58,366
196,145
1,051,437
Deposits by banks
28,744
18,231
2,597
6,997
4,517
12,077
73,163
Customer accounts
441,967
423,725
305,520
128,444
63,535
248,456
1,611,647
Total deposits
470,711
441,956
308,117
135,441
68,052
260,533
1,684,810
31 Dec 20222
Loans and advances to banks
34,495
12,292
5,188
6,328
7,833
38,339
104,475
Loans and advances to customers
182,719
265,988
221,150
57,077
49,036
147,591
923,561
Total loans and advances
217,214
278,280
226,338
63,405
56,869
185,930
1,028,036
Deposits by banks
23,133
16,963
4,002
8,830
4,707
9,087
66,722
Customer accounts
430,866
422,087
312,052
112,399
63,032
229,867
1,570,303
Total deposits
453,999
439,050
316,054
121,229
67,739
238,954
1,637,025
1 ‘Others’ includes items with no currency information available of $1,592m for loans to banks (2022: $1,112m), $1,904m for loans to customers (2022:
$2,112m), $11m for deposits by banks (2022: $13m) and $8m for customer accounts (2022: $6m).
2 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
RWAs by currency
At
31 Dec 2023
$m
USD
GBP
HKD
EUR
CNY
Others
Total
RWAs1
202,697
155,231
135,701
69,996
57,907
232,582
854,114
31 Dec 2022
RWAs1
223,657
143,474
152,804
60,843
49,867
209,075
839,720
1 RWAs includes credit risk, market risk and operational risk RWAs.
Financial summary
112
HSBC Holdings plc
Average balance sheet
Average balance sheet and net interest income
Average balances and related interest are shown for the domestic
operations of our principal commercial banks by legal entity. ‘Other
trading entities’ comprise the operations of our principal commercial
banking and consumer finance entities outside their domestic
markets and all other banking operations, including investment
banking balances and transactions.
Average balances are based on daily averages for the principal areas
of our banking activities with monthly or less frequent averages used
elsewhere.
Balances and transactions with fellow subsidiaries are reported gross
in the principal commercial banking and consumer finance entities,
and the elimination entries are included within ‘Holding companies,
shared service centres and intra-group eliminations’.
Net interest margin numbers are calculated by dividing net interest
income as reported in the income statement by the average interest-
earning assets from which interest income is reported within the ‘Net
interest income’ line of the income statement. Total interest-earning
assets include credit-impaired loans where the carrying amount has
been adjusted as a result of impairment allowances. In accordance
with IFRSs, we recognise interest income on credit-impaired assets
after the carrying amount has been adjusted as a result of
impairment. Fee income that forms an integral part of the effective
interest rate of a financial instrument is recognised as an adjustment
to the effective interest rate and recorded in ‘Interest income’.
Assets
2023
20221
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
$m
$m
%
$m
$m
%
Summary
Interest-earning assets measured at amortised cost (itemised below)
2,161,746
100,868
4.67
2,143,758
52,826
2.46
Trading assets and financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
215,435
6,598
3.06
206,398
4,386
2.13
Expected credit losses provision
(11,603)
N/A
N/A
(10,753)
N/A
N/A
Non-interest-earning assets
694,309
N/A
N/A
678,092
N/A
N/A
Total assets and interest income
3,059,887
107,466
3.51
3,017,495
57,212
1.90
Average yield on all interest-earning assets
4.52
2.43
Short-term funds and loans and advances to banks
HSBC Bank plc
174,004
6,201
3.56
178,340
1,535
0.86
HSBC UK Bank plc
100,780
3,486
3.46
120,954
1,713
1.42
The Hongkong and Shanghai Banking Corporation Limited
88,089
3,078
3.49
91,681
1,266
1.38
HSBC Bank Middle East Limited
6,289
354
5.63
5,125
121
2.36
HSBC North America Holdings Inc.
33,034
1,136
3.44
43,326
526
1.21
HSBC Bank Canada
102
2
1.96
6,143
77
1.25
Grupo Financiero HSBC, S.A. de C.V.
2,609
267
10.23
2,323
162
6.97
Other trading entities
12,752
807
6.33
12,190
230
1.89
Holding companies, shared service centres and intra-group eliminations
(13,985)
(561)
4.01
(14,423)
(53)
0.37
At 31 Dec
403,674
14,770
3.66
445,659
5,577
1.25
Loans and advances to customers
HSBC Bank plc
109,576
4,989
4.55
113,146
2,591
2.29
HSBC UK Bank plc
261,516
11,219
4.29
249,502
7,100
2.85
The Hongkong and Shanghai Banking Corporation Limited
467,179
21,821
4.67
489,742
14,254
2.91
HSBC Bank Middle East Limited
19,769
1,229
6.22
20,546
781
3.80
HSBC North America Holdings Inc.
54,129
3,175
5.87
55,766
1,979
3.55
HSBC Bank Canada
—
—
—
51,415
1,684
3.28
Grupo Financiero HSBC, S.A. de C.V.
24,844
3,406
13.71
20,177
2,374
11.77
Other trading entities
21,083
2,338
11.09
22,375
1,828
8.17
Holding companies, shared service centres and intra-group eliminations
(379)
(504)
132.98
(349)
(48)
13.75
At 31 Dec
957,717
47,673
4.98
1,022,320
32,543
3.18
Reverse repurchase agreements – banks2
HSBC Bank plc
53,042
3,177
5.99
32,587
644
1.98
HSBC UK Bank plc
1,700
69
4.06
1,685
22
1.31
The Hongkong and Shanghai Banking Corporation Limited
65,387
2,437
3.73
63,682
1,220
1.92
HSBC Bank Middle East Limited
3,105
171
5.51
2,696
53
1.97
HSBC North America Holdings Inc.
8,859
645
7.28
10,547
208
1.97
HSBC Bank Canada
—
—
—
1,851
19
1.03
Grupo Financiero HSBC, S.A. de C.V.
2,419
254
10.50
1,629
135
8.29
Other trading entities
3,825
604
15.79
2,238
231
10.32
Holding companies, shared service centres and intra-group eliminations
(25,187)
(871)
3.46
(10,318)
(307)
2.98
At 31 Dec
113,150
6,486
5.73
106,597
2,225
2.09
HSBC Holdings plc
113
Assets (continued)
2023
20221
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
$m
$m
%
$m
$m
%
Reverse repurchase agreements – customers2
HSBC Bank plc
36,414
2,707
7.43
36,549
901
2.47
HSBC UK Bank plc
5,841
327
5.60
11,309
139
1.23
The Hongkong and Shanghai Banking Corporation Limited
49,010
970
1.98
45,268
374
0.83
HSBC Bank Middle East Limited
2,418
113
4.67
1,857
37
1.99
HSBC North America Holdings Inc.
34,842
3,756
10.78
28,956
1,108
3.83
HSBC Bank Canada
36
2
5.56
3,004
89
2.96
Grupo Financiero HSBC, S.A. de C.V.
269
31
11.52
215
12
5.58
Other trading entities
—
—
—
—
—
—
Holding companies, shared service centres and intra-group eliminations
(1,717)
(1)
0.06
(2,697)
1
(0.04)
At 31 Dec
127,113
7,905
6.22
124,461
2,661
2.14
Financial investments
HSBC Bank plc
51,179
1,866
3.65
46,640
776
1.66
HSBC UK Bank plc
27,025
891
3.30
19,003
268
1.41
The Hongkong and Shanghai Banking Corporation Limited
241,467
8,664
3.59
208,592
3,466
1.66
HSBC Bank Middle East Limited
10,682
451
4.22
9,249
136
1.47
HSBC North America Holdings Inc.
39,961
1,634
4.09
37,380
836
2.24
HSBC Bank Canada
—
—
—
13,695
252
1.84
Grupo Financiero HSBC, S.A. de C.V.
4,050
291
7.19
3,929
241
6.13
Other trading entities
11,091
1,908
17.20
13,004
1,513
11.63
Holding companies, shared service centres and intra-group eliminations
21,908
1,153
5.26
21,210
216
1.02
At 31 Dec
407,363
16,858
4.14
372,702
7,704
2.07
Other interest-earning assets
HSBC Bank plc
58,744
3,197
5.44
50,787
1,469
2.89
HSBC UK Bank plc
1,304
79
6.06
1,253
40
3.19
The Hongkong and Shanghai Banking Corporation Limited
11,182
744
6.65
10,697
250
2.34
HSBC Bank Middle East Limited
583
2
0.34
(1,522)
8
(0.53)
HSBC North America Holdings Inc.
3,720
233
6.26
4,703
101
2.15
HSBC Bank Canada
82,832
4,023
4.86
8,153
329
4.04
Grupo Financiero HSBC, S.A. de C.V.
650
24
3.69
589
8
1.36
Other trading entities
104
1,853
1,781.73
184
638
346.74
Holding companies, shared service centres and intra-group eliminations
(6,390)
(2,979)
46.62
(2,825)
(727)
25.73
At 31 Dec
152,729
7,176
4.70
72,019
2,116
2.94
Total interest-earning assets
HSBC Bank plc
482,959
22,137
4.58
458,049
7,916
1.73
HSBC UK Bank plc
398,166
16,071
4.04
403,706
9,282
2.30
The Hongkong and Shanghai Banking Corporation Limited
922,314
37,714
4.09
909,662
20,830
2.29
HSBC Bank Middle East Limited
42,846
2,320
5.41
37,951
1,136
2.99
HSBC North America Holdings Inc.
174,545
10,579
6.06
180,678
4,758
2.63
HSBC Bank Canada
82,970
4,027
4.85
84,261
2,450
2.91
Grupo Financiero HSBC, S.A. de C.V.
34,841
4,273
12.26
28,862
2,932
10.16
Other trading entities
48,855
7,510
15.37
49,991
4,440
8.88
Holding companies, shared service centres and intra-group eliminations
(25,750)
(3,763)
14.61
(9,402)
(918)
9.76
At 31 Dec
2,161,746
100,868
4.67
2,143,758
52,826
2.46
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a
lower net balance reported for repurchase agreements and thus higher cost.
Equity and liabilities
2023
20221
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
$m
$m
%
$m
$m
%
Summary
Interest-bearing liabilities measured at amortised cost (itemised below)
1,872,883
65,072
3.47
1,804,129
22,449
1.24
Trading liabilities and financial liabilities designated at fair value
(excluding own debt issued)
126,969
4,960
3.91
122,021
2,596
2.13
Non-interest bearing current accounts
253,741
N/A
N/A
310,595
N/A
N/A
Total equity and other non-interest bearing liabilities
806,294
N/A
N/A
780,750
N/A
N/A
Total equity and liabilities
3,059,887
70,032
2.29
3,017,495
25,045
0.83
Average cost on all interest-bearing liabilities
3.50
1.30
Financial summary
114
HSBC Holdings plc
Equity and liabilities (continued)
2023
20221
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
$m
$m
%
$m
$m
%
Deposits by banks2
HSBC Bank plc
29,222
1,137
3.89
39,318
235
0.60
HSBC UK Bank plc
12,917
616
4.77
12,748
194
1.52
The Hongkong and Shanghai Banking Corporation Limited
22,416
507
2.26
28,897
239
0.83
HSBC Bank Middle East Limited
4,253
200
4.70
2,355
92
3.91
HSBC North America Holdings Inc.
8,150
315
3.87
8,177
88
1.08
HSBC Bank Canada
270
6
2.22
700
2
0.29
Grupo Financiero HSBC, S.A. de C.V.
540
101
18.70
657
69
10.50
Other trading entities
3,245
31
0.96
2,211
17
0.77
Holding companies, shared service centres and intra-group eliminations
(20,621)
(512)
2.48
(19,324)
(166)
0.86
At 31 Dec
60,392
2,401
3.98
75,739
770
1.02
Debt Securities in issue – non trading
HSBC Bank plc
38,067
1,887
4.96
36,187
694
1.92
HSBC UK Bank plc
18,285
759
4.15
16,566
448
2.70
The Hongkong and Shanghai Banking Corporation Limited
48,728
2,816
5.78
46,017
1,369
2.97
HSBC Bank Middle East Limited
1,970
73
3.71
2,221
47
2.12
HSBC North America Holdings Inc.
23,921
1,505
6.29
20,872
659
3.16
HSBC Bank Canada
741
51
6.88
11,816
293
2.48
Grupo Financiero HSBC, S.A. de C.V.
1,696
92
5.42
1,184
74
6.25
Other trading entities
1,643
155
9.43
1,934
178
9.20
Holding companies, shared service centres and intra-group eliminations
49,816
3,885
7.80
42,978
1,845
4.29
At 31 Dec
184,867
11,223
6.07
179,775
5,607
3.12
Customer accounts3
HSBC Bank plc
230,846
8,511
3.69
202,791
2,181
1.08
HSBC UK Bank plc
269,034
4,532
1.68
270,509
860
0.32
The Hongkong and Shanghai Banking Corporation Limited
702,788
14,523
2.07
694,032
4,156
0.60
HSBC Bank Middle East Limited
12,996
382
2.94
9,714
70
0.72
HSBC North America Holdings Inc.
77,557
2,731
3.52
76,652
809
1.06
HSBC Bank Canada
1
—
—
47,862
567
1.18
Grupo Financiero HSBC, S.A. de C.V.
22,579
1,489
6.59
19,121
783
4.09
Other trading entities
28,887
2,396
8.29
28,960
1,585
5.47
Holding companies, shared service centres and intra-group eliminations
(9,885)
(402)
4.07
(7,299)
(108)
1.48
At 31 Dec
1,334,803
34,162
2.56
1,342,342
10,903
0.81
Repurchase agreements – with banks4
HSBC Bank plc
22,132
1,915
8.65
13,098
282
2.15
HSBC UK Bank plc
656
34
5.18
191
4
2.09
The Hongkong and Shanghai Banking Corporation Limited
43,153
1,368
3.17
26,253
464
1.77
HSBC Bank Middle East Limited
1,982
99
4.99
1,355
23
1.70
HSBC North America Holdings Inc.
5,542
444
8.01
6,756
141
2.09
HSBC Bank Canada
—
—
—
514
12
2.33
Grupo Financiero HSBC, S.A. de C.V.
296
36
12.16
148
10
6.76
Other trading entities
737
114
15.47
333
48
14.41
Holding companies, shared service centres and intra-group eliminations
(24,798)
(1,009)
4.07
(12,986)
(286)
2.20
At 31 Dec
49,700
3,001
6.04
35,662
698
1.96
Repurchase agreements – with customers4
HSBC Bank plc
34,218
2,514
7.35
26,182
711
2.72
HSBC UK Bank plc
7,556
428
5.66
9,596
151
1.57
The Hongkong and Shanghai Banking Corporation Limited
22,496
994
4.42
14,401
228
1.58
HSBC Bank Middle East Limited
—
—
—
—
—
—
HSBC North America Holdings Inc.
31,161
3,538
11.35
28,597
1,025
3.58
HSBC Bank Canada
487
25
5.13
4,158
91
2.19
Grupo Financiero HSBC, S.A. de C.V.
3,429
382
11.14
2,239
178
7.95
Other trading entities
12
1
8.33
13
1
7.69
Holding companies, shared service centres and intra-group eliminations
(2,454)
(25)
1.02
(2,540)
2
(0.08)
At 31 Dec
96,905
7,857
8.11
82,646
2,387
2.89
HSBC Holdings plc
115
Equity and liabilities (continued)
2023
20221
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
$m
$m
%
$m
$m
%
Other interest-bearing liabilities
HSBC Bank plc
65,326
3,498
5.35
61,942
1,458
2.35
HSBC UK Bank plc
607
19
3.13
736
11
1.49
The Hongkong and Shanghai Banking Corporation Limited
16,699
800
4.79
17,002
345
2.03
HSBC Bank Middle East Limited
92
14
15.22
79
2
2.53
HSBC North America Holdings Inc.
3,253
334
10.27
5,488
113
2.06
HSBC Bank Canada
70,814
2,519
3.56
8,390
233
2.78
Grupo Financiero HSBC, S.A. de C.V.
191
27
14.14
163
19
11.66
Other trading entities
271
1,046
385.98
238
367
154.20
Holding companies, shared service centres and intra-group eliminations
(11,037)
(1,829)
16.57
(6,073)
(464)
7.64
At 31 Dec
146,216
6,428
4.40
87,965
2,084
2.37
Total interest-bearing liabilities
HSBC Bank plc
419,811
19,462
4.64
379,517
5,561
1.47
HSBC UK Bank plc
309,055
6,388
2.07
310,346
1,668
0.54
The Hongkong and Shanghai Banking Corporation Limited
856,280
21,008
2.45
826,602
6,801
0.82
HSBC Bank Middle East Limited
21,293
768
3.61
15,724
234
1.49
HSBC North America Holdings Inc.
149,584
8,867
5.93
146,542
2,835
1.93
HSBC Bank Canada
72,313
2,601
3.60
73,440
1,198
1.63
Grupo Financiero HSBC, S.A. de C.V.
28,731
2,127
7.40
23,512
1,133
4.82
Other trading entities
34,795
3,743
10.76
33,689
2,196
6.52
Holding companies, shared service centres and intra-group eliminations
(18,979)
108
(0.57)
(5,243)
823
(15.70)
At 31 Dec
1,872,883
65,072
3.47
1,804,129
22,449
1.24
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2This includes interest-bearing bank deposits only. See page 120 for an analysis of all bank deposits.
3This includes interest-bearing customer accounts only. See page 120 for an analysis of all customer accounts.
4The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a
lower net balance reported for repurchase agreements and thus higher cost.
Net interest margin1
2023
20222
2021
%
%
%
HSBC Bank plc
0.55
0.51
0.49
HSBC UK Bank plc
2.43
1.89
1.53
The Hongkong and Shanghai Banking Corporation Limited
1.81
1.54
1.37
HSBC Bank Middle East Limited
3.62
2.38
1.66
HSBC North America Holdings Inc.
0.98
1.06
0.93
HSBC Bank Canada
1.54
1.49
1.19
Grupo Financiero HSBC, S.A. de C.V.
6.17
6.22
5.61
Other trading entities
7.71
4.49
3.17
At 31 Dec
1.66
1.42
1.20
1Net interest margin is calculated as net interest income divided by average interest-earning assets.
2  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
Distribution of average total assets
2023
20221
2021
%
%
%
HSBC Bank plc
30.0
29.0
30.0
HSBC UK Bank plc
14.0
14.0
14.0
The Hongkong and Shanghai Banking Corporation Limited
44.0
44.0
42.0
HSBC Bank Middle East Limited
2.0
2.0
2.0
HSBC North America Holdings Inc.
8.0
9.0
9.0
HSBC Bank Canada
3.0
3.0
3.0
Grupo Financiero HSBC, S.A. de C.V.
2.0
1.0
1.0
Other trading entities
2.0
2.0
2.0
Holding companies, shared service centres and intra-group eliminations
(5.0)
(4.0)
(3.0)
At 31 Dec
100.0
100.0
100.0
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
Financial summary
116
HSBC Holdings plc
Analysis of changes in net interest income and net interest expense
The following tables allocate changes in interest income and interest expense between volume and rate for 2023 compared with 2022, and for
2022 compared with 2021. We isolate rate variances and allocate any change arising from both volume and rate/volume to volume.
Interest income
Increase/(decrease)
in 2023 compared
with 2022
Increase/(decrease)
in 2022 compared
with 2021
2023
Volume
Rate
20221
Volume
Rate
2021
$m
$m
$m
$m
$m
$m
$m
Short-term funds and loans and advances to banks
HSBC Bank plc
6,201
(149)
4,815
1,535
134
1,244
157
HSBC UK Bank plc
3,486
(694)
2,467
1,713
(52)
1,633
132
The Hongkong and Shanghai Banking Corporation Limited
3,078
(122)
1,934
1,266
68
696
502
HSBC Bank Middle East Limited
354
65
168
121
(12)
99
34
HSBC North America Holdings Inc.
1,136
(356)
966
526
(129)
545
110
HSBC Bank Canada
2
(119)
44
77
(78)
126
29
Grupo Financiero HSBC, S.A. de C.V.
267
29
76
162
13
64
85
Other trading entities
807
36
541
230
(13)
164
79
Holding companies, shared service centres and intra-group eliminations
(561)
17
(525)
(53)
(10)
(20)
(23)
At 31 Dec
14,770
(1,547)
10,740
5,577
(35)
4,507
1,105
Loans and advances to customers
HSBC Bank plc
4,989
(159)
2,557
2,591
(535)
900
2,226
HSBC UK Bank plc
11,219
526
3,593
7,100
(522)
989
6,633
The Hongkong and Shanghai Banking Corporation Limited
21,821
(1,052)
8,619
14,254
36
3,619
10,599
HSBC Bank Middle East Limited
1,229
(49)
497
781
21
146
614
HSBC North America Holdings Inc.
3,175
(98)
1,294
1,979
34
400
1,545
HSBC Bank Canada
—
(1,684)
—
1,684
(16)
378
1,322
Grupo Financiero HSBC, S.A. de C.V.
3,406
641
391
2,374
198
327
1,849
Other trading entities
2,338
(143)
653
1,828
(74)
531
1,371
Holding companies, shared service centres and intra-group eliminations
(504)
(40)
(416)
(48)
5
35
(88)
At 31 Dec
47,673
(3,272)
18,402
32,543
(1,165)
7,637
26,071
Reverse repurchase agreements – with banks
HSBC Bank plc
3,177
1,226
1,307
644
(178)
685
137
HSBC UK Bank plc
69
1
46
22
11
10
1
The Hongkong and Shanghai Banking Corporation Limited
2,437
64
1,153
1,220
135
701
384
HSBC Bank Middle East Limited
171
23
95
53
13
24
16
HSBC North America Holdings Inc.
645
(123)
560
208
(45)
245
8
HSBC Bank Canada
—
(19)
—
19
4
11
4
Grupo Financiero HSBC, S.A. de C.V.
254
83
36
135
(15)
97
53
Other trading entities
604
251
122
231
5
(19)
245
Holding companies, shared service centres and intra-group eliminations
(871)
(514)
(50)
(307)
(52)
(152)
(103)
At 31 Dec
6,486
381
3,880
2,225
(91)
1,571
745
Reverse repurchase agreements – with customers
HSBC Bank plc
2,707
(7)
1,813
901
(30)
811
120
HSBC UK Bank plc
327
(306)
494
139
88
43
8
The Hongkong and Shanghai Banking Corporation Limited
970
75
521
374
155
155
64
HSBC Bank Middle East Limited
113
26
50
37
33
3
1
HSBC North America Holdings Inc.
3,756
636
2,012
1,108
103
970
35
HSBC Bank Canada
2
(165)
78
89
(29)
105
13
Grupo Financiero HSBC, S.A. de C.V.
31
6
13
12
8
(29)
33
Other trading entities
—
—
—
—
—
—
—
Holding companies, shared service centres and intra-group eliminations
(1)
1
(3)
1
—
1
—
At 31 Dec
7,905
166
5,078
2,661
619
1,768
274
HSBC Holdings plc
117
Interest income (continued)
Increase/(decrease)
in 2023 compared
with 2022
Increase/(decrease)
in 2022 compared
with 2021
2023
Volume
Rate
20221
Volume
Rate
2021
$m
$m
$m
$m
$m
$m
$m
Financial investments
HSBC Bank plc
1,866
162
928
776
(252)
335
693
HSBC UK Bank plc
891
264
359
268
(14)
102
180
The Hongkong and Shanghai Banking Corporation Limited
8,664
1,172
4,026
3,466
(765)
230
4,001
HSBC Bank Middle East Limited
451
61
254
136
(25)
100
61
HSBC North America Holdings Inc.
1,634
106
692
836
(123)
308
651
HSBC Bank Canada
—
(252)
—
252
26
149
77
Grupo Financiero HSBC, S.A. de C.V.
291
8
42
241
(17)
35
223
Other trading entities
1,908
(329)
724
1,513
151
575
787
Holding companies, shared service centres and intra-group eliminations
1,153
38
899
216
20
140
56
At 31 Dec
16,858
1,439
7,715
7,704
(1,395)
2,370
6,729
Interest expense
Increase/(decrease)
in 2023 compared
with 2022
Increase/(decrease)
in 2022 compared
with 2021
2023
Volume
Rate
20221
Volume
Rate
2021
$m
$m
$m
$m
$m
$m
$m
Deposits by banks
HSBC Bank plc
1,137
(392)
1,294
235
(39)
213
61
HSBC UK Bank plc
616
8
414
194
144
46
4
The Hongkong and Shanghai Banking Corporation Limited
507
(145)
413
239
(18)
190
67
HSBC Bank Middle East Limited
200
89
19
92
(15)
78
29
HSBC North America Holdings Inc.
315
(1)
228
88
—
84
4
HSBC Bank Canada
6
(10)
14
2
(4)
6
—
Grupo Financiero HSBC, S.A. de C.V.
101
(22)
54
69
(10)
29
50
Other trading entities
31
10
4
17
1
4
12
Holding companies, shared service centres and intra-group eliminations
(512)
(33)
(313)
(166)
(10)
(127)
(29)
At 31 Dec
2,401
(611)
2,242
770
(3)
575
198
Customer accounts
HSBC Bank plc
8,511
1,037
5,293
2,181
(54)
1,857
378
HSBC UK Bank plc
4,532
(7)
3,679
860
(57)
751
166
The Hongkong and Shanghai Banking Corporation Limited
14,523
165
10,202
4,156
35
2,187
1,934
HSBC Bank Middle East Limited
382
96
216
70
3
42
25
HSBC North America Holdings Inc.
2,731
36
1,886
809
(93)
707
195
HSBC Bank Canada
—
(567)
—
567
(26)
423
170
Grupo Financiero HSBC, S.A. de C.V.
1,489
228
478
783
62
310
411
Other trading entities
2,396
(6)
817
1,585
83
672
830
Holding companies, shared service centres and intra-group eliminations
(402)
(105)
(189)
(108)
(5)
(93)
(10)
At 31 Dec
34,162
(232)
23,491
10,903
(145)
6,949
4,099
Financial summary
118
HSBC Holdings plc
Interest expense (continued)
Increase/(decrease)
in 2023 compared
with 2022
Increase/(decrease)
in 2022 compared
with 2021
2023
Volume
Rate
20221
Volume
Rate
2021
$m
$m
$m
$m
$m
$m
$m
Repurchase agreements – with banks
HSBC Bank plc
1,915
782
851
282
(151)
406
27
HSBC UK Bank plc
34
24
6
4
(1)
5
—
The Hongkong and Shanghai Banking Corporation Limited
1,368
536
368
464
79
244
141
HSBC Bank Middle East Limited
99
31
45
23
10
12
1
HSBC North America Holdings Inc.
444
(97)
400
141
3
134
4
HSBC Bank Canada
—
(12)
—
12
4
6
2
Grupo Financiero HSBC, S.A. de C.V.
36
18
8
10
7
(5)
8
Other trading entities
114
62
4
48
26
—
22
Holding companies, shared service centres and intra-group eliminations
(1,009)
(480)
(243)
(286)
(79)
(180)
(27)
At 31 Dec
3,001
848
1,455
698
(98)
618
178
Repurchase agreements – with customers
HSBC Bank plc
2,514
591
1,212
711
25
645
41
HSBC UK Bank plc
428
(115)
392
151
63
87
1
The Hongkong and Shanghai Banking Corporation Limited
994
357
409
228
44
137
47
HSBC Bank Middle East Limited
—
—
—
—
—
—
—
HSBC North America Holdings Inc.
3,538
291
2,222
1,025
(11)
1,029
7
HSBC Bank Canada
25
(188)
122
91
9
74
8
Grupo Financiero HSBC, S.A. de C.V.
382
133
71
178
22
76
80
Other trading entities
1
—
—
1
1
—
—
Holding companies, shared service centres and intra-group eliminations
(25)
1
(28)
2
(1)
2
1
At 31 Dec
7,857
1,156
4,314
2,387
261
1,941
185
Debt securities in issue – non trading
HSBC Bank plc
1,887
93
1,100
694
(330)
671
353
HSBC UK Bank plc
759
71
240
448
(9)
61
396
The Hongkong and Shanghai Banking Corporation Limited
2,816
154
1,293
1,369
182
535
652
HSBC Bank Middle East Limited
73
(9)
35
47
(20)
29
38
HSBC North America Holdings Inc.
1,505
193
653
659
(21)
314
366
HSBC Bank Canada
51
(762)
520
293
(26)
86
233
Grupo Financiero HSBC, S.A. de C.V.
92
28
(10)
74
(50)
(3)
127
Other trading entities
155
(27)
4
178
(1)
69
110
Holding companies, shared service centres and intra-group eliminations
3,885
531
1,509
1,845
59
458
1,328
At 31 Dec
11,223
313
5,303
5,607
(430)
2,434
3,603
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
HSBC Holdings plc
119
Loan maturity and interest sensitivity analysis
The analysis of loan maturity and interest sensitivity is presented for
loans where repayment is expected to occur on a contractual
repayment basis (presented within Loans and advances to banks and
Loans and advances to customers on our balance sheet). Loans that
have been re-classified to Assets held for sale are excluded as
recovery is expected from sale proceeds within the next 12 months
rather than individual contractual repayment terms. The analysis of
loan maturity and interest sensitivity by loan type on a contractual
repayment basis was as follows.
2023
2022
$m
$m
Maturity of 1 year or less
Loans and advances to banks
107,658
97,785
Loans and advances to customers
344,777
350,325
452,435
448,110
Maturity after 1 year but within 5 years
Loans and advances to banks
5,086
6,628
Loans and advances to customers
272,772
276,826
277,858
283,454
Interest rate sensitivity of loans and advances to banks
Fixed interest rate
2,623
3,100
Variable interest rate
2,463
3,528
5,086
6,628
Interest rate sensitivity of loans and advances to customers
Fixed interest rate
60,734
62,582
Variable interest rate
212,038
214,244
272,772
276,826
Maturity after 5 years but within 15 years
Loans and advances to banks
173
41
Loans and advances to customers
169,345
161,596
169,518
161,637
Interest rate sensitivity of loans and advances to banks
Fixed interest rate
173
41
Variable interest rate
—
—
173
41
Interest rate sensitivity of loans and advances to customers
Fixed interest rate
72,458
67,516
Variable interest rate
96,887
94,080
169,345
161,596
Maturity after 15 years
Loans and advances to banks
—
90
Loans and advances to customers
162,713
146,262
162,713
146,352
Interest rate sensitivity of loans and advances to banks
Fixed interest rate
—
90
Variable interest rate
—
—
—
90
Interest rate sensitivity of loans and advances to customers
Fixed interest rate
72,014
61,051
Variable interest rate
90,699
85,211
162,713
146,262
Financial summary
120
HSBC Holdings plc
Deposits
The following tables summarise the average amount of bank
deposits, customer deposits and certificates of deposit (‘CDs’) and
other money market instruments (that are included within ‘Debt
securities in issue’ in the balance sheet), together with the average
interest rates paid thereon for each of the past two years.
The analysis of average deposits by legal entity is based on the legal
entity in which the deposits are recorded and excludes balances with
HSBC companies.
Deposits by banks
2023
2022
Average
balance
Average
rate
Average
balance
Average
rate
$m
%
$m
%
HSBC UK Bank Plc
12,966
12,927
–  demand and other – non-interest bearing
85
—
196
—
–  demand – interest bearing
20
5.0
8
—
–  time
12,861
4.6
12,723
1.4
–  other
—
—
—
—
HSBC Bank plc
29,569
39,361
–  demand and other – non-interest bearing
6,354
—
6,498
—
–  demand – interest bearing
16,781
4.1
17,491
0.9
–  time
6,113
4.0
15,126
0.2
–  other
321
—
246
—
The Hong Kong and Shanghai Banking Corporation Limited
21,179
28,348
–  demand and other – non-interest bearing
3,569
—
4,598
—
–  demand – interest bearing
14,311
2.2
19,665
0.7
–  time
3,295
4.9
4,079
2.2
–  other
4
—
6
—
HSBC Bank Middle East Limited
1,517
1,297
–  demand and other – non-interest bearing
140
—
152
—
–  demand – interest bearing
558
1.3
523
0.4
–  time
717
5.4
540
2.2
–  other
102
—
82
—
HSBC North America Holdings Inc.
5,352
6,017
–  demand and other – non-interest bearing
780
—
1,603
—
–  demand – interest bearing
3,918
4.4
4,414
1.3
–  time
654
5.4
—
—
–  other
—
—
—
—
HSBC Bank Canada
—
162
–  demand and other – non-interest bearing
—
—
77
—
–  demand – interest bearing
—
—
14
—
–  time
—
—
71
1.4
–  other
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V
540
657
–  demand and other – non-interest bearing
—
—
—
—
–  demand – interest bearing
43
11.6
31
6.4
–  time
497
18.7
626
10.4
–  other
—
—
—
—
Other trading entities
291
240
–  demand and other – non-interest bearing
94
—
145
—
–  demand – interest bearing
37
5.4
52
17.2
–  time
160
11.3
43
9.4
–  other
—
—
—
—
Total
71,414
3.4
89,009
–  demand and other – non-interest bearing
11,022
—
13,269
—
–  demand – interest bearing
35,668
3.4
42,198
0.9
–  time
24,297
4.9
33,208
1.2
–  other
427
—
334
—
HSBC Holdings plc
121
Customer accounts
2023
2022
Average
balance
Average
rate
Average
balance
Average
rate
$m
%
$m
%
HSBC UK Bank Plc
334,043
345,868
–  demand and other – non-interest bearing
65,498
—
75,363
—
–  demand – interest bearing
225,190
1.5
241,749
0.3
–  savings
31,666
2.5
24,762
0.5
–  time
11,538
3.8
3,859
1.3
–  other
151
4.0
135
1.5
HSBC Bank plc
282,193
273,892
–  demand and other – non-interest bearing
59,751
—
77,329
—
–  demand – interest bearing
156,071
3.8
151,092
1.0
–  savings
41,771
2.9
28,140
0.9
–  time
22,647
4.4
16,435
1.7
–  other
1,953
4.4
896
1.3
The Hong Kong and Shanghai Banking Corporation Limited
777,111
782,339
–  demand and other – non-interest bearing
74,908
—
88,876
—
–  demand – interest bearing
441,399
0.9
553,526
0.2
–  savings
225,530
4.0
119,439
2.1
–  time
35,274
4.5
20,493
1.9
–  other
—
—
5
—
HSBC Bank Middle East Limited
31,265
28,202
–  demand and other – non-interest bearing
18,308
—
18,586
—
–  demand – interest bearing
6,255
1.8
6,309
0.5
–  savings
5,414
3.6
3,246
1.0
–  time
1,288
5.6
61
5.0
–  other
—
—
—
—
HSBC North America Holdings Inc.
99,377
104,208
–  demand and other – non-interest bearing
22,096
—
27,855
—
–  demand – interest bearing
28,438
4.2
27,821
1.4
–  savings
40,380
2.8
45,810
0.8
–  time
8,463
4.8
2,722
2.4
–  other
—
—
—
—
HSBC Bank Canada
—
53,883
–  demand and other – non-interest bearing
—
—
6,022
—
–  demand – interest bearing
—
—
16,583
1.1
–  savings
—
—
30,945
1.7
–  time
—
—
333
1.8
–  other
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
28,315
5.3
24,281
–  demand and other – non-interest bearing
5,736
—
5,160
—
–  demand – interest bearing
13,174
5.3
11,586
3.5
–  savings
1,166
—
993
—
–  time
8,239
9.6
6,542
5.8
–  other
—
—
—
—
Other trading entities
40,516
4.3
44,475
–  demand and other – non-interest bearing
11,720
—
15,616
—
–  demand – interest bearing
11,936
—
15,164
12.7
–  savings
10,476
16.7
9,845
2.0
–  time
6,384
—
3,850
—
–  other
—
—
—
Total
1,592,820
2.3
1,657,148
–  demand and other – non-interest bearing
258,017
—
314,807
—
–  demand – interest bearing
882,463
1.8
1,023,830
0.5
–  savings
356,403
4.4
263,180
1.9
–  time
93,833
5.0
54,295
2.3
–  other
2,104
4.4
1,036
1.4
Financial summary
122
HSBC Holdings plc
Net charge-offs to average loans
The following table provides the net charge-offs to average loans for
loans and advances to banks and customers.
Net charge-offs to average loans
2023
2022
%
%
Loans and advances to banks
—
—
Loans and advances to customers
0.38
0.24
Allowances for credit losses to total loans are presented in Summary
of credit risk (excluding debt instruments measured at FVOCI) by
stage distribution and ECL coverage by industry sector at page 188.
Estimate of uninsured deposits and uninsured time deposits
HSBC provides deposit services to customers across the many
countries in which we operate and are therefore subject to differing
national and state deposit insurance regimes. Uninsured deposits are
presented on an estimated basis using the same methodologies and
assumptions inherent in our liquidity reporting requirements to our
primary regulator, the Prudential Regulation Authority.
The insured status of a deposit is determined on the basis of
individual insurance limits enacted within local regulations.
At 31 December 2023, the amount of uninsured deposits was $1.3tn
(31 December 2022: $1.3tn).
Uninsured time deposits are uninsured deposits which are subject to
contractual maturity requirements prior to withdrawal. Amounts are
presented on a residual contractual maturity basis and exclude
overnight deposits where contractual requirements are imminently
satisfied.
Maturity analysis of uninsured time deposits
At 31 Dec 2023
3 months or
less
After 3 months
but within 6
months
After 6 months
but within 12
months
After
12 months
Total
$m
$m
$m
$m
$m
Uninsured time deposits
246,148
18,293
10,831
3,676
278,948
At 31 Dec 2022
Uninsured time deposits
202,777
14,935
8,436
4,894
231,042
HSBC Holdings plc
123
Global businesses and legal entities
Contents
Summary
Supplementary analysis of constant currency results and notable
items by global business
Reconciliation of reported and constant currency risk-weighted
assets
Supplementary tables for WPB and GBM
Global business financial performance 2022 compared with 2021
Analysis of reported results by legal entities
Summary information – legal entities and selected countries/
territories
Analysis by country/territory
Summary
The Group Chief Executive, supported by the rest of the Group
Executive Committee (‘GEC‘), reviews operating activity on a number
of bases, including by global business and legal entities. Our global
businesses – Wealth and Personal Banking, Commercial Banking, and
Global Banking and Markets – along with Corporate Centre are our
reportable segments under IFRS 8 ‘Operating Segments’ and are
presented below and in Note 10: Segmental analysis on page 399.
On 1 January 2023, we updated our financial reporting framework and
changed the supplementary presentation of results from geographical
regions to main legal entities to better reflect the Group’s structure.
The results of main legal entities are presented on a reported and
constant currency basis, including HSBC UK Bank plc, HSBC Bank plc,
The Hongkong and Shanghai Banking Corporation Limited, HSBC
Bank Middle East Limited, HSBC North America Holdings Inc., HSBC
Bank Canada and Grupo Financiero HSBC, S.A. de C.V.
The results of legal entities are presented on a reported basis on page
135 and a constant currency basis on page 138.
Basis of preparation
The Group Chief Executive, supported by the rest of the GEC, is
considered the Chief Operating Decision Maker (‘CODM’) for the
purposes of identifying the Group’s reportable segments. Global
business results are assessed by the CODM on the basis of constant
currency performance. We separately disclose ‘notable items’, which are
components of our income statement that management would consider
as outside the normal course of business and generally non-recurring in
nature. Constant currency performance information for 2022 and 2021
are presented as described on page 101. As required by IFRS 8,
reconciliations of the total constant currency global business results to
the Group’s reported results are presented on page 400.
Supplementary reconciliations from reported to constant currency results
by global business are presented on pages 124 to 126 for information
purposes.
Global business performance is also assessed using return on tangible
equity (‘RoTE’). A reconciliation of global business RoTE to the Group’s
RoTE is provided on page 147.
Our operations are closely integrated and, accordingly, the presentation
of data includes internal allocations of certain items of income and
expense. These allocations include the costs of certain support services
and global functions to the extent that they can be meaningfully
attributed to global businesses and legal entities. While such allocations
have been made on a systematic and consistent basis, they necessarily
involve a degree of subjectivity. Costs that are not allocated to global
businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the
results of inter-segment funding along with inter-company and inter-
business line transactions. All such transactions are undertaken on arm’s
length terms. The intra-Group elimination items for the global businesses
are presented in Corporate Centre.
HSBC Holdings incurs the liability of the UK bank levy, with the cost
being recharged to its UK operating subsidiaries. The current year
expense will be reflected in the fourth quarter as it is assessed on our
balance sheet position as at 31 December.
In the first quarter of 2023, following an internal review to assess which
global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our entities in Latin America
was transferred from Global Banking and Markets to Commercial
Banking for reporting purposes. Comparative data have been re-
presented accordingly. Similar smaller transfers from Global Banking and
Markets to Commercial Banking were also undertaken within our entities
in Australia and Indonesia, where comparative data have not been re-
presented.
Supplementary analysis of constant currency results and notable items by global business
Constant currency results1
2023
Wealth and
Personal
Banking
Commercial
Banking2
Global
Banking and
Markets2
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue3
27,275
22,867
16,115
(199)
66,058
ECL
(1,058)
(2,062)
(326)
(1)
(3,447)
Operating expenses
(14,738)
(7,524)
(9,865)
57
(32,070)
Share of profit in associates and joint ventures
65
(1)
—
(257)
(193)
Profit/(loss) before tax
11,544
13,280
5,924
(400)
30,348
Loans and advances to customers (net)
454,878
309,422
173,966
269
938,535
Customer accounts
804,863
475,666
330,522
596
1,611,647
1In the current period constant currency results are equal to reported as there is no currency translation.
2In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our markets in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data
have been re-presented accordingly.
3  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Global businesses
124
HSBC Holdings plc
Notable items
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Disposals, acquisitions and related costs1,2,3
4
1,591
—
(297)
1,298
Fair value movements on financial instruments4
—
—
—
14
14
Disposal losses on Markets Treasury repositioning
(391)
(316)
(270)
—
(977)
Operating expenses
Disposals, acquisitions and related costs
(53)
(55)
3
(216)
(321)
Restructuring and other related costs5
20
32
21
63
136
Impairment of interest in associate6
—
—
—
(3,000)
(3,000)
1  Includes the impact of the sale of our retail banking operations in France.
2  Includes the provisional gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3  Includes fair value movements on the foreign exchange hedging of the expected proceeds from the planned sale of our banking operations in Canada.
4  Fair value movements on non-qualifying hedges in HSBC Holdings.
5  Amounts relate to reversals of restructuring provisions recognised during 2022.
6  Relates to an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 418.
Reconciliation of reported results to constant currency results – global businesses (continued)
20221
Wealth and
Personal
Banking
Commercial
Banking1
Global
Banking and
Markets2
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue3
Reported
21,103
16,494
14,899
(1,876)
50,620
Currency translation
(219)
(211)
(297)
(22)
(749)
Constant currency
20,884
16,283
14,602
(1,898)
49,871
ECL
Reported
(1,130)
(1,849)
(595)
(10)
(3,584)
Currency translation
(56)
(13)
22
1
(46)
Constant currency
(1,186)
(1,862)
(573)
(9)
(3,630)
Operating expenses
Reported
(14,415)
(7,052)
(9,383)
(1,851)
(32,701)
Currency translation
167
158
45
29
399
Constant currency
(14,248)
(6,894)
(9,338)
(1,822)
(32,302)
Share of profit/(loss) in associates and joint ventures
Reported
30
—
(2)
2,695
2,723
Currency translation
—
—
—
(121)
(121)
Constant currency
30
—
(2)
2,574
2,602
Profit/(loss) before tax
Reported
5,588
7,593
4,919
(1,042)
17,058
Currency translation
(108)
(66)
(230)
(113)
(517)
Constant currency
5,480
7,527
4,689
(1,155)
16,541
Loans and advances to customers (net)
Reported
422,309
311,957
188,940
355
923,561
Currency translation
11,813
4,906
1,262
6
17,987
Constant currency
434,122
316,863
190,202
361
941,548
Customer accounts
Reported
779,310
463,928
326,630
435
1,570,303
Currency translation
14,000
8,496
5,673
23
28,192
Constant currency
793,310
472,424
332,303
458
1,598,495
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data
have been re-presented accordingly.
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc
125
Notable items (continued)
20221
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Disposals, acquisitions and related costs2
(2,212)
—
—
(525)
(2,737)
Fair value movements on financial instruments3
—
—
—
(618)
(618)
Restructuring and other related costs4
98
(16)
(184)
(145)
(247)
Operating expenses
Disposals, acquisitions and related costs
(7)
—
—
(11)
(18)
Restructuring and other related costs
(357)
(266)
(252)
(2,007)
(2,882)
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2  Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.3bn (inclusive of
$0.4bn in goodwill impairments) related to the planned sale of the retail banking operations in France.
3  Fair value movements on non-qualifying hedges in HSBC Holdings.
4  Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Reconciliation of reported results to constant currency results – global businesses (continued)
20211
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue2
Reported
22,117
13,743
14,276
(584)
49,552
Currency translation
(1,145)
(1,044)
(1,190)
(94)
(3,473)
Constant currency
20,972
12,699
13,086
(678)
46,079
ECL
Reported
288
397
240
3
928
Currency translation
(93)
(58)
(19)
—
(170)
Constant currency
195
339
221
3
758
Operating expenses
Reported
(16,306)
(7,213)
(10,045)
(1,056)
(34,620)
Currency translation
968
522
790
96
2,376
Constant currency
(15,338)
(6,691)
(9,255)
(960)
(32,244)
Share of profit/(loss) in associates and joint ventures
Reported
34
1
—
3,011
3,046
Currency translation
2
—
—
(241)
(239)
Constant currency
36
1
—
2,770
2,807
Profit/(loss) before tax
Reported
6,133
6,928
4,471
1,374
18,906
Currency translation
(268)
(580)
(419)
(239)
(1,506)
Constant currency
5,865
6,348
4,052
1,135
17,400
Loans and advances to customers (net)
Reported
488,786
353,182
203,106
740
1,045,814
Currency translation
(15,482)
(12,579)
(6,913)
(28)
(35,002)
Constant currency
473,304
340,603
196,193
712
1,010,812
Customer accounts
Reported
859,029
511,195
339,698
652
1,710,574
Currency translation
(24,262)
(15,703)
(17,392)
(30)
(57,387)
Constant currency
834,767
495,492
322,306
622
1,653,187
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2    Net operating income/(expense) before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Notable items (continued)
20211
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Fair value movements on financial instruments2
—
—
—
(221)
(221)
Restructuring and other related costs3
14
(3)
(395)
77
(307)
Operating expenses
Impairment of non-financial items
(587)
—
—
—
(587)
Restructuring and other related costs
(296)
(83)
(195)
(1,262)
(1,836)
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Fair value movements on non-qualifying hedges in HSBC Holdings.
3  Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Global businesses
126
HSBC Holdings plc
Reconciliation of reported and constant currency risk-weighted assets
At 31 Dec 2023
Wealth and
Personal
Banking
Commercial
Banking1
Global
Banking and
Markets1
Corporate
Centre
Total
$bn
$bn
$bn
$bn
$bn
Risk-weighted assets
Reported
192.9
354.5
218.5
88.2
854.1
Constant currency
192.9
354.5
218.5
88.2
854.1
At 31 Dec 2022
Risk-weighted assets
Reported
182.9
342.4
225.9
88.5
839.7
Currency translation
1.7
1.8
(0.1)
—
3.4
Constant currency
184.6
344.2
225.8
88.5
843.1
At 31 Dec 2021
Risk-weighted assets
Reported
178.3
340.0
229.1
90.9
838.3
Currency translation
(6.1)
(15.9)
(8.4)
(1.4)
(31.8)
Constant currency
172.2
324.1
220.7
89.5
806.5
1    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data
have been re-presented accordingly.
Supplementary tables for WPB and GBM
WPB constant currency performance by business unit
A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is
assessed and managed.
WPB – summary (constant currency basis)
Consists of1
Total
WPB
Banking
operations
Life
insurance
Global
Private
Banking
Asset
management
$m
$m
$m
$m
$m
2023
Net operating income before change in expected credit losses and other credit
impairment charges2
27,275
22,279
1,462
2,252
1,282
–  net interest income
20,491
19,055
282
1,155
(1)
–  net fee income/(expense)
5,355
3,213
151
794
1,197
–  other income
1,429
11
1,029
303
86
ECL
(1,058)
(1,056)
4
(6)
—
Net operating income
26,217
21,223
1,466
2,246
1,282
Total operating expenses
(14,738)
(11,474)
(682)
(1,627)
(955)
Operating profit
11,479
9,749
784
619
327
Share of profit in associates and joint ventures
65
15
50
—
—
Profit before tax
11,544
9,764
834
619
327
2022
Net operating income before change in expected credit losses and other credit
impairment charges2
20,884
16,383
1,354
2,016
1,131
–  net interest income
15,971
14,673
339
965
(6)
–  net fee income/(expense)
5,307
3,260
154
788
1,105
–  other income
(394)
(1,550)
861
263
32
ECL
(1,186)
(1,173)
(8)
(4)
(1)
Net operating income
19,698
15,210
1,346
2,012
1,130
Total operating expenses
(14,248)
(11,132)
(785)
(1,477)
(854)
Operating profit
5,450
4,078
561
535
276
Share of profit in associates and joint ventures
30
13
17
—
—
Profit before tax
5,480
4,091
578
535
276
HSBC Holdings plc
127
WPB – summary (constant currency basis) (continued)
Total
WPB
Consists of1
Banking
operations
Life
insurance
manufacturing3
Global Private
Banking
Asset
management
$m
$m
$m
$m
$m
2021
Net operating income before change in expected credit losses and other
credit impairment charges2
20,972
15,527
2,512
1,777
1,156
–  net interest income
13,447
10,563
2,256
630
(2)
–  net fee income/(expense)
5,677
4,249
(603)
916
1,115
–  other income
1,848
715
859
231
43
ECL
195
204
(21)
13
(1)
Net operating income
21,167
15,731
2,491
1,790
1,155
Total operating expenses
(15,338)
(12,379)
(629)
(1,538)
(792)
Operating profit
5,829
3,352
1,862
252
363
Share of profit in associates and joint ventures
36
19
17
—
—
Profit before tax
5,865
3,371
1,879
252
363
1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the year ended
31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
3  We adopted IFRS 17 from 1 January 2023 and have restated 2022 financial data. Data for 2021 has not restated, and ‘Life insurance manufacturing’ is
disclosed on the basis of preparation prevailing in 2021, which includes results from our manufacturing business only, with insurance distribution
presented in ‘banking operations’.
Life insurance business performance
The following table provides an analysis of the performance of our life insurance business for the period. It comprises income earned by our
insurance manufacturing operations within our WPB business, as well as income earned and costs incurred within our Wealth insurance
distribution channels, consolidation and inter-company elimination entries.
Results of WPB’s life insurance business unit (constant currency basis)
Year ended 31 Dec 2023
Insurance
manufac-
turing
operations
Wealth
insurance
and other1
Life
insurance
$m
$m
$m
Net interest income
283
(1)
282
Net fee income/(expense)
(27)
178
151
Other income
990
39
1,029
–  insurance service results
1,127
(34)
1,093
–  net investment returns (excluding net interest income)
(119)
30
(89)
–  other operating income
(18)
43
25
Net operating income before change in expected credit losses and other credit impairment charges2
1,246
216
1,462
ECL
4
—
4
Net operating income
1,250
216
1,466
Total operating expenses
(571)
(111)
(682)
Operating profit
679
105
784
Share of profit/(loss) in associates and joint ventures
50
—
50
Profit before tax
729
105
834
Year ended 31 Dec 20223
Net interest income
345
(6)
339
Net fee income/(expense)
(31)
185
154
Other income
847
14
861
–  insurance service results
861
(18)
843
–  net investment returns (excluding net interest income)
(176)
(28)
(204)
–  other operating income
162
60
222
Net operating income before change in expected credit losses and other credit impairment charges2
1,161
193
1,354
ECL
(8)
—
(8)
Net operating income
1,153
193
1,346
Total operating expenses
(594)
(191)
(785)
Operating profit
559
2
561
Share of profit/(loss) in associates and joint ventures
17
—
17
Profit before tax
576
2
578
1  ‘Wealth insurance and other’ includes fee income earned and operating expenses incurred within our Wealth distribution channels. It also includes the
IFRS 17 consolidation entries arising from transactions between our insurance manufacturing operations and Wealth distribution channels and with
the wider Group, as well as allocations of central costs benefiting life insurance.
2Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly. This table presents an IFRS 17-specific analysis of results and therefore does not include 2021 comparatives.
Global businesses
128
HSBC Holdings plc
WPB insurance manufacturing (constant currency basis)
The following table shows the results of our insurance manufacturing operations for our WPB business and for all global business segments in
aggregate.
Results of insurance manufacturing operations1,2,3
2023
2022
2021
WPB
All global
businesses
WPB
All global
businesses
WPB
All global
businesses
$m
$m
$m
$m
$m
$m
Net interest income 
283
320
345
370
2,255
2,430
Net fee expense
(27)
(14)
(31)
(16)
(599)
(629)
Other income
990
981
847
847
14,257
14,745
Insurance service result
1,127
1,125
861
866
—
—
–release of contractual service margin
1,094
1,094
902
902
—
—
–risk adjustment release
44
44
45
45
—
—
–experience variance and other
30
28
42
47
—
—
–loss from onerous contracts
(41)
(41)
(128)
(128)
—
—
Net investment returns (excluding net interest income)4
(119)
(125)
(176)
(187)
3,948
3,980
–insurance finance income/(expense)
(7,809)
(7,809)
13,850
13,853
—
—
–other investment income
7,690
7,684
(14,026)
(14,040)
3,948
3,980
Net insurance premium income
—
—
—
—
10,145
10,617
Other operating income
(18)
(19)
162
168
164
148
Total operating income
1,246
1,287
1,161
1,201
15,913
16,546
Net insurance claims and benefits paid and movement in liabilities to
policyholders
—
—
—
—
(13,366)
(13,863)
Net operating income before change in expected credit losses and other
credit impairment charges5
1,246
1,287
1,161
1,201
2,547
2,683
Change in expected credit losses and other credit impairment charges
4
4
(8)
(9)
(18)
(22)
Net operating income
1,250
1,291
1,153
1,192
2,529
2,661
Total operating expenses
(571)
(581)
(594)
(589)
(564)
(590)
Operating profit
679
710
559
603
1,965
2,071
Share of profit in associates and joint ventures
50
50
17
17
17
17
Profit before tax of insurance business operations6
729
760
576
620
1,982
2,088
Additional information
Insurance manufacturing new business contractual service margin (reported
basis)
1,686
1,686
1,111
1,111
—
—
Consolidated Group new business contractual service margin (reported basis)
1,812
1,812
1,229
1,229
—
—
Annualised new business premiums of insurance manufacturing operations
3,797
3,797
2,354
2,354
2,777
2,830
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for 2022 have been
restated accordingly; comparative data for 2021 are reported under IFRS 4 ‘Insurance Contracts’.
2Constant currency results are derived by adjusting for period-on-period effects of foreign currency translation differences. The impact of foreign
currency translation differences on ‘All global businesses’ profit before tax was a $13m increase for 2022 and a $53m decrease in 2021.
3The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance
operations. The ‘All global businesses‘ result consists primarily of WPB business, as well as a small proportion of CMB business.
4Net investment return under IFRS 17 for all global businesses for 2023 was $195m (2022: $183m), which consisted of net interest income, net
income/(expenses) on assets held at fair value through profit or loss, and insurance finance income/(expense).
5Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
6The effect of applying hyperinflation accounting in Argentina on insurance manufacturing operations in all global business resulted in a decrease of
$41m in revenue in 2023 (2022: decrease of $7m, 2021: increase of $1m) and a decrease of $41m in profit before tax in 2023 (2022: decrease of $6m,
2021: increase of $1m).
Insurance manufacturing
The following commentary, unless otherwise specified, relates to the
‘All global businesses’ results.
Profit before tax of $0.8bn increased by $0.1bn compared with 2022.
This primarily reflected the following:
–Insurance service result of $1.1bn increased by $0.3bn compared
with 2022. This was driven by an increase in the release of CSM of
$0.2bn as a result of a higher closing CSM balance from the effect
of new business written and favourable assumption updates
primarily from updates to lapse rate assumptions. The improved
insurance service result also reflected a reduction to losses from
onerous contracts of $0.1bn, mainly in Hong Kong and Singapore,
in part due to improved market conditions in 2023.
–Net investment return (excluding net interest income) increased by
$0.1bn, with positive asset returns in 2023 compared with losses
in the prior period.
–Other operating income reduced by $0.2bn compared with 2022,
and included a $0.3bn loss from corrections to historical valuation
estimates, partly offset by gains of $0.2bn from reinsurance
contracts in Hong Kong.
Profit before tax of $0.6bn in 2022 reduced by $1.5bn compared with
2021, primarily reflecting the change in reporting basis from IFRS 4
‘Insurance Contracts’ in 2021 to IFRS 17 ‘Insurance Contracts’ in
2022. Further information regarding the impact of transition is
provided in Note 38 ‘Effects of adoption of IFRS 17’ on page 449.
Annualised new business premiums (‘ANP’) is used to assess new
insurance premiums generated by the business. It is calculated as
100% of annualised first year regular premiums and 10% of single
premiums, before reinsurance ceded. ANP in 2023 increased by 61%
compared with 2022, primarily from strong new business sales in
Hong Kong and a shift in product mix from single to multi-premium
products.
Insurance equity plus CSM net of tax
Insurance equity plus CSM net of tax is a non-GAAP alternative
performance measure that provides information about our insurance
manufacturing operations’ net asset value plus the future earnings
from in-force business. At 31 December 2023, insurance equity plus
CSM net of tax was $16,583m (31 December 2022: $14,646m).
HSBC Holdings plc
129
At 31 December 2023, insurance equity plus CSM net of tax was
calculated as insurance manufacturing operations equity of $7,731m
plus CSM of $10,786m less tax of $1,934m. At 31 December 2022, it
was calculated as insurance manufacturing operations equity of
$7,236m plus CSM of $9,058m less tax of $1,648m.
WPB: Wealth balances
The following table shows the wealth balances, which include invested assets and wealth deposits. Invested assets comprise customer assets
either managed by our Asset Management business or by external third-party investment managers, as well as self-directed investments by our
customers.
WPB – reported wealth balances1
2023
2022
$bn
$bn
Global Private Banking invested assets
363
312
–  managed by Global Asset Management
61
57
–  external managers, direct securities and other
302
255
Retail invested assets
383
363
–  managed by Global Asset Management
178
198
–  external managers, direct securities and other
205
165
Asset Management third-party distribution
445
340
Reported invested assets1
1,191
1,015
Wealth deposits (Premier, Jade and Global Private Banking)2
536
503
Total reported wealth balances
1,727
1,518
1Invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role
as investment manager. At 31 December 2023, $32bn of invested assets were classified as held for sale and are not included in the table above.
2Premier, Jade and Global Private Banking deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts
balance of $805bn (2022: $779bn) on page 124. At 31 December 2023, $42bn of wealth deposits were classified as held for sale and are not included
in the table above.
Global businesses
130
HSBC Holdings plc
Asset Management: funds under management
The following table shows the funds under management of our Asset Management business. Funds under management represents assets
managed, either actively or passively, on behalf of our customers. Funds under management are not reported on the Group’s balance sheet,
except where it is deemed that we are acting as principal rather than agent in our role as investment manager.
Asset Management – reported funds under management1
2023
2022
$bn
$bn
Opening balance
595
630
Net new invested assets
54
45
Net market movements
23
(36)
Foreign exchange and others
12
(44)
Closing balance
684
595
Asset Management – reported funds under management by legal entities
2023
2022
$bn
$bn
HSBC Bank plc
162
134
The Hongkong and Shanghai Banking Corporation Limited
198
184
HSBC North America Holdings Inc.
71
60
Grupo Financiero HSBC, S.A. de C.V.
15
8
Other trading entities2
238
209
Closing balance
684
595
1    Funds under management are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent
in our role as investment manager.
2Funds under management of $177bn in 2023 and $143bn in 2022 relating to our Asset Management entity in the UK are reported under ‘other trading
entities’ in the table above.
At 31 December 2023, Asset Management funds under management
amounted to $684bn, an increase of $89bn or 15%. The increase
reflected net new invested assets of $54bn and a positive impact
from market performances and foreign exchange translation. Net new
invested assets were notably from additions in money market and
exchange traded funds, as well as passive and private equity
products.
Global Private Banking: client balances
Global Private Banking client balances comprises invested assets and deposits, which are translated at the rates of exchange applicable for their
respective year-ends, with the effects of currency translation reported separately.
Global Private Banking – reported client balances1
2023
2022
$bn
$bn
Opening balance
383
423
Net new invested assets
17
18
Increase/(decrease) in deposits
9
(1)
Net market movements
19
(53)
Foreign exchange and others
19
(4)
Closing balance
447
383
Global Private Banking – reported client balances by legal entities
2023
2022
$bn
$bn
HSBC UK Bank plc
32
28
HSBC Bank plc
54
58
The Hongkong and Shanghai Banking Corporation Limited
209
174
HSBC North America Holdings Inc.
64
56
Grupo Financiero HSBC, S.A. de C.V.
3
—
Other trading entities
85
67
Closing balance
447
383
1Client balances are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role
as investment manager. Customer deposits included in these client balances are on balance sheet.
HSBC Holdings plc
131
Retail invested assets
The following table shows the invested assets of our retail
customers. These comprise customer assets either managed by our
Asset Management business or by external third-party investment
managers as well as self-directed investments by our customers.
Retail invested assets are not reported on the Group’s balance sheet,
except where it is deemed that we are acting as principal rather than
agent in our role as investment manager.
Retail invested assets
2023
2022
$bn
$bn
Opening balance
363
434
Net new invested assets1
26
26
Net market movements
7
(47)
Foreign exchange and others
(13)
(50)
Closing balance
383
363
Retail invested assets by legal entities
2023
2022
$bn
$bn
HSBC UK Bank plc
29
27
HSBC Bank plc
31
27
The Hongkong and Shanghai Banking Corporation Limited
292
284
HSBC Bank Middle East Limited
3
2
HSBC North America Holdings Inc.
14
12
Grupo Financiero HSBC, S.A. de C.V.
9
7
Other trading entities
5
4
Closing balance
383
363
1‘Retail net new invested assets’ covers nine markets, comprising Hong Kong including Hang Seng Bank (Hong Kong), mainland China, Malaysia,
Singapore, HSBC UK, UAE, US, Canada and Mexico. The net new invested assets relating to all other geographies is reported in ‘foreign exchange
and others’.
WPB invested assets
Net new invested assets represents the net customer inflows from
retail invested assets, Asset Management third-party distribution and
Global Private Banking invested assets. It excludes all customer
deposits. The net new invested assets in the table below is non-
additive from the tables above, as net new invested assets managed
by Asset Management that are generated by retail clients or Global
Private Banking will be recorded in both businesses.
WPB: Invested assets
2023
2022
$bn
$bn
Opening balance
1,015
1,119
Net new invested assets
84
80
Net market movements
43
(118)
Foreign exchange and others
49
(66)
Closing balance
1,191
1,015
WPB: Net new invested assets by legal entities
2023
2022
$bn
$bn
HSBC UK Bank plc
1
2
HSBC Bank plc
3
6
The Hongkong and Shanghai Banking Corporation Limited
47
59
HSBC Bank Middle East Limited
1
—
HSBC North America Holdings Inc.
7
8
HSBC Bank Canada
—
(1)
Grupo Financiero HSBC, S.A. de C.V.
5
1
Other trading entities
20
5
Total
84
80
Global businesses
132
HSBC Holdings plc
GBM: Securities Services and Issuer Services
Assets held in custody
Custody is the safekeeping and servicing of securities and other
financial assets on behalf of clients. Assets held in custody are not
reported on the Group’s balance sheet, except where it is deemed
that we are acting as principal rather than agent in our role as
investment manager. At 31 December 2023, we held $9.7tn of assets
as custodian, an increase of 6% compared with 31 December 2022.
The balance comprised $8.8tn of assets in Securities Services, which
were recorded at market value, and $0.9tn of assets in Issuer
Services, recorded at book value.
The increase was mainly in Securities Services balances. This was
driven by net asset inflows in Europe and Asia, favourable market
movements in Asia, North America and Latin America, and a positive
impact of currency translation differences in Europe.
Assets under administration
Our assets under administration business includes the provision of
bond and loan administration services, transfer agency services and
the valuation of portfolios of securities and other financial assets on
behalf of clients and complements the custody business. At
31 December 2023, the value of assets held under administration by
the Group amounted to $4.9tn, which was 9% higher than at
31 December 2022. The balance comprised $2.9tn of assets in
Securities Services, which were recorded at market value, and $2.0tn
of assets in Issuer Services, recorded at book value.
The increase was mainly driven by Securities Services balances due
to net asset inflows in Europe and Asia together with a favourable
impact of currency translation differences, market movements and
onboarding of new clients in Europe. Issuer Services balances also
rose driven by new issuances, notably in the US and the UK, as well
as a favourable impact of currency translation differences in the UK.
Global business financial performance 2022 compared with 2021
Wealth and Personal Banking
From 1 January 2023, we adopted IFRS17 and have restated 2022
financial data. 2021 data is not restated, and ‘Life insurance
manufacturing’ is disclosed on the basis of preparation prevailing in
2021, which includes results from our manufacturing business only,
with insurance distribution presented in ‘investment distribution’.
2022 compared with 2021
Financial performance (on a constant currency basis)
Profit before tax of $5.5bn was $0.4bn or 7% lower than in 2021 on a
constant currency basis. This reflected higher net interest income in
Personal Banking and Private Banking from rising interest rates, partly
offset by a reduction in net interest income of $2.1bn due to the
impact of the IFRS17 restatement. There was also a net ECL charge
in 2022 of $1.2bn, compared with a net release of $0.2bn in 2021.
Revenue of $20.9bn was $0.1bn lower on a constant currency basis.
Net interest income grew in Personal Banking by $4.3bn due to rising
interest rates and balance sheet growth in our main legal entities in
the UK, Asia, Mexico and the Middle East. In addition, there was an
increase in net interest income of $0.3bn in Global Private Banking.
This was offset by lower insurance revenue, mainly due to the
adoption of IFRS 17 ’Insurance Contracts’, as well as from adverse
equity markets performance in 2022 compared with a favourable
performance in 2021, and an impairment of $2.4bn recognised
following the reclassification of our retail banking operations in France
as held for sale on 30 September 2022.
In Personal Banking, revenue of $15.9bn was up $4.3bn or 37%.
–Net interest income was $4.3bn or 42% higher due to the positive
impact of rising interest rates. This was supported by strong
balance sheet growth in our main legal entities in the UK, Asia,
Mexico and the Middle East. Compared with 2021, deposit
balances in our main legal entity in Asia increased by $6bn.
Mortgage lending increased in the UK by $9bn and in Hong Kong
by $3bn. In addition, unsecured lending increased in our main legal
entities in Asia by 5% and Mexico by 18%.
In Wealth, revenue of $7.0bn was down by $1.8bn or 21%, notably
from lower life insurance revenue as described above. However, our
investments in Asia contributed to the generation of net new invested
assets of $80bn during 2022.
–Life insurance revenue was $1.2bn or 46% lower compared with
2021. The 2022 figure has been restated to reflect the impact of
the adoption of IFRS 17 on 1 January 2023, which resulted in a
reduction in revenue of $1.1bn. The 2021 figure included positive
market impacts of $0.5bn, reflecting favourable equity markets
performance. This compared with adverse movements in equity
markets 2022, although the impact on revenue of these
movements were lower under IFRS 17 than under IFRS 4, as they
are distributed over the remaining life of the impacted contracts.
The value of new business written in 2022 increased by $0.2bn or
23%, reflecting the launch of new products. In addition, there was
a $0.3bn gain in 2022 following a pricing update for our
policyholders’ funds held on deposit with us in Hong Kong to
reflect the cost to provide this service. We also recognised a
$0.1bn gain on the completion of our acquisition of AXA
Singapore.
–Investment distribution revenue was $0.9bn or 27% lower, as
muted customer sentiment led to lower activity in equity markets,
which compared with a strong 2021, and as Covid-19-related
restrictions in Hong Kong in early 2022 resulted in the temporary
closure of parts of our branch network. Since then, restrictions
have substantially been eased. In 2021, insurance distribution
income of $0.5bn was reported in investment distribution, and
from 1 January 2022 this income was reported in life insurance.
–In Global Private Banking, revenue was $0.2bn or 13% higher due
to the positive impact of rising interest rates on net interest
income. This increase was partly offset by a decline in brokerage
and trading revenue, reflecting reduced client activity compared
with a strong 2021.
–Asset management revenue was $25m or 2% lower, as adverse
market conditions led to unfavourable valuation movements. This
was in part mitigated by growth in management fees from net
new invested assets of $45bn in 2022 and improved performance
fees.
In Other, revenue fell by $2.5bn, notably from an impairment of
$2.4bn recognised following the reclassification of our retail banking
operations in France as held for sale on 30 September 2022 and lower
allocation of revenue from Markets Treasury.
ECL were a net charge of $1.2bn, reflecting a more normalised level
of ECL charges, including provisions relating to a deterioration in the
forward economic outlook from heightened levels of uncertainty and
inflationary pressures. This compared with a net release of $0.2bn in
2021 from Covid-19-related allowances previously built up in 2020.
Operating expenses of $14.2bn were $1.1bn lower on a constant
currency basis, in part due to the non-recurrence of a 2021 goodwill
impairment of $0.6bn related to our WPB business in Latin America.
The increase also reflected continued investments, notably in wealth
in Asia including the costs related to our AXA Singapore acquisition,
and from the impact of higher inflation. These increases were partly
offset by the benefits of our cost-saving initiatives.
HSBC Holdings plc
133
Commercial Banking
2022 compared with 2021
Financial performance (on a constant currency basis)
Profit before tax of $7.5bn was $1.2bn higher than in 2021 on a
constant currency basis. This was driven by an increase in revenue
across all CMB products and in all our main legal entities, notably in
Asia and the UK, and included a 149% increase in GPS net interest
income. This was partly offset by a net ECL charge compared with a
net release of ECL in 2021. Operating expenses remained stable, as
increased investment spend was mitigated by continued cost
discipline.
Revenue of $16.3bn was $3.6bn or 28% higher on a constant
currency basis.
–In GPS, revenue increased by $3.6bn, with growth in all our main
legal entities, particularly in Asia and the UK, driven by higher
margins, reflecting interest rate rises and business repricing
actions. Revenue also benefited from a 6% increase in average
deposit balances. There was a 19% increase in fee income,
notably in cards and payments, with growth in all our main legal
entities, notably in the UK, supported by the delivery of our
strategic fee initiatives.
–In GTRF, revenue increased by $0.2bn or 13%, with growth in all
our main legal entities, notably in the UK and Asia, driven by an
increase in average balances, which rose by 17% compared with
2021 at improved margins. In addition, fee income grew by 4%
compared with 2021.
–In GBM products, Insurance and Investments and Other, revenue
decreased by $0.2bn or 12%, reflecting the adverse effects of
hyperinflation accounting in Türkiye and Argentina, as well as
lower Markets Treasury and insurance revenue. This was partly
offset by an 17% increase in collaboration revenue from GBM
products, notably Foreign Exchange.
ECL were a net charge of $1.9bn, compared with a net release of
$0.3bn in 2021. The charge in 2022 primarily related to stage 3
charges in Asia, mainly in the commercial real estate sector in
mainland China, and higher charges in the UK reflecting heightened
levels of uncertainty and inflationary pressures. This compared with a
net release in 2021 of Covid-19-related allowances previously built up
in 2020
Operating expenses of $6.9bn remained broadly stable (up 3%). The
continued investment in technology and the impact of higher inflation
were mitigated by continued cost discipline on discretionary spend
and through hiring efficiencies, as well as from the impact of our cost-
saving initiatives.
Global Banking and Markets
2022 compared with 2021
Financial performance (on a constant currency basis)
Profit before tax of $4.7bn was $0.6bn or 16% higher than in 2021 on
a constant currency basis. Growth in revenue of $1.5bn or 12% was
partly offset by a net ECL charge in 2022 of $0.6bn, compared with a
net release in 2021 of $0.2bn, and from an increase of $0.1bn in
operating expenses.
Revenue of $14.6bn was $1.5bn or 12% higher compared with 2020,
on a constant currency basis. The increase reflected growth in GPS
net interest income from higher interest rates, and a strong Markets
and Securities Services performance driven by increased client
activity and disciplined risk management. In MSS, revenue increased
by $1.2bn or 15%.
–In Securities Services, revenue grew by $0.2bn or 14% from
higher net interest income as global interest rates rose, partly
offset by reduced fee income from lower market levels.
–In Global Debt Markets, revenue fell by $0.1bn or 15%, reflecting
lower primary issuances and challenging market conditions.
–In Global Foreign Exchange, revenue growth of $1.0bn or 34%
reflected increased client activity due to elevated market volatility
and the combined macroeconomic impacts of rising inflation,
higher interest rates and a strengthening of the US dollar, as well
as a strong trading performance.
–In Equities, revenue fell by $0.2bn or 13% in the context of a
strong prior year and lower client activity in 2022.
–In Securities Financing, revenue increased by $0.1bn or 11%,
driven by client franchise growth and a strong trading
performance.
–In Banking, revenue increased by $0.9bn or 15%.
–In GPS, revenue increased by $1.3bn or 82%, driven by margin
growth as a result of the rising global interest-rate environment
and business pricing actions, together with active portfolio
management and average balance growth. Fee income grew in all
regions from the continued delivery of our strategic initiatives.
–Capital Markets and Advisory revenue decreased $0.4bn or 38%,
primarily from lower fees in line with the reduced global fee pool
and adverse valuation movements on leveraged loans, net of
hedging.
In GBM Other, Principal Investments revenue declined by $0.5bn, as
2022 included lower valuation gains compared with 2021. There
was also a reduction in revenue from Markets Treasury and the
impact of hyperinflationary accounting, which are allocated to the
global businesses. GBM Other also included a loss of $0.1bn from
a buy-back of legacy securities
ECL were net charge of $0.6bn on a constant currency basis. This
included stage 3 charges predominantly in the commercial real estate
sector in mainland China, and in Europe, which also reflected
allowances due to a deterioration in the forward economic outlook
given the heightened levels of uncertainty and inflationary pressures.
This compared with a net release of $0.2bn in 2021 of Covid-19-
related allowances previously built up in 2020.
Operating expenses of $9.3bn increased by $0.1bn or 1% on a
constant currency basis, as the impact of higher inflation and strategic
investments were in part mitigated by our ongoing cost discipline.
Corporate Centre
2022 compared with 2021
Loss before tax of $1.2bn was a $2.3bn reduction compared with a
profit of $1.1bn in 2021 on a constant currency basis due to a
reduction in revenue, higher costs and a lower share of profit in
associates and joint ventures.
Revenue decreased by $1.2bn on a constant currency basis. This was
primarily due to higher adverse fair value movements on financial
instruments, as well as the impacts of the restructuring of our
business in Europe in 2022, including losses associated with the
planned sale of our branch operations in Greece and losses related to
the planned disposal of our operations in Russia. In addition, lower
revenue included losses related to our RWA reduction programme.
Operating expenses increased by $0.9bn or 90% compared with 2021
on a constant currency basis. This reflected an increase in
restructuring and other related costs, partly offset by a favourable
allocation of the UK bank levy and related prior year credits. Since
2021, the UK bank levy and any related credits have been allocated
across our global businesses and Corporate Centre, primarily to GBM
Share of profit in associates and joint ventures of $2.6bn decreased
by $0.2bn or 7% on a constant currency basis, primarily as 2021
included a higher share of profit from BGF in the UK, due to a
recovery in asset valuations. This was partly offset by an increase in
the share of profit from SAB.
Global businesses
134
HSBC Holdings plc
Analysis of reported results by legal entities
HSBC reported profit/(loss) before tax and balance sheet data
2023
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
9,684
2,674
16,705
1,551
1,712
1,275
2,148
3,765
(3,718)
35,796
Net fee income
1,597
1,527
4,859
475
1,237
559
581
1,225
(215)
11,845
Net income from financial
instruments held for trading or
managed on a fair value basis
516
4,220
9,507
397
729
110
437
1,054
(309)
16,661
Net income from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through profit
and loss
—
1,438
6,258
—
—
—
39
323
(171)
7,887
Insurance finance income/(expense)
—
(1,460)
(6,237)
—
—
—
(44)
(166)
98
(7,809)
Insurance service result
—
154
838
—
—
—
87
9
(10)
1,078
Other income/(expense)1
1,608
736
(31)
2
185
22
65
(1,481)
(506)
600
Net operating income before
change in expected credit losses
and other credit impairment
charges2
13,405
9,289
31,899
2,425
3,863
1,966
3,313
4,729
(4,831)
66,058
Change in expected credit losses
and other credit impairment charges
(523)
(212)
(1,641)
(90)
(94)
(46)
(696)
(279)
134
(3,447)
Net operating income
12,882
9,077
30,258
2,335
3,769
1,920
2,617
4,450
(4,697)
62,611
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(4,602)
(6,483)
(13,379)
(1,095)
(3,473)
(1,049)
(1,823)
(2,631)
2,180
(32,355)
Impairment of goodwill and other
intangible assets
(10)
97
(16)
(1)
222
—
(3)
(4)
—
285
Operating profit/(loss)
8,270
2,691
16,863
1,239
518
871
791
1,815
(2,517)
30,541
Share of profit in associates and
joint ventures less impairment3
—
(52)
(696)
—
—
—
14
544
(3)
(193)
Profit/(loss) before tax
8,270
2,639
16,167
1,239
518
871
805
2,359
(2,520)
30,348
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
27.2
8.7
53.3
4.1
1.7
2.9
2.6
7.8
(8.3)
100.0
Cost efficiency ratio
34.4
68.7
42.0
45.2
84.2
53.4
55.1
55.7
45.1
48.5
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
270,208
95,750
455,315
20,072
54,829
—
26,410
15,951
—
938,535
Total assets
423,029
896,682
1,333,911
50,612
252,339
90,731
47,309
59,051
(114,987)
3,038,677
Customer accounts
339,611
274,733
801,430
31,341
99,607
—
29,423
35,326
176
1,611,647
Risk-weighted assets4,5
129,211
131,468
396,677
24,294
72,248
31,890
32,639
59,574
6,704
854,114
HSBC Holdings plc
135
HSBC reported profit/(loss) before tax and balance sheet data (continued)
20226
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
7,615
2,357
14,031
903
1,922
1,251
1,796
2,244
(1,742)
30,377
Net fee income
1,536
1,601
4,924
458
1,223
598
455
1,127
(152)
11,770
Net income from financial
instruments held for trading or
managed on a fair value basis
472
3,564
5,270
360
485
76
351
639
(939)
10,278
Net income from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through profit
and loss
—
(1,761)
(12,117)
—
—
—
(9)
66
(10)
(13,831)
Insurance finance income/(expense)
—
1,431
12,407
—
—
—
3
(32)
(10)
13,799
Insurance service result
—
149
636
—
—
—
50
(20)
(6)
809
Other income/(expense)1
148
(1,920)
491
22
533
29
67
(521)
(1,431)
(2,582)
Net operating income before change
in expected credit losses and other
credit impairment charges2
9,771
5,421
25,642
1,743
4,163
1,954
2,713
3,503
(4,290)
50,620
Change in expected credit losses
and other credit
impairment charges
(563)
(292)
(2,090)
21
(20)
(84)
(507)
(61)
12
(3,584)
Net operating income
9,208
5,129
23,552
1,764
4,143
1,870
2,206
3,442
(4,278)
47,036
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(4,667)
(6,497)
(13,011)
(1,033)
(3,429)
(1,017)
(1,631)
(2,359)
1,090
(32,554)
Impairment of goodwill and other
intangible assets
(54)
11
(42)
(3)
(9)
(21)
(5)
(2)
(22)
(147)
Operating profit/(loss)
4,487
(1,357)
10,499
728
705
832
570
1,081
(3,210)
14,335
Share of profit in associates and
joint ventures less impairment
—
(38)
2,400
—
—
—
13
351
(3)
2,723
Profit/(loss) before tax
4,487
(1,395)
12,899
728
705
832
583
1,432
(3,213)
17,058
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
26.3
(8.2)
75.6
4.3
4.1
4.9
3.4
8.4
(18.8)
100.0
Cost efficiency ratio
48.3
119.6
50.9
59.4
82.6
53.1
60.3
67.4
24.9
64.6
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
245,921
86,964
473,985
19,762
54,159
—
20,446
22,325
(1)
923,561
Total assets
412,522
863,308
1,297,806
48,086
239,117
94,604
39,939
67,345
(113,441)
2,949,286
Customer accounts
336,086
253,075
784,236
29,893
100,404
—
25,531
41,078
—
1,570,303
Risk-weighted assets4,5
110,919
127,017
406,985
22,490
72,446
31,876
26,744
60,289
8,144
839,720
Legal entities
136
HSBC Holdings plc
HSBC reported profit/(loss) before tax and balance sheet data (continued)
2021
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
6,397
2,411
12,623
633
1,809
978
1,542
1,586
(1,490)
26,489
Net fee income
1,484
1,945
5,828
445
1,426
634
406
1,044
(115)
13,097
Net income from financial
instruments held for trading or
managed on a fair value basis
437
2,382
3,649
275
226
89
272
474
(60)
7,744
Net income/(expense) from assets
and liabilities of insurance
businesses, including related
derivatives, measured at fair value
through profit and loss
—
1,670
2,340
—
—
—
4
44
(5)
4,053
Insurance finance income/(expense)
—
—
—
—
—
—
—
—
—
—
Insurance service result
—
—
—
—
—
—
—
—
—
—
Other income/(expense)
278
16
(1,446)
55
595
67
136
(152)
(1,380)
(1,831)
Net operating income before loan
impairment (charges)/recoveries and
other credit risk provisions2
8,596
8,424
22,994
1,408
4,056
1,768
2,360
2,996
(3,050)
49,552
Change in expected credit losses
and other credit impairment
(charges)/recoveries
1,362
239
(840)
142
205
37
(224)
2
5
928
Net operating income
9,958
8,663
22,154
1,550
4,261
1,805
2,136
2,998
(3,045)
50,480
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(5,147)
(7,448)
(12,975)
(955)
(3,678)
(1,036)
(1,558)
(2,060)
970
(33,887)
Impairment of goodwill and other
intangible assets
(25)
(63)
(24)
(3)
(5)
(8)
(7)
(6)
(592)
(733)
Operating profit/(loss)
4,786
1,152
9,155
592
578
761
571
932
(2,667)
15,860
Share of profit in associates and
joint ventures less impairment
—
263
2,486
—
—
—
17
280
—
3,046
Profit/(loss) before tax
4,786
1,415
11,641
592
578
761
588
1,212
(2,667)
18,906
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
25.3
7.5
61.6
3.1
3.1
4.0
3.1
6.4
(14.1)
100.0
Cost efficiency ratio
60.2
89.2
56.5
68.0
90.8
59.0
66.3
69.0
12.4
69.9
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
264,624
122,954
492,523
18,623
52,678
54,226
18,043
22,142
1
1,045,814
Total assets
468,362
807,541
1,259,270
46,773
261,335
94,570
35,525
66,425
(81,862)
2,957,939
Customer accounts
381,482
270,975
792,099
26,802
111,921
58,071
23,583
45,643
(2)
1,710,574
Risk-weighted assets4,5
113,501
136,038
393,742
22,855
77,775
30,198
24,578
56,112
9,072
838,263
1Other income/(expense) in this context comprises gain on acquisitions, impairment gain/(loss) relating to the sale of our retail banking operations in
France, and other operating income/(expense).
2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3  Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
4Risk-weighted assets are non-additive across the principal entities due to market risk diversification effects within the Group.
5Balances are on a third-party Group consolidated basis.
6  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
HSBC Holdings plc
137
Summary information – legal entities and selected countries/territories
Legal entity reported and constant currency results¹
2023
HSBC
UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities2
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue3
13,405
9,289
31,899
2,425
3,863
1,966
3,313
4,729
(4,831)
66,058
ECL
(523)
(212)
(1,641)
(90)
(94)
(46)
(696)
(279)
134
(3,447)
Operating expenses
(4,612)
(6,386)
(13,395)
(1,096)
(3,251)
(1,049)
(1,826)
(2,635)
2,180
(32,070)
Share of profit in associates and joint
ventures
—
(52)
(696)
—
—
—
14
544
(3)
(193)
Profit/(loss) before tax
8,270
2,639
16,167
1,239
518
871
805
2,359
(2,520)
30,348
Loans and advances to customers (net)
270,208
95,750
455,315
20,072
54,829
—
26,410
15,951
—
  938,535
Customer accounts
339,611
274,733
801,430
31,341
99,607
—
29,423
35,326
176
1,611,647
1In the current period, constant currency results are equal to reported, as there is no currency translation.
2Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi
Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit
before tax of $1,286m. Supplementary analysis is provided on page 145 to provide a fuller picture of the MENAT regional performance.
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entity results: notable items
2023
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related
costs1,2,3
1,591
(14)
—
—
—
—
—
—
(279)
1,298
Fair value movements on financial
instruments4
—
—
—
—
—
—
—
—
14
14
Restructuring and other related costs
—
361
—
—
—
—
—
—
(361)
—
Disposal losses on Markets Treasury
repositioning
(145)
(94)
(473)
(20)
(246)
—
—
—
1
(977)
Operating expenses
Disposals, acquisitions and related
costs
(45)
(111)
—
—
(11)
(115)
—
—
(39)
(321)
Restructuring and other related costs5
20
30
10
2
10
—
6
2
56
136
Impairment of interest in associate6
—
—
(3,000)
—
—
—
—
—
—
(3,000)
1  Includes the impacts of the sale of our retail banking operations in France.
2  Includes the provisional gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3  Includes fair value movements on the foreign exchange hedging of the expected proceeds from the planned sale of our banking operations in Canada.
4  Fair value movements on non-qualifying hedges in HSBC Holdings.
5  Balances relate to reversals of restructuring provisions recognised during 2022.
6  Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
Selected countries/territories results1
2023
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue3
19,092
20,611
3,923
3,796
3,313
ECL
(594)
(1,529)
(93)
(94)
(696)
Operating expenses
(12,485)
(8,244)
(2,713)
(3,251)
(1,826)
Share of profit/(loss) in associates and joint ventures
(53)
30
(746)
—
14
Profit before tax
5,960
10,868
371
451
805
Loans and advances to customers (net)
309,262
279,551
44,275
54,829
26,410
Customer accounts
508,181
543,504
56,006
99,607
29,423
1In the current period, constant currency results are equal to reported, as there is no currency translation.
2  UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entities
138
HSBC Holdings plc
Selected countries/territories results: notable items
2023
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related costs1,2,3,4
1,272
—
—
—
—
Fair value movements on financial instruments5
14
—
—
—
—
Disposal losses on Markets Treasury repositioning
(239)
(473)
—
(246)
—
Operating expenses
Disposals, acquisitions and related costs
(71)
(1)
(5)
(11)
—
Restructuring and other related costs6
75
9
4
10
6
Impairment of interest in associate7
—
—
(3,000)
—
—
1UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
2  Includes the provisional gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3  Includes the impairment gain relating to the sale of our retail banking operations in France.
4  Includes fair value movements on the foreign exchange hedging of the expected proceeds from the planned sale of our banking operations in Canada.
5  Fair value movements on non-qualifying hedges in HSBC Holdings.
6  Balances relates to reversals of restructuring provisions recognised during 2022.
7  Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
Legal entity reported and constant currency results (continued)
20221
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities2
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue3
Reported
9,771
5,421
25,642
1,743
4,163
1,954
2,713
3,503
(4,290)
50,620
Currency translation
125
(11)
(278)
3
—
(67)
370
(789)
(102)
(749)
Constant currency
9,896
5,410
25,364
1,746
4,163
1,887
3,083
2,714
(4,392)
49,871
ECL
Reported
(563)
(292)
(2,090)
21
(20)
(84)
(507)
(61)
12
(3,584)
Currency translation
(43)
14
6
—
—
2
(67)
41
1
(46)
Constant currency
(606)
(278)
(2,084)
21
(20)
(82)
(574)
(20)
13
(3,630)
Operating expenses
Reported
(4,721)
(6,486)
(13,053)
(1,036)
(3,438)
(1,038)
(1,636)
(2,361)
1,068
(32,701)
Currency translation
(45)
(81)
134
(1)
—
37
(221)
500
76
399
Constant currency
(4,766)
(6,567)
(12,919)
(1,037)
(3,438)
(1,001)
(1,857)
(1,861)
1,144
(32,302)
Share of profit/(loss) in
associates and joint ventures
Reported
—
(38)
2,400
—
—
—
13
351
(3)
2,723
Currency translation
—
1
(123)
—
—
—
1
—
—
(121)
Constant currency
—
(37)
2,277
—
—
—
14
351
(3)
2,602
Profit/(loss) before tax
Reported
4,487
(1,395)
12,899
728
705
832
583
1,432
(3,213)
17,058
Currency translation
37
(77)
(261)
2
—
(28)
83
(248)
(25)
(517)
Constant currency
4,524
(1,472)
12,638
730
705
804
666
1,184
(3,238)
16,541
Loans and advances to
customers (net)
Reported
245,921
86,964
473,985
19,762
54,159
—
20,446
22,325
(1)
923,561
Currency translation
14,412
4,009
(2,105)
22
—
—
3,044
(1,396)
1
17,987
Constant currency
260,333
90,973
471,880
19,784
54,159
—
23,490
20,929
—
941,548
Customer accounts
Reported
336,086
253,075
784,236
29,893
100,404
—
25,531
41,078
—
1,570,303
Currency translation
19,697
12,400
(2,671)
35
—
—
3,802
(5,072)
1
28,192
Constant currency
355,783
265,475
781,565
29,928
100,404
—
29,333
36,006
1
1,598,495
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2  Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi
Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit
before tax of $997m and constant currency profit before tax of $840m. Supplementary analysis is provided on page 145 to provide a fuller picture of
the MENAT regional performance.
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc
139
Legal entity results: notable items (continued)
20221
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and
related costs2
—
(2,242)
—
—
—
—
—
—
(495)
(2,737)
Fair value movements on
financial instruments3
—
—
—
—
—
—
—
—
(618)
(618)
Restructuring and other
related costs4
1
(278)
46
(13)
98
1
(17)
—
(85)
(247)
Operating expenses
Disposals, acquisitions and
related costs
—
(18)
—
—
—
—
—
—
—
(18)
Restructuring and other
related costs
(521)
(656)
(741)
(64)
(421)
(87)
(115)
(150)
(127)
(2,882)
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.3bn (inclusive of
$0.4bn in goodwill impairments) relates to the planned sale of the retail banking operations in France.
3Fair value movements on non-qualifying hedges in HSBC Holdings.
4Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Selected countries/territories results (continued)
20221
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue3
Reported
17,268
15,712
4,104
4,107
2,713
Currency translation
223
8
(212)
—
370
Constant currency
17,491
15,720
3,892
4,107
3,083
ECL
Reported
(712)
(1,683)
(326)
(20)
(507)
Currency translation
(36)
(2)
16
—
(67)
Constant currency
(748)
(1,685)
(310)
(20)
(574)
Operating expenses
Reported
(13,232)
(7,935)
(2,757)
(3,438)
(1,636)
Currency translation
(140)
(1)
139
—
(221)
Constant currency
(13,372)
(7,936)
(2,618)
(3,438)
(1,857)
Share of profit/(loss) in associates and joint ventures
Reported
(41)
5
2,386
—
12
Currency translation
1
—
(122)
—
2
Constant currency
(40)
5
2,264
—
14
Profit before tax
Reported
3,283
6,099
3,407
649
582
Currency translation
48
5
(179)
—
84
Constant currency
3,331
6,104
3,228
649
666
Loans and advances to customers (net)
Reported
286,032
294,580
50,481
54,159
20,446
Currency translation
16,763
(626)
(1,476)
—
3,044
Constant currency
302,795
293,954
49,005
54,159
23,490
Customer accounts
Reported
493,028
542,543
56,948
100,404
25,531
Currency translation
28,895
(1,153)
(1,664)
—
3,802
Constant currency
521,923
541,390
55,284
100,404
29,333
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entities
140
HSBC Holdings plc
Selected countries/territories results: notable items (continued)
20221
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
(60)
—
—
—
—
Fair value movements on financial instruments3
(617)
—
—
—
—
Restructuring and other related costs4
407
(124)
71
99
(17)
Operating expenses
Restructuring and other related costs
(1,741)
(393)
(70)
(424)
(115)
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3Fair value movements on non-qualifying hedges in HSBC Holdings.
4Comprises gains and losses relating to the business update in February 2020, including losses associated with RWA reduction commitments.
Legal entity reported and constant currency results (continued)
20211
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities1
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue2
Reported
8,596
8,424
22,994
1,408
4,056
1,768
2,360
2,996
(3,050)
49,552
Currency translation
(824)
(737)
(841)
1
—
(127)
344
(871)
(418)
(3,473)
Constant currency
7,772
7,687
22,153
1,409
4,056
1,641
2,704
2,125
(3,468)
46,079
ECL
Reported
1,362
239
(840)
142
205
37
(224)
2
5
928
Currency translation
(128)
(25)
24
—
—
(3)
(36)
(3)
1
(170)
Constant currency
1,234
214
(816)
142
205
34
(260)
(1)
6
758
Operating expenses
Reported
(5,172)
(7,511)
(12,999)
(958)
(3,683)
(1,044)
(1,565)
(2,066)
378
(34,620)
Currency translation
499
677
471
(1)
1
75
(250)
582
322
2,376
Constant currency
(4,673)
(6,834)
(12,528)
(959)
(3,682)
(969)
(1,815)
(1,484)
700
(32,244)
Share of profit/(loss) in
associates and joint ventures
Reported
—
263
2,486
—
—
—
17
280
—
3,046
Currency translation
—
(27)
(214)
—
—
—
3
—
(1)
(239)
Constant currency
—
236
2,272
—
—
—
20
280
(1)
2,807
Profit/(loss) before tax
Reported
4,786
1,415
11,641
592
578
761
588
1,212
(2,667)
18,906
Currency translation
(453)
(112)
(560)
—
1
(55)
61
(292)
(96)
(1,506)
Constant currency
4,333
1,303
11,081
592
579
706
649
920
(2,763)
17,400
Loans and advances to
customers (net)
Reported
264,624
122,954
492,523
18,623
52,678
54,226
18,043
22,142
1
1,045,814
Currency translation
(15,280)
(4,501)
(13,319)
22
—
(2,183)
3,749
(3,491)
1
(35,002)
Constant currency
249,344
118,453
479,204
18,645
52,678
52,043
21,792
18,651
2
1,010,812
Customer accounts
Reported
381,482
270,975
792,099
26,802
111,921
58,071
23,583
45,643
(2)
1,710,574
Currency translation
(22,028)
(12,400)
(16,539)
19
—
(2,338)
4,900
(9,003)
2
(57,387)
Constant currency
359,454
258,575
775,560
26,821
111,921
55,733
28,483
36,640
—
1,653,187
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc
141
Legal entity results: notable items (continued)
20211
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Fair value movements on
financial instruments2
—
—
—
—
—
—
—
—
(221)
(221)
Restructuring and other
related costs3
4
(280)
1
1
(6)
2
(15)
2
(16)
(307)
Operating expenses
Impairment of non-financial
items
—
—
—
—
—
—
—
(1)
(586)
(587)
Restructuring and other
related costs
(356)
(473)
(406)
(31)
(355)
(68)
(59)
(78)
(10)
(1,836)
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2Fair value movements on non-qualifying hedges in HSBC Holdings.
3Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Selected countries/territories results (continued)
20211
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue3
Reported
16,415
14,463
3,734
4,006
2,341
Currency translation
(1,571)
(101)
(340)
(1)
343
Constant currency
14,844
14,362
3,394
4,005
2,684
ECL
Reported
1,645
(608)
(89)
205
(224)
Currency translation
(154)
3
11
—
(36)
Constant currency
1,491
(605)
(78)
205
(260)
Operating expenses
Reported
(14,808)
(7,955)
(2,773)
(3,683)
(1,565)
Currency translation
1,212
51
255
1
(250)
Constant currency
(13,596)
(7,904)
(2,518)
(3,682)
(1,815)
Share of profit/(loss) in associates and joint ventures
Reported
267
16
2,461
—
17
Currency translation
(27)
—
(213)
—
3
Constant currency
240
16
2,248
—
20
Profit before tax
Reported
3,519
5,916
3,333
528
569
Currency translation
(540)
(47)
(287)
—
60
Constant currency
2,979
5,869
3,046
528
629
Loans and advances to customers (net)
Reported
306,464
311,947
54,239
52,678
18,043
Currency translation
(17,696)
(553)
(5,689)
—
3,749
Constant currency
288,768
311,394
48,550
52,678
21,792
Customer accounts
Reported
535,797
549,429
59,266
111,921
23,583
Currency translation
(30,939)
(974)
(6,217)
—
4,900
Constant currency
504,858
548,455
53,049
111,921
28,483
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entities
142
HSBC Holdings plc
Selected countries/territories results: notable items (continued)
20211
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Fair value movements on financial instruments3
(221)
—
—
—
—
Restructuring and other related costs4
227
(54)
41
(9)
(15)
Operating expenses
Restructuring and other related costs
(1,121)
(225)
(32)
(355)
(59)
1Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3Fair value movements on non-qualifying hedges in HSBC Holdings.
4Comprises gains and losses relating to the business update in February 2020, including losses associated with RWA reduction commitments.
Analysis by country/territory
Profit/(loss) before tax by country/territory within global businesses
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK1
2,415
4,437
(692)
(200)
5,960
–  of which: HSBC UK Bank plc (ring-fenced bank)
2,754
5,282
144
90
8,270
–  of which: HSBC Bank plc (non-ring-fenced bank)
396
295
121
177
989
–  of which: Holdings and other
(735)
(1,140)
(957)
(467)
(3,299)
France
(35)
235
128
10
338
Germany
44
144
128
4
320
Switzerland
25
29
—
5
59
Hong Kong
6,808
2,970
1,394
(304)
10,868
Australia
177
319
85
(15)
566
India
56
398
774
289
1,517
Indonesia
23
124
68
(7)
208
Mainland China
(90)
339
662
(540)
371
Malaysia
111
158
219
(21)
467
Singapore
233
436
444
(31)
1,082
Taiwan
99
72
198
(7)
362
Egypt
141
98
303
(11)
531
UAE
387
212
377
(83)
893
Saudi Arabia2
—
—
118
539
657
US
225
513
111
(398)
451
Canada
293
561
120
(96)
878
Mexico
317
504
15
(31)
805
Other3
315
1,731
1,472
497
4,015
Year ended 31 Dec 2023
11,544
13,280
5,924
(400)
30,348
1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
2  Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
3  Corporate Centre includes the profit and loss impact of inter-company debt eliminations of $571m.
HSBC Holdings plc
143
Profit/(loss) before tax by country/territory within global businesses (continued)
20221
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking
and Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK2
1,764
2,094
(534)
(41)
3,283
–  of which: HSBC UK Bank plc (ring-fenced bank)
2,112
2,662
143
(430)
4,487
–  of which: HSBC Bank plc (non-ring-fenced bank)
294
315
141
(473)
277
–  of which: Holdings and other
(642)
(883)
(818)
862
(1,481)
France3
(2,248)
210
81
(231)
(2,188)
Germany
17
8
133
(147)
11
Switzerland
25
17
13
(30)
25
Hong Kong
4,435
1,278
955
(568)
6,100
Australia
147
180
157
(36)
448
India
45
304
622
306
1,277
Indonesia
4
71
100
(8)
167
Mainland China
(100)
303
526
2,678
3,407
Malaysia
110
89
219
(36)
382
Singapore
218
255
351
(77)
747
Taiwan
36
43
137
(17)
199
Egypt
101
76
194
(4)
367
UAE
128
107
320
(86)
469
Saudi Arabia4
30
—
94
345
469
US
209
557
270
(387)
649
Canada
243
548
140
(89)
842
Mexico
241
414
39
(112)
582
Other5
183
1,039
1,102
(2,502)
(178)
Year ended 31 Dec 2022
5,588
7,593
4,919
(1,042)
17,058
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for financial year
ended 31 December 2022 have been restated accordingly.
2    UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
3  Includes the impact of goodwill impairment of $425m as a result of the reclassification of our retail banking operations in France to held for sale. At 31
December 2022, HSBC’s cash-generating units were based on geographical regions, sub-divided by global businesses.
4  Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
5  Corporate Centre includes the profit and loss impact of inter-company debt eliminations of $1,850m.
Profit/(loss) before tax by country/territory within global businesses (continued)
2021
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking
and Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK1
1,511
2,475
(487)
20
3,519
–  of which: HSBC UK Bank plc (ring-fenced bank)
2,047
2,929
127
(318)
4,785
–  of which: HSBC Bank plc (non-ring fenced bank)
176
259
220
(17)
638
–  of which: Holdings and other
(712)
(713)
(834)
355
(1,904)
France
236
163
(97)
(133)
169
Germany
17
82
155
67
321
Switzerland
46
10
—
(12)
44
Hong Kong
4,076
1,303
920
(383)
5,916
Australia
146
132
131
(26)
383
India
20
265
593
232
1,110
Indonesia
14
12
111
(8)
129
Mainland China
(95)
288
586
2,554
3,333
Malaysia
37
(23)
145
(20)
139
Singapore
145
107
231
(13)
470
Taiwan
14
16
106
(5)
131
Egypt
79
42
163
(2)
282
UAE
91
3
342
(61)
375
Saudi Arabia2
17
—
65
274
356
US
(131)
472
524
(337)
528
Canada
141
544
145
(62)
768
Mexico
305
88
222
(46)
569
Other3
(536)
698
867
(665)
364
Year ended 31 Dec 2021
6,133
6,677
4,722
1,374
18,906
1UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
2  Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
3  Includes the impact of goodwill impairment of $587m. At 31 December 2021, HSBC’s cash-generating units were based on geographical regions, sub-
divided by global businesses.
Legal entities
144
HSBC Holdings plc
Middle East, North Africa and Türkiye supplementary information
The following tables show the results of our Middle East, North Africa and Türkiye business operations on a regional basis (including results of
all the legal entities operating in the region and our share of the results of Saudi Awwal Bank). They also show the profit before tax of each of
the global businesses.
Middle East, North Africa and Türkiye regional performance
2023
2022
$m
$m
Revenue1
3,688
2,936
Change in expected credit losses and other credit impairment charges
(133)
8
Operating expenses
(1,592)
(1,586)
Share of profit in associates and joint ventures
538
342
Profit before tax
2,501
1,700
Loans and advances to customers (net)2
22,766
26,475
Customer accounts2
40,708
43,933
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2In the second quarter of 2023, loans and advances to customers of $2,975m were classified as ‘Assets held for sale’, and customer accounts of
$4,878m were classified as ‘Liabilities of disposal groups held for sale’ in respect of the planned merger of our business in Oman. The merger was
subsequently completed in August 2023.
Profit before tax by global business
2023
2022
$m
$m
Wealth and Personal Banking
612
313
Commercial Banking
400
290
Global Banking and Markets
1,104
861
Corporate Centre
385
236
Total
2,501
1,700
Reconciliation of alternative performance measures
Contents
Use of alternative performance measures
Alternative performance measure definitions
Return on average ordinary shareholders’ equity and return on
average tangible equity
Net asset value and tangible net asset value per ordinary share
Post-tax return and average total shareholders’ equity on average
total assets
Expected credit losses and other credit impairment charges as %
of average gross loans and advances to customers
Target basis operating expenses
Basic earnings per share excluding material notable items and
related impacts
Multi-jurisdictional client revenue
Use of alternative performance
measures
Our reported results are prepared in accordance with IFRS Accounting
Standards as detailed in our financial statements starting on page 356.
As described on page 100, we use a combination of reported and
alternative performance measures, including those derived from our
reported results that eliminate factors that distort year-on-year
comparisons. These are considered alternative performance
measures (non-GAAP financial measures).
The following information details the adjustments made to the
reported results and the calculation of other alternative performance
measures. All alternative performance measures are reconciled to the
closest reported performance measure.
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As
required by the standard, the Group applied the requirements
retrospectively with comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022
transition date.
In addition to the alternative performance measures set out in this
section, further alternative performance measures in relation to the
Group’s insurance manufacturing operations are set out on pages 116
to 117.
HSBC Holdings plc
145
Alternative performance measure definitions
Alternative performance
measure
Definition
Return on average ordinary
shareholders’ equity (‘RoE’)
Profit attributable to the ordinary shareholders
Average ordinary shareholders’ equity
Return on average tangible equity
(‘RoTE‘)
Profit attributable to the ordinary shareholders, excluding impairment of goodwill and other intangible assets
Average ordinary shareholders’ equity adjusted for goodwill and intangibles
Return on average tangible equity
(‘RoTE‘) excluding strategic
transactions and impairment of
BoCom
Profit attributable to the ordinary shareholders, excluding impairment of goodwill and other intangible assets,
the impact of strategic transactions and impairment of BoCom1
Average ordinary shareholders’ equity adjusted for goodwill and
intangibles, the impact of strategic transactions and impairment of BoCom1
Net asset value per ordinary share
Total ordinary shareholders’ equity2
Basic number of ordinary shares in issue excluding treasury shares
Tangible net asset value per ordinary
share
Tangible ordinary shareholders’ equity3
Basic number of ordinary shares in issue excluding treasury shares
Post-tax return on average total
assets
Profit after tax
Average total assets
Average total shareholders’ equity on
average total assets
Average total shareholders’ equity
Average total assets
Expected credit losses and other
credit impairment charges (‘ECL’) as
% of average gross loans and
advances to customers
Annualised constant currency ECL4
Constant currency average gross loans and advances to customers4
Expected credit losses and other
credit impairment charges (‘ECL’) as
% of average gross loans and
advances to customers, including held
for sale
Annualised constant currency ECL4
Constant currency average gross loans and advances to customers,
including held for sale4
Target basis operating expenses
Reported operating expenses excluding notable items, foreign exchange
translation and other excluded items5
Basic earnings per share excluding
material notable items and related
impacts
Profit attributable to ordinary shareholders excluding material notable items
and related impacts6
Weighted average number of ordinary shares outstanding, excluding own shares held
Multi-jurisdictional client revenue
Total client revenue we generate from clients that hold a relationship with
us that generates revenue in more than one market
1Excluding the impacts of the sale of our retail banking operations in France, the provisional gain of $1.6bn recognised in respect of the acquisition of
SVB UK and the impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
2    Total ordinary shareholders’ equity is total shareholders‘ equity less non-cumulative preference shares and capital securities.
3Tangible ordinary shareholders’ equity is total ordinary shareholders’ equity excluding goodwill and other intangible assets (net of deferred tax).
4The constant currency numbers are derived by adjusting reported ECL and average loans and advances to customers for the effects of foreign
currency translation differences.
5Includes impact of re-translating comparative period financial information at the latest rates of foreign exchange in hyperinflationary economies, which
we consider to be outside of our control, and the incremental costs associated with our acquisition of SVB UK and related international investments.
6Excluding the impacts of material M&A transactions, the 2022 deferred tax adjustment in HSBC Holdings and the impairment loss of $3.0bn
recognised in 2023 in respect of the Group’s investment in BoCom.
Reconciliation of alternative performance measures
146
HSBC Holdings plc
Return on average ordinary shareholders’ equity, return on average tangible equity and return on average tangible equity excluding strategic
transactions and impairment of BoCom
2023
2022¹
2021
$m
$m
$m
Profit
Profit attributable to the ordinary shareholders of the parent company
22,432
14,346
12,607
Impairment of goodwill and other intangible assets (net of tax)
43
535
608
Decrease/(increase) in PVIF (net of tax)1
—
—
(58)
Profit attributable to the ordinary shareholders, excluding goodwill, other
intangible assets impairment and PVIF
22,475
14,881
13,157
Impact of strategic transactions and impairment of BoCom2,3,4
1,275
1,886
N/A
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment,
strategic transactions and impairment of BoCom
23,750
16,767
N/A
Equity
Average total shareholders’ equity
184,029
180,263
199,295
Effect of average preference shares and other equity instruments
(18,794)
(21,202)
(22,814)
Average ordinary shareholders’ equity
165,235
159,061
176,481
Effect of goodwill, other intangibles and PVIF (net of deferred tax)
(11,480)
(10,786)
(17,705)
Average tangible equity
153,755
148,275
158,776
Average impact of strategic transactions and impairment of BoCom
(1,277)
748
N/A
Average tangible equity excluding strategic transactions and impairment of BoCom
152,478
149,023
N/A
%
%
%
Ratio
Return on average ordinary shareholders’ equity
13.6
9.0
7.1
Return on average tangible equity
14.6
10.0
8.3
Return on average tangible equity excluding strategic transactions and impairment of BoCom
15.6
11.3
N/A
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Includes the impacts of the sale of our retail banking operations in France.
3  Includes the provisional gain of $1.6bn recognised in respect of the acquisition of SVB UK.
4  Includes the impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 421.
From 2024, we intend to revise the adjustments made to return on average tangible equity (‘RoTE’) to exclude all notable items, improving
alignment with the treatment of notable items in our other income statement disclosures. On this basis, we continue to target a RoTE in the
mid-teens for 2024.
The following table details the adjustments made to reported results by global business:
Return on average tangible equity by global business
Year ended 31 Dec 2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Profit before tax
11,544
13,280
5,924
(400)
30,348
Tax expense
(2,141)
(2,945)
(1,165)
462
(5,789)
Profit after tax
9,403
10,335
4,759
62
24,559
Less attributable to: preference shareholders, other equity holders, non-controlling
interests
(828)
(485)
(588)
(226)
(2,127)
Profit attributable to ordinary shareholders of the parent company
8,575
9,850
4,171
(164)
22,432
Other adjustments
(221)
364
168
(268)
43
Profit attributable to ordinary shareholders
8,354
10,214
4,339
(432)
22,475
Average tangible shareholders’ equity
29,352
43,687
38,036
42,680
153,755
Return on average tangible equity (%)
28.5
23.4
11.4
(1.0)
14.6
Year ended 31 Dec 2022
Profit before tax
5,588
7,593
4,919
(1,042)
17,058
Tax expense
(1,150)
(1,796)
(761)
2,898
(809)
Profit after tax
4,438
5,797
4,158
1,856
16,249
Less attributable to: preference shareholders, other equity holders, non-controlling
interests
(688)
(344)
(510)
(362)
(1,903)
Profit attributable to ordinary shareholders of the parent company
3,750
5,453
3,648
1,494
14,346
Other adjustments
432
328
255
(499)
515
Profit attributable to ordinary shareholders
4,182
5,781
3,903
995
14,861
Average tangible shareholders’ equity
30,290
42,271
39,935
35,780
148,276
Return on average tangible equity (%)
13.8
13.7
9.8
2.8
10.0
HSBC Holdings plc
147
Net asset value and tangible net asset value per ordinary share
2023
2022¹
2021
$m
$m
$m
Total shareholders’ equity
185,329
177,833
198,250
Preference shares and other equity instruments
(17,719)
(19,746)
(22,414)
Total ordinary shareholders’ equity
167,610
158,087
175,836
Goodwill, PVIF and intangible assets (net of deferred tax)
(11,900)
(11,160)
(17,643)
Tangible ordinary shareholders’ equity
155,710
146,927
158,193
Basic number of $0.50 ordinary shares outstanding
19,006
19,739
20,073
$
$
$
Value per share
Net asset value per ordinary share
8.82
8.01
8.76
Tangible net asset value per ordinary share
8.19
7.44
7.88
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
Post-tax return and average total shareholders’ equity on average total assets
2023
2022¹
2021
$m
$m
$m
Profit after tax
24,559
16,249
14,693
Average total shareholders’ equity
184,029
180,263
199,295
Average total assets
3,059,887
3,017,495
3,012,437
Ratio
%
%
%
Post-tax return on average total assets
0.8
0.5
0.5
Average total shareholders’ equity to average total assets
6.01
5.97
6.62
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers and expected credit
losses and other credit impairment charges as % of average gross loans and advances to customers, including held for sale
2023
2022¹
2021
$m
$m
$m
Expected credit losses and other credit impairment charges (‘ECL’)
(3,447)
(3,584)
928
Currency translation
—
(46)
(170)
Constant currency
(3,447)
(3,630)
758
Average gross loans and advances to customers
955,585
1,014,148
1,057,412
Currency translation
11,629
6,701
(43,098)
Constant currency
967,214
1,020,849
1,014,314
Average gross loans and advances to customers, including held for sale
1,020,992
1,035,678
1,058,947
Currency translation
12,688
7,837
(43,098)
Constant currency
1,033,680
1,043,515
1,015,849
Ratio
%
%
%
Expected credit losses and other credit impairment charges as % of average gross loans and advances to
customers
0.36
0.36
(0.07)
Expected credit losses and other credit impairment charges as % of average gross loans and advances to
customers, including held for sale
0.33
0.35
(0.07)
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
Target basis operating expenses
Target basis operating expenses is computed by excluding the impact
of notable items and foreign exchange translation impacts from
reported results. We also exclude the impact of retranslating
comparative period financial information at the latest rates of foreign
exchange in hyperinflationary economies, which we consider to be
outside of our control. Our target basis also excludes the impact of
the acquisition of SVB UK and related investments internationally,
which added approximately 1% to our cost growth in 2023 compared
with 2022. We consider this measure to provide useful information to
investors by quantifying and excluding the notable items that
management considered when setting and assessing cost-related
targets.
Target basis operating expenses
2023
2022
$m
$m
Reported operating expenses
32,070
32,701
Notable items
(185)
(2,900)
Disposals, acquisitions and related costs
(321)
(18)
Impairment of non-financial items
—
—
Restructuring and other related costs1
136
(2,882)
Excluding the impact of SVB UK and related international investments
(271)
—
Currency translation2
(430)
Excluding the impact of retranslating prior year costs of hyperinflationary economies at a constant currency foreign exchange rate
440
Target basis operating expenses
31,614
29,811
1Amounts in 2023 relate to reversals of restructuring provisions recognised during 2022.
2  Currency translation on reported operating expenses, excluding currency translation on notable items.
Reconciliation of alternative performance measures
148
HSBC Holdings plc
Basic earnings per share excluding material notable items and related impacts
Material notable items are a subset of notable items. Material notable
items are components of our income statement that management
would consider as outside the normal course of business and
generally non-recurring in nature, which are excluded from our
dividend payout ratio calculation and our earnings per share measure,
along with related impacts. Categorisation as a material notable item
is dependent on the nature of each item in conjunction with the
financial impact on the Group’s income statement.
Related impacts include those items that do not qualify for
designation as notable items but whose adjustment is considered by
management to be appropriate for the purposes of determining the
basis for our dividend payout ratio calculation.
In 2023, material notable items comprised the impacts of the sale of
our retail banking operations in France, the planned sale of our
banking business in Canada, the acquisition of SVB UK and the
impairment of BoCom. The impairment of BoCom is included within
material notables given that the impairment relates to the accounting
assessment of the future value-in-use. The impairment has no
material impact on our distribution capacity, dividends or share buy-
backs. Related items comprised HSBC Bank Canada‘s financial results
from the 30 June 2022 net asset reference date onwards, as a
component of the gain on sale will be recognised through the
consolidation of HSBC Bank Canada‘s results in the Group‘s results,
with the remainder recognised at completion.
Commencing in 2024, we will establish a dividend payout ratio on a
‘target basis’. We will disclose at each quarter the adjustments that
we will designate as material notable items and related impacts.
Basic earnings per share excluding material notable items and related impacts
20231
$m
Profit attributable to shareholders of company
            23,533
Coupon payable on capital securities classified as equity
                (1.1)
Profit attributable to ordinary shareholders of company
                22.4
Impairment of interest in associate2
                  3.0
Provisional gain on acquisition of SVB UK
                (1.5)
Impairment loss relating to the sale of our retail banking operations in France (net of tax)
                  0.1
Impact of the planned sale of our banking business in Canada3
                (0.3)
Profit attributable to ordinary shareholders of company excluding material notable items and related impacts
                23.7
Number of shares
Weighted average basic number of ordinary shares (millions)
            19,478
Basic earnings per share excluding material notable items and related impacts
                1.22
Basic earnings per share 
                1.15
Dividend per ordinary share (in respect of the period) ($)
                0.61
Dividend payout ratio (%) (dividend per ordinary share divided by basic earnings per share excluding material notable items and related impacts)
                50%
1In 2023, earnings per share (‘EPS’) was adjusted for material notable items and related impacts. 2022 comparatives have not been provided due to the
change our reporting framework and restatement due to the adoption of the IFRS 17. See our Annual Report and Accounts 2022 for details of the
impacts of adjustments to our EPS in 2022.
2Represents an impairment loss of $3bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 419.
3  Represents the earnings recognised by the banking business in Canada, net of gains and losses on foreign exchange hedges held at Group level, that
will reduce the gain on sale recognised by the Group on completion.
Multi-jurisdictional revenue
Multi-jurisdictional revenue is a financial metric we use to assess our
ability to drive value from our international network.
In our wholesale businesses, we identify a client as multi-jurisdictional
if they hold a relationship with us that generates revenue in any
market outside of where the primary relationship is managed. A client
is defined as a mastergroup (HSBC’s own client groupings) that
includes both the parent and, where relevant, any subsidiaries.
Multi-jurisdictional client revenue is a component of wholesale client
revenue and represents the total client revenue we generate from
multi-jurisdictional clients. Wholesale client revenue is derived by
excluding from CMB and GBM reported revenue the revenue we
generate from client facilitation in fixed income and equities, the 2023
provisional gain on the acquisition of SVB UK, as well as other non-
client revenue.
In WPB, we identify a customer as multi-jurisdictional if they bank
with us in more than one of our 11 key markets. It is derived by
excluding from WPB reported revenue the revenue from Canada and
our retail business in France, as well as other non-customer income.
Wholesale multi-jurisdictional client revenue
2023
$bn
CMB and GBM revenue
39.0
Allocated revenue and other1
0.9
Client facilitation in Fixed Income and Equities
(4.8)
Provisional gain on acquisition of SVB UK
(1.6)
Wholesale client revenue
33.5
– clients banked in multiple jurisdictions (‘multi-jurisdictional’)
20.4
– domestic only clients
13.1
WPB multi-jurisdictional customer revenue
2023
$bn
WPB revenue
27.3
Allocated revenue and other1
(0.5)
France retail and Canada
(1.4)
WPB customer revenue
25.4
– international customer revenue
10.2
of which: customers banked in multiple jurisdictions (‘multi-
jurisdictional’)
5.3
of which: non-resident and resident foreigner
4.9
– domestic only clients
15.2
1  including allocations of Market Treasury revenue, HSBC Holdings
interest expense and hyperinflationary accounting adjustments, and
interest earned on capital held in the global businesses.
HSBC Holdings plc
149
Other information
Contents
Disclosure controls
Management’s assessment of internal controls over financial
reporting
Regulation and supervision
Disclosures pursuant to Section 13(r) of the Securities Exchange
Act
Disclosure controls
The Group Chief Executive and Group Chief Financial Officer, with the
assistance of other members of management, carried out an
evaluation of the effectiveness of the design and operation of HSBC
Holdings’ disclosure controls and procedures as at 31 December
2023. Based upon that evaluation, the Group Chief Executive and
Group Chief Financial Officer concluded that the disclosure controls
and procedures at 31 December 2023 were effective to provide
reasonable assurance that information required to be disclosed in the
reports that the company files and submits under the US Securities
Exchange Act of 1934, as amended, is recorded, processed,
summarised and reported as and when required. There are inherent
limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can
only provide reasonable assurance of achieving their control
objectives.
Management’s assessment of internal
controls over financial reporting
Management is responsible for establishing and maintaining an
adequate internal control structure and procedures for financial
reporting, and has completed an assessment of the effectiveness of
the Group’s internal controls over financial reporting for the year
ended 31 December 2023. In making the assessment, management
used the framework for internal control evaluation contained in the
Financial Reporting Council’s Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting (September
2014), as well as the criteria established by the Committee of
Sponsoring Organizations of the Treadway Commission (‘COSO’) in
‘Internal Control-Integrated Framework (2013)’.
There have been no changes in HSBC Holdings’ internal control over
financial reporting during the year ended 31 December 2023 that have
materially affected, or are reasonably likely to materially affect, HSBC
Holdings’ internal control over financial reporting.
Based on the assessment performed, management concluded that
for the year ended 31 December 2023, the Group’s internal controls
over financial reporting were effective.
PricewaterhouseCoopers LLP, which has audited the consolidated
financial statements of the Group for the year ended 31 December
2023, has also audited the effectiveness of the Group’s internal
control over financial reporting as stated in their report on page 354.
Regulation and supervision
The ordinary shares of HSBC Holdings are listed in London, Hong
Kong, New York and Bermuda. As a result of the listing in London,
HSBC Holdings is subject to the Listing Rules of the FCA. As a result
of the listing in Hong Kong, HSBC Holdings is subject to The Rules
Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (‘HKEX’). In the US, where the listing is through an
American Depositary Receipt Programme, shares are traded in the
form of American Depositary Shares (‘ADS’), which are registered
with the US Securities and Exchange Commission (‘SEC’). As a
consequence of its US listing, HSBC Holdings is also subject to the
reporting and other requirements of: the US Securities Act of 1933, as
amended; the Securities Exchange Act of 1934, as amended; and the
New York Stock Exchange’s (‘NYSE’) Listed Company Manual, in
each case as applied to foreign private issuers. In Bermuda, HSBC
Holdings is subject to the listing rules of the Bermuda Stock
Exchange applicable to companies with secondary listings.
A statement of our compliance with the provisions of the
UK Corporate Governance Code issued by the Financial Reporting
Council and with the Hong Kong Corporate Governance Code set out
in Appendix 14 to the Rules Governing the Listing of Securities on
HKEX can be found in the ‘Report of the Directors: Statement of
Compliance’ on page 352.
Our operations throughout the world are regulated and supervised
globally by a large number of different regulatory authorities, central
banks and other bodies in those jurisdictions in which we have
offices, branches or subsidiaries. These authorities impose a variety
of requirements and controls designed to provide financial stability,
transparency in financial markets and a contribution to economic
growth. The requirements to which our operations must adhere
include those relating to capital and liquidity, disclosure standards and
restrictions on certain types of products or transaction structures,
recovery and resolution, governance standards, conduct of business
and financial crime.
The UK Prudential Regulation Authority (‘PRA’) is the HSBC Group’s
consolidated lead regulator. HSBC Holdings is approved by, and
directly responsible to the PRA for ensuring the HSBC Group meets
consolidated prudential requirements. The Group‘s other lead UK
regulator, the FCA, supervises 15 of HSBC’s entities in the UK,
including seven where the PRA is responsible for those entities‘
prudential supervision. The FCA maintains global oversight of the
Group’s management of financial crime risk in the exercise of its
wider powers under the Financial Services and Markets Act 2000, and
through the exercise of direct supervisory powers over HSBC
Holdings. In addition, and as required under relevant local laws, each
operating bank, finance company and insurance operation within
HSBC is regulated by relevant local regulatory authorities.
UK regulation and supervision
The UK‘s financial services regulatory structure is comprised of three
regulatory bodies: The Financial Policy Committee, a committee of
the BoE; the PRA; and the FCA.
The Financial Policy Committee is responsible for macro-prudential
supervision, focusing on systemic risks that may affect the UK’s
financial stability.
The BoE conducts prudential regulation and supervision of financial
services firms through the PRA, and in addition to its wider role as the
UK’s central bank, the BoE is the resolution authority responsible for
taking action to manage the failure of financial institutions in the UK, if
necessary. The latter involves a set of responsibilities and powers that
apply outside of an actual bank failure and relate to general resolution
planning, including an assessment of any barriers to the resolution of
banks, the exercise of powers to require the removal of impediments
to resolvability and the setting of minimum requirements for own
funds and eligible liabilities (‘MREL‘), through the Banking Act and the
Bank Recovery and Resolution (No. 2) Order 2014.
These include own funds and liabilities that can be written down or
converted into capital resources to absorb losses or recapitalise a
bank in the event of its failure. These requirements are based on the
resolution strategy for the Group, as agreed by the BoE in
consultation with our local regulators. The BoE set end state MREL
requirements for the Group, which have applied since 1 January 2022.
The PRA and the FCA are micro-prudential supervisors. The Group’s
banking subsidiaries in the UK, such as HSBC Bank plc and HSBC UK,
are ‘dual-regulated’ firms, subject to prudential regulation by the PRA
and to conduct regulation by the FCA. Other (generally smaller, non-
bank) UK-based subsidiaries are ‘solo regulated’ by the FCA (i.e. the
FCA is responsible for both prudential and conduct regulation of those
subsidiaries). HSBC Group is subject to consolidated supervision by
the PRA.
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HSBC Holdings plc
UK banking and financial services institutions are subject to multiple
regulations. The primary UK statute in this context is the Financial
Services and Markets Act 2000, as amended by subsequent
legislation, in addition to EU financial services legislation that was
"onshored" into UK law under the European Union (Withdrawal) Act
2018 (‘EUWA’).
The PRA and FCA are together responsible for authorising and
supervising all our operating businesses in the UK that require
authorisation under the Financial Services and Markets Act 2000.
These include deposit-taking, retail banking, consumer credit, life and
general insurance, pensions, investments, mortgages, custody and
share-dealing businesses, and treasury and capital markets activity.
The FCA is also responsible for promoting effective competition in the
interests of consumers, and an independent subsidiary of the FCA,
the Payment Systems Regulator, regulates payment systems in the
UK.
The PRA and FCA‘s rules establish the minimum criteria for the
authorisation of banks and other financial sector entities that carry out
regulated activities. In the UK, the PRA and FCA have the right to
object, on prudential grounds, to persons who hold, or intend to hold,
10% or more of the voting power or shares of a financial institution
that they regulate, or of its parent undertaking. In its capacity as our
supervisor on a consolidated basis, the PRA receives information on
the capital adequacy of, and sets requirements for, the Group as a
whole. In addition, it conducts stress tests both on HSBC’s UK
entities and more widely on the Group. Individual banking subsidiaries
in the Group are directly regulated by their local banking supervisors,
who set and monitor, inter-alia, their capital adequacy requirements.
The Group is subject to capital requirements as set out in Regulation
(EU) No. 575/2013 on prudential requirements for credit institutions
and investment firms of the European Parliament and of the Council
of 26 June 2013, as amended or supplemented, as it forms part of
domestic law in the UK by virtue of the EUWA (the ‘UK CRR’), the
PRA Rulebook and the UK law implementing the Capital
Requirements Directive (the ‘CRD’ and together with the UK CRR,
and the relevant rules of the PRA Rulebook, the ‘Capital
Requirements Legislative Package’).
The Pillar 1 regulatory capital framework has been, and continues to
be, significantly enhanced. The UK implemented the first tranche of
changes associated with Basel 3.1 in January 2022. These include the
changes in relation to counterparty risk, equity investments in funds
and market risk RWAs and the leverage ratio. The second and final
tranche of changes include the changes to credit and operational risk
and credit valuation adjustment RWAs, further changes to the market
risk RWAs and the implementation of an RWA output floor. In
September 2023, the PRA announced a delay to the implementation
date of the final elements to 1 July 2025. At the same time, it
announced that it intends to reduce the transitional period of the
output floor to 4.5 years to ensure full implementation by 1 January
2030.
The Group is also subject to liquidity requirements as set out in the
UK CRR and as implemented by the PRA, and, in January 2022
became subject to the net stable funding ratio (‘NSFR‘) requirements
as part of the first tranche of changes arising as part of Basel 3.1.
On 30 June 2023, the Financial Services and Markets Act (‘FSMA’)
2023 achieved Royal Assent. FSMA 2023 provides for a number of
changes to the regulatory architecture in the UK, including the
introduction of a new secondary objective for the FCA and PRA to
facilitate growth and international competitiveness in the UK
economy. Amongst other things, FSMA 2023 also contains provisions
that would allow for specified ‘onshored’ EU legislation, including the
UK CRR, to be revoked and replaced by legislation or rules made by
HM Treasury or the regulators and provides for a ‘Designated
Activities Regime‘ that would allow HM Treasury to bring certain
activities, products or conduct within the scope of the Financial
Services and Markets Act 2000.
The PRA and FCA monitor authorised institutions through ongoing
supervision and the review of routine and ad hoc reports relating to
financial, prudential, conduct of business and financial crime matters.
They may also obtain independent reports from a Skilled Person on
the adequacy of procedures and systems covering internal control and
governing records and accounting. The PRA meets the Group’s senior
executives regularly to discuss our adherence to its prudential
requirements. In addition, both the PRA and FCA regularly discuss
with relevant management fundamental matters relating to our
business in the UK and internationally, including areas such as
strategic and operating plans, risk control, loan portfolio composition,
organisational changes, succession planning and recovery and
resolution arrangements.
Hong Kong regulation and supervision
The Banking Ordinance provides the legal framework for banking
supervision in Hong Kong. Section 7(1) of the Ordinance provides that
the principal function of the Hong Kong Monetary Authority (‘HKMA’)
is to ‘promote the general stability and effective working of the
banking system’. The HKMA seeks to establish a regulatory
framework in line with international standards, in particular those
issued by the Basel Committee on Banking Supervision (‘BCBS‘) and
the Financial Stability Board (‘FSB’). The objective is to maintain a
prudential supervisory system that underpins the general stability and
effective working of the banking system, while at the same time
providing sufficient flexibility for authorised institutions to take
commercial decisions. Under the Banking Ordinance, the HKMA is
the licensing authority responsible for the authorisation, suspension,
and revocation of authorised institutions. To provide checks and
balances, the HKMA is required under the Ordinance to consult with
the Financial Secretary on important authorisation decisions, such as
suspension and involuntary revocation.
The Hongkong and Shanghai Banking Corporation Limited and its
overseas branches and subsidiaries are licensed under the Banking
Ordinance and hence subject to the supervision, regulation, and
examination of the HKMA.
The HKMA follows international practices as recommended by the
BCBS to supervise authorised institutions. Under the Banking
Ordinance, the HKMA imposes capital requirements on authorised
institutions through the Banking (Capital) Rules, liquidity requirements
through the Banking (Liquidity) Rules and large exposure limits
through the Banking (Exposure Limits) Rules. These rules take into
account the latest standards set by the BCBS. In November 2023, the
HKMA announced that they plan to implement the Basel 3.1
standards for capitalisation in January 2025, with a reporting only
requirement for market risk and credit valuation adjustment RWAs
starting in July 2024.
As outlined in the HKMA Supervisory Policy Manual SA-1 – Risk
based Supervisory Approach, the HKMA adopts a risk-based
supervisory approach which consists of a structured methodology
designed to establish a forward-looking view on the risk profile of
authorised institutions. During the process, the HKMA assesses eight
inherent risks, namely, credit, market, interest rate, liquidity,
operational, legal, reputation and strategic risks. In the assessment of
these risks, the HKMA will also consider any new risk types that may
emerge from time to time, for example climate risk. The HKMA also
follows a policy of ‘continuous supervision’ through on-site
examinations, off-site reviews, prudential meetings, cooperation with
external auditors and sharing information with other supervisors as a
part of its risk-based supervisory methodology.
The HKMA aims to ensure that the standards for regulatory disclosure
in Hong Kong remain in line with those of other leading financial
centres.
The Banking (Disclosure) Rules take into account the latest disclosure
standards released by the BCBS, which prescribe quarterly, semi-
annual, and annual disclosure of specified items, including in the form
of standard templates and tables, in order to promote user-relevance
and the consistency and comparability of regulatory disclosure among
banks and across jurisdictions.
The Banking Ordinance empowers the HKMA to collect prudential
data from authorised institutions on a routine or ad hoc basis and to
require any holding company or subsidiary or sister company of an
authorised institution to submit such information as may be required
for the exercise of the HKMA’s functions under the Ordinance. The
HKMA has the power to serve a notice of objection on persons if they
are no longer deemed to be fit and proper to be controllers of the
authorised institution, if they may otherwise threaten the interests of
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151
depositors or potential depositors, or if they have contravened any
conditions specified by the HKMA. The HKMA may revoke
authorisation in the event of an institution’s non-compliance with the
provisions of the Banking Ordinance. These provisions require, among
other things, the furnishing of accurate reports.
The HKMA is the relevant authority under the Anti-Money Laundering
and Counter-Terrorist Financing Ordinance for supervising authorised
institutions’ compliance with the legal and supervisory requirements
set out in the Anti-Money Laundering and Counter-Terrorist Financing
Ordinance and the Guideline on Anti-Money Laundering and Counter-
Financing of Terrorism (for Authorised Institutions). The HKMA
requires authorised institutions in Hong Kong and its overseas
branches and subsidiaries to establish effective systems and controls
to prevent and detect money laundering and terrorist financing. It
works closely with other stakeholders within both the government
and the industry to ensure that the banking sector is able to play its
gatekeeper role in Hong Kong’s anti-money laundering and counter-
financing of terrorism regime.
To enhance the exchange of supervisory information and cooperation,
the HKMA has entered into Memoranda of Understanding (’MoU’) or
other formal arrangements with a number of banking supervisory
authorities within and outside Hong Kong.
The marketing of, dealing in and provision of advice and asset
management services in relation to securities and futures in Hong
Kong are subject to the provisions of the Securities and Futures
Ordinance of Hong Kong. Entities engaging in activities regulated by
the Ordinance (including The Hongkong and Shanghai Banking
Corporation Limited) are required to be licensed or registered with the
Securities and Futures Commission (‘SFC’). The HKMA is the front-
line regulator for banks involved in the securities and futures
business.
The HKMA and the SFC work very closely to ensure that there is an
open market with a level playing field for all intermediaries in the
securities industry of Hong Kong.
Among other functions, the Securities and Futures Ordinance vests
the SFC with powers to set and enforce market regulations, including
investigating breaches of rules and market misconduct and taking
appropriate enforcement action.
The SFC is responsible for licensing and supervising intermediaries
conducting SFC-regulated activities, such as investment advisers,
fund managers, brokers, trustees, and custodians. Additionally, the
SFC sets standards for the authorisation and regulation of investment
products, and it reviews and authorises offering documents of retail
investment products to be marketed to the public.
To promote proper conduct and increase awareness of individual
responsibility and accountability, the SFC introduced and
implemented the Manager-In-Charge (‘MIC’) regime in Hong Kong.
The MIC regime applies to senior individuals of licensed corporations
responsible for managing core functions within financial services
businesses supervised by the SFC. The regime required SFC licensed
corporations to review their organisational structure and the roles of
senior management and their responsible officers in light of the SFC’s
classification of core functions within licensed corporations and its
guidelines on identifying Managers-In-Charge of Core Functions. The
regime also imposes reporting requirements on SFC licensed
corporations.
Similar to the SFC, the HKMA launched its Management
Accountability Initiative which aimed at increasing the accountability
of the senior management of Hong Kong registered institutions (‘RIs’)
i.e. Hong Kong banks registered to carry on one or more regulated
activities under the SFO. The Management Accountability Initiative
clarified the HKMA’s expectations on the responsibility and
accountability of RIs’ senior management and enhanced its
information gathering on RIs’ regulated activities, while requiring RIs
to better identify lines of responsibility and accountability for their
regulated activities.
In order to support capacity building and talent development, the
HKMA has been working with the banking industry and relevant
professional bodies to implement an industry-wide enhanced
competency framework for banking practitioners. Currently, the
enhanced competency framework for banking practitioners covers ten
professional work streams: anti-money laundering and counter-
financing of terrorism; cybersecurity; treasury management; retail
wealth management; credit risk management; operational risk
management; Fintech; private wealth management; green and
sustainable finance; and compliance. 
Relevant to the Group‘s insurance business in Hong Kong, the HKMA
and the Hong Kong Insurance Authority (‘IA’) have signed an ‘MoU’ to
enhance the cooperation, exchange of information and mutual
assistance between the two authorities. This MoU sets out the
framework between the HKMA and the IA for strengthening co-
operation in respect of regulation and supervision of entities or
financial groups in which the two authorities have a common
regulatory interest. Pursuant to the statutory regulatory regime for
insurance intermediaries under the Insurance Ordinance, the IA has
delegated its inspection and investigation powers to the HKMA in
relation to insurance related businesses of authorised institutions in
Hong Kong, which aims to improve efficiency and minimise possible
regulatory overlap.
Under the statutory regime for the regulation of Mandatory Provident
Fund (‘MPF’) intermediaries, the Mandatory Provident Fund Schemes
Authority is the lead regulator in respect of regulation of MPF
intermediaries whereas the HKMA, the IA and the SFC are the front-
line regulators of the MPF intermediaries.
The Financial Institutions (Resolution) Ordinance established the legal
basis for a cross-sector resolution regime in Hong Kong under which
the HKMA is the resolution authority for banking sector entities,
including all authorised institutions. The HKMA is also designated as
the lead resolution authority for the cross-sectoral groups in Hong
Kong that include banking sector entities within the scope of the
Financial Institutions (Resolution) Ordinance (‘FIRO‘). The HKMA’s
function as a resolution authority is supported by the Resolution
Office within the HKMA. The Resolution Office is operationally
independent and has a direct reporting line to the chief executive of
the HKMA.
The Financial Institutions (Resolution) (Loss-absorbing Capacity
Requirements – Banking Sector) Rules (‘LAC Rules’) were made by
the HKMA under section 19(1) of the FIRO. The LAC Rules enable the
HKMA to designate entities within Hong Kong as resolution entities or
material subsidiaries and require them to issue Loss Absorbing
Capacity (‘LAC’) instruments, in accordance with the FSB’s standard
‘Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs
in Resolution – Total Loss-absorbing Capacity (‘TLAC’) Term Sheet’.
The LAC Rules also incorporate the BCBS’s disclosure standards on
TLAC.
The HKMA finalised the Operational Continuity in Resolution (‘OCIR‘)
Chapter within their Financial Institution (Resolution) Ordinance
(‘FIRO‘), publishing a Code of Practice (‘CoP‘) that provides further
guidance on OCIR. These are compliant with international resolution
standards defined by the FSB Key Attributes. The HKMA expects an
Authorised Institution (‘AI‘) to be able to demonstrate that it has
assessed the risks to OCIR and that appropriate arrangements are in
place to support the preferred resolution strategy.
The HKMA has also recently issued LFIR-1 ‘Resolution Planning –
Liquidity and Funding in Resolution‘, a new chapter of the code of
practice pursuant to section 196 of the FIRO. The chapter sets out the
HKMA’s expectations as to the capabilities and arrangements that an
AI should have in place, in business as usual, in order to address the
potential impediment to orderly resolution that would arise if an AI
were unable to assess its liquidity and funding needs and access
funding in resolution.
US regulation and supervision
The Group is subject to federal and state supervision and regulation in
the US. Banking laws and regulations of the Federal Reserve Board
(the ‘FRB’), the Office of the Comptroller of the Currency (the ‘OCC’)
and the Federal Deposit Insurance Corporation (the ‘FDIC’)
(collectively, the ‘US banking regulators’) govern all aspects of our US
business. HSBC Bank USA, N.A. (‘HSBC Bank USA’) is subject to
direct supervision and regulation by the Consumer Financial
Protection Bureau (‘CFPB’), which has the authority to examine and
take enforcement action related to compliance with US federal
consumer financial laws and regulations. The Group’s US securities
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HSBC Holdings plc
broker/dealer and investment banking operations are also subject to
ongoing supervision and regulation by the Securities and Exchange
Commission (‘SEC‘), the Financial Industry Regulatory Authority and
other government agencies and self-regulatory organisations under
US federal and state securities laws. Similarly, the Group’s US
commodity futures, commodity options and swaps-related and client
clearing operations are subject to ongoing supervision and regulation
by the Commodity Futures Trading Commission (‘CFTC’), the National
Futures Association and other self-regulatory organisations under US
federal commodities laws. Furthermore, since we have substantial
operations outside the US that conduct many of their day-to-day
transactions with the US, HSBC entities’ operations outside the US
are also subject to the extraterritorial effects of US regulation in many
respects.
HSBC Holdings and its US operations are subject to supervision,
regulation and examination by the FRB because HSBC Holdings is a
‘bank holding company’ (‘BHC‘) under the US Bank Holding Company
Act of 1956, as a result of its control of HSBC Bank USA and HSBC
Trust Company (Delaware), N.A., Wilmington, Delaware (‘HTCD’).
HSBC North America Holdings (‘HNAH‘) and HSBC USA Inc., are each
a ‘bank holding company’ and HNAH is also an intermediate holding
company (‘IHC’) regulated by the FRB. HSBC Holdings, HNAH and
HSBC USA Inc. have elected to be financial holding companies
pursuant to the provisions of the Gramm-Leach-Bliley Act and,
accordingly, may affiliate with securities firms and insurance
companies, and engage in other activities that are financial in nature
or incidental or complementary to activities that are financial in nature.
Under regulations implemented by the FRB, if any financial holding
company, or any depository institution controlled by a financial holding
company, ceases to meet certain capital or management standards,
the FRB may impose corrective capital and/or managerial
requirements on the financial holding company and place limitations
on its ability to conduct the broader financial activities permissible for
financial holding companies. In addition, the FRB may require
divestiture of the holding company’s depository institutions or its
affiliates engaged in broader financial activities in reliance on the
Gramm-Leach-Bliley Act if the deficiencies persist.
The regulations also provide that if any depository institution
controlled by a financial holding company fails to maintain a
satisfactory rating under the Community Reinvestment Act of 1977,
the FRB must prohibit the financial holding company and its
subsidiaries from engaging in any additional activities other than those
permissible for bank holding companies that are not financial holding
companies.
The two US banks, HSBC Bank USA and HTCD, are subject to
regulation and examination primarily by the OCC. HSBC Bank USA
and HTCD are subject to additional regulation and supervision by the
FDIC, the Consumer Financial Protection Bureau and the FRB.
Banking laws and regulations restrict many aspects of their operations
and administration, including the establishment and maintenance of
branch offices, capital and reserve requirements, deposits and
borrowings, investment and lending activities, payment of dividends
and numerous other matters.
In 2019, the FRB and the other US banking regulators jointly finalised
rules that tailor the application of the enhanced prudential standards
for large US banking organisations and the US operations of certain
foreign banking organisations (the ‘Tailoring Rules’). The Tailoring
Rules assign each BHC and US IHC with $50bn or more in total US
assets to one of five buckets (Categories I, II, III, IV, and ‘Other
Firms‘) based on their relative size and complexity and assessed on
asset size, cross-jurisdictional activity, reliance on short-term
wholesale funding, non-bank asset size, and off-balance sheet
exposures. As of 1 January 2024, HNAH continues to be classified as
a Category IV firm per the criteria set forth in the Tailoring Rules. As a
Category IV banking organization, HNAH will continue to be subject to
specific enhanced prudential standards applicable to banking
organisations assigned to Category IV. As the depository institution
subsidiary of HNAH, HSBC Bank USA is also subject to the regulatory
capital requirements applicable to Category IV firms.
HNAH, HSBC USA Inc. and HSBC Bank USA are required to maintain
minimum capital ratios (exclusive of any capital buffers), including a
minimum Tier 1 leverage ratio of 4%, and a minimum total risk-based
capital ratio of at least 8%. HNAH, HSBC USA Inc. and HSBC Bank
USA each calculate their risk-based capital requirements as Non-
Advanced Approaches banks in accordance with the Basel III rule as
adopted by US banking regulators. Over and above the minimum risk-
based requirements, HNAH is subject to a Stress Capital Buffer
(‘SCB’), which is floored at 2.5% and is recalibrated every other year
unless HNAH opts to be subject to supervisory stress testing by the
FRB during an “off year". HSBC USA Inc. and HSBC Bank USA
continue to be subject to the static 2.5% capital conservation buffer
(‘CCB‘). Compliance with the SCB/CCB does not represent minimum
requirements per se, but rather a necessary condition to allow capital
distributions and discretionary bonus payments.
In July 2023, the US banking regulators proposed changes to the
regulatory capital rules applicable to US banks, BHCs and IHCs,
including HNAH, HSBC USA Inc. and HSBC Bank USA. These
changes are intended to be broadly consistent with the Basel III
standards issued by the Basel Committee on Banking Supervision
(‘BCBS’) in 2017. The US proposal would end the use of internal
models for credit risk, credit valuation adjustments, and operational
risk, eliminate the accumulated other comprehensive income opt-out
for Category IV banking organizations, create an expanded risk-based
credit capital approach in addition to retaining a modified version of
the current standardised approach and make changes to the market
risk framework. If finalised as proposed, these changes would not be
effective until 1 July 2025 at the earliest, and certain elements would
be subject to a three-year phase-in period. In August 2023, US
banking regulators also released a proposal that would require certain
US banks, BHCs and IHCs to issue and maintain long-term debt
(‘LTD‘) to improve resolvability. If adopted as proposed, HSBC Bank
USA and HTCD would be required to issue minimum levels of internal
LTD to either HSBC USA Inc. or HNAH, phased-in over a three-year
period. HNAH is already subject to LTD and TLAC requirements as an
IHC of a non-US G-SIB.
Under FRB regulations, HNAH is subject to supervisory stress testing
requirements (on an every other year basis, with the next FRB
supervisory stress test expected to take place in 2024) that are
designed to evaluate whether a BHC has sufficient capital on a total
consolidated basis to absorb losses and support operations under
severely adverse economic conditions. As part of the Comprehensive
Capital Analysis and Review (‘CCAR‘), the FRB uses pro-forma capital
positions and ratios under such stress scenarios to determine the size
of the SCB for each CCAR participating firm.
As part of CCAR, HNAH is required to submit an annual capital plan to
the FRB on or before 5 April of each year. Category IV firms may opt
into CCAR supervisory stress testing in an "off year" in order to
recalibrate their SCB based on their most recent supervisory stress
test. The SCB equals (i) a firm‘s projected decline in common equity
tier 1 under the supervisory severely adverse stress testing scenario
plus (ii) one year of planned common stock dividends. In July 2023,
the FRB announced a new SCB for each CCAR firm based on its most
recent CCAR stress tests and planned common stock distributions,
which took effect on 1 October 2023. HNAH’s SCB requirement
remained the same in 2023 as in 2022, as HNAH did not opt into the
2023 stress test.
HNAH already utilises an internal capital assessment approach that is
analogous to the SCB and continues to review the composition of its
capital structures and capital buffers in light of these developments.
Under the Tailoring Rules, certain US banking organisations are
subject to heightened liquidity and risk management requirements,
including the US LCR and NSFR. Category IV firms, including HNAH,
are subject to a less stringent US LCR and NSFR modified regulatory
requirement so long as HNAH‘s weighted short-term wholesale
funding equals or exceeds $50 billion. As a result, under the modified
US LCR rule, a LCR of 100 percent or higher reflects an
unencumbered HQLA balance that is equal to or exceeds 70 percent
of the firm’s liquidity needs for a 30 calendar day liquidity stress
scenario.
Under the modified US NSFR rule as applied to HNAH, a NSFR of 100
percent or more reflects an available stable funding balance from
liabilities and capital over the next 12 months that is equal to or
exceeds 70 percent of the firm’s required stable funding amount for
assets and off-balance sheet exposures. As a Category IV firm, HNAH
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153
is also subject to liquidity risk management and liquidity buffer
requirements as well as liquidity stress testing on a quarterly basis.
Under the FRB and FDIC rule implementing the resolution planning
requirements for depository institution holding companies (the "SIFI
Plan") in the Dodd-Frank Act, HSBC Holdings is required to file a SIFI
Plan every three years. HSBC Holdings’ last SIFI Plan was a targeted
resolution plan submitted in December 2021. The FRB and FDIC
provided feedback on this targeted plan in December 2022. The FRB
and FDIC did not identify any shortcomings or deficiencies as a result
of this review in HSBC Holdings’ 2021 targeted plan but noted areas
where further progress will help improve HSBC Holdings’ preparation
for a rapid and orderly resolution of its US subsidiaries and operations
that may be addressed in HSBC Holdings’ next plan submission. As
the combined US operations of HSBC Holdings moved from Category
III to Category IV shortly after its last submission, it is now a triennial
reduced filer, which requires the submission of reduced plans every
three years. The next SIFI Plan submission is due on 1 July 2025.
Under the FDIC’s separate resolution plan requirements for insured
depository institutions (the ‘IDI Plan‘) banks with $100 billion or more
in total consolidated assets, including HSBC Bank USA, are required
to submit an IDI Plan every three years. HSBC Bank USA submitted
its latest IDI plan in December 2022. In August 2023, the FDIC issued
a proposal that would increase the frequency of, and substantive
requirements applicable to, IDI Plans. If finalised as proposed, HSBC
Bank USA would be required to submit an IDI Plan every two years
(with an informational supplement in the off years) and would become
subject to increased content requirements and an emphasis on
capabilities testing and engagement with the FDIC. The FRB has
separately established a framework for recovery plans, although
HSBC is not currently required to submit a recovery plan to US
regulators unless specifically requested to do so.
The FRB limits credit exposures to single counterparties for large
BHCs and IHCs. As a Category IV firm, HNAH is not directly subject to
these single counterparty credit limits. Independent of HNAH‘s
classification as a Category IV firm, HNAH, together with its
subsidiaries, could become subject to limits on its exposures to
unaffiliated counterparties if its parent, HSBC, cannot certify its
compliance with a large exposure regime in the UK that is consistent
with the Basel large exposure framework.
Pursuant to Title VII of the Dodd-Frank Act (‘Title VII’), the SEC and
CFTC have adopted extensive requirements to regulate over-the-
counter (‘OTC’) derivatives, including, among other requirements,
registration for swap dealers, major swap participants, security-based
swap (‘SBS’) dealer and major SBS participants, mandatory clearing
and trade execution of certain OTC derivatives, position limits for
certain physical positions and economically equivalent swaps, real-
time public and regulatory trade reporting, business conduct,
enhanced documentation, supervision, recordkeeping, and financial
reporting requirements.
HSBC Bank USA and HSBC Bank plc are registered as swap dealers
with the CFTC and registered as SBS dealers with the SEC. Because
it is a non-US dealer, HSBC Bank plc is only subject to certain of
CFTC’s requirements in respect of swap transactions with US
persons and certain persons guaranteed by or affiliated with US
persons, and only subject to certain of the SEC’s requirements in
respect of SBS transactions with US persons or which are arranged,
negotiated, or executed by US personnel. HSBC Bank plc is also
permitted to satisfy certain CFTC requirements and SEC requirements
through ‘substituted compliance’ pursuant to relevant determinations
and related relief issued by the SEC and the CFTC. 
Pursuant to Title VII, the US prudential regulators adopted margin
requirements for non-cleared swaps and SBS for prudentially
regulated swap dealers and SBS dealers such as HSBC Bank USA and
HSBC Bank plc. Subject to certain exceptions, the margin rules
require HSBC Bank USA and HSBC Bank plc to collect and post initial
and variation margin for non-cleared swaps and SBS entered into with
other swap dealers and certain financial end-users. The prudential
regulators’ margin requirements, the parallel margin rules adopted by
the CFTC and the SEC and certain non-US regulators, as well as other
regulations of OTC derivatives under Title VII, have increased the
costs associated with trading OTC derivatives and may adversely
affect our business in such products.
Dodd-Frank also expands the extra-territorial jurisdiction of US courts
over actions brought by the SEC or the US with respect to violations
of the anti-fraud provisions in the Securities Act, the Securities
Exchange Act of 1934 and the Investment Advisers Act of 1940.
In addition, regulations which the FSOC, the CFPB or other regulators
may adopt could affect the nature of the activities that our FDIC-
insured depository institution subsidiaries may conduct, and may
impose restrictions and limitations on the conduct of such activities.
The implementation of the remaining Dodd-Frank provisions could
result in additional costs or limit or restrict the way we conduct our
business in the US.
In September 2017, HSBC Holdings and HNAH entered into a
consent order with the FRB in connection with its investigation into
HSBC’s historical foreign exchange activities (‘FX/DMA Order‘), which
required HSBC Holdings and HNAH to undertake certain remedial
steps. On 18 August 2023, the FX/DMA Order was terminated by the
FRB after it was determined by the Federal Reserve Bank of Chicago
that HSBC was in full compliance with the order.
EU Regulation and supervision
EU law applies to HSBC’s EU subsidiaries.
EU Directive 2019/878 (CRD V) introduced an obligation to appoint an
Intermediate Parent Undertaking (‘IPU‘) for third-country (i.e. non-EU
headquartered) groups that consist of two or more banks in the EU
(Article 21b). HSBC Continental Europe (‘HBCE’), headquartered in
Paris, France, has been designated as the IPU for HSBC's European
subgroup. As a result of these changes: (i) HBCE will be the main
contact point with regulators of the EU and the Banking Union, and
will centralise all coordination and requests to the unique Joint
Supervisory Team (‘JST‘) and the unique Internal Resolution Team
(‘IRT‘), made up respectively of the European Central Bank (‘ECB‘)
and the EU member states’ national supervisory authorities on one
hand, and the European Single Resolution Board (‘SRB‘) and the EU
member states’ national resolution authorities on the other; and (ii)
reporting to the relevant authorities will consecutively be simplified. In
particular, HBCE will have to submit consolidated reports for the
European subgroup directly onto the portal of the French resolution
authority (ACPR), as the host authority of HBCE.
At the end of 2023, HBCE operated 10 branches in the following
jurisdictions: Belgium, Czech Republic, Germany, Ireland, Italy,
Luxembourg, Netherlands, Poland, Spain and Sweden. In 2022, HBCE
went through further transformation to support its role as the Group’s
EU IPU by completing the acquisitions of HSBC Bank Malta plc
(‘HBMT’), and HSBC Trinkaus & Burkhardt GmbH (‘HTDE’) in
Germany in November 2022. HTDE’s operations were transferred into
a new German branch of HBCE in Q2 2023 and the final stage of
HBCE’s conversion into the Group’s EU IPU was completed in
November 2023 with the acquisition of HSBC Private Bank
(Luxembourg) SA (‘PBLU’).
Under the EU’s Single Supervisory Mechanism (‘SSM’) and the CRD
V requirement on IPUs, the ECB has direct supervisory responsibility
for HBCE as a ‘significant supervised entity’ at the EU consolidated
level. An ECB JST supervises HBCE, including its branches, and its
subsidiaries, including HBMT and PBLU, for the purposes of the EU’s
SSM Regulation. Under the SSM, the ECB increasingly engages with
the relevant ‘national competent authorities’ in relation to HSBC’s
businesses in eurozone countries and more widely with HSBC‘s other
regulators.
The SRB and the EU member states’ national resolution authorities
have developed their views and standards on resolution, culminating
in the creation of the Expectations for Banks (‘EFB‘), published in
March 2020. The overarching aim of the EFB is to ensure that
European banks demonstrate that they could be resolved in an orderly
way and are accountable for ensuring they are prepared for resolution.
The EFB brought together new and existing rules and policies
regarding resolution planning into seven dimensions to apply for both
home and host banks by the end of 2023.
The UK and the EU have entered into a Trade and Cooperation
Agreement and have made certain declarations relating to financial
services. For further details, see ‘The UK’s trading relationship with
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HSBC Holdings plc
the EU, following the UK‘s withdrawal from the EU, may adversely
affect our operating model and financial results‘.
Global and regional prudential and other
regulatory developments
The Group is subject to regulation and supervision by a large number
of regulatory bodies and other agencies. In addition to regulatory
changes being introduced at a country level, changes are often driven
by global bodies such as the G20, the FSB and the Basel Committee
on Banking Supervision, which are then implemented at country level
or (in the case of the EU), regionally, sometimes with modifications
and with separate additional measures.
Of principal importance from a prudential perspective are the changes
that relate to Basel 3.1.
The PRA is responsible for implementing Basel 3.1 in the UK under
powers granted in the Financial Services Act 2021 (‘Financial Services
Act‘). The Financial Services Act enables the PRA to introduce
reforms to update the UK’s prudential regime. At present, the UK
CRR, which is retained EU legislation that takes the status of primary
legislation in the UK, contains many of the existing prudential rules.
The Financial Services Act enables HM Treasury to delegate
responsibility to the PRA for making the firm-facing rules required to
implement Basel's standards. The Act ensures that public policy
considerations including sustainable growth, the relative standing of
the UK, and Basel's standards themselves, are considered by the PRA
when making these rules. This does not require that the PRA
implement rules that replicate Basel 3.1; instead, the PRA has been
given the discretion to decide the substance of the rules, having
regards to the likely effect of the rules on the relative standing of the
UK as a place for internationally active banks to be based or to carry
on activities.
The UK implemented the first tranche of Basel 3.1 in January 2022.
These include the changes in relation to counterparty risk, equity
investments in funds and market risk RWAs and the leverage ratio.
The remainder of Basel 3.1, including the changes to credit risk,
operational risk, market risk and credit valuation adjustment RWAs,
and the implementation of an RWA output floor, is currently
scheduled for implementation in the UK in July 2025. The PRA issued
a consultation on the implementation of the remainder of Basel 3.1 in
November 2022.
The PRA subsequently published a policy statement in December
2023 setting out certain near-final rules implementing Basel 3.1,
including those relating to operational risk, market risk, credit
valuation adjustment RWAs. A second policy statement is expected
to be published in Q2 2024, which is due to set out the remaining
near-final rules including those relating to credit risk and the output
floor.
We are also subject to regulatory stress testing in many jurisdictions.
These have increased both in frequency and in the granularity of
information required by supervisors. They include the programmes of
the BoE, the FRB (as explained in the ‘US regulation and supervision’
section), the OCC, the EBA, the ECB, the HKMA and other regulators.
For further details, see ‘Stress testing’ on page 161. On prudential
changes, further details can be found in the ‘Regulatory
developments’ section on page 6 of the Pillar 3 Disclosures as at
31 December 2023.
Recovery and resolution
The HSBC Group is subject to recovery and resolution requirements
in many of the jurisdictions in which it operates. Some of these
requirements have been described above. In Europe, the Bank
Recovery and Resolution Directive (BRRD) establishes a framework
for the recovery and resolution of EU credit institutions and
investment firms. This framework applies to HSBC’s operating banks
in the European region, including France and Malta. In Hong Kong, the
Banking Ordinance and Financial Institutions (Resolution) Ordinance
sets out requirements for recovery and resolution planning. In
general, each respective part of the HSBC Group is responsible for
ensuring that it meets local recovery and resolution requirements
where they exist, which are mainly applicable only to those regulated
entities in a particular jurisdiction. The PRA and BoE, however, are the
lead “home” regulators from a recovery and resolution perspective
for the consolidated HSBC Group.
HSBC maintains recovery plans designed to outline credible
management actions that the HSBC Group could implement in the
event of severe stress in order to restore its business to a stable and
sustainable condition. The HSBC Group submits a Group recovery
plan on a biennial basis to the PRA. In addition, certain HSBC entities
also submit local recovery plans to host regulators, where local
recovery planning requirements are in place. HSBC’s recovery plans
are frequently re-appraised to reflect HSBC’s Group structure as well
as meet regulatory and internal feedback, including through regular
stress testing and ‘fire drill’ simulations.
In general terms, resolution refers to the exercise of statutory powers
where a financial institution and/or its parent or other group company
is deemed by its regulators to be failing, or likely to fail and it is not
reasonably likely that any action taken would result in the institution
recovering.
In view of the HSBC Group’s corporate structure, which comprises a
group of locally regulated operating banks, the preferred resolution
strategy for the HSBC Group, as confirmed by its regulators, is a
multiple point of entry (‘MPE’) bail-in strategy. This provides flexibility
for HSBC to be resolved either (i) through a bail-in at the HSBC
Holdings level, which enables the recapitalisation of operating bank
subsidiaries in the HSBC Group (as required) while restructuring
actions are undertaken, with the HSBC Group remaining together; or
(ii) at a local subsidiary level pursuant to the application of statutory
resolution powers by local resolution authorities.
In the event of a resolution of the HSBC Group, it is anticipated that
the MREL issued externally by HSBC Holdings plc would be written
down or converted to equity by the BoE using its statutory powers.
This would enable subsidiaries of the HSBC Group to be recapitalised,
as needed, to support the resolution objectives and maintain the
provision of critical functions locally. Recapitalisation of operating bank
subsidiaries could be achieved through the write-down, or conversion
to equity, of internally issued MREL, Total Loss Absorbing Capacity
(‘TLAC‘) or Loss Absorbing Capacity (‘LAC‘). It is anticipated that this
approach to recapitalising the HSBC Group’s operating bank
subsidiaries would allow the Group to stay together in order to ensure
an effective stabilisation of the whole Group whilst also facilitating an
orderly restructuring process post resolution. Any resolution of HSBC
as a group would be coordinated by the BoE.
Given the geographical footprint of the HSBC Group, resolution
authorities have determined that HSBC has three resolution groups
that together account for 93% of total HSBC Group RWAs: The Asia
resolution group, the European resolution group and the US resolution
group. As a result, HSBC is overseen by various regulators and
resolution authorities including its lead global regulators and resolution
authority, the BoE and the PRA and a number of host regulators and
resolution authorities. Examples include the European SRB, the
HKMA, FRB, FDIC and OCC. These host resolution authorities have
statutory resolution group powers which could be applied to
subsidiaries of the HSBC Group in their jurisdictions. The application
of these local statutory resolution powers may result in one or more
individual resolution authorities leading to a local resolution of the
subsidiaries within their jurisdiction.
This may or may not result in such subsidiaries ceasing to be part of
the HSBC Group, depending on the drivers of failure and the
resolution powers exercised by the relevant resolution authority.
HSBC considers that a bail-in at the HSBC Holdings plc level that
enables subsidiaries in the HSBC Group to be recapitalised, (as
required), and the subsequent implementation of restructuring actions
while the HSBC Group remains together, is the strategy most likely to
deliver the optimal resolution outcome for all of HSBC’s stakeholders.
In July 2019, the BoE and PRA published final policies on the
Resolvability Assessment Framework (‘RAF‘), which places the onus
on firms to demonstrate their own resolvability and is designed to
increase transparency and accountability for resolution planning. In
order to be considered resolvable, HSBC must meet three outcomes:
(i) have adequate resources in resolution; (ii) be able to continue
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155
business through resolution and restructuring; and (iii) be able to co-
ordinate its resolution and communicate effectively with stakeholders.
The RAF requires HSBC to prepare a report on the HSBC Group’s
assessment of its resolvability, which must be submitted to the BoE
on a biennial basis. HSBC submitted its first report to the BoE in
October 2021. HSBC Group’s June 2022 public disclosure on its
resolvability summarised the key findings from the first RAF Self-
assessment report. HSBC Group submitted its second report to the
BoE in October 2023. In June 2024, HSBC will make its second public
disclosure on its resolvability, which will summarise the key findings
from the second RAF Self-assessment. In line with the previous BoE
RAF cycle, alongside HSBC's disclosure, the BoE will be disclosing its
own assessment of UK banks’ resolvability, including HSBC, against
expectations set out in the RAF.
Regular engagement with the BoE and PRA continues as HSBC
prepares for the public disclosure of the second RAF cycle.
HSBC continues to engage with the BoE, PRA and its global
regulators in other jurisdictions to help ensure that it meets current
and future recovery and resolution requirements.
Financial crime regulation
HSBC has built a financial crime risk management framework that is
applicable across all global businesses and functions, and all countries
and territories in which it operates. We manage financial crime risk
because it is the right thing to do to protect our customers,
shareholders, staff, the communities in which we operate, as well as
the integrity of the financial system on which we all rely. We remain
committed to conducting our activities in accordance with all
applicable financial crime laws and regulations and applying a
consistently high financial crime standard globally.
HSBC has an established global financial crime programme designed
to enable the bank to detect, prevent and manage the fraud, bribery
and corruption, tax evasion, sanctions and export control violations,
money laundering, terrorist financing and proliferation financing risks
that we may face.
HSBC continues to develop its anti-money laundering programme in
light of emerging risks and new legislation. Technical and digital
innovation in the financial sector continues at pace and we are
actively monitoring developments, defining risk appetite and
developing appropriate controls to manage the risks associated with
the increasing use of alternate (including digitised) payment methods
and digital assets and currencies. HSBC has enhanced its control
framework to detect, deter and disrupt terrorist financing and
proliferation financing more effectively and has expanded the use of
intelligence-led technologies to monitor customer activities. HSBC
has continued to embed procedures designed to prevent tax evasion
and tax evasion facilitation risks, as well as bribery and corruption
risks associated with the activities of its customers, third parties and
staff, which may expose HSBC to corporate criminal liability. HSBC
seeks to comply with all applicable anti-bribery and corruption laws in
every market and jurisdiction in which it operates whilst focussing on
the spirit of relevant laws and regulations to demonstrate HSBC’s
commitment to ethical behaviours and conduct as part of our
environmental, social and corporate governance. HSBC provides
annual mandatory training on the prevention of money laundering,
bribery and corruption and tax evasion to all staff and carries out
regular risk assessments, monitoring and testing of its programmes 
incorporating applicable findings within the annual policy refresh.
HSBC also maintains clear whistleblowing policies and processes, to
ensure that individuals can confidentially report concerns.
HSBC continues to develop its fraud controls in conjunction with
areas such as cyber risk, to protect the bank and our customers;
investing in capabilities to fight financial crime through the application
of new technologies such as behavioural biometrics, advanced
analytics and artificial intelligence. HSBC strengthened its fraud
framework, reviewed and published an updated policy and
streamlined the associated control library. Investment has been
sustained to develop fraud prevention and detection tooling with
leading vendors. Enhanced metrics have been introduced to assist
with control performance monitoring and support ongoing
optimisation of fraud defences.
HSBC’s sanctions programme seeks to apply a globally consistent
standard to manage sanctions compliance and export control risk
effectively across all HSBC legal entities in all jurisdictions in which
HSBC operates. The external sanctions environment remains
dynamic, and sanctions regimes are increasingly complex and less
predictable as geopolitical tensions continue to rise. Russia has
continued to be the target of various trade and financial sanctions in
2023, with greater focus on enforcing sanctions and limiting methods
of sanctions evasion. The US-China relationship remains complex,
with both sides imposing sanctions and export restrictions. The US
continues to enhance semiconductor restrictions and issued an
Executive Order signalling an intent to curb US person investment in
China related to certain national security technologies and products.
China has retaliated by imposing export restrictions on germanium,
gallium, and graphite - key elements in electric vehicle battery
production and other "green" technologies - which the US requires to
fulfil its environmental objectives. Other material sanctions regulatory
developments include the US providing conditional sanctions relief
related to the Venezuela sanctions programme. HSBC continues to
monitor regulatory developments and their impact on HSBC’s global
financial crime policy and risk appetite. HSBC does not consider that
its business activities with counterparties with whom transactions are
restricted under applicable sanctions are material to its business for
the year ended 31 December 2023.
Disclosures pursuant to Section 13(r)
of the Securities Exchange Act
Section 13(r) of the Securities Exchange Act requires each issuer
registered with the SEC to disclose in its annual or quarterly reports
whether it or any of its affiliates have knowingly engaged in specified
activities or transactions with persons or entities targeted by U.S.
sanctions programs relating to Iran, terrorism, or the proliferation of
weapons of mass destruction, even if those activities are not
prohibited by U.S. law and are conducted outside the U.S. by non-U.S.
affiliates in compliance with local laws and regulations.
To comply with this requirement, HSBC Holdings plc (together with
its affiliates, “HSBC”) has requested relevant information from its
affiliates globally. The following activities conducted by HSBC are
disclosed in response to Section 13(r):
Legacy contractual obligations related to
guarantees
Between 1996 and 2007, we provided guarantees to a number of our
non-Iranian customers in Europe and the Middle East for various
business activities in Iran. In a number of cases, we issued counter
indemnities involving Iranian banks as the Iranian beneficiaries of the
guarantees required that they be backed directly by Iranian banks. 
The Iranian banks to which we provided counter indemnities included
Bank Tejarat, Bank Melli, and the Bank of Industry and Mine.
There was no measurable gross revenue in 2023 under those
guarantees and counter indemnities. We do not allocate direct costs
to fees and commissions and, therefore, have not disclosed a
separate net profit measure. We are seeking to cancel all relevant
guarantees and counter indemnities, and do not currently intend to
provide any new guarantees or counter indemnities involving Iran. No
guarantees were cancelled in 2023, and approximately 14 remain
outstanding.
Other relationships with Iranian banks
Activity related to U.S.-sanctioned Iranian banks not covered
elsewhere in this disclosure includes the following:
–We act as the trustee and administrator for a pension scheme
involving eight employees of a U.S.-sanctioned Iranian bank in
Asia. Under the rules of this scheme, we accept contributions
from the Iranian bank each month and allocate the funds into the
pension accounts of the Iranian bank’s employees. We run and
operate this pension scheme in accordance with applicable laws
and regulations. Estimated gross revenue, which includes fees
and/or commissions, generated by this pension scheme during
2023, was approximately $2,012.
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HSBC Holdings plc
For the Iranian bank-related activity discussed above, we do not
allocate direct costs to fees and commissions and, therefore, have
not disclosed a separate net profit measure.
We have been holding a safe custody box for the Central Bank of Iran.
For a number of years, the box has not been accessed by the Central
Bank of Iran, and no fees have been charged to the Central Bank of
Iran.
We currently intend to continue to wind down the above activities, to
the extent legally permissible, and not enter into any new such
activity.
Activity related to U.S. Executive Order
13224
During 2023, four individual customers in the Middle East received
bonus shares pursuant to legacy holdings in an entity designated
under Executive Order 13224 in 2022. We processed these corporate
actions on our customers’ investment accounts.
For these activities, there was no measurable gross revenue or net
profit to HSBC during 2023.
Activity related to U.S. Executive Order
13382
Two corporate customers in Asia became designated under Executive
Order 13382 in 2023. These customers' accounts are restricted and
the relationships are being exited. Immediately following their
designations, and prior to the accounts being restricted, we
processed a low value credit of interest to a local currency account
held by one of the corporate customers and two domestic
transactions through a local payment system for the other corporate
customer.
For this activity, there was no measurable gross revenue or net profit
to HSBC during 2023.
Other activity
We have a non-Iranian insurance company customer in the Middle
East that, during 2023, made local currency domestic payments for
the reimbursement of medical treatment to a hospital located outside
Iran that is owned by the Government of Iran. We processed these
payments from our customer to the hospital.
We have one corporate customer in the Middle East that, during
2023, received a local currency cheque from a hospital located
outside Iran that is owned by the Government of Iran. We processed
the cheque from the hospital to our customer.
We have six customers in the Middle East that, during 2023, received
local currency cheques from an insurance company located outside
Iran that is owned by the Government of Iran. We processed these
cheques from the insurance company to our customers.
We have individual and corporate customers in Asia and Europe that,
during 2023, made small local currency domestic payments to, or
received such payments from, Iranian embassies. These customers
are engaged in activities that require consular services provided by
the embassies or provide goods and services that support the
conduct of the official business of the embassies. We processed
these payments between our customers and the Iranian embassies.
We have four corporate customers in Europe that, during 2023,
received local currency payments from a bank owned by the
Government of Iran in relation to management charges for property
owned by the bank, service charges, and training fees for staff at the
bank. HSBC processed these payments to our customers.
We have individual customers in Europe that are employed by a bank
located outside Iran that is owned by the Government of Iran. During
2023, we processed local currency salary payments received via
banks that are not owned by the Government of Iran to our
customers.
For these activities, there was no measurable gross revenue or net
profit to HSBC during 2023.
Frozen accounts and transactions
We maintain several accounts that are frozen as a result of relevant
sanctions programmes, and safekeeping boxes and other similar
custodial relationships, for which no activity, except as licensed,
authorised, or otherwise related to the maintenance of such accounts
as consistent with applicable law, took place during 2023. There was
no measurable gross revenue or net profit to HSBC during 2023
relating to these frozen accounts.
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157
Risk       
review
Our risk review outlines our approach to
risk management, how we identify and
monitor top and emerging risks, and
the actions we take to mitigate them. In
addition, it explains our material banking
risks, including how we manage capital.
Our approach to risk
Our risk appetite
Risk management
Key developments in 2023
Top and emerging risks
Externally driven
Internally driven
Risk factors
Our material banking risks
Credit risk
Treasury risk
Market risk
Climate risk
Resilience risk
Regulatory compliance risk
Financial crime risk
Model risk
Insurance manufacturing operations risk
Risk review
158
HSBC Holdings plc
Our approach to risk
Our risk appetite
We recognise the importance of a strong culture, which refers to our
shared attitudes, beliefs, values and standards that shape behaviours
including those related to risk awareness, risk taking and risk
management. All our people are responsible for the management of
risk, with ultimate supervisory oversight residing with the Board. Our
risk appetite defines the level and types of risk that we are willing to
take, while informing the financial planning process and guiding
strategic decision making.
The following principles guide the Group’s overarching appetite for
risk and determine how our businesses and risks are managed.
Financial position
–We aim to maintain a strong capital position, defined by regulatory
and internal capital ratios.
–We carry out liquidity and funding management for each operating
entity on a stand-alone basis.
Operating model
–We seek to generate returns in line with our risk appetite and
strong risk management capability.
–We aim to deliver sustainable and diversified earnings and
consistent returns for shareholders.
Business practice
–We have no appetite for deliberately or knowingly causing
detriment to consumers, or incurring a breach of the letter or spirit
of regulatory requirements.
–We have no appetite for inappropriate market conduct by any
member of staff or by any Group business.
–We are committed to managing the climate risks that have an
impact on our financial position and delivering on our net zero
ambition.
–We consider and, where appropriate, mitigate reputational risk that
may arise from our business activities and decisions.
–We monitor non-financial risk exposure against risk appetite,
including exposure related to inadequate or failed internal
processes, people and systems, or events that impact our
customers or can lead to sub-optimal returns to shareholders,
censure, or reputational damage.
Enterprise-wide application
Our risk appetite encapsulates the consideration of financial and non-
financial risks. We define financial risk as the risk of a financial loss as
a result of business activities. We actively take these types of risks to
maximise shareholder value and profits. Non-financial risk is the risk
to achieving our strategy or objectives as the result of failed internal
processes, people and systems, or from external events.
Our risk appetite is expressed in both quantitative and qualitative
terms and applied at the global business and regional levels, and to
material operating entities. Every three years, the Group Risk and
Compliance function commissions an external independent firm to
review the Group’s approach to risk appetite and to help ensure that it
remains in line with market best practice and regulatory expectations.
This review was last carried out in 2021 and confirmed the Group’s
risk appetite statement (‘RAS’) remains aligned to best practices,
regulatory expectations and strategic goals. Our risk appetite
continues to evolve and expand its scope as part of our regular review
process.
The Board reviews and approves the Group’s risk appetite regularly to
make sure it remains fit for purpose. The Group’s risk appetite is
considered, developed and enhanced through:
–an alignment with our strategy, purpose, values and customer
needs;
–trends highlighted in other Group risk reports;
–communication with risk stewards on the developing risk
landscape;
–strength of our capital, liquidity and balance sheet;
–compliance with applicable laws and regulations;
–effectiveness of the applicable control environment to mitigate
risk, informed by risk ratings from risk control assessments;
–functionality, capacity and resilience of available systems to
manage risk; and
–the level of available staff with the required competencies to
manage risks.
We formally articulate our risk appetite through our RAS. Setting out
our risk appetite helps ensure that we agree a suitable level of risk for
our strategy. In this way, risk appetite informs our financial planning
process and helps senior management to allocate capital to business
activities, services and products.
The RAS is applied to the development of business line strategies,
strategic and business planning, and remuneration. At a Group level,
performance against the RAS is reported to the Group Risk
Management Meeting alongside key risk indicators to support
targeted insight and discussion on breaches of risk appetite and any
associated mitigating actions. This reporting allows risks to be
promptly identified and mitigated, and informs risk-adjusted
remuneration to drive a strong risk culture.
Each global business, region and material operating entity is required
to have its own RAS, which is monitored to help ensure it remains
aligned with the Group’s RAS. Each RAS and business activity is
guided and underpinned by qualitative principles and/or quantitative
metrics.
Risk management
We recognise that the primary role of risk management is to help
protect our customers, business, colleagues, shareholders and the
communities that we serve, while ensuring we are able to support
our strategy and provide sustainable growth. This is supported
through our three lines of defence model described on page 161.
The implementation of our business strategy remains a key focus. As
we implement change initiatives, we actively manage the execution
risks. We also perform periodic risk assessments, including against
strategies, to help ensure retention of key personnel for our continued
safe operation.
We aim to use a comprehensive risk management approach across
the organisation and across all risk types, underpinned by our culture
and values. This is outlined in our risk management framework,
including the key principles and practices that we employ in managing
material risks, both financial and non-financial. The framework fosters
continuous monitoring, promotes risk awareness and encourages a
sound operational and strategic decision-making and escalation
process. It also supports a consistent approach to identifying,
assessing, managing and reporting the risks we accept and incur in
our activities, with clear accountabilities. We actively review and
enhance our risk management framework and our approach to
managing risk, through our activities with regard to: people and
capabilities; governance; reporting and management information;
credit risk management models; and data.
Group Risk and Compliance is independent from the global
businesses, including our sales and trading functions. It provides
challenge, oversight and appropriate balance in risk/return decisions.
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159
Our risk management framework
The following diagram and descriptions summarise key aspects of the risk management framework, including governance, structure, risk
management tools and our culture, which together help align employee behaviour with risk appetite.
Key components of our risk management framework
HSBC values and risk culture
Risk governance
Non-executive risk governance
The Board approves the Group’s risk appetite, plans and performance
targets. It sets the ‘tone from the top’ and is advised by the Group Risk
Committee (see page 290).
Executive risk governance
Our executive risk governance structure is responsible for the
enterprise-wide management of all risks, including key policies and
frameworks for the management of risk within the Group (see pages
161 and 181).
Roles and
responsibilities
Three lines of defence model
Our ‘three lines of defence’ model defines roles and responsibilities for
risk management. An independent Group Risk and Compliance
function helps ensure the necessary balance in risk/return decisions
(see page 161).
Processes and tools
Risk appetite
The Group has processes in place to identify, assess, monitor, manage
and report risks to help ensure we remain within our risk appetite.
Enterprise-wide risk management tools
Active risk management: identification/assessment,
monitoring, management and reporting
Internal controls
Policies and procedures
Policies and procedures define the minimum requirements for the
controls required to manage our risks.
Control activities
Operational and resilience risk management defines minimum
standards and processes for managing operational risks and internal
controls.
Systems and infrastructure
The Group has systems and processes that support the identification,
capture and exchange of information to support risk management
activities.
Risk governance
The Board has ultimate supervisory responsibility for the effective
management of risk and approves our risk appetite.
The Group Chief Risk and Compliance Officer, supported by members
of the Group Risk Management Meeting, holds executive
accountability for the ongoing monitoring, assessment and
management of the risk environment and the effectiveness of the risk
management framework.
The Group Chief Risk and Compliance Officer is also responsible for
the oversight of reputational risk, with the support of the Group
Reputational Risk Committee. The Group Reputational Risk
Committee considers matters arising from customers, transactions
and third parties that either present a serious potential reputational
risk to the Group or merit a Group-led decision to ensure a consistent
risk management approach across the regions, global businesses and
global functions. Further details can be found under the ‘Reputational
risk’ section of www.hsbc.com/who-we-are/esg-and-responsible-
business/managing-risk.
Day-to-day responsibility for risk management is delegated to senior
managers with individual accountability for decision making. All our
people have a role to play in risk management. These roles are
defined using the three lines of defence model, which takes into
account our business and functional structures, including regulatory
compliance and financial crime, as described in the following
commentary, ‘Our responsibilities’.
We use a defined executive risk governance structure to help ensure
there is appropriate oversight and accountability of risk, which
facilitates reporting and escalation to the Group Risk Management
Meeting. This structure is summarised in the following table.
Governance structure for the management of risk and compliance
Authority
Membership
Responsibilities include:
Group Risk Management
Meeting
Group Chief Risk and Compliance
Officer
Group Chief Legal Officer
Group Chief Executive
Group Chief Financial Officer
Group Head of Financial Crime and
Group Money Laundering Reporting
Officer
All other Group Executive Committee
members
–Supporting the Group Chief Risk and Compliance Officer in exercising Board-
delegated risk management authority
–Overseeing the implementation of risk appetite and the risk management
framework
–Forward-looking assessment of the risk environment, analysing possible risk
impacts and taking appropriate action
–Monitoring all categories of risk and determining appropriate mitigating action
–Promoting a supportive Group culture in relation to risk management and
conduct
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Governance structure for the management of risk and compliance (continued)
Authority
Membership
Responsibilities include:
Group Risk and
Compliance Executive
Committee
Group Chief Risk and Compliance
Officer
Chief risk and compliance officers of
HSBC’s global businesses
Regional chief risk and compliance
officers and chief risk officers
Heads of Global Risk and Compliance
sub-functions
–Supporting the Group Chief Risk and Compliance Officer in providing strategic
direction for the Group Risk and Compliance function, setting priorities and
providing oversight
–Overseeing a consistent approach to accountability for, and mitigation of, risk
and compliance across the Group
Global business/regional
risk management
meetings
Global business/regional chief risk and
compliance officers and chief risk
officers
Global business/regional chief
executive officers
Global business/regional chief financial
officers
Global business/regional heads
of global functions
–Supporting the Group Chief Risk and Compliance Officer in exercising Board-
delegated risk management authority
–Forward-looking assessment of the risk environment
–Implementation of risk appetite and the risk management framework
–Monitoring all categories of risk and overseeing appropriate mitigating actions
–Embedding a supportive culture in relation to risk management and controls
The Board committees with responsibility for oversight of risk-related matters are set out on page 288.
Treasury risks are the responsibility of the Group Executive Committee and the Group Risk Committee. Global Treasury actively manages these
risks, supported by the Holdings Asset and Liability Management Committee (‘ALCO’) and local ALCOs, overseen by Treasury Risk
Management and the Group Risk Management Meeting. Further details on treasury risk management are set out on page 239.
Our responsibilities
All our people are responsible for identifying and managing risk within
the scope of their roles. Roles are defined using the three lines of
defence model, which takes into account our business and functional
structures as described below.
Three lines of defence
To create a robust control environment to manage risks, we use an
activity-based three lines of defence model. This model delineates
management accountabilities and responsibilities for risk
management and the control environment.
The model underpins our approach to risk management by clarifying
responsibility and encouraging collaboration, as well as enabling
effective coordination of risk and control activities. The three lines of
defence are summarised below:
–The first line of defence owns the risks and is responsible
for identifying, recording, reporting and managing them in line with
risk appetite, and ensuring that the right controls and assessments
are in place to mitigate them.
–The second line of defence challenges the first line of defence on
effective risk management, and provides advice, guidance and
assurance of the first line of defence to ensure it is managing risk
effectively.
–The third line of defence is our Global Internal Audit function,
which provides independent assurance as to whether our risk
management approach and processes are designed and operating
effectively.
Group Risk and Compliance function
Our Group Risk and Compliance function is responsible for the
Group’s risk management framework. This responsibility includes
establishing global policy, monitoring risk profiles, and identifying and
managing forward-looking risk. Group Risk and Compliance is made
up of sub-functions covering all risks to our business. Forming part of
the second line of defence, the Group Risk and Compliance function
is independent from the global businesses, including sales and trading
functions. It provides challenge, appropriate oversight and balance in
risk/return decisions.
Responsibility for minimising both financial and non-financial risk,
including regulatory compliance and financial crime, lies with our
people. They are required to manage the risks of the business and
operational activities for which they are responsible. We maintain
adequate oversight of our risks through our various specialist risk
stewards and the collective accountability held by our chief risk and
compliance officers.
We have continued to strengthen the control environment and our
approach to the management of risk, as set out in our risk
management framework. Our ongoing focus is on helping to ensure
more effective oversight and better end-to-end identification and
management of financial and non-financial risks. This is overseen by
the Enterprise Risk Management function, headed by the Global Head
of Enterprise Risk Management.
Stress testing and recovery planning
Our stress testing programme assesses our capital and liquidity
strength through a rigorous examination of our resilience to external
shocks, and forms part of our risk management and capital and
liquidity planning. As well as undertaking regulatory-driven stress
tests, we conduct our own internal stress tests in order to understand
the nature and level of material risks, quantify the impact of such risks
and develop plausible mitigating actions. The outcome of a stress test
provides management with key insights into the impact of severely
adverse events on the Group and provides an indication of resilience
to regulators on the Group’s financial stability. 
Internal stress tests
Our internal capital assessment uses a range of stress scenarios that
explore risks identified by management. They include potential
adverse macroeconomic, geopolitical, climate and operational risk
events, as well as other potential events that are specific to HSBC.
The selection of stress scenarios is based upon the output of our
identified top and emerging risks and our risk appetite. Stress testing
analysis helps management understand the nature and extent of
vulnerabilities to which the Group is exposed. Using this information,
management decides whether risks can or should be mitigated
through management actions or, if they were to crystallise, be
absorbed through capital and liquidity. This in turn informs decisions
about preferred capital and liquidity levels and allocations.
During 2023, we completed a Group-wide internal stress test
alongside testing of the Group’s strategy, otherwise known as the
corporate plan, to test and inform our strategy and assumptions. The
stress scenario explored the potential impact of interest rate shocks
and a deep recession. Under this scenario, inflation re-intensifies as
accentuated geopolitical tensions lead to severe global supply chain
disruptions and a rise in energy prices.
In addition to the Group-wide stress testing scenarios, each major
subsidiary conducts regular macroeconomic and event-driven scenario
analysis specific to its region. They also participate, as required, in the
regulatory stress testing programmes of the jurisdictions in which
they operate, such as stress tests required by the Bank of England
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161
(‘BoE’) in the UK, the Federal Reserve Board (‘FRB’) in the US, and
the Hong Kong Monetary Authority (‘HKMA’) in Hong Kong. Global
functions and businesses also perform bespoke stress testing to
inform their assessment of risks to potential scenarios.
We also conduct reverse stress tests each year at Group level and,
where required, at subsidiary entity level to understand potential
extreme conditions that would make our business model non-viable.
Reverse stress testing identifies potential stresses and vulnerabilities
we might face, and helps inform early warning triggers, management
actions and contingency plans designed to mitigate risks.
Recovery and resolution plans
Recovery and resolution plans form part of the integral framework
safeguarding the Group’s financial stability. The Group recovery plan,
together with stress testing, help us understand the likely outcomes
of adverse business or economic conditions and in the identification
of appropriate risk mitigating actions. The Group is committed to
further developing its recovery and resolution capabilities, including in
relation to the Resolvability Assessment Framework.
Ibor transition
Interbank offered rates (‘Ibors’) were previously used extensively to
set interest rates on different types of financial transactions and for
valuation purposes, risk measurement and performance
benchmarking.
The publication of sterling, Swiss franc, euro, Japanese yen and US
dollar Libor interest rate benchmarks, as well as the Euro Overnight
Index Average (‘Eonia’) and other local interbank interest rates
globally, has ceased following regulatory announcements and industry
initiatives. To support any remaining contracts referencing sterling and
US dollar Libor benchmarks, the UK’s Financial Conduct Authority
(‘FCA’) has compelled the ICE Benchmark Administration Limited to
publish the three-month sterling Libor setting using an alternative
‘synthetic’ methodology until 31 March 2024, and the one-month,
three-month and six-month US dollar Libor settings until
30 September 2024. We continue to support our customers in the
transition of the limited number of outstanding contracts relying on
‘synthetic’ Libor benchmarks in line with these dates.
There are approximately 90 of these contracts remaining, which are
predominantly syndicated lending contracts, where Commercial
Banking and Global Banking customers have required additional time
to enable refinancing or restructuring, with transition expected to be
completed prior to 30 September 2024. Additionally, there are a small
number of Group-issued MREL and capital securities and client retail
mortgages that are contingent on demised Ibors after the end of their
fixed interest rate periods. HSBC remains committed to seeking to
remediate and/or mitigate relevant risks relating to Ibor-demise, as
appropriate, for these contracts. HSBC expects to be able to
remediate and/or mitigate these risks by the relevant interest rate
calculation dates, which may occur post-cessation of the relevant
Ibor. All other contracts referencing benchmarks that are no longer
published have been transitioned in line with client and investor
discussions.
Although we continue to track the transition of remaining contracts to
alternative interest rate benchmarks, overall, our regulatory
compliance, conduct and legal risks have materially diminished. We
will continue to monitor until all contracts are fully transitioned.
Key developments in 2023
In 2023, we actively managed the risks related to macroeconomic and
geopolitical uncertainties, as well as other key risks described in this
section. In addition, we sought to enhance our risk management in
the following areas:
–We enhanced our model risk frameworks and controls as we seek
to manage the increasing numbers of climate risk, artificial
intelligence (‘AI’) and machine learning models being embedded in
business processes. Focus is also on generative AI due to the
pace of technological changes and regulatory and wider interest in
adoption and usage.
–We implemented two revised risk appetite frameworks to better
manage and strengthen our controls with respect to concentration
risks. These relate to concentration risks arising from exposures to
countries and territories, and to single customer groups.
–We enhanced our processes, framework and capabilities to seek
to improve the control and oversight of our material third parties,
and to help maintain our operational resilience and meet new and
evolving regulatory requirements.
–We continued to make progress with our comprehensive
regulatory reporting programme in seeking to strengthen our
global processes, improve consistency and enhance controls
across regulatory reports.
–Through our climate risk programme, we continued to embed
climate considerations throughout the organisation, including
through risk policy updates and the completion of our annual
climate risk materiality assessment. We also developed risk
metrics to monitor and manage exposures, and further enhanced
our internal climate scenario analysis.
–We deployed industry-leading technology and advanced analytics
capabilities into new markets to improve our ability to identify
suspicious activities and prevent financial crime.
–We continued to develop and enhance our electronic
communication policies and standards to help ensure that we act
on the most substantive issues. A Group-wide approach to
providing corporate device access is being implemented to meet
regulatory expectations.
–We are embedding our suite of regulatory management systems
following the Group-wide roll-out of regulatory horizon scanning
capabilities, and enhanced regulation mapping tooling.
–We continued to stabilise our net interest income, despite the
fluctuations in interest rate expectations, driven by central bank
rate increases and a reassessment of the trajectory of inflation in
major economies.
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HSBC Holdings plc
Top and emerging risks
We use a top and emerging risks process to provide a forward-looking
view of issues with the potential to threaten the execution of our
strategy or operations over the medium to long term.
We proactively assess the internal and external risk environment, as
well as review the themes identified across our regions and global
businesses, for any risks that may require global escalation. We
update our top and emerging risks as necessary.
Our current top and emerging risks are as follows.
Externally driven
Geopolitical and macroeconomic risks
HSBC faces elevated geopolitical risks, with the Russia-Ukraine war
continuing to have global economic and political implications, and the
Israel-Hamas war increasing tensions in the Middle East, leading to
recent attacks on shipping in the Red Sea and countermeasures,
which have begun to disrupt supply chains. HSBC is monitoring and
assessing the impacts of these wars. 
The Russia-Ukraine war has continued to elevate geopolitical
instability, which could have continued ramifications for the Group and
its customers. HSBC continues to monitor and respond to financial
sanctions and trade restrictions that have been adopted in response.
These sanctions and trade restrictions are complex, novel and
evolving. In particular, the US, the UK and the EU, as well as other
countries, have imposed significant sanctions and trade restrictions
against Russia. Such sanctions and restrictions target certain Russian
government officials, politically exposed persons, business people,
Russian oil imports, energy products, financial institutions and other
major Russian companies and sanctions evasion networks. These
countries have also enacted more generally applicable investment,
export, and import bans and restrictions. In December 2023, the US
established a new secondary sanctions regime, providing itself broad
discretion to impose severe sanctions on non-US banks that are
knowingly or even unknowingly engaged in certain transactions or
services involving Russia’s military-industrial base. This creates
challenges associated with the detection or prevention of third-party
activities beyond HSBC’s control. The imposition of such sanctions
against any non-US HSBC entity could result in significant adverse
commercial, operational, and reputational consequences for HSBC,
including the restriction or termination of the non-US HSBC entity’s
ability to access the US financial system and the freezing of the
entity’s assets that are subject to US jurisdiction. In response to such
sanctions and trade restrictions, as well as asset flight, Russia has
implemented certain countermeasures, including the expropriation of
foreign assets.
Our business in Russia principally serves multinational corporate
clients headquartered in other countries, is not accepting new
business or customers and is consequently on a declining trend.
Following a strategic review, HSBC Europe BV (a wholly-owned
subsidiary of HSBC Bank plc) has entered into an agreement to sell its
wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company),
subject to regulatory and governmental approvals. The planned sale of
our business in Russia became less certain and remains subject to
regulatory approval.
The US-China relationship remains complex. To date, the US, the UK,
the EU and other countries have imposed various sanctions and trade
restrictions on Chinese persons and companies, and the countries’
respective approaches to strategic competition with China continue to
develop. Although sanctions and trade restrictions are difficult to
predict, increases in diplomatic tensions between China and the US
and other countries could result in further sanctions and trade
restrictions that could negatively impact the Group, its customers and
the markets in which the Group operates. For example, there is a
continued risk of additional sanctions and trade restrictions being
imposed by the US and other governments in relation to human
rights, technology, and other issues, and this could create a more
complex operating environment for the Group and its customers.
China, in turn, imposed a number of its own sanctions and trade
restrictions that target, or provide authority to target, foreign
individuals and companies as well as certain goods such as rare earth
minerals and metals, and technology and services. These, as well as
certain law enforcement measures, have been imposed against
certain countries, Western consulting and data intelligence firms,
defence companies and public officials associated with the
implementation of foreign sanctions against China.
Further sanctions, counter-sanctions and trade restrictions may
adversely affect the Group, its customers and the markets in which
the Group operates, by creating regulatory, reputational and market
risks.
Economic and financial risks also remain significant, and we continue
to monitor our risk profile closely in the context of uncertainty over
global macroeconomic policies.
A fall in global energy and food prices from the highs of 2022
facilitated a process of disinflation across key economies during 2023.
To date, the Israel-Hamas war has not materially disrupted energy
supply, and non-OPEC producers, including the US, increased output
in the fourth quarter of 2023. Similarly, geopolitical developments in
the Middle East have not to date led to a sustained increase in energy
prices, but disruption and further price volatility continue to be a risk.
The escalation or a broadening of either the Russia-Ukraine war or the
Israel-Hamas war could aggravate supply chain disruptions and drive
inflation higher and may pose challenges for our customers and our
business.
Following the reduction in global inflation rates, central banks in most
developed markets are expected to have concluded monetary policy
tightening in the second half of 2023. A further fall in inflation is
expected to enable reductions in interest rates throughout 2024,
although forecasts still assume that they remain materially higher than
in recent years. Higher financing costs will raise interest payment
burdens for many counterparties.
Fiscal deficits are also expected to remain large in both developed and
emerging markets, as public spending on items including social
welfare, defence and climate transition initiatives is expected to
remain high. In many countries, the fiscal response to the Covid-19
pandemic has also left a very high public debt burden. Against a
backdrop of slower economic growth and high interest rates, a rise in
borrowing costs could increase the financial strains on highly indebted
sovereigns.
Political changes may also have implications for policy. Many
countries are expected to hold elections in 2024. This may result in
continuity in some markets, but significant political and policy change
in others. Political change could bring uncertainty to the political and
legal frameworks in markets where the Group operates.
Sector-specific risks are also closely monitored. Mainland China
commercial real estate conditions remain distressed as offshore
financing conditions and buyer demand remain subdued. Signs of a
material or sustained recovery are yet to emerge, with market data
still reflecting reduced investment and weak sentiment. The Chinese
government is expected to expand fiscal and monetary support to the
economy to boost growth and lending in 2024, including specific
measures to support developers and stimulate housing demand.
However, the risk of a slow and protracted recovery remains
significant. The business and financial performance of corporates
operating in this market has been weak, and refinancing risks are
likely to continue in 2024. State-owned enterprises continue to
outperform privately-owned enterprises in general, with above market
average sales performance, market share gains and greater access to
funding. The challenges in this sector could create further pressure on
our customers. We continue to closely monitor and take actions to
proactively risk manage our portfolio.
Macroeconomic, financial and geopolitical risks have all impacted our
macroeconomic risk scenarios. Our Central scenario, which has the
highest probability weighting in our IFRS 9 ‘Financial Instruments’
calculations of ECL, assumes that GDP growth rates in our main
markets will slow down in 2024, followed by a moderate recovery in
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2025. It is anticipated that inflation will converge towards central
banks’ target rates by early 2025. Similarly, interest rates are
expected to decline but remain materially higher than in recent years.
We also consider scenarios where commodity prices are materially
higher, inflation and interest rates rise and a global recession follows,
although we assign these scenarios a lower probability of occurring.
Forecasts remain uncertain, and changing economic conditions and
the materialisation of key risks could reduce the accuracy of the
Central scenario forecast. In particular, forecasts in recent years have
been sensitive to commodity price changes, changing supply chain
conditions, monetary policy adjustments and inflation expectations.
Uncertainty remains with respect to the relationship between the
economic factors and historical loss experience, which has required
adjustments to modelled ECL in cases where we determined that the
model was unable to capture the material underlying risks.
Despite these risks, forecast stability and reduced forecast dispersion
in our main markets ensured that the Central scenario for impairment 
was assigned the same likelihood of occurrence across our key
markets.
For further details of our Central and other scenarios, see
‘Measurement uncertainty and sensitivity analysis of ECL estimates’
on page 192.
Global tensions over trade, technology and ideology are manifesting
themselves in divergent regulatory standards and compliance
regimes, presenting long-term strategic challenges for multinational
businesses.
As the geopolitical landscape evolves, compliance by multinational
corporations with their legal or regulatory obligations in one
jurisdiction may be seen as supporting the law or policy objectives of
that jurisdiction over another, creating additional compliance,
reputational and political risks for the Group. We maintain dialogue
with our regulators in various jurisdictions on the impact of legal and
regulatory obligations on our business and customers.
The financial impact on the Group of geopolitical risks in Asia is
heightened due to the region’s relatively high contribution to the
Group’s profitability, particularly in Hong Kong.
While it is the Group’s policy to comply with all applicable laws and
regulations of all jurisdictions in which it operates, geopolitical
tensions, and potential ambiguities in the Group’s compliance
obligations, will continue to present challenges and risks for the
Group and could have a material adverse impact on the Group‘s
business, financial condition, results of operations, prospects,
strategy and reputation, as well as on the Group’s customers.
Mitigating actions
–We closely monitor geopolitical and economic developments in
key markets and sectors, and undertake scenario analysis where
appropriate. This helps us to take actions to manage our portfolios
where necessary, including through enhanced monitoring,
amending our risk appetite and/or reducing limits and exposures.
–We stress test portfolios of particular concern to identify
sensitivity to loss under a range of scenarios, with management
actions being taken to rebalance exposures and manage risk
appetite where necessary.
–We regularly review key portfolios – including our commercial real
estate portfolio – to help ensure that individual customer or
portfolio risks are understood and that our ability to manage the
level of facilities offered through any downturn is appropriate.
–We continue to seek to manage sanctions and trade restrictions
through the use of reasonably designed policies, procedures and
controls, which are subject to ongoing testing, auditing and
enhancements.
–We have taken steps, where necessary, to enhance physical
security in geographical areas deemed to be at high risk from
terrorism and military conflicts.
Technology and cybersecurity risk
Like other organisations, we operate in an extensive and complex
technology landscape. We need to remain resilient in order to support
customers, our colleagues and financial markets globally. Risks arise
where, for example, technology is not understood, maintained or
developed appropriately. We also continue to operate in an
increasingly complex cyber threat environment globally. These threats
include potential unauthorised access to customer accounts and
attacks on systems, whether ours or our third-party suppliers’. These
threats require ongoing investment in business and technical controls
to defend against them.
Mitigating actions
–We continue to upgrade many of our IT systems and are
transforming how software solutions are developed, delivered,
maintained and tested as part of our investment in the Group’s
operational resilience capabilities to seek to meet the expectations
of our customers and regulators and to help prevent disruptions to
our services.
–Our cyber intelligence and threat analysis team continually
evaluate threat levels for the most prevalent cyber-attack types
and their potential outcomes (see page 98), and we continue to
seek to strengthen our controls to help reduce the likelihood and
impact of advanced malware, data leakage, exposure through third
parties and security vulnerabilities.
–We continue to seek to enhance our cybersecurity capabilities,
including Cloud security, identity and access management, metrics
and data analytics, and third-party security reviews and to invest in
mitigating the potential threats of emerging technologies.
–We regularly report and review cyber risk and control
effectiveness at executive level across global businesses,
functions and regions, as well as at non-executive Board level to
help ensure there is appropriate visibility and governance of the
risk and its mitigating actions.
–We participate globally in industry bodies and working groups to
collaborate on tactics employed by cyber-crime groups and to
work together to seek to prevent, detect and defend against
cyber-attacks on financial organisations globally.
–We respond to attempts to compromise our cybersecurity in
accordance with our cybersecurity framework, which adheres to
applicable laws, rules and regulations. To date, none of these
attacks have had a material impact on our business or operations.
Environmental, social and governance
(’ESG’) risk
We are subject to financial and non-financial risks associated with
ESG-related matters. Our current areas of focus include climate risk,
nature-related risks and human rights risks. These can impact us both
directly and indirectly through our business activities and
relationships. For details of how we govern ESG, see page 88.
Our assessment of climate risks covers three distinct time periods,
comprising: short term, which is up to 2025; medium term, which is
between 2026 and 2035; and long term, which is between 2036 and
2050. These time periods are aligned to the Climate Action 100+
framework v1.2.
We may face credit losses if our customers’ business models fail to
align to a net zero economy or if our customers face disruption to
their operations or deterioration to their assets as a result of extreme
weather.
We may face trading losses if climate change results in changes to
macroeconomic and financial variables that negatively impact our
trading book exposures.
We may face impacts from physical risk on our own operations and
premises, owing to the increase in frequency and severity of weather
events and chronic shifts in weather patterns, which could affect our
ability to conduct our day-to-day operations.
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HSBC Holdings plc
We may face increased reputational, legal, and regulatory compliance
risks if we fail to make sufficient progress towards our net zero
ambition, and ESG-related targets, commitments and ambitions, if we
fail to meet evolving regulatory expectations and requirements on the
management of climate risk and broader ESG risks, or if we
knowingly or unknowingly make inaccurate, unclear, misleading, or
unsubstantiated claims regarding sustainability to our stakeholders.
Requirements, policy objectives, expectations or views may vary by
jurisdiction and stakeholder in relation to ESG-related matters. We
may be subject to potentially conflicting approaches to ESG matters in
certain jurisdictions, which may impact our ability to conduct certain
business within those jurisdictions or result in additional regulatory
compliance, reputational, political or litigation risks. These risks may
also arise from divergence in the implementation of ESG, climate
policy and financial regulation in the many regions in which we
operate, including initiatives to apply and enforce policy and regulation
with extraterritorial effect.
We may face financial reporting risk in relation to our climate-related
and broader ESG disclosures, as any data, methodologies, scenarios
and reporting standards we have used may evolve over time in line
with market practice, regulation or developments in science. We may
also face the risk of making reporting errors due to issues relating to
the availability, accuracy and verifiability of data, and system, process
and control challenges. Any changes and reporting errors could result
in revisions to our internal frameworks and reported data and could
mean that reported figures are not reconcilable or comparable year on
year. We may also have to re-evaluate our progress towards our
climate-related targets in the future.
We may face model risk, as the uncertain and evolving impacts of
climate change and data and methodology limitations present
challenges to creating reliable and accurate model outputs.
We may face climate and broader ESG-related litigation and regulatory
enforcement risks, either directly if stakeholders think that we are not
adequately managing climate and broader ESG-related risks, or
indirectly if our clients and customers are themselves the subject of
litigation, potentially resulting in the revaluation of client assets.
We may also be exposed to nature-related risks beyond climate
change. These risks arise when the provision of ecosystem services,
such as water availability, air quality and soil quality, is compromised
by human activity. Nature risk can manifest through macroeconomic,
market, credit, reputational, legal and regulatory risks, for both HSBC
and our customers.
Regulation and disclosure requirements in relation to human rights,
and to modern slavery in particular, are increasing. Businesses are
expected to be transparent about their efforts to identify and respond
to the risk of negative human rights impacts arising from their
business activities and relationships.
Mitigating actions
–A dedicated Environmental Risk Oversight Forum is responsible
for shaping and overseeing our approach and providing support in
managing climate and sustainability risk. For further details of the
Group’s ESG governance structure, see page 88.
–Our climate risk programme continues to support the development
of our climate risk management capabilities across four key pillars:
governance and risk appetite, risk management, stress testing and
scenario analysis, and disclosures. We continue to enhance our
approach and mitigation of the risk of greenwashing.
–In January 2024, we updated our energy policy covering the
broader energy system including upstream oil and gas, oil and gas
power generation, coal, hydrogen, renewables and hydropower,
nuclear, biomass and energy from waste. We also updated our
thermal coal phase-out policy, which aims to drive thermal coal
phase-out aligned to science-based timeframes. We take a risk-
based approach in the way that we identify transactions and
clients to which our energy and thermal coal phase-out policies
apply, and report on relevant exposures, adopting approaches
proportionate to risk and materiality. For further details of our
sustainability risk policies, see page 67.
–In 2023, we conducted pilot exercises to assess nature risk
exposures, focusing on our continental Europe portfolios in line
with regulatory expectations.
–In 2023, we provided practical guidance and training, where
relevant, to our colleagues across the Group on how to identify
and manage human rights risk. For further details, see page 89.
–We have expanded the scope of financial reporting risk to explicitly
include oversight over accuracy and completeness of climate-
related and broader ESG disclosures. In 2023, we updated the risk
appetite statement to reference our ESG and climate-related
disclosures. We also updated our internal controls to incorporate
requirements for addressing the risk of misstatement in climate-
related and broader ESG disclosures. To support this, we have
developed a framework to guide control implementation over
climate-related and broader ESG disclosures, which includes areas
such as process and data governance, and risk assessment.
–We continue to engage with our customers, investors and
regulators proactively on the management of climate-related and
broader ESG risks. We also engage with initiatives, including the
Climate Financial Risk Forum, Equator Principles, Task Force on
Climate-related Financial Disclosures and CDP (formerly the
Carbon Disclosure Project) to help drive best practice for climate
risk management.
For further details of our approach to climate risk management, see
‘Climate risk’ on page 257.
For further details of ESG risk management, see ‘Financial crime risk‘
on page 267 and ‘Regulatory compliance risk’ on page 267.
Our ESG review can be found on page 42.
Financial crime risk
Financial institutions remain under considerable regulatory scrutiny
regarding their ability to detect and prevent financial crime. In 2023,
these risks were exacerbated by rising geopolitical tensions and
ongoing macroeconomic factors. These challenging developments
require managing conflicting laws and approaches to legal and
regulatory regimes, and implementing increasingly complex and less
predictable sanctions and trade restrictions.
Amid high levels of inflation and increasing cost of living pressures,
we face increasing regulatory expectations with respect to managing
internal and external fraud and protecting vulnerable customers. In
addition, the accessibility and increasing sophistication of generative
AI brings financial crime risks. While there is potential for the
technology to support financial crime detection, there is also a risk
that criminals use generative AI to perpetrate fraud, particularly
scams.
The digitisation of financial services continues to have an impact on
the payments ecosystem, with an increasing number of new market
entrants and payment mechanisms, not all of which are subject to the
same level of regulatory scrutiny or regulations as banks.
Developments around digital assets and currencies have continued at
pace, with an increasing regulatory and enforcement focus on the
financial crimes linked to these types of assets.
Expectations continue to increase with respect to the intersection of
ESG issues and financial crime, as our organisation, customers and
suppliers transition to net zero. These are particularly focused on
potential ‘greenwashing’, human rights issues and environmental
crimes. In addition, climate change itself could heighten risks linked to
vulnerable migrant populations in countries where financial crime is
already more prevalent.
We also continue to face increasing challenges presented by national
data privacy requirements, which may affect our ability to manage
financial crime risks across markets.
Mitigating actions 
–We continue to seek to manage sanctions and trade restrictions
through the use of reasonably designed policies, procedures and
controls, which are subject to ongoing testing, auditing and
enhancements.
–We continue to develop our fraud controls and invest in
capabilities to fight financial crime through the application of
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advanced analytics and AI, while monitoring technological
developments and engaging with third parties.
–We are looking at the impact of a rapidly changing payments
ecosystem, as well as risks associated with direct and indirect
exposure to digital assets and currencies, in an effort to maintain
appropriate financial crime controls.
–We regularly review our existing policies and control framework so
that developments relating to ESG are considered and the financial
crime risks are mitigated to the extent possible.
–We engage with regulators, policymakers and relevant
international bodies, seeking to address data privacy challenges
through international standards, guidance and legislation.
Digitalisation and technological advances
risk
Developments in technology and changes to regulations are enabling
new entrants to the industry, particularly with respect to payments.
This challenges us to continue innovating to address evolving
customer requirements, drive efficiency and adapt our products to
attract and retain customers. As a result, we may need to increase
our investment in our business to adapt or develop products and
services to respond to our customers’ evolving needs. We also need
to ensure that new digital capabilities do not weaken our resilience or
wider risk management capabilities.
New technologies such as generative AI, large language models
blockchain and quantum computing offer both business opportunities
and potential risks for HSBC. As with the use of all technologies, we
aim to maximise their potential while seeking to ensure a robust
control environment is in place to help manage the inherent risks,
such as the impact on encryption algorithms.
Mitigating actions:
–We continue to monitor this emerging risk and advances in
technology, as well as changes in customer behaviours, to
understand how these may impact our business.
–We assess new technologies to help develop appropriate controls
and maintain resilience.
–We closely monitor and assess financial crime risk and the impact
on payment transparency and architecture.
Evolving regulatory environment risk
We aim to keep abreast of the emerging regulatory compliance and
conduct risk agenda. Current focus areas include but are not limited
to: ESG agenda developments, including in particular managing the
risk of ‘greenwashing’; ensuring good customer outcomes, including
addressing customer vulnerabilities due to cost of living pressures;
enhancements to regulatory reporting controls; and employee
compliance, including the use of e-communication channels.
The competitive landscape in which the Group operates may be
impacted by future regulatory changes and government intervention.
Mitigating actions
–We monitor regulatory developments to understand the evolving
regulatory landscape, and seek to respond with changes in a
timely manner.
–We engage with governments and regulators, and respond to
consultations with a view to help shape regulations that can be
implemented effectively.
–We hold regular meetings with relevant authorities to discuss
strategic contingency plans, including those arising from
geopolitical issues. 
–Our purpose-led conduct approach aligns to our purpose and
values, in particular the value ‘we take responsibility’.
Internally driven
Data risk
We use multiple systems and growing quantities of data to support
our customers. Risk arises if data is incorrect, unavailable, misused, or
unprotected. Along with other banks and financial institutions, we
need to meet external regulatory obligations and laws that cover data,
such as the Basel Committee on Banking Supervision’s 239
guidelines and the General Data Protection Regulation.
Mitigating actions
–Through our global data management framework, we monitor the
quality, availability and security of data that supports our
customers and internal processes. We work towards resolving any
identified data issues in a timely manner.
–We continue to make improvements to our data policies and to our
control framework – which includes trusted sources, data flows
and data quality – in order to enhance the end-to-end management
of data risk.
–We have established a global data management utility and
continue to simplify and unify data management activities across
the Group.
–We seek to protect customer data through our data privacy
framework, which establishes practices, design principles and
guidelines that enable us to demonstrate compliance with data
privacy laws and regulations.
–We continue to modernise our data and analytics infrastructure
through investments in Cloud technology, data visualisation,
machine learning and AI.
–We continue to educate our employees on data risk and data
management. We have delivered regular mandatory training
globally on how to protect and manage data appropriately.
Risks arising from the receipt of services
from third parties
We use third parties to provide a range of goods and services. It is
critical that we ensure we have appropriate risk management policies,
processes and practices over the selection, governance and oversight
of third parties and their supply chain, particularly for key activities
that could affect our operational resilience. Any deficiency in the
management of risks associated with our third parties could affect our
ability to support our customers and meet regulatory expectations.
Mitigating actions
–We continue to monitor the effectiveness of the controls operated
by our third-party providers and request third-party control reports,
where required.   
–We continue to enhance the effective management of our intra-
Group arrangements using the same control standards as we have
for external third-party arrangements.
–We have strengthened the way third-party risk is overseen and
managed across all non-financial risks, and have enhanced our
processes, framework and reporting capabilities to help improve
the visibility of risk and enable more robust management of our
material third parties by our global businesses, functions and
regions.
–We are implementing the changes required by new regulations as
set by our regulators.
Model risk
Model risk arises whenever business decision making includes
reliance on models. We use models in both financial and non-financial
contexts, as well as in a range of business applications such as
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting.
Assessing model performance is a continuous undertaking. Models
can need redevelopment as market conditions change. Significant
increases in global inflation and interest rates have impacted the
reliability and accuracy of both credit and market risk models.
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HSBC Holdings plc
We continued to prioritise the redevelopment of internal ratings-based
(‘IRB’) and internal model methods (‘IMM’) models, in relation to
counterparty credit, as part of the IRB repair and Basel III
programmes, with a key focus on enhancing the quality of data used
as model inputs. Some models have been approved and a number are
pending approval decisions from the UK’s Prudential Regulation
Authority (‘PRA’) and other key regulators. Some IMM and internal
model approach (‘IMA’) models have been approved for use, and
feedback has been received for some IRB models. Climate risk
modelling is a key focus for the Group as HSBC’s commitment to
ESG has become a key part of the Group’s strategy. Focus is also on
AI and machine learning where the pace of technological advances is
driving significant changes in modelling techniques.
Model risk remains a key area of focus given the regulatory scrutiny in
this area, with local regulatory exams taking place in many
jurisdictions and the PRA’s publication of supervisory statement 1/23
(SS1/23) which provided revised principles on how model risk should
be managed, as well as further developments in policy expected from
other regulators.
Mitigating actions
–We have continued to embed the enhanced monitoring, review
and challenge of expected credit loss model performance through
our Model Risk Management function as part of a broader
quarterly process to determine loss levels. The Model Risk
Management team aims to provide effective review and challenge
of any future redevelopment of these models.
–A programme of work is in progress to address the requirements
of the new PRA guidance for managing model risk.
–Model Risk Governance committees at the Group, business and
functional levels continue to provide oversight of model risk.
–A full review of the Group’s model landscape is being undertaken
across the organisation to ensure models are being deployed in
line with global business strategy.
–Model Risk Management works closely with businesses to ensure
that IRB/IMM/IMA models in development meet risk
management, pricing and capital management needs. Global
Internal Audit provides assurance over the risk management
framework for models.
–Additional assurance work is performed by the model risk
governance teams, which act as second lines of defence. The
teams test whether controls implemented by model users comply
with model risk policy and if model risk standards are adequate.
–Models using AI or generative AI techniques are validated and
monitored to help ensure that risks that are determined by the
algorithms have adequate oversight and review. A framework to
manage the range of risks that are generated by these advanced
techniques, and to recognise the multidisciplinary nature of these
risks, is being developed.
Change execution risk
The needs of our customers are evolving faster than ever, particularly
with regard to technological advancements and the global transition to
a low-carbon economy. The resulting scale, complexity and pace of
strategic and regulatory change have elevated the level of risk for
executing such changes safely and efficiently.
Mitigating actions
–Change execution risk is part of our risk taxonomy and control
library so that it is defined, assessed, managed, reported and
overseen in the same way as our other material risks.
–Our change framework provides colleagues across all levels of the
Group who deliver on strategic and organisational initiatives with a
common and consistent understanding of their role in achieving
value and outcomes.
–The Change Prioritisation and Oversight Committee oversees the
prioritisation, strategic alignment and management of execution
risk for all strategic change portfolios and initiatives.
Risks associated with workforce capability,
capacity and environmental factors with
potential impact on growth
Our global businesses and functions in all of our markets are exposed
to risks associated with workforce capacity challenges, including
challenges to retain, develop and attract high-performing employees
in key labour markets, and compliance with employment laws and
regulations. Failure to manage these risks may have an impact on the
delivery of our strategic objectives. It could also result in poor
customer outcomes or a breach of employment laws and regulations,
which may lead to regulatory sanctions or legal claims.
Mitigating actions
–We seek to promote a diverse and inclusive workforce and provide
health and well-being support. We continue to build our speak-up
culture through active campaigns.
–We monitor hiring activities and levels of employee attrition, with
each business and function putting in place plans to help ensure
they have effective workforce forecasting to meet business
demands.
–We monitor people risks that could arise due to organisational
restructuring, helping to ensure we manage redundancies
sensitively and support impacted employees. We encourage our
people leaders to focus on talent retention at all levels, with an
empathetic mindset and approach, while ensuring the whole
proposition of working at HSBC is well understood.
–Our Future Skills curriculum helps provides skills that will help to
enable employees and HSBC to be successful in the future.
–We develop succession plans for key management roles, with
oversight from the Group Executive Committee.
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Risk factors
We have identified a suite of risk factors that cover a broad range of
risks to which our businesses are exposed. These risks have the
potential to have a material adverse effect on our business, financial
condition, results of operations, prospects, capital position, strategy,
reputation and/or customers.
They may not necessarily be deemed as top or emerging risks;
however, they inform the ongoing assessment of our top and
emerging risks that may result in our risk appetite being revised.
The risk factors are set out below.
Macroeconomic and geopolitical risk
Current economic and market conditions
may adversely affect our results
Our earnings are affected by global and local economic and market
conditions. Uncertain economic conditions and volatile markets can
create a challenging operating environment for financial institutions
such as HSBC.
In particular, we have faced and may continue to face the following
challenges to our operations and operating model:
–Economic uncertainty: Current economic forecasts suggest
growth will be weaker in 2024, relative to 2023. Consumer and
business confidence remains low and major economies continue
to face the risk of a more severe downturn, or recession. Interest
rates are forecast to fall throughout 2024, but forecasts still
assume that they remain materially higher than in recent years.
Economic weaknesses and higher interest rates could (among
other things) cause asset prices and payment patterns to be
adversely affected, leading to greater than expected increases in
delinquencies, default rates and expected credit losses and other
credit impairment charges (’ECL’).
–Mainland China commercial real estate: Mainland China
commercial real estate conditions remain distressed as offshore
financing conditions and buyer demand remain subdued. Signs of
a material or sustained recovery are yet to emerge, with market
data still reflecting reduced investment and weak sentiment. The
Chinese government is expected to expand fiscal and monetary
support to the economy to boost growth and lending in 2024,
including specific measures to support developers and stimulate
housing demand. However, the risk of a slow and protracted
recovery remains significant. The business and financial
performance of corporates operating in this market has been
weak, and refinancing risks are likely to continue in 2024. State-
owned enterprises continue to outperform privately-owned
enterprises in general, with above market average sales
performance, market share gains and greater access to funding.
The challenges in this sector could create further pressure on our
customers.
–Geopolitical risks: Geopolitical risks remain elevated. Economic
forecasts are assumed to reflect the impact from the Russia-
Ukraine and Israel-Hamas wars, but there is significant uncertainty
around the duration and possible escalation of these wars.
Additionally, recent attacks on shipping in the Red Sea and the
resulting countermeasures taken have begun to disrupt supply
chains. The escalation or a broadening of the Russia-Ukraine war,
or the Israel-Hamas war could aggravate supply chain disruptions
and drive inflation higher and may pose challenges for our
customers and our business (see ‘The macroeconomic and market
impact of major geopolitical developments may affect our financial
condition and results’ for further discussion);
–Credit demand: The demand for borrowing from creditworthy
customers may diminish during periods of recession or where
economic activity slows or remains subdued;
–Market conditions: Our ability to borrow from other financial
institutions or to engage in funding transactions may be adversely
affected by market disruption; and
–Other economic factors: High inflation, higher interest rates and
the impact of geopolitical risks have significantly changed the
operating environment for many companies and sectors. While
impairment estimates attempt to capture the effects of these in
the aggregate, credit losses on specific exposures, with specific
idiosyncratic features may not be fully captured in ECL estimates.
The occurrence of any of these events or circumstances could have a
material adverse effect on our business, financial condition, results of
operations, prospects and customers.
The macroeconomic and market impact of
major geopolitical developments may affect
our financial condition and results
Significant geopolitical developments, such as the Russia-Ukraine and
Israel-Hamas wars, continue to affect the global economy and have
the potential to further influence the global macroeconomic outlook.
Global commodity markets were impacted by heightened geopolitical
risks in 2023 – including the Russia-Ukraine and Israel-Hamas wars –
which sustained concerns about supply chain disruptions.
A fall in global energy and food prices from the highs of 2022
facilitated a process of disinflation across key economies during 2023.
Following the reduction in global inflation rates, central banks in most
developed markets are expected to have concluded monetary policy
tightening in the second half of 2023.
Disinflationary trends are now visible across most major economies.
Markets expect a reduction in monetary policy rates over the next
year if conditions in labour markets ease further and inflation returns
closer to central banks’ target rates. However, the possibility of
further supply shocks led by geopolitical risks could cause an increase
in prices of commodities and manufactured goods and lead to
inflation effects on wages. Higher inflation could prompt central banks
to raise interest rates further.
The effects of higher inflation and interest rates in many countries
may have material impacts on capital and liquidity. In particular, the
pressure of sustained higher inflation and higher interest rates may
affect the credit rating of our customers and their ability to repay debt.
In turn, this could negatively impact the Group’s risk-weighted assets
(’RWAs’) and capital position, increase ECL and lead to potential
liquidity stress due to, among other factors, increased customer
drawdowns. There could be further adverse impacts on the Group's
income due to lower lending volumes and lower wealth and insurance
revenue, due to market volatility.
Our Central scenario, which has the highest probability weighting in
our IFRS 9 ‘Financial Instruments’ (’IFRS 9’) calculations of ECL,
assumes that GDP growth in many of our main markets will slow
down in 2024 followed by a moderate recovery in 2025. It is
anticipated that inflation will converge towards central banks’ target
rates by early 2025. Similarly, interest rates are expected to decline
but remain materially higher than in recent years. However, forecasts
remain uncertain, and changing economic conditions and the
materialisation of key risks could reduce the accuracy of the Central
scenario forecast. In particular, forecasts in recent years have been
sensitive to commodity price changes, changing supply chain
conditions, monetary policy adjustments and inflation expectations.
Uncertainty remains with respect to the relationship between
economic factors and historical loss experience, which has required
adjustments to modelled ECLs in cases where we determined that
the model was unable to capture the material underlying risks.
There could also be adverse impacts on other assets, goodwill and
other intangible assets.
Fiscal deficits are expected to remain large in both developed and
emerging markets as public spending on items including social
welfare, defence and climate transition initiatives is expected to
remain high. In many countries, the fiscal response to the Covid-19
pandemic has also left a very high public debt burden. Against a
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HSBC Holdings plc
backdrop of slower economic growth and high interest rates, a rise in
borrowing costs could increase the financial strains on highly indebted
sovereigns.
While the average maturity of sovereign debt in developed markets
has lengthened, higher borrowing costs than in recent years could
reduce the affordability of debt and may in some countries eventually
bring its sustainability into question. Among emerging markets and
some developed markets, those that need to refinance maturing US
dollar-denominated debt, in the context of a historically strong US
dollar, may face increasing difficulties. Where HSBC has exposures to
such sovereigns and/or related parties, it could incur losses.
Political changes may also have implications for policy. Many
countries are expected to hold elections in 2024. This may result in
continuity in some markets, but significant political and policy change
in others. Political change could bring uncertainty to the political and
legal frameworks in markets where the Group operates.
Our financial models have been impacted by the effects of higher
inflation and significant increases in interest rates in many countries.
These include retail and wholesale credit models such as IFRS loss
models, as well as capital models, traded risk models and models
used in the asset/liability management process. This continues to
require enhanced monitoring of model outputs and the use of model
overlays, including management judgmental adjustments based on
the expert judgement of senior credit risk managers and the
recalibration of key loss models to take into account the impacts of
higher rates on critical model inputs. See ’We could incur losses or be
required to hold additional capital as a result of model limitations or
failure‘.
The Russia-Ukraine war has continued to elevate geopolitical
instability which could have continued ramifications for the Group and
its customers. See also ’We are subject to political, social and other
risks in the countries in which we operate’. HSBC continues to
monitor and respond to financial sanctions and trade restrictions that
have been adopted in response. These sanctions and trade
restrictions are complex, novel and evolving. In particular, the US, the
UK and the EU, as well as other countries, have imposed significant
sanctions and trade restrictions against Russia. Such sanctions and
restrictions target certain Russian government officials, politically
exposed persons, business people, Russian oil imports, energy
products, financial institutions and other major Russian companies
and sanctions evasion networks. These countries have also enacted
more generally applicable investment, export, and import bans and
restrictions. In December 2023, the US established a new secondary
sanctions regime, providing itself broad discretion to impose severe
sanctions on non-US banks that are knowingly or even unknowingly
engaged in certain transactions or services involving Russia’s military-
industrial base. This creates challenges associated with the detection
or prevention of third-party activities beyond HSBC’s control. The
imposition of such sanctions against any non-US HSBC entity could
result in significant adverse commercial, operational, and reputational
consequences for HSBC, including the restriction or termination of
the non-US HSBC entity’s ability to access the US financial system
and the freezing of the entity’s assets that are subject to US
jurisdiction. In response to such sanctions and trade restrictions, as
well as asset flight, Russia has implemented certain
countermeasures, including the expropriation of foreign assets. These
sanctions, restrictions and Russian countermeasures may adversely
affect the Group, its customers and the markets in which the Group
operates by creating regulatory, reputational and market risks.
Significant uncertainties remain in assessing the duration and impact
of the Russia-Ukraine and Israel-Hamas wars. There is a risk that the
resulting impact on economic activity may last for a prolonged period
and this could have a material adverse effect on the Group’s
business, financial condition, results of operations, prospects,
liquidity, capital position and credit ratings.
We are subject to political, social and other
risks in the countries in which we operate
We operate through an international network of subsidiaries and
affiliates across countries and territories around the world. Our global
operations are subject to potentially unfavourable political, social,
environmental and economic developments in such jurisdictions,
which may include:
–coups, armed conflicts or acts of terrorism;
–political and/or social instability;
–geopolitical tensions;
–epidemics and pandemics (such as Covid-19);
–climate change, acts of God and natural disasters (such as floods
and hurricanes); and
–infrastructure issues, such as transportation and power failures.
Each of the above could impact RWAs, and the financial losses
caused by any of these risk events or developments could impair
asset values and the creditworthiness of customers.
These risk events or developments may also give rise to disruption to
the Group’s services and some may result in physical damage to our
operations and/or risks to the safety of our personnel and customers.
Geopolitical tensions could have significant ramifications for the
Group and its customers. In particular:
–Uncertainty about the scope, duration and potential for further
escalation of the Israel and Hamas war presents global economic
and political implications. (For further details, see ’Current
economic and market conditions may adversely affect our results’
and ’The macroeconomic and market impact of major geopolitical
developments may affect our financial condition and results’);
–The Russia-Ukraine war along with related financial sanctions,
trade restrictions and Russian countermeasures, has had global
economic and political implications. For further details, see
’Current economic and market conditions may adversely affect our
results’ and ’The macroeconomic and market impact of major
geopolitical developments may affect our financial condition and
results’;
–Global tensions over trade, technology and ideology are
manifesting themselves in divergent regulatory standards and
compliance regimes, presenting long-term strategic challenges for
multinational businesses;
–Diplomatic tensions between China and the US, which may extend
to and involve the UK, the EU, India and other countries, and
developments in Hong Kong, Taiwan and the surrounding maritime
region, may affect the Group, creating regulatory, reputational and
market risks;
–To date, the US, the UK, the EU and other countries have imposed
various sanctions and trade restrictions on Chinese persons and
companies, and the countries’ respective approaches to strategic
competition with China continue to develop;
–Although sanctions and trade restrictions are difficult to predict,
increases in diplomatic tensions between China and the US and
other countries could result in further sanctions and trade
restrictions that could negatively impact the Group, its customers
and the markets in which the Group operates. For example, there
is a continued risk of additional sanctions and trade restrictions
being imposed by the US and other governments in relation to
human rights, technology and other issues with China, and this
could create a more complex operating environment for the Group
and its customers.
–China, in turn, imposed a number of its own sanctions and trade
restrictions that target, or provide authority to target, foreign
individuals or companies as well as certain goods such as rare
earth minerals and metals, and technology and services. These, as
well as certain law enforcement measures, have been imposed
against certain countries, Western consulting and data intelligence
firms, defence companies and public officials associated with the
implementation of foreign sanctions against China; and
–Further sanctions, counter-sanctions and trade restrictions may
adversely affect the Group, its customers and the markets in
which the Group operates by creating regulatory, reputational and
market risks.
As the geopolitical landscape evolves, compliance by multinational
corporations with their legal or regulatory obligations in one
jurisdiction may be seen as supporting the law or policy objectives of
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169
that jurisdiction over another, creating additional compliance,
reputational and political risks for the Group. The financial impact on
the Group of geopolitical risks in Asia is heightened due to the
region’s relative high contribution to the Group’s profitability,
particularly in Hong Kong.
While it is the Group’s policy to comply with all applicable laws and
regulations of all jurisdictions in which it operates, geopolitical
tensions, and potential ambiguities in the Group’s compliance
obligations, will continue to present challenges and risks for the
Group and could have a material adverse impact on the Group‘s
business, financial condition, results of operations, prospects,
strategy and reputation, as well as on the Group’s customers.
We are likely to be affected by global
geopolitical trends, including the risk of
government intervention
While economic globalisation appears to remain deeply embedded in
the international system, it is increasingly challenged by nationalism
and protectionism. Consequently, international institutions may be
less capable of adapting to this trend. A dispersion of global economic
power from the US and the EU towards China and emerging markets
appears to be occurring, providing a backdrop for greater US-China
competition.
A rise in nationalism and protectionism, including trade barriers, may
be driven by populist sentiment and structural challenges facing
developed and developing economies. Similarly, if capital flows are
disrupted, some emerging markets may impose protectionist
measures that could affect financial institutions and their clients, and
other emerging, as well as developed, markets, may be tempted to
follow suit. This rise could contribute to weaker global trade,
potentially affecting HSBC’s business.
The broad geographic footprint and coverage of HSBC may make us
and our customers susceptible to protectionist measures taken by
national governments and authorities, including imposition of trade
tariffs, restrictions on market access, restrictions on the ability to
transact on a cross-border basis, expropriation, restrictions on
international ownership, interest rate caps, limits on dividend flows
and increases in taxation.
There may be uncertainty as to the conflicting nature of such
measures, their duration, the potential for escalation, and their
potential impact on global economies. Whether these emerging
trends are cyclical or permanent is hard to determine, and their
causes are likely to be difficult to address. The occurrence of any of
these events or circumstances could have a material adverse effect
on our business, financial condition, results of operations and
prospects.
We are subject to financial and non-financial
risks associated with Environmental, Social
and Governance (‘ESG‘) related matters,
such as climate change, nature-related and
human rights issues
ESG related matters such as climate change, society’s impact on
nature and human rights issues bring risks to our business, our
customers and wider society. If we fail to meet evolving regulatory
expectations or requirements relating to these matters, this could
have regulatory compliance and reputational impacts.
Climate change could have both financial and non-financial impacts on
HSBC either directly or indirectly through our customers. Transition
risk can arise from the move to a low-carbon economy, such as
through policy, regulatory and technological changes. Physical risk can
arise through increasing severity and/or frequency of severe weather
or other climatic events, such as rising sea levels and flooding and
chronic shifts in weather patterns, which could affect our ability to
conduct our day-to-day operations.
We currently expect that the following are the most likely ways in
which climate risk may materialise for the Group:
–credit risk for our corporate customers may increase if climate-
related regulatory, legislative or technological developments
impact customers’ business models or if extreme weather events
disrupt customers’ operations, resulting in financial difficulty for
customers and/or stranded assets. Our customers may find that
their business models fail to align to a net zero economy or face
disruption to their operations or deterioration to their assets as a
result of extreme weather;
–trading losses if climate change results in changes to
macroeconomic and financial variables which negatively impact
our trading book exposures;
–residential real estate may be affected by changes to the climate,
the increase in the frequency and severity of extreme weather
events and chronic shifts in weather patterns, which could impact
both property values and the ability of borrowers to afford their
mortgage payments;
–HSBC may see an increase in operational risk if extreme weather
events impact critical operations and premises;
–regulatory compliance risk may result from the increasing pace,
breadth and depth of climate-related regulatory expectations,
including on the management of climate risk, and variations in
climate-related reporting standards, requiring implementation in
short timeframes across multiple jurisdictions;
–conduct risks could develop in association with the increasing
demand for ‘green’ products where there are differing and
developing standards or taxonomies; and
–reputational risks may arise from how we decide to support our
customers in high-emitting sectors in their transition to net zero,
and if we make insufficient progress in achieving our climate-
related ambitions, targets and commitments.
We also face increased reputational, legal and regulatory risks as we
make progress towards our net zero ambition and other ESG-related
ambitions, targets and commitments, with stakeholders likely to place
greater focus on our actions, such as the development of climate and
broader ESG-related policies, our disclosures and financing and
investment decisions relating to our net zero ambition and other ESG-
related ambitions, targets and commitments. We will face additional
risks if we knowingly or unknowingly make inaccurate, unclear,
misleading, or unsubstantiated claims regarding sustainability to our
stakeholders.
Climate risk may also have an impact on model risk, as the uncertain
and evolving impacts of climate change as well as data and
methodology limitations present challenges to creating reliable and
accurate model outputs.
We may be exposed to climate and broader ESG-related litigation and
regulatory enforcement risks, either directly if stakeholders think that
we are not adequately managing climate and broader ESG risks or
indirectly if our clients and customers are themselves the subject of
litigation, potentially resulting in the revaluation of client assets.
Requirements, policy objectives, expectations or views may vary by
jurisdiction and stakeholder in relation to ESG related matters. We
may be subject to potentially conflicting approaches to ESG matters in
certain jurisdictions, which may impact our ability to conduct certain
business within those jurisdictions or result in additional regulatory
compliance, reputational, political or litigation risks. These risks may
also arise from divergence in the implementation of ESG, climate
policy and financial regulation in the many regions in which we
operate, including initiatives to apply and enforce policy and regulation
with extraterritorial effect.
In addition, there is increasing evidence that nature-related risks
beyond climate change - which include risks that can be represented
more broadly by impact and dependency on nature – can and will
have significant economic impact. These risks arise when the
provision of ecosystem services, such as water availability, air quality,
and soil quality is compromised by overpopulation, urban
development, natural habitat and ecosystem loss, ecosystem
degradation arising from the economic activity and other
environmental stresses beyond climate change. They can manifest
themselves in a variety of ways, including through macroeconomic,
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market, credit, reputational, legal and regulatory risks, for both HSBC
and its customers.
In 2022, we identified human rights issues that are salient for HSBC,
which are the human rights at risk of the most severe negative impact
through our business activities and relationships. These issues include
the right to decent work, including freedom from slavery and forced
labour and the right to equality and freedom from discrimination,
amongst others. Our analysis focused on the risk to people, while
recognising that where this risk is at its highest, it often converges
with material risk to our business, specifically, in HSBC‘s role as
employer, buyer, investor, and provider of products and services to
personal and business clients. Failure to manage this risk may
negatively impact people and communities, which in turn may have
reputational, legal, regulatory and financial consequences for HSBC.
In respect of all ESG-related risks, we also need to ensure that our
strategy and business model, including the products and services we
provide to customers and risk management processes (including
processes to measure and manage the various financial and non-
financial risks the Group faces as a result of ESG-related matters)
adapt to meet regulatory requirements and stakeholder and market
expectations, which continue to evolve significantly and at pace.
Achieving our strategy with respect to ESG matters, including any
ESG-related ambitions, commitments and targets that we may set,
will depend on a number of different factors outside of the Group’s
control, such as advancements in technologies and supportive public
policies in the markets where we operate. If these external factors
and other changes do not occur, or do not occur on a timely basis, the
Group may fail to achieve its ESG-related ambitions, commitments
and targets.
In order to track and report on our progress against our ESG-related
ambitions, targets and commitments, we rely on internal and, where
appropriate and available, external data sources, guided by certain
industry standards and our own ability to collect and process such
data. While ESG-related reporting has improved over time, data
remains of limited quality and consistency exposing us to the risk of
using incomplete and inaccurate data and models which could result
in sub-optimal decision making. Methodologies, data, scenarios and
industry standards that we have used may develop over time in line
with market practice, regulation and developments in science, where
applicable. Any such developments in methodologies and scenarios,
and changes in the availability, accuracy and verifiability of data over
time and our ability to collect and process such data, exposes us to
financial reporting risk in relation to our climate-related and broader
ESG disclosures and could result in revisions to our internal
measurement frameworks as well as reported data going forward,
including on financed emissions, meaning that such data may not be
reconcilable or comparable year-on-year.
This could also result in the Group having to re-evaluate its progress
towards its ESG-related ambitions, commitments and targets in the
future and this could result in reputational, legal and regulatory risks.
If any of the above risks materialise, this could have financial and non-
financial impacts for HSBC which could, in turn, have a material
adverse effect on our business, financial condition, results of
operations, reputation, prospects and strategy.
The UK’s trading relationship with the EU,
following the UK’s withdrawal from the EU,
may adversely affect our operating model
and financial results
The EU and the UK agreed a Trade and Cooperation Agreement on
31 December 2020, following the UK’s withdrawal from the EU. The
agreement mainly focused on goods and services but also covered a
wide range of other areas, including competition, state aid, tax,
fisheries, transport, data and security. A Memorandum of
Understanding (‘MoU‘) was signed on 27 June 2023, setting out a
framework for voluntary regulatory cooperation in financial services
between the UK and the EU, including through the establishment of a
Joint UK-EU Financial Regulatory Forum. This is expected to provide a
platform on which both parties will be able to discuss financial
services-related issues, including future equivalence determinations.
Negotiations between the UK and the EU over the operation of the
Northern Ireland Protocol concluded in February 2023, and in January
2024, the UK Government published further details of how the
Protocol would operate in practice in a document titled "Safeguarding
the Union". As the financial passporting arrangement that existed prior
to, and during, the transition period expired, we put in place new
arrangements for the provision of cross-border banking and
investment services to customers and counterparties in the European
Economic Area (‘EEA‘).
Notwithstanding the progress made in ensuring that we were
prepared for the end of the transition period, there remain risks, many
of them linked to the uncertain outcome of ongoing negotiations
relating to potential developments in the financial services trading
relationship between the UK and EU, including the rules under which
financial services may be provided on a cross-border basis into the EU
and its member states.
The EU law making bodies are understood to have reached
agreement on a new requirement (‘the EU branch requirement’)
under which non-EU banks and significant investment firms would
have to establish a branch in each EU member state in which they
carry out ‘core banking activities’, defined as deposit taking, lending
and guarantees, and commitments. The EU branch requirement,
which will be subject to certain exclusions and exemptions, is being
introduced through revisions to the EU Capital Requirements
Directive (‘CRDVI’). CRDVI is expected to be published in the EU
Official Journal in 2024, and the compliance date for the EU branch
requirement is currently expected to be 12 months after the date of
the transposition into the law of the relevant member state, with such
transposition expected by late 2025. However, grandfathering of
existing contracts will be available.
The Financial Services and Markets Act (‘FSMA’) 2023 became law in
June 2023 and provides for a number of changes to the regulatory
architecture in the UK. It contains provisions that would allow for
specified ‘on shored’ EU legislation, also known as ‘retained EU law’
or ‘REUL’ (and known as "assimilated law" after 1 January 2024), to be
revoked and replaced by legislation or rules made by HM Treasury or
the regulators. FSMA 2023 allows for the eventual repeal of
assimilated law related to financial services and enables the
government and regulators to replace it in line with the FSMA model.
Each piece of assimilated law related to financial services is now
within a “transitional period,” lasting until its repeal is individually
commenced by HM Treasury in a phased and sequenced manner.
Furthermore, as of 1 January 2024, certain legal effects previously
associated with REUL (now referred to as assimilated law) no longer
apply, including the supremacy of REUL over other types of
conflicting domestic UK law, general principles of EU law (which
informed REUL’s interpretation and application) and directly effective
EU rights.
Uncertainty remains as to the extent to which EU and UK laws will
diverge in the future, as a result of the future repeal of assimilated
law under FSMA 2023 or further development of the EU‘s own
regulatory regime. Any changes to the current rules in this respect,
the EU branch requirement and any further divergences in the legal
regimes could require modifications to our UK and EU operating
models, with resulting impacts to our clients and employees. The
precise impacts on our clients will depend on the nature of any
developments and their individual circumstances and could include
disruption to the provision of products and services, and this could in
turn increase operational complexity and/or costs for the Group.
More generally, over the medium to long term, the UK’s withdrawal
from the EU and the operation of the Trade and Cooperation
Agreement (and any complexities that may result therefrom), may
lead to increased market volatility and economic risk, particularly in
the UK, which could adversely impact our profitability and prospects
for growth in this market.
In addition, the UK’s future trading relationship with the EU and the
rest of the world will likely take a number of years to fully stabilise.
This may result in a prolonged period of uncertainty, unstable
economic conditions and market volatility. This could include reduced
international trade flows and loss of export market shares, as well as
currency fluctuations.
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171
We operate in markets that are highly
competitive
We compete with other financial institutions in a highly competitive
industry that continues to undergo significant change as a result of
financial regulatory reform, as well as increased public scrutiny and a
continued challenging macroeconomic environment.
We target internationally mobile clients who need sophisticated global
financial solutions. We generally compete on the basis of the quality
of our customer service, the wide variety of products and services
that we can offer our customers, the ability of our products and
services to satisfy our customers’ needs, the extensive distribution
channels available for our customers, our innovation, and our
reputation. Continued and increased competition in any one or all of
these areas may negatively affect our market share and/or cause us
to increase our capital investment in our businesses in order to
remain competitive. Additionally, our products and services may not
be accepted by our targeted clients.
In many markets, there is increased competitive pressure to provide
products and services at current or lower prices.
Consequently, our ability to reposition or reprice our products and
services from time to time may be limited, and could be influenced
significantly by the actions of our competitors who may or may not
charge similar fees for their products and services. Any changes in
the types of products and services that we offer our customers, and/
or the pricing for those products and services, could result in a loss of
customers and market share.
Developments in technology and changes to regulations are enabling
new entrants to the industry. This challenges HSBC to continue
innovating and taking advantage of new digital capabilities so that we
improve how we serve our customers, drive efficiency and adapt our
products to attract and retain customers. As a result, we may need to
increase our investment in our business to adapt or develop products
and services to respond to our customers‘ evolving needs. We also
need to ensure that new digital capabilities do not weaken our
resilience. If HSBC fails to develop and adapt its products and
services to take advantage of new digital capabilities this could have
an adverse impact on our business.
The digitisation of financial services continues to have an impact on
the payment services ecosystem, including new market entrants and
payment mechanisms, not all of which are subject to the same level
of regulatory scrutiny or regulations as financial institutions. This
presents ongoing challenges in terms of maintaining required levels of
payment transparency, notably where financial institutions serve as
intermediaries. Developments around digital assets and currencies
have continued at pace, with an increasing regulatory and
enforcement focus.
Any of these factors could have a material adverse effect on our
business, financial condition, results of operations, prospects and
reputation.
Changes in foreign currency exchange rates
may affect our results
We prepare our accounts in US dollars because the US dollar and
currencies linked to it form the major currency bloc in which we
transact and fund our business. However, a substantial portion of our
assets, liabilities, assets under management, revenues and expenses
are denominated in other currencies. Changes in foreign exchange
rates, including those that may result from a currency becoming de-
pegged from the US dollar, may have an effect on our accounting
standards, reported income, cash flows and shareholders’ equity.
Unfavourable changes in foreign exchange rates could have a material
adverse effect on our business, financial condition, results of
operations, capital position and prospects.
Market fluctuations may reduce our income
or the value of our portfolios
Our businesses are inherently subject to risks in financial markets and
in the wider economy, including changes in, and increased volatility
of, interest rates, inflation rates, credit spreads, foreign exchange
rates, commodity, equity, bond and property prices, and the risk that
our customers act in a manner inconsistent with our business, pricing
and hedging assumptions.
Market pricing can be volatile and ongoing market movements could
significantly affect us in a number of key areas. For example, banking
and trading activities are subject to interest rate risk, foreign exchange
risk, inflation risk and credit spread risk. Changes in interest rate
levels, interbank spreads over official rates and yield curves affect the
interest rate spread realised between lending and borrowing costs.
The potential for future volatility and margin changes remains. See
‘The macroeconomic and market impact of major geopolitical
developments may affect our financial condition and results‘ above
regarding the impact of these on the interest rate environment.
Competitive pressures on fixed rates or product terms in existing
loans and deposits sometimes restrict our ability to change interest
rates applying to customers in response to changes in official and
wholesale market rates. Our pension scheme assets include equity
and debt securities, the cash flows of which change as equity prices
and interest rates vary.
Our insurance businesses are exposed to the risk that market
fluctuations may cause mismatches to occur between product
liabilities and the investment assets that back them. Market risks can
affect our insurance products in a number of ways depending upon
the product and the associated contract. For example, mismatches
between assets and liability yields and maturities give rise to interest
rate risk. Some of these risks are borne directly by the customer and
some are borne by the insurance businesses, with their excess capital
invested in the markets. Some insurance contracts involve guarantees
and options that increase in value in adverse investment markets.
There is a risk that the insurance businesses could bear some of the
cost of such guarantees and options. The performance of the
investment markets could thus have a direct effect upon the value
embedded in the insurance and investment contracts and our
operating results, financial condition and prospects.
It is difficult to predict with any degree of accuracy changes in market
conditions, and such changes could have a material adverse effect on
our business, financial condition, results of operations, capital position
and prospects.
Liquidity, or ready access to funds, is
essential to our businesses
Our ability to borrow on a secured or unsecured basis, and the cost of
doing so, can be affected by increases in interest rates or credit
spreads, the availability of credit, regulatory requirements relating to
liquidity or the market perceptions of risk relating to the Group or the
banking sector, including our perceived or actual creditworthiness.
Current accounts and savings deposits payable on demand or at short
notice form a significant part of our funding, and we place
considerable importance on maintaining their stability. For deposits,
stability depends upon preserving investor confidence in our capital
strength and liquidity, and on comparable and transparent pricing.
We also access wholesale markets in order to provide funding for
entities that do not accept deposits, to align asset and liability
maturities and currencies, and to maintain a presence in local
markets. In 2023, we issued the equivalent of $23bn of senior debt
securities in the public capital markets in a range of currencies and
maturities from a number of Group entities, including $17.2bn of
senior securities issued by HSBC Holdings.
An inability to obtain financing in the unsecured long-term or short-
term debt capital markets, or to access the secured lending markets,
could have a material adverse effect on our liquidity.
Unfavourable macroeconomic developments, market disruptions or
regulatory developments may increase our funding costs or challenge
our ability to raise funds to support or expand our businesses.
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HSBC Holdings plc
If we are unable to raise funds through deposits and/or in the capital
markets, our liquidity position could be adversely affected, and we
might be unable to meet deposit withdrawals on demand or at their
contractual maturity, to repay borrowings as they mature, to meet our
obligations under committed financing facilities and insurance
contracts or to fund new loans, investments and businesses.
We may need to liquidate unencumbered assets to meet our
liabilities. In a time of reduced liquidity, we may be unable to sell
some of our assets, or we may need to sell assets at reduced prices,
which in either case could materially adversely affect our business,
financial condition, results of operations, capital position and
prospects.
Macro-prudential, regulatory and
legal risks to our business model
We are subject to numerous new and
existing legislative and regulatory
requirements, and to the risk of failure to
comply with applicable regulations
Our businesses are subject to ongoing regulation, policies, voluntary
codes of practice and interpretations in the various markets in which
we operate. A number of regulatory changes affecting our business
have effects beyond the country in which they are enacted.
In recent years, regulators and governments have focused on
reforming both the prudential regulation of the financial services
industry and the ways in which the business of financial services is
conducted. The measures taken include enhanced capital, liquidity
and funding requirements, the separation or prohibition of certain
activities by banks, changes in the operation of capital markets
activities, the introduction of tax levies and transaction taxes and
changes in compensation practices. With regard to conduct, there is a
focus on customers and markets, payments and e-money, ESG
including governance, and operational resilience. This is all set against
increased geopolitical tensions which may limit the development of
consistent regulatory requirements, and the evolving regulatory
response to the ‘banking turmoil’ in 2023. 
Specific areas where regulatory changes and increased supervisory
expectations could have a material effect on our business, financial
condition, results of operations, prospects, capital position, reputation
and strategy include, but are not limited to those listed below.
Prudential and related issues
–the implementation of the Basel Committee on Banking
Supervision‘s reforms to the prudential framework, known in the
UK as Basel 3.1, which include changes to the RWA approaches to
credit risk, market risk, operational risk, counterparty risk and
credit valuation adjustments and the application of RWA floors;
–the increased supervisory expectations arising from expanding and
increasingly complex regulatory reporting obligations, including
expectations on data integrity and associated governance and
controls;
–the possible impacts on some of our regulatory ratios, such as the
CET1 ratio, LCR and NSFR, arising from the programme initiated to
strengthen our global processes, improve consistency (through
data enhancement, transformation of the reporting systems and
an uplift to the control environment over the report production
process) and enhance controls across regulatory reports;
–any changes to the prudential framework following the bank
failures in 2023, for example in relation to liquidity or interest rate
risk in the banking book or rules concerning depositor protection
(such as those related to the operation of the Financial Services
Compensation Scheme in the UK);
–HM Treasury’s work on improving the operation of the UK’s ring-
fencing regime, which includes proposals that may affect HSBC‘s
operations;
–requirements flowing from arrangements for the resolution
strategy of the Group and its individual operating entities that may
have different effects in different countries;
–the financial effects of climate risk and other ESG-related changes
being incorporated within the global prudential framework,
including physical risks from climate change and the transition
risks resulting from a shift to a low carbon economy;
–the increasing regulatory expectations and requirements (for
example, the EU‘s Digital Operational Resilience Act) relating to
various aspects of operational resilience, including an increasing
focus on the response of institutions to operational disruptions;
and
–reviews of regulatory frameworks applicable to the wholesale
financial markets, in particular the reforms and other changes to
the securitisation requirements.
Non-prudential and related issues
–the increasing focus by regulators, international bodies and other
policy makers, heightened by cost-of-living pressures, on how we
conduct business, particularly around the delivery of fair outcomes
for customers (for example, the UK Consumer Duty), promoting
effective competition and ensuring the orderly and transparent
operation of global financial markets;
–the supervisory and regulatory change focus globally on
technology adoption and digital delivery, underpinned by customer
protection, including the use of digital assets and currencies and
wider financial technology risks, for example, the EU‘s Markets in
Crypto-Assets Regulation, which introduces a framework for
regulating crypto-assets, will begin to apply in 2024, and Hong
Kong, Singapore, and the UK are each introducing new regulations
aimed at cryptoassets related activities;
–increasing regulatory expectations and requirements around the
use of artificial intelligence (‘AI’) for example, the EU’s proposed AI
law; 
–continuing supervisory and regulatory change focus globally on
payment services and related infrastructure, including ‘Open
Banking‘ and ‘Open Finance‘ initiatives in the UK and the EU and
changes concerning operational resilience and cybersecurity;
–ongoing expectations with respect to managing emerging financial
crime risks, specifically as they relate to digital assets, an evolving
payments infrastructure, national data privacy requirements, and
fraud, and managing conflicting laws and approaches to legal and
regulatory regimes and implementing increasingly complex and
less predictable sanctions and trade restrictions;
–the demise of certain interbank offered rate (‘Ibor‘) reference rates
and the transition to new replacement rates (as discussed further
under ‘We may not manage risks associated with the replacement
of benchmark rates and indices effectively’);
–the continued evolution of the UK’s regulatory framework
following the UK‘s withdrawal from the EU, including changes
introduced through the FSMA 2023, the review of EU retained
legislation, government proposals known in the UK as the
‘Edinburgh Reforms/Smarter Regulatory Framework‘, and changes
regarding the access of UK and other non-EU financial institutions
to EU markets. For further details, see ‘The UK’s trading
relationship with the EU, following the UK‘s withdrawal from the
EU, may adversely affect our operating model and financial
results‘;
–the implementation of conduct and other measures as a result of
regulators’ focus on organisational culture, employee behaviour,
whistleblowing and diversity and inclusion;
–requirements regarding remuneration arrangements and senior
management accountability more generally within the Group (for
example, the requirements of the Senior Managers and
Certification Regime in the UK and similar regimes in Hong Kong,
Singapore, Australia, Ireland, and elsewhere that are either in
effect or under consideration/implementation);
–changes in national or supra-national requirements regarding the
ability to outsource the provision of services and resources
offshore or to transfer material risk to financial institutions located
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173
in other countries, which may impact our ability to implement
globally consistent and efficient operating models;
–increasing regulatory expectations of firms in relation to ESG-
related governance, risk management and disclosure frameworks
(for example the UK Sustainability Disclosure Requirements and
the EU Corporate Sustainability Reporting Directive), particularly
relating to climate change, transition plans, greenwashing and
supply chain due diligence; and
–the regulatory focus on policies and controls related to the
unauthorised use by employees of electronic communications on
non-business platforms. 
We may not manage risks associated with
the replacement of benchmark rates and
indices effectively
Ibors were previously used extensively to set interest rates on
different types of financial transactions and for valuation purposes,
risk measurement and performance benchmarking.
Key benchmark rates and indices, including Ibors such as the London
interbank offered rate (‘Libor’), have been the subject of both national
and international regulatory scrutiny and reform for many years. This
resulted in significant changes to the methodology and operation of
certain benchmarks and indices, the adoption of replacement near risk
free rates (‘RFRs‘) and the proposed discontinuation of certain
reference rates (including Libor). From the end of December 2021,
the European Money Markets Institute (‘EMMI’) ceased publication of
the Euro Overnight Index average (‘Eonia‘) and ICE Benchmark
Administration Limited (‘IBA’) ceased publication of all sterling, Euro,
Swiss franc and Japanese yen settings, and the one-week and two-
month US dollar Libor settings, RFRs have been adopted in their
place. All remaining US dollar Libor settings ceased to be published
on 30 June 2023. Following the demise of the one- and six- month
sterling Libor settings on 31 March 2023, the only remaining synthetic
rates available are the three- month sterling setting, which is
expected to cease to be published at the end of March 2024, and the
one-, three- and six- month US dollar Libor settings, which will cease
to be published on 30 September 2024.
The continued existence of a small number of legacy contracts in
benchmark rates that have demised (so called ‘tough legacy
contracts‘) and contracts referencing other Ibors that are expected to
demise at a later date, results in several risks for HSBC, its clients and
the financial services industry more widely. These include but are not
limited to:
–Regulatory compliance, legal and conduct risks, which arise from
the transition of legacy contracts to RFRs or alternative rates and
from the sales of products referencing RFRs, could lead to
unintended or unfavourable outcomes for clients and market
participants. These risks could be heightened if HSBC’s sales
processes and procedures are not appropriately adapted or
executed to detail the risks and complexity of the RFR market
conventions;
–Legal risks are associated with legacy contracts that HSBC is
unable to transition, including those contracts that rely on the use
of legislative solutions and/or ‘synthetic’ Libor. If HSBC is unable
to transition legacy contracts, this could lead to reliance on fallback
provisions which do not contemplate the permanent cessation of
the relevant Ibor, and there is a risk that these fallback provisions
will not work from a contractual, practical or financial perspective,
potentially resulting in unintended outcomes for clients. While
legislative solutions have in some circumstances assisted market
participants and investors with transitioning legacy contracts and
mitigating risks associated with ‘tough legacy’ contracts, there
remains some uncertainty around the operation, application and
enforceability of such solutions. For legacy contracts that utilise
‘synthetic’ Libor there is a risk that we are unable to transition
such contracts to a new RFR or alternative rate before the relevant
‘synthetic‘ Libor is discontinued. This could lead to reliance on the
above-mentioned fallback provisions. Each of these issues could
result in unintended or unfavourable outcomes for clients and
market participants and this could potentially increase the risk of
disputes;
–Resilience and operational risks, resulting from changes to manual
and automated processes, made in support of new RFR
methodologies, and the transition of large volumes of Ibor
contracts may lead to operational issues. In particular, there is a
risk that our systems, processes and controls have not been
appropriately adapted to account for new RFR methodology
changes or fallback provisions, which may lead to complaints and
disputes; and
–Model risk resulting from changes to our models, to replace Ibor-
related data, which could adversely affect the accuracy of model
outputs
If any of these risks materialise, this could have a material adverse
effect on our business, financial condition, results of operations,
prospects and customers.
We are subject to the risk of current and
future legal, regulatory or administrative
actions and investigations, the outcomes of
which are inherently difficult to predict
We face significant risks in our business relating to legal, regulatory or
administrative actions and investigations. The amount of damages
claimed in litigation, regulatory proceedings, investigations,
administrative actions and other adversarial proceedings against
financial institutions are increasing for many reasons. These include a
substantial increase in the number of regulatory changes taking place
globally, increasing focus from regulators, investors and other
stakeholders on ESG disclosures, including in relation to the
measurement and reporting of such matters as both local and
international standards in this area continue to significantly evolve and
develop, increased media attention and higher expectations from
regulators and the public. In addition, criminal prosecutions of financial
institutions for, among other things, alleged conduct breaches,
breaches of anti-money laundering, anti-bribery and corruption and
sanctions regulations, antitrust violations, market manipulation, aiding
and abetting tax evasion, and providing unlicensed cross-border
banking services, have become more commonplace and may increase
in frequency due to increased media attention and higher
expectations from regulators and the public.
Any such legal, regulatory or administrative action or investigation
against HSBC Holdings or one or more of our subsidiaries could result
in, among other things, substantial fines, civil penalties, criminal
penalties, cease and desist orders, forfeitures, the suspension or
revocation of key licences, requirements to exit certain businesses,
other disciplinary actions and/or withdrawal of funding from
depositors and other stakeholders. Any threatened or actual litigation,
regulatory proceeding, administrative action, investigation, or other
adversarial proceedings against HSBC Holdings or one or more of our
subsidiaries could have a material adverse effect on our business,
financial condition, results of operations, prospects and reputation.
Additionally, the Group’s financial statements reflect provisioning for
legal proceedings, regulatory and customer remediation matters.
Provisions for legal proceedings, regulatory and customer remediation
matters, typically require a higher degree of judgement than other
types of provisions, and the actual costs resulting from such
proceedings and matters may exceed existing provisioning.
Additionally, as described in Note 36 on the Financial Statements, we
continue to be subject to a number of material legal proceedings,
regulatory actions and investigations, the outcomes of which are
inherently difficult to predict, particularly those cases in which the
matters are brought on behalf of various classes of claimants, seek
damages of unspecified or indeterminate amounts or involve novel
legal claims. Moreover, we may face additional legal proceedings,
investigations, or regulatory actions in the future, including in other
jurisdictions and/or with respect to matters similar to, or broader than,
the existing legal proceedings, investigations or regulatory actions. An
unfavourable result in one or more of these proceedings could have a
material adverse effect on our business, financial condition, results of
operations, prospects and reputation.
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HSBC Holdings plc
We may fail to meet the requirements of
regulatory stress tests
We are subject to supervisory stress tests in many jurisdictions,
which are described on page 240. These exercises are designed to
assess the resilience of banks to potential adverse economic
developments or operational failure to inform mitigation actions and
ensure that they have robust, forward looking capital planning
processes that account for the risks associated with their business
profile. Assessment by supervisors is both on a quantitative and
qualitative basis, the latter focusing on our data provision, stress
testing capability and internal management processes and controls.
Failure to meet quantitative or qualitative requirements of regulatory
stress tests, or the failure by supervisors to approve our stress test
results and capital plans, could result in the Group being required to
enhance its capital position, and this could, in turn, have a material
adverse effect on our business, financial returns, capital position,
operational capabilities and reputation.
HSBC and its UK subsidiaries may become
subject to stabilisation provisions under the
Banking Act, in certain significant stress
situations
Under the Banking Act’s special resolution regime (the ‘SRR’), HM
Treasury, the BoE/PRA and the FCA (together, the ‘Authorities’) are
granted substantial powers to implement the following stabilisation
options: (i) transfer of all of the business of a relevant entity or the
shares of the relevant entity to a private sector purchaser; (ii) transfer
of all or part of the business of the relevant entity to a ‘bridge bank’
wholly owned by the BoE; (iii) transfer of part of the assets, rights or
liabilities of the relevant entity to one or more asset management
vehicles for management of the transferor’s assets, rights or
liabilities; (iv) the write-down, conversion, transfer, modification, or
suspension of the relevant entity’s equity, capital instruments and
liabilities (the so-called “bail-in power”); and (v) temporary public
ownership of the relevant entity.
The SRR also provides for modified insolvency and administration
procedures for relevant entities, and confers ancillary powers on the
Authorities, including the power to modify or override certain
contractual arrangements in certain circumstances.
The Banking Act gives power to HM Treasury to make further
amendments to the law for the purpose of enabling it to use the SRR
powers effectively, potentially with retrospective effect.
These stabilisation options and powers may also be applied to a UK
bank or investment firm or to certain of their affiliates (which, in
respect of HSBC, could include HSBC Holdings) where certain
conditions are met.
In view of the HSBC Group’s corporate structure, which comprises a
group of locally regulated operating banks, the preferred resolution
strategy for the HSBC Group, as confirmed by its regulators, is a
multiple point of entry (‘MPE’) bail-in strategy. This provides flexibility
for HSBC to be resolved either (i) through a bail-in at the HSBC
Holdings level (using the above-mentioned bail-in power), which
enables the recapitalisation of operating bank subsidiaries in the
HSBC Group (as required) while restructuring actions are undertaken,
with the HSBC Group remaining together; or (ii) at a local subsidiary
level pursuant to the application of statutory resolution powers by
local resolution authorities. Further details on HSBC’s resolution
strategy can be found in the section entitled ‘Recovery and resolution’
on page 155.
In addition to the stabilisation options, the relevant Authority may, in
certain circumstances, require the permanent write-down or
conversion into equity of any outstanding tier 1 capital instruments
and tier 2 capital instruments prior to the exercise of any stabilisation
option (including the bail-in power), which may lead to the
cancellation, transfer or dilution of HSBC Holdings’ ordinary share
capital.
In general, the Banking Act requires the Authorities to have regard to
specified objectives in exercising the powers provided for by the
Banking Act. One of the objectives (which is required to be balanced
as appropriate with the other specified objectives) refers to the
protection and enhancement of the stability of the financial system of
the UK. The Banking Act includes, in certain circumstances, and with
respect to the exercise of certain powers provided for by the Banking
Act, provisions related to compensation in respect of transfer
instruments and orders made under it. This includes a ‘no creditor
worse off’ safeguard, which requires that no shareholder or creditor
must be left worse off from the use of resolution powers than they
would have been had the entity entered insolvency rather than
resolution. 
However, if we are at or approaching the point where we may be
deemed by our regulators to be failing, or likely to fail, such as to
require regulatory intervention, any exercise of the above mentioned
powers by the Authorities may result in holders of our ordinary
shares, or other instruments that may fall within the scope of the ‘bail
in’ or other write-down and conversion powers granted under the
Banking Act, being materially adversely affected, including by the
cancellation of shares, the write-down or conversion into shares of
other instruments, the transfer of shares to a third party appointed by
the BoE, the loss of rights associated with shares or other
instruments (including rights to dividends or interest payments), the
dilution of their percentage ownership of our share capital, and any
corresponding material adverse effect on the market price of our
ordinary shares and other instruments.
We are subject to tax-related risks in the
countries in which we operate
We are subject to the substance and interpretation of tax laws in all
countries in which we operate and are subject to routine review and
audit by tax authorities in relation thereto. Our interpretation or
application of these tax laws may differ from those of the relevant tax
authorities and we provide for potential tax liabilities that may arise on
the basis of the amounts expected to be paid to the tax authorities.
The amounts ultimately paid may differ materially from the amounts
provided depending on the ultimate resolution of such matters. 
In addition, potential changes to tax legislation, the approach taken by
tax authorities in audits, and tax rates in the countries and territories
in which we operate, in particular, those arising as a consequence of
the OECD‘s Base Erosion and Profit Shifting project, could increase
our effective tax rate in the future and have a material adverse effect
on our business, financial condition, results of operations, prospects
and capital position.
Risks related to our operations
Our operations are highly dependent on our
information technology systems
We operate in an extensive and complex technology landscape,
which must remain resilient in order to support customers, the Group
and markets globally. Risks arise where technology is not understood,
maintained, or developed appropriately.
The reliability and security of the HSBC Group’s information
technology infrastructure is crucial to HSBC Group’s provision of
financial services to our customers and protecting the HSBC brand.
The effective functioning of our payment systems, financial control,
risk management, credit analysis and reporting, accounting, customer
service and other information technology systems, as well as the
communication networks between our branches and main data
processing centres, are important to our operations.
Critical system failure, prolonged service unavailability or a material
breach of data security, particularly of confidential customer data,
could compromise HSBC Group’s ability to serve its customers. This
could breach regulations and could cause long-term damage to HSBC
Group’s business and brand that could have a material adverse effect
on our financial condition, results of operations, prospects and
reputation.
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We remain susceptible to a wide range of
cyber risks that impact and/or are facilitated
by technology
The threat of cyber-attacks remains a concern for HSBC, as it does
across the entire financial sector. As cyber-attacks continue to evolve,
failure to protect our operations may result in disruption for
customers, manipulation of data or financial loss. This could adversely
impact both us and our customers.
Adversaries attempt to achieve their objectives by compromising
HSBC or related third-party systems. They use techniques that
include malware (such as ransomware), exploitation of both known
and unpublished (zero-day) vulnerabilities in software, phishing emails,
distributed denial of service, as well as potentially physical
compromise of premises, or coercion of staff. Our customers may
also be subject to these constantly evolving cyber-attack techniques.
The Group, like other financial institutions, experiences numerous
attempts to compromise its cybersecurity. We expect to continue to
be the target of such attacks in the future.
Cybersecurity risks will continue to increase, due to continued
increase of services delivered over the internet; increasing reliance on
internet-based products, applications and data storage; and an
increased use of hybrid working models by HSBC’s employees,
contractors, third party service providers and their sub-contractors.
To date, we have not been materially affected by cybersecurity
threats. However, our business strategy, results of operations and
financial condition could be materially affected by cybersecurity risks
and any future material incidents.
A failure to adhere to HSBC’s cybersecurity policies, procedures or
controls, employee wrongdoing, or human, governance or
technological error could also compromise HSBC’s ability to defend
against cyber-attacks. Should any of these cybersecurity risks
materialise, they could have a material adverse effect on our
customers, business, financial condition, results of operations,
prospects and reputation.
We could incur losses or be required to hold
additional capital as a result of model
limitations or failure
HSBC uses models for a range of purposes in managing its business,
including regulatory capital calculations, stress testing, credit
approvals, calculation of ECLs on an IFRS 9 basis, financial crime and
fraud risk management and financial reporting.
HSBC could face adverse consequences as a result of decisions that
may lead to actions by management based on models that are poorly
developed, implemented or used, or as a result of the modelled
outcome being misunderstood, or the use of modelled information for
purposes which it was not designed for, or by inherent limitations
arising from the uncertainty inherent in predicting or estimating future
outcomes. Regulatory scrutiny and supervisory concerns over banks’
use of models are considerable, particularly the internal models and
assumptions used by banks in the calculation of regulatory capital. If
regulatory approval for key capital models is not achieved in a timely
manner or if those models are subject to negative feedback from
regulators HSBC could be required to hold additional capital. Evolving
regulatory requirements have resulted in changes to HSBC’s
approach to model risk management, which poses execution
challenges. The adoption of more sophisticated modelling approaches
including artificial intelligence related risks and technology by both
HSBC and the financial services industry could also lead to increased
model risk. HSBC’s commitment to changes to business activities
due to climate and sustainability challenges will also have an impact
on model risk going forward. Models will play an important role in risk
management and financial reporting of climate-related risks.
Challenges such as uncertainty of the long dated impacts of climate
change and lack of robust and high quality climate related data
present challenges to creating reliable and accurate model outputs for
these models.
Model risk remains a key area of focus given the regulatory scrutiny in
this area with local regulatory examinations taking place in many
jurisdictions and revised principles on model risk published by the
PRA which come into force in 2024 and further developments in
policy expected from other regulators.
Risks arising from the use of models could have a material adverse
effect on our business, financial condition, results of operations,
prospects, capital position and reputation.
Our operations use third-party suppliers and
service providers
HSBC relies on third-party suppliers and service providers to supply
goods and services. The use of third-party suppliers and service
providers by financial institutions is of particular focus to global
regulators. This includes how outsourcing decisions are made, how
key relationships are managed and our understanding of third-party
dependencies and their impact on service provision.
The inadequate management of third-party risk could impact our
ability to meet strategic, regulatory and customer expectations.
This may lead to a range of impacts, including regulatory censure,
penalties or damage both to shareholder value and to our reputation.
This could have a material adverse effect on our business, financial
condition, results of operations, prospects, capital position and
reputation.
Risks related to our governance and
internal controls
Our data management and data privacy
controls must be sufficiently robust to
support the increasing data volumes and
evolving regulations
As the HSBC Group becomes more data-driven and our business
processes move to digital channels, the volume of data that we rely
on has increased. As a result, management of data (including data
retention and deletion, data quality, data privacy and data architecture)
from creation to destruction must be robust and designed to identify
quality and availability issues. Inadequate data management could
result in negative impacts to customer service, business processes,
or require manual intervention to reduce the risk of errors in reporting
to senior management, executives or regulators.
Expanding data privacy, national security and cybersecurity laws in a
number of markets could pose potential challenges to intra-group data
sharing. These developments could increase financial institutions’
compliance obligations in respect of cross-border transfers of
personal information, which may affect our ability to manage financial
crime risks across markets.
In addition, failure to comply with data privacy laws and other
legislation in the jurisdictions in which we operate may result in
regulatory sanctions. Any of these failures could have a material
adverse effect on our business, financial condition, results of
operations, prospects, and reputation.
Third parties may use us as a conduit for
illegal activities without our knowledge
We are required to comply with applicable financial crime laws and
regulations, and have adopted various policies, procedures and
controls aimed at preventing the exploitation of HSBC‘s products and
services for criminal activity. Financial crime includes fraud, bribery
and corruption, tax evasion, sanctions and export control violations,
money laundering, terrorist financing and proliferation financing (see
‘Regulation and supervision - Financial crime regulation’). There are
instances, as permitted by regulation, where we may rely upon
counterparties to undertake certain financial crime risk management
activities on our behalf. While permitted by regulation, such reliance
or other controls may not prevent third parties from using us (and our
relevant counterparties) as a conduit for financial crime, without our
knowledge (and that of those counterparties).
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HSBC Holdings plc
Becoming a party to, associated with, or even accused of being
associated with, financial crime could damage our reputation and
could make us subject to fines, sanctions and/or legal enforcement.
Any one of these outcomes could have a material adverse effect on
our business, financial condition, results of operations, prospects and
reputation.
We are subject to the risk of financial crime
We are exposed to financial crime risk from our customers, staff and
third parties engaging in criminal activity (see also ‘Third parties may
use us as a conduit for illegal activities without our knowledge’) and,
as such, we face increasing regulatory expectations. In 2023, financial
crime risk was exacerbated by increasingly complex geopolitical
challenges, the macroeconomic outlook, the complex and dynamic
nature of sanctions compliance, evolving financial crime regulations,
rapid technological developments, an increasing number of national
data privacy requirements and the increasing sophistication of fraud,
scams and other criminal activities. Our ability to manage financial
crime risk is dependent on the use and effectiveness of our financial
crime risk assessments, systems and controls. Weak or ineffective
financial crime processes and controls may risk HSBC inadvertently
facilitating financial crime which may result in regulatory investigation,
sanction, litigation, fines and reputational damage.
In addition, HSBC Bank USA, as the primary US dollar correspondent
bank for the Group, is subject to heightened financial crime risk
arising from business conducted on behalf of its non-US HSBC
affiliates.
HSBC Bank USA has implemented policies, procedures and controls
reasonably designed to comply with financial crime legal and
regulatory requirements and mitigate financial crime risk from its
affiliates. Nevertheless, in the event that these controls are
ineffective, this could lead to a breach of these requirements resulting
in a potential enforcement action by the US Department of the
Treasury or other US agencies that may include substantial fines or
penalties. Any such action against HSBC Bank USA could have a
material adverse effect on our business, financial condition, results of
operations, prospects and reputation.
We may suffer losses due to employee
misconduct
Our businesses are exposed to risk from potential non-compliance
with Group policies, including the HSBC Values, and related
behaviours and employee misconduct such as fraud, negligence or
non-financial misconduct, all of which could result in regulatory
sanctions and/or reputational or financial harm. In recent years, a
number of multinational financial institutions have suffered material
losses due to the actions of rogue employees. It is not always
possible to deter employee misconduct, and the precautions we take
to prevent and detect this activity may not always be effective.
Misconduct risks could be increased if our prevent-and-detect
measures are less effective because of remote and home working.
Employee misconduct or regulatory sanctions if a regulator deems
HSBC‘s actions to deter such activity to be insufficient, could have a
material adverse effect on our business, financial condition, results of
operations, prospects and reputation.
The delivery of our strategic actions is
subject to execution risk and we may not
achieve all of the expected benefits for
strategic initiatives
Effective management of transformation projects is required to
effectively deliver the Group’s strategic priorities, involving delivering
both on externally driven programmes and key business initiatives to
deliver growth, operational resilience and efficiency outcomes. The
scale, complexity and, at times, concurrent demands of the projects
required to meet these can result in heightened execution risk.
The Group’s strategy (see pages 11 to 13) set out in February 2022,
and refined subsequently, was supported by global trends – the
continued economic development in Emerging Markets, growth of
international trade and capital flows, and wealth creation, particularly
in faster-growing markets. We took into consideration global trends
along with our strategic advantages to help us better deploy capital.
The development and implementation of our strategy requires
difficult, subjective and complex judgements, including forecasts of
economic conditions in various parts of the world. We may fail to
correctly identify the relevant factors in making decisions as to capital
deployment and cost reduction. We may also encounter unpredictable
changes in the external environment that are unfavourable to our
strategy.
Our ability to execute strategic change may be limited by our
operational capacity, effectiveness of our change management
controls, challenges in integrating any newly acquired businesses into
the Group’s business and instituting and maintaining appropriate
transitional arrangements and the potential for unforeseen changes in
the market and/or regulatory environment in which we operate. The
global economic outlook continues to remain uncertain, particularly
with regard to the impact of economic recession, heightened inflation,
changes in legislation and geopolitical tensions. Therefore, there
remains a risk that, in the absence of an improvement in economic
conditions, our cost and investment actions may not be sufficient to
achieve the expected benefits.
The failure to successfully deliver or achieve the expected benefits of
the Group’s key strategic initiatives could have a material adverse
effect on our customers, business, financial condition, results of
operations, prospects, operational resilience and reputation.
Our risk management measures may not be
successful
The management of risk is an integral part of all our activities. Risk
constitutes our exposure to uncertainty and the consequent
variability of return. Specifically, risk equates to the adverse effect
on profitability or financial condition arising from different sources
of uncertainty, including retail and wholesale credit risk, market
risk, non-traded market risk, operational risk, insurance risk,
concentration risk, capital risk, liquidity and funding risk, litigation
risk, conduct risk, reputational risk, strategic risk, pension risk and
regulatory risk.
While we employ a broad and diversified set of risk monitoring and
mitigation techniques, such methods and the judgements that
accompany their application cannot anticipate every unfavourable
event or the specifics and timing of every outcome. Failure to
manage risks appropriately could have a material adverse effect on
our business, financial condition, results of operations, prospects,
capital position, strategy and reputation.
Risks related to our business
Our business has inherent reputational risk
Reputational risk is the risk of failing to meet stakeholder expectations
as a result of any event, behaviour, action or inaction, either by HSBC,
our employees or those with whom we are associated. Any material
lapse in standards of integrity, compliance, customer service or
operating efficiency may represent a potential reputational risk.
Stakeholder expectations constantly evolve, and so reputational risk is
dynamic and varies between geographical regions, groups and
individuals. In addition, our business faces increasing scrutiny in
respect of ESG-related matters. If we fail to act responsibly, or to
achieve our announced targets, commitments, goals or ambitions, in
a number of areas, such as diversity and inclusion, climate,
sustainability, workplace conduct, human rights, and support for local
communities, our reputation and the value of our brand may be
negatively affected.
Social media and other broadcasting channels that facilitate
communication with large audiences in short time frames and with
minimal costs, may significantly enhance and accelerate the
distribution and effect of damaging information and allegations.
Reputational risk could also arise from negative public opinion about
the actual, or perceived, manner in which we conduct our business
activities, or our financial performance, as well as actual or perceived
practices in banking and the financial services industry generally.
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177
Negative public opinion may adversely affect our ability to retain and
attract customers, in particular, corporate and retail depositors, and to
retain and motivate staff, and could have a material adverse effect on
our business, financial condition, results of operations, prospects and
reputation.
Non-Financial risks are inherent in our
business
We are exposed to many types of non-financial risks that are
inherent in our operations. Non-financial risk can be defined as the
risk to HSBC of achieving its strategy or objectives as a result of
inadequate or failed internal processes, people and systems, or
from external events. It includes: breakdowns in processes or
procedures, breaches of regulations or law, financial crime, financial
reporting and tax errors, external events and systems failure or
non-availability. These risks are also present when we rely on
outside suppliers or vendors to provide services to us and our
customers.
These non-financial risks may result in financial losses to the Group
and our customers, an adverse customer experience, reputational
damage and potential litigation, regulatory proceeding, administrative
action or other adversarial proceeding in any jurisdiction in which we
operate, depending on the circumstances of the event.
They could have a material adverse effect on our business, financial
condition, results of operations, prospects, strategy and reputation.
We rely on recruiting, retaining and
developing appropriate senior management
and skilled personnel
Meeting the demand to recruit, retain and develop appropriate senior
management and skilled personnel remains subject to a number of
challenges. These include rapidly changing skill requirements and
ways of working, the evolving regulatory landscape plus increased
requirements and expectations regarding nationalisation and diversity
in some jurisdictions.
Ongoing talent shortages in key markets and capabilities, particularly
where those with the scarce capabilities are globally mobile, add to
the complexity of our supply challenge.
Our continued success and implementation of our growth strategy
depend in part on the retention of key members of our management
team and wider employee base, the availability of skilled management
in each of our global businesses and global functions, and the ability
to continue to attract, train, motivate and retain highly qualified
professionals, each of which may depend on factors beyond our
control, including economic, market and regulatory conditions. In
addition, the Group announced ambitions in relation to increasing the
representation of women and Black heritage employees in senior
leadership roles by 2025. If the Group fails to achieve these goals, its
ability to attract and retain qualified professionals may be negatively
affected.
When we acquire or dispose of a Group operation, we need to ensure
that we comply with any employment requirements, provide support
to affected employees,and integrate new employees into HSBC‘s
Values, culture and ways of working.
If global businesses or global functions fail to staff their operations
appropriately or lose one or more of their key senior executives and
fail to successfully replace them in a satisfactory and timely manner,
or fail to implement successfully the organisational changes required
to support the Group’s strategy, our business, financial condition,
results of operations, prospects and reputation, including control and
operational risks, could be materially adversely affected.
We have significant exposure to
counterparty risk
We are exposed to counterparties that are involved in virtually all
major industries, and we routinely execute transactions with
counterparties in financial services, including brokers and dealers,
central clearing counterparties, commercial banks, investment banks,
mutual and hedge funds, and other institutional clients.
Many of these transactions expose us to credit risk in the event of
default by our counterparty or client.
Our ability to engage in routine transactions to fund our operations
and manage our risks could be materially adversely affected by the
actions and commercial soundness of other financial services
institutions. Financial institutions are necessarily interdependent
because of trading, clearing, counterparty or other relationships. As a
consequence, a default by, or decline in market confidence in,
individual institutions, or anxiety about the financial services industry
generally, can lead to further individual and/or systemic difficulties,
defaults and losses.
Mandatory central clearing of OTC derivatives poses risks to the
Group. As a clearing member, we are required to underwrite losses
incurred at a central counterparty by the default of other clearing
members and their clients. Increased moves towards central clearing
brings with it a further element of interconnectedness between
clearing members and clients that we believe may increase rather
than reduce our exposure to systemic risk. At the same time, our
ability to manage such risk ourselves will be reduced because control
has been largely outsourced to central counterparties, and it is unclear
at present how, at a time of stress, regulators and resolution
authorities will intervene.
Where bilateral counterparty risk has been mitigated by taking
collateral, our credit risk may remain high if the collateral we hold
cannot be realised or has to be liquidated at prices that are insufficient
to recover the full amount of our loan or derivative exposure.
There is a risk that collateral cannot be realised, including situations
where this arises by change of law, or the imposition of sanctions that
may influence our ability to foreclose on collateral or otherwise
enforce contractual rights.
The Group also has credit exposure arising from mitigants, such as
credit default swaps, and other credit derivatives, each of which is
carried at fair value. The risk of default by counterparties to credit
default swaps and other credit derivatives used as mitigants affects
the fair value of these instruments depending on the valuation and the
perceived credit risk of the underlying instrument against which
protection has been purchased. Any such adjustments or fair value
changes could have a material adverse effect on our business,
financial condition, results of operations, prospects, capital position
and reputation.
Any reduction in the credit rating assigned
to HSBC Holdings, any subsidiaries of HSBC
Holdings or any of their respective debt
securities could increase the cost or
decrease the availability of our funding and
materially adversely affect our liquidity
position and/or net interest margin
Credit ratings affect the cost and other terms upon which we are able
to obtain market funding. Rating agencies regularly evaluate HSBC
Holdings and certain of its subsidiaries, as well as their respective
debt securities. Their ratings are based on a number of factors,
including their assessment of the relative financial strength of the
Group or of the relevant subsidiary, as well as conditions affecting the
financial services industry generally. There can be no assurance that
the rating agencies will maintain HSBC Holdings’ or the relevant
subsidiary’s current ratings or outlook, particularly given the rating
agencies’ current review of their bank rating methodologies and the
potential impact on HSBC Holdings’ or its subsidiaries’ ratings.
Any reductions in these current ratings or the outlook could increase
the cost of our funding, limit access to capital markets and require
additional collateral to be placed and, consequently, materially
adversely affect our interest margins and our liquidity position.
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HSBC Holdings plc
Risks concerning borrower credit quality are
inherent in our businesses
Risks arising from changes in credit quality and the recoverability of
loans and amounts due from borrowers and counterparties (for
example, reinsurers and counterparties in derivative transactions) are
inherent in a wide range of our businesses. Adverse changes in the
credit quality of our borrowers and counterparties arising from a
general deterioration in economic conditions or systemic risks in the
financial systems, including uncertainties caused by the Russia-
Ukraine and Israel-Hamas wars could reduce the recoverability and
value of our assets, and require an increase in our ECLs. Additionally,
recent attacks on shipping in the Red Sea and the resulting
countermeasures taken have begun to disrupt supply chains (see 'The
macroeconomic and market impact of major geopolitical
developments may affect our financial condition and results’).
We estimate and recognise ECLs in our credit exposure. This
process, which is critical to our results and financial condition,
requires difficult, subjective and complex judgements, including
forecasts of how the economic and geopolitical conditions, including
the impact of sanctions, and sector specific risks, might impair the
ability of our borrowers to repay their loans and the ability of other
counterparties to meet their obligations. This assessment considers
multiple alternative forward-looking economic conditions (including
GDP estimates) and incorporates this into the ECL estimates to meet
the measurement objective of IFRS 9. As is the case with any such
assessments, we may fail to estimate accurately the effect of factors
that we identify or fail to identify relevant factors. Further, the
information we use to assess the creditworthiness of our
counterparties may be inaccurate or incorrect. Any failure by us to
accurately estimate the ability of our counterparties to meet their
obligations could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Our insurance businesses are subject to
risks relating to insurance claim rates and
changes in insurance customer behaviour
We provide various insurance products for customers, including
several types of life insurance products. The cost of claims and
benefits can be influenced by many factors, including mortality and
morbidity rates, lapse and surrender rates and, if the policy has a
savings element, the performance of assets to support the liabilities.
Adverse developments in any of these factors could materially
adversely affect our business, financial condition, results of operations
capital position, prospects and reputation.
HSBC Holdings is a holding company and,
as a result, is dependent on loan/instrument
payments and dividends from its
subsidiaries to meet its obligations,
including obligations with respect to its debt
securities, and to provide profits for
payment of future dividends to shareholders
HSBC Holdings is a non-operating holding company and, as such, its
principal source of income is from operating subsidiaries that hold the
principal assets of the Group. As a separate legal entity, HSBC
Holdings relies on remittance of its subsidiaries’ loan/instrument
interest payments and dividends in order to be able to pay obligations
to debt holders as they fall due, and to pay dividends to its
shareholders. The ability of HSBC Holdings’ subsidiaries and affiliates
to pay remittances and dividends to HSBC Holdings is subject to such
subsidiaries’ and affiliates’ financial performance and could also be
restricted by applicable laws, regulations, exchange controls and other
requirements.
We may be required to make substantial
contributions to our pension plans
We operate a number of pension plans throughout the world for our
personnel, including defined benefit pension plans. Pension scheme
obligations fluctuate with changes in long-term interest rates,
inflation, salary levels and the longevity of scheme members. They
can also be affected by operational and legal risks. The level of
contributions we make to our pension plans has a direct effect on our
cash flow. To the extent plan assets are insufficient to cover existing
liabilities, higher levels of contributions may be required. As a result,
deficits in those pension plans could have a material adverse effect on
our business, financial condition, results of operations, prospects and
reputation.
Risk related to our financial
statements and accounts
Our financial statements are based in part
on judgements, estimates and assumptions
that are subject to uncertainty
The preparation of financial information requires management to
make judgements and use estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expenses. Due to
the inherent uncertainty in making estimates, particularly those
involving the use of complex models, actual results reported in future
periods could differ from those on which management’s estimates
are based. Judgements, estimates, assumptions and models are
continually evaluated, and are based on historical experience and
other factors, including expectations of future events that are believed
to be reasonable under the prevailing circumstances. The impacts of
revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
Accounting policies deemed critical to our results and financial
position are those that involve a high degree of uncertainty and have a
material impact on the financial statements. In 2023 these included
ECLs for amortised cost financial assets and financial assets
measured at FVOCI, impairment of goodwill and non-financial assets,
valuation of financial instruments, deferred tax assets, provisions,
impairment of interests in associates, post-employment benefit plans,
impairment in investments in subsidiaries, and non-current assets and
disposal groups held for sale, which are discussed in detail in ‘Critical
estimates and judgements’ on page 101.
The measurement of ECLs requires the selection and calibration of
complex models and the use of estimates and assumptions to
incorporate relevant information about past events, current conditions
and forecasts of economic conditions. Additionally, significant
judgement is involved in determining what is considered to be
significant increases in credit risk and what the point of initial
recognition is for revolving facilities.
The assessment of whether goodwill and non-financial assets are
impaired, and the measurement of any impairment, involves the
application of judgement in determining key assumptions, including
discount rates, estimated cash flows for the periods for which
detailed cash flows are available and projecting the long-term pattern
of sustainable cash flows thereafter. The recognition and
measurement of deferred tax assets involves significant judgement
regarding the probability and sufficiency of future taxable profits,
taking into account the future reversal of existing taxable temporary
differences and tax planning strategies, including corporate
reorganisations.
The recognition and measurement of provisions involve significant
judgements due to the high degree of uncertainty in determining
whether a present obligation exists, and in estimating the probability
and amount of any outflows that may arise. The valuation of financial
instruments measured at fair value can be subjective, in particular
where models are used that include unobservable inputs.
The assessment of interests in associates for impairment involves
significant judgements in determining the value in use, in particular
estimating the present values of cash flows expected to arise from
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179
continuing to hold the investment, based on a number of
management assumptions.
At 31 December 2023, we performed an impairment review of our
investment in BoCom and concluded on an impairment charge taken
in the fourth quarter of 2023. The impairment review included
consideration of the potential impact of BoCom’s designation as a
globally systemically important bank in November 2023. The
impairment reviews are complex and require significant judgments,
such as the appropriateness of projected future cash flows, discount
rate and regulatory capital assumptions.
The calculation of the defined benefit pension obligation involves the
determination of key assumptions, including discount rate, inflation
rate, pension payments and deferred pension and pay and mortality.
Given the uncertainty and subjectivity associated with the above
critical accounting judgements and estimates, future outcomes may
differ materially from those assumed using information available at
the reporting date.
The assessment of interests in subsidiaries for impairment involves
significant judgements in determining the value in use, in particular
estimating the present values of cash flows expected to arise from
continuing to hold the investment, based on a number of
management assumptions.
The assessment of the held for sale criteria involves significant
judgements with regards to classifying a sale as highly probable and
the anticipated timing for the sale to complete.
The calculation of the fair value less cost to sell involves valuations
techniques with observable and unobservable market data, and the
calculation of any related impairment loss is subject to accounting
estimates.
These judgements and estimates could have a material adverse effect
on the future financial position of the Group, results of operations,
capital position, prospects and reputation. For further details, see
‘Critical estimates and judgements’ on page 101.
Changes in accounting standards may have
a material impact on how we report our
financial results and financial condition
We prepare our consolidated financial statements in conformity with
the requirements of the Companies Act 2006 and in accordance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (‘IASB‘) (‘IFRS Accounting
Standards’), including interpretations (‘IFRICs’) issued by the IFRS
Interpretations Committee.
From time to time, the IASB or the IFRS Interpretations Committee
may issue new accounting standards or interpretations that could
materially impact how we calculate, report and disclose our financial
results and financial condition, and which may affect our capital ratios,
including the CET1 ratio. For example, on 1 January 2023, the Group
adopted the requirements of IFRS 17 ‘Insurance Contracts’
retrospectively with comparatives restated from the transition date,
1 January 2022. IFRS 17 sets the requirements that an entity should
apply in accounting for insurance contracts it issues and reinsurance
contracts it holds. Upon transition to IFRS 17, the Group‘s total equity
reduced by $10,459m. We could also be required to apply new or
revised standards retrospectively, resulting in our restating prior
period financial statements in material amounts. This could have a
material adverse effect on our business, financial condition, results of
operations and capital position.
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180
HSBC Holdings plc
Our material banking risks
The material risk types associated with our banking and insurance manufacturing operations are described in the following tables:
Description of risks – banking operations
Risks
Arising from
Measurement, monitoring and management of risk
Credit risk (see page 183)
Credit risk is the risk of financial
loss if a customer or counterparty
fails to meet an obligation under a
contract.
Credit risk arises principally from direct
lending, trade finance and leasing
business, but also from other products
such as guarantees and derivatives.
Credit risk is:
–measured as the amount that could be lost if a customer or
counterparty fails to make repayments;
–monitored using various internal risk management measures and
within limits approved by individuals within a framework of delegated
authorities; and
–managed through a robust risk control framework, which outlines clear
and consistent policies, principles and guidance for risk managers; and
by setting limits and appetite across geographical markets, portfolios
or sectors.
Treasury risk (see page 239)
Treasury risk is the risk of having
insufficient capital, liquidity or
funding resources to meet
financial obligations and satisfy
regulatory requirements, including
the risk of adverse impact on
earnings or capital due to
structural and transactional foreign
exchange exposures and changes
in market interest rates, together
with pension and insurance risk.
Treasury risk arises from changes to the
respective resources and risk profiles
driven by customer behaviour,
management decisions or the external
environment.
Treasury risk is:
–measured through risk appetite and more granular limits, set to
provide an early warning of increasing risk, minimum ratios of relevant
regulatory metrics, and metrics to monitor the key risk drivers
impacting treasury resources;
–monitored and projected against appetites and by using operating
plans based on strategic objectives together with stress and scenario
testing; and
–managed through control of resources in conjunction with risk profiles,
strategic objectives and cash flows.
Market risk (see page 254)
Market risk is the risk of an
adverse financial impact on trading
activities arising from changes in
market parameters such as
interest rates, foreign exchange
rates, asset prices, volatilities,
correlations and credit spreads.
Market risk arises from both trading
portfolios and non-trading portfolios.
Market risk for non-trading portfolios is
discussed in the Treasury risk section
on page 251.
Market risk exposures arising from our
insurance operations are discussed on
page 271.
Market risk is:
–measured using sensitivities, value at risk and stress testing, giving a
detailed picture of potential gains and losses for a range of market
movements and scenarios, as well as tail risks over specified time
horizons;
–monitored using value at risk, stress testing and other measures; and
–managed using risk limits approved by the Group Risk Management
Meeting and the risk management meetings in various global
businesses.
Climate risk (see page 257)
Climate risk relates to the financial
and non-financial impacts that may
arise as a result of climate change
and the move to a net zero
economy.
Climate risk can materialise through:
–physical risk, which arises from the
increased frequency and severity of
weather events;
–transition risk, which arises from the
process of moving to a low-carbon
economy;
–net zero alignment risk, which arises
from failing to meet our net zero
commitments or to meet external
expectations related to net zero
because of inadequate ambition and/
or plans, poor execution, or inability
to adapt to changes in the external
environment; and
–the risk of greenwashing, which
arises from the act of knowingly or
unknowingly making inaccurate,
unclear, misleading or
unsubstantiated claims regarding
sustainability to stakeholders.
Climate risk is:
–measured using risk metrics and stress testing;
–monitored against risk appetite statements; and
–managed through adherence to risk appetite thresholds, through
specific policies, and through enhancements to processes and
development of tools including the development of product market
controls to manage the risk of greenwashing and the development of
portfolio steering capabilities to manage our net zero targets.
Resilience risk (see page 266)
Resilience risk is the risk of
sustained and significant business
disruption from execution,
delivery, physical security or safety
events, causing the inability to
provide critical services to our
customers, affiliates, and
counterparties.
Resilience risk arises from failures or
inadequacies in processes, people,
systems or external events.
Resilience risk is:
–measured using a range of metrics with defined maximum acceptable
impact tolerances, and against our agreed risk appetite;
–monitored through oversight of enterprise processes, risks, controls
and strategic change programmes; and
–managed by continual monitoring and thematic reviews.
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181
Description of risks – banking operations (continued)
Risks
Arising from
Measurement, monitoring and management of risk
Regulatory compliance risk (see page 267)
Regulatory compliance risk is the
risk associated with breaching our
duty to clients and other
counterparties, inappropriate
market conduct (including
unauthorised trading) and
breaching related financial services
regulatory standards.
Regulatory compliance risk arises from
the failure to observe relevant laws,
codes, rules and regulations and can
manifest itself in poor market or
customer outcomes and lead to fines,
penalties and reputational damage to
our business.
Regulatory compliance risk is:
–measured by reference to risk appetite, identified metrics, incident
assessments, regulatory feedback and the judgement and
assessment of our regulatory compliance teams;
–monitored against the first line of defence risk and control
assessments, the results of the monitoring and control assurance
activities of the second line of defence functions, and the results of
internal and external audits and regulatory inspections; and
–managed by establishing and communicating appropriate policies and
procedures, training employees in them and monitoring activity to
help ensure their observance. Proactive risk control and/or
remediation work is undertaken where required.
Financial crime risk (see page 267)
Financial crime risk is the risk that
HSBC’s products and services will
be exploited for criminal activity.
This includes fraud, bribery and
corruption, tax evasion, sanctions
and export control violations,
money laundering, terrorist
financing and proliferation
financing.
Financial crime risk arises from day-to-
day banking operations involving
customers, third parties and employees.
Financial crime risk is:
–measured by reference to risk appetite, identified metrics, incident
assessments, regulatory feedback and the judgement of, and
assessment by, our compliance teams;
–monitored against the first line of defence risk and control
assessments, the results of the monitoring and control assurance
activities of the second line of defence functions, and the results of
internal and external audits and regulatory inspections; and
–managed by establishing and communicating appropriate policies and
procedures, training employees in them and monitoring activity to
help ensure their observance. Proactive risk control and/or
remediation work is undertaken where required.
Model risk (see page 268)
Model risk is the risk of the
potential for adverse
consequences from model errors
or the inappropriate use of
modelled outputs to inform
business decisions.
Model risk arises in both financial and
non-financial contexts whenever
business decision making includes
reliance on models.
Model risk is:
–measured by reference to model performance tracking and the output
of detailed technical reviews, with key metrics including model review
statuses and findings; 
–monitored against model risk appetite statements, insight from the
independent validations completed by the model risk management
team, feedback from internal and external audits, and regulatory
reviews; and
–managed by creating and communicating appropriate policies,
procedures and guidance, training colleagues in their application, and
supervising their adoption to ensure operational effectiveness.
Our insurance manufacturing subsidiaries are regulated separately
from our banking operations. Risks in our insurance entities are
managed using methodologies and processes that are subject to
Group oversight. Our insurance operations are also subject to many of
the same risks as our banking operations, and these are covered by
the Group’s risk management processes. However, there are specific
risks inherent to the insurance operations as noted below.
Description of risks – insurance manufacturing operations
Risks
Arising from
Measurement, monitoring and management of risk
Financial risk (see page 271)
For insurance entities, financial risk
includes the risk of not being able
to effectively match liabilities
arising under insurance contracts
with appropriate investments and
that the expected sharing of
financial performance with
policyholders under certain
contracts is not possible.
Exposure to financial risk arises from:
–market risk affecting the fair values of
financial assets or their future cash
flows;
–credit risk; and
–liquidity risk of entities being unable
to make payments to policyholders as
they fall due.
Financial risk is:
–measured for credit risk, in terms of economic capital and the amount
that could be lost if a counterparty fails to make repayments; for
market risk, in terms of economic capital, internal metrics and
fluctuations in key financial variables; and for liquidity risk, in terms of
internal metrics including stressed operational cash flow projections;
–monitored through a framework of approved limits and delegated
authorities; and
–managed through a robust risk control framework, which outlines clear
and consistent policies, principles and guidance. This includes using
product design, asset liability matching and bonus rates.
Insurance risk (see page 273)
Insurance risk is the risk that, over
time, the cost of insurance policies
written, including claims and
benefits, may exceed the total
amount of premiums and
investment income received.
The cost of claims and benefits can be
influenced by many factors, including
mortality and morbidity experience, as
well as lapse and surrender rates.
Insurance risk is:
–measured in terms of life insurance liabilities and economic capital
allocated to insurance underwriting risk;
–monitored through a framework of approved limits and delegated
authorities; and
–managed through a robust risk control framework, which outlines clear
and consistent policies, principles and guidance. This includes using
product design, underwriting, reinsurance and claims-handling
procedures.
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HSBC Holdings plc
Credit risk
Contents
Overview
Credit risk management
Credit risk in 2023
Summary of credit risk
Stage 2 decomposition
Assets held for sale
Credit exposure
Measurement uncertainty and sensitivity analysis of ECL
estimates
Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers
including loan commitments and financial guarantees
Credit quality
Wholesale lending
Personal lending
Supplementary information
HSBC Holdings
Overview
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet an obligation under a contract. Credit risk arises
principally from direct lending, trade finance and leasing business, but
also from other products such as guarantees and derivatives.
Credit risk management
Key developments in 2023
There were no material changes to the policies and practices for the
management of credit risk in 2023. We continued to apply the
requirements of IFRS 9 ‘Financial Instruments’ within the Credit Risk
sub-function. For our wholesale portfolios, we introduced new
policies for the management of country risk, subordinated debt
assessments, and a revised risk appetite framework. Implementation
of these changes did not have a material impact on our wholesale
portfolios.
We actively managed the risks related to macroeconomic
uncertainties, including interest rates, inflation, fiscal and monetary
policy, broader geopolitical uncertainties and conflicts.
For further details, see ‘Top and emerging risks’ on page 163.
Governance and structure
We have established Group-wide credit risk management and related
IFRS 9 processes. We continue to assess the impact of economic
developments in key markets on specific customers, customer
segments or portfolios. As credit conditions change, we take
mitigating actions, including the revision of risk appetites or limits and
tenors, as appropriate. In addition, we continue to evaluate the terms
under which we provide credit facilities within the context of
individual customer requirements, the quality of the relationship, local
regulatory requirements, market practices and our local market
position.
Credit Risk sub-function
(Audited)
Credit approval authorities are delegated by the Board to the Group
Chief Executive together with the authority to sub-delegate them. The
Credit Risk sub-function in Group Risk and Compliance is responsible
for the key policies and processes for managing credit risk, which
include formulating Group credit policies and risk rating frameworks,
guiding the Group’s appetite for credit risk exposures, undertaking
independent reviews and objective assessment of credit risk, and
monitoring performance and management of portfolios.
The principal objectives of our credit risk management are:
–to maintain across HSBC a strong culture of responsible lending,
and robust risk policies and control frameworks;
–to both partner and challenge our businesses in defining,
implementing and continually re-evaluating our risk appetite under
actual and scenario conditions; and
–to ensure there is independent, expert scrutiny of credit risks, their
costs and their mitigation.
Key risk management processes
IFRS 9 ‘Financial Instruments’ process
The IFRS 9 process comprises three main areas: modelling and data;
implementation; and governance.
Modelling, data and forward economic guidance
We have established IFRS 9 modelling and data processes in various
geographies, which are subject to internal model risk governance
including independent review of significant model developments.
We have a centralised process for generating unbiased and
independent global economic scenarios. Scenarios are subject to a
process of review and challenge by a dedicated central team and
individually for each region. Each quarter, the scenarios and probability
weights are reviewed and checked for consistency with the economic
conjuncture and current economic and financial risks. These are
subject to final review and approval by senior management in a
Forward Economic Guidance Global Business Impairment Committee.
Implementation
A centralised impairment engine performs the expected credit losses
calculation using data, which is subject to a number of validation
checks and enhancements, from a variety of client, finance and risk
systems. Where possible, these checks and processes are performed
in a globally consistent and centralised manner.
Governance
Regional management review forums are established in key sites and
regions in order to review and approve the impairment results.
Regional management review forums have representatives from
Credit Risk and Finance. The key site and regional approvals are
reported up to the relevant global business impairment committee for
final approval of the Group’s ECL for the period. Required members of
the committee are the Wholesale Global Chief Corporate Credit
Officer and Chief Risk and Compliance Officer for Wealth and
Personal Banking Risk, as well as the relevant global business’s Chief
Financial Officer and the Global Financial Controller.
Concentration of exposure
(Audited)
Concentrations of credit risk arise when a number of counterparties or
exposures have comparable economic characteristics, or such
counterparties are engaged in similar activities or operate in the same
geographical areas or industry sectors so that their collective ability to
meet contractual obligations is uniformly affected by changes in
economic, political or other conditions. We use a number of controls
and measures to minimise undue concentration of exposure in our
portfolios across industries, countries and global businesses. These
include portfolio and counterparty limits, approval and review controls,
and stress testing.
Credit quality of financial instruments
(Audited)
Our risk rating system facilitates the internal ratings-based approach
under the Basel framework adopted by the Group to support the
calculation of our minimum credit regulatory capital requirement. The
five credit quality classifications encompass a range of granular
internal credit rating grades assigned to wholesale and retail
customers, and the external ratings attributed by external agencies to
debt securities.
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183
For debt securities and certain other financial instruments, external
ratings have been aligned to the five quality classifications based upon
the mapping of related customer risk rating (‘CRR’) to external credit
rating.
Wholesale lending
The CRR 10-grade scale summarises a more granular underlying
23-grade scale of obligor probability of default (‘PD’). All corporate
customers are rated using the 10- or 23-grade scale, depending on
the degree of sophistication of the Basel approach adopted for the
exposure.
Each CRR band is associated with an external rating grade by
reference to long-run default rates for that grade, represented by the
average of issuer-weighted historical default rates. This mapping
between internal and external ratings is indicative and may vary over
time.
Retail lending
Retail lending credit quality is based on a 12-month point-in-time
probability-weighted PD.
Credit quality classification
Sovereign debt
securities
and bills
Other debt
securities
and bills
Wholesale lending
and derivatives
Retail lending
External credit
rating
External credit
rating
Internal credit
rating
12-month
Basel
probability of
default %
Internal credit
rating
12 month
probability-
weighted PD %
Quality classification1,2
Strong
BBB and above
A- and above
CRR 1 to CRR 2
0–0.169
Band 1 and 2
0.000–0.500
Good
BBB- to BB
BBB+ to BBB-
CRR 3
0.170–0.740
Band 3
0.501–1.500
Satisfactory
BB- to B and
unrated
BB+ to B and
unrated
CRR 4 to CRR 5
0.741–4.914
Band 4 and 5
1.501–20.000
Sub-standard
B- to C
B- to C
CRR 6 to CRR 8
4.915–99.999
Band 6
20.001–99.999
Credit impaired
Default
Default
CRR 9 to CRR 10
100
Band 7
100
1Customer risk rating (‘CRR’).
212-month point-in-time probability-weighted probability of default (‘PD’).
Quality classification definitions
–‘Strong’ exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of
expected loss.
–‘Good’ exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk.
–‘Satisfactory’ exposures require closer monitoring and demonstrate an average-to-fair capacity to meet financial commitments, with moderate default
risk.
–‘Sub-standard’ exposures require varying degrees of special attention and default risk is of greater concern.
–‘Credit-impaired’ exposures have been assessed as described on Note 1.2(i) on the financial statements.
Forborne loans and advances
(Audited)
Forbearance measures consist of concessions towards an obligor that
is experiencing or about to experience difficulties in meeting its
financial commitments.
We continue to class loans as forborne when we modify the
contractual payment terms due to having significant concerns about
the borrowers’ ability to meet contractual payments when they were
due. Our definition of forborne captures non-payment-related
concessions, such as covenant waivers.
For details of our policy on forbearance, see Note 1.2(i) in the financial
statements.
Credit quality of forborne loans
For wholesale lending, where payment-related forbearance measures
result in a diminished financial obligation, or if there are other
indicators of impairment, the loan will be classified as credit impaired
if it is not already so classified. All facilities with a customer, including
loans that have not been modified, are considered credit impaired
following the identification of a payment-related forborne loan. For
retail lending, where a material payment-related concession has been
granted, the loan will be classified as credit impaired. In isolation, non-
payment forbearance measures may not result in the loan being
classified as credit impaired unless combined with other indicators of
credit impairment. These are classed as performing forborne loans for
both wholesale and retail lending.
Wholesale and retail lending forborne loans are classified as credit
impaired until there is sufficient evidence to demonstrate a significant
reduction in the risk of non-payment of future cash flows, observed
over a minimum one-year period, and there are no other indicators of
impairment. Any forborne loans not considered credit impaired will
remain forborne for a minimum of two years from the date that credit
impairment no longer applies. For wholesale and retail lending, any
forbearance measures granted on a loan already classed as forborne
results in the customer being classed as credit impaired.
Forborne loans and recognition of expected credit losses
(Audited)
Forborne loans expected credit loss assessments reflect the higher
rates of losses typically experienced with these types of loans such
that they are in stage 2 and stage 3. The higher rates are more
pronounced in unsecured retail lending requiring further
segmentation. For wholesale lending, forborne loans are typically
assessed individually. Credit risk ratings are intrinsic to the
impairment assessments. The individual impairment assessment
takes into account the higher risk of the future non-payment inherent
in forborne loans.
Impairment assessment
(Audited)
For details of our impairment policies on loans and advances and
financial investments, see Note 1.2(i) on the financial statements.
Write-off of loans and advances
(Audited)
Under IFRS 9, write-off should occur when there is no reasonable
expectation of recovering further cash flows from the financial asset.
This principle does not prohibit early write-off, which is defined in
local policies to ensure effectiveness in the management of
customers in the collections process.
Unsecured personal facilities, including credit cards, are generally
written off at between 150 and 210 days past due. The standard
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HSBC Holdings plc
period runs until the end of the month in which the account becomes
180 days contractually delinquent. However, in exceptional
circumstances, to avoid unfair customer outcomes, deliver customer
duty or meet regulatory expectations, the period may be extended
further.
For secured facilities, write-off should occur upon repossession of
collateral, receipt of proceeds via settlement, or determination that
recovery of the collateral will not be pursued. Where these assets are
maintained on the balance sheet beyond 60 months of consecutive
delinquency-driven default, the prospect of recovery is reassessed.
Recovery activity, on both secured and unsecured assets, may
continue after write-off.
Any unsecured exposures that are not written off at 180 days past
due, and any secured exposures that are in ‘default’ status for 60
months or greater but are not written off, are subject to additional
monitoring via the appropriate governance forums.
Credit risk in 2023
At 31 December 2023, gross loans and advances to customers and
banks of $1,063bn increased by $23.1bn, compared with
31 December 2022. This included favourable foreign exchange
movements of $17.7bn.
Excluding foreign exchange movements, the underlying increase of
$5.4bn was driven by a $21.1bn rise in personal loans and advances
to customers and a $8.9bn rise in loans and advances to banks. These
were partly offset by a $24.6bn decrease in wholesale loans and
advances to customers.
The underlying increase in personal loans and advances to customers
was mainly driven by an increase in France (up $7.8bn) due to the
retention of a portfolio of home loans and other loans previously
classified as assets held for sale. It also comprised increases in the
UK (up $6.6bn), in Hong Kong (up $5.8bn), in Mexico (up $2.3bn) and
in Australia (up $1.4bn) driven by mortgage growth. These were partly
offset by a decrease of $1.2bn due to the merger of our business in
Oman and a decrease of $1.0bn due to the disposal of our retail
mortgage loan portfolio in New Zealand.
The underlying increase in loans and advances to banks was driven by
central bank balances and money market lending growth in Singapore
(up $6.5bn), Hong Kong (up $5.1bn) and the UK (up $2.8bn). These
were partly offset by decreases in mainland China (down $2.6bn),
Malaysia (down $1.6bn) and Switzerland (down $1.4bn).
The underlying decrease in wholesale loans and advances to
customers was driven by a $31.5bn reduction in corporate and
commercial balances, of which $13.7bn in stage 1 and $16.8bn in
stage 2. The decrease was observed mainly in Hong Kong (down
$18.6bn), in the UK (down $5.4bn) and in mainland China (down
$2.2bn), driven by repayments and deleveraging, as well as de-risking
measures on mainland China commercial real estate exposures. It
also comprised a decrease in Oman (down $2.1bn) due to the merger
of our operations in the country. This was partly offset by an increase
in balances with non-bank financial institutions (up $6.8bn) mainly in
stage 1 in HSBC UK (up $5.2bn) due to the acquisition of SVB UK.
At 31 December 2023, the allowance for ECL of $12.0bn decreased
by $0.6bn compared with 31 December 2022, including adverse
foreign exchange movements of $0.2bn. The $12.0bn allowance
comprised $11.5bn in respect of assets held at amortised cost,
$0.4bn in respect of loan commitments and financial guarantees, and
$0.1bn in respect of debt instruments measured at fair value through
other comprehensive income (‘FVOCI’).
Excluding foreign exchange movements, the allowance for ECL in
relation to loans and advances to customers decreased by $0.6bn
from 31 December 2022. This was attributable to:
–a $0.5bn decrease in wholesale loans and advances to customers
driven by stages 1 and 2; and
–a $0.1bn decrease in personal loans and advances to customers
driven by stages 1 and 2.
Stage 3 balances and allowances for ECL at 31 December 2023
remained broadly stable compared with 31 December 2022, as write-
offs and repayments offset new and additional allowances.
In wholesale lending, mainland China’s commercial real estate sector
continued to deteriorate in 2023, resulting in new and additional stage
3 charges during the year.
The ECL charge for 2023 was $3.4bn, inclusive of recoveries. This
was driven by net stage 3 charges, including $1.0bn in the mainland
China commercial real estate sector, as well as the impact of
continued economic uncertainty in other markets, rising interest rates
and inflationary pressures.
The ECL charge comprised: $2.3bn in respect of wholesale lending, of
which the stage 3 charge was $2.2bn; $1.0bn in respect of personal
lending, of which $0.7bn were in stage 3; and $0.1bn in respect of
debt instruments measured at FVOCI.
Income statement movements are analysed further on page 103.
While credit risk arises across most of our balance sheet, ECL have
typically been recognised on loans and advances to customers and
banks, in addition to securitisation exposures and other structured
products. As a result, our disclosures focus primarily on these two
areas. For further details of:
–maximum exposure to credit risk, see page 191;
–measurement uncertainty and sensitivity analysis of ECL
estimates, see page 192;
–reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers
including loan commitments and financial guarantees, see
page 204;
–credit quality, see page 208;
–total wholesale lending for loans and advances to banks and
customers by stage distribution, see page 213;
–wholesale lending collateral, see page 223;
–total personal lending for loans and advances to customers at
amortised cost by stage distribution, see page 227; and
–personal lending collateral, see page 233.
Summary of credit risk
We have adopted the recommendations of the Taskforce on
Disclosures about Expected Credit Losses (’DECL’) to provide
disclosures that help investors and other stakeholders better
understand the risks we manage.
The DECL Taskforce, which was jointly established by the Financial
Conduct Authority, Financial Reporting Council and the Prudential
Regulation Authority, was created to help guide ECL disclosure
practice and to encourage consistency and comparability across
financial institutions.
The following sections of this report include new and redesigned
disclosures addressing the taskforce’s recommendations from its
third report, which was published in September 2022. For further
details of:
–stage 2 decomposition for loans and advances to banks and
personal lending products, see page 189;
–residual average life for personal and wholesale lending by
product, see page 189;
–alignment of management judgemental adjustments to the DECL
definition with additional qualitative and quantitative granularity,
see page 199;
–reconciliation of management judgemental adjustments to
reported ECL, see page 199;
–enhanced wholesale ECL sensitivity to future economic
conditions, see page 201;
–enhanced retail ECL sensitivity to future economic conditions, see
page 202;
–reconciliation from reported exposure and ECL to sensitised
exposure and weighted ECL, see page 204;
–reconciliation of changes in gross carrying amount and allowances
for loans and advances to banks and customers, see page 207;
–reconciliation of changes in nominal amount and allowances for
loan commitments and financial guarantees, see page 207;
HSBC Holdings plc
185
–wholesale lending – credit risk profile by obligor grade for loan and
other credit-related commitments and financial guarantees, see
page 218;
–first lien residential mortgages – reconciliation of changes in gross
carrying/nominal amount and allowances for loans and advances to
customers including loan commitments and financial guarantees,
see page 230;
–credit cards – reconciliation of changes in gross carrying/nominal
amount and allowances for loans and advances to customers
including loan commitments and financial guarantees, see
page 231; 
–other personal lending – reconciliation of changes in gross
carrying/nominal amount and allowances for loans and advances to
customers including loan commitments and financial guarantees,
see page 231; 
–enhanced personal lending – credit risk profile by internal PD band
for loans and advances to customers at amortised cost, see
page 232; and
–Personal lending – credit risk profile by internal PD band for loan
and other credit-related commitments and financial guarantees,
see page 233.
Comparative information for the prior period has not been presented
in this Form 20-F for the majority of the new disclosures as we
recognised and prioritised the importance of increasing the
comparability of our external disclosures within the timeline
recommended by the DECL Taskforce. While prior period information
can be valuable in certain contexts, at 31 December 2023 we believed
the prospective expansion of the level of disclosures outweighed the
benefits of presenting data from prior years. Comparative information
is expected to be disclosed from the Annual Report and Accounts
2024.
The following disclosure presents the gross carrying/nominal amount
of financial instruments to which the impairment requirements in
IFRS 9 are applied and the associated allowance for ECL.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited)
31 Dec 2023
At 31 Dec 2022
Gross carrying/
nominal amount
Allowance for
ECL1
Gross carrying/
nominal amount
Allowance for
ECL1
$m
$m
$m
$m
Loans and advances to customers at amortised cost
949,609
(11,074)
935,008
(11,447)
Loans and advances to banks at amortised cost
112,917
(15)
104,544
(69)
Other financial assets measured at amortised cost
960,271
(422)
954,934
(493)
–  cash and balances at central banks
285,868
—
327,005
(3)
–  items in the course of collection from other banks
6,342
—
7,297
—
–  Hong Kong Government certificates of indebtedness
42,024
—
43,787
—
–  reverse repurchase agreements – non-trading
252,217
—
253,754
—
–  financial investments
148,346
(20)
109,086
(20)
–  assets held for sale2
103,186
(324)
102,556
(415)
–  prepayments, accrued income and other assets3
122,288
(78)
111,449
(55)
Total gross carrying amount on-balance sheet
2,022,797
(11,511)
1,994,486
(12,009)
Loans and other credit-related commitments
661,015
(367)
618,788
(386)
Financial guarantees
17,009
(39)
18,783
(52)
Total nominal amount off-balance sheet4
678,024
(406)
637,571
(438)
2,700,821
(11,917)
2,632,057
(12,447)
Fair value
Memorandum
allowance for
ECL5
Fair value
Memorandum
allowance for
ECL5
$m
$m
$m
$m
Debt instruments measured at fair value through other comprehensive income
(‘FVOCI’)
302,348
(97)
265,147
(126)
1The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset,
in which case the ECL is recognised as a provision.
2For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 190. At
31 December 2023, the gross carrying amount comprised $84,074m of loans and advances to customers and banks (2022: $81,221m) and $19,112m
of other financial assets at amortised cost (2022: $21,334m). The corresponding allowance for ECL comprised $303m of loans and advances to
customers and banks (2022: $392m) and $21m of other financial assets at amortised cost (2022: $23m).
3Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’
as presented within the consolidated balance sheet on page 358 comprises both financial and non-financial assets, including cash collateral and
settlement accounts.
4Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
The following table provides an overview of the Group’s credit risk by
stage and industry, and the associated ECL coverage. The financial
assets recorded in each stage have the following characteristics:
–Stage 1: These financial assets are unimpaired and without
significant increase in credit risk on which a 12-month allowance
for ECL is recognised.
–Stage 2: A significant increase in credit risk has been experienced
on these financial assets since initial recognition for which a
lifetime ECL is recognised.
–Stage 3: There is objective evidence of impairment and the
financial assets are therefore considered to be in default or
otherwise credit impaired on which a lifetime ECL is recognised.
–POCI: Financial assets that are purchased or originated at a deep
discount are seen to reflect the incurred credit losses on which a
lifetime ECL is recognised.
Risk review
186
HSBC Holdings plc
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2023
(Audited)
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
Stage
1
Stage
2
Stage
3
POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
%
Loans and
advances to
customers at
amortised cost
809,384
120,871
19,273
81
949,609
(1,130)
(2,964)
(6,950)
(30)
(11,074)
0.1
2.5
36.1
37.0
1.2
–  personal
396,534
47,483
3,505
—
447,522
(579)
(1,434)
(854)
—
(2,867)
0.1
3.0
24.4
—
0.6
–  corporate
and
commercial
342,878
69,738
14,958
81
427,655
(499)
(1,500)
(5,774)
(30)
(7,803)
0.1
2.2
38.6
37.0
1.8
–  non-bank
financial
institutions
69,972
3,650
810
—
74,432
(52)
(30)
(322)
—
(404)
0.1
0.8
39.8
—
0.5
Loans and
advances to
banks at
amortised cost
111,479
1,436
2
—
112,917
(10)
(3)
(2)
—
(15)
—
0.2
100.0
—
—
Other financial
assets
measured at
amortised cost
946,873
12,734
664
—
960,271
(109)
(132)
(181)
—
(422)
—
1.0
27.3
—
—
Loan and other
credit-related
commitments
630,949
28,922
1,140
4
661,015
(153)
(128)
(86)
—
(367)
—
0.4
7.5
—
0.1
–  personal
253,183
3,459
355
—
256,997
(23)
—
(2)
—
(25)
—
—
0.6
—
—
–  corporate
and
commercial
246,210
20,928
736
4
267,878
(120)
(119)
(83)
—
(322)
—
0.6
11.3
—
0.1
–  financial
131,556
4,535
49
—
136,140
(10)
(9)
(1)
—
(20)
—
0.2
2.0
—
—
Financial
guarantees
14,746
1,879
384
—
17,009
(7)
(7)
(25)
—
(39)
—
0.4
6.5
—
0.2
–  personal
1,106
13
—
—
1,119
—
—
—
—
—
—
—
—
—
—
–  corporate
and
commercial
10,157
1,290
330
—
11,777
(6)
(6)
(24)
—
(36)
0.1
0.5
7.3
—
0.3
–  financial
3,483
576
54
—
4,113
(1)
(1)
(1)
—
(3)
—
0.2
1.9
—
0.1
At 31 Dec
2023
2,513,431
165,842
21,463
85
2,700,821
(1,409)
(3,234)
(7,244)
(30)
(11,917)
0.1
2.0
33.8
35.3
0.4
1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2Purchased or originated credit-impaired (‘POCI’).
Unless identified at an earlier stage, all financial assets are deemed to
have suffered a significant increase in credit risk when they are 30
days past due (‘DPD’) and are transferred from stage 1 to stage 2.
The following disclosure presents the ageing of stage 2
financial assets by those less than 30 DPD and greater than 30 DPD
and therefore presents those financial assets classified as stage 2 due
to ageing (30 DPD) and those identified at an earlier stage (less than
30 DPD).
Stage 2 days past due analysis at 31 December 2023
(Audited)
Gross carrying amount
Allowance for ECL
ECL coverage %
Stage 2
Up-to-
date
1 to 29
DPD1
30 and
> DPD1
Stage 2
Up-to-
date
1 to 29
DPD1
30 and
> DPD1
Stage 2
Up-to-
date
1 to 29
DPD1
30 and >
DPD1
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
Loans and advances to
customers at amortised
cost
120,871
116,320
2,571
1,980
(2,964)
(2,458)
(245)
(261)
2.5
2.1
9.5
13.2
–  personal
47,483
44,634
1,785
1,064
(1,434)
(974)
(214)
(246)
3.0
2.2
12.0
23.1
–  corporate and
commercial
69,738
68,446
697
595
(1,500)
(1,454)
(31)
(15)
2.2
2.1
4.4
2.5
–  non-bank financial
institutions
3,650
3,240
89
321
(30)
(30)
—
—
0.8
0.9
—
—
Loans and advances to
banks at amortised cost
1,436
1,424
—
12
(3)
(3)
—
—
0.2
0.2
—
—
Other financial assets
measured at amortised
cost
12,734
12,417
171
146
(132)
(113)
(9)
(10)
1.0
0.9
5.3
6.8
1The days past due amounts presented above are on a contractual basis.
HSBC Holdings plc
187
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2022
(Audited)
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
Stage
1
Stage
2
Stage
3
POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
%
Loans and
advances to
customers at
amortised cost
776,299
139,076
19,504
129
935,008
(1,092)
(3,488)
(6,829)
(38)
(11,447)
0.1
2.5
35.0
29.5
1.2
–  personal
362,677
48,866
3,339
—
414,882
(561)
(1,504)
(805)
—
(2,870)
0.2
3.1
24.1
—
0.7
–corporate and
commercial
351,885
85,492
15,696
129
453,202
(488)
(1,907)
(5,887)
(38)
(8,320)
0.1
2.2
37.5
29.5
1.8
–  non-bank
financial
institutions
61,737
4,718
469
—
66,924
(43)
(77)
(137)
—
(257)
0.1
1.6
29.2
—
0.4
Loans and
advances to
banks at
amortised cost
102,723
1,739
82
—
104,544
(18)
(29)
(22)
—
(69)
—
1.7
26.8
—
0.1
Other financial
assets
measured at
amortised cost
938,798
15,339
797
—
954,934
(95)
(165)
(233)
—
(493)
—
1.1
29.2
—
0.1
Loan and other
credit-related
commitments
583,383
34,033
1,372
—
618,788
(141)
(180)
(65)
—
(386)
—
0.5
4.7
—
0.1
–  personal
239,521
3,686
799
—
244,006
(26)
(1)
—
—
(27)
—
—
—
—
—
–  corporate and
commercial
241,313
27,323
551
—
269,187
(111)
(166)
(63)
—
(340)
—
0.6
11.4
—
0.1
–  financial
102,549
3,024
22
—
105,595
(4)
(13)
(2)
—
(19)
—
0.4
9.1
—
—
Financial
guarantees
16,071
2,463
249
—
18,783
(6)
(13)
(33)
—
(52)
—
0.5
13.3
—
0.3
–  personal
1,123
11
1
—
1,135
—
—
—
—
—
—
—
—
—
—
–  corporate and
commercial
11,547
1,793
247
—
13,587
(5)
(12)
(33)
—
(50)
—
0.7
13.4
—
0.4
–  financial
3,401
659
1
—
4,061
(1)
(1)
—
—
(2)
—
0.2
—
—
—
At 31 Dec 2022
2,417,274
192,650
22,004
129
2,632,057
(1,352)
(3,875)
(7,182)
(38)
(12,447)
0.1
2.0
32.6
29.5
0.5
1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2Purchased or originated credit-impaired (‘POCI’).
Stage 2 days past due analysis at 31 December 2022
(Audited)
Gross carrying amount
Allowance for ECL
ECL coverage %
Stage 2
Up-to-
date
1 to 29
DPD1
30 and >
DPD1
Stage
2
Up-to-
date
1 to 29
DPD1
30 and >
DPD1
Stage
2
Up-to-
date
1 to 29
DPD1
30 and >
DPD1
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
Loans and advances to
customers at amortised cost
139,076
134,680
2,410
1,986
(3,488)
(3,017)
(234)
(237)
2.5
2.2
9.7
11.9
–  personal
48,866
46,378
1,682
806
(1,504)
(1,080)
(214)
(210)
3.1
2.3
12.7
26.1
–  corporate and commercial
85,492
83,976
712
804
(1,907)
(1,860)
(20)
(27)
2.2
2.2
2.8
3.4
–  non-bank financial
institutions
4,718
4,326
16
376
(77)
(77)
—
—
1.6
1.8
—
—
Loans and advances to banks
at amortised cost
1,739
1,729
—
10
(29)
(29)
—
—
1.7
1.7
—
—
Other financial assets
measured at amortised cost
15,339
15,103
140
96
(165)
(141)
(8)
(16)
1.1
0.9
5.7
16.7
1The days past due amounts presented above are on a contractual basis.
Risk review
188
HSBC Holdings plc
Stage 2 decomposition
The following table presents the stage 2 decomposition of gross
carrying amount and allowances for ECL for loans and advances to
customers and banks. It also sets out the reasons why an exposure is
classified as stage 2 and therefore presented as a significant increase
in credit risk at 31 December 2023.
The quantitative classification shows gross carrying amount and
allowances for ECL for which the applicable reporting date probability
of default (‘PD’) measure exceeds defined quantitative thresholds for
retail and wholesale exposures, as set out in Note 1.2 ‘Summary of
material accounting policies’, on page 375.
The qualitative classification primarily accounts for customer risk
rating (‘CRR’) deterioration, watch-and-worry and retail management
judgemental adjustments.
A summary of our current policies and practices for the significant
increase in credit risk is set out in ‘Summary of material accounting
policies’ on page 375.
Loans and advances to customers and banks1,2
At 31 Dec 2023
Loans and advances to customers
Loans and
advances
to banks at
amortised
cost
Total stage 2
Personal
of which:
Corporate
and
commercial
Non-bank
financial
institutions
first lien
mortgage
credit
cards3
other
personal
lending3
$m
$m
$m
$m
$m
$m
$m
$m
Quantitative
35,742
31,178
1,940
2,624
53,034
2,955
781
92,512
Qualitative
11,678
7,077
2,477
2,124
16,241
653
642
29,214
of which: forbearance
171
69
34
68
982
2
—
1,155
30 DPD backstop4
63
32
2
29
463
42
13
581
Total gross carrying amount
47,483
38,287
4,419
4,777
69,738
3,650
1,436
122,307
Quantitative
(1,103)
(149)
(554)
(400)
(1,225)
(24)
(1)
(2,353)
Qualitative
(324)
(50)
(142)
(132)
(270)
(6)
(2)
(602)
of which: forbearance
(4)
—
(1)
(3)
(11)
—
—
(15)
30 DPD backstop4
(7)
(1)
(1)
(5)
(5)
—
—
(12)
Total allowance for ECL
(1,434)
(200)
(697)
(537)
(1,500)
(30)
(3)
(2,967)
ECL coverage %
3.0
0.5
15.8
11.2
2.2
0.8
0.2
2.4
Residual average life5 (in years)
16.0
19.3
<1.0
4.1
2.5
1.2
<1.0
Loans and advances to customers1
At 31 Dec 2022
Gross carrying amount
Allowance for ECL
ECL
coverage
Personal
Corporate
and
commercial
Non-bank
financial
institutions
Total
Personal
Corporate
and
commercial
Non-bank
financial
institutions
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
%
Quantitative
41,610
66,421
3,679
111,710
(1,302)
(1,642)
(66)
(3,010)
2.7
Qualitative
7,209
18,555
878
26,642
(200)
(262)
(11)
(473)
1.8
30 DPD backstop4
47
516
161
724
(2)
(3)
—
(5)
0.7
Total stage 2
48,866
85,492
4,718
139,076
(1,504)
(1,907)
(77)
(3,488)
2.5
1  Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure
and ECL have been assigned in order of categories presented.
2  Stage 2 decomposition for loans and advances to banks and personal lending products have been reported for the first time at 31 December 2023
following the adoption of the recommendations of the DECL Taskforce’s third report.
3  The higher relative contribution of qualitative stage 2 for credit cards and other personal lending is due to management judgemental adjustments,
primarily affordability. 
4  Days past due (‘DPD’).
5  Calculated as the difference between final contractual maturities and the reporting date, weighted based on the contribution of the instrument to the
stage 2 total gross carrying amount of the corresponding product or sector. 
HSBC Holdings plc
189
Assets held for sale
(Audited)
At 31 December 2023, the most material balances held for sale arose
from our banking business in Canada and our retail banking operations
in France.
Disclosures relating to assets held for sale are provided in the
following credit risk tables, primarily where the disclosure is relevant
to the measurement of these financial assets:
–‘Maximum exposure to credit risk’ (page 191); and
–‘Distribution of financial instruments by credit quality at
31 December’ (page 208);
Although there was a reclassification on the balance sheet, there was
no separate income statement reclassification. As a result, charges
for changes in expected credit losses and other credit impairment
charges shown in the credit risk disclosures include charges relating
to financial assets classified as ‘assets held for sale’.
‘Loans and other credit-related commitments’ and ‘financial
guarantees’, as reported in credit disclosures, also include exposures
and allowances relating to financial assets classified as ‘assets held
for sale’.
Loans and advances to customers and banks measured at amortised cost
(Audited)
2023
2022
Total gross loans and
advances
Allowance for ECL
Total gross loans and
advances
Allowance for ECL
$m
$m
$m
$m
As reported
1,062,526
(11,089)
1,039,552
(11,516)
Reported in ‘Assets held for sale’
84,075
(303)
81,221
(392)
At 31 December
1,146,601
(11,392)
1,120,773
(11,908)
At 31 December 2023, gross loans and advances of our banking
business in Canada were $56.5bn, and the related allowance for ECL
was $0.2bn. Gross loans of our retail banking operations in France
were $27.3bn, and the related allowance for ECL was $0.1bn.
Lending balances held for sale continue to be measured at amortised
cost less allowances for impairment and, therefore, such carrying
amounts may differ from fair value.
These lending balances are part of associated disposal groups that are
measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount
of these assets and their sales price is part of the overall gain or loss
on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at
31 December 2023 of loans and advances to banks and customers
classified as held for sale, see Note 23 on the financial statements.
Gross loans and allowance for ECL on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited)
Banking business in
Canada
Retail banking operations
in France
Other
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
at amortised cost
56,349
(220)
16,984
(82)
255
(1)
73,588
(303)
–  personal
27,071
(95)
13,920
(79)
140
(1)
41,131
(175)
–  corporate and commercial
27,789
(120)
3,012
(3)
—
—
30,801
(123)
–  non-bank financial institutions
1,489
(5)
52
—
115
—
1,656
(5)
Loans and advances to banks at
amortised cost
154
—
10,333
—
—
—
10,487
—
At 31 December 2023
56,503
(220)
27,317
(82)
255
(1)
84,075
(303)
Loans and advances to customers
at amortised cost
55,431
(234)
25,121
(92)
412
(62)
80,964
(388)
–  personal
26,637
(75)
22,691
(88)
305
(47)
49,633
(210)
–  corporate and commercial
27,128
(154)
2,379
(4)
107
(15)
29,614
(173)
–  non-bank financial institutions
1,666
(5)
51
—
—
—
1,717
(5)
Loans and advances to banks at
amortised cost
100
—
—
—
157
(4)
257
(4)
At 31 December 2022
55,531
(234)
25,121
(92)
569
(66)
81,221
(392)
The table below analyses the amount of ECL (charges)/releases arising from assets held for sale. The charges during the period primarily relate
to our business in Canada.
Changes in expected credit losses and other credit impairment
(Audited)
2023
2022
$m
$m
ECL (charges)/releases arising from:
–  assets held for sale
(49)
(5)
–assets not held for sale
(3,398)
(3,579)
Year ended 31 December
(3,447)
(3,584)
Risk review
190
HSBC Holdings plc
Credit exposure
Maximum exposure to credit risk
(Audited)
This section provides information on balance sheet items and their offsets as well as loan and other credit-related commitments. Commentary
on consolidated balance sheet movements in 2023 is provided on page 110. The offset of derivatives remains in line with the movements
in maximum exposure amounts.
‘Maximum exposure to credit risk’ table
The following table presents our maximum exposure before taking
account of any collateral held or other credit enhancements (unless such
enhancements meet accounting offsetting requirements).
The table excludes trading assets, financial assets designated and
otherwise mandatorily measured at fair value through profit or loss, and
financial investments measured at fair value through other
comprehensive income as their carrying amount best represents the net
exposure to credit risk. Equity securities are also excluded as they are
not subject to credit risk. For the financial assets recognised on the
balance sheet, the maximum exposure to credit risk equals their carrying
amount and is net of the allowance for ECL. For financial guarantees and
other guarantees granted, it is the maximum amount that we would have
to pay if the guarantees were called upon. For loan commitments and
other credit-related commitments, it is generally the full amount of the
committed facilities.
The offset in the table relates to amounts where there is a legally
enforceable right of offset in the event of counterparty default and
where, as a result, there is a net exposure for credit risk purposes.
However, as there is no intention to settle these balances on a net basis
under normal circumstances, they do not qualify for net presentation for
accounting purposes. No offset has been applied to off-balance sheet
collateral. In the case of derivatives, the offset column also includes
collateral received in cash and other financial assets.
Other credit risk mitigants
While not disclosed as an offset in the following ‘Maximum exposure
to credit risk’ table, other arrangements are in place that reduce our
maximum exposure to credit risk. These include a charge over
collateral on borrowers’ specific assets, such as residential properties,
collateral held in the form of financial instruments that are not held on
the balance sheet and short positions in securities. In addition, for
financial assets held as part of linked insurance/investment contracts
the credit risk is predominantly borne by the policyholder. See page
374 and Note 31 on the financial statements for further details of
collateral in respect of certain loans and advances and derivatives.
Collateral available to mitigate credit risk is disclosed in the ‘Collateral’
section on page 223.
Maximum exposure to credit risk
(Audited)
2023
2022
Maximum
exposure
Offset
Net
Maximum
exposure
Offset
Net
$m
$m
$m
$m
$m
$m
Loans and advances to customers held at amortised cost
938,535
(22,607)
915,928
923,561
(20,315)
903,246
–  personal
444,655
(2,470)
442,185
412,012
(2,575)
409,437
–  corporate and commercial
419,852
(18,771)
401,081
444,882
(16,262)
428,620
–  non-bank financial institutions
74,028
(1,366)
72,662
66,667
(1,478)
65,189
Loans and advances to banks at amortised cost
112,902
—
112,902
104,475
—
104,475
Other financial assets held at amortised cost
973,316
(13,919)
959,397
970,119
(8,969)
961,150
–  cash and balances at central banks
285,868
—
285,868
327,002
—
327,002
–  items in the course of collection from other banks
6,342
—
6,342
7,297
—
7,297
–  Hong Kong Government certificates of indebtedness
42,024
—
42,024
43,787
—
43,787
–  reverse repurchase agreements – non-trading
252,217
(13,919)
238,298
253,754
(8,969)
244,785
–  financial investments
148,326
—
148,326
109,066
—
109,066
–  assets held for sale
114,134
—
114,134
115,919
—
115,919
–  prepayments, accrued income and other assets
124,405
—
124,405
113,294
—
113,294
Derivatives
229,714
(222,059)
7,655
284,159
(273,497)
10,662
Total on-balance sheet exposure to credit risk
2,254,467
(258,585)
1,995,882
2,282,314
(302,781)
1,979,533
Total off-balance sheet
1,007,885
—
1,007,885
934,329
—
934,329
–  financial and other guarantees
111,102
—
111,102
106,861
—
106,861
–  loan and other credit-related commitments
896,783
—
896,783
827,468
—
827,468
At 31 Dec
3,262,352
(258,585)
3,003,767
3,216,643
(302,781)
2,913,862
Concentration of exposure
We have a number of global businesses with a broad range of
products. We operate in a number of geographical markets with the
majority of our exposures in Asia and Europe.
For an analysis of:
–financial investments, see Note 16 on the financial statements;
–trading assets, see Note 11 on the financial statements;
–derivatives, see page 226 and Note 15 on the financial statements;
and
–loans and advances by industry sector and by the location of the
principal operations of the lending subsidiary (or, in the case of the
operations of The Hongkong and Shanghai Banking Corporation
Limited, HSBC Bank plc, HSBC Bank Middle East Limited and
HSBC Bank USA, by the location of the lending branch), see page
212 for wholesale lending and page 226 for personal lending.
Credit deterioration of financial instruments
(Audited)
A summary of our current policies and practices regarding the
identification, treatment and measurement of stage 1, stage 2,
stage 3 (credit impaired) and POCI financial instruments can be found
in Note 1.2 on the financial statements.
HSBC Holdings plc
191
Measurement uncertainty and sensitivity analysis of ECL estimates
(Audited)
The recognition and measurement of ECL involves the use of
significant judgement and estimation. We form multiple economic
scenarios based on economic forecasts, apply these assumptions to
credit risk models to estimate future credit losses, and probability
weight the results to determine an unbiased ECL estimate.
Management assessed the current economic environment, reviewed
the latest economic forecasts and discussed key risks before
selecting the economic scenarios and their weightings. 
Scenarios were constructed to reflect the latest geopolitical risks and
macroeconomic developments, including the Israel-Hamas war and
subsequent disruptions in the Red Sea, and current inflation and
monetary policy expectations.
Management judgemental adjustments are used where modelled
ECL does not fully reflect the identified risks and related uncertainty,
or to capture significant late-breaking events.
At 31 December 2023, there was an overall reduction in management
judgemental adjustments compared with 31 December 2022, as
modelled outcomes better reflected the key risks at 31 December
2023.
Methodology
At 31 December 2023, four scenarios were used to capture the latest
economic expectations and to articulate management’s view of the
range of risks and potential outcomes. Each scenario is updated with
the latest economic forecasts and estimates every quarter.
Three scenarios, the Upside, Central and Downside, are drawn from
external consensus forecasts, market data and distributional
estimates of the entire range of economic outcomes. The fourth
scenario, the Downside 2, represents management’s view of severe
downside risks.
The Central scenario is deemed the ‘most likely’ scenario, and usually
attracts the largest probability weighting. It is created using
consensus forecasts, which is the average of a panel of external
forecasts.
The outer scenarios represent the tails of the distribution and are less
likely to occur. The consensus Upside and Downside scenarios are
created with reference to distributions for select markets that capture
forecasters’ views of the entire range of economic outcomes. In the
later years of those scenarios, projections revert to long-term
consensus trend expectations. Reversion to trend is done with
reference to historically observed quarterly changes in the values of
macroeconomic variables.
The fourth scenario, the Downside 2, is designed to represent
management’s view of severe downside risks. It is a globally
consistent, narrative-driven scenario that explores a more extreme
economic outcome than those captured by the consensus scenarios.
In this scenario, variables do not, by design, revert to long-term trend
expectations and may instead explore alternative states of
equilibrium, where economic activity moves permanently away from
past trends.
The consensus Downside and the consensus Upside scenarios are
each calibrated to be consistent with a 10% probability. The
Downside 2 is calibrated to a 5% probability. The Central scenario is
assigned the remaining 75%. This weighting scheme is deemed
appropriate for the unbiased estimation of ECL in most
circumstances. However, management may depart from this
probability-based scenario weighting approach when the economic
outlook and forecasts are determined to be particularly uncertain and
risks are elevated.
In the fourth quarter of 2023, the weights were consistent with the
calibrated scenario probabilities, as key risk metrics implied a decline
in the uncertainty attached to the Central scenario, compared with the
fourth quarter of 2022. Economic forecasts for the Central scenario
remained stable, and the dispersion within consensus forecast panels
remained low, even as the Israel-Hamas war escalated. Risks,
including the economic consequences of a broader war in the Middle
East, were reflected in the Downside scenarios. 
Scenarios produced to calculate ECL are aligned to HSBC’s top and
emerging risks.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC with reference to external forecasts and estimates,
specifically for the purpose of calculating ECL.
Forecasts remain subject to uncertainty and variability. Outer
scenarios are constructed so that they capture risks that could alter
the trajectory of the economy and are designed to encompass the
potential crystallisation of key macro-financial risks.
In our key markets, Central scenario forecasts remained broadly
stable in the fourth quarter of 2023, compared with the third quarter
of 2023. The key exception was with regard to monetary policy,
where expectations for interest rate cuts were brought forward.
There continue to be expectations that 2024 will be a period of below
trend growth, with inflation remaining above central bank targets.
At the end of 2023, risks to the economic outlook included a number
of significant geopolitical issues. Within our Downside scenarios, the
economic consequences from the crystallisation of those risks were
captured by higher commodity and goods prices, the reacceleration of
inflation, a further rise in interest rates and a global recession.
The scenarios used to calculate ECL in this Form 20-F are described
below.
The consensus Central scenario
HSBC’s Central scenario reflects expectations for a low growth and
high interest rate environment across many of our key markets,
where GDP growth is expected to be lower in 2024 than in the
previous year.
Expectations of lower GDP growth in many markets in 2024 are
driven by the assumed lagged effects of higher interest rates and
inflation in North America and Europe. In the scenario, household
discretionary income remains under pressure and business margins
deteriorate amid higher refinancing costs. Growth only returns to its
long-term expected trend in later years, once inflation reverts back
towards central bank targets and interest rates stabilise at lower
levels.
In mainland China and Hong Kong, growth is also expected to be
moderately slower in 2024 relative to 2023. The economic boost from
post-pandemic reopening has faded, and slower global growth and
low trade volumes are expected to moderate activity. In mainland
China, the continued fall in investment in the property sector is
expected to act as a further brake on the economy, while in Hong
Kong, higher interest rates are expected to drive a further decline in
property valuations. Despite these headwinds, a steeper downturn is
expected to be avoided as the authorities in mainland China increase
fiscal and monetary support to the economy. Substantial fiscal
expansion is anticipated for 2024, alongside additional credit easing.
Global GDP is expected to grow by 2.2% in 2024 in the Central
scenario, and the average rate of global GDP growth is forecast to be
2.6% over the five-year forecast period. This is below the average
growth rate over the five-year period prior to the onset of the
pandemic of 2.9%.
The key features of our Central scenario are:
–GDP growth rates in our main markets are expected to slow down
in 2024, followed by a moderate recovery in 2025. The slowdown
in the UK is particularly notable in this scenario, with growth close
to zero through much of 2024. In the scenario, weaker growth is
caused by high interest rates, which act to deter consumption and
investment.
–In most markets, unemployment is expected to rise moderately as
economic activity slows, although it remains low by historical
standards.
Risk review
192
HSBC Holdings plc
–Inflation is expected to continue to fall as commodity prices
decline, supply disruptions abate, and wage growth moderates. It
is anticipated that inflation converges towards central banks’ target
rates by early 2025. In mainland China, weak consumption and
excess supply has caused inflation to drop sharply but, in the
scenario, deflation is not projected to persist.
–Weak conditions in housing markets are expected to persist
through 2024 and 2025 in many of our main markets, including the
UK, Hong Kong and mainland China, as higher interest rates and,
in many cases, declining prices, depress activity.
–Challenging conditions are also forecast to continue in the
commercial property sector in a number of our key markets.
Structural changes to demand in the office segment in particular
have driven lower valuations.
–Policy interest rates in key markets are forecast to have peaked
and are projected to decline in 2024. In the longer term, they are
expected to remain at a higher level than in recent years.
–The Brent crude oil price is forecast to average around $75 per
barrel over the projection period.
The Central scenario was created with forecasts available in late
November, and reviewed continually until the end of December 2023.
In accordance with HSBC’s scenario framework, a probability weight
of 75% has been assigned to the Central scenario across all major
markets.
The following tables describe key macroeconomic variables in the consensus Central scenario.
Consensus Central scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP (annual average growth
rate, %)
2024
0.3
1.0
2.6
4.5
0.8
0.8
3.7
1.9
2025
1.2
1.8
2.7
4.4
2.0
1.5
4.0
2.2
2026
1.7
2.1
2.6
4.3
2.0
1.6
3.8
2.3
2027
1.6
2.0
2.6
3.8
2.0
1.5
3.4
2.4
2028
1.6
2.0
2.6
3.9
2.0
1.5
3.4
2.4
5-year average1
1.3
1.8
2.6
4.2
1.7
1.4
3.6
2.2
Unemployment rate (%)
2024
4.7
4.3
3.0
5.2
6.2
7.5
2.6
2.9
2025
4.6
4.2
3.0
5.1
5.9
7.3
2.6
2.9
2026
4.3
4.0
3.2
5.1
5.7
7.0
2.6
2.9
2027
4.2
4.0
3.2
5.1
5.7
6.8
2.6
2.9
2028
4.2
4.0
3.2
5.1
5.7
6.8
2.6
2.9
5-year average1
4.4
4.1
3.1
5.1
5.8
7.1
2.6
2.9
House prices (annual average
growth rate, %)
2024
(5.5)
2.9
(6.6)
(0.6)
(4.8)
(1.0)
12.6
6.5
2025
0.1
2.7
(0.7)
1.1
2.2
2.4
7.7
4.2
2026
3.5
3.1
2.6
2.6
2.8
4.0
4.4
4.2
2027
3.0
2.7
2.8
4.0
2.4
4.4
2.6
4.0
2028
3.0
2.1
3.0
4.5
2.8
4.0
2.3
4.0
5-year average1
0.8
2.7
0.2
2.3
1.1
2.8
5.9
4.6
Inflation (annual average growth
rate, %)
2024
3.2
2.7
2.1
1.8
2.6
2.7
2.3
4.2
2025
2.2
2.2
2.1
2.0
2.1
1.8
2.2
3.6
2026
2.2
2.3
2.2
2.1
2.1
1.7
2.1
3.5
2027
2.3
2.2
2.4
2.0
2.1
1.9
2.1
3.5
2028
2.3
2.2
2.4
2.0
2.1
2.1
2.1
3.5
5-year average
2.4
2.3
2.2
2.0
2.2
2.0
2.1
3.7
Central bank policy rate (annual
average, %)
2024
5.0
5.0
5.4
4.1
4.7
3.6
5.1
10.4
2025
4.3
4.0
4.4
4.2
3.9
2.8
4.1
8.6
2026
3.9
3.7
4.1
4.4
3.4
2.6
3.7
7.9
2027
3.8
3.7
4.1
4.6
3.2
2.6
3.7
7.9
2028
3.7
3.8
4.1
4.8
3.3
2.7
3.8
8.1
5-year average1
4.1
4.1
4.4
4.4
3.7
2.9
4.1
8.6
1  The five-year average is calculated over a projected period of 20 quarters from 1Q24 to 4Q28.
HSBC Holdings plc
193
Consensus Central scenario 2023–2027 (as at 4Q22)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE2
Mexico
GDP (annual average growth rate, %)
2023
(0.8)
0.2
2.7
4.6
0.6
0.2
3.7
1.2
2024
1.3
1.5
3.0
4.8
1.9
1.6
3.7
2.0
2025
1.7
2.0
2.7
4.7
2.0
1.5
3.1
2.3
2026
1.7
2.0
2.6
4.4
1.8
1.4
2.8
2.0
2027
1.7
2.0
2.6
4.4
1.8
1.4
2.9
2.0
5-year average1
1.1
1.5
2.7
4.6
1.6
1.2
3.2
1.9
Unemployment rate (%)
2023
4.4
4.3
3.7
5.2
6.1
7.6
2.9
3.7
2024
4.6
4.5
3.5
5.1
5.9
7.5
2.8
3.7
2025
4.3
4.2
3.4
5.0
6.0
7.3
2.8
3.5
2026
4.1
3.9
3.3
4.9
5.9
7.2
2.8
3.5
2027
4.1
4.0
3.3
4.8
5.9
7.2
2.8
3.5
5-year average1
4.3
4.2
3.4
5.0
5.9
7.3
2.8
3.6
House prices (annual average growth
rate, %)
2023
0.2
(2.5)
(10.0)
(0.1)
(15.6)
1.8
5.9
7.9
2024
(3.8)
(3.2)
(3.0)
2.9
(1.2)
2.0
5.2
5.2
2025
0.7
(1.0)
1.7
3.5
4.0
3.1
4.5
4.2
2026
2.1
0.7
2.8
4.1
4.1
3.5
3.3
4.1
2027
2.7
2.5
3.4
4.3
3.0
3.6
2.9
3.9
5-year average1
0.4
(0.7)
(1.0)
2.9
(1.1)
2.8
4.4
5.1
Inflation (annual average growth 
rate,%)
2023
6.9
4.1
2.1
2.4
3.5
4.6
3.2
5.7
2024
2.5
2.5
2.1
2.2
2.2
2.0
2.2
4.1
2025
2.1
2.2
2.0
2.2
2.1
1.8
2.1
3.7
2026
2.0
2.3
2.1
2.1
2.0
1.7
2.1
3.7
2027
2.0
2.3
2.1
2.1
2.0
1.7
2.1
3.7
5-year average1
3.1
2.7
2.1
2.2
2.4
2.4
2.3
4.2
Central bank policy rate (annual
average, %)
2023
4.4
4.7
5.2
4.6
4.3
2.7
6.1
10.3
2024
4.2
3.8
4.3
4.9
3.9
2.7
5.2
8.1
2025
3.7
3.0
3.5
5.1
3.4
2.4
4.4
7.2
2026
3.4
2.9
3.3
5.3
3.1
2.3
4.3
7.3
2027
3.1
2.9
3.3
5.5
3.2
2.3
4.3
7.8
5-year average1
3.8
3.5
3.9
5.1
3.6
2.5
4.9
8.1
1  The five-year average is calculated over a projected period of 20 quarters from 1Q23 to 4Q27.
The graphs compare the Central scenario at the year end 2022 with economic expectations at the end of 2023.
GDP growth: Comparison of Central scenarios
Hong Kong
hkggdp.jpg
Note: Real GDP shown as year-on-year percentage change.
Mainland China
chngdp.jpg
Note: Real GDP shown as year-on-year percentage change.
Risk review
194
HSBC Holdings plc
UK
ukgdp.jpg
Note: Real GDP shown as year-on-year percentage change.
US
usagdp.jpg
Note: Real GDP shown as year-on-year percentage change.
The consensus Upside scenario
Compared with the Central scenario, the consensus Upside scenario
features stronger economic activity in the near term, before
converging to long-run trend expectations. It also incorporates a faster
fall in the rate of inflation than incorporated in the Central scenario.
The scenario is consistent with a number of key upside risk themes.
These include a faster fall in the rate of inflation that allows central
banks to reduce interest rates more quickly, an easing in financial
conditions, and a de-escalation in geopolitical tensions as the Israel-
Hamas and Russia-Ukraine wars move towards conclusions, and the
US-China relationship improves.
The following tables describe key macroeconomic variables in the consensus Upside scenario.
Consensus Upside scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level (%, start-to-peak)1
10.8
(4Q28)
14.3
(4Q28)
21.8
(4Q28)
30.4
(4Q28)
14.9
(4Q28)
10.4
(4Q28)
30.7
(4Q28)
17.8
(4Q28)
Unemployment rate
(%, min)2
3.1
(4Q24)
3.1
(2Q25)
2.4
(3Q24)
4.8
(4Q25)
5.1
(4Q25)
6.2
(4Q25)
2.0
(4Q25)
2.4
(3Q24)
House price index
(%, start-to-peak)1
13.0
(4Q28)
21.9
(4Q28)
17.9
(4Q28)
19.7
(4Q28)
21.0
(4Q28)
19.6
(4Q28)
34.2
(4Q28)
30.6
(4Q28)
Inflation rate
(YoY % change, min)3
1.3
(2Q25)
1.4
(1Q25)
0.3
(4Q24)
0.6
(3Q24)
1.1
(1Q25)
1.5
(3Q24)
1.4
(1Q25)
2.7
(1Q25)
Central bank policy rate
(%, min)2
3.7
(3Q28)
3.7
(2Q27)
4.1
(1Q27)
4.0
(2Q24)
3.2
(2Q27)
2.6
(2Q26)
3.7
(1Q27)
7.8
(2Q25)
1Cumulative change to the highest level of the series during the 20-quarter projection.
2Lowest projected unemployment or policy interest rate in the scenario.
3Lowest projected year-on-year percentage change in inflation in the scenario.
Consensus Upside scenario 2023–2027 (as at 4Q22)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level (%, start-to-peak)1
14.6
(4Q27)
13.6
(4Q27)
23.3
(4Q27)
31.5
(4Q27)
14.0
(4Q27)
10.2
(4Q27)
26.4
(4Q27)
16.4
(4Q27)
Unemployment rate
(%, min)2
3.5
(4Q23)
3.1
(3Q23)
3.0
(4Q23)
4.7
(3Q24)
5.2
(3Q24)
6.5
(4Q24)
2.2
(3Q24)
3.1
(3Q23)
House price index
(%, start-to-peak)1
7.8
(4Q27)
3.9
(4Q27)
8.6
(4Q27)
26.3
(4Q27)
12.3
(4Q27)
17.0
(4Q27)
30.6
(4Q27)
33.0
(4Q27)
Inflation rate
(YoY % change, min)3
0.7
(1Q24)
1.6
(1Q24)
(0.1)
(4Q23)
0.8
(4Q23)
1.0
(1Q24)
0.8
(4Q23)
1.5
(3Q24)
3.2
(1Q24)
Central bank policy rate
(%, min)2
3.1
(4Q27)
2.9
(1Q27)
3.3
(1Q27)
4.4
(1Q23)
3.1
(3Q26)
2.3
(3Q26)
4.3
(1Q27)
7.1
(3Q25)
1Cumulative change to the highest level of the series during the 20-quarter projection.
2Lowest projected unemployment or policy interest rate in the scenario.
3Lowest projected year-on-year percentage change in inflation in the scenario.
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Downside scenarios
Downside scenarios explore the intensification and crystallisation of a
number of key economic and financial risks. These include an
escalation of geopolitical tensions, which disrupt key commodity and
goods markets, causing inflation and interest rates to rise, and
creating a global recession.
As the geopolitical environment remains volatile and complex, risks
include:
–a broader and more prolonged conflict in the Middle East that 
undermines confidence, drives an increase in global energy costs 
and reduces trade and investment;
–a potential escalation in the Russia-Ukraine war, which expands
beyond Ukraine’s borders, and further disrupts energy, fertiliser
and food supplies; and
–continued differences between the US and China, which could
affect economic confidence, the global goods trade and supply
chains for critical technologies.
High inflation and higher interest rates also remain key risks. Should
geopolitical tensions escalate, energy and food prices could rise and
increase pressure on household budgets and firms’ costs.
A wage-price spiral, triggered by higher inflation and labour supply
shortages, could put sustained upward pressure on wages and
services prices, aggravating cost pressures and increasing the
squeeze on household real incomes and corporate margins. In turn, it
raises the risk of a more forceful policy response from central banks,
a steeper trajectory for interest rates, significantly higher defaults and,
ultimately, a deep economic recession.
The consensus Downside scenario
In the consensus Downside scenario, economic activity is weaker
compared with the Central scenario. In this scenario, GDP declines,
unemployment rates rise, and asset prices fall. The scenario features
an escalation of geopolitical tensions, which causes a rise in inflation,
as supply chain constraints intensify and energy prices rise. The
scenario also features a temporary increase in interest rates above
the Central scenario, before the effects of weaker consumption
demand begin to dominate and commodity prices and inflation fall
again.
The following tables describe key macroeconomic variables in the consensus Downside scenario.
Consensus Downside scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level
(%, start-to-trough)1
(1.0)
(2Q25)
(1.4)
(3Q24)
(1.6)
(3Q25)
(1.5)
(1Q24)
(1.7)
(3Q24)
(0.3)
(2Q24)
1.4
(1Q24)
(0.3)
(4Q24)
Unemployment rate
(%, max)2
6.4
(1Q25)
5.6
(4Q24)
4.7
(4Q25)
6.9
(4Q25)
7.4
(3Q24)
8.5
(4Q24)
3.7
(4Q25)
3.5
(4Q25)
House price index
(%, start-to-trough)1
(12.0)
(2Q25)
(1.3)
(3Q24)
(9.6)
(4Q24)
(7.1)
(3Q25)
(12.0)
(3Q25)
(1.2)
(3Q24)
0.3
(1Q24)
1.2
(1Q24)
Inflation rate
(YoY % change, max)3
4.1
(1Q24)
3.5
(4Q24)
3.8
(3Q24)
3.5
(4Q24)
3.4
(2Q24)
3.8
(2Q24)
3.0
(1Q24)
6.5
(4Q24)
Central bank policy rate
(%, max)2
5.7
(1Q24)
5.6
(1Q24)
6.0
(1Q24)
4.1
(3Q24)
5.6
(1Q24)
4.2
(1Q24)
5.7
(1Q24)
12.0
(3Q24)
1Cumulative change to the lowest level of the series during the 20-quarter projection.
2The highest projected unemployment or policy interest rate in the scenario.
3The highest projected year-on-year percentage change in inflation in the scenario.
Consensus Downside scenario 2023–2027 (as at 4Q22)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level
(%, start-to-trough)1
(3.0)
(1Q25)
(4.0)
(4Q24)
(2.3)
(3Q24)
(1.7)
(2Q23)
(3.9)
(4Q23)
(0.9)
(2Q23)
0.1
(1Q23)
(2.8)
(4Q24)
Unemployment rate
(%, max)2
5.8
(2Q24)
5.9
(1Q24)
5.2
(3Q24)
5.9
(4Q23)
7.6
(3Q23)
8.8
(4Q23)
4.1
(3Q23)
4.4
(1Q23)
House price index
(%, start-to-trough)1
(15.0)
(4Q24)
(11.6)
(4Q25)
(11.9)
(1Q24)
(1.0)
(4Q23)
(20.1)
(4Q24)
(0.7)
(3Q23)
(4.0)
(3Q23)
1.2
(1Q23)
Inflation rate
(YoY % change, max)3
10.8
(1Q23)
6.2
(1Q23)
3.7
(4Q23)
4.0
(4Q23)
6.0
(1Q23)
7.2
(1Q23)
4.5
(1Q23)
7.9
(1Q23)
Central bank policy rate
(%, max)2
5.1
(3Q23)
5.2
(3Q23)
5.7
(3Q23)
5.2
(4Q23)
5.6
(3Q23)
3.4
(4Q23)
6.6
(3Q23)
12.1
(3Q23)
1Cumulative change to the lowest level of the series during the 20-quarter projection.
2The highest projected unemployment or policy interest rate in the scenario.
3The highest projected year-on-year percentage change in inflation in the scenario.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management’s view of the tail of the economic distribution. It
incorporates the crystallisation of a number of risks simultaneously,
including a further escalation of geopolitical crises globally, which
creates severe supply disruptions to goods and energy markets.
In the scenario, as inflation surges and central banks tighten monetary
policy further, confidence evaporates. However, this impulse is
assumed to prove short lived, as recession takes hold, causing
commodity prices to correct sharply and global price inflation to fall.
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The following tables describe key macroeconomic variables in the Downside 2 scenario.
Downside 2 scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level
(%, start-to-trough)1
(8.8)
(2Q25)
(4.6)
(1Q25)
(8.2)
(1Q25)
(6.4)
(1Q25)
(4.8)
(1Q25)
(6.6)
(1Q25)
(4.9)
(2Q25)
(8.1)
(2Q25)
Unemployment rate
(%, max)2
8.4
(2Q25)
9.3
(2Q25)
6.4
(4Q24)
7.0
(4Q25)
11.9
(1Q25)
10.2
(4Q25)
4.3
(3Q24)
4.9
(2Q25)
House price index
(%, start-to-trough)1
(30.2)
(4Q25)
(14.7)
(4Q24)
(32.8)
(3Q26)
(25.5)
(4Q25)
(42.7)
(2Q25)
(14.5)
(2Q26)
(2.9)
(4Q25)
1.2
(1Q24)
Inflation rate
(YoY % change, max)3
10.1
(2Q24)
4.8
(2Q24)
4.1
(3Q24)
4.1
(4Q24)
5.4
(2Q24)
8.6
(2Q24)
3.5
(2Q24)
7.0
(4Q24)
Central bank policy rate
(%, max)2
6.0
(1Q24)
6.1
(1Q24)
6.4
(1Q24)
4.8
(3Q24)
5.8
(1Q24)
5.2
(1Q24)
6.1
(1Q24)
12.7
(3Q24)
1Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario.
3 The highest projected year-on-year percentage change in inflation in the scenario.
Downside 2 scenario 2023–2027 (as at 4Q22)
UK
US
Hong Kong
Mainland
China
Canada
France
UAE
Mexico
GDP level
(%, start-to-trough)1
(7.5)
(2Q24)
(5.2)
(2Q24)
(10.1)
(2Q24)
(6.9)
(1Q24)
(7.1)
(4Q24)
(7.4)
(2Q24)
(4.3)
(2Q24)
(8.2)
(2Q24)
Unemployment rate
(%, max)2
8.7
(2Q24)
9.5
(4Q24)
5.8
(1Q24)
6.8
(4Q24)
11.6
(2Q24)
10.3
(4Q24)
4.6
(2Q24)
5.6
(2Q24)
House price index
(%, start-to-trough)1
(32.9)
(1Q25)
(21.6)
(1Q24)
(26.6)
(2Q26)
(23.2)
(4Q24)
(41.2)
(3Q24)
(11.4)
(2Q25)
(4.8)
(2Q24)
1.1
(1Q23)
Inflation rate
(YoY % change, max)3
13.5
(2Q23)
6.3
(1Q23)
4.3
(4Q23)
4.6
(4Q23)
6.5
(1Q23)
10.4
(2Q23)
4.8
(1Q23)
7.9
(1Q23)
Central bank policy rate
(%, max)2
5.6
(4Q23)
5.5
(3Q23)
5.9
(3Q23)
5.1
(3Q23)
6.1
(3Q23)
4.1
(4Q23)
6.8
(3Q23)
12.3
(3Q23)
1Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario.
3 The highest projected year-on-year percentage change in inflation in the scenario.
The following graphs show the historical and forecasted GDP growth rate for the various economic scenarios in our four largest markets.
Hong Kong
hkg.jpg
UK
uk.jpg
Mainland China
chn.jpg
US
usa.jpg
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Scenario weighting
In reviewing the economic environment, the level of risk and
uncertainty, management has considered both global and country-
specific factors.
In the fourth quarter of 2023, key considerations around uncertainty
attached to the Central scenario projections focused on:
–the risk that the Israel-Hamas war escalates and affects economic
expectations;
–the lagged impact of elevated interest rates on household finances
and businesses, and the implications of recent changes to
monetary policy expectations on growth and employment; and
–the outlook for real estate in our key markets, particularly in the
US, UK, Hong Kong and mainland China.
Although these risk factors remain significant, management assessed
that they were adequately reflected in the scenarios at their calibrated
probability. It was noted that despite the escalation of geopolitical risk
in the Middle East, economic forecasts had remained stable, and
dispersion of forecasts around the consensus were either stable, or
have moved lower. Financial market measures of volatility also
remained low through the fourth quarter of 2023.
This has led management to assign scenario probabilities that are
aligned to the standard scenario probability calibration framework.
This entailed assigning a 75% probability weighting to the Central
scenario in our major markets. The consensus Upside scenario was
awarded a 10% weighting, and the consensus Downside scenario
was given 10%. The Downside 2 was assigned a 5% weighting.
In support of the decision, it was noted that in mainland China recent
policy announcements suggest fiscal and monetary stimulus will
increase significantly through 2024. This suggests that there will be
increased official support to current economic headwinds, which
would reduce the uncertainty attached to current forecasts.
In the UK, the Central scenario reflects a weak growth environment in
which recession risks remain high. Similarly, in the US, the Central
scenario reflects expectations for a weaker growth environment in
2024 as the economy adjusts to the higher rates environment.
For the UAE, it was agreed that there has been an increase in
geopolitical uncertainty since the outbreak of the Israel-Hamas war,
with the potential for regional escalation remaining a risk. However,
economic and market impacts have been limited and oil production
remains unaffected.
Management concluded that consensus expectations for Mexico,
France and Canada were also consistent with its view of the
economic outlook, while assessments of uncertainty were also
aligned to historical averages.
In the fourth quarter of 2022, management varied the applied scenario
weights to reflect greater uncertainty around the inflation and interest
rate outlook, amid supply disruption to energy and food commodity
markets due to the Ukraine-Russia war. In Hong Kong and mainland
China, uncertainty assessments focused on the upside and downside
risks of post-pandemic reopening.
Those factors were reflected in the measures of risk and uncertainty
used to inform judgements around the Central scenario. In particular,
large forecast changes were observed, alongside wide dispersion of
forecasts around consensus estimates and heightened financial
market volatility.
The following tables describe the probabilities assigned in each scenario.
Scenario weightings, %
Standard
weights
UK
US
Hong
Kong
Mainland
China
Canada
France
UAE
Mexico
4Q23
Upside scenario
10
10
10
10
10
10
10
10
10
Central scenario
75
75
75
75
75
75
75
75
75
Downside scenario
10
10
10
10
10
10
10
10
10
Downside 2 scenario
5
5
5
5
5
5
5
5
5
4Q22
Upside scenario
10
5
5
20
20
5
5
5
5
Central scenario
75
60
70
55
55
70
60
70
70
Downside scenario
10
25
20
20
20
15
25
20
20
Downside 2 scenario
5
10
5
5
5
10
10
5
5
At 31 December 2023, the consensus Upside and Central scenarios for all markets had a combined weighting of 85%. At 31 December 2022,
mainland China, Hong Kong and the US each had a combined weighting of 75% for the consensus Upside and Central scenarios. The UK had a
combined weighting of 65%.
Critical estimates and judgements
The calculation of ECL under IFRS 9 involved significant judgements,
assumptions and estimates at 31 December 2023. These included:
–the selection of weights to apply to the economic scenarios given
the rapidly changing economic conditions and the inherent
uncertainty of the underlying forecast under each scenario;
–the selection of scenarios to consider given the changing nature of
macroeconomic and geopolitical risks that the Group and wider
economy faces; and
–estimating the economic effects of those scenarios on ECL,
particularly sector and portfolio-specific risks, and the uncertainty
of default and recovery experience under all scenarios.
How economic scenarios are reflected in
ECL calculations
Models are used to reflect economic scenarios on ECL estimates. As
described above, modelled assumptions and linkages based on
historical information could not alone produce relevant information
under the conditions experienced in 2023, and management
judgemental adjustments were still required to support modelled
outcomes. 
We have developed globally consistent methodologies for the
application of forward economic guidance into the calculation of ECL
for wholesale and retail credit risk. These standard approaches are
described below, followed by the management judgemental
adjustments made, including those to reflect the circumstances
experienced in 2023.
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For our wholesale portfolios, a global methodology is used for the
estimation of the term structure of probability of default (‘PD’) and
loss given default (‘LGD’). For PDs, we consider the correlation of
forward economic guidance to default rates for a particular industry in
a country. For LGD calculations, we consider the correlation of
forward economic guidance to collateral values and realisation rates
for a particular country and industry. PDs and LGDs are estimated for
the entire term structure of each instrument.
For impaired loans, allowance for ECL estimates are derived based on
discounted cash flow (‘DCF’) calculations for internal forward-looking
scenarios specific to individual borrower circumstances (see page
375). Probability-weighted outcomes are applied, and depending on
materiality and status of the borrower, the number of scenarios
considered will change. Where relevant for the case being assessed,
forward economic guidance is incorporated as part of these scenarios.
LGD-driven proxy and modelled estimates are used for certain less
material cases.
For our retail portfolios, the models are predominantly based on
historical observations and correlations with default rates and
collateral values.
For PD, the impact of economic scenarios is modelled for each
portfolio, using historical relationships between default rates and
macroeconomic variables. These are included within IFRS 9 ECL
estimates using either economic response models or models that
contain internal, external and macroeconomic variables. The
macroeconomic impact on PD is modelled over the period equal to
the remaining maturity of the underlying assets.
For LGD, the impact is modelled for mortgage portfolios by
forecasting future loan-to-value profiles for the remaining maturity of
the asset, using national level house price index forecasts and
applying the corresponding LGD expectation relative to the updated
forecast collateral values.
Management judgemental adjustments are described below.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are
typically short-term increases or decreases to the modelled allowance
for ECL at either a customer, segment or portfolio level where
management believes allowances do not sufficiently reflect the credit
risk/expected credit losses at the reporting date. These can relate to
risks or uncertainties that are not reflected in the models and/or to
any late-breaking events with significant uncertainty, subject to
management review and challenge.
This includes refining model inputs and outputs and using
adjustments to ECL based on management judgement and
quantitative analysis for impacts that are difficult to model.
The effects of management judgemental adjustments are considered
for both balances and allowance for ECL when determining whether
or not a significant increase in credit risk has occurred and is allocated
to a stage where appropriate. This is in accordance with the internal
adjustments framework.
Management judgemental adjustments are reviewed under the
governance process for IFRS 9 (as detailed in the section ‘Credit risk
management’ on page 183). Review and challenge focuses on the
rationale and quantum of the adjustments with a further review
carried out by the second line of defence where significant. For some
management judgemental adjustments, internal frameworks establish
the conditions under which these adjustments should no longer be
required and as such are considered as part of the governance
process. This internal governance process allows management
judgemental adjustments to be reviewed regularly and, where
possible, to reduce the reliance on these through model recalibration
or redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to
evolve with the economic environment and as new risks emerge.
In addition to management judgemental adjustments there are also
‘Other adjustments’, which are made to address process limitations
and data/model deficiencies.
‘Management judgemental adjustments’ and ‘Other adjustments’
constitute the total value of adjustments to modelled allowance for
ECL. For the wholesale portfolio, defaulted exposures are assessed
individually and management judgemental adjustments are made only
to the performing portfolio.
At 31 December 2023, there was a $0.2bn reduction in management
judgemental adjustments compared with 31 December 2022. For the
wholesale portfolio, this was due to modelled outcomes better
reflecting the key risks at 31 December 2023. For the retail portfolio,
there was an increase in other credit judgements due to the potential
delayed impact of economic scenarios on unsecured portfolio
defaults, primarily within the UK .
Management judgemental adjustments made in estimating the
scenario-weighted reported allowance for ECL at 31 December 2023
are set out in the following table.
Management judgemental adjustments to ECL at 31 December 20231
Retail
Wholesale2
Total
$bn
$bn
$bn
Modelled ECL (A)3
2.6
2.4
5.0
Banks, sovereigns, government entities and low-risk counterparties
0.0
0.0
Corporate lending adjustments
0.1
0.1
Inflation related adjustments
0.1
0.1
Other credit judgements
0.5
0.5
Total management judgemental adjustments (B)4
0.6
0.1
0.7
Other adjustments (C)5
0.0
0.0
0.0
Final ECL (A + B + C)6
3.2
2.5
5.7
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Management judgemental adjustments to ECL at 31 December 20221 (continued)
Retail
Wholesale2
Total
$bn
$bn
$bn
Modelled ECL (A)3
3.0
2.6
5.6
Banks, sovereigns, government entities and low-risk counterparties
0.1
0.1
Corporate lending adjustments
0.5
0.5
Inflation-related adjustments
0.1
0.1
Other credit judgements
0.2
0.2
Total management judgemental adjustments (B)4
0.3
0.6
0.9
Other adjustments (C)5
0.0
(0.1)
(0.1)
Final ECL (A + B + C)6
3.3
3.1
6.4
1  Management judgemental adjustments presented in the table reflect increases or (decreases) to allowance for ECL, respectively.
2  The wholesale portfolio corresponds to adjustments to the performing portfolio (stage 1 and stage 2).
3  (A) refers to probability-weighted allowance for ECL before any adjustments are applied.
4(B) refers to adjustments that are applied where management believes allowance for ECL does not sufficiently reflect the credit risk/expected credit
losses of any given portfolio at the reporting date. These can relate to risks or uncertainties that are not reflected in the model and/or to any late-
breaking events.
5(C) refers to adjustments to allowance for ECL made to address process limitations and data/model deficiencies.
6As presented within our internal credit risk governance (see page 183).
Management judgemental adjustments at 31 December 2023 were
an increase to allowance for ECL of $0.1bn for the wholesale portfolio
and an increase to ECL of $0.6bn for the retail portfolio.
At 31 December 2023, wholesale management judgemental
adjustments were an increase to allowance for ECL of $0.1bn
(31 December 2022: $0.6bn increase).
–Management judgemental adjustments to corporate exposures
increased allowance for ECL by $0.1bn at 31 December 2023
(31 December 2022: $0.5bn increase), mostly due to management
judgements to reflect heightened uncertainty in specific sectors
and geographies, including adjustments to exposures to the real
estate sectors in mainland China, the UK and the US. The
decrease in adjustments to allowances compared with
31 December 2022 is attributed to a crystallisation of existing risks
at that date through downgrades, and an improved reflection of
emerging risks in macroeconomic scenarios and modelled
outcomes.
At 31 December 2023, retail management judgemental adjustments
were an increase to allowance for ECL of $0.6bn (31 December 2022:
$0.3bn increase). The increase in adjustments to allowance for ECL
compared with 31 December 2022 was primarily due to the increase
in management judgemental adjustments in other credit judgements
(detailed below).
–Management judgemental adjustments in relation to inflation 
increased allowance for ECL by $0.1bn (31 December 2022:
$0.1bn). These adjustments addressed where increasing inflation
and interest rates result in affordability risks that were not fully
captured by the modelled output.
–Management judgemental adjustments in relation to other credit 
judgements increased allowance for ECL by $0.5bn (31 December
2022: $0.2bn). These adjustments were primarily to capture the
potential delayed impact of economic scenarios on unsecured
portfolio defaults in the UK.
Economic scenarios sensitivity analysis of
ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the allowance for ECL under each scenario described
above for selected portfolios, applying a 100% weighting to each
scenario in turn. The weighting is reflected in both the determination
of a significant increase in credit risk and the measurement of the
resulting allowances.
The allowance for ECL calculated for the Upside and Downside
scenarios should not be taken to represent the upper and lower limits
of possible ECL outcomes. The impact of defaults that might occur in
the future under different economic scenarios is captured by
recalculating allowances for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100%
weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes
allowance for ECL and financial instruments related to defaulted
(stage 3) obligors. The measurement of stage 3 ECL is relatively more
sensitive to credit factors specific to the obligor than future economic
scenarios, and therefore the effects of macroeconomic factors are not
necessarily the key consideration when performing individual
assessments of allowances for obligors in default. Loans to defaulted
obligors are a small portion of the overall wholesale lending exposure,
even if representing the majority of the allowance for ECL. Due to the
range and specificity of the credit factors to which the ECL is
sensitive, it is not possible to provide a meaningful alternative
sensitivity analysis for a consistent set of risks across all defaulted
obligors.
For retail mortgage exposures the sensitivity analysis includes
allowance for ECL for defaulted obligors of loans and advances. This
is because the retail ECL for secured mortgage portfolios, including
loans in all stages, is sensitive to macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%
weighted results. These exclude portfolios held by the insurance
business and small portfolios, and as such cannot be directly
compared with personal and wholesale lending presented in other
credit risk tables. In both the wholesale and retail analysis, the
comparative period results for Downside 2 scenarios are also not
directly comparable with the current period, because they reflect
different risks relative to the consensus scenarios for the period end.
The wholesale and retail sensitivity analysis is stated inclusive of
management judgemental adjustments, as appropriate to each
scenario.
For both retail and wholesale portfolios, the gross carrying amount of
financial instruments are the same under each scenario. For
exposures with similar risk profile and product characteristics, the
sensitivity impact is therefore largely the result of changes in
macroeconomic assumptions.
Risk review
200
HSBC Holdings plc
Wholesale analysis
IFRS 9 ECL sensitivity to future economic conditions1,2,3
Reported
Gross carrying
amount4
Reported
allowance for
ECL
Consensus
Central
scenario
allowance for
ECL
Consensus
Upside
scenario
allowance for
ECL
Consensus
Downside
scenario
allowance for
ECL
Downside 2
scenario
allowance for
ECL
By geography at 31 Dec 2023
$m
$m
$m
$m
$m
$m
UK
426,427
820
754
599
1,041
2,487
US
191,104
215
199
189
268
441
Hong Kong
447,480
609
566
433
807
1,393
Mainland China
129,945
258
217
142
414
945
Canada5
84,092
89
75
56
107
487
Mexico
30,159
60
56
46
73
226
UAE
52,074
32
32
30
34
40
France
178,827
98
102
90
124
141
Other geographies6
450,271
325
298
245
410
882
Total
1,990,378
2,507
2,301
1,829
3,278
7,043
of which:
Stage 1
1,820,843
754
702
553
860
854
Stage 2
169,535
1,753
1,599
1,276
2,418
6,189
By geography at 31 Dec 2022
UK
421,685
769
624
484
833
2,240
US
190,858
277
241
227
337
801
Hong Kong
415,875
925
819
592
1,315
2,161
Mainland China
125,466
295
242
144
415
1,227
Canada5
83,274
126
80
60
148
579
Mexico
26,096
88
80
67
116
313
UAE
45,064
45
41
30
55
93
France
173,146
110
102
90
121
145
Other geographies6
445,758
447
384
304
527
1,054
Total
1,927,222
3,083
2,612
2,000
3,866
8,612
1Allowance for ECL sensitivity includes off-balance sheet financial instruments. These are subject to significant measurement uncertainty.
2Includes low credit-risk financial instruments such as debt instruments at FVOCI, which have high carrying amounts but low ECL under all the above
scenarios.
3Excludes defaulted obligors. For a detailed breakdown of performing and non-performing wholesale portfolio exposures, see page 212.
4Staging refers only to probability-weighted/reported gross carrying amount. Stage allocation of gross exposures varies by scenario, with higher
allocation to stage 2 under the Downside 2 scenario.
5Classified as held for sale at 31 December 2023 and 31 December 2022.
6  Includes small portfolios that use less complex modelling approaches and are not sensitive to macroeconomic changes.
At 31 December 2023, the highest level of 100% scenario-weighted
allowance for ECL was observed in the UK and Hong Kong. This
higher ECL impact was largely driven by significant exposure in these
regions.
Compared with 31 December 2022, the Downside 2 allowance for
ECL was lower in Hong Kong and mainland China, mostly due to the
crystallisation of defaults for certain high-risk exposures and a
decrease of the associated downside uncertainty.
In the wholesale portfolio, off-balance sheet financial instruments
have a lower likelihood to be fully converted to a funded exposure at
the point of default, and consequently the sensitivity of the allowance
for ECL is lower in relation to its nominal amount, when compared
with an on-balance sheet exposure with a similar risk profile.
HSBC Holdings plc
201
Retail analysis
IFRS 9 ECL sensitivity to future economic conditions1
Reported gross
carrying
amount
Reported
allowance for
ECL
Consensus
Central
scenario
allowance for
ECL
Consensus
Upside
scenario
allowance for
ECL
Consensus
Downside
scenario
allowance for
ECL
Downside 2
scenario
allowance for
ECL
By geography at 31 December 2023
$m
$m
$m
$m
$m
$m
UK
Mortgages
161,127
189
180
172
201
334
Credit cards
7,582
344
340
302
353
486
Other
8,183
341
333
273
383
515
Mexico
Mortgages
8,666
188
180
150
235
363
Credit cards
2,445
295
286
206
376
489
Other
4,529
513
503
426
600
731
Hong Kong
Mortgages
106,136
2
2
1
3
5
Credit cards
9,128
287
239
214
395
887
Other
6,269
109
100
88
124
256
UAE
Mortgages
2,001
25
25
25
25
25
Credit cards
471
24
24
22
25
32
Other
721
20
20
19
21
28
France3
Mortgages
20,589
50
50
50
51
51
Other
1,328
44
44
43
45
48
US
Mortgages
14,385
8
4
3
4
10
Credit cards
204
15
15
10
15
16
Canada2
Mortgages
25,464
67
65
64
70
99
Credit cards
338
13
13
12
16
15
Other
1,368
13
13
12
14
33
Other geographies
Mortgages
55,368
152
149
144
158
198
Credit cards
3,655
173
166
151
202
291
Other
2,416
91
86
83
95
137
Total
442,373
2,962
2,835
2,471
3,411
5,049
of which: mortgages
Stage 1
347,874
101
92
77
145
303
Stage 2
43,451
264
249
225
280
429
Stage 3
2,412
316
314
307
322
352
of which: credit cards
Stage 1
18,557
249
232
180
329
604
Stage 2
4,953
707
657
546
859
1,415
Stage 3
312
193
193
192
194
197
of which: others
Stage 1
19,551
218
151
205
272
501
Stage 2
4,542
540
423
519
636
868
Stage 3
722
373
370
373
375
379
Risk review
202
HSBC Holdings plc
IFRS 9 ECL sensitivity to future economic conditions1 (continued)
Reported gross
carrying amount
Reported
allowance for
ECL
Consensus
Central scenario
allowance for ECL
Consensus
Upside scenario
allowance for ECL
Consensus
Downside scenario
allowance for ECL
Downside 2
scenario
allowance for ECL
By geography at 31 December 2022
$m
$m
$m
$m
$m
$m
UK
Mortgages
147,306
204
188
183
189
399
Credit cards
6,518
455
434
396
442
719
Other
7,486
368
333
274
383
605
Mexico
Mortgages
6,319
152
127
102
183
270
Credit cards
1,616
198
162
97
233
289
Other
3,447
438
400
318
503
618
Hong Kong
Mortgages
100,107
1
1
—
1
1
Credit cards
8,003
261
227
180
417
648
Other
5,899
85
81
74
100
123
UAE
Mortgages
2,170
37
37
36
38
38
Credit cards
441
41
37
21
68
86
Other
718
17
17
15
19
22
France
Mortgages
21,440
51
50
50
51
52
Other
1,433
54
53
52
55
59
US
Mortgages
13,489
7
6
6
8
15
Credit cards
219
26
25
23
27
36
Canada
Mortgages
25,163
45
44
43
46
58
Credit cards
299
10
9
8
11
11
Other
1,399
16
14
13
17
36
Other geographies
Mortgages
56,383
199
190
183
205
253
Credit cards
3,871
192
176
150
219
324
Other
3,630
115
111
107
119
159
Total
417,356
2,972
2,722
2,331
3,334
4,821
1  Allowance for ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2  Classified as ‘assets held for sale’ at 31 December 2023.
3  Includes balances and allowance for ECL, which have been reclassified from ‘loans and advances to customers’ to ‘assets held for sale’ in the balance
sheet at 31 December 2023. This also includes any balances and allowance for ECL, which continue to be reported as personal lending in ‘loans and
advances to customers’ that are in accordance with the basis of inclusion for retail sensitivity analysis.
At 31 December 2023, the most significant level of allowance for ECL
sensitivity was observed in the UK, Mexico and Hong Kong.
Mortgages reflected the lowest level of allowance for ECL sensitivity
across most markets given the significant levels of collateral relative
to the exposure values. Credit cards and other unsecured lending
across stage 1 and 2 are more sensitive to economic forecasts and
therefore reflected the highest level of allowance for ECL sensitivity
during 2023.
There is limited sensitivity in credit cards and other unsecured lending
in stage 3 as levels of loss on defaulted exposures remain consistent
through various economic conditions. The alternative downside is
from the tail of the economic distribution where allowance for ECL is
more sensitive based on historical experience.
The reported gross carrying amount by stage is representative of the
weighted scenario allowance for ECL. The allowance for ECL
sensitivity to the other scenarios includes changes in allowance for
ECL due to the levels of loss and the migration of additional lending
balances in or out of stage 2.
Group ECL sensitivity results
The allowance for ECL of the scenarios and management
judgemental adjustments is highly sensitive to movements in
economic forecasts. Based upon the sensitivity tables presented
above, if the Group allowance for ECL balance was estimated solely
on the basis of the Central scenario, Downside scenario or the
Downside 2 scenario at 31 December 2023, it would increase/
(decrease) as presented in the below table.
Retail1
Wholesale1
Total Group ECL at 31 December 2023
$bn
$bn
Reported allowance for ECL
3.0
2.5
Scenarios
100% Consensus Central scenario
(0.1)
(0.2)
100% Consensus Upside scenario
(0.5)
(0.7)
100% Consensus Downside scenario
0.4
0.8
100% Downside 2 scenario
2.1
4.5
Total Group ECL at 31 December 2022
Reported allowance for ECL
3.0
3.1
Scenarios
100% Consensus Central scenario
(0.2)
(0.5)
100% Consensus Upside scenario
(0.6)
(1.1)
100% Consensus Downside scenario
0.4
0.8
100% Downside 2 scenario
1.8
5.5
1On the same basis as retail and wholesale sensitivity analysis.
HSBC Holdings plc
203
At 31 December 2023, the Group allowance for ECL remained
unchanged in the retail portfolio and decreased by $0.6bn in the
wholesale portfolio, compared with 31 December 2022.
The decrease in the Downside 2 scenario sensitivity within the
wholesale portfolio since 31 December 2022 has been mostly driven
by the crystallisation of defaults of higher risk exposures to the
mainland China real estate sector and a reduction of related
uncertainty. Within the retail portfolio, the increase in the Downside 2
scenario sensitivity was due to portfolio growth in Mexico and
scenario forecast deterioration in Hong Kong.
At 31 December 2023, the sensitivity of the allowance for ECL to the
consensus Central and consensus Upside scenarios decreased for
both retail and wholesale portfolios due to lower macroeconomic
forecast uncertainty, and the return to standardised weighting for the
probability-weighted reported allowance.
Reconciliation from reported exposure and ECL to sensitised exposure and weighted ECL
Wholesale
Retail
Total
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
Included in sensitivity analysis
1,990,378
(2,507)
442,373
(2,962)
2,432,751
(5,469)
–  Exclusions from sensitivity as described in the
section above1
17,024
(6,237)
308,569
(93)
325,593
(6,330)
–  Debt instruments measured at fair value through
other comprehensive income2
(302,348)
97
—
—
(302,348)
97
–  Performance guarantees2
(93,312)
35
—
—
(93,312)
35
–  Other financial assets at amortised cost not
presented as wholesale or personal lending, including
held for sale2
(579,534)
93
(41,129)
174
(620,663)
267
–  Other3
2,704
(84)
(4,175)
(11)
(1,471)
(95)
As reported in the Summary of credit risk
(excluding debt instruments measured at FVOCI) by
stage distribution and ECL coverage by industry
sector at 31 December 2023
1,034,912
(8,603)
705,638
(2,892)
1,740,550
(11,495)
Other financial assets at amortised cost
960,271
(422)
Total reported in the Summary of credit risk
(excluding debt instruments measured at FVOCI) by
stage distribution and ECL coverage by industry
sector at 31 December 2023
2,700,821
(11,917)
1  Comprises wholesale defaulted obligors, retail portfolios utilising less complex modelling approaches, private banking and insurance.
2  The sensitivity analysis includes certain items reported in Other assets at amortised cost, which are not allocated to an industry in the credit tables. It
also includes FVOCI and performance guarantees, which are presented separately in the credit tables.
3  Includes FX and other operational variances.
Reconciliations of changes in gross carrying/nominal amount and allowances
for loans and advances to banks and customers including loan commitments
and financial guarantees
The following disclosure provides a reconciliation by stage of the
Group’s gross carrying/nominal amount and allowances for loans and
advances to banks and customers, including loan commitments and
financial guarantees.
In addition, a reconciliation by stage of the Group’s gross carrying
amount and allowances for loans and advances to banks and
customers and a reconciliation by stage of the Group’s nominal
amount and allowances for loan commitments and financial
guarantees were included in this section following the adoption of the
recommendations of the DECL Taskforce‘s third report.
Movements are calculated on a quarterly basis and therefore fully
capture stage movements between quarters. If movements were
calculated on a year-to-date basis they would only reflect the opening
and closing position of the financial instrument.
The transfers of financial instruments represents the impact of stage
transfers upon the gross carrying/nominal amount and associated
allowance for ECL.
The net remeasurement of ECL arising from transfer of stage
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the
underlying customer risk rating (‘CRR’)/probability of default (‘PD’)
movements of the financial instruments transferring stage. This is
captured, along with other credit quality movements in the ‘changes
to risk parameters – credit quality’ line item.
Changes in ‘Net new and further lending/repayments’ represents the
impact from volume movements within the Group’s lending portfolio
and includes ‘New financial assets originated or purchased’, ‘assets
derecognised (including final repayments)’ and ‘changes to risk
parameters – further lending/repayment’.
Risk review
204
HSBC Holdings plc
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
1,433,643
(1,257)
177,223
(3,710)
21,207
(6,949)
129
(38)
1,632,202
(11,954)
Transfers of financial
instruments:
(18,948)
(1,048)
10,286
2,228
8,662
(1,180)
—
—
—
—
–transfers from stage 1 to
stage 2
(150,728)
442
150,728
(442)
—
—
—
—
—
—
–  transfers from stage 2 to
stage 1
133,079
(1,467)
(133,079)
1,467
—
—
—
—
—
—
–  transfers to stage 3
(1,986)
23
(8,600)
1,379
10,586
(1,402)
—
—
—
—
–  transfers from stage 3
687
(46)
1,237
(176)
(1,924)
222
—
—
—
—
Net remeasurement of ECL
arising from transfer of
stage
—
917
—
(973)
—
(124)
—
—
—
(180)
Net new and further
lending/repayments
77,693
(185)
(36,795)
661
(4,956)
1,117
(36)
3
35,906
1,596
Changes to risk parameters
– credit quality
—
307
—
(1,262)
—
(3,896)
—
21
—
(4,830)
Changes to models used
for ECL calculation
—
(22)
—
46
—
7
—
—
—
31
Assets written off
—
—
—
—
(3,922)
3,922
—
—
(3,922)
3,922
Credit-related modifications
that resulted in
derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and
others1
4,417
(12)
2,370
(92)
(73)
(55)
(8)
(16)
6,706
(175)
At 31 Dec 2023
1,496,805
(1,300)
153,084
(3,102)
20,799
(7,063)
85
(30)
1,670,773
(11,495)
ECL income statement
change for the period
1,017
(1,528)
(2,896)
24
(3,383)
Recoveries
268
Others
(195)
Total ECL income
statement change for the
period
(3,310)
1Total includes $7.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding
allowance for ECL of $70m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’
on page 428.
At 31 Dec 2023
12 months ended
31 Dec 2023
Gross carrying/
nominal amount
Allowance for ECL
ECL charge
 
$m
$m
$m
As above
1,670,773
(11,495)
(3,310)
Other financial assets measured at amortised cost
960,271
(422)
(35)
Non-trading reverse purchase agreement commitments
69,777
—
—
Performance and other guarantees not considered for IFRS 9
—
—
(44)
Summary of financial instruments to which the impairment requirements in IFRS 9 are
applied/Summary consolidated income statement
2,700,821
(11,917)
(3,389)
Debt instruments measured at FVOCI
302,348
(97)
(58)
Total allowance for ECL/total income statement ECL change for the period
n/a
(12,014)
(3,447)
As shown in the previous table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees decreased $459m during the period from
$11,954m at 31 December 2022 to $11,495m at 31 December 2023.
This decrease was driven by:
–$3,922m of assets written off;
–$1,596m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayment;
–$95m relating to credit-related modifications, which resulted in
derecognition; and
–$31m of changes to models used for ECL calculation.
These were partly offset by:
–$4,830m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between
stages;
–$180m relating to the net remeasurement impact of stage
transfers; and
–foreign exchange and other movements of $175m.
HSBC Holdings plc
205
The ECL charge for the period of $3,383m presented in the previous
table consisted of $4,830m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages and $180m relating to the net
remeasurement impact of stage transfers.
This was partly offset by $1,596m relating to underlying net book
volume movement and $31m in changes to models used for ECL
calculation.
Summary views of the movement in wholesale and personal lending
are presented on pages 215 and 228.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2022
1,575,808
(1,552)
155,654
(3,323)
19,796
(6,928)
275
(64)
1,751,533
(11,867)
Transfers of financial instruments:
(98,940)
(794)
88,974
1,616
9,966
(822)
—
—
—
—
–  transfers from stage 1 to
stage 2
(225,458)
469
225,458
(469)
—
—
—
—
—
—
–  transfers from stage 2 to
stage 1
128,170
(1,211)
(128,170)
1,211
—
—
—
—
—
—
–  transfers to stage 3
(2,392)
9
(10,083)
1,132
12,475
(1,141)
—
—
—
—
–  transfers from stage 3
740
(61)
1,769
(258)
(2,509)
319
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
735
—
(948)
—
(148)
—
—
—
(361)
Net new and further lending/
repayments
99,253
(175)
(44,877)
435
(3,399)
674
(133)
3
50,844
937
Changes to risk parameters –
credit quality
—
400
—
(1,671)
—
(3,019)
—
32
—
(4,258)
Changes to models used for ECL
calculation
—
4
—
(151)
—
13
—
—
—
(134)
Assets written off
—
—
—
—
(2,791)
2,791
(10)
10
(2,801)
2,801
Credit-related modifications that
resulted in derecognition
—
—
—
—
(32)
9
—
—
(32)
9
Foreign exchange and others1
(142,478)
125
(22,528)
332
(2,333)
481
(3)
(19)
(167,342)
919
At 31 Dec 2022
1,433,643
(1,257)
177,223
(3,710)
21,207
(6,949)
129
(38)
1,632,202
(11,954)
ECL income statement change for
the period
—
964
—
(2,335)
0
(2,480)
—
35
—
(3,816)
Recoveries
—
—
—
—
—
—
—
—
—
316
Others
—
—
—
—
—
—
—
—
—
(28)
Total ECL income statement
change for the period
—
—
—
—
—
—
—
—
—
(3,528)
1  Total includes $82.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a
corresponding allowance for ECL of $426m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups
held for sale’ on page 428.
At 31 Dec 2022
12 months ended
31 Dec 2022
Gross carrying/
nominal amount
Allowance for
ECL
ECL charge
 
$m
$m
$m
As above
1,632,202
(11,954)
(3,528)
Other financial assets measured at amortised cost
954,934
(493)
(38)
Non-trading reverse purchase agreement commitments
44,921
—
—
Performance and other guarantees not considered for IFRS 9
—
—
39
Summary of financial instruments to which the impairment requirements in IFRS 9 are
applied/Summary consolidated income statement
2,632,057
(12,447)
(3,527)
Debt instruments measured at FVOCI
265,147
(126)
(57)
Total allowance for ECL/total income statement ECL change for the period
n/a
(12,573)
(3,584)
Risk review
206
HSBC Holdings plc
Reconciliation of changes in gross carrying amount and allowances for loans and advances to banks and customers
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
879,023
(1,109)
140,816
(3,518)
19,586
(6,851)
129
(38)
1,039,554
(11,516)
Transfers of financial instruments:
(19,276)
(980)
11,250
2,154
8,026
(1,174)
—
—
—
—
–  transfers from stage 1 to stage 2
(108,758)
423
108,758
(423)
—
—
—
—
—
—
–  transfers from stage 2 to stage 1
90,655
(1,382)
(90,655)
1,382
—
—
—
—
—
—
–  transfers to stage 3
(1,692)
22
(7,975)
1,367
9,667
(1,389)
—
—
—
—
–  transfers from stage 3
519
(43)
1,122
(172)
(1,641)
215
—
—
—
—
Net remeasurement of ECL arising
from transfer of stage
—
859
—
(934)
—
(118)
—
—
—
(193)
Net new and further lending/
repayments
55,024
(210)
(32,069)
685
(4,233)
1,026
(40)
3
18,682
1,504
Changes to risk parameters – credit
quality
—
311
—
(1,292)
—
(3,804)
—
21
—
(4,764)
Changes to models used for ECL
calculation
—
(17)
—
28
—
7
—
—
—
18
Assets written off
—
—
—
—
(3,922)
3,922
—
—
(3,922)
3,922
Credit-related modifications that
resulted in derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and others1
6,092
6
2,310
(90)
(63)
(55)
(8)
(16)
8,331
(155)
At 31 Dec 2023
920,863
(1,140)
122,307
(2,967)
19,275
(6,952)
81
(30)
1,062,526
(11,089)
ECL income statement change for
the period
943
(1,513)
(2,889)
24
(3,435)
Recoveries
268
Others
(203)
Total ECL income statement
change for the period
(3,370)
1  Total includes $7.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding
allowance for ECL of $70m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’
on page 428.
Reconciliation of changes in nominal amount and allowances for loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
554,620
(148)
36,407
(192)
1,621
(98)
—
—
592,648
(438)
Transfers of financial instruments:
328
(68)
(964)
74
636
(6)
—
—
—
—
–  transfers from stage 1 to
stage 2
(41,970)
19
41,970
(19)
—
—
—
—
—
—
–  transfers from stage 2 to
stage 1
42,424
(85)
(42,424)
85
—
—
—
—
—
—
–  transfers to stage 3
(294)
1
(625)
12
919
(13)
—
—
—
—
–  transfers from stage 3
168
(3)
115
(4)
(283)
7
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
58
—
(39)
—
(6)
—
—
—
13
Net new and further lending/
repayments
22,669
25
(4,726)
(24)
(723)
91
4
—
17,224
92
Changes to risk parameters –
credit quality
—
(4)
—
30
—
(92)
—
—
—
(66)
Changes to models used for ECL
calculation
—
(5)
—
18
—
—
—
—
—
13
Foreign exchange and others
(1,675)
(18)
60
(2)
(10)
—
—
—
(1,625)
(20)
At 31 Dec 2023
575,942
(160)
30,777
(135)
1,524
(111)
4
—
608,247
(406)
ECL income statement change
for the period
74
(15)
(7)
—
52
Recoveries
—
Others
8
Total ECL income statement
change for the period
60
HSBC Holdings plc
207
Credit quality
Credit quality of financial instruments
(Audited)
We assess the credit quality of all financial instruments that are
subject to credit risk. The credit quality of financial instruments is a
point-in-time assessment of PD, whereas stages 1 and 2 are
determined based on relative deterioration of credit quality since initial
recognition for the majority of portfolios. Accordingly, for non-credit-
impaired financial instruments, there is no direct relationship
between the credit quality assessment and stages 1 and 2, although
typically the lower credit quality bands exhibit a higher proportion in
stage 2.
The five credit quality classifications provided below each encompass
a range of granular internal credit rating grades assigned to wholesale
and personal lending businesses and the external ratings attributed by
external agencies to debt securities, as shown in the table on
page 184.
                                                                                                                                                                                   
Distribution of financial instruments by credit quality at 31 December 2023
(Audited)
Gross carrying/notional amount
Allowance
for ECL/
other credit
provisions
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
In-scope for IFRS 9 ECL
Loans and advances to
customers held at amortised cost
497,665
206,476
197,582
28,532
19,354
949,609
(11,074)
938,535
–  personal
346,562
62,656
32,314
2,485
3,505
447,522
(2,867)
444,655
–  corporate and commercial
118,123
123,713
145,249
25,531
15,039
427,655
(7,803)
419,852
–  non-bank financial institutions
32,980
20,107
20,019
516
810
74,432
(404)
74,028
Loans and advances to banks
held at amortised cost
101,057
4,640
6,363
855
2
112,917
(15)
112,902
Cash and balances at central
banks
284,723
1,068
77
—
—
285,868
—
285,868
Items in the course of collection
from other banks
6,327
15
—
—
—
6,342
—
6,342
Hong Kong Government
certificates of indebtedness
42,024
—
—
—
—
42,024
—
42,024
Reverse repurchase agreements
– non-trading
170,494
46,884
34,206
633
—
252,217
—
252,217
Financial investments
143,333
3,814
1,137
62
—
148,346
(20)
148,326
Assets held for sale
68,501
16,403
14,812
2,939
531
103,186
(324)
102,862
Other assets
99,857
11,967
9,965
366
133
122,288
(78)
122,210
–  endorsements and
acceptances
2,405
2,666
2,707
161
18
7,957
(18)
7,939
–  accrued income and other
97,452
9,301
7,258
205
115
114,331
(60)
114,271
Debt instruments measured at
fair value through other
comprehensive income1
288,959
12,037
7,897
805
5
309,703
(97)
309,606
Out-of-scope for IFRS 9 ECL
Trading assets
122,695
20,595
20,746
1,326
135
165,497
—
165,497
Other financial assets designated
and otherwise mandatorily
measured at fair value through
profit or loss
52,649
11,517
4,733
84
6
68,989
—
68,989
Derivatives
196,098
27,377
6,041
187
11
229,714
—
229,714
Assets held for sale
12,495
—
—
—
—
12,495
—
12,495
Total gross carrying amount on
balance sheet
2,086,877
362,793
303,559
35,789
20,177
2,809,195
(11,608)
2,797,587
Percentage of total
credit quality (%)
74.3
12.9
10.8
1.3
0.7
100
Loan and other credit-related
commitments
436,359
142,500
73,230
7,782
1,144
661,015
(367)
660,648
Financial guarantees
7,700
4,146
4,080
699
384
17,009
(39)
16,970
In-scope: Irrevocable loan
commitments and financial
guarantees
444,059
146,646
77,310
8,481
1,528
678,024
(406)
677,618
Loan and other credit-related
commitments
92,509
77,891
61,462
3,896
377
236,135
—
236,135
Performance and other
guarantees
39,784
32,231
19,445
1,853
964
94,277
(145)
94,132
Out-of-scope: Revocable loan
commitments and non-
financial guarantees
132,293
110,122
80,907
5,749
1,341
330,412
(145)
330,267
1For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance.
As such, the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value
gains and losses.
Risk review
208
HSBC Holdings plc
Distribution of financial instruments by credit quality at 31 December 2022 (continued)
(Audited)
Gross carrying/notional amount
Allowance
for ECL/other
credit
provisions
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
In-scope for IFRS 9 ECL
Loans and advances to customers
held at amortised cost
492,711
196,735
196,486
29,443
19,633
935,008
(11,447)
923,561
–  personal
333,839
45,590
28,918
3,196
3,339
414,882
(2,870)
412,012
–  corporate and commercial
126,521
132,128
153,841
24,887
15,825
453,202
(8,320)
444,882
–  non-bank financial institutions
32,351
19,017
13,727
1,360
469
66,924
(257)
66,667
Loans and advances to banks
held at amortised cost
92,675
4,833
5,643
1,311
82
104,544
(69)
104,475
Cash and balances at central
banks
325,119
1,296
590
—
—
327,005
(3)
327,002
Items in the course of collection
from other banks
7,280
12
5
—
—
7,297
—
7,297
Hong Kong Government
certificates of indebtedness
43,787
—
—
—
—
43,787
—
43,787
Reverse repurchase agreements
–  non-trading
170,386
41,659
41,686
20
3
253,754
—
253,754
Financial investments
103,379
3,212
2,334
161
—
109,086
(20)
109,066
Assets held for sale
67,616
17,993
13,972
2,333
642
102,556
(415)
102,141
Other assets
91,006
11,126
8,875
290
152
111,449
(55)
111,394
–  endorsements and
acceptances
2,350
3,059
2,815
175
25
8,424
(17)
8,407
–  accrued income and other
88,656
8,067
6,060
115
127
103,025
(38)
102,987
Debt instruments measured at
fair value through other
comprehensive income1
260,654
9,957
5,730
1,910
7
278,258
(126)
278,132
Out-of-scope for IFRS 9 ECL
Trading assets
91,330
14,371
23,414
820
133
130,068
—
130,068
Other financial assets designated
and otherwise mandatorily
measured at fair value through
profit or loss
49,602
11,116
3,145
187
—
64,050
—
64,050
Derivatives
241,918
34,181
7,843
181
36
284,159
—
284,159
Assets held for sale
15,254
—
—
—
—
15,254
—
15,254
Total gross carrying amount on
balance sheet
2,052,717
346,491
309,723
36,656
20,688
2,766,275
(12,135)
2,754,140
Percentage of total
credit quality (%)
74.2
12.6
11.2
1.3
0.7
100
—
—
Loan and other credit-related
commitments
402,972
132,402
74,410
7,632
1,372
618,788
(386)
618,402
Financial guarantees
8,281
4,669
4,571
1,013
249
18,783
(52)
18,731
In-scope: Irrevocable loan
commitments and financial
guarantees
411,253
137,071
78,981
8,645
1,621
637,571
(438)
637,133
Loan and other credit-related
commitments
76,098
69,667
59,452
3,360
489
209,066
—
209,066
Performance and other
guarantees
37,943
30,029
17,732
2,137
399
88,240
(110)
88,130
Out-of-scope: Revocable loan
commitments and non-financial
guarantees
114,041
99,696
77,184
5,497
888
297,306
(110)
297,196
1For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance.
As such, the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value
gains and losses.
HSBC Holdings plc
209
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
Gross carrying/notional amount
Allowance 
for ECL
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers at amortised cost
497,665
206,476
197,582
28,532
19,354
949,609
(11,074)
938,535
–  stage 1
478,422
177,410
147,940
5,612
—
809,384
(1,130)
808,254
–  stage 2
19,243
29,066
49,642
22,920
—
120,871
(2,964)
117,907
–  stage 3
—
—
—
—
19,273
19,273
(6,950)
12,323
–  POCI
—
—
—
—
81
81
(30)
51
Loans and advances to banks at amortised cost
101,057
4,640
6,363
855
2
112,917
(15)
112,902
–  stage 1
101,011
4,631
5,550
287
—
111,479
(10)
111,469
–  stage 2
46
9
813
568
—
1,436
(3)
1,433
–  stage 3
—
—
—
—
2
2
(2)
—
–  POCI
—
—
—
—
—
—
—
—
Other financial assets measured at amortised cost
815,259
80,151
60,197
4,000
664
960,271
(422)
959,849
–  stage 1
814,776
78,486
53,095
516
—
946,873
(109)
946,764
–  stage 2
483
1,665
7,102
3,484
—
12,734
(132)
12,602
–  stage 3
—
—
—
—
664
664
(181)
483
–  POCI
—
—
—
—
—
—
—
—
Loan and other credit-related commitments
436,359
142,500
73,230
7,782
1,144
661,015
(367)
660,648
–  stage 1
432,017
135,192
61,213
2,527
—
630,949
(153)
630,796
–  stage 2
4,342
7,308
12,017
5,255
—
28,922
(128)
28,794
–  stage 3
—
—
—
—
1,140
1,140
(86)
1,054
–  POCI
—
—
—
—
4
4
—
4
Financial guarantees
7,700
4,146
4,080
699
384
17,009
(39)
16,970
–  stage 1
7,497
3,943
3,204
102
—
14,746
(7)
14,739
–  stage 2
203
203
876
597
—
1,879
(7)
1,872
–  stage 3
—
—
—
—
384
384
(25)
359
–  POCI
—
—
—
—
—
—
—
—
At 31 Dec 2023
1,858,040
437,913
341,452
41,868
21,548
2,700,821
(11,917)
2,688,904
Debt instruments at FVOCI1
–  stage 1
288,909
12,037
7,579
—
—
308,525
(37)
308,488
–  stage 2
50
—
318
805
—
1,173
(59)
1,114
–  stage 3
—
—
—
—
5
5
(1)
4
–  POCI
—
—
—
—
—
—
—
—
At 31 Dec 2023
288,959
12,037
7,897
805
5
309,703
(97)
309,606
Loans and advances to customers at amortised cost
492,711
196,735
196,486
29,443
19,633
935,008
(11,447)
923,561
–  stage 1
458,706
170,055
142,408
5,130
—
776,299
(1,092)
775,207
–  stage 2
34,005
26,680
54,078
24,313
—
139,076
(3,488)
135,588
–  stage 3
—
—
—
—
19,504
19,504
(6,829)
12,675
–  POCI
—
—
—
—
129
129
(38)
91
Loans and advances to banks at amortised cost
92,675
4,833
5,643
1,311
82
104,544
(69)
104,475
–  stage 1
92,377
4,465
5,466
415
—
102,723
(18)
102,705
–  stage 2
298
368
177
896
—
1,739
(29)
1,710
–  stage 3
—
—
—
—
82
82
(22)
60
–  POCI
—
—
—
—
—
—
—
—
Other financial assets measured at amortised cost
808,573
75,298
67,462
2,804
797
954,934
(493)
954,441
–  stage 1
807,893
70,794
59,887
224
—
938,798
(95)
938,703
–  stage 2
680
4,504
7,575
2,580
—
15,339
(165)
15,174
–  stage 3
—
—
—
—
797
797
(233)
564
–  POCI
—
—
—
—
—
—
—
—
Loan and other credit-related commitments
402,972
132,402
74,410
7,632
1,372
618,788
(386)
618,402
–  stage 1
398,120
121,581
60,990
2,692
—
583,383
(141)
583,242
–  stage 2
4,852
10,821
13,420
4,940
—
34,033
(180)
33,853
–  stage 3
—
—
—
—
1,372
1,372
(65)
1,307
–  POCI
—
—
—
—
—
—
—
—
Financial guarantees
8,281
4,669
4,571
1,013
249
18,783
(52)
18,731
–  stage 1
8,189
4,245
3,488
149
—
16,071
(6)
16,065
–  stage 2
92
424
1,083
864
—
2,463
(13)
2,450
–  stage 3
—
—
—
—
249
249
(33)
216
–  POCI
—
—
—
—
—
—
—
—
At 31 Dec 2022
1,805,212
413,937
348,572
42,203
22,133
2,632,057
(12,447)
2,619,610
Debt instruments at FVOCI1
–  stage 1
260,411
9,852
5,446
—
—
275,709
(67)
275,642
–  stage 2
243
105
284
1,910
—
2,542
(58)
2,484
–  stage 3
—
—
—
—
5
5
(1)
4
–  POCI
—
—
—
—
2
2
—
2
At 31 Dec 2022
260,654
9,957
5,730
1,910
7
278,258
(126)
278,132
1For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance.
As such, the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value
gains and losses.
Risk review
210
HSBC Holdings plc
Credit-impaired loans
(Audited)
We determine that a financial instrument is credit impaired and in
stage 3 by considering relevant objective evidence, primarily whether:
–contractual payments of either principal or interest are past due for
more than 90 days;
–there are other indications that the borrower is unlikely to pay,
such as when a concession has been granted to the borrower for
economic or legal reasons relating to the borrower’s financial
condition; and
–the loan is otherwise considered to be in default. If such
unlikeliness to pay is not identified at an earlier stage, it is deemed
    to occur when an exposure is 90 days past due. Therefore, the
definitions of credit impaired and default are aligned as far as
possible so that stage 3 represents all loans that are considered
defaulted or otherwise credit impaired.
Forbearance
The following table shows the gross carrying amounts and allowances
for ECL of the Group’s holdings of forborne loans and advances to
customers by industry sector and by stages.
A summary of our current policies and practices for forbearance is set
out in ‘Credit risk management’ on page 183.
Forborne loans and advances to customers at amortised cost by stage allocation
Performing forborne
Non-performing forborne
Total forborne
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
Gross carrying amount
Personal
816
1,282
—
2,098
–  first lien residential mortgages
530
815
—
1,345
–  second lien residential mortgages
1
8
—
9
–  guaranteed loans in respect of residential property
24
20
—
44
–  other personal lending which is secured
1
6
—
7
–  credit cards
96
83
—
179
–  other personal lending which is unsecured
155
349
—
504
–  motor vehicle finance
9
1
—
10
Wholesale
5,848
5,505
68
11,421
–  corporate and commercial
5,778
5,459
68
11,305
–  non-bank financial institutions
70
46
—
116
At 31 Dec 2023
6,664
6,787
68
13,519
Allowance for ECL
Personal
(113)
(307)
—
(420)
–  first lien residential mortgages
(50)
(113)
—
(163)
–  second lien residential mortgages
—
(3)
—
(3)
–  guaranteed loans in respect of residential property
—
(2)
—
(2)
–  other personal lending which is secured
—
(1)
—
(1)
–  credit cards
(17)
(46)
—
(63)
–  other personal lending which is unsecured
(43)
(142)
—
(185)
–  motor vehicle finance
(3)
—
—
(3)
Wholesale
(259)
(1,932)
(28)
(2,219)
–  corporate and commercial
(257)
(1,920)
(28)
(2,205)
–  non-bank financial institutions
(2)
(12)
—
(14)
At 31 Dec 2023
(372)
(2,239)
(28)
(2,639)
Gross carrying amount
Personal
651
1,171
—
1,822
–  first lien residential mortgages
369
738
—
1,107
–  second lien residential mortgages
—
7
—
7
–  guaranteed loans in respect of residential property
—
4
—
4
–  other personal lending which is secured
5
13
—
18
–  credit cards
93
75
—
168
–  other personal lending which is unsecured
179
334
—
513
–  motor vehicle finance
5
—
—
5
Wholesale
4,873
4,576
107
9,556
–  corporate and commercial
4,859
4,562
107
9,528
–  non-bank financial institutions
14
14
—
28
At 31 Dec 2022
5,524
5,747
107
11,378
Allowance for ECL
Personal
(124)
(302)
—
(426)
–  first lien residential mortgages
(49)
(118)
—
(167)
–  second lien residential mortgages
—
(3)
—
(3)
–  guaranteed loans in respect of residential property
—
(3)
—
(3)
–  other personal lending which is secured
—
(2)
—
(2)
–  credit cards
(19)
(44)
—
(63)
–  other personal lending which is unsecured
(54)
(132)
—
(186)
–  motor vehicle finance
(2)
—
—
(2)
Wholesale
(152)
(1,497)
(25)
(1,674)
–  corporate and commercial
(151)
(1,490)
(25)
(1,666)
–  non-bank financial institutions
(1)
(7)
—
(8)
At 31 Dec 2022
(276)
(1,799)
(25)
(2,100)
HSBC Holdings plc
211
Forborne loans and advances to customers by legal entities
HSBC UK
Bank plc
HSBC Bank
plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
$m
$m
$m
$m
$m
$m
$m
$m
Gross carrying amount
Performing forborne
1,478
2,081
1,574
31
954
503
43
6,664
Non-performing forborne
1,936
1,199
2,250
471
430
233
336
6,855
At 31 Dec 2023
3,414
3,280
3,824
502
1,384
736
379
13,519
Allowance for ECL
Performing forborne
(75)
(25)
(142)
(1)
(43)
(84)
(2)
(372)
Non-performing forborne
(289)
(400)
(986)
(225)
(74)
(126)
(167)
(2,267)
At 31 Dec 2023
(364)
(425)
(1,128)
(226)
(117)
(210)
(169)
(2,639)
Gross carrying amount
Performing forborne
899
2,222
276
435
997
530
165
5,524
Non-performing forborne
1,723
913
1,562
554
209
195
698
5,854
At 31 Dec 2022
2,622
3,135
1,838
989
1,206
725
863
11,378
Allowance for ECL
Performing forborne
(63)
(31)
(21)
(7)
(50)
(79)
(25)
(276)
Non-performing forborne
(257)
(310)
(525)
(356)
(21)
(111)
(244)
(1,824)
At 31 Dec 2022
(320)
(341)
(546)
(363)
(71)
(190)
(269)
(2,100)
Wholesale lending
This section provides further details on the major legal entities,
countries, territories and products comprising wholesale loans and
advances to customers and banks. Product granularity is also provided
by stage with legal entity data presented for loans and advances to
customers, banks, other credit commitments, financial guarantees
and similar contracts. Additionally, this section provides a
reconciliation of the opening 1 January 2023 to 31 December 2023
closing gross carrying/nominal amounts and the associated allowance
for ECL.
At 31 December 2023, wholesale lending for loans and advances to
banks and customers of $615bn decreased by $9.6bn compared with
31 December 2022. This included favourable foreign exchange
movements of $6.1bn. Excluding foreign exchange movements, the
total loans and advances to customers decrease of $24.6bn was
driven by a $31.5bn decrease in corporate and commercial balances,
partly offset by a $6.9bn increase in balances from non-bank financial
institutions. In addition, there was a $8.9bn increase in loans and
advances to banks.
The underlying reduction in corporate and commercial lending was
mainly driven by decreases in Hong Kong (down $18.6bn), in the UK
(down $5.4bn), in mainland China (down $2.2bn), in France (down
$1.6bn), in the US (down $1.3bn). These were partly offset by
increased lending in India (up $1.8bn). There was a $2.1bn decrease
from the merger of our business in Oman.
The underlying decrease in loans advances to corporate and
commercial customers within stage 2 included repayments within our
commercial real estate portfolio in Hong Kong, together with de-
risking measures in our mainland China commercial real estate
portfolio. In addition, there was a further decrease in the wholesale
and retail trade portfolio in the UK largely from repayments and
improvements in the economic outlook that led to upgrades to
stage 1.
The underlying growth in loans and advances to non-bank financial
institutions was mainly driven by the formation of HSBC Innovation
Banking, following the acquisition of SVB UK, in the UK (up $6.4bn). In
addition, increases in France (up $1.4bn) were partly offset by
decreases in mainland China (down $0.9bn).
The underlying growth in loans and advances to banks was mainly
driven by central bank balances and money market lending growth in
Singapore (up $6.5bn), Hong Kong (up $5.1bn), the UK (up $2.8bn)
and Egypt (up $1.5bn). These were partly offset by reductions in
mainland China (down $2.6bn), Malaysia (down $1.6bn), Switzerland
(down $1.4bn) and the UAE (down $1.2bn). There was also a $0.6bn
decrease from the merger of our business in Oman.
Loan commitments and financial guarantees increased by $27.5bn
since 31 December 2022 to $419.9bn at 31 December 2023.
Excluding favourable foreign exchange movements of $8.7bn, loan
commitments and financial guarantees grew by $18.8bn. This can be
mainly attributed to a $23.2bn increase in unsettled reverse
repurchase agreements, partly offset by a decrease of $6.3bn in loan
commitments with corporate and commercial customers.
The allowance for ECL attributable to loans and advances to banks
and customers of $8.2bn at 31 December 2023 decreased from
$8.6bn at 31 December 2022. This included adverse foreign exchange
movements of $0.1bn.
Excluding foreign exchange movements, the total decrease in the
wholesale allowance for ECL attributable to loans and advances to
customers and banks was mostly driven by a $0.6bn decrease in
corporate and commercial balances, partly offset by a $0.1bn increase
in loans to non-bank financial institutions and banks.
The allowance for ECL attributable to loan commitments and financial
guarantees at 31 December 2023 remained stable at $0.4bn
compared with 31 December 2022.
The table below provides a breakdown by industry sector and stage of
the Group’s gross carrying amount and allowances for ECL for
wholesale loans and advances to banks and customers.
Counterparties or exposures are classified when presenting
comparable economic characteristics, or engaged in similar activities
so that their collective ability to meet contractual obligations is
uniformly affected by changes in economic, political or other
conditions. Therefore, the industry classification does not adhere to
Nomenclature des Activités Économiques dans la Communauté
Européenne (‘NACE’), which is applicable to other financial regulatory
reporting.
Risk review
212
HSBC Holdings plc
Total wholesale lending for loans and advances to banks and customers by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
342,878
69,738
14,958
81
427,655
(499)
(1,500)
(5,774)
(30)
(7,803)
–  agriculture, forestry and fishing
5,207
1,662
312
—
7,181
(13)
(53)
(64)
—
(130)
–  mining and quarrying
6,260
638
325
—
7,223
(7)
(11)
(83)
—
(101)
–  manufacturing
69,690
13,744
1,877
22
85,333
(89)
(194)
(839)
(21)
(1,143)
–  electricity, gas, steam and air-
conditioning supply
12,817
1,283
255
—
14,355
(14)
(17)
(88)
—
(119)
–  water supply, sewerage, waste
management and remediation
2,753
407
102
—
3,262
(5)
(7)
(51)
—
(63)
–  real estate and construction
73,701
21,871
5,835
48
101,455
(96)
(629)
(2,554)
(7)
(3,286)
–  of which: commercial real estate
59,883
19,107
4,552
47
83,589
(73)
(603)
(2,091)
(7)
(2,774)
–  wholesale and retail trade, repair of
motor vehicles and motorcycles
66,083
10,676
2,358
4
79,121
(80)
(127)
(1,132)
(2)
(1,341)
–  transportation and storage
17,117
3,894
445
—
21,456
(18)
(52)
(160)
—
(230)
–  accommodation and food
9,681
5,135
1,058
—
15,874
(27)
(118)
(112)
—
(257)
–  publishing, audiovisual and
broadcasting
17,455
2,066
210
—
19,731
(42)
(81)
(50)
—
(173)
–  professional, scientific and technical
activities
22,686
3,327
733
7
26,753
(32)
(63)
(306)
—
(401)
–  administrative and support services
19,055
2,551
597
—
22,203
(31)
(63)
(174)
—
(268)
–  public administration and defence,
compulsory social security
1,037
5
—
—
1,042
—
—
—
—
—
–  education
1,137
277
46
—
1,460
(3)
(8)
(4)
—
(15)
–  health and care
3,245
808
183
—
4,236
(9)
(21)
(26)
—
(56)
–  arts, entertainment and recreation
1,666
196
99
—
1,961
(5)
(6)
(31)
—
(42)
–  other services
7,065
972
318
—
8,355
(26)
(37)
(90)
—
(153)
–  activities of households
684
10
—
—
694
—
—
—
—
—
–  extra-territorial organisations and
bodies activities
100
1
—
—
101
—
—
—
—
—
–  government
5,420
202
205
—
5,827
(2)
—
(10)
—
(12)
–  asset-backed securities
19
13
—
—
32
—
(13)
—
—
(13)
Non-bank financial institutions
69,972
3,650
810
—
74,432
(52)
(30)
(322)
—
(404)
Loans and advances to banks
111,479
1,436
2
—
112,917
(10)
(3)
(2)
—
(15)
At 31 Dec 2023
524,329
74,824
15,770
81
615,004
(561)
(1,533)
(6,098)
(30)
(8,222)
By legal entity
HSBC UK Bank plc
76,793
18,735
3,769
—
99,297
(213)
(474)
(593)
—
(1,280)
HSBC Bank plc
82,025
8,452
2,673
40
93,190
(69)
(138)
(1,035)
(7)
(1,249)
The Hongkong and Shanghai Banking
Corporation Limited
287,876
37,402
7,077
38
332,393
(185)
(696)
(3,349)
(21)
(4,251)
HSBC Bank Middle East Limited
21,927
1,598
894
3
24,422
(17)
(11)
(571)
(2)
(601)
HSBC North America Holdings Inc.
30,797
5,712
583
—
37,092
(24)
(145)
(127)
—
(296)
Grupo Financiero HSBC, S.A. de C.V.
13,714
1,186
382
—
15,282
(39)
(56)
(231)
—
(326)
Other trading entities
11,164
1,739
392
—
13,295
(14)
(13)
(192)
—
(219)
Holding companies, shared service
centres and intra-Group eliminations
33
—
—
—
33
—
—
—
—
—
At 31 Dec 2023
524,329
74,824
15,770
81
615,004
(561)
(1,533)
(6,098)
(30)
(8,222)
Total wholesale lending for loans and other credit-related commitments and financial guarantees to banks and customers by stage distribution1
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
256,367
22,218
1,066
4
279,655
(126)
(125)
(107)
—
(358)
Financial
135,039
5,111
103
—
140,253
(11)
(10)
(2)
—
(23)
At 31 Dec 2023
391,406
27,329
1,169
4
419,908
(137)
(135)
(109)
—
(381)
By legal entity
HSBC UK Bank plc
31,982
5,760
350
—
38,092
(31)
(32)
(56)
—
(119)
HSBC Bank plc
148,980
9,466
310
4
158,760
(20)
(27)
(27)
—
(74)
The Hongkong and Shanghai Banking
Corporation Limited
70,436
3,975
79
—
74,490
(59)
(39)
(16)
—
(114)
HSBC Bank Middle East Limited
6,944
323
56
—
7,323
(4)
(1)
(3)
—
(8)
HSBC North America Holdings Inc.
101,067
5,103
248
—
106,418
(14)
(27)
(1)
—
(42)
HSBC Bank Canada
28,156
2,461
66
—
30,683
(8)
(8)
(3)
—
(19)
Grupo Financiero HSBC, S.A. de C.V.
2,092
34
—
—
2,126
(1)
—
—
—
(1)
Other trading entities
1,749
207
60
—
2,016
—
(1)
(3)
—
(4)
At 31 Dec 2023
391,406
27,329
1,169
4
419,908
(137)
(135)
(109)
—
(381)
1Included in loans and other credit-related commitments and financial guarantees is $70bn relating to unsettled reverse repurchase agreements, which
once drawn are classified as ‘Reverse repurchase agreements – non-trading’.
HSBC Holdings plc
213
Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
351,885
85,492
15,696
129
453,202
(488)
(1,907)
(5,887)
(38)
(8,320)
–  agriculture, forestry and fishing
4,805
1,505
261
—
6,571
(10)
(44)
(68)
—
(122)
–  mining and quarrying
6,424
1,463
232
1
8,120
(5)
(21)
(145)
(1)
(172)
–  manufacturing
70,144
15,251
2,016
49
87,460
(93)
(164)
(867)
(29)
(1,153)
–  electricity, gas, steam and air-
conditioning supply
14,402
1,799
277
—
16,478
(10)
(31)
(67)
—
(108)
–  water supply, sewerage, waste
management and remediation
2,690
277
26
—
2,993
(3)
(5)
(13)
—
(21)
–  real estate and construction
81,830
27,104
5,625
26
114,585
(107)
(954)
(2,229)
(3)
(3,293)
–  of which: commercial real estate
68,120
23,608
4,648
19
96,395
(82)
(865)
(1,799)
—
(2,746)
–  wholesale and retail trade, repair of
motor vehicles and motorcycles
63,752
15,867
2,805
5
82,429
(97)
(225)
(1,341)
(3)
(1,666)
–  transportation and storage
19,068
5,062
556
—
24,686
(30)
(65)
(153)
—
(248)
–  accommodation and food
9,862
6,523
787
2
17,174
(23)
(139)
(81)
(1)
(244)
–  publishing, audiovisual and
broadcasting
16,574
1,537
249
28
18,388
(22)
(36)
(58)
(1)
(117)
–  professional, scientific and technical
activities
15,164
2,229
542
—
17,935
(21)
(51)
(200)
—
(272)
–  administrative and support services
20,592
3,505
962
18
25,077
(25)
(90)
(293)
—
(408)
–  public administration and defence,
compulsory social security
1,166
14
—
—
1,180
—
(1)
—
—
(1)
–  education
1,325
181
87
—
1,593
(4)
(5)
(22)
—
(31)
–  health and care
2,993
643
266
—
3,902
(6)
(17)
(67)
—
(90)
–  arts, entertainment and recreation
1,264
452
146
—
1,862
(4)
(16)
(57)
—
(77)
–  other services
10,335
1,547
589
—
12,471
(25)
(30)
(219)
—
(274)
–  activities of households
730
14
—
—
744
—
—
—
—
—
–  extra-territorial organisations and
bodies activities
47
—
—
—
47
—
—
—
—
—
–  government
8,699
506
270
—
9,475
(3)
—
(7)
—
(10)
–  asset-backed securities
19
13
—
—
32
—
(13)
—
—
(13)
Non-bank financial institutions
61,737
4,718
469
—
66,924
(43)
(77)
(137)
—
(257)
Loans and advances to banks
102,723
1,739
82
—
104,544
(18)
(29)
(22)
—
(69)
At 31 Dec 2022
516,345
91,949
16,247
129
624,670
(549)
(2,013)
(6,046)
(38)
(8,646)
By legal entity
HSBC UK Bank plc
64,930
18,856
4,439
28
88,253
(165)
(445)
(643)
(1)
(1,254)
HSBC Bank plc
83,174
9,175
2,631
3
94,983
(56)
(181)
(1,075)
—
(1,312)
The Hongkong and Shanghai Banking
Corporation Limited
292,022
50,708
6,934
80
349,744
(216)
(1,074)
(3,125)
(24)
(4,439)
HSBC Bank Middle East Limited
21,922
1,777
946
4
24,649
(11)
(21)
(684)
(3)
(719)
HSBC North America Holdings Inc.
30,816
6,861
211
—
37,888
(24)
(194)
(22)
—
(240)
Grupo Financiero HSBC, S.A. de C.V.
9,969
1,979
399
—
12,347
(48)
(62)
(225)
—
(335)
Other trading entities
13,512
2,593
687
14
16,806
(29)
(36)
(272)
(10)
(347)
Holding companies, shared service
centres and intra-Group eliminations
—
—
—
—
—
—
—
—
—
—
At 31 Dec 2022
516,345
91,949
16,247
129
624,670
(549)
(2,013)
(6,046)
(38)
(8,646)
Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1 (continued)
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
252,860
29,116
798
—
282,774
(116)
(178)
(96)
—
(390)
Financial
105,950
3,683
23
—
109,656
(5)
(14)
(2)
—
(21)
At 31 Dec 2022
358,810
32,799
821
—
392,430
(121)
(192)
(98)
—
(411)
By legal entity
HSBC UK Bank plc
26,036
5,527
208
—
31,771
(24)
(45)
(38)
—
(107)
HSBC Bank plc
142,100
11,710
291
—
154,101
(16)
(41)
(47)
—
(104)
The Hongkong and Shanghai Banking
Corporation Limited
67,473
6,081
114
—
73,668
(54)
(53)
(9)
—
(116)
HSBC Bank Middle East Limited
6,683
231
14
—
6,928
(2)
(2)
—
—
(4)
HSBC North America Holdings Inc.
88,039
3,959
87
—
92,085
(13)
(32)
(2)
—
(47)
HSBC Bank Canada
24,395
4,671
84
—
29,150
(8)
(15)
—
—
(23)
Grupo Financiero HSBC, S.A. de C.V.
2,468
240
3
—
2,711
(1)
—
—
—
(1)
Other trading entities
1,616
380
20
—
2,016
(3)
(4)
(2)
—
(9)
At 31 Dec 2022
358,810
32,799
821
—
392,430
(121)
(192)
(98)
—
(411)
1Included in loans and other credit-related commitments and financial guarantees is $45bn relating to unsettled reverse repurchase agreements, which
once drawn are classified as ‘Reverse repurchase agreements – non-trading’.
Risk review
214
HSBC Holdings plc
Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and
customers including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
830,322
(670)
124,660
(2,205)
17,068
(6,144)
129
(38)
972,179
(9,057)
Transfers of financial
instruments:
(16,804)
(429)
10,247
1,141
6,557
(712)
—
—
—
—
–transfers from stage 1 to
stage 2
(93,511)
172
93,511
(172)
—
—
—
—
—
—
–transfers from stage 2 to
stage 1
77,772
(605)
(77,772)
605
—
—
—
—
—
—
–  transfers to stage 3
(1,444)
20
(6,255)
765
7,699
(785)
—
—
—
—
–  transfers from stage 3
379
(16)
763
(57)
(1,142)
73
—
—
—
—
Net remeasurement of
ECL arising from transfer
of stage
—
354
—
(294)
—
(45)
—
—
—
15
Net new and further
lending/repayments
43,282
(138)
(32,082)
311
(3,787)
973
(36)
3
7,377
1,149
Change to risk parameters
– credit quality
—
203
—
(621)
—
(2,941)
—
21
—
(3,338)
Changes to models used
for ECL calculation
—
(9)
—
25
—
—
—
—
—
16
Assets written off
—
—
—
—
(2,596)
2,596
—
—
(2,596)
2,596
Credit-related
modifications that resulted
in derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and
others1
(10,818)
(9)
(696)
(25)
(184)
(29)
(8)
(16)
(11,706)
(79)
At 31 Dec 2023
845,982
(698)
102,129
(1,668)
16,939
(6,207)
85
(30)
965,135
(8,603)
ECL income statement
change for the period
410
(579)
(2,013)
24
(2,158)
Recoveries
42
Others
(203)
Total ECL income
statement change for the
period
(2,319)
1  Total includes $13.5bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale during the year, and
a corresponding allowance for ECL of $61m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal
groups held for sale’ on page 428.
As shown in the above table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees decreased by $454m during the period from
$9,057m at 31 December 2022 to $8,603m at 31 December 2023.
This decrease was driven by:
–$2,596m of assets written off;
–$1,149m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayments;
–$95m relating to credit-related modification, which resulted in
derecognition;
–$16m relating to changes to models used for ECL calculation; and
–$15m relating to the net remeasurement impact of stage
transfers.
These were partly offset by:
–$3,338m of changes to models used for ECL calculation; and
–foreign exchange and other movements of $79m.
The ECL charge for the period of $2,158m presented in the previous
table consisted of $3,338m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages. This was partly offset by $1,149m
relating to underlying net book volume movement, $16m in changes
to models used for ECL calculation and $15m relating to the net
remeasurement impact of stage transfers.
During the period, there was a net transfer to stage 2 of $15,739m
gross carrying/nominal amounts. It was primarily driven by $8,792m in
Hong Kong, mainly due to deterioration in the real estate and
construction sectors, and $6,273m in the UK, mainly driven by
increased interest rates affecting the corporate and commercial
portfolio.
HSBC Holdings plc
215
Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and
customers including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2022
880,181
(860)
137,493
(2,103)
14,685
(5,702)
275
(64)
1,032,634
(8,729)
Transfers of financial instruments:
(58,104)
(298)
49,485
942
8,619
(644)
—
—
—
—
–  transfers from stage 1 to
stage 2
(157,443)
202
157,443
(202)
—
—
—
—
—
—
–  transfers from stage 2 to
stage 1
100,810
(484)
(100,810)
484
—
—
—
—
—
—
–  transfers to stage 3
(1,829)
8
(8,101)
770
9,930
(778)
—
—
—
—
–  transfers from stage 3
358
(24)
953
(110)
(1,311)
134
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
240
—
(369)
—
(63)
—
—
—
(192)
Net new and further lending/
repayments
68,616
(158)
(45,336)
201
(3,253)
583
(133)
3
19,894
629
Changes to risk parameters –
credit quality
—
318
—
(995)
—
(2,196)
—
32
—
(2,841)
Changes to models used for ECL
calculation
—
6
—
(56)
—
—
—
—
—
(50)
Assets written off
—
—
—
—
(1,579)
1,579
(10)
10
(1,589)
1,589
Credit-related modifications that
resulted in derecognition
—
—
—
—
(32)
9
—
—
(32)
9
Foreign exchange and others1
(60,371)
82
(16,982)
175
(1,372)
290
(3)
(19)
(78,728)
528
At 31 Dec 2022
830,322
(670)
124,660
(2,205)
17,068
(6,144)
129
(38)
972,179
(9,057)
ECL income statement change
for the period
406
(1,219)
(1,676)
35
(2,454)
Recoveries
33
Others
—
—
—
—
—
—
—
—
—
(25)
Total ECL income statement
change for the period
(2,446)
1  Total includes $33.1bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale during the year, and
a corresponding allowance for ECL of $204m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal
groups held for sale’ on page 428.
Wholesale lending – distribution of financial instruments to which the impairment requirements of IFRS 9 are applied by credit quality
Gross carrying amount
Allowance
for ECL
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
By legal entity
HSBC UK Bank plc
20,777
30,245
36,206
8,300
3,769
99,297
(1,280)
98,017
HSBC Bank plc
41,149
20,962
24,164
4,202
2,713
93,190
(1,249)
91,941
The Hongkong and Shanghai Banking
Corporation Limited
165,255
72,683
78,566
8,774
7,115
332,393
(4,251)
328,142
HSBC Bank Middle East Limited
13,660
3,082
6,270
513
897
24,422
(601)
23,821
HSBC North America Holdings Inc.
6,244
13,668
13,094
3,503
583
37,092
(296)
36,796
Grupo Financiero HSBC, S.A. de C.V.
1,853
6,543
5,882
622
382
15,282
(326)
14,956
Other trading entities
3,189
1,277
7,449
988
392
13,295
(219)
13,076
Holding companies, shared service centres and
intra-Group eliminations
        33
          —
            —
          —
            —
        33
—
        33
At 31 Dec 2023
    252,160
      148,460
          171,631
        26,902
        15,851
      615,004
(8,222)
        606,782
Percentage of total credit quality (%)
41.0
24.1
27.9
4.4
2.6
100.0
By legal entity
HSBC UK Bank plc
17,533
28,685
32,388
5,180
4,467
88,253
(1,254)
86,999
HSBC Bank plc
41,687
21,058
24,560
5,044
2,634
94,983
(1,312)
93,671
The Hongkong and Shanghai Banking
Corporation Limited
167,209
81,128
84,661
9,732
7,014
349,744
(4,439)
345,305
HSBC Bank Middle East Limited
13,023
4,119
5,879
678
950
24,649
(719)
23,930
HSBC North America Holdings Inc.
7,226
13,220
12,673
4,558
211
37,888
(240)
37,648
Grupo Financiero HSBC, S.A. de C.V.
1,024
5,540
4,612
772
399
12,347
(335)
12,012
Other trading entities
3,845
2,228
8,438
1,594
701
16,806
(347)
16,459
At 31 Dec 2022
251,547
155,978
173,211
27,558
16,376
624,670
(8,646)
616,024
Percentage of total credit quality (%)
40.3
25.0
27.7
4.4
2.6
100.0
Risk review
216
HSBC Holdings plc
Our risk rating system facilitates the internal ratings-based approach under the Basel framework adopted by the Group to support calculation of
our minimum credit regulatory capital requirement. The credit quality classifications can be found on page 184.
Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost
Gross carrying amount
Allowance for ECL
Basel one-year
PD range
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
ECL
coverage
Mapped
external
rating
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Corporate
and
commercial
342,878
69,738
14,958
81
427,655
(499)
(1,500)
(5,774)
(30)
(7,803)
1.8
–  CRR 1
0.000 to 0.053
34,097
715
—
—
34,812
(4)
(3)
—
—
(7)
—
AA- and above
–  CRR 2
0.054 to 0.169
81,131
2,180
—
—
83,311
(23)
(14)
—
—
(37)
—
A+ to A-
–  CRR 3
0.170 to 0.740
112,322
11,391
—
—
123,713
(106)
(87)
—
—
(193)
0.2
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
72,654
16,904
—
—
89,558
(156)
(130)
—
—
(286)
0.3
BB+ to BB-
–  CRR 5
1.928 to 4.914
37,631
18,060
—
—
55,691
(169)
(240)
—
—
(409)
0.7
BB- to B
–  CRR 6
4.915 to 8.860
2,675
7,341
—
—
10,016
(24)
(176)
—
—
(200)
2.0
B-
–  CRR 7
8.861 to 15.000
1,031
6,319
—
—
7,350
(10)
(246)
—
—
(256)
3.5
CCC+
–  CRR 81
15.001 to 99.999
1,337
6,828
—
—
8,165
(7)
(604)
—
—
(611)
7.5
CCC to C
–  CRR 9/10
100.000
—
—
14,958
81
15,039
—
—
(5,774)
(30)
(5,804)
38.6
D
Non-bank
financial
institutions
69,972
3,650
810
—
74,432
(52)
(30)
(322)
—
(404)
0.5
–  CRR 1
0.000 to 0.053
15,475
211
—
—
15,686
(2)
—
—
—
(2)
—
AA- and above
–  CRR 2
0.054 to 0.169
16,920
374
—
—
17,294
(6)
(2)
—
—
(8)
—
A+ to A-
–  CRR 3
0.170 to 0.740
19,195
912
—
—
20,107
(10)
(4)
—
—
(14)
0.1
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
11,480
1,032
—
—
12,512
(19)
(5)
—
—
(24)
0.2
BB+ to BB-
–  CRR 5
1.928 to 4.914
6,635
872
—
—
7,507
(9)
(15)
—
—
(24)
0.3
BB- to B
–  CRR 6
4.915 to 8.860
232
116
—
—
348
(6)
(1)
—
—
(7)
2.0
B-
–  CRR 7
8.861 to 15.000
25
93
—
—
118
—
(2)
—
—
(2)
1.7
CCC+
–  CRR 8
15.001 to 99.999
10
40
—
—
50
—
(1)
—
—
(1)
2.0
CCC to C
–  CRR 9/10
100.000
—
—
810
—
810
—
—
(322)
—
(322)
39.8
D
Banks
111,479
1,436
2
—
112,917
(10)
(3)
(2)
—
(15)
—
–  CRR 1
0.000 to 0.053
89,112
10
—
—
89,122
(4)
—
—
—
(4)
—
AA- and above
–  CRR 2
0.054 to 0.169
11,899
36
—
—
11,935
(2)
—
—
—
(2)
—
A+ to A-
–  CRR 3
0.170 to 0.740
4,631
9
—
—
4,640
(1)
—
—
—
(1)
—
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
2,488
58
—
—
2,546
(1)
—
—
—
(1)
—
BB+ to BB-
–  CRR 5
1.928 to 4.914
3,062
755
—
—
3,817
(2)
(1)
—
—
(3)
0.1
BB- to B
–  CRR 6
4.915 to 8.860
22
20
—
—
42
—
—
—
—
—
—
B-
–  CRR 7
8.861 to 15.000
1
—
—
—
1
—
—
—
—
—
—
CCC+
–  CRR 8
15.001 to 99.999
264
548
—
—
812
—
(2)
—
—
(2)
0.2
CCC to C
–  CRR 9/10
100.000
—
—
2
—
2
—
—
(2)
—
(2)
100.0
D
At 31 Dec
2023
524,329
74,824
15,770
81
615,004
(561)
(1,533)
(6,098)
(30)
(8,222)
1.3
1  Corporate and commercial lending reported in CRR 8 for stage 1 includes $782m related to the UK Bounce Back Loan Scheme with immaterial
allowances for ECL.
HSBC Holdings plc
217
Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost (continued)
Basel one-year
PD range
Gross carrying amount
Allowance for ECL
ECL
coverage
Mapped
external rating
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Corporate and
commercial
351,885
85,492
15,696
129
453,202
(488)
(1,907)
(5,887)
(38)
(8,320)
1.8
–  CRR 1
0.000 to 0.053
35,574
330
—
—
35,904
(6)
(1)
—
—
(7)
—
AA- and above
–  CRR 2
0.054 to 0.169
87,383
3,234
—
—
90,617
(28)
(15)
—
—
(43)
0.1
A+ to A-
–  CRR 3
0.170 to 0.740
114,403
17,725
—
—
132,128
(128)
(122)
—
—
(250)
0.2
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
74,100
21,550
—
—
95,650
(155)
(210)
—
—
(365)
0.4
BB+ to BB-
–  CRR 5
1.928 to 4.914
36,563
21,628
—
—
58,191
(145)
(361)
—
—
(506)
0.9
BB- to B
–  CRR 6
4.915 to 8.860
2,512
9,171
—
—
11,683
(16)
(236)
—
—
(252)
2.2
B-
–  CRR 7
8.861 to 15.000
1,164
5,477
—
—
6,641
(8)
(336)
—
—
(344)
5.2
CCC+
–  CRR 8
15.001 to 99.999
186
6,377
—
—
6,563
(2)
(626)
—
—
(628)
9.6
CCC to C
–  CRR 9/10
100.000
—
—
15,696
129
15,825
—
—
(5,887)
(38)
(5,925)
37.4
D
Non-bank financial
institutions
61,737
4,718
469
—
66,924
(43)
(77)
(137)
—
(257)
0.4
–  CRR 1
0.000 to 0.053
15,082
421
—
—
15,503
(2)
(1)
—
—
(3)
—
AA- and above
–  CRR 2
0.054 to 0.169
16,351
497
—
—
16,848
(3)
(1)
—
—
(4)
—
A+ to A-
–  CRR 3
0.170 to 0.740
17,253
1,764
—
—
19,017
(9)
(13)
—
—
(22)
0.1
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
7,059
717
—
—
7,776
(19)
(4)
—
—
(23)
0.3
BB+ to BB-
–  CRR 5
1.928 to 4.914
5,215
736
—
—
5,951
(10)
(10)
—
—
(20)
0.3
BB- to B
–  CRR 6
4.915 to 8.860
716
90
—
—
806
—
(4)
—
—
(4)
0.5
B-
–  CRR 7
8.861 to 15.000
46
32
—
—
78
—
(3)
—
—
(3)
3.9
CCC+
–  CRR 8
15.001 to 99.999
15
461
—
—
476
—
(41)
—
—
(41)
8.6
CCC to C
–  CRR 9/10
100.000
—
—
469
—
469
—
—
(137)
—
(137)
29.2
D
Banks
102,723
1,739
82
—
104,544
(18)
(29)
(22)
—
(69)
0.1
–  CRR 1
0.000 to 0.053
79,217
120
—
—
79,337
(8)
—
—
—
(8)
—
AA- and above
–  CRR 2
0.054 to 0.169
13,160
178
—
—
13,338
(2)
—
—
—
(2)
—
A+ to A-
–  CRR 3
0.170 to 0.740
4,465
368
—
—
4,833
(3)
—
—
—
(3)
0.1
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
2,154
5
—
—
2,159
(1)
—
—
—
(1)
0.1
BB+ to BB-
–  CRR 5
1.928 to 4.914
3,312
172
—
—
3,484
(4)
(1)
—
—
(5)
0.1
BB- to B
–  CRR 6
4.915 to 8.860
—
5
—
—
5
—
—
—
—
—
—
B-
–  CRR 7
8.861 to 15.000
1
861
—
—
862
—
(27)
—
—
(27)
3.1
CCC+
–  CRR 8
15.001 to 99.999
414
30
—
—
444
—
(1)
—
—
(1)
0.2
CCC to C
–  CRR 9/10
100.000
—
—
82
—
82
—
—
(22)
—
(22)
26.8
D
At 31 Dec 2022
516,345
91,949
16,247
129
624,670
(549)
(2,013)
(6,046)
(38)
(8,646)
1.4
Wholesale lending – credit risk profile by obligor grade for loan and other credit-related commitments and financial guarantees
Nominal amount
Allowance for ECL
Basel one-year
PD range
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
ECL
coverage
Mapped
external
rating
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Loan and
other credit-
related
commitments
377,766
25,463
785
4
404,018
(130)
(128)
(84)
—
(342)
0.1
–  CRR 1
0.000 to 0.053
65,730
1,676
—
—
67,406
(5)
(1)
—
—
(6)
—
AA- and above
–  CRR 2
0.054 to 0.169
152,224
2,490
—
—
154,714
(13)
(6)
—
—
(19)
—
A+ to A-
–  CRR 3
0.170 to 0.740
105,569
6,044
—
—
111,613
(46)
(24)
—
—
(70)
0.1
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
38,102
4,751
—
—
42,853
(33)
(20)
—
—
(53)
0.1
BB+ to BB-
–  CRR 5
1.928 to 4.914
14,054
5,367
—
—
19,421
(28)
(31)
—
—
(59)
0.3
BB- to B
–  CRR 6
4.915 to 8.860
1,170
2,453
—
—
3,623
(4)
(15)
—
—
(19)
0.5
B-
–  CRR 7
8.861 to 15.000
780
848
—
—
1,628
(1)
(10)
—
—
(11)
0.7
CCC+
–  CRR 8
15.001 to 99.999
137
1,834
—
—
1,971
—
(21)
—
—
(21)
1.1
CCC to C
–  CRR 9/10
100.000
—
—
785
4
789
—
—
(84)
—
(84)
10.6
D
Financial
guarantees
13,640
1,866
384
—
15,890
(7)
(7)
(25)
—
(39)
0.2
–  CRR 1
0.000 to 0.053
2,553
1
—
—
2,554
—
—
—
—
—
—
AA- and above
–  CRR 2
0.054 to 0.169
4,212
202
—
—
4,414
(1)
—
—
—
(1)
—
A+ to A-
–  CRR 3
0.170 to 0.740
3,584
202
—
—
3,786
(2)
—
—
—
(2)
0.1
BBB+ to BBB-
–  CRR 4
0.741 to 1.927
1,932
407
—
—
2,339
(2)
(1)
—
—
(3)
0.1
BB+ to BB-
–  CRR 5
1.928 to 4.914
1,266
455
—
—
1,721
(2)
(2)
—
—
(4)
0.2
BB- to B
–  CRR 6
4.915 to 8.860
91
387
—
—
478
—
(1)
—
—
(1)
0.2
B-
–  CRR 7
8.861 to 15.000
1
76
—
—
77
—
—
—
—
—
—
CCC+
–  CRR 8
15.001 to 99.999
1
136
—
—
137
—
(3)
—
—
(3)
2.2
CCC to C
–  CRR 9/10
100.000
—
—
384
—
384
—
—
(25)
—
(25)
6.5
D
At 31 Dec 2023
391,406
27,329
1,169
4
419,908
(137)
(135)
(109)
—
(381)
0.1
Risk review
218
HSBC Holdings plc
Commercial real estate
Commercial real estate lending includes the financing of corporate,
institutional and high net worth customers who are investing primarily
in income-producing assets and, to a lesser extent, in their
construction and development. The portfolio has larger concentrations
in Hong Kong, the UK, mainland China and the US.
Our global exposure is centred largely on cities with economic,
political or cultural significance. In more developed markets, our
exposure mainly comprises the financing of investment assets, the
redevelopment of existing stock and the augmentation of both
commercial and residential markets to support economic and
population growth. In less developed commercial real estate markets,
our exposures comprise lending for development assets on relatively
short tenors with a particular focus on supporting larger, better
capitalised developers involved in residential construction or assets
supporting economic expansion.
Excluding favourable foreign exchange movements of $1.1bn,
commercial real estate lending decreased by $13.8bn, mainly from
$7.4bn in Hong Kong due to loan repayments. The decrease included
loan sales of $0.5bn in the US as part of an initiative to reduce the
portfolio exposure.
Despite the lower exposure, allowance for  ECL remained at $2.8bn,
reflecting the challenging conditions in the commercial property
sector, including the impact of lower valuations in the office segment.
Commercial real estate lending to customers
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong and
Shanghai Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.1
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Gross loans
and advances
Stage 1
10,304
4,218
41,307
1,126
1,803
685
440
59,883
10,790
28,846
Stage 2
3,262
400
13,229
189
1,956
70
1
19,107
3,294
10,375
Stage 3
444
184
3,570
145
166
25
18
4,552
470
3,226
POCI
—
32
15
—
—
—
—
47
32
15
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589
14,586
42,462
–  of which: 
  forborne loans
461
69
2,454
126
433
52
—
3,595
519
2,227
Allowance for
ECL
(148)
(49)
(2,399)
(55)
(98)
(15)
(10)
(2,774)
(172)
(2,149)
Gross loans and
advances
Stage 1
11,409
5,083
46,700
1,094
2,096
832
906
68,120
12,209
35,905
Stage 2
2,763
828
16,311
323
3,249
43
91
23,608
3,008
11,068
Stage 3
702
277
3,320
264
—
28
57
4,648
827
3,029
POCI
—
—
19
—
—
—
—
19
—
19
At 31 Dec 2022
14,874
6,188
66,350
1,681
5,345
903
1,054
96,395
16,044
50,021
–  of which:
  forborne loans
215
143
763
449
428
47
23
2,068
336
654
Allowance for
ECL
(216)
(153)
(2,094)
(153)
(93)
(24)
(13)
(2,746)
(323)
(1,878)
1  During 1Q23, we aligned the classification of commercial real estate across the Group and re-presented commercial real estate exposure in HSBC
North America Holdings Inc. at 31 December 2022 as $5.3bn, which had a corresponding ECL charge of $0.1bn.
Commercial real estate lending to customers by global business
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC North
America
Holdings Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Wealth and
Personal
Banking
409
377
66
—
2
—
423
1,277
409
66
Commercial
Banking
13,601
3,322
37,826
733
3,923
780
36
60,221
13,686
27,811
Global Banking
and Markets
—
1,135
20,066
727
—
—
—
21,928
491
14,444
Corporate
Centre
—
—
163
—
—
—
—
163
—
141
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589
14,586
42,462
HSBC Holdings plc
219
Commercial real estate lending to customers by global business (continued)
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle East
Limited
HSBC North
America
Holdings Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Wealth and
Personal
Banking
532
2
70
—
4
—
826
1,434
534
70
Commercial
Banking
14,342
4,390
42,803
951
5,341
903
205
68,935
14,638
33,123
Global Banking
and Markets
—
1,796
23,333
730
—
—
23
25,882
872
16,684
Corporate
Centre
—
—
144
—
—
—
—
144
—
144
At 31 Dec 2022
14,874
6,188
66,350
1,681
5,345
903
1,054
96,395
16,044
50,021
Commercial real estate lending to customers by credit quality
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC North
America
Holdings Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Strong
3,940
740
12,394
255
25
65
16
17,435
4,191
6,527
Good
2,555
2,054
17,777
246
781
130
18
23,561
2,592
12,004
Satisfactory
6,370
1,642
19,509
634
1,691
500
407
30,753
6,575
16,290
Sub-standard
701
182
4,856
180
1,262
60
—
7,241
726
4,400
Credit impaired
444
216
3,585
145
166
25
18
4,599
502
3,241
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589
14,586
42,462
Strong
3,951
1,444
16,063
303
352
29
72
22,214
4,681
10,061
Good
3,094
1,448
20,692
359
864
190
4
26,651
3,244
15,209
Satisfactory
6,819
2,647
20,930
539
2,397
616
881
34,829
6,959
16,775
Sub-standard
308
372
5,326
216
1,732
40
40
8,034
333
4,928
Credit impaired
702
277
3,339
264
—
28
57
4,667
827
3,048
At 31 Dec 2022
14,874
6,188
66,350
1,681
5,345
903
1,054
96,395
16,044
50,021
Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a
significant proportion of the principal at maturity. Typically, a customer
will arrange repayment through the acquisition of a new loan to settle
the existing debt. Refinance risk is the risk that a customer, being
unable to repay the debt on maturity, fails to refinance it at
commercial terms. We monitor our commercial real estate portfolio
closely, assessing indicators for signs of potential issues with
refinancing.
Commercial real estate gross loans and advances to customers maturity analysis
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle East
Limited
HSBC North
America
Holdings Inc.1
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
< 1 year
3,553
1,496
25,427
396
1,472
619
437
33,400
3,950
19,887
1–2 years
4,514
474
14,144
175
623
60
2
19,992
4,571
10,923
2–5 years
5,411
2,149
16,052
441
1,814
71
3
25,941
5,520
9,885
> 5 years
532
715
2,498
448
16
30
17
4,256
545
1,767
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589
14,586
42,462
< 1 year
8,315
2,059
23,468
423
1,883
241
703
37,092
9,211
18,675
1–2 years
3,518
1,503
18,007
218
810
115
228
24,399
3,678
13,873
2–5 years
2,385
1,644
21,804
664
2,624
449
60
29,630
2,472
14,963
> 5 years
656
982
3,071
376
28
98
63
5,274
683
2,510
At 31 Dec 2022
14,874
6,188
66,350
1,681
5,345
903
1,054
96,395
16,044
50,021
1  During 1Q23, we aligned the classification of commercial real estate across the Group and re-presented commercial real estate exposure in HSBC
North America Holdings Inc. at 31 December 2022 as $5.3bn, which had a corresponding ECL charge of $0.1bn.
Risk review
220
HSBC Holdings plc
The following table presents the Group’s exposure to borrowers classified in the commercial real estate sector where the ultimate parent is
based in mainland China, as well as all commercial real estate exposures booked on mainland China balance sheets.
The exposures at 31 December 2023 are split by country/territory and credit quality including allowances for ECL by stage.
Mainland China commercial real estate
(Audited)
Hong Kong
Mainland China
Rest of the Group
Total
$m
$m
$m
$m
Loans and advances to customers1
6,033
4,917
839
11,789
Guarantees issued and others2
255
66
37
358
Total mainland China commercial real estate exposure at 31 Dec 2023
6,288
4,983
876
12,147
Distribution of mainland China commercial real estate exposure by
credit quality
Strong
781
1,723
6
2,510
Good
604
953
421
1,978
Satisfactory
679
1,704
261
2,644
Sub-standard
1,298
327
188
1,813
Credit impaired
2,926
276
—
3,202
At 31 Dec 2023
6,288
4,983
876
12,147
Allowance for ECL by credit quality
Strong
—
(3)
—
(3)
Good
—
(5)
(1)
(6)
Satisfactory
(3)
(27)
—
(30)
Sub-standard
(66)
(87)
(16)
(169)
Credit impaired
(1,726)
(125)
—
(1,851)
At 31 Dec 2023
(1,795)
(247)
(17)
(2,059)
Allowance for ECL by stage distribution
Stage 1
—
(10)
—
(10)
Stage 2
(69)
(112)
(17)
(198)
Stage 3
(1,726)
(125)
—
(1,851)
At 31 Dec 2023
(1,795)
(247)
(17)
(2,059)
ECL coverage %
28.5
5.0
1.9
17.0
1  Amounts represent gross carrying amount.
2  Amounts represent nominal amount for guarantees and other contingent liabilities.
HSBC Holdings plc
221
Mainland China commercial real estate (continued)
Hong Kong
Mainland China
Rest of the Group
Total
(audited)1
(audited)2
(unaudited)1
(unaudited)2
$m
$m
$m
$m
Loans and advances to customers2
9,129
5,752
860
15,741
Guarantees issued and others3
249
755
18
1,022
Total mainland China commercial real estate exposure at 31 Dec 2022
9,378
6,507
878
16,763
Distribution of mainland China commercial real estate exposure by credit
quality
Strong
1,425
2,118
220
3,763
Good
697
1,087
370
2,154
Satisfactory
1,269
2,248
77
3,594
Sub-standard
2,887
779
193
3,859
Credit impaired
3,100
275
18
3,393
At 31 Dec 2022
9,378
6,507
878
16,763
Allowance for ECL by credit quality
Strong
—
(5)
—
(5)
Good
—
(8)
(1)
(9)
Satisfactory
(20)
(81)
—
(101)
Sub-standard
(458)
(42)
(3)
(503)
Credit impaired
(1,268)
(105)
—
(1,373)
At 31 Dec 2022
(1,746)
(241)
(4)
(1,991)
Allowance for ECL by stage distribution
Stage 1
(1)
(9)
(1)
(11)
Stage 2
(477)
(127)
(3)
(607)
Stage 3
(1,268)
(105)
—
(1,373)
At 31 Dec 2022
(1,746)
(241)
(4)
(1,991)
ECL coverage %
18.6
3.7
0.5
11.9
1  Disclosures in respect of mainland China commercial real estate exposures in Hong Kong and mainland China form part of the scope of the audit of
the Group’s Annual Report and Accounts 2022. Amounts disclosed for mainland China commercial real estate exposures elsewhere in the Group have
not been audited but are provided for completeness.
2  Amounts represent gross carrying amount.
3  Amounts represent nominal amount for guarantees and other contingent liabilities.
(Unaudited)
Commercial real estate financing refers to lending that focuses on
commercial development and investment in real estate and covers
commercial, residential and industrial assets. The exposures in the
table are related to companies whose primary activities are focused
on these activities. Lending is generally focused on tier 1 and 2 cities.
The table also includes financing provided to a corporate or financial
entity for the purchase or financing of a property that supports the
overall operations of the business. Such exposures are outside of our
normal definition of commercial real estate, as applied elsewhere in
this report, but are provided here for a more comprehensive view of
our mainland China property exposure.
The table above shows 59% ($7.1bn) of total exposure with a credit
quality of ’satisfactory’ or above, which was slightly higher in
proportion compared with 31 December 2022 (57%, $9.5bn). Total
‘credit impaired’ exposures increased to 26% ($3.2bn) (31 December
2022: 20%, $3.4bn), reflecting sustained stress in the China
commercial real estate market, including weakness in both property
market fundamentals and financing conditions for borrowers
operating in this sector.
Allowances for ECL are substantially against unsecured exposures.
For secured exposures, allowances for ECL are minimal, reflecting the
nature and value of the security held.
Facilities booked in Hong Kong continued to represent the largest
proportion of mainland China commercial real estate exposures,
although total exposures reduced to $6.3bn, down $3.1bn since
31 December 2022, as a result of de-risking measures, repayments
and write-offs. This portfolio remains relatively higher risk, with 33%
(31 December 2022: 36%) of exposure booked with a credit quality of
‘satisfactory’ or above and 47% ‘credit impaired’ (31 December 2022:
33%).
At 31 December 2023, the Group had allowances for ECL of $1.8bn
(31 December 2022: $1.7bn) held against mainland China commercial
real estate exposures booked in Hong Kong. ECL coverage increased
to 28.5% (31 December 2022: 18.6%), reflecting a further credit
deterioration during the year.
Approximately half of the unimpaired exposure in the Hong Kong
portfolio is lending to state-owned enterprises and relatively strong
private-owned enterprises. This is reflected in the relatively low
allowance for ECL in this part of the portfolio.
Market conditions are likely to remain subdued with a protracted
recovery as sentiment and domestic residential demand remain weak,
with ongoing refinancing and liquidity risk for corporates operating in
this market. The divergence between privately-owned enterprises and
state-owned enterprises is likely to continue, with state-owned
enterprises achieving above-market sales performance, and benefiting
from market share gains and better access to funding.
The Group has additional exposures to mainland China commercial
real estate as a result of lending to multinational corporates booked
outside of mainland China, which is not incorporated in the table
above.
Risk review
222
HSBC Holdings plc
Collateral and other credit enhancements
(Audited)
Although collateral can be an important mitigant of credit risk, it is the
Group’s practice to lend on the basis of the customer’s ability to meet
their obligations out of cash flow resources rather than placing
primary reliance on collateral and other credit risk enhancements.
Depending on the customer’s standing and the type of product,
facilities may be provided without any collateral or other credit
enhancements. For other lending, a charge over collateral is obtained
and considered in determining the credit decision and pricing. In the
event of default, the Group may utilise the collateral as a source of
repayment.
Depending on its form, collateral can have a significant financial effect
in mitigating our exposure to credit risk. Where there is sufficient
collateral, an expected credit loss is not recognised. This is the case
for reverse repurchase agreements and for certain loans and
advances to customers where the loan to value (‘LTV’) is very low.
Mitigants may include a charge on borrowers’ specific assets, such as
real estate or financial instruments. Other credit risk mitigants include
short positions in securities and financial assets held as part of linked
insurance/investment contracts where the risk is predominantly borne
by the policyholder. Additionally, risk may be managed by employing
other types of collateral and credit risk enhancements, such as
second charges, other liens and unsupported guarantees. Guarantees
are normally taken from corporates and export credit agencies.
Corporates would normally provide guarantees as part of a parent/
subsidiary relationship and span a number of credit grades. The export
credit agencies will normally be investment grade.
Certain credit mitigants are used strategically in portfolio management
activities. While single name concentrations arise in portfolios
managed by Global Banking and Corporate Banking, it is only in Global
Banking that their size requires the use of portfolio level credit
mitigants. Across Global Banking, risk limits and utilisations, maturity
profiles and risk quality are monitored and managed proactively. This
process is key to the setting of risk appetite for these larger, more
complex, geographically distributed customer groups. While the
principal form of risk management continues to be at the point of
exposure origination, through the lending decision-making process,
Global Banking also utilises loan sales and credit default swap (‘CDS’)
hedges to manage concentrations and reduce risk.
These transactions are the responsibility of a dedicated Global
Banking portfolio management team. Hedging activity is carried out
within agreed credit parameters, and is subject to market risk limits
and a robust governance structure. Where applicable, CDSs are
entered into directly with a central clearing house counterparty.
Otherwise, the Group’s exposure to CDS protection providers is
diversified among mainly banking counterparties with strong credit
ratings.
CDS mitigants are held at portfolio level and are not included in the
expected credit loss calculations. CDS mitigants are not reported in
the following tables.
Collateral on loans and advances
Collateral held is analysed separately for commercial real estate and
for other corporate, commercial and financial (non-bank) lending. The
following tables include off-balance sheet loan commitments,
primarily undrawn credit lines.
The collateral measured in the following tables consists of fixed first
charges on real estate, and charges over cash and marketable
financial instruments. The values in the tables represent the expected
market value on an open market basis. No adjustment has been made
to the collateral for any expected costs of recovery. Marketable
securities are measured at their fair value.
Other types of collateral such as unsupported guarantees and floating
charges over the assets of a customer’s business are not measured
in the following tables. While such mitigants have value, often
providing rights in insolvency, their assignable value is not sufficiently
certain and they are therefore assigned no value for disclosure
purposes.
The LTV ratios presented are calculated by directly associating loans
and advances with the collateral that individually and uniquely
supports each facility. When collateral assets are shared by multiple
loans and advances, whether specifically or, more generally, by way
of an all monies charge, the collateral value is pro-rated across the
loans and advances protected by the collateral.
For credit-impaired loans, the collateral values cannot be directly
compared with impairment allowances recognised. The LTV figures
use open market values with no adjustments. Impairment allowances
are calculated on a different basis, by considering other cash flows
and adjusting collateral values for costs of realising collateral as
explained further on page 375.
Commercial real estate loans and advances
The value of commercial real estate collateral is determined by using
a combination of external and internal valuations and physical
inspections. For commercial real estate, where the facility exceeds
regulatory threshold requirements, Group policy requires an
independent review of the valuation at least every three years, or
more frequently as the need arises.
In Hong Kong, market practice is typically for lending to major
property companies to be either secured by guarantees or unsecured.
In Europe, facilities of a working capital nature are generally not
secured by a first fixed charge, and are therefore disclosed as not
collateralised.
HSBC Holdings plc
223
Wholesale lending – commercial real estate loans and advances to customers including loan commitments by level of collateral for key
countries/territories (by stage)
(Audited)
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
%
%
%
%
%
Not collateralised
36,754
5,128
2,543
—
44,425
0.1
3.9
72.4
—
4.7
Fully collateralised by LTV ratio
46,212
15,177
1,963
—
63,352
0.1
2.5
12.0
—
1.0
–  less than 50%
24,391
7,413
574
—
32,378
0.1
1.9
13.1
—
0.7
–  51% to 75%
16,086
5,240
657
—
21,983
0.1
3.1
9.3
—
1.1
–  76% to 90%
3,140
1,437
454
—
5,031
0.1
3.5
11.8
—
2.1
–  91% to 100%
2,595
1,087
278
—
3,960
0.2
2.3
16.6
—
1.9
Partially collateralised (A):  LTV > 100%
7,075
1,487
156
50
8,768
0.1
1.8
30.2
14.5
1.0
–  collateral value on A
4,004
1,061
115
26
5,206
Total at 31 Dec 2023
90,041
21,792
4,662
50
116,545
0.1
2.8
45.6
14.5
2.4
of which: UK
Not collateralised
4,644
1,288
97
—
6,029
0.4
2.0
12.4
—
0.9
Fully collateralised by LTV ratio
9,762
2,512
295
—
12,569
0.1
1.3
13.9
—
0.7
–  less than 50%
3,514
507
51
—
4,072
0.1
1.9
21.6
—
0.6
–  51% to 75%
4,826
1,418
103
—
6,347
0.1
1.1
16.4
—
0.6
–  76% to 90%
749
292
80
—
1,121
0.1
1.3
14.9
—
1.5
–  91% to 100%
673
295
61
—
1,029
0.1
1.6
1.9
—
0.6
Partially collateralised (B):  LTV > 100%
1,580
239
82
35
1,936
0.1
1.1
34.2
20.7
2.0
–  collateral value on B
524
171
62
17
774
Total UK at 31 Dec 2023
15,986
4,039
474
35
20,534
0.2
1.5
17.1
20.7
0.9
of which: Hong Kong
Not collateralised
16,889
2,323
2,215
—
21,427
—
6.5
78.7
—
8.8
Fully collateralised by LTV ratio
20,783
8,447
989
—
30,219
—
2.1
5.0
—
0.8
–  less than 50%
15,425
5,604
294
—
21,323
—
1.5
1.4
—
0.5
–  51% to 75%
4,102
2,140
312
—
6,554
0.1
3.8
2.1
—
1.4
–  76% to 90%
657
619
315
—
1,591
0.1
1.8
8.0
—
2.3
–  91% to 100%
599
84
68
—
751
—
0.1
20.5
—
1.9
Partially collateralised (C):  LTV > 100%
1,770
616
52
15
2,453
—
0.8
24.5
—
0.7
–  collateral value on C
1,569
535
39
8
2,151
Total Hong Kong at 31 Dec 2023
39,442
11,386
3,256
15
54,099
—
2.9
55.5
—
4.0
Not collateralised
43,987
9,779
2,612
—
56,378
0.1
5.7
53.7
—
3.6
Fully collateralised by LTV ratio
54,003
17,619
1,617
—
73,239
0.1
1.8
10.9
—
0.7
–  less than 50%
29,635
6,523
544
—
36,702
0.1
1.9
16.5
—
0.7
–  51% to 75%
18,664
8,312
594
—
27,570
0.1
1.3
4.4
—
0.5
–  76% to 90%
3,220
911
315
—
4,446
0.1
2.1
4.1
—
0.8
–  91% to 100%
2,484
1,873
164
—
4,521
0.2
3.5
28.7
—
2.6
Partially collateralised (A):  LTV > 100%
4,965
1,924
513
19
7,421
0.1
2.2
54.2
—
4.4
–  collateral value on A
2,804
1,192
293
8
4,297
Total at 31 Dec 20221
102,955
29,322
4,742
19
137,038
0.1
3.1
39.1
—
2.1
of which: UK
Not collateralised
5,960
2,511
295
—
8,766
0.3
1.5
35.3
—
1.8
Fully collateralised by LTV ratio
10,293
2,025
372
—
12,690
0.1
0.9
6.5
—
0.4
–  less than 50%
2,900
664
53
—
3,617
0.2
0.9
3.8
—
0.4
–  51% to 75%
6,361
1,197
291
—
7,849
0.1
0.9
2.1
—
0.3
–  76% to 90%
556
140
11
—
707
0.2
1.4
18.2
—
0.7
–  91% to 100%
476
24
17
—
517
0.2
0.4
76.5
—
2.8
Partially collateralised (B):  LTV > 100%
1,920
179
176
—
2,275
0.2
1.1
68.8
—
5.5
–  collateral value on B
1,113
144
72
—
1,329
Total UK at 31 Dec 2022
18,173
4,715
843
—
23,731
0.2
1.3
29.5
—
1.5
of which: Hong Kong
Not collateralised
20,263
4,648
2,123
—
27,034
—
10.6
56.9
—
6.3
Fully collateralised by LTV ratio
27,892
7,457
864
—
36,213
—
1.1
5.2
—
0.4
–  less than 50%
21,185
3,539
318
—
25,042
—
1.4
2.2
—
0.3
–  51% to 75%
5,365
3,536
205
—
9,106
0.1
1.0
3.4
—
0.5
–  76% to 90%
995
134
264
—
1,393
—
0.1
1.9
—
0.4
–  91% to 100%
347
248
77
—
672
—
0.2
32.5
—
3.9
Partially collateralised (C):  LTV > 100%
804
390
73
19
1,286
—
2.8
61.6
—
4.4
–  collateral value on C
584
249
39
8
880
Total Hong Kong at 31 Dec 2022
48,959
12,495
3,060
19
64,533
—
4.7
42.5
—
2.9
1  During 1Q23, we aligned the classification of commercial real estate across the Group and re-presented commercial real estate exposure in HSBC
North America Holdings Inc. at 31 December 2022 as $5.3bn, which had a corresponding ECL charge of $0.1bn.
Risk review
224
HSBC Holdings plc
Other corporate, commercial and financial (non-bank) loans and advances
Other corporate, commercial and financial (non-bank) loans are
analysed separately in the following table, which focuses on the
countries/territories containing the majority of our loans and advances
balances. For financing activities in other corporate and commercial
lending, collateral value is not strongly correlated to principal
repayment performance.
Collateral values are generally refreshed when an obligor’s general
credit performance deteriorates and we have to assess the likely
performance of secondary sources of repayment should it prove
necessary to rely on them.
Wholesale lending – other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level
of collateral for key countries/territories (by stage)
(Audited)
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
%
%
%
%
%
Not collateralised
672,142
76,261
7,702
8
756,113
0.1
0.9
40.0
6.8
0.6
Fully collateralised by LTV ratio
113,339
19,747
2,629
23
135,738
0.1
1.4
10.7
89.8
0.5
–  less than 50%
42,953
7,069
1,168
—
51,190
0.1
1.5
11.8
—
0.5
–  51% to 75%
24,011
8,222
887
—
33,120
0.1
1.3
6.4
—
0.6
–  76% to 90%
10,194
2,531
421
23
13,169
0.1
1.6
10.3
90.6
0.9
–  91% to 100%
36,181
1,925
153
—
38,259
—
1.1
27.6
—
0.2
Partially collateralised (A):  LTV > 100%
53,686
9,019
2,233
3
64,941
0.1
0.7
32.2
38.4
1.3
–  collateral value on A
24,505
4,266
993
1
29,765
Total at 31 Dec 2023
839,167
105,027
12,564
34
956,792
0.1
1.0
32.5
67.1
0.6
of which: UK
Not collateralised
117,824
20,401
3,423
—
141,648
0.2
1.9
23.2
—
1.0
Fully collateralised by LTV ratio
22,217
5,912
1,162
—
29,291
0.1
1.7
3.7
—
0.6
–  less than 50%
7,385
2,340
601
—
10,326
0.1
1.2
1.3
—
0.5
–  51% to 75%
6,966
2,292
434
—
9,692
0.1
1.7
3.6
—
0.7
–  76% to 90%
2,256
809
106
—
3,171
0.2
2.5
15.8
—
1.3
–  91% to 100%
5,610
471
21
—
6,102
0.1
2.1
14.5
—
0.3
Partially collateralised (B):  LTV > 100%
6,335
1,732
299
—
8,366
0.2
1.8
18.4
—
1.2
–  collateral value on B
3,508
1,080
175
—
4,763
Total UK at 31 Dec 2023
146,376
28,045
4,884
—
179,305
0.2
1.8
18.3
—
0.9
of which: Hong Kong
—
Not collateralised
114,025
7,523
906
—
122,454
—
0.4
57.5
—
0.5
Fully collateralised by LTV ratio
32,857
8,918
877
22
42,674
0.1
1.3
6.6
94.7
0.5
–  less than 50%
16,175
2,898
230
—
19,303
0.1
1.4
11.8
—
0.4
–  51% to 75%
9,461
4,515
336
—
14,312
0.1
1.2
3.1
—
0.5
–  76% to 90%
4,245
863
253
22
5,383
0.1
1.8
2.0
94.7
0.9
–  91% to 100%
2,976
642
58
—
3,676
—
0.4
27.0
—
0.5
Partially collateralised (C):  LTV > 100%
16,152
2,887
704
—
19,743
—
0.6
30.2
—
1.2
–  collateral value on C
6,619
1,306
318
—
8,243
Total Hong Kong at 31 Dec 2023
163,034
19,328
2,487
22
184,871
0.1
0.8
31.8
94.7
0.6
Not collateralised
632,889
79,009
8,278
64
720,240
0.1
1.1
38.4
18.8
0.6
Fully collateralised by LTV ratio
94,789
27,422
1,948
24
124,183
0.1
1.1
13.7
91.7
0.5
–  less than 50%
36,747
10,643
678
—
48,068
0.1
1.1
18.6
—
0.6
–  51% to 75%
29,108
10,457
503
1
40,069
0.1
1.2
11.3
—
0.5
–  76% to 90%
9,643
2,987
402
23
13,055
0.1
1.0
4.7
95.7
0.6
–  91% to 100%
19,291
3,335
365
—
22,991
0.1
0.8
17.5
—
0.4
Partially collateralised (A):  LTV > 100%
54,794
12,830
2,120
22
69,766
0.1
0.9
37.3
18.2
1.4
–  collateral value on A
27,775
6,289
1,133
16
35,213
—
—
—
—
—
Total at 31 Dec 2022
782,472
119,261
12,346
110
914,189
0.1
1.0
34.3
34.6
0.7
of which: UK
Not collateralised
105,126
16,886
3,783
28
125,823
0.1
2.2
17.8
3.6
0.9
Fully collateralised by LTV ratio
21,192
6,511
699
—
28,402
0.1
1.3
4.6
—
0.5
–  less than 50%
6,928
2,872
175
—
9,975
0.1
1.0
3.4
—
0.5
–  51% to 75%
7,611
2,656
336
—
10,603
0.1
1.5
6.5
—
0.6
–  76% to 90%
1,889
578
102
—
2,569
0.1
1.9
1.0
—
0.5
–  91% to 100%
4,764
405
86
—
5,255
—
1.2
3.5
—
0.2
Partially collateralised (B):  LTV > 100%
6,480
2,288
308
—
9,076
0.1
1.2
25.6
—
1.2
–  collateral value on B
3,470
1,197
158
—
4,825
—
—
—
—
Total UK at 31 Dec 2022
132,798
25,685
4,790
28
163,301
0.1
1.9
16.4
3.6
0.9
of which: Hong Kong
Not collateralised
109,919
9,901
939
—
120,759
—
0.7
56.0
—
0.5
Fully collateralised by LTV ratio
38,083
12,693
665
24
51,465
0.1
1.0
3.8
91.7
0.4
–  less than 50%
15,695
4,577
175
—
20,447
0.1
0.9
1.7
—
0.3
–  51% to 75%
13,893
5,413
115
1
19,422
0.1
1.2
7.8
—
0.5
–  76% to 90%
4,964
1,479
268
23
6,734
0.1
0.7
0.4
95.7
0.6
–  91% to 100%
3,531
1,224
107
—
4,862
0.1
0.3
10.3
—
0.3
Partially collateralised (C):  LTV > 100%
17,704
3,379
777
14
21,874
0.1
0.6
30.9
—
1.2
–  collateral value on C
7,737
1,524
397
13
9,671
—
—
—
—
Total Hong Kong at 31 Dec 2022
165,706
25,973
2,381
38
194,098
0.1
0.8
33.2
57.9
0.6
HSBC Holdings plc
225
Other credit risk exposures
In addition to collateralised lending, other credit enhancements are
employed and methods used to mitigate credit risk arising from
financial assets. These are summarised below:
–Some securities issued by governments, banks and other financial
institutions benefit from additional credit enhancements provided
by government guarantees that cover the assets.
–Debt securities issued by banks and financial institutions include
asset-backed securities (‘ABSs’) and similar instruments, which
are supported by underlying pools of financial assets. Credit risk
associated with ABSs is reduced through the purchase of credit
default swap (‘CDS’) protection.
–Trading loans and advances mainly pledged against cash collateral
are posted to satisfy margin requirements. There is limited credit
risk on cash collateral posted since in the event of default of the
counterparty this would be set off against the related liability.
Reverse repos and stock borrowing are by their nature
collateralised.
Collateral accepted as security that the Group is permitted to sell or
repledge under these arrangements is described on page 417 of the
financial statements.
The Group’s maximum exposure to credit risk includes financial
guarantees and similar contracts granted, as well as loan and other
credit-related commitments. Depending on the terms of the
arrangement, we may use additional credit mitigation if a guarantee is
called upon or a loan commitment is drawn and subsequently
defaults.
For further information on these arrangements, see Note 33 on the
financial statements.
Derivatives
We participate in transactions exposing us to counterparty credit risk.
Counterparty credit risk is the risk of financial loss if the counterparty
to a transaction defaults before satisfactorily settling it. It arises
principally from over-the-counter (‘OTC’) derivatives and securities
financing transactions and is calculated in both the trading and non-
trading books. Transactions vary in value by reference to a market
factor such as an interest rate, exchange rate or asset price.
The counterparty risk from derivative transactions is taken into
account when reporting the fair value of derivative positions. The
adjustment to the fair value is known as the credit valuation
adjustment (‘CVA’).
For an analysis of CVAs, see Note 12 on the financial statements.
The following table reflects by risk type the fair values and gross notional contract amounts of derivatives cleared through an exchange, central
counterparty or non-central counterparty.
Notional contract amounts and fair values of derivatives
2023
20221
Notional
amount
Fair value
Notional
amount
Fair value
Assets
Liabilities
Assets
Liabilities
$m
$m
$m
$m
$m
$m
Total OTC derivatives
24,551,539
337,066
343,098
23,649,591
421,324
423,909
–  total OTC derivatives cleared by central counterparties
11,130,785
116,520
118,796
11,360,730
149,193
154,167
–  total OTC derivatives not cleared by central counterparties
13,420,754
220,546
224,302
12,288,861
272,131
269,742
Total exchange traded derivatives
1,111,247
9,134
8,159
1,146,426
3,822
2,840
Gross
25,662,786
346,200
351,258
24,796,017
425,146
426,749
Offset
(116,486)
(116,486)
(140,987)
(140,987)
At 31 Dec
229,714
234,772
284,159
285,762
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
The purposes for which HSBC uses derivatives are described
in Note 15 on the financial statements.
The International Swaps and Derivatives Association (‘ISDA’) master
agreement is our preferred agreement for documenting derivatives
activity. It is common, and our preferred practice, for the parties
involved in a derivative transaction to execute a credit support annex
(‘CSA’) in conjunction with the ISDA master agreement. Under a CSA,
collateral is passed between the parties to mitigate the counterparty
risk inherent in outstanding positions. The majority of our CSAs are
with financial institutional clients.
We manage the counterparty exposure on our OTC derivative
contracts by using collateral agreements with counterparties and
netting agreements. Currently, we do not actively manage our general
OTC derivative counterparty exposure in the credit markets, although
we may manage individual exposures in certain circumstances.
We place strict policy restrictions on collateral types and as a
consequence the types of collateral received and pledged are, by
value, highly liquid and of a strong quality, being predominantly cash.
Where a collateral type is required to be approved outside the
collateral policy, approval is required from a committee of senior
representatives from Markets, Legal and Risk.
See Note 31 on the financial statements for details regarding legally
enforceable right of offset in the event of counterparty default and
collateral received in respect of derivatives.
Personal lending
This section presents further disclosures related to personal lending.
It provides details of the major legal entities, countries and products
that are driving the change observed in personal loans and advances
to customers, with the impact of foreign exchange separately
identified. Additionally, Hong Kong and UK mortgage book LTV data is
provided.
This section also provides reconciliations of the opening
1 January 2023 to 31 December 2023 closing gross carrying/nominal
amounts and associated allowance for ECL by product. Further
product granularity is also provided by stage, with data for major legal
entities presented for loans and advances to customers, loan and
other credit-related commitments and financial guarantees.
At 31 December 2023, total personal lending for loans and advances
to customers of $447.5bn increased by $32.6bn compared with
31 December 2022. This increase included favourable foreign
exchange movements of $11.5bn. Excluding foreign exchange
movements, the increase of $21.1bn was mainly driven by growth in
the UK (up $6.6bn), in Hong Kong (up $5.8bn), in Mexico (up $2.3bn)
and in Australia (up $1.4bn). Additionally, France increased by $7.8bn
due to the retention of the home loan portfolio, which is no longer
classified as assets held for sale.
The increase was partly offset by a $1.2bn decrease from the merger
of our business in Oman and a $1.0bn decrease from the sale of our
retail mortgage loan portfolio in New Zealand.
Risk review
226
HSBC Holdings plc
The allowance for ECL attributable to personal lending, excluding off-
balance sheet loan commitments and guarantees, remained broadly
stable at $2.9bn at 31 December 2023, as net releases were offset by
adverse foreign exchange movements of $0.1bn.
Excluding foreign exchange movements and reclassifications to held
for sale, mortgage lending balances increased by $15.5bn to $360.9bn
at 31 December 2023, mainly in Hong Kong (up $5.9bn), in the UK (up
$4.9bn), in Mexico (up $1.7bn), in the US (up $1.5bn) and in Australia
(up $1.4bn). The allowance for ECL attributable to mortgages
remained broadly stable at $0.6bn when compared with 31 December
2022.
Total personal lending gross carrying amounts in stage 2 decreased
by $1.4bn compared with 31 December 2022. Excluding favourable
foreign exchange movements of $2.3bn, the decrease of $3.7bn was
driven by favourable economic conditions and the model updates for
interest-only and offset mortgages at a portfolio level in the UK.
The quality of both our Hong Kong and UK mortgage books remained
strong, with low levels of impairment allowances. The average LTV
ratio on new mortgage lending in Hong Kong was 64%, compared
with an estimated 60% for the overall mortgage portfolio. The
average LTV ratio on new lending in the UK was 65%, compared with
an estimated 53% for the overall mortgage portfolio.
Excluding foreign exchange movements and reclassifications to held
for sale, other personal lending balances at 31 December 2023
increased by $7.8bn compared with 31 December 2022. This was
mainly from the retained home loan portfolio in France (up $7.4bn),
which is no longer classified as assets held for sale. In addition, our
credit card portfolio in Mexico increased by $0.6bn.
The allowance for ECL, excluding foreign exchange movements,
attributable to other personal lending of $2.3bn remained unchanged
from 31 December 2022. The allowance for ECL attributable to credit
cards decreased by $0.1bn, offset by adverse foreign exchange
movements of $0.1bn in other personal lending.
Total personal lending for loans and advances to customers at amortised cost by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
By portfolio
First lien residential mortgages
320,410
38,287
2,212
360,909
(102)
(200)
(269)
(571)
–  of which: interest-only (including offset)
21,895
2,923
139
24,957
(4)
(27)
(31)
(62)
–  affordability (including US adjustable rate                   
mortgages)
14,380
381
291
15,052
(3)
(1)
(10)
(14)
Other personal lending
76,124
9,196
1,293
86,613
(477)
(1,234)
(585)
(2,296)
–  second lien residential mortgages
317
58
21
396
—
(3)
(5)
(8)
–  guaranteed loans in respect of residential property
8,001
502
90
8,593
(1)
(5)
(14)
(20)
–  other personal lending which is secured
28,900
424
157
29,481
(13)
(5)
(24)
(42)
–  credit cards
19,909
4,419
352
24,680
(236)
(697)
(203)
(1,136)
–  other personal lending which is unsecured
17,010
3,582
659
21,251
(212)
(505)
(331)
(1,048)
–  motor vehicle finance
1,987
211
14
2,212
(15)
(19)
(8)
(42)
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
By legal entity
HSBC UK Bank plc
146,354
35,190
1,218
182,762
(152)
(490)
(255)
(897)
HSBC Bank plc
14,598
1,747
273
16,618
(24)
(22)
(91)
(137)
The Hongkong and Shanghai Banking Corporation
Limited
191,382
7,741
948
200,071
(165)
(402)
(162)
(729)
HSBC Bank Middle East Limited
3,335
397
47
3,779
(19)
(33)
(36)
(88)
HSBC North America Holdings Inc.
18,096
553
364
19,013
(5)
(14)
(16)
(35)
Grupo Financiero HSBC, S.A. de C.V.
12,717
1,740
536
14,993
(197)
(463)
(273)
(933)
Other trading entities
10,052
115
119
10,286
(17)
(10)
(21)
(48)
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
HSBC UK Bank plc
52,093
734
88
52,915
(11)
—
(2)
(13)
HSBC Bank plc
1,630
36
4
1,670
—
—
—
—
The Hongkong and Shanghai Banking Corporation
Limited
181,967
2,479
223
184,669
(3)
—
—
(3)
HSBC Bank Middle East Limited
1,978
7
1
1,986
—
—
—
—
HSBC North America Holdings Inc.
3,695
72
8
3,775
—
—
—
—
HSBC Bank Canada
6,610
113
30
6,753
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
4,308
—
—
4,308
(8)
—
—
(8)
Other trading entities
2,008
31
1
2,040
(1)
—
—
(1)
At 31 Dec 2023
254,289
3,472
355
258,116
(23)
—
(2)
(25)
HSBC Holdings plc
227
Total personal lending for loans and advances to customers at amortised cost by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
By portfolio
First lien residential mortgages
294,919
39,860
2,042
336,821
(74)
(231)
(270)
(575)
–  of which: interest-only (including offset)
19,636
4,485
169
24,290
(3)
(46)
(41)
(90)
–  affordability (including US adjustable rate
mortgages)
14,773
369
240
15,382
(5)
(3)
(4)
(12)
Other personal lending
67,758
9,006
1,297
78,061
(487)
(1,273)
(535)
(2,295)
–  second lien residential mortgages
353
20
6
379
(1)
(2)
(3)
(6)
–  guaranteed loans in respect of residential property
1,121
121
125
1,367
(1)
(3)
(30)
(34)
–  other personal lending which is secured
31,306
594
206
32,106
(15)
(10)
(30)
(55)
–  credit cards
16,705
4,423
260
21,388
(225)
(776)
(160)
(1,161)
–  other personal lending which is unsecured
16,512
3,681
687
20,880
(234)
(469)
(305)
(1,008)
–  motor vehicle finance
1,761
167
13
1,941
(11)
(13)
(7)
(31)
At 31 Dec 2022
362,677
48,866
3,339
414,882
(561)
(1,504)
(805)
(2,870)
By legal entity
HSBC UK Bank plc
128,590
37,394
1,012
166,996
(135)
(688)
(227)
(1,050)
HSBC Bank plc
6,377
740
127
7,244
(10)
(18)
(38)
(66)
The Hongkong and Shanghai Banking Corporation
Limited
185,723
8,698
1,117
195,538
(138)
(362)
(187)
(687)
HSBC Bank Middle East Limited
3,657
184
86
3,927
(26)
(37)
(52)
(115)
HSBC North America Holdings Inc.
16,906
375
270
17,551
(12)
(23)
(6)
(41)
Grupo Financiero HSBC, S.A. de C.V.
9,542
1,099
377
11,018
(213)
(331)
(194)
(738)
Other trading entities
11,882
376
350
12,608
(27)
(45)
(101)
(173)
At 31 Dec 2022
362,677
48,866
3,339
414,882
(561)
(1,504)
(805)
(2,870)
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution (continued)
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
HSBC UK Bank plc
50,535
439
104
51,078
(11)
(1)
—
(12)
HSBC Bank plc
2,440
131
7
2,578
—
—
—
—
The Hongkong and Shanghai Banking Corporation
Limited
170,104
2,916
634
173,654
(2)
—
—
(2)
HSBC Bank Middle East Limited
1,717
8
1
1,726
(1)
—
—
(1)
HSBC North America Holdings Inc.
3,914
24
17
3,955
(1)
—
—
(1)
HSBC Bank Canada
6,346
115
30
6,491
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
3,198
—
—
3,198
(9)
—
—
(9)
Other trading entities
2,390
64
7
2,461
(2)
—
—
(2)
At 31 Dec 2022
240,644
3,697
800
245,141
(26)
(1)
—
(27)
Exposure to UK interest-only mortgage loans
The following information is presented for HSBC branded interest-
only mortgage loans. This excludes offset mortgages in first direct
and private banking mortgages.
At the end of 2023, the average LTV ratio of the interest-only
mortgage loans was 44% (2022: 41%), and 97% (2022: 99%) had an
LTV ratio of 75% or less.
Of the interest-only mortgage loans that expired in 2021, 82% were
repaid within 12 months of expiry with a total of 96% being repaid
within 24 months of expiry. For those expiring during 2022, 92%
were repaid within 12 months of expiry.
At 31 December 2023, interest-only mortgage loan exposures were
$15.2bn (2022: $14.4bn) and the maturity profile was as follows:
UK interest-only mortgage loans
$m
Expired interest-only mortgage loans
141
Interest-only mortgage loans by maturity
–  2024
141
–  2025
242
–  2026
315
–  2027
436
–  2028–2032
2,919
–  post-2032
11,010
At 31 Dec 2023
15,204
Risk review
228
HSBC Holdings plc
UK interest-only mortgage loans (continued)
$m
Expired interest-only mortgage loans
134
Interest-only mortgage loans by maturity
–  2023
219
–  2024
215
–  2025
300
–  2026
383
–  2027–2031
2,951
–  post-2031
10,248
At 31 Dec 2022
14,450
Exposure to offset mortgage in first direct
The offset mortgage in first direct is a flexible way for our customers to take control of their finances. It works by grouping together the
customer’s mortgage, savings and current accounts to offset their credit and debit balances against their mortgage exposure. At 31 December
2023, exposures were worth a total $5.0bn with an average LTV ratio of 29% (2022: $5.5bn exposure and 32% LTV ratio).
Reconciliations of changes in personal lending gross carrying/nominal amount and
allowances for loans and advances to customers including loan commitments and financial
guarantees
The following disclosure provides a reconciliation by stage of the Group’s personal lending gross carrying/nominal amount and allowances for
loans and advances to customers, including loan commitments and financial guarantees.
In addition, three reconciliations by stage of the Group’s gross carrying/nominal amount and allowances for first lien mortgages, credit cards and
other personal lending, including loan commitments and financial guarantees were added at 31 December 2023 following the adoption of the
recommendations of the DECL Taskforce’s third report.
Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers
including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
603,321
(587)
52,563
(1,505)
4,139
(805)
660,023
(2,897)
Transfers of financial instruments:
(2,144)
(619)
39
1,087
2,105
(468)
—
—
–  transfers from stage 1 to stage 2
(57,217)
270
57,217
(270)
—
—
—
—
–  transfers from stage 2 to stage 1
55,307
(862)
(55,307)
862
—
—
—
—
–  transfers to stage 3
(542)
3
(2,345)
614
2,887
(617)
—
—
–  transfers from stage 3
308
(30)
474
(119)
(782)
149
—
—
Net remeasurement of ECL arising from transfer
of stage
—
563
—
(679)
—
(79)
—
(195)
Net new and further lending/repayments
34,411
(47)
(4,713)
350
(1,169)
144
28,529
447
Change to risk parameters – credit quality
—
104
—
(641)
—
(955)
—
(1,492)
Changes to models used for ECL calculation
—
(13)
—
21
—
7
—
15
Assets written off
—
—
—
—
(1,326)
1,326
(1,326)
1,326
Foreign exchange and others1,2
15,235
(3)
3,066
(67)
111
(26)
18,412
(96)
At 31 Dec 2023
650,823
(602)
50,955
(1,434)
3,860
(856)
705,638
(2,892)
ECL income statement change for the period
607
(949)
(883)
(1,225)
Recoveries
226
Others
8
Total ECL income statement change for the
period
(991)
1  Total includes $7.8bn of gross carrying loans and advances and a corresponding allowance for ECL of $11m, due to the retention of certain balances
previously classified as assets held for sale of our retail banking operations in France. For further details, see Note 23 ‘Assets held for sale and
liabilities of disposal groups held for sale’ on page 428.
2  Total includes $2.0bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance
for ECL of $20m, reflecting business disposals, as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on
page 428.
As shown in the above table, the allowance for ECL for loans and
advances to customers and relevant loan commitments and financial
guarantees decreased by $5m during the period from $2,897m at
31 December 2022 to $2,892m at 31 December 2023.
This decrease was driven by:
–$1,326m of assets written off;
–$447m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayment; and
–$15m of changes to models used for ECL calculation.
HSBC Holdings plc
229
These were partly offset by:
–$1,492m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between
stages;
–$195m relating to the net remeasurement impact of stage
transfers; and
–foreign exchange and other movements of $96m.
The ECL charge for the period of $1,225m presented in the above
table consisted of $1,492m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages, and $195m relating to the net
remeasurement impact of stage transfers. This was partly offset by
$447m relating to underlying net book volume movements and $15m
in changes to models used for the calculation of ECL.
During the period, there was a net transfer to stage 2 of $1,910m
gross carrying/nominal amounts. This increase was mainly driven by
$1,550m in Mexico, due to slight deterioration in the unsecured
portfolio.
Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers
including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2022
695,627
(692)
18,161
(1,220)
5,111
(1,226)
718,899
(3,138)
Transfers of financial instruments:
(40,836)
(496)
39,489
674
1,347
(178)
—
—
–  transfers from stage 1 to stage 2
(68,016)
268
68,016
(268)
—
—
—
—
–  transfers from stage 2 to stage 1
27,359
(730)
(27,359)
730
—
—
—
—
–  transfers to stage 3
(561)
2
(1,983)
361
2,544
(363)
—
—
–  transfers from stage 3
382
(36)
815
(149)
(1,197)
185
—
—
Net remeasurement of ECL arising from transfer of
stage
—
495
—
(579)
—
(85)
—
(169)
Net new and further lending/repayments
30,637
(17)
459
234
(146)
91
30,950
308
Change to risk parameters – credit quality
—
82
—
(676)
—
(823)
—
(1,417)
Changes to models used for ECL calculation
—
(2)
—
(95)
—
13
—
(84)
Assets written off
—
—
—
—
(1,212)
1,212
(1,212)
1,212
Foreign exchange and others1
(82,107)
43
(5,546)
157
(961)
191
(88,614)
391
At 31 Dec 2022
603,321
(587)
52,563
(1,505)
4,139
(805)
660,023
(2,897)
ECL income statement change for the period
558
(1,116)
(804)
(1,362)
Recoveries
283
Others
(3)
Total ECL income statement change for the period
(1,082)
1  Total includes $49.6bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding
allowance for ECL of $221m, reflecting business disposals, as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’
on page 428.
First lien residential mortgages – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to
customers including loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
317,666
(74)
40,048
(231)
2,230
(270)
359,944
(575)
Transfers of financial instruments:
(1,182)
(109)
421
138
761
(29)
—
—
–  transfers from stage 1 to stage 2
(41,207)
28
41,207
(28)
—
—
—
—
–  transfers from stage 2 to stage 1
40,164
(117)
(40,164)
117
—
—
—
—
–  transfers to stage 3
(354)
1
(958)
100
1,312
(101)
—
—
–  transfers from stage 3
215
(21)
336
(51)
(551)
72
—
—
Net remeasurement of ECL arising from transfer of
stage
—
72
—
(79)
—
(67)
—
(74)
Net new and further lending/repayments
15,447
(3)
(3,939)
22
(751)
322
10,757
341
Change to risk parameters – credit quality
—
16
—
(67)
—
(269)
—
(320)
Changes to models used for ECL calculation
—
(2)
—
28
—
—
—
26
Assets written off
—
—
—
—
(53)
53
(53)
53
Foreign exchange and others
8,833
(9)
1,983
(13)
71
(4)
10,887
(26)
At 31 Dec 2023
340,764
(109)
38,513
(202)
2,258
(264)
381,535
(575)
ECL income statement change for the period
83
(96)
(14)
(27)
Recoveries
10
Others
13
Total ECL income statement change for the
period
(4)
Risk review
230
HSBC Holdings plc
Credit cards – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan
commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
140,519
(244)
6,747
(777)
353
(160)
147,619
(1,181)
Transfers of financial instruments:
199
(292)
(848)
496
649
(204)
—
—
–  transfers from stage 1 to stage 2
(7,855)
102
7,855
(102)
—
—
—
—
–  transfers from stage 2 to stage 1
8,124
(391)
(8,124)
391
—
—
—
—
–  transfers to stage 3
(82)
1
(621)
227
703
(228)
—
—
–  transfers from stage 3
12
(4)
42
(20)
(54)
24
—
—
Net remeasurement of ECL arising from transfer of
stage
—
185
—
(301)
—
(5)
—
(121)
Net new and further lending/repayments
13,206
27
621
169
12
(41)
13,839
155
Change to risk parameters – credit quality
—
82
—
(281)
—
(301)
—
(500)
Changes to models used for ECL calculation
—
(9)
—
15
—
1
—
7
Assets written off
—
—
—
—
(571)
571
(571)
571
Foreign exchange and others
(632)
(2)
27
(19)
7
(5)
(598)
(26)
At 31 Dec 2023
153,292
(253)
6,547
(698)
450
(144)
160,289
(1,095)
ECL income statement change for the period
285
(398)
(346)
(459)
Recoveries
108
Others
(200)
Total ECL income statement change for the
period
(551)
Other personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to
customers including loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
145,136
(269)
5,768
(497)
1,556
(375)
152,460
(1,141)
Transfers of financial instruments:
(1,161)
(218)
466
453
695
(235)
—
—
–  transfers from stage 1 to stage 2
(8,155)
140
8,155
(140)
—
—
—
—
–  transfers from stage 2 to stage 1
7,019
(354)
(7,019)
354
—
—
—
—
–  transfers to stage 3
(106)
1
(766)
287
872
(288)
—
—
–  transfers from stage 3
81
(5)
96
(48)
(177)
53
—
—
Net remeasurement of ECL arising from transfer of
stage
—
306
—
(299)
—
(7)
—
—
Net new and further lending/repayments
5,758
(71)
(1,395)
159
(430)
(137)
3,933
(49)
Change to risk parameters – credit quality
—
6
—
(293)
—
(385)
—
(672)
Changes to models used for ECL calculation
—
(2)
—
(22)
—
6
—
(18)
Assets written off
—
—
—
—
(702)
702
(702)
702
Foreign exchange and others1
7,034
8
1,056
(35)
33
(17)
8,123
(44)
At 31 Dec 2023
156,767
(240)
5,895
(534)
1,152
(448)
163,814
(1,222)
ECL income statement change for the period
239
(455)
(523)
(739)
Recoveries
108
Others
195
Total ECL income statement change for the
period
(436)
1  Total includes $7.2bn of gross carrying loans and advances and a corresponding allowance for ECL of $10m, due to the retention of certain balances
previously classified as assets held for sale of our retail banking operations in France. For further details, see Note 23 ‘Assets held for sale and
liabilities of disposal groups held for sale’ on page 428.
HSBC Holdings plc
231
Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost
Gross carrying amount
Allowance for ECL
PD range1
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
ECL
coverage
%
$m
$m
$m
$m
$m
$m
$m
$m
%
First lien residential
mortgages2
320,410
38,287
2,212
360,909
(102)
(200)
(269)
(571)
0.2
–  Band 1
0.000 to 0.250
229,188
3,174
—
232,362
(16)
(14)
—
(30)
—
–  Band 2
0.251 to 0.500
54,891
12,266
—
67,157
(11)
(17)
—
(28)
—
–  Band 3
0.501 to 1.500
28,159
16,140
—
44,299
(22)
(49)
—
(71)
0.2
–  Band 4
1.501 to 5.000
7,451
4,559
—
12,010
(52)
(30)
—
(82)
0.7
–  Band 5
5.001 to 20.000
599
1,097
—
1,696
—
(11)
—
(11)
0.6
–  Band 6
20.001 to 99.999
122
1,051
—
1,173
(1)
(79)
—
(80)
6.8
–  Band 7
100.000
—
—
2,212
2,212
—
—
(269)
(269)
12.2
Credit cards
19,909
4,419
352
24,680
(236)
(697)
(203)
(1,136)
4.6
–  Band 1
0.000 to 0.250
9,490
1
—
9,491
(32)
—
—
(32)
0.3
–  Band 2
0.251 to 0.500
2,481
6
—
2,487
(21)
(1)
—
(22)
0.9
–  Band 3
0.501 to 1.500
4,799
294
—
5,093
(56)
(17)
—
(73)
1.4
–  Band 4
1.501 to 5.000
2,787
2,291
—
5,078
(93)
(158)
—
(251)
4.9
–  Band 5
5.001 to 20.000
352
1,374
—
1,726
(34)
(258)
—
(292)
16.9
–  Band 6
20.001 to 99.999
—
453
—
453
—
(263)
—
(263)
58.1
–  Band 7
100.000
—
—
352
352
—
—
(203)
(203)
57.7
Other personal lending
(excluding credit cards)
56,215
4,777
941
61,933
(241)
(537)
(382)
(1,160)
1.9
–  Band 1
0.000 to 0.250
28,115
30
—
28,145
(34)
(1)
—
(35)
0.1
–  Band 2
0.251 to 0.500
6,634
286
—
6,920
(11)
(1)
—
(12)
0.2
–  Band 3
0.501 to 1.500
12,935
329
—
13,264
(61)
(9)
—
(70)
0.5
–  Band 4
1.501 to 5.000
7,215
1,447
—
8,662
(79)
(46)
—
(125)
1.4
–  Band 5
5.001 to 20.000
1,137
2,005
—
3,142
(55)
(199)
—
(254)
8.1
–  Band 6
20.001 to 99.999
179
680
—
859
(1)
(281)
—
(282)
32.8
–  Band 7
100.000
—
—
941
941
—
—
(382)
(382)
40.6
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
0.6
First lien residential
mortgages2
294,919
39,860
2,042
336,821
(74)
(231)
(270)
(575)
0.2
–  Band 1
0.000 to 0.250
247,330
21,220
—
268,550
(13)
(4)
—
(17)
—
–  Band 2
0.251 to 0.500
19,615
7,900
—
27,515
(4)
(3)
—
(7)
—
–  Band 3
0.501 to 1.500
21,323
5,691
—
27,014
(18)
(7)
—
(25)
0.1
–  Band 4
1.501 to 5.000
6,594
2,694
—
9,288
(39)
(24)
—
(63)
0.7
–  Band 5
5.001 to 20.000
34
1,024
—
1,058
—
(40)
—
(40)
3.8
–  Band 6
20.001 to 99.999
23
1,331
—
1,354
—
(153)
—
(153)
11.3
–  Band 7
100.000
—
—
2,042
2,042
—
—
(270)
(270)
13.2
Other personal lending
67,758
9,006
1,297
78,061
(487)
(1,273)
(535)
(2,295)
2.9
–  Band 1
0.000 to 0.250
30,150
153
—
30,303
(54)
(13)
—
(67)
0.2
–  Band 2
0.251 to 0.500
7,219
251
—
7,470
(26)
(1)
—
(27)
0.4
–  Band 3
0.501 to 1.500
17,077
1,499
—
18,576
(82)
(44)
—
(126)
0.7
–  Band 4
1.501 to 5.000
10,344
2,036
—
12,380
(170)
(103)
—
(273)
2.2
–  Band 5
5.001 to 20.000
2,501
3,692
—
6,193
(154)
(520)
—
(674)
10.9
–  Band 6
20.001 to 99.999
467
1,375
—
1,842
(1)
(592)
—
(593)
32.2
–  Band 7
100.000
—
—
1,297
1,297
—
—
(535)
(535)
41.2
At 31 Dec 2022
362,677
48,866
3,339
414,882
(561)
(1,504)
(805)
(2,870)
0.7
1  12-month point in time adjusted for multiple economic scenarios.
2  PD bands do not consider the impact of any management judgemental adjustments on stage or allowances for ECL including the impact of new
models not yet formally implemented. For a list of management judgemental adjustments see page 199.
Risk review
232
HSBC Holdings plc
Personal lending – credit risk profile by internal PD band for loan and other credit-related commitments and financial guarantees
Nominal amount
Allowance for ECL
PD range1
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
ECL
coverage
%
$m
$m
$m
$m
$m
$m
$m
$m
%
Loan and other credit-
related commitments
253,183
3,459
355
256,997
(23)
—
(2)
(25)
—
–  Band 1
0.000 to 0.250
196,201
114
—
196,315
(15)
—
—
(15)
—
–  Band 2
0.251 to 0.500
17,861
63
—
17,924
(1)
—
—
(1)
—
–  Band 3
0.501 to 1.500
29,623
1,262
—
30,885
(1)
—
—
(1)
—
–  Band 4
1.501 to 5.000
8,550
1,334
—
9,884
(4)
—
—
(4)
—
–  Band 5
5.001 to 20.000
508
564
—
1,072
(2)
—
—
(2)
0.2
–  Band 6
20.001 to 99.999
440
122
—
562
—
—
—
—
—
–  Band 7
100.000
—
—
355
355
—
—
(2)
(2)
0.6
Financial guarantees
1,106
13
—
1,119
—
—
—
—
—
–  Band 1
0.000 to 0.250
348
—
—
348
—
—
—
—
—
–  Band 2
0.251 to 0.500
386
—
—
386
—
—
—
—
—
–  Band 3
0.501 to 1.500
359
1
—
360
—
—
—
—
—
–  Band 4
1.501 to 5.000
3
—
—
3
—
—
—
—
—
–  Band 5
5.001 to 20.000
2
12
—
14
—
—
—
—
—
–  Band 6
20.001 to 99.999
8
—
—
8
—
—
—
—
—
–  Band 7
100.000
—
—
—
—
—
—
—
—
—
At 31 Dec 2023
254,289
3,472
355
258,116
(23)
—
(2)
(25)
—
112-month point in time adjusted for multiple economic scenarios.
Collateral on loans and advances
(Audited)
The following table provides a quantification of the value of fixed
charges we hold over specific assets where we have a history
of enforcing, and are able to enforce, collateral in satisfying a debt in
the event of the borrower failing to meet its contractual obligations,
and where the collateral is cash or can be realised by sale in an
established market. The collateral valuation excludes any adjustments
for obtaining and selling the collateral and, in particular, loans shown
as not collateralised or partially collateralised may also benefit from
other forms of credit mitigants.
Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage
(Audited)
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
%
%
%
%
Fully collateralised by LTV ratio
331,279
38,378
2,129
371,786
—
0.5
10.1
0.1
–  less than 50%
140,992
19,715
1,165
161,872
—
0.3
7.1
0.1
–  51% to 70%
113,043
12,636
568
126,247
—
0.6
10.9
0.1
–  71% to 80%
37,866
4,111
229
42,206
—
0.9
15.2
0.2
–  81% to 90%
23,278
1,499
109
24,886
—
1.2
17.3
0.2
–  91% to 100%
16,100
417
58
16,575
—
1.6
28.9
0.2
Partially collateralised (A): LTV > 100%
9,529
136
129
9,794
—
3.4
42.0
0.6
–  collateral value on A
8,968
123
104
9,195
Total at 31 Dec 2023
340,808
38,514
2,258
381,580
—
0.5
11.9
0.1
of which: UK
Fully collateralised by LTV ratio
146,739
33,597
759
181,095
—
0.3
9.7
0.1
–  less than 50%
60,403
17,629
458
78,490
—
0.2
7.9
0.1
–  51% to 70%
49,945
11,248
207
61,400
—
0.4
9.4
0.1
–  71% to 80%
20,293
3,275
61
23,629
—
0.6
13.4
0.1
–  81% to 90%
12,946
1,161
18
14,125
—
0.8
17.5
0.1
–  91% to 100%
3,152
284
15
3,451
—
1.0
41.6
0.3
Partially collateralised (B): LTV > 100%
317
19
27
363
0.1
1.7
17.5
1.4
–  collateral value on B
244
15
22
281
Total UK at 31 Dec 2023
147,056
33,616
786
181,458
—
0.3
9.9
0.1
of which: Hong Kong
Fully collateralised
97,414
1,354
93
98,861
—
—
0.3
—
–  less than 50%
41,903
831
66
42,800
—
—
0.1
—
–  51% to 70%
29,762
330
15
30,107
—
—
0.5
—
–  71% to 80%
5,260
48
2
5,310
—
0.1
0.4
—
–  81% to 90%
8,161
61
4
8,226
—
0.1
1.9
—
–  91% to 100%
12,328
84
6
12,418
—
0.3
1.8
—
Partially collateralised (C): LTV > 100%
8,973
86
4
9,063
—
0.9
7.8
—
–  collateral value on C
8,535
81
4
8,620
Total Hong Kong at 31 Dec 2023
106,387
1,440
97
107,924
—
0.1
0.7
—
HSBC Holdings plc
233
Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage
(continued)
(Audited)
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
%
%
%
%
Fully collateralised by LTV ratio
310,705
39,906
2,097
352,708
—
0.6
9.9
0.1
–  less than 50%
154,337
12,250
1,077
167,664
—
0.7
7.2
0.1
–  51% to 70%
102,191
16,989
537
119,717
—
0.5
9.5
0.1
–  71% to 80%
25,458
6,770
212
32,440
—
0.5
14.7
0.2
–  81% to 90%
17,106
3,388
147
20,641
—
0.5
17.8
0.2
–  91% to 100%
11,613
509
124
12,246
—
1.1
18.1
0.3
Partially collateralised (A): LTV > 100%
6,964
143
133
7,240
—
6.9
46.9
1.0
–  collateral value on A
6,521
123
79
6,723
Total at 31 Dec 2022
317,669
40,049
2,230
359,948
—
0.6
12.1
0.2
of which: UK
Fully collateralised by LTV ratio
134,044
34,541
676
169,261
—
0.4
11.1
0.1
–  less than 50%
70,936
10,387
448
81,771
—
0.6
9.4
0.1
–  51% to 70%
43,617
14,943
158
58,718
—
0.4
11.6
0.1
–  71% to 80%
12,849
5,922
33
18,804
—
0.3
19.7
0.1
–  81% to 90%
5,922
2,918
10
8,850
—
0.2
24.5
0.1
–  91% to 100%
720
371
27
1,118
—
0.2
22.5
0.6
Partially collateralised (B): LTV > 100%
329
49
12
390
—
0.3
9.8
0.3
–  collateral value on B
237
38
4
279
Total UK at 31 Dec 2022
134,373
34,590
688
169,651
—
0.4
11.1
0.1
of which: Hong Kong
Fully collateralised by LTV ratio
94,949
981
237
96,167
—
—
0.1
—
–  less than 50%
44,740
577
105
45,422
—
—
—
—
–  51% to 70%
28,123
256
37
28,416
—
—
0.3
—
–  71% to 80%
4,167
37
25
4,229
—
—
0.1
—
–  81% to 90%
7,883
51
27
7,961
—
0.1
—
—
–  91% to 100%
10,036
60
43
10,139
—
0.2
—
—
Partially collateralised (C): LTV > 100%
6,441
47
1
6,489
—
0.2
0.3
—
–  collateral value on C
6,146
44
1
6,191
Total Hong Kong at 31 Dec 2022
101,390
1,028
238
102,656
—
—
0.1
—
Supplementary information
Wholesale lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount
Allowance for ECL
Corporate
and
commercial
of which: real
estate and
construction1
Non-bank
financial
institutions
Total
Corporate
and
commercial
of which: real
estate and
construction1
Non-bank
financial
institutions
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
105,536
17,852
18,343
123,879
(1,451)
(246)
(231)
(1,682)
–of which: HSBC UK Bank
plc (ring-fenced bank)
80,248
17,060
9,372
89,620
(1,212)
(212)
(66)
(1,278)
–of which: HSBC Bank plc
(non-ring-fenced bank)
24,791
792
8,971
33,762
(240)
(34)
(165)
(405)
–  of which: Other trading
entities
497
—
—
497
1
—
—
1
France
27,017
4,796
5,701
32,718
(636)
(53)
(18)
(654)
Germany
6,667
240
632
7,299
(74)
—
—
(74)
Switzerland
1,168
423
378
1,546
(12)
(1)
—
(12)
Hong Kong
125,340
48,594
19,319
144,659
(3,099)
(2,147)
(57)
(3,156)
Australia
12,685
4,443
1,564
14,249
(49)
(1)
—
(49)
India
10,856
2,083
5,315
16,171
(47)
(7)
(4)
(51)
Indonesia
3,100
162
411
3,511
(136)
(58)
—
(136)
Mainland China
28,655
6,709
7,775
36,430
(313)
(212)
(11)
(324)
Malaysia
5,797
1,137
258
6,055
(69)
(15)
—
(69)
Singapore
15,845
3,458
948
16,793
(321)
(40)
(1)
(322)
Taiwan
4,512
30
81
4,593
—
—
—
—
Egypt
899
45
86
985
(128)
(10)
(1)
(129)
UAE
13,740
1,979
823
14,563
(543)
(296)
—
(543)
US
26,993
5,143
9,155
36,148
(239)
(101)
(58)
(297)
Mexico
11,326
865
1,349
12,675
(320)
(19)
(5)
(325)
Other
27,519
3,496
2,294
29,813
(366)
(80)
(18)
(384)
At 31 Dec 2023
427,655
101,455
74,432
502,087
(7,803)
(3,286)
(404)
(8,207)
Risk review
234
HSBC Holdings plc
Wholesale lending – loans and advances to customers at amortised cost by country/territory (continued)
Gross carrying amount
Allowance for ECL
Corporate
and
commercial
of which: real
estate and
construction
Non-bank
financial
institutions
Total
Corporate
and
commercial
of which: real
estate and
construction
Non-bank
financial
institutions
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
104,775
18,747
12,662
117,437
(1,522)
(420)
(131)
(1,653)
–of which: HSBC UK Bank
plc (ring-fenced bank)
78,249
17,121
2,980
81,229
(1,247)
(279)
(6)
(1,253)
–of which: HSBC Bank plc
(non-ring-fenced bank)
26,526
1,625
9,682
36,208
(275)
(141)
(125)
(400)
France
27,571
4,607
4,152
31,723
(621)
(49)
(4)
(625)
Germany
6,603
252
713
7,316
(154)
—
(3)
(157)
Switzerland
988
635
298
1,286
(8)
—
—
(8)
Hong Kong
144,256
58,531
20,798
165,054
(2,997)
(1,980)
(35)
(3,032)
Australia
11,641
3,339
1,157
12,798
(97)
(1)
—
(97)
India
9,052
1,901
4,267
13,319
(80)
(26)
(10)
(90)
Indonesia
3,214
206
226
3,440
(187)
(5)
—
(187)
Mainland China
31,790
7,499
8,908
40,698
(327)
(174)
(30)
(357)
Malaysia
5,986
1,351
180
6,166
(133)
(38)
—
(133)
Singapore
15,905
4,031
1,192
17,097
(387)
(44)
(1)
(388)
Taiwan
4,701
36
65
4,766
(1)
—
—
(1)
Egypt
1,262
111
101
1,363
(117)
(6)
(1)
(118)
UAE
13,503
2,091
149
13,652
(674)
(342)
—
(674)
US
28,249
6,491
8,640
36,889
(214)
(95)
(26)
(240)
Mexico
9,784
1,081
717
10,501
(334)
(34)
(1)
(335)
Other
33,922
3,676
2,699
36,621
(467)
(79)
(15)
(482)
At 31 Dec 2022
453,202
114,585
66,924
520,126
(8,320)
(3,293)
(257)
(8,577)
1Real estate lending within this disclosure corresponds solely to the industry of the borrower. Commercial real estate on page 219 includes borrowers
in multiple industries investing in income-producing assets and, to a lesser extent, their construction and development.
Personal lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount
Allowance for ECL
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
168,469
19,503
8,056
187,972
(209)
(697)
(339)
(906)
–of which: HSBC UK Bank plc (ring-fenced bank)
164,878
17,884
7,975
182,762
(205)
(692)
(336)
(897)
–  of which: HSBC Bank plc (non-ring-fenced
  bank)
3,226
141
81
3,367
(3)
(5)
(2)
(8)
–of which: Other trading entities
365
1,478
—
1,843
(1)
—
(1)
(1)
France1
436
7,476
1
7,912
(13)
(8)
—
(21)
Germany
—
165
—
165
—
—
—
—
Switzerland
1,770
5,466
—
7,236
(1)
(20)
—
(21)
Hong Kong
107,182
31,248
9,663
138,430
(2)
(417)
(286)
(419)
Australia
23,001
446
396
23,447
(5)
(19)
(18)
(24)
India
1,537
680
185
2,217
(4)
(16)
(12)
(20)
Indonesia
58
288
137
346
(2)
(11)
(7)
(13)
Mainland China
7,503
754
287
8,257
(3)
(49)
(39)
(52)
Malaysia
2,313
2,115
882
4,428
(23)
(87)
(36)
(110)
Singapore
8,151
5,589
521
13,740
—
(38)
(17)
(38)
Taiwan
5,607
1,370
309
6,977
—
(17)
(4)
(17)
Egypt
—
341
89
341
—
(1)
(1)
(1)
UAE
1,957
1,325
440
3,282
(10)
(62)
(24)
(72)
US
18,340
673
199
19,013
(15)
(19)
(14)
(34)
Mexico
8,778
6,215
2,465
14,993
(176)
(757)
(297)
(933)
Other
5,807
2,959
1,050
8,766
(108)
(78)
(42)
(186)
At 31 Dec 2023
360,909
86,613
24,680
447,522
(571)
(2,296)
(1,136)
(2,867)
HSBC Holdings plc
235
Personal lending – loans and advances to customers at amortised costs by country/territory (continued)
Gross carrying amount
Allowance for ECL
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
154,519
16,793
6,622
171,312
(227)
(838)
(449)
(1,065)
–  of which: HSBC UK Bank plc (ring-fenced bank)
151,188
15,808
6,556
166,996
(222)
(828)
(447)
(1,050)
–  of which: HSBC Bank plc (non-ring-fenced
    bank)
3,331
985
66
4,316
(5)
(10)
(2)
(15)
France1
30
76
9
106
(14)
(8)
—
(22)
Germany
—
234
—
234
—
—
—
—
Switzerland
1,378
5,096
—
6,474
—
(20)
—
(20)
Hong Kong
101,478
31,409
8,644
132,887
(1)
(352)
(258)
(353)
Australia
21,372
456
396
21,828
(11)
(18)
(18)
(29)
India
1,078
590
162
1,668
(4)
(18)
(13)
(22)
Indonesia
70
278
141
348
(1)
(17)
(12)
(18)
Mainland China
9,305
921
378
10,226
(3)
(61)
(49)
(64)
Malaysia
2,292
2,437
843
4,729
(27)
(92)
(31)
(119)
Singapore
7,501
6,264
422
13,765
—
(35)
(14)
(35)
Taiwan
5,428
1,189
284
6,617
—
(18)
(5)
(18)
Egypt
—
310
83
310
—
(2)
(1)
(2)
UAE
2,104
1,339
426
3,443
(14)
(84)
(41)
(98)
US
16,847
704
213
17,551
(10)
(31)
(23)
(41)
Mexico
6,124
4,894
1,615
11,018
(145)
(593)
(196)
(738)
Other
7,295
5,071
1,150
12,366
(118)
(108)
(51)
(226)
At 31 Dec 2022
336,821
78,061
21,388
414,882
(575)
(2,295)
(1,161)
(2,870)
1Included in other personal lending at 31 December 2023 is $7,424m (31 December 2022: nil) guaranteed by Crédit Logement.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business
Gross carrying/nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
–  WPB
630,661
54,069
4,233
—
688,963
(621)
(1,551)
(977)
—
(3,149)
–  CMB
464,893
66,688
12,698
49
544,328
(508)
(1,336)
(4,995)
(23)
(6,862)
–  GBM
696,377
14,247
3,002
32
713,658
(119)
(199)
(1,161)
(7)
(1,486)
–  Corporate Centre
75,805
37
6
—
75,848
(1)
(13)
—
—
(14)
Total gross carrying amount on-balance sheet at
31 Dec 2023
1,867,736
135,041
19,939
81
2,022,797
(1,249)
(3,099)
(7,133)
(30)
(11,511)
–  WPB
253,333
3,811
333
—
257,477
(22)
—
(2)
—
(24)
–  CMB
142,206
16,238
877
—
159,321
(100)
(101)
(102)
—
(303)
–  GBM
250,007
10,752
314
4
261,077
(38)
(34)
(7)
—
(79)
–  Corporate Centre
149
—
—
—
149
—
—
—
—
—
Total nominal amount off-balance sheet at
31 Dec 2023
645,695
30,801
1,524
4
678,024
(160)
(135)
(111)
—
(406)
–  WPB
124,747
406
—
—
125,153
(14)
(17)
—
—
(31)
–  CMB
86,021
405
—
—
86,426
(9)
(18)
—
—
(27)
–  GBM
88,229
173
1
—
88,403
(13)
(6)
(1)
—
(20)
–  Corporate Centre
2,201
165
—
—
2,366
(1)
(18)
—
—
(19)
Debt instruments measured at FVOCI at
31 Dec 2023
301,198
1,149
1
—
302,348
(37)
(59)
(1)
—
(97)
–  WPB
593,424
53,302
3,959
—
650,685
(602)
(1,586)
(980)
—
(3,168)
–  CMB
440,638
82,087
13,072
112
535,909
(484)
(1,620)
(4,988)
(38)
(7,130)
–  GBM
700,267
20,577
3,344
17
724,205
(116)
(463)
(1,116)
—
(1,695)
–  Corporate Centre
83,491
188
8
—
83,687
(3)
(13)
—
—
(16)
Total gross carrying amount on-balance sheet at
31 Dec 2022
1,817,820
156,154
20,383
129
1,994,486
(1,205)
(3,682)
(7,084)
(38)
(12,009)
–  WPB
239,357
4,388
770
—
244,515
(25)
(1)
—
—
(26)
–  CMB
130,342
20,048
642
—
151,032
(83)
(136)
(81)
—
(300)
–  GBM
229,507
12,059
209
—
241,775
(39)
(56)
(17)
—
(112)
–  Corporate Centre
248
1
—
—
249
—
—
—
—
—
Total nominal amount off-balance sheet at
31 Dec 2022
599,454
36,496
1,621
—
637,571
(147)
(193)
(98)
—
(438)
–  WPB
112,591
1,066
—
1
113,658
(17)
(17)
—
—
(34)
–  CMB
71,445
735
—
—
72,180
(9)
(14)
—
—
(23)
–  GBM
75,228
434
—
1
75,663
(10)
(8)
—
—
(18)
–  Corporate Centre
3,347
299
—
—
3,646
(31)
(19)
(1)
—
(51)
Debt instruments measured at FVOCI at
31 Dec 2022
262,611
2,534
—
2
265,147
(67)
(58)
(1)
—
(126)
Risk review
236
HSBC Holdings plc
Loans and advances to customers and banks – other supplementary information
Gross
carrying
amount
of which:
stage 3
and POCI
Allowance
for ECL
of which:
stage 3
and POCI
Change in
ECL
Write-offs
Recoveries
$m
$m
$m
$m
$m
$m
$m
First lien residential mortgages
360,909
2,212
(571)
(269)
(10)
(53)
10
–  second lien residential mortgages
396
21
(8)
(5)
(1)
(1)
2
–  guaranteed loans in respect of residential property
8,593
90
(20)
(14)
2
(8)
2
–  other personal lending which is secured
29,481
157
(42)
(24)
8
(2)
2
–  credit cards
24,680
352
(1,136)
(203)
(577)
(571)
108
–  other personal lending which is unsecured
21,251
659
(1,048)
(331)
(380)
(663)
99
–  motor vehicle finance
2,212
14
(42)
(8)
(61)
(28)
3
Other personal lending
86,613
1,293
(2,296)
(585)
(1,009)
(1,273)
216
Personal lending
447,522
3,505
(2,867)
(854)
(1,019)
(1,326)
226
–  agriculture, forestry and fishing
7,181
312
(130)
(64)
(21)
(9)
—
–  mining and quarrying
7,223
325
(101)
(83)
27
(49)
—
–  manufacturing
85,333
1,899
(1,143)
(860)
(355)
(273)
11
–  electricity, gas, steam and air-conditioning supply
14,355
255
(119)
(88)
(26)
(10)
—
–  water supply, sewerage, waste management and
remediation
3,262
102
(63)
(51)
(44)
(2)
—
–  real estate and construction
101,455
5,883
(3,286)
(2,561)
(1,358)
(1,191)
6
–  wholesale and retail trade, repair of motor vehicles and
motorcycles
79,121
2,362
(1,341)
(1,134)
(124)
(447)
12
–  transportation and storage
21,456
445
(230)
(160)
(87)
(42)
—
–  accommodation and food
15,874
1,058
(257)
(112)
(33)
(26)
—
–  publishing, audiovisual and broadcasting
19,731
210
(173)
(50)
(106)
(73)
—
–  professional, scientific and technical activities
26,753
740
(401)
(306)
(262)
(110)
1
–  administrative and support services
22,203
597
(268)
(174)
39
(137)
—
–  public administration and defence, compulsory social
security
1,042
—
—
—
—
—
—
–  education
1,460
46
(15)
(4)
(1)
(22)
—
–  health and care
4,236
183
(56)
(26)
40
(7)
—
–  arts, entertainment and recreation
1,961
99
(42)
(31)
15
(8)
—
–  other services
8,355
318
(153)
(90)
22
(181)
12
–  activities of households
694
—
—
—
—
—
—
–  extra-territorial organisations and bodies activities
101
—
—
—
—
—
—
–  government
5,827
205
(12)
(10)
(15)
—
—
–  asset-backed securities
32
—
(13)
—
—
—
—
Corporate and commercial
427,655
15,039
(7,803)
(5,804)
(2,289)
(2,587)
42
Non-bank financial institutions
74,432
810
(404)
(322)
(168)
(9)
—
Wholesale lending
502,087
15,849
(8,207)
(6,126)
(2,457)
(2,596)
42
Loans and advances to customers
949,609
19,354
(11,074)
(6,980)
(3,476)
(3,922)
268
Loans and advances to banks
112,917
2
(15)
(2)
53
—
—
At 31 Dec 2023
1,062,526
19,356
(11,089)
(6,982)
(3,423)
(3,922)
268
HSBC Holdings plc
237
Loans and advances to customers and banks – other supplementary information (continued)
Gross
carrying
amount
of which:
stage 3 and
POCI
Allowance
for ECL
of which:
stage 3 and
POCI
Change in
ECL
Write-offs
Recoveries
$m
$m
$m
$m
$m
$m
$m
First lien residential mortgages
336,821
2,042
(575)
(270)
180
(48)
26
–  second lien residential mortgages
379
6
(6)
(3)
9
(1)
4
–  guaranteed loans in respect of residential property
1,367
125
(34)
(30)
(11)
(9)
2
–  other personal lending which is secured
32,106
206
(55)
(30)
(16)
(5)
1
–  credit cards
21,388
260
(1,161)
(160)
(638)
(471)
126
–  other personal lending which is unsecured
20,880
687
(1,008)
(305)
(655)
(660)
119
–  motor vehicle finance
1,941
13
(31)
(7)
39
(18)
5
Other personal lending
78,061
1,297
(2,295)
(535)
(1,272)
(1,164)
257
Personal lending
414,882
3,339
(2,870)
(805)
(1,092)
(1,212)
283
–  agriculture, forestry and fishing
6,571
261
(122)
(68)
(32)
(42)
—
–  mining and quarrying
8,120
233
(172)
(146)
(24)
(46)
—
–  manufacturing
87,460
2,065
(1,153)
(896)
(191)
(171)
3
–  electricity, gas, steam and air-conditioning supply
16,478
277
(108)
(67)
(75)
(16)
—
–  water supply, sewerage, waste management and
remediation
2,993
26
(21)
(13)
3
(1)
—
–  real estate and construction
114,585
5,651
(3,293)
(2,232)
(1,630)
(310)
8
–  wholesale and retail trade, repair of motor vehicles and
motorcycles
82,429
2,810
(1,666)
(1,344)
(344)
(667)
8
–  transportation and storage
24,686
556
(248)
(153)
(13)
(82)
1
–  accommodation and food
17,174
789
(244)
(82)
103
(29)
—
–  publishing, audiovisual and broadcasting
18,388
277
(117)
(59)
9
(47)
1
–  professional, scientific and technical activities
17,935
542
(272)
(200)
(81)
(31)
1
–  administrative and support services
25,077
980
(408)
(293)
(27)
(27)
1
–  public administration and defence, compulsory social
security
1,180
—
(1)
—
5
—
—
–  education
1,593
87
(31)
(22)
1
(3)
—
–  health and care
3,902
266
(90)
(67)
(30)
(7)
1
–  arts, entertainment and recreation
1,862
146
(77)
(57)
1
(17)
—
–  other services
12,471
589
(274)
(219)
120
(92)
7
–  activities of households
744
—
—
—
—
—
—
–  extra-territorial organisations and bodies activities
47
—
—
—
1
—
1
–  government
9,475
270
(10)
(7)
(5)
—
—
–  asset-backed securities
32
—
(13)
—
(4)
—
—
Corporate and commercial
453,202
15,825
(8,320)
(5,925)
(2,213)
(1,588)
32
Non-bank financial institutions
66,924
469
(257)
(137)
(165)
(1)
1
Wholesale lending
520,126
16,294
(8,577)
(6,062)
(2,378)
(1,589)
33
Loans and advances to customers
935,008
19,633
(11,447)
(6,867)
(3,470)
(2,801)
316
Loans and advances to banks
104,544
82
(69)
(22)
(53)
—
—
At 31 Dec 2022
1,039,552
19,715
(11,516)
(6,889)
(3,523)
(2,801)
316
HSBC Holdings
(Audited)
Risk in HSBC Holdings is overseen by the HSBC Holdings Asset and
Liability Management Committee. The major risks faced by HSBC
Holdings are credit risk, liquidity risk and market risk (in the form of
interest rate risk and foreign exchange risk).
Credit risk in HSBC Holdings primarily arises from transactions with
Group subsidiaries.
In HSBC Holdings, the maximum exposure to credit risk arises from
two components:
–financial assets on the balance sheet, where maximum exposure
equals the carrying amount (see page 365); and
–financial guarantees and other guarantees, where the maximum
exposure is the maximum that we would have to pay if the
guarantees were called upon (see Note 34).
In the case of our derivative asset balances (see page 365), there is a
legally enforceable right of offset in the event of counterparty default
and where, as a result, there is a net exposure for credit risk
purposes. However, as there is no intention to settle these balances
on a net basis under normal circumstances, they do not qualify for net
presentation for accounting purposes. These offsets also include
collateral received in cash and other financial assets.
The total offset relating to our derivative asset balances was $3.0bn at
31 December 2023 (2022: $3.1bn).
The credit quality of loans and advances and financial investments,
both of which consist of intra-Group lending and US Treasury bills and
bonds, is assessed as ‘strong’, with 100% of the exposure being
neither past due nor impaired (2022: 100%). For further details of
credit quality classification, see page 184.
Risk review
238
HSBC Holdings plc
Treasury risk
Contents
Overview
Treasury risk management
Other Group risks
Capital risk in 2023
Liquidity and funding risk in 2023
Structural foreign exchange risk in 2023
Interest rate risk in the banking book in 2023
Overview
Treasury risk is the risk of having insufficient capital, liquidity or
funding resources to meet financial obligations and satisfy regulatory
requirements, including the risk of adverse impact on earnings or
capital due to structural and transactional foreign exchange
exposures, as well as changes in market interest rates, together with
pension and insurance risk.
Treasury risk arises from changes to the respective resources and risk
profiles driven by customer behaviour, management decisions or the
external environment.
Approach and policy
(Audited)
Our objective in the management of treasury risk is to maintain
appropriate levels of capital, liquidity, funding, foreign exchange and
market risk to support our business strategy, and meet our regulatory
and stress testing-related requirements.
Our approach to treasury management is driven by our strategic and
organisational requirements, taking into account the regulatory,
economic and commercial environment. We aim to maintain a strong
capital and liquidity base to support the risks inherent in our business
and invest in accordance with our strategy, meeting both consolidated
and local regulatory requirements at all times.
Our policy is underpinned by our risk management framework. The
risk management framework incorporates a number of measures
aligned to our assessment of risks for both internal and regulatory
purposes. These risks include credit, market, operational, pensions,
structural and transactional foreign exchange risk, and interest rate
risk in the banking book.
For further details, refer to our Pillar 3 Disclosures at 31 December
2023.
Treasury risk management
Key developments in 2023
–Following high-profile banking failures in the first quarter of 2023,
we reviewed our liquidity monitoring and metric assumptions as
part of our internal liquidity adequacy assessment process cycle to
ensure they continued to cover observed and emerging risks.
–In 2023, we reverted to a policy of paying quarterly dividends, with
the Board approving three interim dividends of $0.10 per share.
We announced $7bn of share buy-backs during 2023.
–Effective July 2023, the Bank of England’s Financial Policy
Committee doubled the UK countercyclical capital buffer rate from
1% to 2%, in line with the usual 12‑month implementation lag.
This change increased our CET1 requirement by 0.2 percentage
points.
–We further stabilised our net interest income against a backdrop of
fluctuating interest rate expectations as the trajectory of inflation
for major economies was reassessed.
–Following the acquisition of SVB UK in the first quarter of 2023,
we launched HSBC Innovation Banking in June, which combined
the expertise of SVB UK with the reach of our international
network. We are in the process of integrating HSBC Innovation
Banking into the Group. The acquisition was funded from existing
resources, and the impacts on our Group LCR and CET1 ratio were
minimal.
–In the fourth quarter of 2023, we reclassified our retail banking
operations in France as held for sale, recognising a $2.0bn loss. In
the first quarter, we had recognised a $2.1bn partial reversal of
impairment for this business. The net result for the year was a
favourable $0.1bn impact. On 1 January 2024, we completed the
sale of this business with no material incremental impact on CET1.
–Having entered into an agreement to sell our banking business in
Canada in 2022, the transaction is expected to complete at the
end of the first quarter of 2024. The associated gain on sale is
expected to add approximately 1.2 percentage points to the CET1
ratio as it stood at 31 December 2023.
For quantitative disclosures on capital ratios, own funds and risk-
weighted assets (‘RWAs’), see pages 242 to 243. For quantitative
disclosures on liquidity and funding metrics, see pages 246 to 247.
For quantitative disclosures on interest rate risk in the banking book,
see pages 250 to 252.
Governance and structure
The Global Head of Traded and Treasury Risk Management and Risk
Analytics is the accountable risk steward for all treasury risks. The
Group Treasurer is the risk owner for all treasury risks, with the
exception of pension risk and insurance risk. The Group Treasurer co-
owns pension risk with the Group Head of Performance, Reward and
Employee Relations. Insurance risk is owned by the Chief Executive
Officer for Global Insurance.
Capital risk, liquidity risk, interest rate risk in the banking book,
structural foreign exchange risk and transactional foreign exchange
risk are the responsibility of the Group Executive Committee and the
Group Risk Committee (‘GRC’). Global Treasury actively manages
these risks on an ongoing basis, supported by the Holdings Asset and
Liability Management Committee (‘ALCO’) and local ALCOs, overseen
by Treasury Risk Management and Risk Management Meetings.
Pension risk is overseen by a network of local and regional pension
risk management meetings. The Global Pensions Risk Management
Meeting provides oversight of all pension plans sponsored by HSBC
globally, and is chaired by the accountable risk steward. Insurance risk
is overseen by the Global Insurance Risk Management Meeting,
chaired by the Chief Risk and Compliance Officer for Global
Insurance.
Capital, liquidity and funding risk
management processes
Assessment and risk appetite
Our capital management policy is supported by a global capital
management framework. The framework sets out our approach to
determining key capital risk appetites including CET1, total capital,
minimum requirements for own funds and eligible liabilities (‘MREL’),
the leverage ratio and double leverage. Our internal capital adequacy
assessment process (‘ICAAP’) is an assessment of the Group’s
capital position, outlining both regulatory and internal capital resources
and requirements resulting from HSBC’s business model, strategy,
risk profile and management, performance and planning, risks to
capital, and the implications of stress testing. Our assessment of
capital adequacy is driven by an assessment of risks. These risks
include credit, market, operational, pensions, insurance, structural
foreign exchange, interest rate risk in the banking book and Group
risk. Climate risk is also considered as part of the ICAAP, and we are
continuing to develop our approach. The Group’s ICAAP supports the
determination of the consolidated capital risk appetite and target
ratios, as well as enables the assessment and determination of capital
requirements by regulators. Subsidiaries prepare ICAAPs in line with
global guidance, while considering their local regulatory regimes to
determine their own risk appetites and ratios.
HSBC Holdings plc
239
HSBC Holdings is the provider of MREL to its subsidiaries, including
equity and non-equity capital. These investments are funded by HSBC
Holdings’ own equity capital and MREL-eligible debt. MREL includes
own funds and liabilities that can be written down or converted into
capital resources in order to absorb losses or recapitalise a bank in the
event of its failure. In line with our existing structure and business
model, HSBC has three resolution groups – the European resolution
group, the Asian resolution group and the US resolution group. There
are some smaller entities that fall outside these resolution groups.
HSBC Holdings seeks to maintain a prudent balance between the
composition of its capital and its investments in subsidiaries.
As a matter of long-standing policy, the holding company group
retains a substantial holdings capital buffer comprising cash and other
high-quality liquid assets, which at 31 December 2023 was in excess
of $27bn, within risk appetite.
We aim to ensure that management has oversight of our liquidity and
funding risks at Group and entity level through robust governance, in
line with our risk management framework. We manage liquidity and
funding risk at an operating entity level in accordance with globally
consistent policies, procedures and reporting standards. This ensures
that obligations can be met in a timely manner, in the jurisdiction
where they fall due.
Operating entities are required to meet internal minimum
requirements and any applicable regulatory requirements at all times.
These requirements are assessed through our internal liquidity
adequacy assessment process (‘ILAAP’), which ensures that
operating entities have robust strategies, policies, processes and
systems for the identification, measurement, management and
monitoring of liquidity risk over an appropriate set of time horizons,
including intra-day. The ILAAP informs the validation of risk tolerance
and the setting of risk appetite. It also assesses the capability to
manage liquidity and funding effectively in each major entity. These
metrics are set and managed locally but are subject to robust global
review and challenge to ensure consistency of approach and
application of the Group’s policies and controls.
Planning and performance
Capital and RWA plans form part of the annual financial resource plan
that is approved by the Board. Capital and RWA forecasts are
submitted to the Group Executive Committee on a monthly basis, and
capital and RWAs are monitored and managed against the plan. The
responsibility for global capital allocation principles rests with the
Group Chief Financial Officer, supported by the Group Capital
Management Meeting. This is a specialist forum addressing capital
management, reporting into Holdings ALCO. 
Through our internal governance processes, we seek to strengthen
discipline over our investment and capital allocation decisions, and to
ensure that returns on investment meet management’s objectives.
Our strategy is to allocate capital to businesses and entities to
support growth objectives where returns above internal hurdle levels
have been identified and in order to meet their regulatory and
economic capital needs. We evaluate and manage business returns
by using a return on average tangible equity measure and a related
economic profit measure.
Funding and liquidity plans also form part of the financial resource
plan that is approved by the Board. The Board-level appetite measures
are the liquidity coverage ratio (‘LCR’) and net stable funding ratio
(‘NSFR’), together with an internal liquidity metric. In addition, we use
a wider set of measures to manage an appropriate funding and
liquidity profile, including legal entity depositor concentration limits,
intra-day liquidity, forward-looking funding assessments and other key
measures.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified
that have the potential to affect our RWAs, capital and/or liquidity
position. Downside and Upside scenarios are assessed against our
management objectives, and mitigating actions are assigned as
necessary. We closely monitor future regulatory developments and
continue to evaluate the impact of these upon our capital and liquidity
requirements, particularly those related to the UK’s implementation of
the outstanding measures to be implemented from the Basel III
reforms (‘Basel 3.1‘).
Regulatory developments
Future changes to our ratios will occur with the implementation of
Basel 3.1. The Prudential Regulation Authority (‘PRA‘) has published
its consultation paper on the UK’s implementation, with a proposed
implementation date of 1 July 2025. The PRA has also published a set
of near-final rules in relation to some Basel 3.1 elements. We are
currently assessing the impact of implementation.
The RWA output floor under Basel 3.1 is proposed to be subject to a
four-and-a-half year transitional provision. Any impact from the output
floor is expected be towards the end of the transition period.
Regulatory reporting processes and controls
The quality of regulatory reporting remains a key priority for
management and regulators. We are progressing with a
comprehensive programme to strengthen our global processes,
improve consistency and enhance controls across regulatory reports.
The ongoing programme of work focuses on our material regulatory
reports and is being phased over a number of years. This programme
includes data enhancement, transformation of the reporting systems
and an uplift to the control environment over the report production
process.
While this programme continues, there may be further impacts on
some of our regulatory ratios, such as the CET1, LCR and NSFR, as
we implement recommended changes and continue to enhance our
controls across the process.
Stress testing and recovery and resolution planning
The Group uses stress testing to inform management of the capital
and liquidity needed to withstand internal and external shocks,
including a global economic downturn or a systems failure. Stress
testing results are also used to inform risk mitigation actions, input
into global business performance measures through tangible equity
allocation, and recovery and resolution planning, as well as to re-
evaluate business plans where analysis shows capital, liquidity and/or
returns do not meet their target.
In addition to a range of internal stress tests, we are subject to
supervisory stress testing in many jurisdictions. These include the
programmes of the Bank of England (‘BoE’), the US Federal Reserve
Board, the European Banking Authority, the European Central Bank
and the Hong Kong Monetary Authority. The results of regulatory
stress testing and our internal stress tests are used when assessing
our internal capital and liquidity requirements through the ICAAP and
ILAAP. The outcomes of stress testing exercises carried out by the
PRA and other regulators feed into the setting of regulatory minimum
ratios and buffers.
We maintain recovery plans for the Group and material entities, which
set out potential options management could take in a range of stress
scenarios that could result in a breach of capital or liquidity buffers.
The Group recovery plan sets out the framework and governance
arrangements to support restoring HSBC to a stable and viable
position, and so lowering the probability of failure from either
idiosyncratic company-specific stress or systemic market-wide issues.
Our material entities’ recovery plans provide detailed actions that
management would consider taking in a stress scenario should their
positions deteriorate and threaten to breach risk appetite and
regulatory minimum levels. This is to help ensure that HSBC entities
can stabilise their financial position and recover from financial losses
in a stress environment.
The Group also has capabilities, resources and arrangements in place
to address the unlikely event that HSBC might not be recoverable and
would therefore need to be resolved by regulators. The Group and the
BoE publicly disclosed the status of HSBC’s progress against the
BoE’s Resolvability Assessment Framework in June 2022, following
the submission of HSBC’s inaugural resolvability self-assessment in
October 2021. HSBC has continued to enhance its resolvability
capabilities since this time and submitted its second self-assessment
in October 2023. A subsequent update was provided to the BoE in
January 2024. Further public disclosure by the Group and the BoE as
Risk review
240
HSBC Holdings plc
to HSBC’s progress against the Resolvability Assessment Framework
will be made in June 2024.
Overall, HSBC’s recovery and resolution planning helps safeguard the
Group’s financial and operational stability. The Group is committed to
further developing its recovery and resolution capabilities, including in
relation to the Resolvability Assessment Framework.
Measurement of interest rate risk in the
banking book processes
Assessment and risk appetite
Interest rate risk in the banking book is the risk of an adverse impact
to earnings or capital due to changes in market interest rates. It is
generated by our non-traded assets and liabilities, specifically loans,
deposits and financial instruments that are not held for trading intent
or in order to hedge positions held with trading intent. Interest rate
risk that can be economically hedged may be transferred to Global
Treasury. Hedging is generally executed through interest rate
derivatives or fixed-rate government bonds. Any interest rate risk that
Global Treasury cannot economically hedge is not transferred and will
remain within the global business where the risks originate.
Global Treasury uses a number of measures to monitor and control
interest rate risk in the banking book, including:
–net interest income sensitivity;
–banking net interest income sensitivity; and
–economic value of equity sensitivity.
Net interest income and banking net interest income
sensitivity
A principal part of our management of non-traded interest rate risk is
to monitor the sensitivity of expected net interest income (‘NII’) under
varying interest rate scenarios (i.e. simulation modelling), where all
other economic variables are held constant. This monitoring is
undertaken at an entity and Group level, where a range of interest
rate scenarios are monitored on a one-year basis.
NII sensitivity figures represent the effect of pro forma movements in
projected yield curves based on a static balance sheet size and
structure, except for certain mortgage products where balances are
impacted by interest rate sensitive prepayments. These sensitivity
calculations do not incorporate actions that would be taken by Global
Treasury or in the business that originates the risk to mitigate the
effect of interest rate movements.
The NII sensitivity calculations assume that interest rates of all
maturities move by the same amount in the ‘up-shock’ scenario. The
sensitivity calculations in the ‘down-shock’ scenarios reflect no floors
to the shocked market rates. However, customer product-specific
interest rate floors are recognised where applicable.
During 2023, we introduced an additional metric to measure and
manage the sensitivity of our NII to interest rate shocks. In addition to
NII sensitivity, we now also monitor banking NII sensitivity. HSBC has
a significant quantity of trading book assets that are funded by
banking book liabilities, and the NII sensitivity measure does not
include the sensitivity of the internal transfer income from this
funding. Banking NII sensitivity includes an adjustment on top of NII
sensitivity to reflect this. Going forwards, this will be our primary
metric for monitoring and management of interest rate risk in the
banking book.
Economic value of equity sensitivity
Economic value of equity (‘EVE’) represents the present value of the
future banking book cash flows that could be distributed to equity
holders under a managed run-off scenario. This equates to the current
book value of equity plus the present value of future NII in this
scenario. An EVE sensitivity represents the expected movement in
EVE due to pre-specified interest rate shocks, where all other
economic variables are held constant. Operating entities are required
to monitor EVE sensitivities as a percentage of capital resources.
Further details of HSBC’s risk management of interest rate risk in the
banking book can be found in the Group’s Pillar 3 Disclosures at
31 December 2023.
Other Group risks
Non-trading book foreign exchange
exposures
Structural foreign exchange exposures
Structural foreign exchange exposures arise from net assets or capital
investments in foreign operations, together with any associated
hedging. A foreign operation is defined as a subsidiary, associate, joint
arrangement or branch where the activities are conducted in a
currency other than that of the reporting entity. An entity’s functional
reporting currency is normally that of the primary economic
environment in which the entity operates.
Exchange differences on structural exposures are recognised in other
comprehensive income (‘OCI’). We use the US dollar as our
presentation currency in our consolidated financial statements
because the US dollar and currencies linked to it form the major
currency bloc in which we transact and fund our business. Therefore,
our consolidated balance sheet is affected by exchange differences
between the US dollar and all the non-US dollar functional currencies
of underlying foreign operations.
Our structural foreign exchange exposures are managed with the
primary objective of ensuring, where practical, that our consolidated
capital ratios and the capital ratios of individual banking subsidiaries
are largely protected from the effect of changes in exchange rates.
We hedge structural foreign exchange positions where it is capital
efficient to do so, and subject to approved limits. This is achieved
through a combination of net investment hedges and economic
hedges. Hedging positions are monitored and rebalanced periodically
to manage RWA or downside risks associated with HSBC’s foreign
currency investments.
For further details of our structural foreign exchange exposures, see
page 249.
Transactional foreign exchange exposures
Transactional foreign exchange risk arises primarily from day-to-day
transactions in the banking book generating profit and loss or fair
value through other comprehensive income (‘FVOCI’) reserves in a
currency other than the reporting currency of the operating entity.
Transactional foreign exchange exposure generated through profit and
loss is periodically transferred to Markets and Securities Services and
managed within limits, with the exception of limited residual foreign
exchange exposure arising from timing differences or for other
reasons. Transactional foreign exchange exposure generated through
OCI reserves is managed by Global Treasury within approved
appetite.
HSBC Holdings risk management
As a financial services holding company, HSBC Holdings has limited
market risk activities. Its activities predominantly involve maintaining
sufficient capital resources to support the Group’s diverse activities;
allocating these capital resources across the Group’s businesses;
earning dividend and interest income on its investments in the
businesses; payment of operating expenses; providing dividend
payments to its equity shareholders and interest payments to
providers of debt capital; and maintaining a supply of short-term liquid
assets for deployment under extraordinary circumstances.
The main market risks to which HSBC Holdings is exposed are
banking book interest rate risk and foreign currency risk. Exposure to
these risks arises from short-term cash balances, funding positions
held, loans to subsidiaries, investments in long-term financial assets,
financial liabilities including debt capital issued, and structural foreign
exchange hedges. The objective of HSBC Holdings’ market risk
management strategy is to manage volatility in capital resources, cash
flows and distributable reserves that could be caused by movements
in market parameters. Market risk for HSBC Holdings is monitored by
Holdings ALCO in accordance with its risk appetite statement.
HSBC Holdings plc
241
HSBC Holdings uses interest rate swaps and cross-currency interest
rate swaps to manage the interest rate risk and foreign currency risk
arising from its long-term debt issues. It also uses forward foreign
exchange contracts to manage its structural foreign exchange
exposures.
For quantitative disclosures on interest rate risk in the banking book,
see pages 250 to 252.
Pension risk management processes
Our global pensions strategy is to move from defined benefit to
defined contribution plans, where local law allows and it is considered
competitive to do so. Our most material defined benefit plans have
been closed to new entrants for many years, and the majority
(including the largest plan in the UK) are also closed to future accrual.
In defined contribution pension plans, the contributions that HSBC is
required to make are known, while the ultimate pension benefit will
vary, typically with investment returns achieved by investment
choices made by the employee. While the market risk to HSBC of
defined contribution plans is low, the Group is still exposed to
operational and reputational risk.
In defined benefit pension plans, the level of pension benefit is
known. Therefore, the level of contributions required by HSBC will
vary due to a number of risks, including:
–investments delivering a return below the level required to provide
the projected plan benefits;
–the prevailing economic environment leading to corporate failures,
thus triggering write-downs in asset values (both equity and debt);
–a change in either interest rates or inflation expectations, causing
an increase in the value of plan liabilities; and
–plan members living longer than expected (known as longevity
risk).
Pension risk is assessed using an economic capital model that takes
into account potential variations in these factors. The impact of these
variations on both pension assets and pension liabilities is assessed
using a one-in-200-year stress test. Scenario analysis and other stress
tests are also used to support pension risk management, including
the review of de-risking opportunities.
To fund the benefits associated with defined benefit plans,
sponsoring Group companies, and in some instances employees,
make regular contributions in accordance with advice from actuaries
and in consultation with the plan’s fiduciaries where relevant. These
contributions are normally set to ensure that there are sufficient funds
to meet the cost of the accruing benefits for the future service of
active members. However, higher contributions are required when
plan assets are considered insufficient to cover the existing pension
liabilities. Contribution rates are typically revised annually or once
every three years, depending on the plan.
The defined benefit plans invest contributions in a range of
investments designed to limit the risk of assets failing to meet a
plan’s liabilities. Any changes in expected returns from the
investments may also change future contribution requirements. In
pursuit of these long-term objectives, an overall target allocation is
established between asset classes of the defined benefit plan. In
addition, each permitted asset class has its own benchmarks, such as
stock-market or property valuation indices or liability characteristics.
The benchmarks are reviewed at least once every three to five years
and more frequently if required by local legislation or circumstances.
The process generally involves an extensive asset and liability review.
In addition, some of the Group’s pension plans hold longevity swap
contracts. These arrangements provide long-term protection to the
relevant plans against costs resulting from pensioners or their
dependants living longer than initially expected. The most sizeable
plan to do this is the HSBC Bank (UK) Pension Scheme, which holds
longevity swaps covering approximately 50% of the plan’s pensioner
liabilities.
Capital risk in 2023
Capital overview
Capital adequacy metrics
At
31 Dec
31 Dec
2023
2022
Risk-weighted assets (‘RWAs’) ($bn)
Credit risk
683.9
679.1
Counterparty credit risk
35.5
37.1
Market risk
37.5
37.6
Operational risk
97.2
85.9
Total RWAs
854.1
839.7
Capital on a transitional basis ($bn)
Common equity tier 1 (‘CET1’) capital
126.5
119.3
Tier 1 capital
144.2
139.1
Total capital
171.2
162.4
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio
14.8
14.2
Tier 1 ratio
16.9
16.6
Total capital ratio
20.0
19.3
Capital on an end point basis ($bn)
Common equity tier 1 (‘CET1’) capital
126.5
119.3
Tier 1 capital
144.2
139.1
Total capital
167.1
157.2
Capital ratios on an end point basis (%)
Common equity tier 1 ratio
14.8
14.2
Tier 1 ratio
16.9
16.6
Total capital ratio
19.6
18.7
Liquidity coverage ratio (‘LCR’)
Total high-quality liquid assets ($bn)
647.5
647.0
Total net cash outflow ($bn)
477.1
490.8
LCR (%)
136
132
Net stable funding ratio (‘NSFR’)
Total available stable funding ($bn)
1,601.9
1,552.0
Total required stable funding ($bn)
1,202.4
1,138.4
NSFR (%)
133
136
Risk review
242
HSBC Holdings plc
References to EU regulations and directives (including technical
standards) should, as applicable, be read as references to the UK’s
version of such regulation or directive, as onshored into UK law under
the European Union (Withdrawal) Act 2018, and as may be
subsequently amended under UK law.
Capital figures and ratios in the previous table are calculated in
accordance with the regulatory requirements of the Capital
Requirements Regulation and Directive, the CRR II regulation and the
PRA Rulebook (‘CRR II’). The table presents them under the
transitional arrangements in CRR II for capital instruments and after
their expiry, known as the end point.
The liquidity coverage ratio is based on the average month-end value
over the preceding 12 months. The net stable funding ratio is the
average of the preceding four quarters.
Regulatory numbers and ratios are as presented at the date of
reporting. Small changes may exist between these numbers and
ratios and those submitted in regulatory filings. Where differences are
significant, we may restate in subsequent periods.
Own funds disclosure
(Audited)
At
31 Dec
31 Dec
2023
2022
Ref*
$m
$m
Common equity tier 1 (‘CET1’) capital: instruments and reserves
1
Capital instruments and the related share premium accounts
22,964
23,406
–  ordinary shares
22,964
23,406
2,3
Retained earnings, accumulated other comprehensive income (and other reserves)1
128,419
121,609
5
Minority interests (amount allowed in consolidated CET1)
3,917
4,444
5a
Independently reviewed net profits net of any foreseeable charge or dividend
10,568
8,633
6
Common equity tier 1 capital before regulatory adjustments1
165,868
158,092
28
Total regulatory adjustments to common equity tier1
(39,367)
(38,801)
29
Common equity tier 1 capital
126,501
119,291
36
Additional tier 1 capital before regulatory adjustments
17,732
19,836
43
Total regulatory adjustments to additional tier 1 capital
(70)
(60)
44
Additional tier 1 capital
17,662
19,776
45
Tier 1 capital
144,163
139,067
51
Tier 2 capital before regulatory adjustments
28,148
24,779
57
Total regulatory adjustments to tier 2 capital
(1,107)
(1,423)
58
Tier 2 capital
27,041
23,356
59
Total capital
171,204
162,423
*The references identify lines prescribed in the PRA template, which are applicable and where there is a value.
1On adoption of IFRS 17 ‘Insurance Contracts’, comparative data previously published under IFRS 4 ‘Insurance Contracts’ have been restated for 2022,
with no impact on CET1 and total capital.
At 31 December 2023, our CET1 capital ratio increased to 14.8% from
14.2% at 31 December 2022, reflecting an increase in CET1 capital of
$7.2bn, partly offset by an increase in RWAs of $14.4bn. The key
drivers of the overall rise in our CET1 ratio during the year were:
–a 1.0 percentage point increase from capital generation, mainly
through profits less dividends and share buy-backs;
–a 0.3 percentage point reduction due to an increase in regulatory
deductions, primarily for expected excess loss and intangible
assets; and
–a 0.1 percentage point decrease from the adverse impact of
foreign exchange fluctuations and the increase in the underlying
RWAs.
The impairment of BoCom had an insignificant impact on our capital
and CET1 ratio. This is because the impairment charge had a partially
offsetting reduction in threshold deductions from regulatory capital.
For regulatory capital purposes, our share of BoCom’s profits is not
capital accretive, although the dividends we receive from BoCom are
capital accretive.
Our Pillar 2A requirement at 31 December 2023, as per the PRA’s
Individual Capital Requirement based on a point-in-time assessment,
was equivalent to 2.6% of RWAs, of which 1.5% was required to be
met by CET1. Throughout 2023, we complied with the PRA’s
regulatory capital adequacy requirements.
Risk-weighted assets
RWAs by global business
WPB
CMB1
GBM1
Corporate
Centre
Total
RWAs
$bn
$bn
$bn
$bn
$bn
Credit risk
155.3
319.1
131.5
78.0
683.9
Counterparty credit risk
1.9
1.5
32.0
0.1
35.5
Market risk
1.3
1.0
22.2
13.0
37.5
Operational risk
34.4
32.9
32.8
(2.9)
97.2
At 31 Dec 2023
192.9
354.5
218.5
88.2
854.1
At 31 Dec 2022
182.9
342.4
225.9
88.5
839.7
1  In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs,
a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have
been re-presented accordingly.
HSBC Holdings plc
243
RWAs by legal entities1
HSBC
UK
Bank
plc
HSBC
Bank
plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
Credit risk
110.7
73.4
314.0
17.1
59.3
27.1
25.9
48.0
8.4
683.9
Counterparty credit risk
0.3
17.8
8.7
0.7
3.1
0.5
0.7
3.7
—
35.5
Market risk2
0.2
22.7
27.4
2.8
2.6
0.8
0.7
1.6
9.3
37.5
Operational risk
18.0
17.6
46.6
3.7
7.2
3.5
5.3
6.3
(11.0)
97.2
At 31 Dec 2023
129.2
131.5
396.7
24.3
72.2
31.9
32.6
59.6
6.7
854.1
At 31 Dec 2022
110.9
127.0
407.0
22.5
72.5
31.9
26.7
60.3
8.1
839.7
1Balances are on a third-party Group consolidated basis.
2Market risk RWAs are non-additive across the legal entities due to diversification effects within the Group.
RWA movement by global business by key driver
Credit risk, counterparty credit risk and operational
risk
WPB
CMB1
GBM1
Corporate
Centre
Market
risk
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 1 Jan 2023
181.2
341.3
202.3
77.3
37.6
839.7
Asset size2
15.6
3.2
3.2
2.6
1.6
26.2
Asset quality
2.8
1.5
(0.6)
(1.2)
—
2.5
Model updates
(1.3)
(0.1)
(0.3)
—
(0.9)
(2.6)
Methodology and policy
(6.2)
(1.8)
(7.5)
(3.5)
(0.9)
(19.9)
Acquisitions and disposals
(1.3)
8.0
(0.7)
0.1
0.1
6.2
Foreign exchange movements3
0.8
1.4
(0.1)
(0.1)
—
2.0
Total RWA movement
10.4
12.2
(6.0)
(2.1)
(0.1)
14.4
RWAs at 31 Dec 2023
191.6
353.5
196.3
75.2
37.5
854.1
1  In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs,
a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have
been re-presented accordingly.
2  The movements in asset size include the increase in operational risk RWAs, which was driven by revenue.
3   Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying
transactional currencies.
RWA movement by legal entities by key driver1
Credit risk, counterparty credit risk and operational risk
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Market
risk
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 1 Jan 2023
110.8
106.5
378.4
20.8
69.5
31.1
26.2
58.0
0.8
37.6
839.7
Asset size2
5.1
0.2
5.8
1.8
0.4
(0.2)
2.9
12.1
(3.5)
1.6
26.2
Asset quality
2.3
(0.9)
(1.9)
(1.0)
0.8
0.3
(0.5)
3.3
0.1
—
2.5
Model updates
(1.0)
(0.3)
(0.4)
0.1
—
—
—
(0.1)
—
(0.9)
(2.6)
Methodology and policy
(4.0)
0.8
(11.2)
(0.3)
(1.1)
(0.7)
0.2
(2.5)
(0.2)
(0.9)
(19.9)
Acquisitions and
disposals
9.5
(0.2)
(0.1)
—
—
—
—
(3.2)
0.1
0.1
6.2
Foreign exchange
movements3
6.3
2.7
(1.3)
0.1
—
0.6
3.1
(9.6)
0.1
—
2.0
Total RWA movement
18.2
2.3
(9.1)
0.7
0.1
—
5.7
—
(3.4)
(0.1)
14.4
RWAs at 31 Dec 2023
129.0
108.8
369.3
21.5
69.6
31.1
31.9
58.0
(2.6)
37.5
854.1
1  Balances are on a third-party Group consolidated basis.
2  The movements in asset size include the increase in operational risk RWAs, which was driven by revenue.
3  Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying
transactional currencies.
Risk review
244
HSBC Holdings plc
Risk-weighted assets (‘RWAs’) rose by $14.4bn during the year,
driven by an increase of $34.4bn from increased lending, higher
operational risk RWAs, business acquisitions and foreign exchange
movements. These were partly offset by a reduction of $19.9bn due
to methodology and policy changes.
Asset size
Asset size RWAs increased by $26.2bn, including a $10.4bn rise in
operational risk RWAs driven by growth in NII.
WPB RWAs increased by $15.6bn, notably due to an expansion of
retail lending in Asia, the UK and Mexico, additional sovereign
exposures in Asia and other trading entities, including a $2.9bn rise in
operational risk RWAs.
CMB RWAs increased by $3.2bn, reflecting an increase in operational
risk RWAs of $5.2bn and additional sovereign exposures across
various entities. This was partly offset by a net decrease in corporate
lending in Asia, the US and Europe.
GBM RWAs increased by $3.2bn, mainly from the $4.0bn rise in
operational risk RWAs and additional sovereign exposures across
various entities. This was partly offset by a fall in lending in Asia and
Europe.
Corporate Centre RWAs rose by $2.6bn, primarily due to an increase
in corporate exposures in Saudi Awwal Bank (‘SAB’).
Asset quality
Asset quality contributed to an RWA increase of $2.5bn due to credit
risk rating migrations and portfolio mix changes, notably in Asia, the
US and Europe.
Model updates
Model updates decreased RWAs by $2.6bn, mainly due to a change
in our risk approach to multilateral development banks’ exposures,
following approval for change from the PRA, the implementation of
the exposure at default mortgage model in the UK, and changes to
the incremental risk charge model.
Methodology and policy
The decrease of RWAs from methodology and policy of $19.9bn was
mainly driven by a decline of $7.7bn from regulatory changes related
to the risk-weighting of residential mortgages in Hong Kong, and
credit risk parameter refinements mainly in Asia and Europe.
Acquisitions and disposals
The increase in RWAs from acquisitions and disposals of $6.2bn was
primarily due to a rise of $9.6bn from the acquisition of SVB UK. This
was partly offset by a decline of $3.2bn from the disposal of our
business in Oman.
Foreign currency movements increased total RWAs by $2.0bn.
Leverage ratio1
At
31 Dec
31 Dec
2023
2022
$bn
$bn
Tier 1 capital (leverage)
144.2
139.1
Total leverage ratio exposure
2,574.8
2,417.2
%
%
Leverage ratio
5.6
5.8
1Leverage ratio calculation is in line with the PRA’s UK leverage rules. This includes IFRS 9 transitional arrangement and excludes central bank claims.
Our leverage ratio was 5.6% at 31 December 2023, down from 5.8%
at 31 December 2022. The increase in the leverage exposure was
primarily due to growth in the balance sheet, which led to a fall of
0.4 percentage points in the leverage ratio. This was partly offset by a
rise of 0.2 percentage points due to an increase in tier 1 capital.
At 31 December 2023, our UK minimum leverage ratio requirement of
3.25% was supplemented by a leverage ratio buffer of 0.9%, which
consists of an additional leverage ratio buffer of 0.7% and a
countercyclical leverage ratio buffer of 0.2%. These buffers translated
into capital values of $18.0bn and $5.1bn respectively.
Regulatory and other developments
In September 2023, the PRA announced changes to the UK
implementation of Basel 3.1 with a new proposed implementation
date of 1 July 2025. For further details related to the November 2022
consultation, see page 6 of our Pillar 3 Disclosures at 31 December
2022. We are currently assessing the impact of the consultation paper
and the associated implementation challenges (including data
provision) on our RWAs upon initial implementation. The RWA output
floor under Basel 3.1 is now proposed to be subject to a four-and-a-
half year transitional provision. Any impact from the output floor is
expected to be towards the end of the transition period.
Regulatory transitional arrangements for
IFRS 9 ‘Financial Instruments’
We have adopted the regulatory transitional arrangements of the
Capital Requirements Regulation for IFRS 9, including paragraph four
of article 473a. These allow banks to add back to their capital base a
proportion of the impact that IFRS 9 has upon their loan loss
allowances. Our capital and ratios are presented under these
arrangements throughout the tables in this section, including the end
point figures.
Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market
discipline and aims to make financial services firms more transparent
by requiring publication of wide-ranging information on their risks,
capital and management.
For further details, see our Pillar 3 Disclosures at 31 December 2023,
which is expected to be published on or around 21 February 2024 at
www.hsbc.com/investors.
HSBC Holdings plc
245
Liquidity and funding risk in 2023
Liquidity metrics
At 31 December 2023, all of the Group’s material operating entities
were above the required regulatory minimum liquidity and funding
levels.
Each entity maintains sufficient unencumbered liquid assets to
comply with local and regulatory requirements.
Each entity maintains a sufficient stable funding profile and is
assessed using the NSFR or other appropriate metrics.
In addition to regulatory metrics, we use a wide set of measures to
manage our liquidity and funding profile.
The Group liquidity and funding position on an average basis is
analysed in the following sections.
Operating entities’ liquidity1
At 31 December 2023
LCR
HQLA
Net
outflows
NSFR
%
$bn
$bn
%
HSBC UK Bank plc (ring-fenced bank)2
201
118
59
158
HSBC Bank plc (non-ring-fenced bank)3
148
132
89
116
The Hongkong and Shanghai Banking Corporation – Hong Kong branch4
192
147
77
127
HSBC Singapore5
292
26
9
174
Hang Seng Bank
254
52
21
163
HSBC Bank China
170
24
14
139
HSBC Bank USA
172
82
48
131
HSBC Continental Europe 6,7
158
83
52
137
HSBC Bank Middle East Ltd – UAE branch
281
13
5
163
HSBC Canada
164
21
13
129
HSBC Mexico
149
8
5
124
At 31 December 2022
HSBC UK Bank plc (ring-fenced bank)2
226
136
60
164
HSBC Bank plc (non-ring-fenced bank)3
143
128
90
115
The Hongkong and Shanghai Banking Corporation – Hong Kong branch4
179
147
82
130
HSBC Singapore5
247
21
9
173
Hang Seng Bank
228
50
22
156
HSBC Bank China
183
23
13
132
HSBC Bank USA
164
85
52
131
HSBC Continental Europe6
151
55
37
132
HSBC Bank Middle East Ltd – UAE branch
239
12
5
158
HSBC Canada
149
22
15
122
HSBC Mexico
155
8
5
129
1The LCR and NSFR ratios presented in the above table are based on average values. The LCR is the average of the preceding 12 months. The NSFR is
the average of the preceding four quarters.
2HSBC UK Bank plc refers to the HSBC UK liquidity group, which comprises five legal entities: HSBC UK Bank plc, Marks and Spencer Financial
Services plc, HSBC Private Bank (UK) Ltd, HSBC Innovation Bank Limited and HSBC Trust Company (UK) Limited, managed as a single operating
entity, in line with the application of UK liquidity regulation as agreed with the PRA.
3HSBC Bank plc includes overseas branches and special purpose entities consolidated by HSBC for financial statements purposes.
4The Hongkong and Shanghai Banking Corporation – Hong Kong branch represents the material activities of The Hongkong and Shanghai Banking
Corporation Limited. It is monitored and controlled for liquidity and funding risk purposes as a stand-alone operating entity.
5HSBC Singapore includes HSBC Bank Singapore Limited and The Hongkong and Shanghai Banking Corporation – Singapore branch. Liquidity and
funding risk is monitored and controlled at country level in line with the local regulator’s approval.
6In response to the requirement for an intermediate parent undertaking in line with the EU Capital Requirements Directive (’CRD V’), HSBC Continental
Europe acquired control of HSBC Germany and HSBC Bank Malta on 30 November 2022. The averages for LCR and NSFR include the impact of the
inclusion of the two entities from November 2022.
7HSBC Continental Europe NSFR includes the impact of the sale of our retail banking operations in France.
Consolidated liquidity metrics
Net stable funding ratio
We manage funding risk based on the PRA’s NSFR rules. The Group’s NSFR at 31 December 2023, calculated from the average of the four
preceding quarters average, was 133%.
At1
31 Dec
30 Jun
31 Dec
2023
2023
2022
$bn
$bn
$bn
Total available stable funding ($bn)
1,602
1,575
1,552
Total required stable funding ($bn)
1,202
1,172
1,138
NSFR ratio (%)
133
134
136
1  Group NSFR numbers above are based on average values. The NSFR number is the average of the preceding four quarters.
Risk review
246
HSBC Holdings plc
Liquidity coverage ratio
At 31 December 2023, the average high-quality liquid assets (‘HQLA‘)
held at entity level amounted to $795bn (31 December 2022:
$812bn). The Group consolidation methodology includes a deduction
to reflect the impact of limitations in the transferability of entity
liquidity around the Group. That resulted in an adjustment of $147bn
to LCR HQLA and $7bn to LCR inflows on an average basis.
Furthermore, this methodology was enhanced in 2023 to consider
more accurately non-convertible currencies.
At1
31 Dec
30 Jun
31 Dec
2023
2023
2022
$bn
$bn
$bn
High-quality liquid assets (in entities)
795
796
812
EC Delegated Act adjustment for transfer
restrictions2
(154)
(172)
(174)
Group LCR HQLA
648
631
647
Net outflows
477
478
491
Liquidity coverage ratio (%)
136
132
132
1  Group LCR numbers above are based on average values. The LCR is
the average of the preceding 12 months.
2  This includes adjustments made to high-quality liquid assets and
inflows in entities to reflect liquidity transfer restrictions.
Liquid assets
After the $147bn deduction, the average Group LCR HQLA of $648bn
(31 December 2022: $647bn) was held in a range of asset classes and
currencies. Of these, 97% were eligible as level 1 (31 December
2022: 97%).
The following tables reflect the composition of the average liquidity
pool by asset type and currency at 31 December 2023.
Liquidity pool by asset type1
Liquidity
pool
Cash
Level 12
Level 22
$bn
$bn
$bn
$bn
Cash and balance at central
bank
310
310
—
—
Central and local government
bonds
319
—
303
16
Regional government public
sector entities
2
—
2
—
International organisation and
multilateral developments
banks
10
—
10
—
Covered bonds
6
—
2
4
Other
1
—
—
1
Total at 31 Dec 2023
648
310
317
21
Total at 31 Dec 2022
647
344
284
19
1Group liquid assets numbers are based on average values.
2As defined in EU regulations, level 1 assets means ‘assets of
extremely high liquidity and credit quality’, and level 2 assets means
‘assets of high liquidity and credit quality’.
Liquidity pool by currency1
$
£
€
HK$
Other
Total
$bn
$bn
$bn
$bn
$bn
$bn
Liquidity pool at 31 Dec
2023
184
173
112
51
128
648
Liquidity pool at 31 Dec
2022
167
191
98
54
137
647
1  Group liquid assets numbers are based on average values.
Sources of funding
Our primary sources of funding are customer current accounts and
savings deposits payable on demand or at short notice. We issue
secured and unsecured wholesale securities to supplement customer
deposits, meet regulatory obligations and to change the currency mix,
maturity profile or location of our liabilities.
The following ‘Funding sources’ and ‘Funding uses’ tables provide a
view of how our consolidated balance sheet is funded. In practice, all
the principal operating entities are required to manage liquidity and
funding risk on a stand-alone basis.
The tables analyse our consolidated balance sheet according to the
assets that primarily arise from operating activities and the sources of
funding primarily supporting these activities. Assets and liabilities that
do not arise from operating activities are presented at a net balancing
source or deployment of funds.
Funding sources
(Audited)
2023
20221
$m
$m
Customer accounts
1,611,647
1,570,303
Deposits by banks
73,163
66,722
Repurchase agreements – non-trading
172,100
127,747
Debt securities in issue
93,917
78,149
Cash collateral, margin and settlement accounts
85,255
88,476
Liabilities of disposal groups held for sale2
108,406
114,597
Subordinated liabilities
24,954
22,290
Financial liabilities designated at fair value
141,426
127,321
Insurance contract liabilities
120,851
108,816
Trading liabilities
73,150
72,353
–  repos
12,198
16,254
–  stock lending
3,322
3,541
–  other trading liabilities
57,630
52,558
Total equity
192,610
185,197
Other balance sheet liabilities
341,198
387,315
At 31 Dec
3,038,677
2,949,286
Funding uses
(Audited)
2023
20221
$m
$m
Loans and advances to customers
938,535
923,561
Loans and advances to banks
112,902
104,475
Reverse repurchase agreements – non-trading
252,217
253,754
Cash collateral, margin and settlement accounts
89,911
82,984
Assets held for sale2
114,134
115,919
Trading assets
289,159
218,093
–  reverse repos
16,575
14,798
–  stock borrowing
14,609
10,706
–  other trading assets
257,975
192,589
Financial investments
442,763
364,726
Cash and balances with central banks
285,868
327,002
Other balance sheet assets
513,188
558,772
At 31 Dec
3,038,677
2,949,286
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which
replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022
comparative data.
2  ‘Liabilities of disposal groups held for sale’ includes $82bn and ‘Assets
held for sale’ includes $88bn in respect of the planned sale of our
banking business in Canada. ‘Liabilities of disposal groups held for sale’
includes $26bn and ‘Assets of disposal groups held for sale’ includes
$28bn in respect of the sale of our retail banking operations in France.
.
HSBC Holdings plc
247
Wholesale term debt maturity profile
The maturity profile of our wholesale term debt obligations is set out
in the following table. The balances in the table are not directly
comparable with those in the consolidated balance sheet because the
table presents gross cash flows relating to principal payments and
not the balance sheet carrying value, which includes debt securities
and subordinated liabilities measured at fair value.
Wholesale funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities1
Due not
more
than
1 month
Due over
1 month
but not
more than
3 months
Due over
3 months
but not
more than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more
than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due
over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Debt securities issued
17,620
9,798
14,284
13,226
12,226
20,882
64,010
50,045
202,091
–  unsecured CDs and CP
6,400
6,777
7,601
6,429
6,513
1,179
1,073
925
36,897
–  unsecured senior MTNs
8,190
1,160
4,365
3,627
3,267
12,903
54,984
41,007
129,503
–  unsecured senior structured notes
2,307
1,491
1,617
2,513
1,978
2,924
2,793
5,910
21,533
–  secured covered bonds
—
—
—
—
—
—
1,275
—
1,275
–  secured asset-backed commercial paper
426
—
—
—
—
—
—
—
426
–  secured ABS
22
44
62
58
55
188
861
539
1,829
–  others
275
326
639
599
413
3,688
3,024
1,664
10,628
Subordinated liabilities
—
2,013
—
—
—
3,358
4,282
27,234
36,887
–  subordinated debt securities
—
2,000
—
—
—
3,358
4,282
25,441
35,081
–  preferred securities
—
13
—
—
—
—
—
1,793
1,806
At 31 Dec 2023
17,620
11,811
14,284
13,226
12,226
24,240
68,292
77,279
238,978
Debt securities issued
11,959
11,266
12,532
8,225
8,212
26,669
52,435
52,952
184,250
–  unsecured CDs and CP
3,821
6,017
7,088
4,137
3,123
1,264
707
1,004
27,161
–  unsecured senior MTNs
5,973
2,351
3,534
1,363
3,238
19,229
44,023
44,021
123,732
–  unsecured senior structured notes
1,264
1,421
1,247
1,850
1,627
4,463
2,609
5,990
20,471
–  secured covered bonds
—
—
—
—
—
—
602
—
602
–  secured asset-backed commercial paper
690
—
—
—
—
—
—
—
690
–  secured ABS
15
28
40
38
36
123
656
220
1,156
–  others
196
1,449
623
837
188
1,590
3,838
1,717
10,438
Subordinated liabilities
—
—
11
160
—
2,000
5,581
25,189
32,941
–  subordinated debt securities
—
—
11
160
—
2,000
5,581
23,446
31,198
–  preferred securities
—
—
—
—
—
—
—
1,743
1,743
At 31 Dec 2022
11,959
11,266
12,543
8,385
8,212
28,669
58,016
78,141
217,191
1Excludes financial liabilities of disposal groups.
Risk review
248
HSBC Holdings plc
Structural foreign exchange risk in 2023
Structural foreign exchange exposures represent net assets or capital investments in subsidiaries, branches, joint arrangements or associates,
together with any associated hedges, the functional currencies of which are currencies other than the US dollar. Exchange differences on
structural exposures are usually recognised in ‘other comprehensive income’.
Net structural foreign exchange exposures
2023
Currency of structural exposure
Net
investment
in foreign
operations
(excl non-
controlling
interest)
Net
investment
hedges
Structural
foreign
exchange
exposures
(pre-
economic
hedges)
Economic
hedges –
structural
FX hedges1
Economic
hedges –
equity
securities
(AT1)2
Net
structural
foreign
exchange
exposures
$m
$m
$m
$m
$m
$m
Hong Kong dollars
39,014
(5,792)
33,222
(7,979)
—
25,243
Pounds sterling
46,661
(16,415)
30,246
—
(1,275)
28,971
Chinese renminbi
33,809
(3,299)
30,510
(1,066)
—
29,444
Euros
15,673
(515)
15,158
—
(1,384)
13,774
Canadian dollars
5,418
(1,076)
4,342
—
—
4,342
Indian rupees
6,286
(2,110)
4,176
—
—
4,176
Mexican pesos
4,883
—
4,883
—
—
4,883
Saudi riyals
4,312
—
4,312
—
—
4,312
UAE dirhams
4,995
(613)
4,382
(2,761)
—
1,621
Malaysian ringgit
2,754
—
2,754
—
—
2,754
Singapore dollars
2,345
(224)
2,121
—
—
2,121
Australian dollars
2,362
—
2,362
—
—
2,362
Taiwanese dollars
2,212
(1,127)
1,085
—
—
1,085
Indonesian rupiah
1,535
(512)
1,023
—
—
1,023
Swiss francs
1,191
(526)
665
—
—
665
Korean won
1,354
(864)
490
—
—
490
Thai baht
1,022
—
1,022
—
—
1,022
Egyptian pound
959
—
959
—
—
959
Qatari rial
834
(215)
619
(299)
—
320
Argentinian peso
794
—
794
—
—
794
Vietnamese dong
872
—
872
—
—
872
Others, each less than $700m
4,386
(487)
3,899
—
—
3,899
At 31 Dec
183,671
(33,775)
149,896
(12,105)
(2,659)
135,132
20223
Hong Kong dollars
39,191
(4,597)
34,594
(8,363)
—
26,231
Pounds sterling
39,298
(14,000)
25,298
—
(1,205)
24,093
Chinese renminbi
35,712
(3,532)
32,180
(994)
—
31,186
Euros
14,436
(777)
13,659
—
(2,402)
11,257
Canadian dollars
4,402
(811)
3,591
—
—
3,591
Indian rupees
4,967
(1,380)
3,587
—
—
3,587
Mexican pesos
3,932
—
3,932
—
—
3,932
Saudi riyals
4,182
(109)
4,073
—
—
4,073
UAE dirhams
4,534
(731)
3,803
(2,285)
—
1,518
Malaysian ringgit
2,715
—
2,715
—
—
2,715
Singapore dollars
2,517
(358)
2,159
—
(559)
1,600
Australian dollars
2,264
—
2,264
—
—
2,264
Taiwanese dollars
2,058
(1,140)
918
—
—
918
Indonesian rupiah
1,453
(469)
984
—
—
984
Swiss francs
1,233
(727)
506
—
—
506
Korean won
1,283
(817)
466
—
—
466
Thai baht
908
—
908
—
—
908
Egyptian pound
746
—
746
—
—
746
Qatari rial
785
(200)
585
(277)
—
308
Argentinian peso
1,010
—
1,010
—
—
1,010
Vietnamese dong
665
—
665
—
—
665
Others, each less than $700m
4,470
(495)
3,975
(36)
—
3,939
At 31 Dec
172,761
(30,143)
142,618
(11,955)
(4,166)
126,497
1Represents hedges that do not qualify as net investment hedges for accounting purposes.
2Represents foreign currency-denominated preference share and AT1 instruments. These are accounted for at historical cost under IFRS Accounting
Standards and do not qualify as net investment hedges for accounting purposes. The gain or loss arising from changes in the US dollar value of these
instruments is recognised on redemption in retained earnings.
3  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
For a definition of structural foreign exchange exposures, see page 241.
HSBC Holdings plc
249
Interest rate risk in the banking book in 2023
Net interest income and banking net interest income sensitivity
We have introduced a new metric to analyse sensitivity of our income
to interest rate shocks. In addition to NII sensitivity, we are also
disclosing banking NII sensitivity. HSBC has trading book assets that
are funded by banking book liabilities and the NII sensitivity measure
does not include the sensitivity of the internal transfer income from
this funding. Banking NII sensitivity includes an adjustment on top of
NII sensitivity to reflect this. The currency split of banking NII
sensitivities includes the impact of vanilla foreign exchange swaps to
optimise cash management across the Group.
In this disclosure we present the banking NII sensitivity alongside the
NII sensitivity. Over time we expect to phase out NII sensitivity once
the appropriate prior period comparables are available for banking NII
sensitivity.
The following tables set out the assessed impact to a hypothetical
base case projection of our NII and banking NII under an immediate
shock of 100bps to the current market-implied path of interest rates
across all currencies on 1 January 2024 (effects in the first, second
and third years). For example, Year 3 shows the impact of an
immediate rate shock on the NII and banking NII projected for the
third year.
The sensitivities shown represent a hypothetical simulation of the
base case income, assuming a static balance sheet (specifically no
assumed migration from current account to term deposits), and no
management actions from Global Treasury. This also incorporates the
effect of interest rate behaviouralisation, hypothetical managed rate
product pricing assumptions, prepayment of mortgages and deposit
stability. The sensitivity calculations exclude pensions, insurance, and
interests in associates.
The sensitivity analysis performed in the case of a down-shock does
not include floors to market rates, and it does not include floors on
some wholesale assets and liabilities. However, floors have been
maintained for deposits and loans to customers where this is
contractual or where negative rates would not be applied.
As market and policy rates move, the degree to which these changes
are passed on to customers will vary based on a number of factors,
including the absolute level of market rates, regulatory and
contractual frameworks, and competitive dynamics. To aid
comparability between markets, we have simplified the basis of
preparation for our disclosure and have used a 50% pass-on
assumption for major entities on certain interest-bearing deposits.
Our pass-through asset assumptions are largely in line with our
contractual agreements or established market practice, which
typically results in a significant portion of interest rate changes being
passed on.
An immediate interest rate rise of 100bps would increase projected
NII for the 12 months to 31 December 2024 by $1.1bn and banking
NII by $2.8bn. An immediate interest rate fall of 100bps would
decrease projected NII for the 12 months to 31 December 2024 by
$1.6bn and banking NII by $3.4bn.
The sensitivity of NII for 12 months as at 31 December 2023
decreased by $2.5bn in the plus 100bps parallel shock and by $2.4bn
in the minus 100bps parallel shock, when compared with
31 December 2022. The key drivers of the reduction in NII sensitivity
are the increase in stabilisation activities in line with our strategy, as
well as deposit migration.
For further details of measurement of interest rate risk in the banking
book, see page 241.
NII sensitivity to an instantaneous change in yield curves (12 months) – Year 1 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 December 2023)
+100bps parallel
(1,155)
148
325
503
1,232
1,053
-100bps parallel
1,004
(230)
(432)
(522)
(1,391)
(1,571)
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 December 2022)
+100bps parallel
(267)
413
1,026
674
1,689
3,535
-100bps parallel
236
(476)
(1,177)
(765)
(1,787)
(3,969)
NII sensitivity to an instantaneous down 100bps parallel change in yield curves – Year 2 and Year 3 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in NII (based on balance sheet at 31 December 2023)
Year 2 (Jan 2025 to Dec 2025)
488
(431)
(768)
(552)
(1,733)
(2,996)
Year 3 (Jan 2026 to Dec 2026)
213
(499)
(1,269)
(624)
(1,861)
(4,040)
Change in NII (based on balance sheet at 31 December 2022)
Year 2 (Jan 2024 to Dec 2024)
(43)
(532)
(1,580)
(810)
(1,979)
(4,944)
Year 3 (Jan 2025 to Dec 2025)
(404)
(636)
(1,954)
(839)
(2,092)
(5,925)
Banking NII sensitivity to an instantaneous change in yield curves (12 months) – Year 1 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 December 2023)
+100bps parallel
343
411
496
285
1,297
2,832
-100bps parallel
(494)
(493)
(602)
(304)
(1,460)
(3,353)
Risk review
250
HSBC Holdings plc
Banking NII sensitivity to an instantaneous down 100bps parallel change in yield curves – Year 2 and Year 3 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in banking NII (based on balance sheet at 31 December 2023)
Year 2 (Jan 2025 to Dec 2025)
(1,015)
(693)
(938)
(333)
(1,798)
(4,777)
Year 3 (Jan 2026 to Dec 2026)
(1,289)
(761)
(1,439)
(405)
(1,926)
(5,820)
Non-trading value at risk
Non-trading portfolios comprise positions that primarily arise from the
interest rate management of our retail and commercial banking
assets and liabilities, financial investments measured at fair value
through other comprehensive income, debt instruments measured at
amortised cost, and exposures arising from our insurance operations.
Value at risk of non-trading portfolios
Value at risk (‘VaR’) is a technique for estimating potential losses on
risk positions as a result of movements in market rates and prices
over a specified time horizon and to a given level of confidence. The
use of VaR is integrated into the market risk management of non-
trading portfolios to have a complete picture of risk, complementing
risk sensitivity analysis.
Our models are predominantly based on historical simulation that
incorporates the following features:
–historical market rates and prices, which are calculated with
reference to interest rates, credit spreads and the associated
volatilities;
–potential market movements that are calculated with reference to
data from the past two years; and
–calculations to a 99% confidence level and using a one-day
holding period.
Although a valuable guide to risk, VaR is used for non-trading
portfolios with awareness of its limitations. For example:
–The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events,
particularly those that are extreme in nature. As the model is
calibrated on the last 500 business days, it does not adjust
instantaneously to a change in the market regime.
–The use of a one-day holding period for risk management
purposes of non-trading books is only an indication of exposure
and not indicative of the time period required to hedge or liquidate
positions.
–The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
The interest rate risk on the fixed-rate securities issued by HSBC
Holdings is not included in the Group non-trading VaR. The
management of this risk is described on page 253.
Non-trading VaR also excludes the equity risk on securities held at fair
value and non-trading book foreign exchange risk.
The daily levels of total non-trading VaR in 2023 are set out in the
graph below.
Daily VaR (non-trading portfolios), 99% 1 day ($m)
1562
The Group non-trading VaR for 2023 is shown in the table below.
Non-trading VaR, 99% 1 day
(Audited)
Interest
rate
Credit
spread
Portfolio
diversification1
Total2
$m
$m
$m
$m
Balance at 31 Dec 2023
173.8
112.8
(104.2)
182.4
Average
156.2
84.2
(63.7)
176.6
Maximum
201.9
116.4
224.3
Minimum
108.8
55.2
127.0
HSBC Holdings plc
251
Non-trading VaR, 99% 1 day (continued)
(Audited)
Interest
rate
Credit
spread
Portfolio
diversification1
Total2
$m
$m
$m
$m
Balance at 31 Dec 2022
159.8
56.6
(45.3)
171.1
Average
134.6
56.9
(35.9)
155.6
Maximum
225.5
84.7
265.3
Minimum
98.3
43.4
106.3
1Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types – such as interest rate and credit spreads – together in one
portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number
represents the benefit of portfolio diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful
to calculate a portfolio diversification benefit for these measures.
2The total VaR is non-additive across risk types due to diversification effects.
The VaR for non-trading activity increased by $11m from $171m at
31 December 2022 to $182m at 31 December 2023 due to relatively
small changes in risk profile over the year. The average portfolio
diversification effect between interest rate and credit spread
exposure increased during the year, with the offset increasing to
$104m from $45m.
Sensitivity of capital and reserves
Global Treasury maintains a portfolio of high-quality liquid assets for
contingent liquidity and NII stabilisation purposes, which is in part
accounted for under a hold-to-collect-and-sell business model. This
hold-to-collect-and-sell portfolio, together with any associated
derivatives in designated hedge accounting relationships, is
accounted for at fair value through other comprehensive income and
has an impact on CET1. The portfolio represents the vast majority of
our hold-to-collect-and-sell capital risk and is risk managed with a
variety of tools, including risk sensitivities and value at risk measures.
The table below measures the sensitivity of the value of this portfolio
to an instantaneous 100 basis point increase in interest rates, based
on the risk sensitivity of a shift in value for a 1 basis point (‘bps‘)
parallel movement in interest rates.
Sensitivity of hold-to-collect-and-sell reserves to interest rate movements
$m
At 31 Dec 2023
+100 basis point parallel move in all yield curves
(2,264)
As a percentage of total shareholders’ equity
(1.22)%
At 31 Dec 2022
+100 basis point parallel move in all yield curves
(1,199)
As a percentage of total shareholders’ equity
(0.64)%
The increase in the sensitivity of the portfolio during 2023 was mainly
driven by an increase in NII stabilisation in line with our strategy. The
figures in the table above do not take into account the effects of
interest rate convexity. The portfolio mostly comprises vanilla
sovereign bonds in a variety of currencies, and the primary risk is
interest rate duration risk, although the portfolio also generates asset
swap, credit spread and asset spread risks that are managed within
appetite as part of our risk management framework. A minus 100bps
shock would lead to an approximately symmetrical gain.
Alongside our monitoring of the hold-to-collect-and-sell reserve
sensitivity, we also monitor the sensitivity of reported cash flow
hedging reserves to interest rate movements on a yearly basis by
assessing the expected reduction in valuation of cash flow hedges
due to parallel movements of plus or minus 100bps in all yield curves.
The following table describes the sensitivity of our cash flow hedging
reserves to the stipulated movements in yield curves at the
year end. The sensitivities are indicative and based on simplified
scenarios. These particular exposures form only a part of our overall
interest rate exposure. We apply flooring on negative rates in the
minus 100bps scenario in this assessment. Due to increases in
interest rates in most markets, the effect of this flooring is immaterial
at the end of 2023.
Comparing 31 December 2023 with 31 December 2022, the
sensitivity of the cash flow hedging reserve increased by $1,537m in
the plus 100bps scenario and increased by $1,562m in the minus
100bps scenario. The increase in the sensitivity of this reserve was
mainly driven by an increase in our NII stabilisation. Our exposure to
fixed rate pound sterling hedges continued to be the largest in size
and in terms of year-on-year increase. Hong Kong dollar and euro
hedges contributed to the majority of the rest of the increase in
exposure, partly offset by a reduction in the size of US dollar hedges.
Sensitivity of cash flow hedging reported reserves to interest rate movements
$m
At 31 Dec 2023
+100 basis point parallel move in all yield curves
(3,436)
As a percentage of total shareholders’ equity
(1.85)%
-100 basis point parallel move in all yield curves
3,474
As a percentage of total shareholders’ equity
1.87%
At 31 Dec 2022
+100 basis point parallel move in all yield curves
(1,899)
As a percentage of total shareholders’ equity
(1.01)%
-100 basis point parallel move in all yield curves
1,912
As a percentage of total shareholders’ equity
1.02%
Risk review
252
HSBC Holdings plc
Third-party assets in Markets Treasury
Third-party assets in Markets Treasury increased by 5% compared
with 31 December 2022. The net increase of $38bn is partly
reflective of higher commercial surpluses during the year, with the
increase of $76bn in ‘Financial Investments’ and the decrease of
$39bn in ‘Cash and balances at central banks’ largely driven by NII
stabilisation activity.
Third-party assets in Markets Treasury
2023
2022
$m
$m
Cash and balances at central banks
278,289
317,479
Trading assets
238
498
Loans and advances:
–  to banks
78,667
67,612
–  to customers
1,083
2,102
Reverse repurchase agreements
45,419
53,016
Financial investments
396,259
319,852
Other
34,651
36,192
At 31 Dec
834,606
796,751
Defined benefit pension plans
Market risk arises within our defined benefit pension plans to the extent that the obligations of the plans are not fully matched by assets with
determinable cash flows.
For details of our defined benefit plans, including asset allocation, see Note 5 on the financial statements, and for pension risk management,
see page 242.
Additional market risk measures applicable only to the parent company
HSBC Holdings monitors and manages foreign exchange risk and
interest rate risk. In order to manage interest rate risk, HSBC
Holdings uses the projected sensitivity of its NII to future changes in
yield curves.
Foreign exchange risk
HSBC Holdings’ foreign exchange exposures derive almost entirely
from the execution of structural foreign exchange hedges on behalf
of the Group. At 31 December 2023, HSBC Holdings had forward
foreign exchange contracts of $33.8bn (2022: $30.1bn) to manage
the Group’s structural foreign exchange exposures.
For further details of our structural foreign exchange exposures, see
page 249.
Sensitivity of net interest income
HSBC Holdings monitors NII sensitivity in the first, second and third
years, reflecting the longer-term perspective on interest rate risk
management appropriate to a financial services holding company.
These sensitivities assume that any issuance where HSBC Holdings
has an option to redeem at a future call date is called at this date.
The tables below set out the effect on HSBC Holdings’ future NII of
an immediate shock of +/-100bps to the current market-implied path
of interest rates across all currencies on 1 January 2024.
The NII sensitivities shown are indicative and based on simplified
scenarios. An immediate interest rate rise of 100bps would decrease
projected NII for the 12 months to 31 December 2024 by $233m.
Conversely, an immediate fall of 100bps would increase projected NII
for the 12 months to 31 December 2024 $233m.
Overall the NII sensitivity is mainly driven by floating liabilities funding
equity (non-interest bearing) investments in subsidiaries.
During 2023, HSBC Holdings hedged $3.6bn of previously unhedged
issuances, which increased the negative NII sensitivity to positive
parallel shifts in interest rates. In year 1, that impact is offset by a
shorter repricing profile of assets.
As of the Annual Report and Accounts 2023, HSBC Holdings is no
longer disclosing the interest rate repricing gap table, as the
sensitivity of net interest income table captures HSBC Holdings‘
exposure to interest rate risk and is aligned to the way we disclose
interest rate risk internally to key management.
NII sensitivity to an instantaneous change in yield curves (12 months) – Year 1 sensitivity by currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 December 2023)
+100bps parallel
(258)
—
12
5
8
(233)
-100bps parallel
258
—
(12)
(5)
(8)
233
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 December 2022)
+100bps parallel
(265)
—
16
9
—
(240)
-100bps parallel
265
—
(16)
(9)
—
240
NII sensitivity to an instantaneous down 100bps parallel change in yield curves – Year 2 and Year 3 sensitivity by currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in NII (based on balance sheet at 31 December 2023)
Year 2 (Jan 2025 to Dec 2025)
219
—
(12)
1
(9)
199
Year 3 (Jan 2026 to Dec 2026)
218
—
(12)
—
(10)
196
Change in NII (based on balance sheet at 31 December 2022)
—
Year 2 (Jan 2024 to Dec 2024)
182
—
(12)
(8)
—
162
Year 3 (Jan 2025 to Dec 2025)
160
—
(10)
(7)
—
143
The figures represent hypothetical movements in NII based on our
projected yield curve scenarios, HSBC Holdings’ current interest rate
risk profile and assumed changes to that profile during the next three
years. The sensitivities represent our assessment of the change to a
hypothetical base case based on a static balance sheet assumption,
and do not take into account the effect of actions that could be taken
to mitigate this interest rate risk.
HSBC Holdings plc
253
Market risk
Contents
Overview
Market risk management
Market risk in 2023
Trading portfolios
Market risk balance sheet linkages
Overview
Market risk is the risk of an adverse financial impact on trading
activities arising from changes in market parameters such as interest
rates, foreign exchange rates, asset prices, volatilities, correlations
and credit spreads. Market risk arises from both trading portfolios and
non-trading portfolios.
For further details of market risk in non-trading portfolios, see page
251 of the Annual Report and Accounts 2023.
Market risk management
Key developments in 2023
There were no material changes to our policies and practices for the
management of market risk in 2023.
Governance and structure
The following diagram summarises the main business areas where
trading market risks reside and the market risk measures used to
monitor and limit exposures.
Risk types
Trading risk
–Foreign exchange and commodities
–Interest rates
–Credit spreads
–Equities
Global business
GBM
Risk measure
Value at risk | Sensitivity | Stress testing
The objective of our risk management policies and measurement
techniques is to manage and control market risk exposures to
optimise return on risk while maintaining a market profile consistent
with our established risk appetite.
Market risk is managed and controlled through limits approved by the
Group Chief Risk and Compliance Officer for HSBC Holdings. These
limits are allocated across business lines and to the Group’s legal
entities. Each major operating entity has an independent market risk
management and control sub-function, which is responsible for
measuring, monitoring and reporting market risk exposures against
limits on a daily basis. Each operating entity is required to assess the
market risks arising in its business and to transfer them either to its
local Markets and Securities Services or Markets Treasury unit for
management, or to separate books managed under the supervision of
the local ALCO. The Traded Risk function enforces the controls
around trading in permissible instruments approved for each site as
well as changes that follow completion of the new product approval
process. Traded Risk also restricts trading in the more complex
derivative products to only those offices with appropriate levels of
product expertise and control systems.
Key risk management processes
Monitoring and limiting market risk exposures
Our objective is to manage and control market risk exposures while
maintaining a market profile consistent with our risk appetite.
We use a range of tools to monitor and limit market risk exposures
including sensitivity analysis, VaR and stress testing.
Sensitivity analysis
Sensitivity analysis measures the impact of movements in individual
market factors on specific instruments or portfolios, including interest
rates, foreign exchange rates and equity prices. We use sensitivity
measures to monitor the market risk positions within each risk type.
Granular sensitivity limits are set for trading desks with consideration
of market liquidity, customer demand and capital constraints, among
other factors.
Value at risk
(Audited)
VaR is a technique for estimating potential losses on risk positions as
a result of movements in market rates and prices over a specified
time horizon and to a given level of confidence. The use of VaR is
integrated into market risk management and calculated for all trading
positions regardless of how we capitalise them. Where we do not
calculate VaR explicitly, we use alternative tools as summarised in
the ‘Stress testing’ section below.
Our models are predominantly based on historical simulation that
incorporates the following features:
–historical market rates and prices, which are calculated with
reference to foreign exchange rates, commodity prices, interest
rates, equity prices and the associated volatilities;
–potential market movements that are calculated with reference to
data from the past two years; and
–calculations to a 99% confidence level and using a one-day
holding period.
The models also incorporate the effect of option features on the
underlying exposures. The nature of the VaR models means that an
increase in observed market volatility will lead to an increase in VaR
without any changes in the underlying positions.
VaR model limitations
Although a valuable guide to risk, VaR is used with awareness of its
limitations. For example:
–The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events,
particularly those that are extreme in nature. As the model is
calibrated on the last 500 business days, it does not adjust
instantaneously to a change in the market regime.
–The use of a one-day holding period for risk management
purposes of trading books assumes that this short period is
sufficient to hedge or liquidate all positions.
–The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
–VaR is calculated on the basis of exposures outstanding at the
close of business and therefore does not reflect intra-day
exposures.
Risk not in VaR framework
The risks not in VaR (‘RNIV’) framework captures and capitalises
material market risks that are not adequately covered in the VaR
model.
Risk factors are reviewed on a regular basis and are either
incorporated directly in the VaR models, where possible, or quantified
through either the VaR-based RNIV approach or a stress test
approach within the RNIV framework. While VaR-based RNIVs are
calculated by using historical scenarios, stress-type RNIVs are
estimated on the basis of stress scenarios whose severity is
calibrated to be in line with the capital adequacy requirements. The
outcome of the VaR-based RNIV approach is included in the overall
VaR calculation but excluded from the VaR measure used for
regulatory back-testing.
Stress-type RNIVs include a deal contingent derivatives capital charge
to capture risk for these transactions and a de-peg risk measure to
capture risk to pegged and heavily managed currencies.
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Stress testing
Stress testing is an important procedure that is integrated into our
market risk management framework to evaluate the potential impact
on portfolio values of more extreme, although plausible, events or
movements in a set of financial variables. In such scenarios, losses
can be much greater than those predicted by VaR modelling. Stress
testing and reverse stress testing provide senior management with
insights regarding the ‘tail risk’ beyond VaR.
Stress testing is implemented at legal entity, regional and overall
Group levels. A set of scenarios is used consistently across all
regions within the Group. Market risk stress testing incorporates both
historical and hypothetical events. Market risk reverse stress tests
are designed to identify vulnerabilities in our portfolios by looking for
scenarios that lead to loss levels considered severe for the relevant
portfolio. These scenarios may be local or idiosyncratic in nature and
complement the systematic top-down stress testing.
The risk appetite around potential stress losses for the Group is set
and monitored against limits.
Trading portfolios
Trading portfolios comprise positions held for client servicing and
market-making, with the intention of short-term resale and/or to
hedge risks resulting from such positions.
Back-testing
We routinely validate the accuracy of our VaR models by back-testing
the VaR metric against both actual and hypothetical profit and loss.
Hypothetical profit and loss excludes non-modelled items such as
fees, commissions and revenue of intra-day transactions.
The hypothetical profit and loss reflects the profit and loss that would
be realised if positions were held constant from the end of one
trading day to the end of the next. This measure of profit and loss
does not align with how risk is dynamically hedged, and is not
therefore necessarily indicative of the actual performance of the
business.
The number of hypothetical loss back-testing exceptions, together
with a number of other indicators, is used to assess model
performance and to consider whether enhanced internal monitoring
of a VaR model is required. We back-test our VaR at set levels of our
Group entity hierarchy.
Market risk in 2023
During 2023, global financial markets were mainly driven by the
inflation outlook, interest rate expectations and recession risks,
coupled with banking failures in March, and rising geopolitical
tensions in the Middle East from October. Major central banks
maintained restrictive monetary policies, and bond markets
experienced a volatile year. After rising significantly in the second and
third quarters of 2023, US treasury bond yields fell during the fourth
quarter, as lower inflation pressures led markets to expect that key
rates would be cut in 2024. The interest rate outlook was also a major
driver of performance in global equity markets, alongside resilient
corporate earnings and positive sentiment in the technology sector.
Equities in developed markets advanced significantly amid low
volatility, while performance in emerging markets was more
subdued. In foreign exchange markets, the US dollar fluctuated
against other major currencies, mostly in line with US Federal
Reserve policy and bond yields expectations. Investor sentiment
remained resilient in credit markets. High-yield and investment-grade
credit spreads narrowed, in general, as fears of contagion in the
banking sector in the first quarter of 2023 abated, and economic
growth remained resilient throughout the year.
We continued to manage market risk prudently during 2023.
Sensitivity exposures and VaR remained within appetite as the
business pursued its core market-making activity in support of our
customers. Market risk was managed using a complementary set of
risk measures and limits, including stress testing and scenario
analysis.
Trading portfolios
Value at risk of the trading portfolios
Trading VaR was predominantly generated by the Markets and
Securities Services business.
Trading VaR as at 31 December 2023 increased by $3.3m compared
with 31 December 2022. Interest rate risk factors were the major
contributors to VaR at the end of December 2023. The VaR increase
during 2023 peaked in September, and was mainly driven by:
–interest rate risk exposures in currencies held across the Fixed
Income and Foreign Exchange business lines to facilitate client-
driven activity; and
–the effects of relatively large short-term interest rate shocks for
key currencies, which are captured in the VaR scenario window.
These factors were partly offset by lower losses from equity risks
and interest rate risks that were captured within the RNIV framework.
The daily levels of total trading VaR during 2023 are set out in the graph below.
Daily VaR (trading portfolios), 99% 1 day ($m)
762
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255
The Group trading VaR for the year is shown in the table below.
Trading VaR, 99% 1 day1
(Audited)
Foreign
exchange and
commodity
Interest
rate
Equity
Credit
spread
Portfolio
diversification2
Total3
$m
$m
$m
$m
$m
$m
Balance at 31 Dec 2023
13.4
55.9
15.2
7.2
(38.9)
52.8
Average
16.2
53.9
19.0
11.6
(40.8)
59.8
Maximum
24.6
86.0
27.8
16.5
98.2
Minimum
9.3
25.5
13.4
6.6
34.4
Balance at 31 Dec 2022
15.4
40.0
18.6
11.9
(36.4)
49.5
Average
13.6
29.6
16.1
16.8
(34.0)
42.1
Maximum
29.2
73.3
24.8
27.9
78.3
Minimum
5.7
20.2
11.5
9.1
29.1
1Trading portfolios comprise positions arising from the market-making and warehousing of customer-derived positions.
2Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types – such as interest rate, equity and foreign exchange – together
in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number
represents the benefit of portfolio diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful
to calculate a portfolio diversification benefit for these measures.
3The total VaR is non-additive across risk types due to diversification effects.
The table below shows trading VaR at a 99% confidence level compared with trading VaR at a 95% confidence level at 31 December 2023.
This comparison facilitates the benchmarking of the trading VaR, which can be stated at different confidence levels, with financial institution
peers. The 95% VaR is unaudited.
Comparison of trading VaR, 99% 1 day vs trading VaR, 95% 1 day
Trading VaR,
99% 1 day
Trading VaR,
95% 1 day
$m
$m
Balance at 31 Dec 2023
52.8
35.3
Average
59.8
36.8
Maximum
98.2
53.3
Minimum
34.4
21.0
Balance at 31 Dec 2022
49.5
31.7
Average
42.1
24.6
Maximum
78.3
49.0
Minimum
29.1
17.5
Back-testing
During 2023, the Group experienced no back-testing exceptions on losses against actual or hypothetical profit and losses.
Market risk balance sheet linkages
The following balance sheet lines in the Group’s consolidated position are subject to market risk:
Trading assets and liabilities
The Group’s trading assets and liabilities are in almost all cases
originated by GBM. Other than a limited number of exceptions, these
assets and liabilities are treated as traded risk for the purposes of
market risk management. The exceptions primarily arise in Global
Banking where the short-term acquisition and disposal of assets are
linked to other non-trading-related activities such as loan origination.
Derivative assets and liabilities
We undertake derivative activity for three primary purposes: to create
risk management solutions for clients, to manage the portfolio risks
arising from client business, and to manage and hedge our own risks.
Most of our derivative exposures arise from sales and trading
activities within GBM. The assets and liabilities included in trading
VaR give rise to a large proportion of the income included in net
income from financial instruments held for trading or managed on a
fair value basis. Adjustments to trading income such as valuation
adjustments are not measured by the trading VaR model.
For information on the accounting policies applied to financial
instruments at fair value, see Note 1 on the financial statements.
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Climate risk TCFD
Contents
257
Overview
258
Climate risk management
259
Embedding our climate risk approach
261
Insights from climate scenario analysis
Overview
Our climate risk approach is aligned to the framework outlined by the
Taskforce on Climate-related Financial Disclosures (‘TCFD’), which
identifies two primary drivers of climate risk:
–physical risk, which arises from the increased frequency and
severity of extreme weather events, such as hurricanes and
floods, or chronic gradual shifts in weather patterns or rises in the
sea level; and
–transition risk, which arises from the process of moving to a net
zero economy, including changes in government policy and
legislation, technology, market demand, and reputational
implications triggered by a change in stakeholder expectations,
action or inaction.
In addition to these primary drivers of climate risk, we have also
identified the following thematic issues related to climate risk, which
are most likely to materialise in the form of reputational, regulatory
compliance and litigation risks:
–net zero alignment risk, which arises from the risk of HSBC failing
to meet its net zero commitments or failing to meet external
expectations related to net zero, because of inadequate ambition
and/or plans, poor execution, or inability to adapt to changes in the
external environment; and
–the risk of greenwashing, which arises from the act of knowingly
or unknowingly making inaccurate, unclear, misleading or
unsubstantiated claims regarding sustainability to our
stakeholders.
Approach
We recognise that the physical impacts of climate change and the
transition to a net zero economy can create significant financial risks
for companies, investors and the financial system. HSBC may be
affected by climate risks either directly or indirectly through our
relationships with our customers, which could result in both financial
and non-financial impacts.
Our climate risk approach aims to effectively manage the material
climate risks that could impact our operations, financial performance
and stability, and reputation. It is informed by the evolving
expectations of our regulators.
We are developing our climate risk capabilities across our businesses,
by prioritising sectors, portfolios and counterparties with the highest
impacts.
We continue to make progress in enhancing our climate risk
capabilities, and recognise it is a long-term iterative process.
We aim to regularly review our approach to increase coverage and
incorporate maturing data, climate analytics capabilities, frameworks
and tools, as well as respond to emerging industry best practice and
climate risk regulations.
This includes updating our approach to reflect how the risks
associated with climate change continue to evolve in the real world,
and maturing how we embed climate risk factors into strategic
planning, transactions and decision making across our businesses.
Our climate risk approach is aligned to our Group-wide risk
management framework and three lines of defence model, which
sets out how we identify, assess and manage our risks. For further
details of the three lines of defence framework, see page 161.
The tables below provide an overview of the climate risk drivers and thematic issues considered within HSBC’s climate risk approach.
Climate risk – risk drivers
Details
Potential impacts
Time horizons
Physical
Acute
Increased frequency and severity of weather events causing
disruption to business operations
–Decreased real estate values or
stranded assets
–Decreased household income and
wealth
–Increased costs of legal and
compliance
–Increased public scrutiny
–Decreased profitability
–Lower asset performance
Short term
Medium term
Long term
Chronic
Longer-term shifts in climate patterns (e.g. sustained higher
temperatures, sea level rise, shifting monsoons or chronic
heat waves)
Transition
Policy and
legal
Mandates on, and regulation of products and services and/or
policy support for low-carbon alternatives. Litigation from
parties who have suffered loss and damage from climate
impacts
Technology
Replacement of existing products with lower emissions
options
End-demand
(market)
Changing consumer demand from individuals and corporates
Reputational
Increased scrutiny following a change in stakeholder
perceptions of climate-related action or inaction
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257
Climate risk – thematic issues
Net zero
alignment risk
Net zero
ambition risk
Failing to set or adapt our net zero ambition and broader business strategy in alignment with key stakeholder
expectations, latest scientific understanding and commercial objectives.
Net zero
execution risk
Failing to meet our net zero targets due to taking insufficient or ineffective actions, or due to the actions of
clients, suppliers and other stakeholders.
Net zero
reporting risk
Failing to report emissions baselines and targets, and performance against these accurately due to data,
methodology and model limitations.
Risk of
greenwashing
Firm
Making inaccurate, unclear, misleading, or unsubstantiated claims in relation to our sustainability commitments
and targets, as well as the reporting of our performance towards them.
Product
Making inaccurate, unclear, misleading or unsubstantiated claims in relation to products or services offered to
clients that have stated sustainability objectives, characteristics, impacts or features.
Client
Making inaccurate, unclear, misleading or unsubstantiated claims as a consequence of our relationships with
clients or transactions we undertake with them, where their sustainability commitments or related performance
are misrepresented or are not aligned to our own commitments.
In 2023, we updated our climate risk materiality assessment, to
understand how climate risk may impact across HSBC’s risk
taxonomy. The assessment focused on a 12-month time horizon, as
well as time horizons for the short-term, medium-term and long-term
periods. We define short term as time periods up to 2025; medium
term as between 2026 and 2035; and long term as between 2036
and 2050. These time periods align to the Climate Action 100+
disclosure framework v1.2. The table below provides a summary of
how climate risk may impact a subset of HSBC’s principal risks.
The assessment is refreshed annually, and the results may change as
our understanding of climate risk and how it impacts HSBC evolve
(for further details, see ‘Impact on reporting and financial statements’
on page 44).
In addition to this assessment, we also consider climate risk in our
emerging risk reporting and scenario analysis (for further details, see
‘Top and emerging risks’ on page 38).
Climate risk drivers
Credit risk
Traded risk
Reputational risk1
Regulatory
compliance risk1
Resilience risk
Other financial
and non-financial
risk types
Physical risk
●
●
●
●
●
Transition risk
●
●
●
●
●
●
1  Our climate risk approach identifies thematic issues such as HSBC net zero alignment risk and the risk of greenwashing, which are most likely to
materialise in the form of reputational, regulatory compliance and litigation risks.
Climate risk management
Key developments in 2023
Our climate risk programme continues to support the development of
our climate risk management capabilities. The following outlines key
developments in 2023:
–We updated our climate risk management approach to incorporate
net zero alignment risk and developed guidance on how climate
risk should be managed for non-financial risk types.
–We enhanced our climate risk materiality assessment to consider
longer time horizons.
–We enhanced our approach to assessing the impact of climate
change on capital, focusing on credit and market risks.
–We further developed our risk metrics to monitor our performance
against our net zero targets for both financed emissions and own
operations.
–We enhanced our internal climate scenario analysis, including
through improvements to our use of customer transition plan data.
For further details of scenario analysis, see page 65.
–We have updated our merger and acquisition process to consider
potential climate and sustainability-related targets, net zero
transition plans and climate strategy, and how this relates to
HSBC.
While we have made progress in enhancing our climate risk
framework, further work remains. This includes the need to develop
additional metrics and tools to measure our exposure to climate-
related risks, and to incorporate these tools within decision making.
Governance and structure
The Board takes overall supervisory responsibility for our ESG
strategy, overseeing executive management in developing the
approach, execution and associated reporting.
The ESG Committee supports the development and delivery of our
ESG strategy, key policies and material commitments by providing
oversight, coordination and management of ESG commitments and
initiatives. It is co-chaired by the Group Chief Sustainability Officer
and the Group Chief Financial Officer.
The Sustainability Execution Committee has oversight of the
environmental strategy, including the commercial execution and
operationalisation through the sustainability execution programme,
which is a Group-wide programme established to enable the delivery
of our sustainability agenda.
The Group Reputational Risk Committee considers climate-related
matters arising from customers, transactions and third parties that
either present a serious potential reputational risk to the Group or
merit a Group-led decision to ensure a consistent approach to
reputational risk management across the regions, global businesses
and global functions.
The Group Risk Management Meeting and the Group Risk
Committee receive regular updates on our climate risk profile and
progress of our climate risk programme.
The Group Chief Risk and Compliance Officer is the senior manager
responsible for the management of climate risk under the UK Senior
Managers Regime, which involves holding overall accountability for
the Group’s climate risk programme.
The Environmental Risk Oversight Forum (formerly the Climate Risk
Oversight Forum) oversees risk activities relating to climate and
sustainability risk management, including the transition and physical
risks from climate change. Equivalent forums have been established
at a regional level.
For further details of the Group’s ESG governance structure, see
page 88.
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Risk appetite
Our climate risk appetite forms part of the Group’s risk appetite
statement and supports the business in delivering our net zero
ambition effectively and sustainably.
Our climate risk appetite statement is approved and overseen by the
Board. It is supported by risk appetite metrics and tolerance
thresholds. We have also defined additional key management
information metrics. Both the risk appetite statement and key
management information metrics are reported on a quarterly basis for
oversight by the Group Risk Management Meeting and the Group
Risk Committee.
Policies, processes and controls
We continue to integrate climate risk into policies, processes and
controls across many areas of our organisation, and we will continue
to update these as our climate risk management capabilities mature
over time. For further details of how we manage climate risk across
our global businesses, see page 65.
Embedding our climate risk approach
The table below provides further details of how we have embedded the management of climate risk across key risk types. For further details of
our internal scenario analysis, see ‘Insights from climate scenario analysis’ on page 261.
Risk type
Our approach
Wholesale
credit risk
We have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six high transition risk sectors, as
shown in the below table. As at 31 December 2023, the overall exposure to six high transition risk sectors was $112bn. The sector
classifications are based on internal HSBC definitions and can be judgemental in nature. The sector classifications are subject to the
remediation of ongoing data quality challenges. This data will be enhanced and refined in future years.
Our relationship managers engage with our key wholesale customers through a transition engagement questionnaire (formerly the
transition and physical risk questionnaire) to gather information and assess the alignment of our wholesale customers’ business
models to net zero and their exposure to physical and transition risks. We use the responses to the questionnaire to create a climate
risk score for our key wholesale customers.
Our credit policies require that relationship managers comment on climate risk factors in credit applications for new money requests
and annual credit reviews. Our credit policies also require manual credit risk rating overrides if climate is deemed to have a material
impact on credit risk under 12 months if not already captured under the original credit risk rating.
Key developments to our framework in 2023 include expanding the scope of our transition engagement questionnaire to capture new
countries, territories and sectors.
Key challenges for further embedding climate risk into credit risk management relate to the availability of adequate physical risk data to
assess impacts to our wholesale customers.
Wholesale loan exposure to high transition risk sectors at 31 December 20231
Units
Automotive
Chemicals
Construction
and building
materials
Metals
and
mining
Oil and
gas
Power
and
utilities
Total 2023
Exposure to sector1, 2, 3, 4
$bn
21
17
20
14
18
22
112
Sector weight as a proportion of
high transition risk sectors
%
18
16
18
13
16
19
100
1  Amounts shown in the table also include green and other sustainable finance loans, which support the transition to the net zero
economy. The methodology for quantifying our exposure to high transition risk sectors and the transition risk metrics will evolve
over time as more data becomes available and is incorporated in our risk management systems and processes.
2  Counterparties are allocated to the high transition risk sectors via a two-step approach. Firstly, where the main business of a group
of connected counterparties is in a high transition risk sector, all lending to the group is included in one high transition risk sector
irrespective of the sector of each individual obligor within the group. Secondly, where the main business of a group of connected
counterparties is not in a high transition risk sector, only lending to individual obligors in the high transition risk sectors is included.
The main business of a group of connected counterparties is identified by the industry that generates the majority of revenue within
a group. Customer revenue data utilised during this allocation process is the most recent readily available and will not align to our
own reporting period.
3  These disclosures cover the whole of the value chain of the sector. For details of financed emissions coverage, please refer to page
53.
4  The six high transition risk sectors make up 17.4% of total wholesale loans and advances to customer and banks of $644bn.
Amounts include assets held for sale.
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Risk type
Our approach
Retail credit
risk
We have implemented policies and tools to manage climate risk across our retail mortgage markets.
Our retail credit risk management policy requires each mortgage market to conduct an annual review of their climate risk management
procedures, including perils and data sources, to ensure they remain fit for purpose. In 2023 we introduced a global ‘soft trigger’
monitoring and review process for physical risk exposure where a market reaches or exceeds a set threshold, as this ensures markets
are actively considering their balance sheet risk exposure to peril events.
Within our mortgage portfolios, properties or areas with potentially heightened physical risk are identified and assessed locally and
potential exposure is monitored through quarterly metrics.  We have also set risk appetite metrics for physical risk in our largest
mortgage markets, the UK and Hong Kong, as well as those with local regulatory requirements, including Singapore. 
The UK is our largest mortgage market, which as at September 2023 made up 40.0% of our global mortgage portfolio. We estimate
that 0.2% of our UK retail mortgage portfolio is at very high risk of flooding and 3.5% is at high risk. This is based on approximately
94.2% climate risk data coverage by value of our UK portfolio as at September 2023.
In the UK we also monitor the energy performance certificate (‘EPC’) ratings of individual properties in our mortgage portfolio. As at
September 2023, approximately 64.5% of properties within the portfolio by value had a valid EPC dated within the last 10 years. Of
these, 40.0% of properties had a current rating of A to C, and 97.0% had the potential to reach these rating bands, if appropriate
energy efficiency improvement measures are taken.
For both flood risk and EPC data, we disclose the end of September 2023 position. This is due to the time required for the data to be
processed and our reliance on the government’s public EPC data, which usually lags one month behind.
The table below outlines the UK retail mortgage portfolio tenor as at the end of December 2023 (by balance split by remaining term).
This table shows that the majority of our portfolio tenor is greater than five years, and that the average remaining loan term in the UK
is 21.5 years. 
Residential mortgages tenor (remaining mortgage term by balance $m)1
Tenor
Remaining mortgage balance ($m)
<1 years
382
1 to 5 years
3,469
>5 years
157,643
Weighted average of remaining
mortgage term (years)
21.50
The average term for new mortgages in the UK is 25 years, although the average life of a loan is approximately five years due to
refinancing. Despite this, our strategic approach to climate risk considers present day and long-term risk given customers may remain
over the whole loan term.
For further details of flood risk and the EPC breakdown of our UK retail mortgage portfolio, see our ESG Data Pack at www.hsbc.com/
esg.
1  The table includes instances where individual properties have multiple associated accounts and balances. These are aggregated to a
property level and the longest term remaining is taken as the tenor.
Treasury risk
As part of our ICAAP in 2023, we enhanced our approach for assessing the impact of climate change on capital, focusing on credit and
market risks. As part of our ILAAP, we conducted an initial analysis to identify the potential climate risk exposures across key liquidity
risk drivers. 
We updated our treasury risk policies to ensure that the impact of climate risk is considered when assessing applicable treasury risks.
We regularly discuss climate-related topics that may impact Global Treasury through climate-relevant governance forums, including the
Treasury Risk Management Climate Risk Oversight Forum and the Group Treasury Sustainability Committee.
Treasury portfolios are also included within the scope of the internal climate scenario analysis and the Hong Kong Monetary Authority’s
climate risk stress test, with potential quantitative impacts on relevant hold-to-collect-and-sell positions estimated.
Pensions risk
We conduct an annual exercise to monitor the exposure of our largest pension plans to climate risk.
Our pension policies have also been updated to explicitly reflect climate considerations.
Insurance risk
We have an evolving programme to support the identification and management of climate risk. In 2023, we updated our sustainability
procedures to align with the Group’s updated energy and thermal coal-phase out policy.
Traded risk
We have implemented metrics and thresholds to monitor exposure to high physical and transition risk sectors for the different asset
classes in the Markets and Securities Services (‘MSS‘) business. The metrics use a risk taxonomy that categorises countries/territories
and sectors into high, medium and low risk, for which we have set corresponding thresholds. We have implemented these metrics for
key entities. In addition, we have identified key regions and business lines that contribute the most to the total MSS high-climate
sensitive exposures and developed reports to monitor trends and pockets of risks.
We have developed tools to provide a better understanding of key profit and loss drivers under different climate scenarios along
different dimensions such as risk factors and business lines. These reports are available to traded risk managers to help monitor and
understand how climate-sensitive exposures are impacted under different scenarios. Stress testing results have been presented to
senior management for visibility during dedicated review and challenge sessions to provide awareness on the impact to the MSS
portfolio and underlying business lines.
Reputational
risk
We manage the reputational impact of climate risk through our broader reputational risk framework, supported by our sustainability risk
policies and metrics.
Our sustainability risk policies set out our appetite for financing activities in certain sectors. Our thermal coal phase-out and energy
policies aim to drive down greenhouse gas emissions while supporting a just transition.
Our global network of sustainability risk managers provides local policy guidance to relationship managers for the oversight of policy
compliance and in support of implementation across our wholesale banking activities. For further details of our sustainability risk
policies, see the ESG review on page 42.
We have developed risk appetite metrics to monitor our performance against our financed emissions targets. For further details of our
targets, see page 57.
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HSBC Holdings plc
Risk type
Our approach
Regulatory
compliance
risk
Our policies set the Group-wide standards that are required to manage the risk of breaches of our regulatory duty to customers,
including those related to climate risk, ensuring fair customer outcomes are achieved. To make sure our responsibilities are met in this
regard, our policies are subject to continuous review and enhancement. We are also focused on the ongoing development and
improvement of our monitoring capabilities, ensuring appropriate alignment to the broader focus on regulatory compliance risks.
Regulatory Compliance is particularly focused on mitigating climate risks inherent to the product lifecycle. To support this, we have
enhanced a number of processes including:
–ensuring Regulatory Compliance provides risk oversight and review of new product marketing materials with any reference to
climate, sustainability and ESG;
–developing our product marketing controls to ensure climate claims are robustly evidenced and substantiated within product
marketing materials; and 
–clarifying and improving product marketing framework, procedures and associated guidance, to ensure product-related marketing
materials comply with both internal and external standards, and are subject to robust governance.
Regulatory Compliance operates an ESG and Climate Risk Working Group to track and monitor the integration and embedding of
climate risk management into the functions’ activities, while monitoring regulatory and legislative changes across the ESG and climate
risk agenda. Regulatory Compliance also continues to be an active member of the Group’s Environmental Risk Oversight Forums.
Resilience
risk
Our Enterprise Risk Management function is responsible for overseeing the identification and assessment of physical and transition
climate risks that may impact on the organisation’s operational and resilience capabilities.
We have developed metrics to assess how physical risk may impact our critical properties. In 2023, we also developed an energy and
travel risk appetite metric for our own operations to establish and monitor progress against our net zero ambitions.
Our resilience risk policies are subject to continuous improvement to remain relevant to evolving climate risks. New developments
relevant to our own operations are reviewed to ensure climate risk considerations are effectively captured.
Model risk
The impact of climate risk on model risk is driven by the increasing number of climate risk models and the expanding model use cases.
Review and challenge of models mitigates some risk but given the nascent nature of climate modelling and the lack of benchmarks,
the validation of model assumptions and results remains a key challenge.
Model Risk has published a new climate risk and ESG model category standard, which sets out minimum control requirements for
identifying, measuring and managing model risk for climate-related models. 
We completed independent model validation for a number of models used for financed emissions calculations and climate scenario
analysis using both qualitative and quantitative assessments of modelling decisions and outputs.
Financial
reporting
risk
We have expanded the scope of financial reporting risk to explicitly include oversight over accuracy and completeness of ESG and
climate reporting. In 2023, we updated the risk appetite statement to reference our ESG and climate-related disclosures. We also
updated our internal controls to incorporate requirements for addressing the risk of misstatement in ESG and climate reporting. To
support this, we have developed a framework to guide control implementation over ESG and climate reporting disclosures, which
includes areas such as process and data governance, and risk assessment.
As the landscape for ESG and climate-related disclosures develops, we continue to focus on horizon scanning and interpretation of
relevant external reporting requirements, to ensure a timely response for producing the required disclosures. As the volume and
nature of these requirements continue to evolve, the level of risk is heightened. Part of our response to this heightened risk includes
undertaking a range of assurance procedures over these disclosures.
Challenges
While we have continued to develop our climate risk framework, our
remaining challenges include:
–the diverse range of internal and external data sources and data
structures needed for climate-related reporting, which introduces
data accuracy and reliability risks;
–data limitations on customer assets and supply chains, and
methodology gaps, which hinder our ability to assess physical
risks accurately;
–industry-wide data gaps on customer emissions and transition
plan and methodology gaps, which limit our ability to assess
transition risks accurately; and
–limitations in our management of net zero alignment risk is due to
known and unknown factors, including the limited accuracy and
reliability of data, merging methodologies, and the need to
develop new tools to better inform decision making.
Insights from climate scenario
analysis
Scenario analysis supports our strategy by assessing our potential
exposures to risks and vulnerabilities under a range of climate
scenarios. It helps to build our awareness of climate change, plan for
the future and meet our growing regulatory requirements.
In 2023, we enhanced our internal climate scenario analysis exercise
by focusing our efforts on generating more granular insights for key
sectors and regions to support core decision-making processes, and
to respond to our regulatory requirements. We also produced several
climate stress tests for regulators around the world, including the
Hong Kong Monetary Authority (‘HKMA’) and the Central Bank of the
United Arab Emirates. 
We continue to enhance our climate scenario analysis exercises so
that we can have a more comprehensive understanding of climate
headwinds, risks and opportunities to support our strategic planning
and actions.
In climate scenario analysis, we consider, jointly, both physical risks
and transition risks. For further details about these risks, see ‘Climate
risk’ on page 257.
We also analyse how these climate risks impact principal risk types
within our organisation, including credit and traded market risks, non-
financial risks, and pension risk.
Our climate scenarios
In our 2023 climate scenario analysis exercises, we explored five
scenarios that were created to examine the potential impacts from
climate change for the Group and its entities.
The analysis considered the key regions in which we operate, and
assessed the impact on our balance sheet across three distinct
timeframes: short term up to 2025; medium term from 2026 to 2035;
and long term from 2036 to 2050. The time horizons are aligned to
the Climate Action 100+ framework v1.2.
We created our internal scenarios using external publicly available
climate scenarios as a reference, including those produced by the
Network for Greening the Financial System (‘NGFS’), the
Intergovernmental Panel on Climate Change (‘IPCC’) and the
International Energy Agency. Using these external scenarios as a
template, we adapted them by incorporating the unique climate risks
and vulnerabilities to which our organisation and customers across
different business sectors and regions are exposed. This helped us
produce the scenarios, which vary by severity to analyse how climate
risks will impact our portfolios.
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261
Our scenarios were:
–the Net Zero scenario, which is consistent with the Paris
Agreement. This assumes that there will be orderly but
considerable climate action, limiting global warming to no more
than 1.5°C by 2100, when compared with pre-industrial levels;
–the Current Commitments scenario, which assumes that climate
action is limited to current governmental committed policies,
including already implemented actions, leading to global
temperature rises of 2.4°C by 2100. This slow transition scenario
helps us to determine the actions we need to take to reach our
net zero ambition while operating in a world that is not net zero;
–the Delayed Transition Risk scenario, which assumes that climate
action is delayed until 2030 with a late disorderly transition to net
zero but stringent and rapid enough to limit global warming to
under 2°C by 2100. This scenario allows us to stress test severe
but plausible transition risk impacts;
–the Downside Physical Risk scenario, which assumes climate
action is limited to currently implemented governmental policies,
leading to extreme global warming with global temperatures
increasing by greater than 4°C by 2100. This scenario allows us to
assess physical risks associated with climate change; and
–the Near Term scenario, which assumes both a sharp increase in
policies that drive a disorderly transition towards net zero and a
sharp increase in extreme climate events over a five-year period
until 2027. This scenario focused on our business in Asia.
We have chosen these scenarios to provide a holistic view that will
supplement the Group’s current and future strategic thinking. They
reflect inputs from our key stakeholders and experts across the
Group, and have been reviewed through internal governance.
Our scenarios reflect different levels of physical and transition risks
over a variety of time periods. The scenario assumptions include
varying levels of governmental climate policy changes,
macroeconomic factors and technological developments. However,
these scenarios rely on the development of technologies that are still
unproven, such as global hydrogen production to decarbonise aviation
and shipping.
The nature of the scenarios, our developing capabilities, and
limitations of the analysis lead to outcomes that are indicative of
climate change headwinds, although they are not a direct forecast.
Developments in climate science, data, methodology and scenario
analysis techniques will help us shape our approach further. We
therefore expect this view to change over time.
Characteristics of our scenarios
Scenarios
Net zero
Current
Commitments
Delayed 
Transition Risk
Downside
Physical Risk
Near Term
Scenario
outcomes
Rise in global temperatures by
2100 (vs pre-industrial levels)
1.5˚c
Temps-01.jpg
2.4˚c
Temps-02 light.jpg
1.6˚c
Temps-01 (3).jpg
4.2˚c
Temps-03.jpg
1.4˚c
Temps-4.jpg
Focus horizon
Medium term
Short/medium term
Medium/long term
Medium/long term
Short/medium term
Underlying
assumptions
based on
global
averages
Assumed variation in global
climate policies
Low
Medium
High
Low
High
Assumed pace of technology
change and adoption
Fast
Gradual
Accelerates from
2030
None
Based on existing
technology
Assumed socioeconomic
impact
High
Moderate
Very high
Very high
(in long term)
Very high
2030
2050
2030
2050
2030
2050
2030
2050
2027
Assumed carbon price
($/tCO2)
161
623
34
91
34
558
6
6
193
Assumed change in energy
consumption (% change after
2022)
(10)%
(16)%
12%
17%
12%
(11)%
5%
24%
(14)%
Assumed change in CO2
emissions (% change after 2022)
(37)%
(100)%
(7)%
(33)%
(7)%
(89)%
3%
11%
(34)%
Scenario risk
characteristics
Climate
risk
Physical
q
Lower
u
Moderate
q
Lower
p
Higher
p
Higher
Transition
p
Higher
u
Moderate
p
Higher
q
Lower
p
Higher
Our methodology
For our scenario analysis, we used models to assess how transition
and physical risks may impact our portfolios under different
scenarios. Our models incorporate a range of climate-specific metrics
that will have an impact on our customers, including expected
production volumes, revenue, costs and capital expenditure.
We assess how these metrics interplay with economic factors such
as carbon prices, which represent the cost effect of climate-related
policies that aim to discourage carbon-emitting activities and
encourage low-carbon solutions. The expected result of higher carbon
prices is a reduction in emissions as high-emission activities become
uneconomical. We also assume carbon prices will vary from country
to country.
The models for our wholesale corporate lending portfolio consider 
our customers’ individual climate transition plans where available,
while we refine and deepen our assessment of these plans. These
results feed into the calculation of our risk-weighted assets and
expected credit loss (‘ECL’) projections. For our real estate portfolio
models, we focus on physical risk factors, including property
locations, perils and insurance coverage when assessing the overall
credit risk impact to the portfolio. The results are reviewed by our
sector specialists who, subject to our governance procedures, make
bespoke adjustments to our results based on their expert judgement
where relevant.
Our models support the calculation of outputs that inform us about
the level of climate-related ECL provisions required under IFRS 9, and
also support the shaping of our climate-related capital approach under
ICAAP. In 2023, in addition to incorporating our customers’ transition
plans, we enhanced our credit risk models for the wholesale portfolio
by updating our assumptions regarding how we expect state-
supported companies to be impacted, and improved how we model
the impact of emissions on company financial forecasts.
Modelling limitations
We continue to look for ways of enhancing our methodology to
improve the effectiveness of our climate scenario analyses. There are
industry-wide limitations, particularly on data availability, although our
models are designed to produce outputs that can support our
assessment of the level of our climate resilience.
Climate scenario analysis requires considerable amounts of data,
although data is only available for a subset of our counterparties. As a
result, we have to extrapolate the results observed in the subset to
the wider population or dataset. We do not capture the second order
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HSBC Holdings plc
impacts of climate risk exposures within our modelling approach,
such as impacts on our counterparties from their supply chains.
We continue to enhance our capabilities by incorporating lessons
learnt from previous exercises and feedback from key stakeholders,
including regulators.
For a broad overview of the models that we use for our climate
scenario analysis, as well as graphs that show how global carbon
prices and carbon emissions will differ under our climate scenarios,
see our ESG Data Pack at www.hsbc.com/esg.
Analysing the outputs of climate scenario
analysis
Climate scenario analysis allows us to model how different potential
climate pathways may affect and impact the resilience of our
customers and our portfolios, particularly in respect of credit losses.
As the following chart shows, losses are influenced by their exposure
to a variety of climate risks under different climate scenarios.
RIsk Chart p230.jpg
1  The counterfactual scenario is modelled on a scenario where there
would be no losses due to climate change.
2  The dotted line in the chart shows the impact of modelled expected
credit losses following our strategic responses to reduce the effect of
climate risks under the Net Zero scenario.
3  The projections shown in this chart were modelled during 2023 and are
not intended to reflect the final 31 December 2023 position that is
disclosed elsewhere in this Form 20-F.
While climate-related losses are expected to remain minimal in the
short term, they are likely to increase compared with the
counterfactual scenario in the medium and longer term, driven by the
transition to a net zero economy.
These losses are lower in the Net Zero orderly transition scenario, 
than in the Delayed Transition Risk scenario where climate action
begins later and is more rapid and disruptive as our customers will
have less time to restructure their business models and reduce their
carbon emissions. As the dotted line in the graph shows, losses in
these scenarios can be mitigated through active management
approaches, which include identifying new climate-related business
opportunities and adapting our portfolios to reduce exposure to
climate risks and losses.
By building a more climate-resilient balance sheet, we can reduce
impairment risks and improve longer-term stability.
Under the Current Commitments scenario, we expect lower levels of
losses relating to transition risks, although we would expect an
increase in the effects of climate-related physical risks over the
longer term. If the world does not align with a net zero path, physical
risks in the medium to long term are expected to continue to rise due
to the increasing frequency of extreme weather events.
The Near Term scenario
Our Near Term scenario allowed us to explore the combined impacts
of a disorderly transition towards net zero and extreme acute physical
events occurring simultaneously. The scenario was designed to meet
HKMA regulatory requirements and will help us to improve how we
assess short-term impacts across the Group. As part of the HKMA
exercise, our initial analysis was focused on our portfolio in Asia.
The exercise allowed us to understand the extent to which a stressed
scenario exhibiting both high physical and transition risks in the near
term could immediately impact our customers across all our sectors.
In the following sections, we assess the impacts to our banking
portfolios under different climate scenarios. 
How climate change is impacting our
wholesale lending portfolio
In our internal climate scenario analysis, we assessed the impact of
climate-related risks on our corporate counterparties under different
climate scenarios, which we measured by reviewing the modelled
effect on our ECL.
The climate scenario analysis exercise for the wholesale lending
portfolio was designed to examine our climate risks and
vulnerabilities, primarily in the short and medium term. We focused
on the Current Commitment scenario, believing it to be the scenario
most likely to unfold in this timeframe, and the Net Zero scenario,
which allows us to assess the resilience of our strategy and to
identify specific climate-related opportunities.
Within our wholesale lending portfolio, customers in higher emitting
sectors continue to be most exposed to larger climate-related losses.
For each sector in both scenarios, we calculated the projected ECL
increase as at 2035, where we compared the increase in ECL under
the scenario against a counterfactual scenario that incorporates no
climate change.
We use the sector’s exposure at default (‘EAD’), which represents
the size of our exposure to potential losses from customer defaults.
This helps to identify which sectors are the most material to us in
terms of the impact of climate change.
The table below shows the relative size of exposures at default in
2023 and the increase in cumulative ECL under each scenario
compared with a counterfactual scenario by 2035 (expressed as a
multiple).
Impact on wholesale lending portfolios
Wholesale sectors
Exposure
at default
(2023)
ECL increase1
Current
Commitments
Net Zero
Conglomerates and
industrials
n
<1.1x
<2.75x
Construction and
building materials
n
<1.25x
<2.25x
Chemicals
n
<1.1x
<1.75x
Power and utilities
n
<1.1x
<1.75x
Oil and gas
n
<1.1x
<1.25x
Automotive
n
<1.25x
<1.75x
Land transport and
logistics
n
<1.1x
<2.75x
Agriculture & soft
commodities
n
<1.1x
<2.5x
Metals and mining
n
<1.1x
>3x
Aviation
n
<1.1x
<1.5x
Marine
n
<1.1x
<1.5x
1  Increase in cumulative ECL compared with counterfactual by 2035
expressed as a multiple.
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263
We have continued to incorporate information from our customers’
transition plans to consider more detailed information on how they
and their sector will be impacted under different climate scenarios.
The levels of ECL observed across our wholesale lending portfolio are
driven by: our customers’ carbon emissions; the presence of realistic
transition plans; the amount of capital investment required to support
their transition; and the degree to which their competitive
environment impacts their ability to pass on carbon costs.
In 2022, we used scenario analysis to assess the impacts on our
corporate counterparties across the sectors that are most affected by
climate-related risks.
In 2023, we enhanced our approach in some key high-emitting
sectors, which includes the construction and building materials,
power and utilities, and oil and gas sectors. The analysis below
provides a more detailed view of the anticipated impacts on these
portfolios and our customers, improving our understanding of climate
risks and potential opportunities.
The construction and building materials sector faces an increase in
losses because it includes companies with high emissions from
manufacturing processes, such as steel or cement, or from their
supply chains, which will increase cost pressures due to carbon
taxes. The sector also has a high proportion of customers without
transition plans.
Although our scenario analysis showed that companies with
transition plans performed better on average, their plans typically fall
short of requirements needed to meet net zero targets. Overall, we
believe there are significant lending opportunities for us to help
support our customers as they transition to a lower carbon economy
while meeting their growing business demands.
These opportunities include the exploration of less carbon-intensive
fuel sources, electrification, the integration of carbon capture and
storage, and the adoption of new technologies in the search to
reduce emissions.
In the power and utilities sector, our analysis showed that rising costs
from increased carbon prices and the capital expenditure required to
support transition requirements, infrastructure improvements and
decommissioning costs, alongside greater downstream energy
demands, will potentially lead to higher debt levels and worsening
counterparty risk ratings for customers.
As technologies mature, the capital cost of some renewables
infrastructure is expected to fall, becoming cheaper than non-
renewable sources due to improved efficiencies. This will reduce the
required expenditure for companies.
In the oil and gas sector, customers that commit to renewable energy
should benefit from the additional greener revenue streams, which
will help mitigate the impact of reduced profitability from fossil fuels
and heightened carbon prices, enabling them to sustain their gross
margins. This sector has relatively lower projected losses as a large
proportion of customers provided transition plans with granular
information about their climate-related impacts.
We have the opportunity to ease potential negative impacts as
transition risks increase by supporting our customers to diversify into
more renewable and greener revenue streams, and invest in
emission-reducing technologies.
How climate change is impacting our retail
mortgage portfolio
As part of our 2023 internal climate scenario analysis, we completed
a detailed climate risk assessment for the UK, Hong Kong, mainland
China and Australia, which together represent 75% of the balances in
our global retail mortgage portfolio.
Our analysis shows that over the longer term, we expect minimal
losses to materialise when considering the Current Commitments
scenario. Although the severity of climate perils is expected to
worsen over time, our overall losses also remain low under a
Downside Physical Risk scenario.
In 2023, we widened the scope of our climate modelling to include
new markets, such as mainland China, and increased the peril
coverage within markets already covered.
In our analysis of the retail mortgage portfolio, we reassessed the
physical perils that could impact the value of properties, which
include flooding, wildfire and windstorms. The underlying peril data
we use has been enhanced to include updated and higher resolution
flood maps where available. We have also worked with external
vendors to improve outputs from peril projections and to increase the
granularity of data to provide more detailed insights into the impact of
climate risks across our portfolio of properties, in particular the impact
of wildfires.
Our scenario analysis methodology was enriched further in 2023 by
combining the impacts of physical risk with transition risks, including
rising energy costs and impacts from direct government legislation
such as homeowner energy efficiency upgrades in the UK. We have
enhanced our modelling by considering customers’ affordability
incorporating increased debt servicing costs and the impacts on
property valuations. As insurance remains a key mitigator against
climate losses, we further refined our assumptions including the
assessment of insurance availability for properties that experience
frequent climate events.
Projected peril risk
Flooding has the potential to drive significant impacts at an aggregate
level but this is localised to specific areas that are close to water
sources such as rivers or the coast, or areas that are located in
valleys where surface water can ‘pool’.
The ’Exposure to flooding’ table below shows that the majority of
properties located in four of our largest markets are predicted to
experience zero to low risk of flooding, with flood depths of less than
0.5 metres, under a 1-in-100-year event in each of the scenarios.
Flood depths outlined here do not consider building type and property
floor level, which would potentially further mitigate the impacts.
However, they are considered within our climate risk modelling and
loss projections.
The table below sets out the proportion of properties with projected
flood depths in a 1-in-100-year severity flood event, under the Current
Commitments and Downside Physical Risk scenarios.
Exposure to flooding (%)1
Scenarios
Number of
properties2
Flood depth
(metres)
Baseline   
flood risk           
20233
(%)
Current
Commitments
2050 
(%)
Downside
Physical
Risk 2050 
(%)
UK
0-0.5
97.4
97.4
96.9
n
0.5-1.5
2.4
2.5
2.8
>1.5
0.2
0.2
0.3
Hong Kong
0-0.5
85.3
81.4
79.5
n
0.5-1.5
14.6
18.4
20.4
>1.5
0.1
0.1
0.1
Australia
0-0.5
95.7
95.4
95.3
n
0.5-1.5
2.9
3.0
3.1
>1.5
1.5
1.5
1.5
Mainland
China
0-0.5
88.0
86.5
84.7
0.5-1.5
11.1
12.5
12.7
n
>1.5
0.9
1.0
2.7
1  Severe flood events include river and surface flooding and coastal
inundation. The table compares 2050 snapshots under the Current
Commitments and Downside Physical Risk scenarios with a baseline
view in 2023. We do expect to see changes to our flood depth
distributions as climate risk data is refreshed.
2  The size of the bubbles represents the size of the portfolios, in terms
of number of properties where exposure to flooding data is available,
relative to one another.
3  Baseline flood risk is the flood risk for a 1 in 100 year event, based on
current peril data.
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HSBC Holdings plc
How climate change is impacting our
commercial real estate portfolios
We assessed our commercial real estate customers’ vulnerability to
various perils, including flooding and windstorms. Our commercial
real estate portfolio is globally diversified with larger concentrations in
Hong Kong, the UK and the US.
Geographical location is a key determinant in our exposure to
potential physical risk events, which can lead to higher ECL due to
the cost of repairing damage as well as impact property valuations in
areas where physical risk events are increasing in frequency.
The ‘Exposure to peril’ table below shows the proportion of our
commercial real estate portfolio exposed to specific physical perils in
our key markets.
Exposure to peril (%)1
Exposure
at
default2
Coastal
inundation
(%)
Cyclone
wind
(%)
Surface
water
flooding
(%)
Riverine
flooding
(%)
Hong Kong
n
2.0
94.8
19.0
10.0
UK
n
15.8
0.0
16.5
7.1
US
n
10.1
81.5
11.4
28.6
1  Proportion of our commercial real estate portfolio exposed to specific
physical perils in the Downside Physical scenario.
2  The size of the bubbles represents the size of the portfolios, in terms
of EAD, relative to one another.
Overall, and in line with our 2022 disclosure, our commercial real
estate portfolio remains resilient to climate risk, with the more severe
impacts mitigated by insurance coverage.
Our most significant credit exposure is in Hong Kong, a region with
material physical risk exposures to wind and flooding due to strong
tropical cyclones. The impact on prospective credit losses remains
low, due to stringent building standards and existing measures in
place against flooding and storm surges.
Our largest exposure to transition risk is within our UK portfolio.
Under the Net Zero scenario, we assessed the impacts of the UK
government consultation on non-domestic rental properties being
required to hold an energy performance certificate rating of at least
’B’ by 2030. To meet these proposed minimum standards, more than
80% of the properties in our portfolio would potentially need to be
retrofitted, which would increase impairments and lead to a small
uplift in ECL for this portfolio.
In 2023, as part of the scenario analysis exercise for the Central Bank
of the United Arab Emirates, we also assessed in more detail the
climate risk impacts on our UAE portfolio. Our findings showed that
many properties could become chronically exposed to permanent
inundation over time due to their relatively low elevation above sea
level.
How we assess climate risk impacts on
other risk types
We use climate scenario analysis to assess the impacts on other
risks beyond credit risk. These include traded market risks, non-
financial risks and pension risk.
Traded market risk
In 2023, we explored the potential impacts of climate risks on our
trading and banking portfolio under the Delayed Transition Risk and
Downside Physical Risk scenarios.
The analysis considered all relevant asset classes including interest
rates, exchange rates, corporate and sovereign bonds and equities.
The analysis applied shocks reflecting the impact of abrupt increases
in carbon prices or physical risk perils resulting in structural economic
impacts that affect the productivity of high-risk sectors at a country
level.
We have developed tools to provide us with a more granular
understanding of the key profit and loss drivers under different
climate scenarios. These can be viewed by risk factor, business line
or at trading desk level to help traded risk managers to monitor and
understand how climate sensitive exposures are impacted.
Sovereign credit risk
We assessed the impacts of climate risks on sovereign debt under
the different climate scenarios. In particular, our models considered
the impacts of climate change on a country’s GDP, the amount of
headroom sovereign nations have in terms of their fiscal and external
reserves, and their dependency and exposure to particular corporate
sectors.
Pension risk
We modelled balance sheet and income statement projections for
the main pension plans. Our modelling capability has been enhanced
to incorporate climate-specific modelling over a longer timeframe,
with the initial exercise being focused on assessing the impacts of a
disruptive transition to net zero using the Delayed Transition scenario.
Non-financial risk
We assessed the potential impacts of errors in sustainable lending
volumes contained within our ESG disclosures as part of our financial
reporting risks. To understand our regulatory compliance risks we
assessed any misrepresentations within the marketing of our ESG
funds.
Use of climate scenario analysis outputs
Climate scenario analysis plays a crucial role helping us to identify and
understand the impact of climate-related risks and potential
opportunities as we navigate the transition to net zero.
Scenario analysis results have been used to support the Group’s
ICAAP. This is an internal assessment of the capital the Group needs
to hold to meet the risks identified on a current and projected basis,
including climate risk.
In addition, scenario analysis informs our risk appetite statement
metrics. As an example, it supports the calibration of physical risk
metrics for our retail mortgage portfolios and it is used to consider
climate impact in our IFRS 9 assessment.
From a financial planning perspective, internal climate scenario
analysis results are used to assess whether additional short-term
climate-specific ECL are required within our financial plan.
Next steps
We plan to continue to enhance our capabilities for climate scenario
analysis including addressing model limitations and data gaps and
developing our assessment of liquidity, resilience and insurance risks.
We also plan to use the results for decision making, particularly in:
–client engagement, by identifying climate opportunities and
vulnerabilities in specific regions and sectors such as renewables,
carbon capture technologies and electric vehicles, and using this
information to engage and support clients in their transition to net
zero;
–portfolio steering, by using scenario analysis outputs to inform
how to reallocate our portfolio to maximise returns and mitigate
risk while achieving our net zero targets; and
–looking beyond climate change by building capabilities to assess
our resilience to wider environmental risks.
Understanding the resilience of our critical
properties
Climate change poses a physical risk to the buildings that we occupy
as an organisation, including our offices, retail branches and data
centres, both in terms of loss and damage, and business interruption.
We measure the impacts of climate and weather events to our
buildings on an ongoing basis using historical, current and scenario
modelled forecast data. In 2023, there were 27 major storms that had
a minor impact on five premises with no impact on the availability of
our buildings.
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265
We use stress testing to evaluate the potential for impact on our
owned or leased premises. Our scenario stress test, conducted in
2023, analysed how eight climate change-related hazards could
impact 1,000 of our critical and important buildings. These hazards
were coastal inundation, extreme heat, extreme winds, wildfires,
riverine flooding, pluvial flooding, soil movement due to drought, and
surface water flooding.
The 2023 stress test modelled climate change with IPCC’s Taking the
Highway scenario (SSP5-8.5), which projects that the rise in global
temperatures will likely exceed 4°C by 2100. It also modelled a less
severe IPCC Middle of the Road scenario (SSP2-4.5), which projects
that global warming will likely be limited to 2°C.
Key findings from the Taking the Highway scenario included that by
2050, 20 of our 1,000 critical and important buildings will have a high
potential for impact due to climate change, with insurance-related
losses estimated to be in excess of 10% of the insured value of the
buildings.
These include 16 retail properties primarily impacted by extreme
temperatures and four data centres, where three face the risk of
water stress and one faces extreme temperatures and water stress.
This could lead to failure of mechanical cooling equipment or soil
movement resulting from drought.
A further 248 properties have the potential to be impacted by climate
change, albeit to a lesser extent, with insurance-related losses
estimated at between 5% and 10% of the insured value of our
buildings. The principal risks are temperature extremes and water
stress.
A key finding from the Middle of the Road scenario showed that the
total number of buildings at risk reduced from 20 to 13. The
highlighted facilities are still at risk from the same perils of extreme
temperature and water stress by 2050.
This forward-looking data along with historical data helps inform real
estate planning. We will continue to enhance our understanding of
how extreme weather events impact our building portfolio as climate
risk assessment tools improve and evolve. We buy insurance for
property damage and business interruption and consider insurance as
a loss mitigation strategy depending on its availability and price.
We regularly review and enhance our building selection process and
global engineering standards and will continue to assess historical
claims data to help ensure our building selection and design
standards address the potential impacts of climate change.
Resilience risk
Overview
Resilience risk is the risk of sustained and significant business
disruption from execution, delivery, physical security or safety events,
causing the inability to provide critical services to our customers,
affiliates and counterparties. Resilience risk arises from failures or
inadequacies in processes, people, systems or external events.
Resilience risk management
Key developments in 2023
During the year, we carried out several initiatives to keep pace with
geopolitical, regulatory and technology changes, and strengthened
the management of resilience risk:
–We focused on enhancing our understanding of our risk and
control environment, by updating our risk taxonomy and control
libraries, and refreshing risk and control assessments.
–We continued to recognise that our customers are impacted by
service disruptions, and responded to these urgently and aimed to
recover with minimum delay. We continued to initiate post-
incident review processes to prevent recurrence. Where we
identify that investment is required to further enhance the Group’s
operational resilience capabilities, findings are fed into the Group’s
financial planning, helping to ensure we continue to meet the
expectations of our customers and our regulators.
–We continued to monitor markets affected by the Russia-Ukraine
and Israel-Hamas wars, as well as other geopolitical events, for
any potential impact they may have on our colleagues and
operations.
–We strengthened the way third-party risk is overseen and
managed across all non-financial risks, and enhanced the
processes, framework and reporting capabilities used by our
global businesses, functions and regions.
–We provided analysis and easy-to-access risk and control
information and metrics to enable management to focus on non-
financial risks in their decision making and appetite setting.
–We further strengthened our non-financial risk governance and
senior leadership, and improved our coverage and risk steward
oversight for data risk and change execution.
We prioritise our efforts on material risks and areas undergoing
strategic growth, aligning our location strategy to this need. We also
remotely provide oversight and stewardship, including support of
chief risk officers, in territories where we have no physical presence.
Governance and structure
The Enterprise Risk Management target operating model provides a
globally consistent view across resilience risks, strengthening our risk
management oversight while operating effectively as part of a
simplified non-financial risk structure.
We view resilience risk across seven sub-risk types related to: third-
party risk; technology and cybersecurity risk; transaction processing
risk; business interruption and incident risk; data risk; change
execution risk; and facilities availability, safety and security risk. 
Risk appetite and key escalations for resilience risk are reported to
the Non-Financial Risk Management Board, chaired by the Group
Chief Risk and Compliance Officer, with an escalation path to the
Group Risk Management Meeting and Group Risk Committee.
Key risk management processes
Operational resilience is our ability to anticipate, prevent, adapt,
respond to, recover and learn from operational disruption while
minimising customer and market impact. Resilience is determined by
assessing whether we can continue to provide our important
business services, within an agreed impact tolerance. This is
achieved via day-to-day oversight and periodic and ongoing
assurance, such as deep dive reviews and controls testing, which
may result in challenges being raised to the business by risk
stewards. Further challenge is also raised in the form of risk steward
opinion papers to formal governance. We accept we will not be able
to prevent all disruption but we must prioritise investment to
continually improve the response and recovery strategies for our
important business services and important group business services
to meet regulatory expectations.
Business operations continuity
We continue to monitor the Russia-Ukraine and Israel-Hamas wars,
and remain ready to take measures to ensure business continuity in
affected markets should the situations require. There have been no
significant disruptions to our services, although businesses and
functions in nearby markets continually review their plans and
responses to minimise any potential impacts.
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266
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Regulatory compliance risk
Overview
Regulatory compliance risk is the risk associated with breaching our
duty to clients and other counterparties, inappropriate market conduct
(including unauthorised trading) and breaching related financial
services regulatory standards. Regulatory compliance risk arises from
the failure to observe relevant laws, codes, rules and regulations and
can manifest itself in poor market or customer outcomes and lead to
fines, penalties and reputational damage to our business.
Regulatory compliance risk management
Key developments in 2023
The dedicated programme to embed our updated purpose-led
conduct approach has concluded. Work to map applicable regulations
to our risks and controls continued in 2023, alongside the adoption of
new tooling to support enterprise-wide horizon scanning for new
regulatory obligations and supporting wider work on regulatory
reporting enhancements. Climate risk has been integrated into
regulatory compliance policies and processes, with enhancements
made to the product governance framework and controls to ensure
the effective consideration of climate – and in particular the risk of
greenwashing – risks.
Governance and structure
The Compliance function has now been restructured and integrated
into a combined Risk and Compliance function with the appointment
of a Group Head of Regulatory Compliance reporting directly into the
Group Chief Risk and Compliance Officer. Regulatory Compliance and
Financial Crime teams work together and with relevant stakeholders
to achieve good conduct outcomes, and provide enterprise-wide
support on the compliance risk agenda in close collaboration with
colleagues from the Group Risk and Compliance function.
Key risk management processes
The Global Regulatory Compliance capability is responsible for setting
global policies, standards and risk appetite to guide the Group’s
management of regulatory compliance risk. It also devises the
required frameworks, support processes and tooling to protect
against regulatory compliance risks. The Group capability provides
oversight, review and challenge of the global market, regional and line
of business teams to help them identify, assess and mitigate
regulatory compliance risks, where required. The Group’s regulatory
compliance risk policies are regularly reviewed. Global policies and
procedures require the identification and escalation of any actual or
potential regulatory breaches, and relevant events and issues are
escalated to the Group’s Non-Financial Risk Management Board, the
Group Risk Management Meeting and the Group Risk Committee, as
appropriate. The Group Head of Regulatory Compliance reports to the
Group Chief Risk and Compliance Officer, and attends the Risk and
Compliance Executive Committee, the Group Risk Management
Meeting and the Group Risk Committee.
Financial crime risk
Overview
Financial crime risk is the risk that HSBC’s products and services will
be exploited for criminal activity. This includes fraud, bribery and
corruption, tax evasion, sanctions and export control violations,
money laundering, terrorist financing and proliferation financing.
Financial crime risk arises from day-to-day banking operations
involving customers, third parties and employees.
Financial crime risk management
Key developments in 2023
We regularly review the effectiveness of our financial crime risk
management framework, which includes continued consideration of
the complex and dynamic nature of sanctions compliance and export
control risk. We continued to respond to the financial sanctions and
trade restrictions that have been imposed on Russia, including
methods used to limit sanctions evasion.
We continued to make progress with several key financial crime risk
management initiatives, including:
–We deployed our intelligence-led, dynamic risk assessment
capability for customer account monitoring in additional entities
and global businesses, including in the UK, the Channel Islands
and the Isle of Man, Hong Kong and the UAE.
–We deployed a next generation capability to increase our
monitoring coverage on correspondent banking activity.
–We successfully introduced the required changes to our
transaction screening capability to accommodate the global
change to payment systems formatting under ISO 20022
requirements.
–We made enhancements in response to the rapidly evolving and
complex global payments landscape and refined our digital assets
and currencies strategy.
Governance and structure
The structure of the Financial Crime function remained substantively
unchanged in 2023, although we continued to review the
effectiveness of our governance framework to manage financial
crime risk. The Group Head of Financial Crime and Group Money
Laundering Reporting Officer continues to report to the Group Chief
Risk and Compliance Officer, while the Group Risk Committee retains
oversight of matters relating to financial crime.
Key risk management processes
We will not tolerate knowingly conducting business with individuals
or entities believed to be engaged in criminal activity. We require
everybody in HSBC to play their role in maintaining effective systems
and controls to prevent and detect financial crime. Where we believe
we have identified suspected criminal activity or vulnerabilities in our
control framework, we will take appropriate mitigating action.
We manage financial crime risk because it is the right thing to do to
protect our customers, shareholders, staff, the communities in which
we operate, as well as the integrity of the financial system on which
we all rely. We operate in a highly regulated industry in which these
same policy goals are codified in law and regulation.
We are committed to complying with the laws and regulations of all
the markets in which we operate and applying a consistently high
financial crime standard globally.
We continue to assess the effectiveness of our end-to-end financial
crime risk management framework, and invest in enhancing our
operational control capabilities and technology solutions to deter and
detect criminal activity. We have simplified our framework and
consolidated previously separate financial crime policies into a single
policy to drive consistency and provide a more holistic assessment of
financial crime risk. We further strengthened our financial crime risk
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267
taxonomy and control libraries and our monitoring capabilities through
technology deployments. We developed more targeted metrics, and
continued to seek to enhance our governance and reporting. We are
committed to working in partnership with the wider industry and the
public sector in managing financial crime risk and we participate in
numerous public-private partnerships and information sharing
initiatives around the world. In 2023, our focus remained on
measures to improve the overall effectiveness of the global financial
crime framework, notably by providing input into legislative and
regulatory reform activities. We did this by contributing to the
development of responses to consultation papers focused on how
financial crime risk management frameworks can deliver more
effective outcomes in detecting and deterring criminal activity.
Through our work with the Wolfsberg Group and the Institute of
International Finance, we supported the efforts of the global standard
setter, the Financial Action Task Force. In addition, we participated in
a number of public events related to enhancing public-private
partnerships, payment transparency, asset recovery, tackling forestry
crimes, wildlife trafficking and human trafficking.
Model risk
Overview
Model risk is the risk of the potential for adverse consequences from
model errors or the inappropriate use of modelled outputs to inform
business decisions.
Model risk arises in both financial and non-financial contexts
whenever business decision making includes reliance on models.
Key developments in 2023
In 2023, we continued to make improvements in our model risk
management processes amid regulatory changes in model
requirements.
Initiatives during the year included:
–Following regulatory feedback on a number of our model
submissions for our internal ratings-based (‘IRB’) approach for
credit risk, internal model method (‘IMM’) for counterparty credit
risk and internal model approach (‘IMA’) for market risk, we
implemented approved models for IMM and IMA alongside an
approved IRB model for UK mortgages. We began a programme
of work to address feedback from the PRA and other regulators
on the IRB models for wholesale credit.
–We made changes to our VaR model in response to multiple
breaches that had been observed from market volatility resulting
from changes in monetary policy in major markets.
–We introduced a new procedure to ensure any new tool
developed using generative AI would require validation by Model
Risk Management before its use.
–We enhanced our frameworks and controls as climate risk and AI
and machine learning models become more embedded in
business processes.
–Following the publication of Supervisory Statement 1/23 – the
PRA’s guiding principles for how model risks should be managed
across the industry – we began a programme of work to seek to
meet the enhanced model risk management requirements, with
representation from all global businesses and key functions,
including Internal Audit.
Governance and structure
Model risk governance committees at the Group, business and
functional levels provide oversight of model risk. The committees
include senior leaders from the three global businesses and the
Group Risk and Compliance function, and focus on model-related
concerns and are supported by key model risk metrics. We also have
Model Risk Committees in our geographical regions focused on local
delivery and requirements. The Group-level Model Risk Committee is
chaired by the Group Chief Risk and Compliance Officer, and the
heads of key businesses participate in these meetings.
Key risk management processes
We use a variety of modelling approaches, including regression,
simulation, sampling, machine learning and judgemental scorecards
for a range of business applications. These activities include
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting. Global
responsibility for managing model risk is delegated from the Board to
the Group Chief Risk and Compliance Officer, who authorises the
Group Model Risk Committee. This committee regularly reviews our
model risk management policies and procedures, and requires the
first line of defence to demonstrate comprehensive and effective
controls based on a library of model risk controls provided by Model
Risk Management. Model Risk Management also reports on model
risk to senior management and the Group Risk Committee on a
regular basis through the use of the risk map, risk appetite metrics
and top and emerging risks.
We regularly review the effectiveness of these processes, including
the model risk committee structure, to help ensure appropriate
understanding and ownership of model risk is embedded in the
businesses and functions.
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HSBC Holdings plc
Insurance manufacturing operations risk
Contents
Overview
Insurance manufacturing operations risk management
Insurance manufacturing operations risk in 2023
Measurement
Key risk types
–  Market risk
–  Credit risk
–  Liquidity risk
–  Insurance underwriting risk
Overview
The key risks for our insurance manufacturing operations are market
risk, in particular interest rate and equity, credit risk and insurance
underwriting risk. These have a direct impact on the financial results
and capital positions of the insurance operations. Liquidity risk, while
significant in other parts of the Group, is less material for our
insurance operations.
HSBC’s insurance business
We sell insurance products through a range of channels including our
branches, insurance sales forces, direct channels and third-party
distributors. The majority of sales are through an integrated
bancassurance model that provides insurance products principally for
customers with whom we have a banking relationship, although the
proportion of sales through other sources such as independent
financial advisers, tied agents and digital platforms is increasing.
For the insurance products we manufacture, the majority of sales are
savings, universal life and protection contracts.
We choose to manufacture these insurance products in HSBC
subsidiaries based on an assessment of operational scale and risk
appetite. Manufacturing insurance allows us to retain the risks and
rewards associated with writing insurance contracts by keeping part
of the underwriting profit and investment income within the Group.
We have life insurance manufacturing subsidiaries in eight markets,
which are Hong Kong, Singapore, mainland China, France, UK, Malta,
Mexico and Argentina. In addition, we have: an interest in a life
insurance manufacturing associate in India; a captive insurance entity
in Bermuda that insures the non-financial risks of the wider Group;
and a reinsurance entity in Bermuda.
Where we do not have the risk appetite or operational scale to be an
effective insurance manufacturer, we engage with a small number of
leading external insurance companies in order to provide insurance
products to our customers. These arrangements are generally
structured with our exclusive strategic partners and earn the Group a
combination of commissions, fees and a share of profits. We
distribute insurance products in all of our geographical regions.
This section focuses only on the risks relating to the insurance
products we manufacture.
Insurance manufacturing operations
risk management
Key developments in 2023
The insurance manufacturing subsidiaries follow the Group’s risk
management framework. In addition, there are specific policies and
practices relating to the risk management of insurance contracts,
which did not change materially over 2023. During the year, there
was continued market volatility observed across interest rates, equity
and credit markets and foreign exchange rates. This was
predominantly driven by geopolitical factors and wider inflationary
concerns. One key area of risk management focus during 2023 was
the implementation of the new accounting standard, IFRS 17
‘Insurance Contracts’, which became effective on 1 January 2023.
Given the fundamental change the new accounting standard
represented in insurance accounting, and the complexity of the new
standard, this presented additional financial reporting and model risks
for the Group, which were managed via the IFRS 17 implementation
project. Other areas of focus were the ongoing integration of the
insurance business that was acquired through AXA Singapore in 2022
into the Group’s risk management framework, the establishment of a
reinsurance entity in Bermuda and controls supporting IFRS 17
implementation.
Governance and structure
(Audited)
Insurance manufacturing risks are managed to a defined risk appetite,
which is aligned to the Group’s risk appetite and risk management
framework, including its three lines of defence model. For details of
the Group’s governance framework, see page 160. The Global
Insurance Risk Management Meeting oversees the control
framework globally and is accountable to the WPB Risk Management
Meeting on risk matters relating to the insurance business.
The monitoring of the risks within our insurance operations is carried
out by Insurance Risk teams. The Group’s risk stewardship functions
support the Insurance Risk teams in their respective areas of
expertise.
Stress and scenario testing
(Audited)
Stress testing forms a key part of the risk management framework
for the insurance business. We participate in local and Group-wide
regulatory stress tests, as well as internally developed stress and
scenario tests, including Group internal stress test exercises.
The results of these stress tests and the adequacy of management
action plans to mitigate these risks are considered in the Group’s
ICAAP and the entities’ regulatory Own Risk and Solvency
Assessments, which are produced by all material entities.
Key risk management processes
Market risk
(Audited)
All our insurance manufacturing subsidiaries have market risk
mandates and limits that specify the investment instruments in which
they are permitted to invest and the maximum quantum of market
risk that they may retain. They manage market risk by using, among
others, some or all of the techniques listed below, depending on the
nature of the contracts written:
–We are able to adjust bonus rates to manage the liabilities to
policyholders for products with participating features. The effect is
that a significant proportion of the market risk is borne by the
policyholder.
–We use asset and liability matching where asset portfolios are
structured to support projected liability cash flows. The Group
manages its assets using an approach that considers asset quality,
diversification, cash flow matching, liquidity, volatility and target
investment return. We use models to assess the effect of a range
of future scenarios on the values of financial assets and
associated liabilities, and ALCOs employ the outcomes in
determining how best to structure asset holdings to support
liabilities.
–We use derivatives and other financial instruments to protect
against adverse market movements.
–We design new products to mitigate market risk, such as
changing the investment return sharing proportion between
policyholders and the shareholder.
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269
Credit risk
(Audited)
Our insurance manufacturing subsidiaries also have credit risk
mandates and limits within which they are permitted to operate,
which consider the credit risk exposure, quality and performance of
their investment portfolios. Our assessment of the creditworthiness
of issuers and counterparties is based primarily upon internationally
recognised credit ratings and other publicly available information.
Stress testing is performed on investment credit exposures using
credit spread sensitivities and default probabilities.
We use a number of tools to manage and monitor credit risk. These
include a credit report containing a watch-list of investments with
current credit concerns, primarily investments that may be at risk of
future impairment or where high concentrations to counterparties are
present in the investment portfolio. Sensitivities to credit spread risk
are assessed and monitored regularly.
Capital and liquidity risk
(Audited)
Capital risk for our insurance manufacturing subsidiaries is assessed
in the Group’s ICAAP based on their financial capacity to support the
risks to which they are exposed. Capital adequacy is assessed on
both the Group’s economic capital basis, and the relevant local
insurance regulatory basis.
Risk appetite buffers are set to ensure that the operations are able to
remain solvent, allowing for business-as-usual volatility and extreme
but plausible stress events.
Liquidity risk is less material for the insurance business. It is managed
by cash flow matching and maintaining sufficient cash resources,
investing in high credit-quality investments with deep and liquid
markets, monitoring investment concentrations and restricting them
where appropriate, and establishing committed contingency
borrowing facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity risk
reports and an annual review of the liquidity risks to which they are
exposed.
Insurance underwriting risk
Our insurance manufacturing subsidiaries primarily use the following
frameworks and processes to manage and mitigate insurance
underwriting risks:
–a formal approval process for launching new products or making
changes to products;
–a product pricing and profitability framework, which requires initial
and ongoing assessment of the adequacy of premiums charged
on new insurance contracts to meet the risks associated with
them;
–a framework for customer underwriting;
–reinsurance, which cedes risks to third-party reinsurers to keep
risks within risk appetite, reduce volatility and improve capital
efficiency; and
–oversight by financial reporting committees in each of our entities
of the methodology and assumptions that underpin IFRS 17
reporting.
Insurance manufacturing operations risk in 2023
Measurement
The following tables show the composition of the fair value of underlying items of the Group’s participating contracts at the reporting date.
Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
Life direct
participating
and
investment
DPF
contracts1
Life
other
contracts2
Other
contracts3
Shareholder
assets
and liabilities
Total
At 31 Dec 2023
$m
$m
$m
$m
$m
Financial assets
113,605
3,753
5,812
7,696
130,866
–  trading assets
—
—
—
—
—
–  financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
100,427
3,593
4,177
1,166
109,363
–  derivatives
258
10
—
6
274
–  financial investments – at amortised cost
1,351
67
1,157
4,772
7,347
–  financial assets at fair value through other comprehensive income
8,859
—
5
693
9,557
–  other financial assets
2,710
83
473
1,059
4,325
Insurance contract assets
13
213
—
—
226
Reinsurance contract assets
—
4,871
—
—
4,871
Other assets and investment properties
2,782
164
35
1,636
4,617
Total assets at 31 Dec 2023
116,400
9,001
5,847
9,332
140,580
Liabilities under investment contracts designated at fair value
—
—
5,103
—
5,103
Insurance contract liabilities
116,389
3,961
—
—
120,350
Reinsurance contract liabilities
—
819
—
—
819
Deferred tax
—
1
—
3
4
Other liabilities
—
—
—
6,573
6,573
Total liabilities
116,389
4,781
5,103
6,576
132,849
Total equity
—
—
—
7,731
7,731
Total liabilities and equity at 31 Dec 2023
116,389
4,781
5,103
14,307
140,580
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270
HSBC Holdings plc
Balance sheet of insurance manufacturing subsidiaries by type of contract (continued)
(Audited)
Life direct
participating
and
investment
DPF
contracts1
Life
other
contracts2
Other
contracts3
Shareholder
assets
and liabilities
Total
At 31 Dec 20224
$m
$m
$m
$m
$m
Financial assets
102,539
4,398
6,543
7,109
120,589
–  trading assets
—
—
—
—
—
–  financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
89,671
3,749
4,916
1,088
99,424
–  derivatives
432
9
21
15
477
–  financial investments – at amortised cost
981
165
1,221
4,660
7,027
–  financial assets at fair value through other comprehensive income
9,030
—
—
569
9,599
–  other financial assets
2,425
475
385
777
4,062
Insurance contract assets
4
130
—
—
134
Reinsurance contract assets
—
4,413
—
—
4,413
Other assets and investment properties
2,443
60
30
1,666
4,199
Total assets at 31 Dec 20224
104,986
9,001
6,573
8,775
129,335
Liabilities under investment contracts designated at fair value
—
—
5,374
—
5,374
Insurance contract liabilities
104,662
3,766
—
—
108,428
Reinsurance contract liabilities
—
748
—
—
748
Deferred tax
23
—
—
2
25
Other liabilities
—
—
—
7,524
7,524
Total liabilities
104,685
4,514
5,374
7,526
122,099
Total equity
—
—
—
7,236
7,236
Total liabilities and equity at 31 Dec 20224
104,685
4,514
5,374
14,762
129,335
1‘Life direct participating and investment DPF contracts’ are substantially measured under the variable fee approach measurement model.
2‘Life other contracts’ are measured under the general measurement model and mainly includes protection insurance contracts as well as reinsurance
contracts. The reinsurance contracts primarily provide diversification benefits over the life direct participating and investment discretionary
participation feature (’DPF’) contracts.
3‘Other contracts’ includes investment contracts for which HSBC does not bear significant insurance risk.
4From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Key risk types
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting HSBC’s
capital or profit. Market factors include interest rates, equity and
growth assets, credit spreads and foreign exchange rates.
Our exposure varies depending on the type of contract issued.
Our most significant life insurance products are contracts with
participating features. These products typically include some form of
capital guarantee or guaranteed return on the sums invested by the
policyholders, to which bonuses are added if allowed by the overall
performance of the funds. These funds are primarily invested in fixed
interest, with a proportion allocated to other asset classes to provide
customers with the potential for enhanced returns.
Participating products expose HSBC to the risk of variation in asset
returns, which will impact our participation in the investment
performance.
In addition, in some scenarios the asset returns can become
insufficient to cover the policyholders’ financial guarantees, in which
case the shortfall has to be met by HSBC. Amounts are held against
the cost of such guarantees, calculated by stochastic modelling in the
larger entities.
The cost of such guarantees are generally not material and are
absorbed by the insurance fulfilment cash flows.
For unit-linked contracts, market risk is substantially borne by the
policyholder, but some market risk exposure typically remains, as
fees earned are related to the market value of the linked assets.
Sensitivities
(Audited)
The following table provides the impacts on the CSM, profit after tax
and equity of our insurance manufacturing subsidiaries from
reasonably possible effects of changes in selected interest rate,
credit spread, equity price, growth assets and foreign exchange rate
scenarios for the year. These sensitivities are prepared in accordance
with current IFRS Accounting Standards and are based on changing
one assumption at a time with other variables being held constant,
which in practice could be correlated.
Due in part to the impact of the cost of guarantees and hedging
strategies, which may be in place, the relationship between the CSM,
profit after tax and total equity and the risk factors is non-linear.
Therefore, the results disclosed should not be extrapolated to
measure sensitivities to different levels of stress. For the same
reason, the impact of the stress is not necessarily symmetrical on the
upside and downside. The sensitivities are stated before allowance
for management actions, which may mitigate the effect of changes in
the market environment.
The method used for deriving sensitivity information and significant
market risk factors remain consistent between 2022 and 2023. In
2022, due to a lower CSM level, some portfolios generated onerous
contracts in the 100bps up scenarios for interest rate and credit
spread sensitivities, generating income statement losses and equity
reductions in those scenarios. This was less prevalent in 2023 as the
base CSMs were higher from changing market conditions and
changes in lapse rate assumptions.
HSBC Holdings plc
271
Sensitivity of HSBC’s insurance manufacturing subsidiaries to market risk factors1
(Audited)
2023
20222
Effect on
profit after tax
Effect on
CSM
Effect on
total equity
Effect on profit
after tax
Effect on
CSM
Effect on
total equity
$m
$m
$m
$m
$m
$m
+100 basis point parallel shift in yield curves
66
(92)
32
(210)
(82)
(240)
–  Insurance and reinsurance contracts
69
(92)
69
(214)
(82)
(214)
–  Financial instruments
(3)
—
(37)
4
—
(26)
-100 basis point parallel shift in yield curves
(137)
(390)
(103)
(49)
(57)
(19)
–  Insurance and reinsurance contracts
(133)
(390)
(133)
(41)
(57)
(41)
–  Financial instruments
(4)
—
30
(8)
—
22
+100 basis point shift in credit spreads
(11)
(884)
(45)
(324)
(843)
(354)
–  Insurance and reinsurance contracts
(9)
(884)
(9)
(322)
(843)
(322)
–  Financial Instruments
(2)
—
(36)
(2)
—
(32)
-100 basis point shift in credit spreads
104
806
138
119
1,133
149
–  Insurance and reinsurance contracts
102
806
102
117
1,133
117
–  Financial instruments
2
—
36
2
—
32
10% increase in growth assets3
78
436
78
68
400
68
–  Insurance and reinsurance contracts
43
436
43
38
400
38
–  Financial instruments
35
—
35
30
—
30
10% decrease in growth assets3
(85)
(507)
(86)
(81)
(560)
(81)
–  Insurance and reinsurance contracts
(49)
(507)
(49)
(49)
(560)
(49)
–  Financial instruments
(36)
—
(36)
(32)
—
(32)
10% appreciation in US dollar exchange rate against local
functional currency
117
390
117
95
272
95
–  Insurance and reinsurance contracts
27
390
27
20
272
20
–  Financial instruments
90
—
90
75
—
75
10% depreciation in US dollar exchange rate against local
functional currency
(117)
(390)
(117)
(95)
(272)
(95)
–  Insurance and reinsurance contracts
(27)
(390)
(27)
(20)
(272)
(20)
–  Financial instruments
(90)
—
(90)
(75)
—
(75)
1Sensitivities presented for ‘Insurance and reinsurance Contracts’ includes the impact of the sensitivity stress on underlying assets held to support
insurance and reinsurance contracts. Sensitivities presented for ‘Financial instruments’ includes the impact of the sensitivity stress on other financial
instruments, primarily shareholder assets.
2  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
3‘Growth assets’ primarily comprise equity securities and investment properties. Variability in growth asset fair value constitutes a market risk to
HSBC insurance manufacturing subsidiaries.
Credit risk
(Audited)
Description and exposure
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet their obligation under a contract. It arises in two main
areas for our insurance manufacturers:
–risk associated with credit spread volatility and default by debt
security counterparties after investing premiums to generate a
return for policyholders and shareholders; and
–risk of default by reinsurance counterparties and non-
reimbursement for claims made after ceding insurance risk.
The amounts outstanding at the balance sheet date in respect
of these items are shown in the table on page 270.
The credit quality of the reinsurers’ share of liabilities under insurance
contracts is assessed as ‘satisfactory’ or higher (as defined on
page 184), with 100% of the exposure being neither past due nor
impaired (2022: 100%).
Credit risk on assets supporting unit-linked liabilities is predominantly
borne by the policyholders. Therefore, our exposure is primarily
related to liabilities under non-linked insurance and investment
contracts and shareholders’ funds. The credit quality of insurance
financial assets is included in the table on page 208.
The risk associated with credit spread volatility is to a large extent
mitigated by holding debt securities to maturity, and sharing a degree
of credit spread experience with policyholders.
Liquidity risk
(Audited)
Description and exposure
Liquidity risk is the risk that an insurance operation, though solvent,
either does not have sufficient financial resources available to meet
its obligations when they fall due, or can secure them only at
excessive cost. Liquidity risk may be able to be shared with
policyholders for products with participating features.
The remaining maturity of insurance contract liabilities is included in
Note 4 on page 389.
Risk review
272
HSBC Holdings plc
The amounts of insurance contract liabilities that are payable on demand are set out by the product grouping below:
Amounts payable on demand
(Audited)
2023
20221
Amounts payable
on demand
Carrying amount
for these
contracts
Amounts payable
on demand
Carrying amount
for these contracts
$m
$m
$m
$m
Life direct participating and investment DPF contracts
107,287
116,389
100,273
104,669
Life other contracts
2,765
3,961
2,813
3,759
At 31 Dec
110,052
120,350
103,086
108,428
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Insurance underwriting risk
Description and exposure
Insurance underwriting risk is the risk of loss through adverse
experience, in either timing or amount, of insurance underwriting
parameters (non-economic assumptions). These parameters include
mortality, morbidity, longevity, lapse and expense rates. Lapse risk
exposure on products with premium financing increased over the
year as rising interest rates led to an increase in the cost of financing
for customers.
The principal risk we face is that, over time, the cost of the contract,
including claims and benefits, may exceed the total amount of
premiums and investment income received.
The tables on pages 270 analyse our life insurance underwriting risk
exposures by composition of the fair value of the underlying items.
The insurance underwriting risk profile and related exposures remain
largely consistent with those observed at 31 December 2022.
Sensitivities
(Audited)
The following table shows the sensitivity of the CSM, profit and total
equity to reasonably foreseeable changes in non-economic
assumptions across all our insurance manufacturing subsidiaries.
These sensitivities are prepared in accordance with current IFRS
Accounting Standards, which have changed following the adoption of
IFRS 17 ‘Insurance Contracts’, effective from 1 January 2023. Further
information about the adoption of IFRS 17 is provided on page 369.
Mortality and morbidity risk is typically associated with life insurance
contracts. The effect on profit of an increase in mortality or morbidity
depends on the type of business being written.
Sensitivity to lapse rates depends on the type of contracts
being written. An increase in lapse rates typically has a negative
effect on CSM (and therefore expected future profits) due to the loss
of future income on the lapsed policies. However, some contract
lapses have a positive effect on profit due to the existence of policy
surrender charges.
Expense rate risk is the exposure to a change in the allocated cost
of administering insurance contracts. To the extent that increased
expenses cannot be passed on to policyholders, an increase in
expense rates will have a negative effect on our profits. This risk is
generally greatest for our smaller entities.
The impact of changing insurance underwriting risk factors is
primarily absorbed within the CSM, unless contracts are onerous in
which case the impact is directly to profits. The impact of changes to
the CSM is released to profits over the expected coverage periods of
the related insurance contracts.
Sensitivity of HSBC’s insurance manufacturing subsidiaries to insurance underwriting risk factors
(Audited)
Effect on CSM
(gross)1
Effect on profit
after tax (gross)1
Effect on profit
after tax (net)2
Effect on total
equity (gross)1
Effect on total
equity (net)2
At 31 Dec 2023
$m
$m
$m
$m
$m
10% increase in mortality and/or morbidity rates
(392)
(49)
(24)
(49)
(24)
10% decrease in mortality and/or morbidity rates
440
22
30
22
30
10% increase in lapse rates
(316)
(33)
(24)
(33)
(24)
10% decrease in lapse rates
348
22
29
22
29
10% increase in expense rates
(68)
(9)
(6)
(9)
(6)
10% decrease in expense rates
69
8
11
8
11
At 31 Dec 20223
10% increase in mortality and/or morbidity rates
(354)
(23)
(21)
(23)
(21)
10% decrease in mortality and/or morbidity rates
374
16
18
16
18
10% increase in lapse rates
(225)
(23)
(23)
(23)
(23)
10% decrease in lapse rates
232
22
22
22
22
10% increase in expense rates
(59)
(7)
(7)
(7)
(7)
10% decrease in expense rates
60
4
5
4
5
1The ‘gross’ sensitivities impacts are provided before considering the impacts of reinsurance contracts held as risk mitigation.
2The ‘net’ sensitivities impacts are provided after considering the impacts of reinsurance contracts held as risk mitigation.
3  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
HSBC Holdings plc
273
Corporate
governance
report
HSBC continues to enhance its corporate
governance practices and procedures to
support the Board’s ambition of world-class
governance.
The corporate governance report contains the
Report of the Directors and gives details of our
Board of Directors, senior management, and
Board committees. It outlines key aspects of
our approach to corporate governance,
including internal control.
It also includes the Directors’ remuneration
report, which explains our policies on
remuneration and their application.
275 The Board
280Senior management
284 How we are governed
290 Board matters considered and shareholder engagement
296 Board and committee effectiveness,
performance and accountability
298 Board committees
315Directors’ remuneration report
343Share capital and other related governance disclosures
348Internal control
350Employees
352Statement of compliance
We have a comprehensive range of policies and systems
in place designed to help ensure that the Group is well
managed, with effective oversight and control.
Report of the Directors | Corporate governance report
274
HSBC Holdings plc
The Board
The Board, which seeks to promote the Group’s long-term
success, deliver sustainable value to shareholders
and promote a culture of openness and debate, comprises
diverse, high-calibre members who have experience in
our global markets.
Chairman and executive Directors
Mark-tucker-4582x3055_RGB_new_SQUARE.jpg
Mark E Tucker (66) 4C
Group Chairman
Appointed to the Board: September 2017
Group Chairman since: October 2017
Skills and experience: With over 35 years of
experience in financial services in Asia, Africa, the
US, the EU and the UK, including 30 years living
and working in Hong Kong, Mark has a deep
understanding of the industry and markets in
which we operate.
Career: Mark was previously Chairman, Group
Chief Executive and President of AIA Group
Limited (‘AIA’), and prior to AIA he was Group
Chief Executive of Prudential plc. Mark previously
served as a non-executive Director of the Court of
the Bank of England and as an independent non-
executive Director of Goldman Sachs Group.
External appointments:
–Non-executive Chairman of Discovery Limited
–Supporting Chair of Chapter Zero
–Member of the UK Investment Council
–Member of the Advisory Group on Trade Finance
to the International Chamber of Commerce
–Member of the Trade Advisory Group on
Financial Services to the UK Government’s
Department for International Trade
–Member of the Asia Business Council
–Member of Hong Kong's Chief Executive's
Advisory Council on Economic Development
–Member of the Investment Advisory Council of
the Supreme National Investment Committee of
the Kingdom of Saudi Arabia
–Chairman of the Multinational Chairman’s Group
–Director, Peterson Institute for International
Economics
–Director, Institute of International Finance
–Asia Society Global Board of Trustees
–International Advisory Council of the China
National Financial Regulatory Administration
–Hong Kong Academy of Finance International
Council of Advisors
–Member of the Asia Global Institute
–International Business Leaders' Advisory Council
to the Mayor of Beijing – Adviser to the Mayor
–International Business Leaders' Advisory Council
to the Mayor of Shanghai – Adviser to the Mayor
noel quinn square.jpg
Noel Quinn (62)
Group Chief Executive
Appointed to the Board: August 2019
Group Chief Executive since: March 2020
Skills and experience: Having qualified as an
accountant in 1987, Noel has more than 30 years
of banking and financial services experience, both
in the UK and Asia.
Career: Noel was appointed Group Chief
Executive in March 2020, having held the role on
an interim basis since August 2019. Since joining
HSBC and its constituent companies in 1987, Noel
has held a variety of roles including Chief
Executive Officer, Global Commercial Banking;
Regional Head of Commercial Banking for Asia-
Pacific; Head of Commercial Banking UK; and
Head of Commercial Finance Europe.
External appointments:
–Independent non-executive Director of
Sustainable Markets Initiative Limited and Chair
of the Financial Services Task Force
–Principal member of the Glasgow Financial
Alliance for Net Zero
–Member of the World Economic Forum's
International Business Council
–Member of the World Bank Private Sector
Investment Lab
–Member of the Advisory Board of the China
Children Development Fund
–Founding member of CNBC ESG Council
–Member of the British Infrastructure Council
George_Elhedry.jpg
Georges Elhedery (49)
Group Chief Financial Officer
Appointed to the Board: January 2023
Skills and experience: Georges has over 25
years of experience in the banking industry across
Europe, the Middle East and Asia, and has held a
number of executive roles at both a regional and
global business level.
Career: Georges was appointed Group Chief
Financial Officer and executive Director with effect
from 1 January 2023. He is also responsible for the
oversight of the Group’s transformation initiatives,
strategy and corporate development activities.
Georges was previously co-Chief Executive Officer,
Global Banking and Markets and also Head of the
Markets and Securities Services division of the
business. Georges joined HSBC in 2005 with
extensive trading experience in London, Paris and
Tokyo. He has since held a number of senior
leadership roles, including Head of Global Banking
and Markets, Middle East and North Africa; Chief
Executive Officer for HSBC, Middle East, North
Africa and Türkiye; and Global Head of Markets
based in London. 
Board committee membership key
C. Committee Chair
1.Group Audit Committee
2.Group Risk Committee
3.Group Remuneration Committee
4.Nomination & Corporate Governance
Committee
For full biographical details of our Board
Footnote Arrow.jpg
members, see www.hsbc.com/who-we-are/
leadership-and-governance.
HSBC Holdings plc
275
Independent non-executive Directors
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Geraldine Buckingham (46) 2,3,4
Independent non-executive
Director
Appointed to the Board: May 2022
Skills and experience: Geraldine is
an experienced executive within the
global financial services industry,
with significant leadership experience
in Asia.
Career: Geraldine is the former Chair
and Head of Asia-Pacific at
BlackRock, where she was
responsible for all business activities
across Hong Kong, mainland China,
Japan, Australia, Singapore, India
and Korea. After stepping down from
this role, she acted as senior adviser
to the Chairman and Chief Executive
Officer of BlackRock. She earlier
served as BlackRock's Global Head of
Corporate Strategy, and previously
was a partner within McKinsey &
Company’s financial services
practice. 
External appointments:
–Independent non-executive
Director of Brunswick Group
Partnership Ltd
–Independent non-executive
Director of H.R.L. Morrison & Co
Limited
–Member of the Advisory Board of
ClimateWorks Centre Australia
–Member of the Advisory Board of
the McKinsey Health Institute
5.1 Rachel Duan master image Oct 2021_RET.jpg
Rachel Duan (53) 1,3,4
Independent non-executive
Director
Appointed to the Board: September
2021
Skills and experience: Rachel is an
experienced business leader with
exceptional international experience
in the US, Japan, mainland China and
Hong Kong.
Career: Rachel spent 24 years at
General Electric (‘GE’), where she
held positions including Senior Vice
President of GE, and President and
Chief Executive Officer of GE’s Global
Markets where she was responsible
for driving GE’s growth in Asia-
Pacific, the Middle East, Africa, Latin
America, Russia and the
Commonwealth of Independent
States. She also previously served as
President and Chief Executive Officer
of GE Advanced Materials China and
then of the Asia-Pacific; President
and CEO of GE Healthcare China; and
President and CEO of GE China.
External appointments:
–Independent non-executive
Director of Sanofi S.A.
–Independent non-executive
Director of AXA S.A.
–Independent non-executive
Director of the Adecco Group AG
RT 5.2 210625_4929_cut-out_Carolyn_D_RET.jpg
Dame Carolyn Fairbairn (63)
2,3C,4
Independent non-executive
Director
Appointed to the Board: September
2021
Skills and experience: Carolyn has
significant experience across the
media, government and finance
sectors, and a deep understanding of
the macroeconomic, regulatory, and
political environment.
Career: An economist by training,
Carolyn has served as a partner at
McKinsey & Company, a member of
the UK prime minister John Major's
Number 10 Policy Unit, and as
Director-General of the Confederation
of British Industry, and held senior
executive positions at the BBC and
ITV plc. She has extensive board
experience, having previously served
as non-executive Director of Lloyds
Banking Group plc, The Vitec Group
plc, Capita plc and BAE Systems plc.
She has also served as a non-
executive Director of the UK
Competition and Markets Authority
and the Financial Services Authority.
External appointments:
–Independent non-executive
Director of Tesco plc
–Chair of Royal Mencap Society
–Honorary Fellow of Gonville and
Caius College, Cambridge
Report of the Directors | Corporate governance report
276
HSBC Holdings plc
James Forese CMYK.jpg
James Forese (60) 1,2C,4
Independent non-executive
Director
Appointed to the Board: May 2020
Skills and experience: Jamie has
over 30 years of international
business and management
experience in the finance industry
working in areas including global
markets, investment and private
banking.
Career: Jamie formerly served as
President of Citigroup. He began his
career in securities trading with
Salomon Brothers, one of Citigroup’s
predecessor companies, in 1985. In
addition to his most recent role as
Citigroup's President, he was Chief
Executive Officer of Citigroup’s
Institutional Clients Group. He has
held the positions of Chief Executive
of its Securities and Banking division
and Head of its Global Markets
business.
External appointments:
–Non-executive Chair of HSBC
North America Holdings Inc
–Non-executive Chairman of Global
Bamboo Technologies
Ann Godbehere.jpg
Ann Godbehere (68) 3,4
Independent non-executive
Director
Appointed to the Board: September
2023
Skills and experience: Ann brings
deep financial acumen and extensive
financial services experience over a
30-year career spanning insurance,
retail and private banking, and wealth
management. She also provides
global perspectives, drawing upon
experiences and insights gained from
a long career in international
business.
Career: After joining Swiss Re in
1996, Ann served as the company’s
Chief Financial Officer from 2003 to
2007. She was also Interim Chief
Financial Officer of Northern Rock
Bank from 2008 to 2009 in the period
immediately after its nationalisation.
Ann also has extensive board
experience, including with FTSE 100
companies, having previously served
as non-executive Director of
Prudential plc, British American
Tobacco plc, UBS AG, UBS Group AG
and as Senior Independent non-
executive Director of Rio Tinto plc
and Rio Tinto Limited.
External appointments:
–Non-executive Director and Chair
of the Audit Committee of Stellantis
N.V.
–Non-executive Director and Chair
of the Audit Committee of Shell plc
Steven Guggenheimer CMYK.jpg
Steven Guggenheimer (58) 2,4
Independent non-executive
Director
Appointed to the Board: May 2020
Skills and experience: Steven
brings extensive insight into
technologies ranging from artificial
intelligence to Cloud computing,
through his experience advising
businesses on digital transformation.
Career: Steven has more than 25
years of experience at Microsoft,
including more than a decade as
Corporate Vice President, where he
led teams focused on original
equipment manufacturers,
developers and independent software
vendors and artificial intelligence
solutions.
External appointments:
–Independent non-executive
Director of BT Group plc
–Independent non-executive
Director of Leupold & Stevens, Inc
–Independent non-executive
Director of Forrit Holdings Limited
HSBC Holdings plc
277
191008_1852_jose-antonio-meade-kuribrena_D_CMYK_newBG.jpg
Dr José Antonio Meade Kuribreña
(54) 3,4
Independent non-executive
Director
Appointed to the Board: March 2019
Workforce engagement non-executive
Director since: June 2022
Skills and experience: José has
extensive experience in public
administration, banking and financial
policy.
Career: José has held Cabinet-level
positions in the federal government of
Mexico, including as Secretary of
Finance and Public Credit, Secretary
of Social Development, Secretary of
Foreign Affairs and Secretary of
Energy. Prior to his appointment to
the Cabinet, he served as
Undersecretary and as Chief of Staff
in the Ministry of Finance and Public
Credit. José is also a former Director
General of Banking and Savings at
the Ministry of Finance and Public
Credit, and served as Chief Executive
Officer of the National Bank for Rural
Credit.
External appointments:
–Independent non-executive
Director of Alfa S.A.B. de C.V.
–Independent non-executive
Director of Grupo Comercial
Chedraui, S.A.B. de C.V.
–Board member of the Global
Center on Adaptation
–Member of the Advisory Board of
the University of California, Centre
for US Mexican Studies
–Member of the UNICEF Mexico
Advisory Board
Kalpana Morparia.jpg
Kalpana Morparia (74) 2,4
Independent non-executive
Director
Appointed to the Board: March 2023
Skills and experience: Kalpana is a
skilled business leader with
significant experience gained through
a 45-year career in banking across
Asia, primarily in India.
Career: Kalpana’s most recent
executive role was as Chair of J.P.
Morgan, South and Southeast Asia
and a member of J.P. Morgan’s Asia
executive committee, which she held
until her retirement in 2021. Before
J.P. Morgan, she was the Joint
Managing Director of ICICI Bank,
India’s second-largest bank, from
2001 to 2007.
External appointments:
–Independent non-executive
Director of Hindustan Unilever
Limited
–Independent non-executive
Director of Dr. Reddy's
Laboratories Ltd.
–Independent non-executive
Director of Philip Morris
International Inc
–Governing board member of the
Bharti Foundation
–Governing board member of
Foundation for Audit Quality
–Governing board member of the
Generation India Foundation
–Governing council member of
Krea University
RT Eileen_Murray_Dec_2022_1600x900 px.jpg
Eileen Murray (65) 1,3,4
Independent non-executive
Director
Appointed to the Board: July 2020
Skills and experience: Eileen has
extensive knowledge in financial
services, technology and corporate
strategy from a career spanning more
than 40 years.
Career: Eileen previously served as
co-Chief Executive Officer of
Bridgewater Associates, LP. Before
this, she was Chief Executive Officer
for Investment Risk Management
LLC, and President and co-Chief
Executive Officer of Duff Capital
Advisors. Eileen started her
professional career at Morgan
Stanley, where she held positions
including Controller, Treasurer, and
Global Head of Technology and
Operations, as well as Chief
Operating Officer for its Institutional
Securities Group. She was also Head
of Global Technology, Operations and
Product Control at Credit Suisse.
External appointments:
–Independent non-executive
Director of Guardian Life Insurance
Company of America
–Independent non-executive
Director of Broadridge Financial
Solutions, Inc
–Member of the Advisory Board of
Mobilize Capital Partners
Report of the Directors | Corporate governance report
278
HSBC Holdings plc
Brendan Nelson.jpg
Brendan Nelson (74) 1,2,4
Independent non-executive
Director
Appointed to the Board: September
2023
Skills and experience: Brendan
brings UK and international financial
and auditing expertise, and
significant experience in auditing and
as audit committee chair of UK-listed
companies.
Career: Brendan spent over 25 years
as a partner at KPMG LLP, served on
the board from 2000 and as Vice
Chairman from 2006, until his
retirement in 2010. Internationally, he
held various senior positions
including Global Chairman of the
financial services practice.
Subsequently, Brendan joined the
boards of bp plc and NatWest Group
plc where he also served as Chairman
of both companies' audit committees.
During his career, Brendan was
President of the Institute of Chartered
Accountants of Scotland, a member
of the Financial Reporting Review
Panel and a member of the Financial
Services Authority's Practitioner
Panel. As current Chairman of the
Board of BP Pension Fund Trustees
Ltd, Brendan has received training in
ESG considerations for investment
decisions and helped set an ambition
to be net zero in terms of greenhouse
gas emissions from investments by
2050.
External appointments:
–Chairman of BP Pension Trustees
Ltd
David Nish CMYK.jpg
David Nish (63) 1C,2,4
Independent non-executive
Director
Appointed to the Board: May 2016
Senior Independent non-executive
Director since: February 2020
Skills and experience: David has
international experience in financial
services, corporate governance,
strategy, financial reporting, and
operational transformation.
Career: David served as Group Chief
Executive Officer of Standard Life plc
between 2010 and 2015, having
joined the company in 2006 as Group
Finance Director. He is also a former
Group Finance Director of Scottish
Power plc and was a partner at Price
Waterhouse. David has also
previously served as a non-executive
Director of HDFC Life (India),
Northern Foods plc, Thus plc, London
Stock Exchange Group plc, the UK
Green Investment Bank plc and
Zurich Insurance Group.
External appointments:
–Senior Independent non-executive
Director of Vodafone Group plc and
Chairman of the Audit and Risk
Committee
–Honorary Professor of University of
Dundee Business School
Swee Lian Teo.jpg
Swee Lian Teo (64) 2,4
Independent non-executive
Director
Appointed to the Board: October 2023
Skills and experience: Swee Lian
brings extensive experience within
the international financial services
industry, having previously spent over
27 years with the Monetary Authority
of Singapore (‘MAS‘).
Career: During Swee Lian's time at
the MAS, she worked in foreign
reserves management, financial
sector development, strategic
planning and financial supervision,
before she became the Deputy
Managing Director for Financial
Supervision. She retired from the
MAS in 2015 after serving as Special
Advisor, focused on MAS's role in the
international regulatory framework, in
the Managing Director’s office. Swee
Lian previously served as a non-
executive Director on the boards of
AIA Group Limited and the Dubai
Financial Services Authority.
External appointments:
–Non-executive Director of
Singapore Telecommunications
Limited and Chair of the Risk
Committee
–Non-executive Director of Avanda
Investment Management Pte Ltd
–Director of Clifford Capital Pte Ltd
–Director of Clifford Capital Holdings
Pte Ltd
–Chair of CapitaLand Integrated
Commercial Trust Management
Limited.
191101-aileen-taylor-8042X4524_CMYK_newBG.jpg
Aileen Taylor (51)
Group Company Secretary and
Chief Governance Officer
Appointed: November 2019
Skills and experience: Aileen is a
solicitor with significant governance
and regulatory experience across
various roles in the banking industry.
She is a member of the European
Corporate Governance Council, the
GC100 and the Financial Conduct
Authority's Listing Authority Advisory
Panel.
Career: Prior to joining HSBC, Aileen
spent 19 years at the Royal Bank of
Scotland Group, holding various
legal, risk and compliance roles. She
was appointed Group Secretary in
2010 and subsequently Chief
Governance Officer and Board
Counsel.
Former Directors who served during the year
Jackson Tai
Jackson Tai retired from the Board on 5 May 2023
For full biographical details of our Board members, see
Footnote Arrow.jpg
www.hsbc.com/who-we-are/leadership-and-governance.
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279
Senior management
Senior management, which includes the
Group Executive Committee, supports the
Group Chief Executive in the day-to-day
management of the business and the
implementation of strategy.
191118_2169_Senior management profiles_elaine-arden_CMYK.jpg
Elaine Arden (55)
Group Chief Human
Resources Officer
Elaine joined HSBC as Group Chief
Human Resources Officer in June
2017. Prior to joining HSBC, she was
Group Human Resources Director at
the Royal Bank of Scotland Group for
six years in the aftermath of the
global financial crisis. She has held a
number of human resources roles
throughout her career in financial
services, including Head of Human
Resources for Direct Line Group.
Elaine is a member of the Chartered
Institute of Personnel and
Development, and a Fellow of the
Chartered Institute of Banking in
Scotland.
191118_2169_Senior management profiles_jonathan-calvert-davies_CMYK.jpg
Jonathan Calvert-Davies (55)
Group Head of Internal Audit
Jonathan is a standing attendee of
the Group Executive Committee,
having joined HSBC as Group Head
of Internal Audit in October 2019. He
has over 30 years of experience
providing assurance, audit and
advisory services to the banking and
securities industries in the UK, the US
and Europe. Jonathan’s previous
roles included leading KPMG UK’s
financial services internal audit
services practice and PwC’s UK
internal audit services practice. He
also previously served as interim
Group Head of Internal Audit at the
Royal Bank of Scotland Group.
191118_2169_Senior management profiles_Colin Bell 2_CMYK.jpg
Colin Bell (56)
Chief Executive Officer,
HSBC Bank plc and HSBC Europe
Colin joined HSBC in July 2016 and
was appointed Chief Executive
Officer, HSBC Bank plc and HSBC
Europe in February 2021, having
previously held the role of Group
Chief Compliance Officer. He is also a
Director of HSBC Bank (Singapore)
Limited. Colin worked at UBS as
Global Head of Compliance and
Operational Risk Control. He served
for 16 years in the British Army,
where he held a variety of command
and staff positions, including
operational tours of Iraq and Northern
Ireland, and roles in the Ministry of
Defence and NATO.
Greg Guyett CMYK.jpg
Greg Guyett (60)
Chief Executive Officer,
Global Banking and Markets
Greg joined HSBC in October 2018 as
Head of Global Banking and became
co-Chief Executive Officer of Global
Banking and Markets in March 2020,
before assuming sole responsibility in
October 2022. Before joining HSBC,
he was President and Chief Operating
Officer of East West Bank. Greg
began his career as an investment
banker at J.P. Morgan, where
positions included: Chief Executive
Officer for Greater China; Chief
Executive Officer, Global Corporate
Bank; Head of Investment Banking
for Asia-Pacific; and Co-Head of
Banking for Asia-Pacific.
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280
HSBC Holdings plc
210716-celine-herweijer-768x576_Flat_RT.jpg
Dr Celine Herweijer (46)
Group Chief Sustainability Officer
Celine joined HSBC as Group Chief
Sustainability Officer in July 2021,
and is responsible for the Group’s
execution of its sustainability
strategy. She was previously a
partner at PwC for over a decade,
where she held global leadership
roles including acting as its global
innovation and sustainability leader.
Before joining PwC in 2009, Celine
worked as Director of Climate
Change and Consulting for Risk
Management Solutions. She is a
World Economic Forum Young Global
Leader, a co-chair of the We Mean
Business Coalition, a PhD climate
scientist and NASA Fellow.
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Steve John (50)
Group Chief Communications and
Brand Officer
Steve joined HSBC in December 2019
and was appointed to the Group
Executive Committee in April 2021.
He has a wealth of senior
communications, public policy and
leadership experience acquired
across a number of multinational and
charitable organisations. Steve was
previously a partner and Global
Director of Communications at
McKinsey & Company from 2014 to
2019. He has also held roles with
Bupa as Global Director of Corporate
Affairs and PepsiCo as Director of
Corporate Affairs for their UK and
Ireland franchises.
200120_2527_John Hinshaw cut out for ARA_nobg_32_D_CMYK_Amended.jpg
John Hinshaw (53)
Group Chief Operating Officer
John became Group Chief Operating
Officer in February 2020, having
joined HSBC in December 2019. He is
Chairman of HSBC Global Services
Limited and a Director of HSBC
Innovation Bank Limited. John was
previously Executive Vice President of
Technology and Operations and Chief
Customer Officer at Hewlett Packard
and Hewlett Packard Enterprise, and
has held senior executive positions at
Verizon and Boeing. John serves on
the boards of Sysco Corporation and
Illumio, Inc., and has previously
served on the boards of BNY Mellon,
DocuSign and the National Academy
Foundation.
RT 220303-pam-kaur-768x576 Flat.jpg
Pam Kaur (60)
Group Chief Risk and
Compliance Officer
Pam was appointed Group Chief Risk
and Compliance Officer in 2021,
having been Group Chief Risk Officer
since 2020. She is a Director of the
Hongkong and Shanghai Banking
Corporation Limited. Since joining
HSBC in 2013, her roles included
Group Head of Internal Audit and
Head of Wholesale Market and Credit
Risk. Since qualifying as a chartered
accountant with Ernst & Young, Pam 
held various senior audit, compliance,
finance and operations roles with
Deutsche Bank, the Royal Bank of
Scotland Group, Lloyds TSB and
Citigroup. She serves as a non-
executive Director of abrdn plc.
Bob Hoyt.jpg
Bob Hoyt (59)
Group Chief Legal Officer
Bob joined HSBC as Group Chief
Legal Officer in January 2021. He
was previously Group General
Counsel at Barclays from 2013 to
2020. Prior to that, he was General
Counsel and Chief Regulatory Affairs
Officer for PNC Financial Services
Group. Bob has served as General
Counsel and Senior Policy Adviser to
the US Department of the Treasury
under Secretary Henry M. Paulson Jr,
and as Special Assistant and
Associate Counsel to the White
House under President George W.
Bush.
RT 210604-david-liao-1600x900_Flat_RT.jpg
David Liao (51)
Co-Chief Executive,
The Hongkong and Shanghai
Banking Corporation Limited
David was appointed Co-Chief
Executive of the Asia-Pacific region in
2021. He is also a Director of the
Bank of Communications Co.,
Limited, and Hang Seng Bank
Limited. David joined HSBC in 1997,
with previous roles including: Head of
Global Banking Coverage for Asia-
Pacific; President and Chief Executive
of HSBC China; Head of Global
Banking and Markets, HSBC China;
and Treasurer and Head of Global
Markets, HSBC China.
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281
Nuno Matos CMYK.jpg
Nuno Matos (56)
Chief Executive Officer,
Wealth and Personal Banking
Nuno was appointed Chief Executive
Officer of Wealth and Personal
Banking in 2021. Since joining HSBC
in 2015 from Santander Group, he
has held various roles, most recently
as Chief Executive Officer of HSBC
Bank plc and HSBC Europe. He has
also held the positions of Chief
Executive Officer of HSBC Mexico
and Regional Head of Retail Banking
and Wealth Management for Latin
America. He is currently the
Chairman of MP Payments Group
Limited.
191202_2169_Senior management profiles_michael-roberts_CMYK.jpg
Michael Roberts (63)
Chief Executive Officer,
HSBC USA and Americas
Michael was appointed Chief
Executive Officer of HSBC USA when
he joined HSBC in 2019. He became
Chief Executive Officer of the
Americas with oversight responsibility
for Canada and Latin America in
2021. He is a Director of HSBC Bank
Canada; Director, President and Chief
Executive Officer of HSBC North
America Holdings Inc.; and Chairman
of HSBC Bank USA, N.A., HSBC USA
Inc and HSBC Latin America
Holdings (UK) Limited. Previously,
Michael spent over 30 years at
Citigroup in a number of senior
leadership roles, most recently as
Global Head of Corporate Banking
and Capital Management and Chief
Lending Officer.
191119_2169_Senior management profiles_stephen-moss_CMYK.jpg
Stephen Moss (57)
Regional Chief Executive Officer,
Middle East, North Africa and
Türkiye
Stephen was appointed Regional
Chief Executive Officer for the Middle
East, North Africa and Türkiye in
2021. He has held a series of roles in
Asia, the UK and the Middle East
since joining HSBC in 1992, including
as Chief of Staff to the Group Chief
Executive and overseeing the Group’s
mergers and acquisitions, and
strategy and planning activities.
Stephen is a Director of HSBC Bank
Middle East Limited, HSBC Middle
East Holdings B.V, HSBC Bank Egypt
S.A.E., HSBC Saudi Arabia and Saudi
Awwal Bank.
210604-surendra-rosha-1600x900_v2_Flat_RT.jpg
Surendra Rosha (55)
Co-Chief Executive,
The Hongkong
and Shanghai Banking
Corporation Limited
Surendra was appointed Co-Chief
Executive of the Asia-Pacific region in
2021. He is a Director of The
Hongkong and Shanghai Banking
Corporation Limited, HSBC Global
Asset Management Limited and
HSBC Bank Malaysia Berhad.
Surendra joined HSBC in 1991 and
has held several senior positions
within Global Banking and Markets,
including Head of Global Markets in
Indonesia and Head of Institutional
Sales, Asia-Pacific. He previously held
the position of Chief Executive for
HSBC India and Head of HSBC’s
financial institutions group for Asia-
Pacific.
191118_2169_Senior management profiles__IMG_0087_CMYK.jpg
Barry O’Byrne (48)
Chief Executive Officer,
Global Commercial Banking
Barry was appointed Chief Executive
Officer of Global Commercial Banking
in 2020, having served in the role on
an interim basis since August 2019.
He joined HSBC in 2017 as Chief
Operating Officer for Commercial
Banking. Before joining HSBC, Barry
worked at GE Capital for 19 years
where he held a number of senior
leadership roles, including Chief
Executive Officer and Chief Operating
Officer for GE Capital International.
191219_2396_Ian Stuart profilenew_Ian Stuart_D_CMYK.jpg
John David Stuart
(known as Ian Stuart) (60)
Chief Executive Officer,
HSBC UK Bank plc
Ian has been Chief Executive Officer
of HSBC UK Bank plc since 2017,
having joined HSBC as Head of
Commercial Banking in the UK and
Europe in 2014. He has worked in
financial services for over 40 years,
previously holding roles at the Royal
Bank of Scotland Group and Barclays.
Ian holds an Honorary Masters and
Honorary Doctorate degree for his
services to the banking sector. He is a
member of the UK Finance Board, the
UK Investment Council and a
business ambassador for Meningitis
Now.
Additional members of the
Group Executive Committee
Noel Quinn
Georges Elhedery
Aileen Taylor
Biographies are provided on
pages 275 and 279.
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282
HSBC Holdings plc
Board and senior management diversity
We value difference
Diversity and inclusion are embedded within the culture of HSBC. The Board remains
committed to having an inclusive culture that recognises the importance of
gender, social and ethnic diversity, and the benefits gained from different perspectives.
This section outlines the key diversity and inclusion metrics for Board members and executive management as at 31 December 2023. This
includes tenure, age, skills and experience, as well as gender and ethnic representation.
Gender and ethnic diversity
The Financial Conduct Authority requires all listed companies to publish in their Annual Report and Accounts information on female and ethnic
heritage representation on the Board and in senior management. The tables below outline the current gender and ethnic diversity of the HSBC
Holdings Board and executive management reflecting data gathered through self-identification.
Gender Ethnic diversity
               
21440476752951
21440476752979
57174604656627
57174604656629
Board members
Executive management2
Number
%
Number of senior positions1
Number
%
Male
8
53
4
15
79
Female
7
47
0
4
21
Other
—
—
—
—
—
Not specified/prefer not to say
—
—
—
—
—
Board members
Executive management2
Number
%
Number of senior positions1
Number
%
White British or other White (including minority-White groups)
10
67
4
13
69
Mixed/multiple ethnic groups
—
—
—
1
5
Asian/Asian British
3
20
—
3
16
Black/African/Caribbean/Black British
—
—
—
—
—
Other ethnic groups, including Arab
2
13
—
1
5
Not specified/prefer not to say
—
—
—
1
5
1  Senior positions on the Board comprise the Group Chairman, Group Chief Executive, Group Chief Financial Officer and Senior Independent non-executive Director.
2  Executive management comprises the Group Chief Executive, his direct reports, and the Group Company Secretary and Chief Governance Officer.
Board composition, tenure and age
2 Executive Directors
13 Non-executive Directors
57174604656452
57174604656454
1  Tenure of a non-executive Director is calculated by reference to the
date of their election by shareholders following their appointment.
Skills and experience
The summary below provides an overview of the skills and
experiences held by the non-executive Directors on the Board. This is
based on the current skills matrix, which is reviewed annually by the
Nomination & Corporate Governance Committee to ensure that the
Board has the skills and experience required to effectively discharge
its duties and to support succession planning discussions. The skills
and experiences of the newly appointed non-executive Directors are
also included in the below extract.
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283
57174604644380
How we are governed
We are committed to high standards of corporate governance. The
Group has a comprehensive range of policies and procedures in place
designed to help ensure that it is well managed, with effective
oversight and controls. 
Board and executive governance
The Board, led by the Group Chairman, is responsible among other
matters for:
–promoting the Group’s long-term success and delivering
sustainable value to shareholders;
–establishing and approving the Group’s strategy and objectives,
and monitoring the alignment of the Group’s purpose, strategy and
values with the desired culture and standards;
–setting the Group’s risk appetite and monitoring the Group’s risk
profile;
–approving and monitoring capital and financial resource plans for
achieving strategic objectives, including material transactions;
–considering and approving the Group’s technology and
environmental, social and governance strategies;
–ensuring effective engagement with, and encouraging participation
from, shareholders and other key stakeholders;
–approving the appointment and remuneration of Directors,
including Board roles;
–reviewing the Group’s overall corporate governance arrangements;
and
–providing entrepreneurial leadership of the Group within a
framework of prudent and effective controls.
The Board’s responsibilities are set out in a schedule of matters
reserved within its terms of reference, which are available on our
website at www.hsbc.com/who-we-are/leadership-and-governance/
board-responsibilities. The Board’s powers are subject to relevant
laws, regulations and HSBC’s articles of association.
The role of the independent non-executive Directors is to support the
development of strategy, oversee risk, hold management to account
and ensure the executive Directors are discharging their
responsibilities properly, while creating the right culture to encourage
constructive challenge. Further details on the independence of the
Board can be found in the Nomination & Corporate Governance
Committee report on page 298. Non-executive Directors also review
the performance of management in meeting agreed goals and
objectives. The Group Chairman meets with the non-executive
Directors without the executive Directors in attendance after Board
meetings and otherwise, as necessary.
The roles of Group Chairman and Group Chief Executive are separate.
There is a clear division of responsibilities between the leadership of
the Board by the Group Chairman, and the executive responsibility for
day-to-day management of HSBC’s business, which is undertaken by
the Group Chief Executive.
The majority of Board members are independent non-executive
Directors. At 31 December 2023, the Board comprised the Group
Chairman, 12 non-executive Directors, and two executive Directors
who are the Group Chief Executive and the Group Chief Financial
Officer. As previously announced, David Nish will not stand for
re-election at the Annual General Meeting (’AGM’) on 3 May 2024.
For further details of Board members' career backgrounds, skills,
experience and external appointments, see their biographies on
page 275, and for a breakdown of the diversity and skills of the Board
and senior management, see page 283.
Operation of the Board
The Board is ordinarily scheduled to meet nine times a year. In 2023,
the Board held 11 meetings. For further details on attendance at
those meetings, see page 285. The Board agenda is agreed by the
Group Chairman, working with both the Group Chief Executive and
the Group Company Secretary and Chief Governance Officer. For
further information, see ’Board matters considered and shareholder
engagement’ on page 290.
The Group Company Secretary and Chief Governance Officer, the
Group Chief Risk and Compliance Officer and the Group Chief Legal
Officer are regular attendees at Board meetings. The non-executive
Chairman of The Hongkong and Shanghai Banking Corporation
Limited is also a regular attendee at most Board meetings. The chief
executive officers of the three global businesses attend Board
strategy discussions, and other senior executives attend Board
meetings for specific items as required.
In addition, as agreed by the Board, the Board Oversight Sub-Group is
called on an ad hoc basis where necessary. Such meetings are an
informal mechanism for a smaller group of Board members and
management to discuss emerging issues and upcoming Board
matters. The Board Oversight Sub-Group was not convened in 2023.
Report of the Directors | Corporate governance report
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HSBC Holdings plc
Board roles, responsibilities and meeting attendance
The table below sets out the Board members’ respective roles, responsibilities and attendance at Board meetings and the AGM in 2023. For a
full description of key Board members’ responsibilities, see www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.
Roles
Board
attendance
in 20231
Responsibilities
Group Chairman
Mark E Tucker2,3
12/12
–Provides effective leadership of the Board and promotes the highest standards of corporate governance practices.
–Leads the Board in providing strong strategic oversight and setting the Board’s agenda, culture and values.
–Leads the Board in challenging management’s thinking and proposals, and fosters open and constructive debate
among Directors.
–Maintains internal and external relationships with key stakeholders, and communicates investors’ views to the
Board.
–Organises periodic monitoring and evaluation, including externally facilitated evaluation, of the performance of the
Board, its committees and individual Directors.
–Leads on succession planning for the Board and its committees, ensuring appointments reflect diverse cultures,
skills and experiences.
Executive Director
Group Chief Executive
Noel Quinn3
12/12
–Leads and directs the implementation of the Group’s business strategy, embedding the organisation’s culture and
values.
–Leads the Group Executive Committee with responsibility for the day-to-day operations of the Group, under
authority delegated to him from the Board.
–Maintains relationships with key internal and external stakeholders including the Group Chairman, the Board,
customers, regulators, governments and investors.
–Maintains responsibility and accountability for the Group’s and its employees’ compliance with applicable laws,
codes, rules and regulations, good market practice and HSBC’s own standards.
Executive Director
Group Chief Financial
Officer
Georges Elhedery3,4
12/12
–Supports the Group Chief Executive in developing and implementing the Group strategy, and recommends the
annual budget and long-term strategic and financial resource plan.
–Leads the Finance function and is responsible for effective financial and regulatory reporting, including the
effectiveness of the processes and controls, to ensure the financial control framework is robust and fit for
purpose.
–Maintains relationships with key stakeholders including shareholders.
Non-executive Director
Senior Independent
Director
David Nish3,5,6
10/12
–Supports the Group Chairman, acting as intermediary for non-executive Directors when necessary.
–Leads the non-executive Directors in the oversight of the Group Chairman, supporting the clear division of
responsibility between the Group Chairman and the Group Chief Executive.
–Listens to shareholders’ views if they have concerns that cannot be resolved through the normal channels.
Non-executive Directors
–Develop and approve the Group strategy.
–Challenge and oversee the performance of management in achieving agreed corporate goals and objectives.
–Approve the Group’s risk appetite and review risk profile and performance.
–Contribute to the assessment and monitoring of culture.
–Maintain internal and external relationships with the Group’s key stakeholders.
-
Geraldine Buckingham3,5
12/12
Rachel Duan3,5
12/12
Dame Carolyn Fairbairn3,5,6
10/12
James Forese3,5
12/12
Ann Godbehere4,5
3/3
Steven Guggenheimer3,5,6
11/12
Dr José Antonio Meade
Kuribreña3,5,7
12/12
Kalpana Morparia3,4,5
10/10
Eileen Murray3,5,6
11/12
Brendan Nelson4,5
3/3
Jackson Tai3,5,6,8
6/7
Swee Lian Teo4,5
2/2
Group Company
Secretary and Chief
Governance Officer
Aileen Taylor
–Maintains strong and consistent governance practices at Board level and throughout the Group.
–Supports the Group Chairman in ensuring effective functioning of the Board and its committees, and transparent
engagement between senior management and non-executive Directors.
–Facilitates induction and professional development of non-executive Directors.
–Advises and supports the Board and management in ensuring effective end-to-end governance and decision
making across the Group.
1The total number of meetings comprised nine scheduled meetings, two ad hoc meetings and the AGM.
2The non-executive Group Chairman was considered to be independent on appointment.
3Attended the AGM on 5 May 2023.
4Georges Elhedery joined the Board effective 1 January 2023. Kalpana Morparia joined the Board effective 1 March 2023. Ann Godbehere and Brendan
Nelson joined the Board effective 1 September 2023. Swee Lian Teo joined the Board effective 1 October 2023.
5Independent non-executive Director. All of the non-executive Directors are considered to be independent of HSBC. There are no relationships or
circumstances that are likely to affect any individual non-executive Director’s judgement. All non-executive Directors have confirmed their
independence during the year.
6  Meetings held on 9 March 2023, 16 March 2023 and 8 November 2023 were called at short notice. Due to prior commitments Dame Carolyn Fairbairn
was unable to attend on 9 March 2023, David Nish, Jackson Tai and Dame Carolyn Fairbairn were unable to attend on 16 March 2023, and David Nish
and Steven Guggenheimer were unable to attend on 8 November 2023. Due to prior commitments Eileen Murray was unable to attend the Board
meeting in September 2023.
7Dr José Antonio Meade Kuribreña was appointed as the independent non-executive Director with responsibility for workforce engagement on 1 June
2022. Further information can be found on page 293.
8Jackson Tai retired from the Board on 5 May 2023.
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285
Relationship between the Board and senior
management
The Board delegates day-to-day management of the business and
implementation of strategy to the Group Chief Executive. The Group
Chief Executive is supported in his management of the Group by
recommendations and advice from the Group Executive Committee
(’GEC’), an executive forum comprising members of senior
management that include chief executive officers of the global
businesses and regions, as well as functional heads. For further
details of the senior management team, see page 280.
All Directors are encouraged to have contact with management at all
levels, and have full access to all relevant information. Visits to local
business operations and meetings with local management are
arranged for the non-executive Directors when they attend Board
meetings in different locations, and when travelling for other reasons.
Senior management often attend alongside Directors’ stakeholder
engagements (see ’Board decision making and engagement with
stakeholders’ on page 20). The workforce engagement non-executive
Director attends the GEC on occasion to provide senior management
with updates on workforce engagements carried out by the Board,
including relevant Board observations. For further details, see ’Board
stakeholder and workforce engagement’ on page 293.
Executive governance
The GEC promotes the tone from the top, set by the Board, across
the organisation. This helps to ensure that our colleagues follow our
values, and foster a culture that delivers against our purpose of
opening up a world of opportunity. At its meetings, the GEC dedicates
time to reflect on our purpose and values and how they are
demonstrated in the day-to-day course of business.
During 2023, the GEC undertook an extensive review of the Group’s
strategy with a view to building upon its unique strengths. For further
details of our strategy, see page 11.
The GEC has led and overseen the delivery of a number of strategic
projects to simplify how we get things done, by identifying operating
efficiencies, reducing complexity and optimising costs. The GEC will
continue to focus on simplification throughout 2024.
The GEC’s operating rhythm helps to facilitate end-to-end governance
between senior leadership and the Board.
The operating rhythm has the following three pillars:
–regular check-in meetings to review and discuss current and
emerging trends and issues;
–a monthly meeting to review the performance of each of the
global businesses in principal geographical areas and legal entities,
supported by the development and introduction of a new key
performance indicators architecture in 2023; and
–a strategy- and governance-focused meeting, which is generally
held two weeks in advance of each Board meeting.
Separate committees have been established to provide specialist
oversight for matters delegated to the Group Chief Executive and
senior management. For further details of these committees, see
page 288.
To further support our senior management, we have dedicated
corporate governance officers who support and advise legal entities,
global businesses and global functions on our corporate governance
practices. These corporate governance officers serve to strengthen
the consistency and effectiveness of our end-to-end governance
arrangements, and support connectivity and information sharing.
Subsidiary governance
We are committed to maintaining high standards of corporate
governance throughout the Group. All subsidiary boards and their
respective businesses are required to have in place effective
governance arrangements with regard to the businesses’ nature, size,
location and the sectors in which they operate.
The subsidiary accountability framework
The subsidiary accountability framework aims to balance appropriate
governance oversight by the Group with each subsidiary’s local legal
and regulatory duties. The framework supports the Group in
promoting effective governance arrangements across its subsidiaries
by:
–setting out high level principles to enhance communications and
connectivity; and
–ensuring a shared and consistent understanding of the Group’s
strategic objectives, culture and values.
The subsidiary accountability framework also focuses on ensuring that
each subsidiary is led by an effective board with an appropriate
balance of skills, diversity, experience and knowledge, having regard
to the nature of the subsidiary’s business and local legal and
regulatory requirements. Board composition of the Group’s
subsidiaries is kept under review as part of succession planning.
The framework is subject to periodic review by the Board and/or the
Nomination & Corporate Governance Committee and updated as
required to ensure it is aligned to best practice.
The role of principal subsidiaries
Certain subsidiaries are designated formally by the Board as principal
subsidiaries. In addition to their obligations under their respective local
laws and regulations, principal subsidiaries, supported by regional
company secretaries, perform a critical role in ensuring effective and
high standards of governance across the Group and in overseeing the
implementation of the subsidiary accountability framework in the
regions for which they are responsible.
Representatives from principal subsidiaries attend the Board and its
committee meetings for relevant topics, including when the Board
holds meetings outside of the UK. Chairs of the principal subsidiary
risk and audit committees also regularly attend respective Group Risk
Committee and Group Audit Committee meetings. Attendance and
participation at these committees enhance the subsidiary directors'
understanding of the challenges facing the Group and help to identify
common challenges and share lessons learned. Such committee
participation supplements the regular reports, certifications and
escalations from principal subsidiaries' boards and their committees
to the Board and relevant committee(s) of the Board.
The Group Chairman also interacts regularly with the chairs of the
principal subsidiaries, including through the Chairman’s Forum. The
Chairman’s Forum comprises the chairs of the principal subsidiaries
and the chairs of the Group’s audit, risk and remuneration
committees, and where relevant, the Group Chief Executive, other
non-executive Directors and relevant executive management,
advisers and/or external experts. In 2023, the Chairman’s Forum
covered topics such as strategic business considerations, geopolitical
issues, resolvability assessment requirements and separability,
shareholder engagements, Group-wide connectivity of non-executive
Directors, key regulatory themes, ESG insights, employee
engagement and financial performance.
The Group Remuneration Committee Chair also hosted dedicated
forums with chairs of principal subsidiaries to share key priorities for
2023 and the future. These sessions also provide an opportunity for
review and input on proposed pay outcomes and allocation, before
approval by the Group Remuneration Committee.
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HSBC Holdings plc
The principal subsidiaries are:
Principal subsidiary
Oversight responsibility
The Hongkong and Shanghai
Banking Corporation Limited
Asia-Pacific
HSBC Bank plc
Europe, Bermuda (excluding
Switzerland and UK ring-fenced
activities)
HSBC UK Bank plc
UK ring-fenced bank and its
subsidiaries
HSBC Middle East Holdings BV
Middle East, North Africa and
Türkiye
HSBC North America Holdings Inc.
US
HSBC Latin America Holdings (UK)
Limited
Mexico and Latin America
HSBC Bank Canada1
Canada
1  On 29 November 2022, HSBC announced the sale of HSBC Bank
Canada to Royal Bank of Canada, subject to regulatory and
governmental approvals. On 21 December 2023, the Canadian Federal
Government’s Minister of Finance approved the sale, and the
transaction is expected to close in the first quarter of 2024.
Subsidiary director development
The Group is dedicated to supporting the continuing professional
development of its subsidiary directors. In May 2023, a two-day non-
executive director summit was held in Hong Kong, which brought
together over 100 non-executive directors from across the Group. 
Connectivity was a key theme and attendees were reminded of the
importance of the subsidiary accountability framework in driving
consistent governance standards and ensuring connectivity and
engagement across our non-executive director community. The
agenda included sessions on strategy and financial performance; Asia-
Pacific; subsidiary governance; the macroeconomic environment;
diversity and inclusion; sustainability; technology; finance; and risk.
The Bank Director Programme, launched in 2022, continues to
support subsidiaries with succession planning by developing and
equipping internal talent to undertake internal non-executive director
roles on subsidiary boards.
Following the success of the Bank Director Programme, a Bank Chair
Programme is being developed to ensure existing and prospective
chairs of subsidiary boards and board committees have the requisite
knowledge, skills and behaviours to be effective chairs.
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287
Board and Group Executive committees and working groups
The Board delegates oversight of certain audit, risk, remuneration,
nomination and governance matters to its committees. Each standing
Board committee is chaired by a non-executive Director and has a
remit to cover specific topics in accordance with their respective
terms of reference. Only the Group Chairman and the independent
non-executive Directors are members of Board committees. Details
of the work carried out by each of the Board committees can be
found in the respective committee reports from page 298.
The Chairman’s Committee provides the Board with the opportunity
to consider ad hoc and routine matters between scheduled Board
meetings. All Board members are invited to attend Chairman’s
Committee meetings.
As part of its ongoing review of the effectiveness of the Group’s
governance arrangements, and in response to the findings from the
Board evaluation in 2023, the Board has decided to establish a new
Group Technology Committee to oversee the Group’s technology
strategy and alignment with the overall Group strategy. The
committee, which will be in place from 1 March 2024, will have
responsibility for areas where technology is fundamental to strategic
delivery, including innovation, data and cyber risk frameworks. As a
result, the Technology Governance Working Group, which was
established to support oversight of technology strategy, governance
and emerging risks, will be demised from the same date. The terms
of reference and membership of the Board committees are available
at www.hsbc.com/who-we-are/leadership-and-governance/board-
committees.
The GEC has established a number of committees to support the
Group Chief Executive and senior management in their running of the
business, and provide specialist oversight for matters delegated to
them, including capital and liquidity, risk management, disclosure and
financial reporting, restructuring and investment considerations,
transformation oversight, ESG matters and talent and development.
These committees also help fulfil their responsibilities under the
Senior Managers and Certification Regime.
During 2023, new committees were established including the
Sustainability Execution Committee to provide greater oversight of
ESG matters. In addition, the Transformation Oversight Executive
Committee was demised and in its place the Change Prioritisation
Oversight Committee was formed. The committee provides oversight
of the Group's change portfolio, focusing on investment oversight and
prioritisation, as well as delivery and execution of ongoing initiatives
across the Group.
Board Chair: Mark Tucker
Chairman’s
Committee
Nomination &
Corporate
Governance
Committee
Group Audit
Committee
Group Risk
Committee
Group
Remuneration
Committee
Informal governance
Board Oversight Sub-
Group
Chair: Mark Tucker
Chair: Mark Tucker
Chair: David Nish1
Chair: James Forese
Chair: Dame Carolyn
Fairbairn
Chair: Mark Tucker
See page 298
See page 302
See page 310
See page 315
Technology
Governance Working
Group2
1  Brendan Nelson will be appointed as chair from 21 February 2024.
2  The Technology Governance Working Group will be demised on 1 March 2024. The Group Technology Committee will
be established on the same date.
Co-Chairs:               
Eileen Murray and
Steven Guggenheimer
Chairman’s Forum
Chair: Mark Tucker
Group Executive Committee Chair: Noel Quinn
Acquisitions and
Disposals
Committee
Group Disclosure
and Controls
Committee
Group People
Committee
Group Risk
Management
Meeting
Holdings Asset
and Liabilities
Committee
Change
Prioritisation and
Oversight
Committee
Environmental,
Social and
Governance
Committee
Chair: Noel Quinn
Chair: Georges
Elhedery
Chair: Elaine 
Arden
Chair: Pam Kaur
Chair: Georges
Elhedery
Chair: Georges
Elhedery
Co-Chairs:
Celine Herweijer and
Georges Elhedery
Sustainability
Execution
Committee
Co-Chairs:
Celine Herweijer and
Barry O’Byrne
Report of the Directors | Corporate governance report
288
HSBC Holdings plc
Board induction and training
The Group Company Secretary and Chief Governance Officer works
with the Group Chairman to ensure that all Board members receive
appropriate training, both individually and collectively, throughout their
time on the Board. On appointment, new Directors are provided with
tailored and comprehensive induction programmes to fit with their
individual experiences and needs, including the process for managing
conflicts. 
During 2023, Kalpana Morparia, Ann Godbehere, Brendan Nelson and
Swee Lian Teo were welcomed to the Board as non-executive
Directors. Biographies for each can be found from page 275.
The Group Company Secretary and Chief Governance Officer also
helps to arrange and deliver the induction programme through formal
briefings and introductory sessions with other Board members, senior
management, legal counsel, auditors, tax advisers and regulators, as
appropriate. Topics covered in the induction programme include, but
are not limited to: purpose and values; culture and leadership;
governance and stakeholder management; Directors’ legal and
regulatory duties; recovery and resolution planning; anti-money
laundering and anti-bribery; technical and business briefings; and
strategy.
The induction process is often initiated before appointment to allow
each new Board member to contribute meaningfully from
appointment, such as in February 2023 when Kalpana Morparia joined
the Board meeting as an observer before she was appointed to the
Board the following month. The structure of the induction supports
good information flows within the Board and its committees, as well
as between senior management and non-executive Directors,
providing a clear understanding of our culture and way of operating.
In January 2023, the Nomination & Corporate Governance Committee
agreed the proposed approach to Board training for the year. It was
agreed that the training programme would include key topics relevant
to the Directors' respective roles and recent developments, in areas
such as corporate governance, recovery and resolution, and
technology. Where appropriate, the training sessions were facilitated
by external presenters who were able to provide insights into
geopolitical matters, macroeconomic issues and investor sentiment.
The training sessions were held as part of scheduled Board meetings
to allow for in-person interactions as much as possible.
Directors were also issued routine training modules that all colleagues
must complete annually. During 2023, this training covered topics
including risk management, cybersecurity, sustainability, health,
safety and well-being, financial crime, and data.
Non-executive Directors also discussed individual development areas
with the Group Chairman as part of their ongoing performance
discussions with regard to their contributions on the Board. The
Group Company Secretary and Chief Governance Officer makes
appropriate arrangements for any additional training needs identified
using internal resources, or otherwise, at HSBC’s expense.
Members of Board committees receive relevant training as
appropriate. Further details on any specific training commissioned by
Board committees can be found in the respective committee reports.
Directors may take independent professional advice at HSBC’s
expense.
Board Directors who serve on principal subsidiary boards receive
training that is pertinent to circumstances and context relevant to
those boards. Opportunities exist for the principal subsidiary
committee chairs to share their understanding of specific areas with
the Board Directors as part of the Chairman’s Forum. For further
details, see ’The role of principal subsidiaries’ on page 286.
Directors’ induction and ongoing development in 2023
Director
Induction1
Strategy and
business briefings2
Risk and
control3
Corporate
governance, ESG
and other
reporting matters4
Board global
mandatory
training5
Geraldine Buckingham
ô
l
l
l
l
Rachel Duan
ô
l
l
l
l
Georges Elhedery
l
l
l
l
l
Dame Carolyn Fairbairn
ô
l
l
l
l
James Forese
ô
l
l
l
l
Ann Godbehere6
l
l
l
l
l
Steven Guggenheimer
ô
l
l
l
l
José Antonio Meade Kuribreña
ô
l
l
l
l
Kalpana Morparia
l
l
l
l
l
Eileen Murray
ô
l
l
l
l
Brendan Nelson6
l
l
l
l
l
David Nish
ô
l
l
l
l
Swee Lian Teo6
l
l
l
l
l
Noel Quinn
ô
l
l
l
l
Mark Tucker
ô
l
l
l
l
l
Matter considered
ô
Matter not considered
1The induction programme was delivered through formal briefings and introductory sessions including topic-specific deep dives, with Board members,
senior management, legal counsel, auditors, tax advisers and regulators, as appropriate. Topics covered included, but were not limited to: purpose and
values; culture and leadership; governance and stakeholder management; Directors’ legal and regulatory duties; recovery and resolution planning; anti-
money laundering and anti-bribery; technical and business briefings; and strategy.
2Directors participated in business strategy, market development and business briefings, which are global, regional and/or market-specific. Examples of
specific sessions held in 2023 included: ’Technology and the future of artificial intelligence’, ’WPB customer-centricity improvement plan’, and
’Investor sentiments’.
3Directors received risk and control training and briefings. Examples of specific sessions held in 2023 included: ’Recovery and resolution’ and ’Capital
management’.
4Directors received training in Board meetings on: ’Board stakeholder engagement and management’ and various ESG development updates. Directors
received additional training through their attendance at forums such as the Chairman's Forum, Remuneration Committee Chairs' Forum and the Non-
Executive Director Summit.
5Global mandatory training, issued to all Directors, mirrored training undertaken by all employees, including senior management. This included:
management of risk under the risk management framework; cybersecurity risk; health, safety and well-being; sustainability; financial crime, including
understanding money laundering, terrorist financing, tax transparency, sanctions, fraud and bribery and corruption risks; our values, including
workplace harassment; and data privacy and data literacy.
6Ann Godbehere and Brendan Nelson, who joined the Board effective 1 September 2023, and Swee Lian Teo, who joined the Board effective
1 October 2023, only participated in training modules that were available to them since their respective joining dates.
HSBC Holdings plc
289
Board matters considered and shareholder engagement
During 2023, the Board remained focused on HSBC’s strategic
direction, overseeing performance, and risk. It considered
performance against financial and other strategic objectives, key
business challenges, emerging risks, business development, investor
relations and the Group’s relationships with its stakeholders. The end-
to-end governance framework facilitated discussion on strategy and
performance by each of the global businesses and across the principal
geographical areas, which enabled the Board to support executive
management with its delivery of the Group’s strategy.
Key areas of focus
The Board’s key areas of focus in 2023 are set out by theme below.
Strategy and business performance
The Group remains focused on building a sustainable platform for
growth by increasing returns for investors, enhancing customer
service, and creating capacity for future investment. The Board
reviewed progress within the Group’s global businesses and regions
against its four strategic pillars: Focus, Digitise, Energise and
Transition. At each Board meeting in 2023, the Board discussed the
Group’s strategic performance and opportunities to track strategic
execution and delivery.
Environmental, social and governance
In 2020, the Group announced a climate ambition to align its financed
emissions to net zero by 2050, and to become net zero in its own
operations and supply chain by 2030. The Group aims to achieve this
by supporting clients’ transition to a net zero carbon economy and
focusing on sustainable finance opportunities, as well as by reducing
the carbon emissions in its own operations.
The Board takes overall responsibility for ESG strategy, overseeing
executive management in developing the approach, execution and
associated reporting. The Board considered whether to establish a
Board committee dedicated to ESG issues, but instead decided that
the best way to support the oversight and delivery of the Group’s
climate ambition and ESG strategy was to retain governance at Board
level. The GEC further enhanced its governance model of ESG
matters with the introduction of a new Sustainability Execution
Committee and supporting forums. These support senior
management in the operationalisation of the Group’s sustainability
strategy, through the oversight of the sustainability execution
programme. For further details of the Sustainability Execution
Committee and the sustainability execution programme, see page 88.
In 2023, the Board oversaw the implementation of ESG strategy
through regular dashboard reports and detailed updates including:
review and approval of the net zero transition plan, deep dives on the
sustainability execution programme, reviews of net zero-aligned
policies and climate-aligned financing initiatives.
Financial decisions
The Board and its dedicated committees approved key financial
decisions throughout the year, including the Annual Report and
Accounts 2022, the Interim Report 2023 and the first quarter and the
third quarter Earnings Releases.
At the end of 2022, the Board approved the 2023 financial resource
plan. The Board monitored the Group’s performance against the
approved plan, as well as the plans of each of the global businesses.
The Board also approved the renewal of the various debt issuance
programmes. In January 2024, the Board approved the financial
resource plan for 2024.
The Board adopted a dividend policy designed to provide sustainable
cash dividends, while retaining the flexibility to invest and grow the
business in the future, supplemented by additional shareholder
distributions, if appropriate. For the financial year 2023, the Group
reverted to paying quarterly dividends, and achieved a dividend payout
ratio of 50% of reported earnings per ordinary share (’EPS’),  in line
with our published target for 2023 and 2024. EPS for this purpose
excludes material notable items and related impacts, including the
sale of our retail banking operations in France, the planned sale of the
banking business in Canada and the acquisition of SVB UK. In addition
to dividend payments, HSBC announced share buy-backs of up to
$2bn each on 2 May 2023 and 1 August 2023, and a further share
buy-back of up to $3bn on 30 October 2023, bringing the total
announced for 2023 to $7bn.
On 21 February 2023, an interim dividend of $0.23 per share for the
2022 full-year was announced, followed by interim dividends of $0.10
each on 2 May 2023, 1 August 2023 and 30 October 2023. For further
details of dividend payments, see page 462.
Risk, regulatory and legal considerations
The Board, advised by the Group Risk Committee, promotes a strong
risk governance culture that shapes the Group’s risk appetite and
supports the maintenance of a strong risk management framework,
giving consideration to the measurement, evaluation, acceptance and
management of risks, including emerging risks.
The Board considered the Group’s approach to risk including its
regulatory obligations. A number of key frameworks, control
documents, core processes and legal responsibilities were also
reviewed and approved as required by the Board and/or its relevant
committees. These included:
–the Group’s risk appetite framework and risk appetite statement;
–the individual liquidity adequacy assessment process;
–the individual capital adequacy assessment process;
–the Group’s obligations under the Modern Slavery Act and
approval of the Modern Slavery and Human Trafficking Statement;
–review and approval of the self-assessment to address the BoE's
Resolvability Assessment Framework;
–review and approval of the Group’s risk data aggregation and risk
reporting framework aligned to the Basel Committee on Banking
Supervision 239 Principles;
–review of the latest PRA Operational Resilience self-assessment
regulatory submission;
–annual review and approval of the internal controls framework; and
–the revised terms of reference for the Board and Board
committees.
The Board also reviewed and monitored the implications of
geopolitical and macroeconomic developments during the year, both
directly and by way of updates from the Group Risk Committee, and
received regular updates on the Group's risk profile, including in
relation to financial crime risk.
Technology
Throughout the year, the Board received detailed updates on
technology and innovation from the Group Chief Operating Officer,
including on the implementation of the technology strategy and key
strategic business initiatives.
Following a detailed update at the Board meeting in May 2023, at the
Board’s request, management engaged a third party professional
services firm to review the technology strategy and provide industry
and peer insights. The Board received a number of updates on the
review during the second half of 2023, and recommendations were
presented at the December 2023 Board meeting.
Members of the Board were also closely involved in the hiring
process for the new Group Chief Information Officer, who will join the
Group at the end of February 2024.
Report of the Directors | Corporate governance report
290
HSBC Holdings plc
In addition, the Technology Governance Working Group continued to
oversee the Group's governance of technology, and supported
connectivity with the principal subsidiaries on key technology
initiatives. From 1 March 2024, the Technology Governance Working
Group will be demised and the Group Technology Committee will be
established on the same date.
People and culture
The Board continued to dedicate time in its meetings to discuss
people-related and culture-related issues, with these topics remaining
an important part of its focus. Each scheduled Board meeting begins
with a ’culture moment’, which helps to ensure that the right cultural
tone is set from the top, and sets the right cultural tone for Board
discussion. To help raise its awareness of employee and other
stakeholder perspectives, Board meetings and dedicated reports
feature insights into behaviours within the Group, which demonstrate
alignment to its purpose and values. Board papers highlight relevant
stakeholder considerations, including in connection with employees.
The Board also gains valuable cultural insights through its many
personal interactions with the workforce and other stakeholders. For
further details see ’Board decision making and engagement with
stakeholders’ on page 20.
The Board also learns of people and culture matters by way of
presentations at the Chairman’s Forum. The principal subsidiary chairs
report on their respective approaches to workforce engagement as
well as what they have learned from such engagements and other
cultural insights. The Board also receives cultural insights from the all-
employee Snapshot survey and broader reporting, which provide key
data indicators, including on people's behaviours, sentiment and
business outcomes. Through the work of the committees, the Board
is also able to monitor how the Group’s culture is working in practice
by receiving people-related reports covering whistleblowing, conduct
and investigations.
Board engagement with management and the wider workforce
continued to remain a strong area of attention, particularly with the
ongoing activities carried out by the dedicated workforce engagement
non-executive Director. For further details of the work carried out by
the workforce engagement non-executive Director, see page 293.
Governance
The Board continued to oversee the governance, smooth operation
and oversight of the Group and its principal and material subsidiaries,
including monitoring compliance with the UK Corporate Governance
Code, the Hong Kong Corporate Governance Code and the
Companies Act 2006. Governance featured prominently in the Board
agendas for the year and helped to shape strategic direction and
decision taking on key issues. To see how the Board considered
principal decisions in relation to our strategy, see ’Principal strategic
decisions’ on pages 22 and 23.
The Board and senior management continued to support further
improvements to various governance initiatives to encourage
simplification and promote effective decision making in the business.
Guidance and training for Board and committee paper templates took
place across global businesses and functions throughout the course
of the year to ensure a consistent approach for writing papers. In
addition, to drive our simplification agenda, the Group-wide
delegations of authority framework was reviewed and standardised,
allowing for more efficient signing and execution of contracts and
other documentation by directors and senior management across all
entities.
In 2023, Jackson Tai retired as an independent non-executive
Director. On 1 January 2023, Georges Elhedery joined the Board as
Group Chief Financial Officer, and the following were appointed as
independent non-executive Directors: Kalpana Morparia on 1 March
2023; Ann Godbehere and Brendan Nelson on 1 September 2023; and
Swee Lian Teo on 1 October 2023. The Board, supported by the
Nomination & Corporate Governance Committee, reviews the skills
and experience of the Board on an ongoing basis. This ensures that
the Board and its committees comprise the necessary skills, diversity,
experience and competencies to discharge their responsibilities
effectively. For further details of the review and changes to the Board,
see the Nomination & Corporate Governance report on page 298. For
further details of diversity of the Board, see page 283.
HSBC Holdings plc
291
Board engagements with shareholders
In 2023, the Group Chairman and Group Chief Executive held a Q&A
session with retail shareholders as part of the Informal Shareholders’
Meeting in Hong Kong, and the Board held a Q&A session with
shareholders as part of the 2023 AGM in the UK. Board members
remained responsive to shareholder requests, and were particularly
active following the 2023 AGM poll vote result. They continued to
engage in constructive dialogue with top investors, including Ping An
Asset Management Co. Ltd. The Group Chairman and the Senior
Independent Director, often with the Group Company Secretary and
Chief Governance Officer, engaged with a number of our large
institutional investors in 16 meetings, including a large group
gathering held with the members of The Investor Forum. The Group
Chief Executive and the Group Chief Financial Officer, together and
separately, attended over 100 meetings with investors. Key topics
included our financial performance, updates on strategy and market
presence, geopolitical risks and the macroeconomic outlook in key
geographies.
For further details of the Group Remuneration Committee Chair’s
engagements with key investors and proxy advisory firms, and how
they were taken into account by the Group Remuneration Committee
in its decision making, see the Directors’ remuneration report on
page 315.
For further details of how the Board engaged with shareholders
during 2023, see ’Board decision making and engagement with
stakeholders’ on page 20.
Board matters considered in 2023
Main topic
Sub-topic
Meetings at which topics were discussed1
Jan
Feb
Mar
May
Jun
Jul
Sep
Nov
Dec
Strategy
Group strategy
ô
l
l
l
l
l
l
l
l
Regional strategy/global business strategy
l
l
l
l
l
l
l
l
l
Environmental, social, governance
ô
l
l
l
l
l
l
l
l
Business and financial
performance
Region/global business
l
l
ô
l
l
l
l
l
l
Financial performance
l
l
l
l
l
l
l
ô
l
Financial
Results and accounts
l
l
ô
ô
ô
l
ô
ô
ô
Dividends
l
l
ô
ô
ô
l
ô
ô
ô
Group financial resource planning
ô
ô
ô
ô
l
ô
l
ô
ô
Risk
Risk function
l
l
ô
l
l
l
l
ô
l
Risk appetite
l
ô
ô
ô
ô
l
ô
ô
ô
Capital and liquidity adequacy
ô
ô
l
l
l
ô
ô
ô
ô
Regulatory
Regulatory and legal matters2
l
l
l
l
l
l
l
ô
l
Regulatory matters with regulators in attendance3
ô
ô
ô
ô
l
ô
l
ô
ô
External
External insights
ô
ô
ô
ô
l
ô
l
ô
ô
Technology
Strategic and operational
l
ô
ô
l
ô
ô
l
l
l
People and culture
Purpose, values and engagement
l
l
ô
l
l
l
l
ô
l
Governance
Policies and terms of reference
ô
ô
ô
ô
ô
l
ô
ô
ô
Board/committee effectiveness
l
ô
ô
ô
ô
l
ô
ô
l
Appointment and succession
ô
l
l
ô
ô
l
l
ô
l
Conflicts of interest
ô
l
ô
l
ô
l
l
ô
l
Stakeholder/workforce engagement
ô
l
ô
l
l
l
l
ô
l
Delegation of authority
l
l
ô
ô
ô
ô
l
ô
ô
AGM and resolutions
l
l
l
l
ô
ô
l
ô
ô
l
Matter considered
ô
Matter not considered
1No Board meetings were held during April, August and October 2023.
2Includes recovery and resolution planning, modern slavery and human trafficking, UK regulatory activities, and listing authority renewals.
3Meetings attended by members of the Prudential Regulation Authority and the Financial Conduct Authority.
Report of the Directors | Corporate governance report
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HSBC Holdings plc
Board stakeholder and workforce engagement
The Board is committed to engaging with colleagues, which takes
place in a two-way dialogue in a variety of forums. This helps build the
Board’s understanding of key themes and topics that are important to
the workforce.
Since his appointment as dedicated workforce engagement non-
executive Director in 2022, and in line with the Board's expectation of
the role, José Meade has helped deliver a progressive programme of
engagements throughout 2023. Outcomes from these engagements
have helped inform discussions and decision making in the
Boardroom, by taking into account the employee voice on related key
themes and topics.
His dedicated role does not preclude other Board members from
engaging with the workforce. It remains the responsibility of all
Directors to consider diverse stakeholder views, including employees,
across the Group.
For more examples of how the Board has engaged with the
workforce and other stakeholders, see ‘Board decision making and
engagement with stakeholders’ on page 20.
Workforce engagement programme
A structured workforce engagement programme has been in place
throughout 2023 with a focus on topics aligned to the Group’s four
strategic pillars. The programme was structured around the Board’s
priorities and agenda in 2023. These included in-person engagements
when the Board travelled to different regions for Board meetings,
which were highly valued by colleagues and Board members alike.
The engagements formed the bases of José Meade’s reports to the
Directors, aligned to key Board agenda items including those in the
geographies in which the Board met. Further engagement events,
town halls and meetings with the workforce were scheduled with
Board members based on their locality or coincidental travel
throughout the year.
The engagement events were held both at scale and through more
targeted dialogue in smaller groups, to accommodate the breadth of
experience, geographical spread and range of seniority of our
colleagues. These engagements were designed to promote open
dialogue and two-way discussions between the Board and
employees, allowing the Board to gain valuable insight on employee
perspectives, and in turn inform its deliberations in decision making.
February
March
May
June
July
September
November
December
Cost of living
crisis support
International
Women’s Day
Pay, reward and
performance
Strategy and
performance
Branch visit
HSBC graduate
insights
Mexico town
hall
Hyderabad
office event
↓
↓
↓
↓
↓
↓
↓
↓
Audience
London-based
colleagues
Group-wide
colleagues
Group-wide
colleagues
Managing
Directors
Local branch
colleagues
US-based
graduates
Mexico and
Latin America-
based
colleagues
Hyderabad and
India-based
colleagues
Location
London, UK
Various global
and local
events
Birmingham,
UK,
videoconference
Videoconference
Hong Kong
New York, US,
and
videoconference
Mexico City,
Mexico, and
videoconference
In person visit to
Hyderabad,
India office and
videoconference
José Meade’s connectivity with the employee resource groups
formed part of the workforce engagement programme. He took part
in the annual employee resource group summit in September to
discuss his observations since taking on the workforce engagement
role, and to hear feedback on how the Board could enhance support
for employee resource groups. José also participated in meetings
with the employee resource group to which he is aligned, UK Nurture.
This helped him better understand their successes, the value of the
network and agree how often and through which means he would
connect with his employee resource group in 2024.
During the year, the Board acknowledged that relevant aspects of
Board discussions on workforce engagement activities and matters,
informed by the employee voice, needed to make their way back to
management. In this way, relevant views could be taken into
consideration when progressing workforce-related matters at the
executive level. To facilitate this, José Meade committed to attending
the GEC and the Chairman’s Forum to discuss the key themes and
outcomes from the 2023 workforce engagements. Feedback gained
from the GEC session attended in November 2023 re-emphasised the
value colleagues put on the two-way dialogue with Board members.
This feedback helped shape the 2024 workforce engagement
programme.
The Board also regularly considers other forms of employee
engagement to help be informed of initiatives and sentiment, and to
plan for future engagement activities. The Chairman’s Forum, held in
December 2023, also discussed employee feedback gained through
the Group’s principal subsidiaries. José Meade presented to the
Chairman’s Forum an overview of workforce engagement over the
course of 2023 and key themes arising. He will continue to discuss
workforce engagement with the GEC and the Chairman’s Forum
during 2024.
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Workforce engagement non-executive Director
jose-antonio-meade-kuribrena_square.jpg
"The value of Board-employee engagement is rooted in the Board’s openness to challenge and ability to adopt
new approaches in response."
Q&A with José Meade
Workforce engagement non-executive Director
Q: Since being appointed as the workforce engagement
non-executive Director in 2022, what insights have you
gained?
A: When I reflect on the Board’s engagement with the
workforce over the year, I am proud of the evolution of our
approach since I took on the role. Having a dedicated
programme aligned to Board priorities over the course of the
year has enabled me to report to the Board on the most
pertinent matters depending on our location and agenda. The
year 2023 was a very productive year with respect to engaging
with our workforce. I met with a large number of our colleagues
on a regular basis during the year, and each event has provided
me with different and equally valuable insights. I have learnt the
value colleagues place on having two-way dialogue with the
Board. Linked to this is our non-executive Director engagement
with our employee resource groups. Each non-executive
Director is aligned to one of our employee resource groups, and
we listened to feedback that a more structured approach to non-
executive Director engagement would be valuable during 2024.
As a result, we held dedicated meetings for non-executive
Directors to meet with their employee resource groups to agree
the cadence for engagement and priorities in 2024.
Q: What are your reflections on the value of Board-
employee engagement at HSBC?
A: Firstly, at every employee engagement event I attended
during the year, I was able to hear directly from our colleagues –
that is an irreplaceable and extremely valuable insight to gain as
a non-executive Director. Having the employee voice in the
Boardroom is crucial in equipping Directors with important
context to better understand successes and challenges felt
throughout the Group. It then helps empower the Board to
make better recommendations and feedback to executive
management with employee sentiment front-of-mind. At one of
our branch visits, I was able to experience first-hand the level of
care put into every single one of our clients, which was
extraordinary. Following the visit, we got great feedback from
the branch team that they were grateful for our time in
recognising how our colleagues put customers at the centre of
their work, and they said that our front-line staff were highly
motivated by our kind words and encouragement.
The value of Board-employee engagement is rooted in the
Board’s openness to challenge and ability to adopt new
approaches in response. The key outcomes we get from all our
engagement events are discussed not only in the Boardroom,
but with executive management and between our principal
subsidiaries as well. It is this circular communication that is so
important to make sure not only is the employee voice heard,
but it forms a backdrop for Board and executive discussions and
decisions. For instance, it was interesting to hear from
graduates the importance of our hybrid working strategy to
them, which was seen as a differentiator compared with
competitors. Our Chairman’s Forum discussed each of our
regions’ respective workforce engagement programmes in
December, which was an invaluable session to understand
regional differences in sentiment and where subsidiary
Directors were focusing their time for 2024 activities.
Q: Where do you see opportunities for 2024?
A: We plan to build on the successes of 2023 and engage with
more colleagues over the course of 2024. Our workforce
engagement plan will continue to be guided by our Board
priorities for the year and tightly aligned to our four strategic
pillars. The plan incorporates, where possible, participation at
colleague events already scheduled, which we will supplement
with targeted engagement events. We also plan to enhance the
visibility of management colleagues in critical roles or on
executive committee succession plans to boards across the
Group. Lastly, we will align Board member scheduled travel
plans to workforce engagement activities in various regions, as
well as work to identify how to engage with the workforce in
geographies where Board travel is not envisaged.
wfemex.jpg
Mexico Town Hall, Mexico City, November 2023
"The insight and reflections provided by the speakers was extremely
useful as we had a mixture of local and global level input."
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Workforce engagement non-executive
Director activities during 2023
In 2023, José Meade undertook a variety of engagements in his role
including:
Mexico
–Attended the annual Leones event in Quintana Roo, Mexico.
–Approximately 400 employees participated across
businesses and functions.
–This event recognised our top performers in HSBC Mexico.
Hong Kong
–Visited employees at the HSBC Hong Kong flagship branch
and the K11 Atelier Wealth Centre (which opened in October
2021 to provide high net worth wealth management
services) to understand their perspective on working life.
UK
–Participated in an in-person meeting with a small group of
local managers in London to discuss the cost of living crisis
in the UK.
–The group discussed the support that HSBC had provided to
its employees in response, and considered ideas for further
support.
US
–Met with US-based graduates both in-person and virtually to
hear the perceptions of the next generation of talent at
HSBC.
–Views were sought on topics such as expectation versus the
reality of what it is like to work at HSBC, personal
development opportunities and hybrid working successes
and challenges.
Türkiye
–Participated in an in-person meeting with a diverse group of
colleagues to share experiences and views on socio-
economic challenges, career development, and pay and
performance.
Global employee resource group summit
–Attended the virtual annual employee resource group
summit and heard about the groups' leaders‘ successes,
challenges and their respective look ahead for 2024.
–Connected with employee resource group representatives
across multiple regions in the Group.
India
–Spent a day at our Hyderabad office learning about the
history of our presence in India and the impact of our global
service centres, as well as discussing the future of the
workforce and how to create a supportive environment for
professional growth.
–Also participated alongside nearly 5,000 colleagues in a
‘Digitise’ town hall, which discussed HSBC’s digital strategy
and the role played by colleagues in India.
Engagement highlights
india.jpg
Global Service Centre office visit, Hyderabad, December 2023
68
9,571
Virtual/physical sessions
attended by non-executive
Directors
Number of employees engaged
virtually/physically
41
8,282
Virtual/physical sessions
attended by workforce
engagement non-executive
Director
Number of employees engaged
virtually/physically by workforce
engagement non-executive
Director
8
69%
Countries of engagement
Highest employee engagement
survey response
HSBC Holdings plc
295
Board and committee effectiveness, performance and
accountability
The Board and its committees are committed to regular, independent
evaluation of their effectiveness. In 2023, the Board performance
review comprised an externally facilitated evaluation in accordance
with the UK Corporate Governance Code.
During 2023, the Nomination & Corporate Governance Committee
oversaw the process to appoint an independent service provider to
evaluate the Board and its committees' effectiveness and
performance. The Group Chairman led a formal tender process, with
the support of the Group Company Secretary and Chief Governance
Officer, which included a desktop review of proposals and a panel
interview with prospective firms to discuss their approach to the
evaluation. The panel interviews included the Group Chairman, three
non-executive Directors, and the Group Company Secretary and Chief
Governance Officer.
Following this process, and based on the recommendation of the
panel, the Nomination & Corporate Governance Committee appointed
Independent Board Evaluation (‘IBE’) to conduct the Board review in
2023. IBE is an independent external service provider with no other
connection with the Group or any individual Directors.
Board effectiveness review format
A comprehensive brief was provided to IBE by the Group Chairman
and Company Secretary and Chief Governance Officer. The review
took the form of detailed interviews with every Board member,
regular attendees of the relevant meetings and key advisers. IBE also
observed the Board and its committees at the September 2023
meetings and reviewed the meeting materials.
A report was compiled by IBE based on the information and views
supplied by those interviewed and IBE’s observations from the
September 2023 Board and committee meetings.
Board and committee evaluation process 
Board effectiviness.jpg
The Board made good progress against all of the action points identified during the 2022 evaluation. In particular:
–Management developed a new key performance indicator
architecture relating to performance, execution and risk
management as well as other key value drivers.
–The Sustainability Execution Committee, a management forum,
was established to provide greater focus and accountability for
progress against the Group’s ESG deliverables and milestones.
–An independent review of the Group’s technology strategy was
performed by a third party, with the outcomes, including lessons
learned, and next steps discussed and agreed by the Board.
–The Board held focused sessions on prioritisation and
simplification.
–Stakeholder engagement plans were structured around the
Board’s visits to Paris, Hong Kong, New York and India during the
year, and broader non-executive Director travel. These plans
provided the Board with the opportunity to engage with the full
spectrum of stakeholder groups, including employees. Further
details of the Board’s engagement activities are detailed on
page 21.
–Continued training and guidance was provided to key paper
authors and contributors to reinforce the importance of timely,
balanced and accurate reporting to the Board.
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Findings and recommendations
Overall, the review concluded that the Board was performing well as
an engaged, global governance body. The Group Chairman is regarded
as an excellent leader of the Board, fostering a culture of openness,
with encouragement for Board members to speak freely on any issue.
In particular, the effectiveness review highlighted that the Board
performed well in various areas including:
–Stakeholder accountability: The Board takes its responsibilities
towards stakeholders seriously, positively and sincerely.
–Board culture: The culture of the Board is regarded as a key
strength. Preserving and sustaining this has been a key factor in
considering candidates for appointment to the Board.
Communication is open and transparent.
–Relationship with senior management: Board members value the
openness between, and access to, the senior management team.
–Committee chairs: Chairs of committees are well supported by the
respective functional teams, including Risk, Finance, HR and
Corporate Governance and Secretariat.
–Board resources and support: The Board appreciates the strategic
advice and counsel it receives on governance issues from the
Group Company Secretary and Chief Governance Officer and her
team.
IBE presented its report to the December 2023 Board meeting, and
was present for the Board’s discussion, led by the Group Chairman,
on the findings identified through IBE’s review. Among other
recommendations for consideration that could strengthen the end-to-
end governance of the Board and its committees, the Board focused
on the following three specific themes:
–Effecting change: A need for greater focus was identified in
relation to the prioritisation of execution, with clearer and more
timely progress reporting to the Board, in particular around
challenges faced.
–Board information: Reporting to the Board requires more succinct
narrative and relevant key performance indicators. It was reiterated
that the Board would continue to hold the Group Chief Executive
and members of the GEC accountable for the quality of reporting
to the Board.
–Technology governance: Strengthened governance mechanisms
were agreed to support the Board’s review and challenge of
technology-related deliverables and monitoring of delivery against
the Group-wide technology strategy.
Further details of the findings and agreed actions to be taken can be
found in the table below. Completion of these actions will be
monitored by the Board throughout 2024.
The additional areas of feedback gathered from members of the
Board and regular attendees will be taken forward at the discretion of
the Group Chairman based on his determination of their impact on the
overall effectiveness of the Board and its committees.
Similar discussions were led by each of the Board committee chairs in
their respective January 2024 meetings. Progress against these
actions will be included in the Annual Report and Accounts 2024.
Summary of 2023 Board effectiveness findings and recommendations for action:
Findings from the evaluation
Agreed actions
Effecting change
–Although the Board is performing well, there are areas
where, working with management, enhancements could
be made to drive even greater value.
–This would reinforce a clear understanding of priorities
and enhanced clarity of management reporting,
particularly in relation to areas of challenge in, or delay to,
execution of those key deliverables. 
–Greater rigour was required in relation to the
communication of, accountability for, and execution
against the Board’s feedback.
–Consideration will be given to the frequency and format of
strategic updates to the Board. 
–The Group Company Secretary and Chief Governance Officer will
support the Group Chairman and committee chairs to ensure that
there is enhanced consolidation of related discussion and actions
across Board and the committees, including clearer articulation of
expected outcomes.
–The Group Chief Executive will drive an increased focus in
addressing the Board’s feedback within the wider management
team.
Board information
–The volume of information provided to the Board and to
committee meetings during the year was a common
area of discussion during the review. Enhanced, dynamic
and well-timed reporting of information to the Board is
required.
–Although the Board welcomed the thoroughness of
management’s review of key performance indicators,
these required to be refined for Board purposes to
ensure better alignment with paper narrative to ensure a
clear, consistent basis for Board reporting.
–The Board has commissioned a training programme, to be
developed and delivered by the Group Company Secretary and
Chief Governance Officer, to further support senior leaders and
other subject matter experts on reporting to, and interactions
with, the Board.
–A condensed key performance indicators framework was approved
by the Board at its meeting in January 2024 and will be cascaded
throughout the Group by the Group Chief Executive, the Group
Chief Financial Officer and the Group Company Secretary and
Chief Governance Officer.
Technology
governance
–Although the Board welcomed the important and
valuable role of the Technology Governance Working
Group, there is still more to do to develop a holistic
oversight of technology at Board-level.
–It was agreed that the future approach to oversight of
technology-related matters needed to complement the
existing responsibilities of the Board, Group Risk
Committee, Group Audit Committee and subsidiary
boards.
–A formal Board-level governance committee consisting of non-
executive Directors – the Group Technology Committee – will be
established to provide oversight of technology-related matters
across the Group. This will be chaired by Eileen Murray and take
effect from 1 March 2024.
–The existing Technology Governance Working Group will be
demised at that time.
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297
Nomination & Corporate Governance Committee
Mark-tucker-4582x3055_RGB_new_SQUARE.jpg
"I am confident that the changes to the composition of the Board over the past year have further strengthened
the Board’s collective knowledge and experience required to oversee, challenge and support management."
Mark E Tucker
Chair
Nomination & Corporate Governance Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 2023
The Committee’s key responsibilities include:
–overseeing and monitoring the corporate governance framework
of the Group and ensuring that this is consistent with best
practice;
–overseeing succession planning and leading the process for
identifying and nominating candidates for appointment to the
Board and its committees; and
–overseeing succession planning and development for the Group
Executive Committee and other senior executives.
Mark Tucker (Chair)
Oct 2017
9/9
Geraldine Buckingham
May 2022
9/9
Rachel Duan
Sep 2021
9/9
Dame Carolyn Fairbairn1
Sep 2021
8/9
James Forese
May 2020
9/9
Ann Godbehere2
Sep 2023
2/2
Steven Guggenheimer
May 2020
9/9
José Antonio Meade
Kuribreña
Apr 2019
9/9
Kalpana Morparia3
Mar 2023
6/6
Eileen Murray4
Jul 2020
8/9
Brendan Nelson2
Sep 2023
2/2
David Nish
Apr 2018
9/9
Jackson Tai5
Apr 2018
5/5
Swee Lian Teo6
Oct 2023
1/1
1  Dame Carolyn Fairbairn was unable to attend the January meeting
due to a prior commitment.
2  Ann Godbehere and Brendan Nelson joined the Committee on their
appointments to the Board on 1 September 2023.
3  Kalpana Morparia joined the Committee on her appointment to the
Board on 31 March 2023. 
4  Eileen Murray was unable to attend the September meeting due to
a prior commitment.
5  Jackson Tai retired from the Board on 5 May 2023.
6  Swee Lian Teo joined the Committee on her appointment to the
Board on 1 October 2023.
I am pleased to present the Nomination & Corporate Governance
Committee report, which provides an overview of the Committee’s
activities during 2023.
I signalled in last year’s report that succession for key roles on the
Board would be a priority for the Committee through 2023, and we
announced in early December the successors for the roles of Senior
Independent Director and Chair of the Group Audit Committee. This
represented the culmination of considerable work by the Committee
over a number of months.
As announced in December, David Nish confirmed his plans to retire
from the Board at the conclusion of our AGM in May 2024. Brendan
Nelson will succeed David as Chair of the Group Audit Committee
with effect from 21 February 2024, and Ann Godbehere will succeed
him as Senior Independent Director with effect from the conclusion of
the 2024 AGM. On behalf of the Board, I want to take this opportunity
to thank David for his significant commitment and contribution to
HSBC, particularly in his role as Chair of the Group Audit Committee,
and for the valuable counsel he has provided to the Board and to me
personally. You can read more on the Committee’s work on these
appointments later in this report.
We also welcomed Kalpana Morparia and Swee Lian Teo and,
together with Ann and Brendan’s appointments, I am confident that
the changes to the composition of the Board over the past year have
further strengthened its collective knowledge and experience required
to oversee, challenge and support management.
As a result of the changes to the Board during 2023, our year-end
2023 target of at least 40% female representation was achieved. We
are committed to maintaining this at or above 40% going forward.
More broadly, we remain committed to ensuring the compositions of
the Board and senior management reflect the wider workforce and
communities in which we operate, and you can read more on our
efforts this year on page 350.
The annual review of the performance of the Board and its
committees is a critical part of ensuring that our governance practices
are aligned with best practice and are working effectively.
Independent Board Evaluation conducted the 2023 review for the
Board and its committees, and its findings and agreed actions can be
found on pages 296 to 297.
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298
HSBC Holdings plc
These actions included the decision to establish the Group
Technology Committee, which was discussed by the Committee.
Further information on this new Board-level committee is set out on
page 288. In addition, the Committee reviewed the approach to the
Group’s governance of developing areas such as ESG and AI, and will
continue to focus on whether these remain appropriate and forward-
looking as external standards and practices develop.
There have been numerous consultations issued over 2023, aimed at
improving the effectiveness of the UK audit, governance and
regulatory regimes. Given their potential impact, the Committee
received updates on these and their potential implications on
governance arrangements. The Committee also reviewed and
provided input to the Group’s responses to relevant consultations,
including the Financial Reporting Council's ('FRC') consultation on
proposed revisions to the UK Corporate Governance Code. The
Committee continues to monitor potential future developments in the
UK, Hong Kong and elsewhere to ensure that the impact of any
proposed governance and regulatory changes on HSBC and its
international operations is considered.
As we look ahead to the remainder of 2024, the Committee will look
to oversee and enhance the succession pipeline at Board and senior
management level, as well as efforts to deliver consistent standards
of governance best practice across the Group.
Mark E Tucker
Group Chairman
Committee governance
The Group Chief Executive, the Group Chief Human Resources
Officer, and the Group Head of Talent routinely and selectively
attended Committee meetings. The Group Company Secretary and
Chief Governance Officer attends all Committee meetings and
supports the Group Chairman in ensuring that the Committee fulfils
its governance responsibilities.
Russell Reynolds Associates supported the Committee and the
management team in relation to Board succession planning and
appointments. It also provides support to management in relation to
senior management succession, development and recruitment. It
regularly and selectively attended meetings during the year, and has
no other connection with the Group or members of the Board.
Appointment and re-election of Directors
A rigorous selection process is followed for the appointment of
Directors. Appointments are made on merit and candidates are
considered against objective criteria, and with regard to the benefits
of a diverse Board. Appointments are made in accordance with HSBC
Holdings’ Articles of Association.
The Board may at any time appoint any person as a Director or
secretary, either to fill a vacancy or as an additional officer. The Board
may appoint any Director or secretary to hold any employment or
executive office and may revoke or terminate any such appointment.
Non-executive Directors are appointed for an initial three-year term
and, subject to continued satisfactory performance based upon an
assessment by the Group Chairman and the Committee, are
proposed for re-election by shareholders at each AGM. They typically
serve two three-year terms, with any individual's appointment beyond
six years to be for a rolling one-year term and subject to thorough
review and challenge with reference to the needs of the Board.
Where non-executive Directors are appointed beyond six years, an
explanation will be provided in the Annual Report and Accounts.
Shareholders vote at each AGM on whether to elect and re-elect
individual Directors. All Directors that stood for election and re-
election at the 2023 AGM were elected and re-elected by
shareholders.
Non-executive Director commitments
The terms and conditions of the appointments of non-executive
Directors are set out in a letter of appointment, which includes the
expectations of them, and the estimated time required to perform
their role. Letters of appointment of each non-executive Director are
available for inspection at the registered office of HSBC Holdings.
Non-executive Directors serving on the Board and as a member of
any committees are expected to serve up to 75 days per annum. The
Senior Independent Director is expected to serve an additional 30
days per annum. Those Directors who also chair a large committee
are expected to commit up to 100 days per annum, with the Group
Risk Committee Chair expected to commit up to 150 days per annum.
Any additional time commitment required of non-executive Directors
in connection with Board and committee activities is confirmed to
them separately.
Board approval is required for any non-executive Director’s external
commitments, with consideration given to their total time
commitments, potential conflicts of interest, and regulatory and
investor expectations.
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299
Board composition and succession
During 2023, the compositions of the Board and its committees were
reviewed, with assessments focused on the skills, knowledge and
experience necessary to oversee, challenge and support management
in the achievement of the Group’s strategic and business objectives.
The assessments were focused on the Board, both collectively and as
individual members. The Committee discussed succession planning
for key roles on the Board and committees, including the roles of
Senior Independent Director and Chair of the Group Audit Committee.
The recruitment process for the new Directors provided an
opportunity to add significant executive experience in banking. It also
provided an opportunity to add deep business and cultural expertise
across Asia that the Board had previously identified as a priority, and
to meet our target for a woman to hold at least one of the senior
Board positions by the end of 2025. In line with these objectives, a list
of potential candidates was identified and considered by the
Committee. Members of the Board, including the Group Chief
Executive and Group Chief Financial Officer, met with potential
candidates and their feedback helped inform the Committee’s
discussions and recommendations to the Board. The Board then
approved the Committee’s recommendations to appoint Kalpana
Morparia with effect from 1 March 2023, Ann Godbehere and
Brendan Nelson with effect from 1 September 2023, and Swee Lian
Teo with effect from 1 October 2023.
Kalpana Morparia and Swee Lian Teo each bring significant banking,
risk and regulatory experience in Asia. Ann’s deep financial acumen
and extensive financial services experience gained over a 30-year
career, as well as her extensive large, public-listed company board
experience as a non-executive director, makes her the right successor
for the role of Senior Independent Director. Brendan’s UK and
international financial expertise and significant experience as statutory
audit partner, and as audit committee chair at UK-listed companies, as
well as previously being President of the Institute of Chartered
Accountants of Scotland, will be particularly valuable in the leadership
of the Group Audit Committee given the evolving audit, regulatory and
disclosure environment in which the Group operates. Their
biographies can be found on pages 275 to 279.
Following the annual review of the Board skills matrix, the Committee
remains focused on identifying candidates for future appointments
with deep business and cultural expertise across Hong Kong and
mainland China.
The Committee will continue to monitor the market during 2024 for
potential candidates for appointment to the Board in both the short
and medium term, to ensure that the Board has a pipeline of credible
successors.
Neither Jackson Tai, who retired from the Board during the year, nor
David Nish, who is not offering himself for re-election at the 2024
AGM, have raised concerns about the operation of the Board or the
management of the company.
Committee composition
As part of the decision to establish the Group Technology Committee,
when reviewing the Committee composition, it was agreed that
Eileen Murray would be appointed as Chair, and Steven
Guggenheimer, Kalpana Morparia, Swee Lian Teo and Brendan
Nelson would be appointed as members of the Group Technology
Committee with effect from 1 March 2024.
The Committee also reviewed the composition of the Board
committees more broadly to ensure that these remained appropriate
and diverse, with consideration of the Board diversity and inclusion
policy while utilising the respective skills and expertise of the Board
members as set out in the Board skills matrix on page 283. As a
result, and in addition to the appointments of members to the Group
Technology Committee, it was agreed that Ann Godbehere would be
appointed to the Group Audit Committee with effect from
21 February 2024.
Board diversity
The Board recognises the importance of gender, social and ethnic
diversity, and the benefits diversity brings to Board effectiveness.
Diversity is taken into account when considering succession plans
and appointments at both Board and senior management level, as
well as more broadly across the Group. The Committee also
considered the diversity and representation on Board committees
when reviewing their composition.
At the end of 2023, the Board had 47% female representation, with
seven female Board members out of 15, ahead of the year-end 2025
target set by the FTSE Women Leaders Review. Ann Godbehere’s
appointment as Senior Independent Director will mean the Board
achieves the FTSE Women Leaders Review target that at least one of
the senior Board positions of Chair, Chief Executive Officer, Senior
Independent Director or Chief Financial Officer is held by a woman. In
accordance with the UK Listing Rules, the Board is on track to be
compliant with these diversity targets and will be fully compliant with
effect from the conclusion of the 2024 AGM. Beyond gender, the
Board continues to exceed the Parker Review target of having at least
one Director of ethnic heritage. However, given the international
nature of our business, including our heritage in Asia, the Board has
set a target to maintain or improve the current representation of
Directors from a diverse ethnic heritage.
The Board’s diversity and inclusion policy was updated in December
2023. The policy confirms our commitment to, and also details the
approach to achieving, our diversity ambitions. Further details on
activities to improve diversity across senior management and the
wider workforce, together with representation statistics, can be found
from page 76. The Board's diversity and inclusion policy is available on
www.hsbc.com/who-we-are/leadership-and-governance/board-
responsibilities
Independence
Independence is a critical component of good corporate governance,
and a principle that is applied consistently at both HSBC Holdings and
subsidiary level. The Committee has delegated authority from the
Board in relation to the assessment of the independence of non-
executive Directors. In accordance with the UK and Hong Kong
Corporate Governance Codes, the Committee has reviewed and
confirmed that all non-executive Directors who have submitted
themselves for election and re-election at the AGM are considered to
be independent. This conclusion was reached after consideration of
all relevant circumstances that are likely to impair, or could appear to
impair, independence.
In line with the requirements of the Hong Kong Corporate
Governance Code, the Committee also reviewed and considered the
mechanisms in place to ensure independent views and input are
available to the Board. These mechanisms include:
–having the appropriate Board and committee structure in place,
including rules on the appointment and tenure of non-executive
Directors;
–facilitating the option of having brokers and external industry
experts in attendance at Board meetings during 2023, as well as
having representatives from the Group’s key regulators attend
Board meetings in relation to specific regulatory items;
–ensuring non-executive Directors are entitled to obtain
independent professional advice relating to their personal
responsibilities as a Director at the Group’s expense;
–having terms of reference for each committee and the Board
provide authority to engage independent professional advisers;
and
–holding annual Board and committee effectiveness reviews, with
feedback sought from members on the quality of, and access to,
independent external advice.
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300
HSBC Holdings plc
Senior executive succession and
development
Following Georges Elhedery’s appointment as Group Chief Financial
Officer from 1 January 2023, the Committee monitored and received
updates on his induction plan.
The succession plans for the Group Executive Committee members
were approved by the Committee in December 2023. These reflect
continued efforts to support the development and progression of
diverse talent and promote the long-term success of the Group, with
the gender diversity and proportion of Asian heritage successors
improving year on year. The approval of succession plans included
future internal and external succession options for the Group Chief
Executive, to ensure that the Committee has a robust and actionable
plan when required. The Committee also reviewed longer-term
internal succession options for the Group Chief Executive to enable
the Committee to interact more frequently with high potential and
diverse talent in the Group.
The Committee continued to receive updates on the development of
our talent programme within the Asia-Pacific region. Since its launch
in 2020, significant progress has been made towards ensuring that
we have a deeper and more diverse leadership bench-strength.
Succession plans are more robust, with greater diversity and good
succession fulfilment outcomes.
Committee evaluation
The annual review of the effectiveness of the Board and Board
committees, including the Committee, was conducted externally by
Independent Board Evaluation for 2023. It determined that the
Committee continued to operate effectively, with no specific actions
identified for the Committee. Positive feedback was received on the
effectiveness of the recruitment processes of new Board members
and the succession planning for senior management.
Further details of the annual review of the Board and committee
effectiveness can be found on pages 296 to 297.
Subsidiary governance
In line with the subsidiary accountability framework, the Committee
continued to oversee the corporate governance and succession
arrangements across the principal and material subsidiary portfolio.
The Committee also reviewed the succession plans for the principal
subsidiary chairs to ensure future successors had the necessary skills
and experience to effectively oversee and monitor delivery of the
Group’s strategic and business priorities within their territory, in
accordance with the Group’s governance expectations. 
Where a subsidiary was unable to fully comply with the subsidiary
accountability framework, the Committee endorsed exceptions,
where appropriate, subject to strong rationale, including consideration
of local laws and regulations and market practice. Endorsement
requests were also subject to thorough review and consideration by
the Group Company Secretary and Chief Governance Officer in
advance of consideration by the Committee.
The Committee reviewed succession plans and oversaw compliance
with the Group’s governance expectations of principal and material
subsidiaries. The overall quality of succession plans has improved
markedly over the past three years, with plans demonstrating a clear
focus on strengthening boards’ overall diversity and experience, in
line with strategic and business objectives.
The Committee continued to support and seek opportunities to
enhance subsidiary connectivity, including through the Chairman’s
Forum and Remuneration Committee Chairs’ Forum, which regularly
brought together the chairs of the principal subsidiaries to discuss
common issues, and the Non-Executive Director Summit which
brought over 100 non-executive Directors together in Hong Kong in
May 2023.
Subsidiaries also provided opportunities for internal talent to serve on
their boards, following the training that they received through the
HSBC Bank Director Programme. The Committee continues to
support and look for opportunities to enhance subsidiary connectivity
through Non-Executive Director Summits and other engagement
forums.
Matters considered during 2023
Jan
Feb
Mar
Apr
May
Jun
Jul
Sep
Dec
Board composition and succession
Board composition, including succession planning and skills matrices
l
l
l
l
l
l
l
l
l
Approval of diversity and inclusion policy
ô
ô
ô
ô
ô
ô
ô
ô
l
Executive talent and development
Senior executive succession
l
l
ô
ô
ô
l
l
l
l
Approval of executive succession plans
ô
ô
ô
ô
ô
ô
ô
ô
l
Talent programmes
ô
ô
ô
ô
ô
ô
l
ô
ô
Governance
Board and committee evaluation
l
ô
l
ô
ô
ô
l
ô
ô
Subsidiary governance
ô
ô
ô
ô
l
ô
l
l
l
Subsidiary and executive appointments
l
l
ô
ô
l
ô
l
ô
l
l
Matter considered
ô
Matter not considered
HSBC Holdings plc
301
Group Audit Committee
david nish square.jpg
"Given the uncertain external environment, as well as HSBC's growth ambitions, the GAC will continue to play
an important role in monitoring the effectiveness of the control environment."
David Nish
Chair
Group Audit Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20231
The Committee’s key responsibilities include:
–monitoring and assessing the integrity of the financial
statements, formal announcements and regulatory information
in relation to the Group’s financial performance, as well as
significant accounting judgements;
–reviewing the effectiveness of, and ensuring that management
has appropriate internal controls over, financial reporting;
–reviewing management’s arrangements for compliance with
prudential regulatory financial reporting;
–reviewing and monitoring the relationship with the external
auditor and overseeing its appointment, remuneration and
independence;
–overseeing the Group’s policies, procedures and arrangements
for capturing and responding to whistleblower concerns and
ensuring they are operating effectively; and
–overseeing the work of Global Internal Audit and monitoring and
assessing the effectiveness, performance, resourcing,
independence and standing of the function.
David Nish (Chair)
May 2016
10/10
Rachel Duan2
Apr 2022
9/10
James Forese3
May 2020
7/7
Eileen Murray4
Jun 2022
8/10
Brendan Nelson5
Sep 2023
4/4
Jackson Tai6
Dec 2018
3/3
1  These included two joint meetings with the Group Risk Committee
(‘GRC’) and the Technology Governance Working Group.
2  Rachel Duan was unable to join one meeting, a joint meeting with
the GRC and Technology Governance Working Group, due to prior a
commitment.
3  James Forese rejoined the GAC on 5 May 2023 following his
appointment as GRC Chair.
4  Eileen Murray was unable to join two meetings due to prior
commitments.
5  Brendan Nelson joined the GAC upon appointment to the Board with
effect from 1 September 2023 and has been appointed GAC Chair
with effect from 21 February 2024.
6  Jackson Tai retired from the GAC on 5 May 2023 upon his
retirement from the Board.
I am pleased to introduce the Group Audit Committee (‘GAC’) report
setting out the key matters and issues considered in 2023.
As well as the GAC’s usual obligations for financial reporting and the
associated control environment, the GAC spent significant time on
the oversight of the Group's ESG disclosures and improvement of the
Group’s regulatory reporting, specifically assurance of the Group’s
ESG disclosures for the Annual Report and Accounts 2023 and the
net zero transition plan and related policies, which were published in
January 2024.
Internal financial control also remained a key area of focus for the
GAC during 2023. This will continue to be a priority going ahead due
to the need for a robust control environment given the ongoing the
volume of regulatory- and strategy-driven change across the Group.
This included oversight of regulatory and accounting deliverables,
such as the enhancement of Finance systems and controls and the
progress in the implementation of Basel III.
Significant time was also spent at GAC meetings on the positioning
and forward-looking financial guidance provided to the market as part
of our financial reporting for both the current and prior year, notably in
relation to returns, costs and expected credit losses (‘ECL’), including
those associated with the Group’s exposure to the China corporate
real estate market.
Given the uncertain external environment, as well as HSBC’s growth
ambitions, the GAC will continue to play an important role in
monitoring the effectiveness of the control environment in supporting
sustainability of these ambitions.
The GAC continued to strengthen our relationships and understanding
of issues at the local level through regular information sharing with
the principal subsidiary audit committee chairs. This was
supplemented with regular meetings with the chairs to discuss key
issues, and through their periodic attendance at GAC meetings. I also
joined a number of principal subsidiary audit committee meetings
throughout the year, which supported connectivity and information
flows across the Group.
The Group’s whistleblowing arrangements continue to satisfy
regulatory obligations. I regularly met the whistleblowing team to
discuss material whistleblowing cases, and the progress made in
enhancing the Group’s whistleblowing arrangements.
The GAC’s performance and effectiveness were reviewed as part of
the Board effectiveness review undertaken during the year. I was
pleased that the review concluded that the GAC continued to operate
effectively, with no material areas for improvement identified.
Finally, as announced on 6 December, Brendan Nelson will succeed
me as Chair of the GAC following the publication of HSBC’s Annual
Report and Accounts 2023 on 21 February 2024. The Board has
determined that Brendan’s previous experience, notably as audit chair
at NatWest and bp, makes him ideally suited to chair the GAC.
David Nish
Chair of the Group Audit Committee
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302
HSBC Holdings plc
Committee governance
The Committee operates under delegated authority from the Board,
and advises the Board on matters concerning the Group’s financial
reporting requirements. The Committee Chair reports on the key
matters and discussions at the subsequent Board meeting, and the
Board also receives copies of the Committee agendas and minutes.
This supports the Board's oversight of the work carried out by
management, Global Internal Audit and PricewaterhouseCoopers LLP
(‘PwC‘), as the Group’s statutory auditor.
The Nomination & Corporate Governance Committee has confirmed
that each member of the Committee is independent according to the
criteria from the US Securities and Exchange Commission; and the
Committee and individual members continue to possess competence
relevant to the banking and broader financial services sector in which
the Group operates. The Board has determined that David Nish,
Brendan Nelson and Eileen Murray are the audit committee ‘financial
experts’ for the purposes of section 407 of the Sarbanes-Oxley Act
and have recent and relevant financial experience for the purposes of
the UK and Hong Kong Corporate Governance Codes.
The Committee Chair continued to engage with various key
stakeholders, including regulators such as the UK’s PRA and the
Financial Reporting Council, to understand their views, key themes
and areas of focus within the broader financial services sector. These
included trilateral meetings involving the Group’s external auditor,
PwC, and the PRA.
The Group Chief Executive, Group Chief Financial Officer, Global
Financial Controller, Group Head of Internal Audit, Group Chief Risk
and Compliance Officer, Group Company Secretary and Chief
Governance Officer and other members of senior management
routinely attended meetings of the GAC. The external auditor
attended all meetings.
The Chair holds regular meetings with management, Global Internal
Audit and PwC, as the external auditor, to discuss relevant items as
they had arisen during the year outside the formal Committee
process. The Committee also regularly meets with the internal and
external auditors, without management present. Private discussions
are also held with relevant members of senior management, including
the Group Chief Financial Officer and Group Chief Risk and
Compliance Officer.
Matters considered during 2023
Jan
Feb
Apr
Jun
Jul
Sep
Oct
Dec
Reporting
Financial reporting matters including:
– review of financial statements, ensuring that disclosures are fair, balanced and understandable
– significant accounting judgements
– going concern assumptions and viability statement
– supplementary regulatory information
ESG and climate reporting
Regulatory reporting-related matters including:
–oversight of the Group's engagement with PRA-requested skilled person reviews
–reports from the principal subsidiaries on progress and learnings in relation to their local
remediation efforts
–adequacy of resources across Finance and other SME teams to deliver the Group-wide
remediation programme
Certificates from principal subsidiary audit committees
ô
ô
ô
ô
ô
ô
Control environment
Control enhancement programmes
Group transformation
ô
ô
ô
ô
ô
ô
Review of deficiencies and effectiveness of internal financial controls
Internal audit
Reports from Global Internal Audit
ô
ô
Audit plan updates, independence and effectiveness
ô
ô
External audit
Reports from external audit, including external audit plan
Appointment, remuneration, non-audit services and effectiveness
ô
Compliance
Accounting standards and critical accounting policies
ô
ô
ô
ô
Corporate governance codes and listing rules
ô
ô
ô
ô
ô
ô
Whistleblowing
Whistleblowing arrangements and effectiveness
ô
ô
ô
ô
ô
l
Matter considered
ô
Matter not considered
How the Committee discharged its responsibilities
Financial, ESG and climate reporting
The GAC is responsible for reviewing the Group’s financial reporting
during the year, including the Annual Report and Accounts, Interim
Report, quarterly earnings releases, analyst presentations and Pillar 3
disclosures.
Furthermore, as an area of expanded assurance, the GAC, supported
by the executive-level ESG Committee, provided close oversight of
the disclosure risks in relation to ESG and climate reporting, amid
rising stakeholder expectations.
As part of its review, the GAC:
–reviewed the narrative commentary on our financial and non-
financial performance to ensure it remained fair, balanced and
understandable;
–challenged and evaluated management’s application of critical
accounting policies and material areas in which significant
accounting judgements were applied;
–gave particular regard to the analysis and measurement of IFRS 9
ECL, including the key judgements and management adjustments
made in relation to the forward economic guidance, underlying
economic scenarios and reasonableness of the weightings, as well
as modelling and adjustments;
–focused on preparation for disclosures to ensure these were
consistent, appropriate and acceptable under the relevant financial
and governance reporting requirements;
HSBC Holdings plc
303
–tracked and monitored developments relating to the strategy and
scope of ESG and climate disclosures, in particular the assurance
related to the Group’s net zero transition plan, which was
published at the end of January 2024. The GAC also focused on
internal and external assurance within ESG reporting in line with
wider market developments to ensure ESG and climate
disclosures were materially accurate and consistent;
–tracked and monitored the delivery against the external audit plan;
–provided advice to the Board on the form and basis underlying the
long-term viability statement; and
–considered the key performance metrics related to strategic
priorities, and ensured that the performance and outlook
statements reflected the risks and uncertainties appropriately.
We also received independent third-party limited standalone
assurance on the Group’s climate reporting. Further details can be
found in ’Assurance relating to ESG data’ on page 43.
In conjunction with the GRC, the GAC considered the current position
of the Group, along with the emerging and principal risks, and carried
out a robust assessment of the Group’s prospects. This assessment
informed the GAC’s recommendation to the Board on the Group’s
long-term viability. The GAC also undertook a detailed review before
recommending to the Board that the Group continues to adopt the
going concern basis in preparing the annual and interim financial
statements. Further details can be found on page 40.
Fair, balanced and understandable
Following review and challenge of the disclosures, the Committee
recommended to the Board that the Annual Report and Accounts,
taken as a whole, were fair, balanced and understandable. These
provided the shareholders with the necessary information to assess
the Group’s position and performance, business model, strategy and
risks facing the business, including in relation to the increasingly
important ESG considerations.
The Committee reviewed the draft Annual Report and Accounts 2023
and results announcements to provide feedback and challenge to
management. It was supported by the work of the Group Disclosure
and Controls Committee, which also reviewed and assessed the
Annual Report and Accounts 2023 and investor communications.
This work enables the GAC to discharge its responsibilities and
support the Board in making the statement required under the UK and
Hong Kong Corporate Governance Codes.
Internal controls
Regular updates and confirmations are provided to the GAC on the
action management takes to remediate any failings or weaknesses
identified through the operation of the Group’s framework of internal
financial controls. This is supplemented by reviews of these controls
by the second line of defence and internal audit, and the external
auditors, who provided additional comfort to the Committee on the
effectiveness of these controls. These reviews confirmed that there
were no material weaknesses as at the year-end.
These updates included the Group’s work on compliance with section
404 of the Sarbanes-Oxley Act. Based on this work, the GAC
recommended that the Board support its assessment of the internal
controls over financial reporting.
The GAC continues to focus on controls over the Group's insurance
business following the implementation of the IFRS 17 ‘Insurance
Contracts‘ accounting standards. This will remain a focus through
2024, with the GAC scheduled to receive further updates on the
control environment for this business and in relation to the change
programme more generally through the first half of 2024.
For further details of how the Board reviewed the effectiveness of
key aspects of internal control, see page 348. 
Regulatory reporting
Regulatory reporting has been a key priority for the Committee over
recent years, and will continue to be a priority for 2024. The
Committee is focused on monitoring the programme of work to
address the quality and reliability of regulatory reporting to meet
regulatory expectations.
The Committee approved the Integrity of Regulatory Reporting
programme, management’s strategy for remediation of deficiencies in
relation to the Group's regulatory reporting governance, process and
controls. The Committee also provided oversight of the Group's
engagement with PRA-requested skilled-persons reviews including
the initiation of a review of the sustainability of the Group’s ongoing
remediation efforts for regulatory reporting, which commenced in
2023 for an initial period to 31 December 2025. Regular updates will
be provided to the Committee by the skilled person throughout the
course of their review.
Management provided updates on the status of ongoing HSBC-
specific external reviews, and discussed the issues and themes
identified from the increased assurance work and focus on regulatory
reporting. The GAC also discussed root cause themes, remediation of
known issues and new issues identified through the increased
assurance work and focus on regulatory reporting. The Committee
challenged management on remediation plans, to ensure there was a
sustainable reduction in issues and that dependencies with other key
programmes were well understood.
The Committee Chair initiated a schedule under which certain
principal subsidiary audit committee chairs, chief executive officers
and chief financial officers attended GAC meetings to share progress
and learnings in relation to their local remediation efforts.
Further details can be found in the ‘Principal activities and significant
issues considered during 2023’ table on page 307.
Adequacy of resources
The Committee is responsible, under the Hong Kong Listing Rules, to
annually assess the adequacy of resources of the accounting, internal
audit, financial reporting and ESG performance and reporting
functions. It also monitored the legal and regulatory environment
relevant to its responsibilities.
The Committee determined that each of the functions provided
thorough information with regards to people capacity and capability
and endorsed the annual update to the Board.
In recognition that the enhancement of the Group’s regulatory
reporting processes and controls was a priority for both the
Committee and the Group’s regulators, the GAC also considered the
adequacy of regulatory reporting resources as part of the year-end
activities.
Connectivity with principal subsidiary audit committees
The Committee recognises the importance of strong connectivity and
alignment with principal subsidiary audit committees. The
mechanisms to support this are well established and continued to
operate effectively during the year.
This included information sharing and targeted collaboration between
audit committee chairs and management to ensure there was
appropriate focus on the local implementation of programmes. During
2023 this included a particular focus on regulatory reporting, with the
subsidiary audit committee chairs, chief executive officers and chief
financial officers, attending Committee meetings to update on
progress, share local challenges, and areas of focus with the
Committee.
In addition to the Chair's regular meetings with the audit chairs of the
Group’s UK, European, US and Asian principal subsidiaries, and their
attendance at Committee meetings for reference items, escalations
were received by the Committee for its information and action.
On a half-year basis, principal subsidiary audit committees provided
certifications to the GAC that regarded the preparation of their
financial statements, adherence to Group policies and escalation of
any issues that required the attention of the GAC. These certifications
also included information regarding the governance, review and
assurance activities undertaken by principal subsidiary audit
committees in relation to prudential regulatory reporting.
External auditor
The GAC has the primary responsibility for overseeing the relationship
with the Group’s external auditor, PwC. The GAC undertook a formal
competitive tender process for the Group’s statutory audit during
2022 following PwC’s appointment for the Annual Report and
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304
HSBC Holdings plc
Accounts 2015. This process concluded that PwC would remain as
the statutory auditor, which was announced in January 2023. As part
of the tender process, PwC committed to a number of initiatives to
enhance the effectiveness and efficiency of the Group audit, and
progress against these is reported to the Committee on a regular
basis to allow these to be monitored.
PwC completed its ninth audit, providing robust challenge to
management and sound independent advice to the Committee on
specific financial reporting judgements and the control environment.
The senior audit partner is Scott Berryman who has been in the role
since 2019. It was announced during 2023 that Matthew Falconer
would become the senior audit partner from 2024 as part of the
rotation of auditors. The Committee reviewed the external auditor’s
approach and strategy for the annual audit and received regular
updates on the audit, including observations on the control
environment. Key audit matters discussed with PwC are set out in its
report on page 354.
Following the publication of the Financial Reporting Council's (‘FRC’)
Audit Committee and the External Audit: Minimum Standard (’the
Standard’) during 2023, the Committee confirmed that all
requirements of the standard have been complied with.
External audit plan
The GAC reviewed the PwC external audit approach, including the
materiality, risk assessment and scope of the audit. PwC highlighted
the changes being made to its approach to enhance the quality and
effectiveness of the audit. PwC’s plan supports its, and the GAC's,
focus on audit quality through standardisation, centralisation and the
use of technology. The GAC has questioned PwC on its plans to
utilise more digital solutions on the HSBC audit, and updates on this
will be provided through 2024.
Effectiveness of external audit process
The GAC assessed the effectiveness of PwC as the Group’s external
auditor, using a questionnaire that focused on the overall audit
process, its effectiveness and the quality of output.
In addition, the GAC Chair, certain principal subsidiary audit chairs and
members of the Group Executive Committee met with the  Senior
Audit Partner to discuss findings from the questionnaire and provide
in-depth feedback on the interaction with the PwC audit team.
PwC highlighted the actions being taken in response to the HSBC
effectiveness review, including the development of audit quality
indicators. These provide a balanced scorecard and transparent
reporting to the GAC on the work of both HSBC teams and PwC
during the course of the audit. These audit quality indicators focused
on the following areas:
–findings from inspections across the Group and regulators on PwC
as a firm;
–the hours of audit work delivered by senior PwC audit team
members, the extent of specialist and expert involvement, delivery
against agreed timetable and milestones and the use of
technology;
–any new control deficiencies in Sarbanes-Oxley locations,
proportion of management identified deficiencies and delivery of
audit deliverables to agreed timelines; and
–matters occurring in PwC's global network that could be relevant
to the audit of HSBC.
Specifically in 2023, PwC reported to the GAC on the recommended
actions taken in response to the independent review of governance,
culture and accountability that was undertaken by Dr Ziggy
Switkowski AO, as well as further detail on audit quality controls
across PwC’s global operations.
The GAC receives regular updates from PwC and management on
performance across the audit quality indicators, which provides wider
visibility of ongoing and emerging issues. The GAC requested that
these indicators included metrics in relation to PwC's IT security,
reflecting the significant volume of information that is shared
between HSBC and PwC as part of the audit activity.
There were no breaches of the policy on hiring employees or former
employees of the external auditor during the year. The external
auditor attended all Committee meetings and the GAC Chair
maintains regular contact with the senior audit partner and his team
throughout the year.
The FRC’s Quality Review team routinely monitors the quality of the
audit work of certain UK audit firms through inspections of sample
audits and related quality processes. PwC was reviewed on the audit
of our financial reporting for the 2022 financial year. The Chair had
discussions with the FRC as part of the process, and also discussed
the outcome of the inspection with the Senior Audit Partner and the
other members of the Committee. The Committee was pleased with
the outcome of the inspection, which reported no key findings as well
as a number of specific examples of good audit practice.
Independence and objectivity
The Committee assessed any potential threats to independence that
were self-identified or reported by PwC. The GAC considered PwC to
be independent and PwC, in accordance with professional ethical
standards and applicable rules and regulations, provided the GAC with
written confirmation of its independence for the duration of 2023.
The Committee confirms it has complied with the provisions of The
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 for the financial statements.
Following the recommendation to reappoint PwC as the auditor, the
associated resolutions concerning the reappointment and the audit
fee for 2023 were approved at the 2023 AGM by the shareholders of
the Group.
Non-audit services
The Committee is responsible for setting, reviewing and monitoring
the appropriateness of the provision of non-audit services by the
external auditor. It also applies the Group’s policy on the award of
non-audit services to the external auditor. The non-audit services are
carried out in accordance with the external auditor independence
policy to ensure that services do not create a conflict of interest. All
non-audit services are either approved by the GAC, or by Group
Finance when acting within delegated limits and criteria set by the
GAC.
The non-audit services carried out by PwC included 64 engagements
approved during the year where the fees were over $100,000 but less
than $1m. Global Finance, as a delegate of the GAC, considered that
it was in the best interests of the Group to use PwC for these
services because they were:
–audit-related engagements that were largely carried out by
members of the audit engagement team, with the work closely
related to the work performed in the audit;
–engagements covered under other assurance services that require
obtaining appropriate audit evidence to express a conclusion
designed to enhance the degree of confidence of the intended
users other than the responsible party about the subject matter
information;
–other permitted services such as advisory attestation reports on
internal controls of a service organisation primarily prepared for
and used by third-party end users; or
–required or permitted by local regulators to be performed by the
external auditor.
Eight engagements during the year were approved where the fees
exceeded $1m. These were mainly engagements required by the
regulator and incremental fees related to previously approved
engagements, including the provision of independent assurance
reports on global controls for 2023.
2023
2022
Auditors‘ remuneration
$m
$m
Total fees payable
155.9
148.1
of which fees for non-audit services
46.1
50.5
Ratio of non-audit fees to audit fees1
42.0%
51.7%
1  The calculation is on a simple ratio and is not based on FRC guidance
on non-audit fees ratio thresholds.
HSBC Holdings plc
305
Whistleblowing and speak-up culture
An important part of HSBC’s values is speaking up when something
does not feel right. HSBC remains committed to ensuring colleagues
have confidence to speak up and acting when they do. A wide variety
of channels are provided for colleagues to raise concerns, including
the Group’s whistleblowing channel, HSBC Confidential (see page 94
for further information).
The Board has delegated responsibility to the GAC to oversee the
effectiveness of HSBC’s whistleblowing procedures. The Chair of the
GAC is a Group Senior Manager (SMF7), and has a prescribed
responsibility as the whistleblowers’ champion, to ensure integrity of
HSBC’s policies on whistleblowing and protecting those who report
concerns. As part of his responsibility, the GAC Chair reports to the
Board on the GAC’s oversight of whistleblowing as part of his regular
reporting updates.
The Group Head of Regulatory Compliance regularly updates the GAC
on whistleblowing effectiveness, including controls assessments and
internal audit findings. The Committee is briefed on culture and
conduct risks from whistleblowing cases and actions taken.
In 2023, the GAC received updates on topics such as cultural insights
from internal HR-led investigations relating to matters reported
through HSBC Confidential. Reports were also provided on the
actions taken to support different functional areas collaborate post-
investigation. The Chair met with the Group Head of Conduct, Policy
and Whistleblowing for briefings on significant whistleblowing
matters. In 2024, the GAC will continue to receive briefings on these
actions and the ongoing efficiency of the HSBC Confidential channel.
Global Internal Audit
The primary role of the Global Internal Audit function is to help the
Board and management protect the assets, reputation and
sustainability of the Group. Global Internal Audit does this by providing
independent and objective assurance on the design and operating
effectiveness of the Group’s governance, risk management and
control framework and processes, prioritising the greatest areas of
risk. The independence of Global Internal Audit from day-to-day line
management responsibility is critical to its ability to deliver objective
audit coverage by maintaining an independent and objective stance.
Global Internal Audit is free from interference by any element in the
organisation, including on matters of audit selection, scope,
procedures, frequency, timing, or internal audit report content. The
Group Head of Internal Audit reports to, and meets frequently with,
the Chair of the GAC. In addition, in 2023, there was more interaction
between Global Internal Audit senior management and the members
of the GAC, aimed at increasing knowledge and awareness of the
audit universe and existing and emerging risks identified by Global
Internal Audit. Global Internal Audit adheres to The Institute of Internal
Auditors’ mandatory guidance.
Consistent with previous years, the 2024 audit planning process
includes assessing the inherent risks and strength of the control
environment across the audit entities representing the Group. Results
of this assessment are combined with a top-down analysis of risk
themes by risk category to ensure that themes identified are
addressed in the annual plan. Audit coverage is achieved using a
combination of business and functional audits of processes and
controls, risk management frameworks and major change initiatives,
as well as regulatory audits, investigations and special reviews. In
addition to the ongoing importance of regulatory-focused work, key
risk theme categories for 2024 audit coverage remain as: strategy,
governance and culture; financial crime, conduct and compliance;
financial resilience; and operational resilience. A quarterly continuous
monitoring assessment of key risk themes will form the basis of
thematic reporting and plan updates and will ultimately drive the 2025
planning process.
In 2024, Global Internal Audit’s new or heightened areas of coverage
are: transformation including regulatory change; people capacity and
capability; ESG; material regulatory obligations; Consumer Duty
implementation; retail and wholesale credit risk management;
Basel III; regulatory reporting; treasury; operational resilience;
enterprise-wide risk management; model risk management; machine
learning and artificial intelligence; data management and technology.
In addition, Global Internal Audit will continue its programme of
culture audits to assess the extent that behaviours reflect HSBC’s
purpose, ambition, values and strategy, and expand its coverage of
franchise audits for locally significant countries. The annual audit plan
and material plan updates made in response to changes in the
Group’s structure and risk profile are approved by the GAC.
The results of audit work, together with an assessment of the
Group’s overall governance, risk management and control framework
and processes are reported to the GAC, GRC and local audit and risk
committees, as appropriate. This reporting highlights key themes
identified through audit activity, and the output from continuous
monitoring. This includes business and regulatory developments and
an independent view of emerging and horizon risk, together with
details of audit coverage and any required changes to the annual audit
plan. Based on regular internal audit reporting to the GAC, private
sessions with the Group Head of Internal Audit, the Global
Professional Practices annual assessment and quarterly quality
assurance updates, the GAC is satisfied with the effectiveness of the
Global Internal Audit function and the appropriateness of its
resources.
Executive management is accountable for addressing the matters
raised by Global Internal Audit, which must be addressed within an
appropriate and agreed timetable. Confirmation to this effect must be
provided to Global Internal Audit, which validates closure on a risk
basis.
Global Internal Audit maintains a close working relationship with
HSBC’s external auditor, PwC. The external auditor is kept informed
of Global Internal Audit’s activities and results, and is afforded free
access to all internal audit reports and supporting records.
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306
HSBC Holdings plc
Principal activities and significant issues considered during 2023
Areas of focus
Key issues
Conclusions and actions
Financial and
regulatory
reporting
Environmental, social and governance
(‘ESG’) reporting
The Committee considered
management’s efforts to enhance ESG
disclosures and associated verification and
assurance activities, with a specific focus
on the net zero transition plan and climate-
related disclosures made in this           
Form 20-F.
The Committee considered ESG disclosures for the Annual Report and Accounts 2023 in
detail, to ensure these were fair and balanced, and were also transparent on the
challenges faced and aligned with the Group's progress in the embedding of sustainable
and climate-related policies across the business.
The Committee also focused on the evolution of the control environment for ESG
disclosures, particularly data sourcing and policy adherence. Management provided
updates on additional assurance performed over these disclosures while the control
environment matures and the progress of the sustainability enhancement programme (to
upgrade our capabilities in this growing area).
Regulatory reporting
The GAC monitored the progress of the
regulatory reporting assurance
programme to enhance the Group’s
regulatory reporting, impact on the control
environment and oversight of regulatory
reviews and engagement.
The Committee reflected on the continued focus on the quality and reliability of regulatory
reporting by the PRA and other regulators globally. The GAC reviewed management’s
proposals on remediation efforts, and endorsed the strategy for the remediation of the
errors in the Group’s reporting submissions to regulators globally.
The chief executive officers, chief financial officers and audit committee chair of the US,
UK ring-fenced bank, European and Asian subsidiaries attended Committee meetings
during the year to report on the remediation activities and priorities with regards to
regulatory reporting in their respective markets.
We continue to keep the PRA and other relevant regulators informed of our progress.
Significant
accounting
judgements
Expected credit losses
The measurement of expected credit
losses involves significant judgements,
particularly under current economic
conditions. There remains uncertainty
over ECL estimation due to sustained high
inflation, a high interest rate environment
and weaker economic growth in the
Group’s key operating markets.
The Committee reviewed economic scenarios for the key countries and territories in
which the Group operates and challenged management’s judgements on the weightings
assigned to the scenarios. The Committee also challenged management’s judgemental
adjustments to account for uncertainty in specific sectors and geographies, including the
controls underpinning the adjustments process and conditions under which the
adjustments would be reduced or removed. 
The Committee continued to monitor management’s updates on areas of particular focus,
including downside risk on mainland China and Hong Kong commercial real estate.
Tax-related judgements
HSBC has recognised deferred tax assets
to the extent that they are recoverable
through expected future taxable profits.
Significant judgement continues to be
exercised in assessing the probability and
sufficiency of future taxable profits, future
reversals of existing taxable temporary
differences and expected outcomes
relating to uncertain tax treatments.
The Committee considered the recoverability of deferred tax assets, in particular in the
US, the UK and France.
The Committee also considered management’s judgements relating to tax positions in
respect of which the appropriate tax treatment is uncertain, open to interpretation or has
been challenged by the tax authority.
Valuation of defined benefit pension
obligations
The valuation of defined benefit pension
obligations involves highly judgemental
inputs and actuarial assumptions which
includes rate, inflation rate, mortality rates
and other demographic assumptions.
Management considered these
assumptions in consultation with actuarial
experts to determine the valuation of the
defined benefit obligations.
The GAC has considered the effect of changes in key assumptions on the HSBC UK Bank
plc section of the HSBC Bank (UK) Pensions Scheme, which is the principal plan of HSBC
Group. Details of key assumptions can be found on pages 393 to 395 of the ’Notes on the
financial statements’.
Valuation of financial instruments
During 2023, management continuously
refined its methodology and approach to
valuing the Group’s portfolio in relation to
investments, trading assets and liabilities
and derivatives.
The Committee considered the key valuation metrics and judgements involved in the
determination of the fair value of financial instruments, and agreed with the judgements
applied by management, which were validated through appropriate governance and
control forums.
Investment in subsidiaries
Management has reviewed investments
in subsidiaries for indicators of impairment
and conducted impairment reviews where
relevant. These involve exercising
significant judgement to assess the
recoverable amounts of subsidiaries, by
reference to projected future cash flows,
discount rates and regulatory capital
assumptions.
The Committee reviewed the judgements in relation to the impairment review of HSBC
Overseas Holdings (UK) Limited and the key inputs such as projected profits, underpinning
the recoverable amounts of its subsidiaries.
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307
Principal activities and significant issues considered during 2023 (continued)
Areas of focus
Key issues
Conclusions and actions
Significant
accounting
judgements
Investment in an associate – Bank of
Communications Co., Limited
During the year, management performed
impairment reviews of HSBC’s
investment in Bank of Communications
Co., Ltd (‘BoCom’). This included
consideration of the potential impact of
BoCom’s designation as a globally
systemically important bank in November
2023. 
The impairment reviews are complex and
require significant judgements, such as
the appropriateness of projected future
cash flows, discount rate, and regulatory
capital assumptions.
The Committee reviewed and challenged management’s judgements in relation to
impairment reviews of HSBC’s investment in BoCom, performed using a value-in-use
methodology. The GAC reviewed the appropriateness of key assumptions such as
projected future cash flows, with a particular focus on the loan growth and net interest
margin outlook, and potential impacts of the recent designation of BoCom as a globally
systemically important bank.
The Committee held a dedicated meeting to challenge management on the impairment
charge taken in the fourth quarter of 2023, considering sensitivity analysis of value-in-use
to reasonably possible changes in key assumptions and consistency of judgements with
prior impairment reviews, which we have disclosed previously.
Interest rate management, including
disposal of hold-to-collect-and-sell
portfolio 
During 2023, management proposed a
framework for the disposal of selected
hold-to-collect-and-sell securities to
improve risk management of hold-to-
collect-and-sell positions and to stabilise
and protect net interest income over the
medium term.
The GAC received regular management updates on hedging strategy, including the
repositioning of structural interest rate hedges. 
The Committee reviewed controls on, and financial outcomes of, disposals of hold-to-
collect-and-sell securities.
Impairment of goodwill and non-
financial assets
During the year, management tested for
impairment goodwill and non-financial
assets. Key judgements in this area relate
to long-term growth rates, discount rates
and projected future cash flows to include
for each cash-generating unit tested, both
in terms of compliance with the
accounting standards and reasonableness
of the forecasts.
The Committee reviewed and challenged management’s approach and methodology used
for the impairment testing of goodwill and non-financial assets, with a key focus on the
projected cash flows included in the forecasts and discount rates used. The GAC also
challenged management’s key judgements and considered the reasonableness of the
outcomes against business forecasts and strategic objectives of HSBC.
Legal proceedings and regulatory
matters
Management has used judgement in
relation to the recognition and
measurement of provisions, as well as the
existence of contingent liabilities for legal
and regulatory matters.
The Committee reviewed reports from management on legal proceedings and regulatory
matters, and challenged related accounting judgements and disclosures.
Long-term viability and going concern
statement
The GAC has considered a wide range of
information relating to present and future
projections of profitability, cash flows,
capital requirements and capital
resources. These considerations include
stressed scenarios that reflect the
implications of:
(i) the ongoing Russia-Ukraine and Middle
East conflicts, and the consequential
impacts on the supply chains globally;
(ii) macroeconomic risks including
inflationary risks, which were expected to
remain heightened in most markets; and
(iii) climate risk, operational resilience, and
other top and emerging risks, and the
related impact on profitability, capital and
liquidity.
In accordance with the UK and Hong Kong Corporate Governance Codes, the Directors
carried out a robust assessment of the principal risks of the Group and parent company.
The GAC considered the statement to be made by the Directors and concluded that the
Group and parent company will be able to continue in operation and meet liabilities as they
fall due, and that it is appropriate that the long-term viability statement covers a period of
three years.
Impact of acquisitions and disposals
HSBC engaged in a number of business
acquisitions and disposals, notably in the
UK, Canada, France, Greece, China, Oman
and Russia.
Significant judgement was involved in
determining the timing of recognition of
assets held-for-sale, gains or losses, and
the measurement of assets and liabilities
on acquisition or disposal.
The Committee reviewed management’s judgements related to the planned sales of our
banking business in Canada, our retail banking operations in France and our banking
business in Russia, such as the timing of classification as held-for-sale and the
remeasurement of assets.
The Committee considered the financial and accounting impacts of the merger of HSBC
Oman with Sohar International Bank of Oman, and the acquisitions of Silicon Valley Bank
UK Limited, Silkroad Property Partners Pte Limited and Citi’s retail wealth management
portfolio in China.
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308
HSBC Holdings plc
Principal activities and significant issues considered during 2023 (continued)
Areas of focus
Key issues
Conclusions and actions
Control
environment
Sustainable control environment
The GAC will oversee the impact on the
risk and control environment.
The Committee received regular updates on the control environment, and broader change
framework, to review the impact on financial reporting and tax risk within the Group, with
particular focus on the implementation of IFRS 17 in the year.
In these updates the Committee monitored the assessment of the financial reporting risk,
tax risk and progress made on remediation of Sarbanes Oxley significant deficiencies. This
oversight helped the Committee to understand the progress being made by management
to set out strategic actions to remediate identified issues and uplift the control
environment to enable a sustainable reduction in risk.
Management’s updates were supplemented by further focus and assurance work from
Global Internal Audit, including audits of significant programmes of activity during 2023.
Regulatory
change
Basel III Reform
The GAC considered the implementation
of the Basel III Reform and the impact on
the capital requirements and RWA
assurance. This was considered in the
context of the strategy and structure of
the balance sheet.
The Committee received updates on the progress and impact of the Basel III programme
on the Group.
Management discussed the delayed implementation dates due to ongoing uncertainty
over the final definition of the rules by regulators, and the work undertaken to mitigate
delivery risks given the concentration of delivery during 2024. The discussion highlighted
the dependencies of the Basel III programme with data and management. Management
focus was on ensuring that the data required and evolving internal standards were
delivered by the end of 2023 to allow for integrated testing in the first quarter of 2024.
The Committee  reviewed the ongoing management of risks, issues and dependencies
and challenged management to prioritise deliverables across each jurisdiction in line with
regulatory timelines. The Committee discussed focus on ensuring, in each case,  solutions
were delivered to the minimum required standards.
Committee
connectivity
Collaboration with GAC/GRC/
Technology Governance Working
Group
The GAC and GRC worked closely to
ensure there were procedures to manage
risk and oversee the internal control
framework. The Chairs are members of
both committees and engage on the
agendas of each other’s committees to
further enhance connectivity, coordination
and flow of information.
Given that all material remediation plans within the Group rely heavily on data, the
committees held joint meetings to develop an understanding of the HSBC data strategy
and execution plan. The joint meetings discussed:
–the review undertaken of data within the Group and the associated baseline
established as part of the review;
–actions taken to prioritise execution to deliver key capabilities and remediate data
quality, including pilots to provide clarity around scale, key milestones and expected
execution timelines; and
–the three-year Group data programme delivery roadmap including detailed plans to
address data quality issues, improve the data control landscape, engage with
colleagues to actively mature data culture, and build sustainable capabilities that meet
a growing global trend towards localisation of data.
Committee evaluation and effectiveness
The annual review of the effectiveness of the Board committees,
including the GAC, was conducted by IBE, Independent Board
Evaluation during 2023. The review determined that the GAC
continued to operate effectively.
Positive feedback was noted on the leadership of the Committee
Chair, the composition of the Committee and the focus and balance
of time dedicated to discussion at Committee meetings. The review
highlighted the continued importance of strong interaction between
the GAC, GRC, Technology Governance Working Group and the
Board, on key issues including ESG.
Further details of the annual review of the Board and Committee
effectiveness can be found on pages 296 to 297.
Committee priorities
At its meeting in December 2023, the Committee agreed a number of
priorities for 2024. These included:
–Regulatory reporting: Given the criticality of accurate and timely
regulatory reporting to the Group’s licence to operate, the
Committee will have a key focus on delivery of the Integrity of
Regulatory Reporting  programme during 2024.
–ESG: As competent authorities in the markets in which the Group
operates launch market-specific disclosure requirements under
new regulation, the Committee will continue to focus on the
assurance of reporting and disclosure at both a Group and
subsidiary level, as well as the effectiveness of the supporting
control environment and governance.
–Data: The Committee plans to monitor and provide input into the
data strategy, remediation, and controls for the purposes of
financial and regulatory reporting, including that data management
strategies are embedded across the Group.
HSBC Holdings plc
309
Group Risk Committee
james forsee.jpg
"The Committee takes continuous and active steps to safeguard the Group's capital and liquidity positions,
keeping it secure in the face of macroeconomic headwinds, enabling it to effectively deploy capital dynamically
to take advantage of opportunities"
James Forese
Chair
Group Risk Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20231
The GRC has overall non-executive responsibility for the oversight
of risk-related matters and the risks impacting the Group. The
GRC’s key responsibilities include:
–overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks;
–advising the Board on risk appetite-related matters, and key
regulatory submissions;
–reviewing the effectiveness of the Group’s risk management
framework and internal controls systems (other than internal
financial controls overseen by the GAC);
–reviewing and challenging the Group’s stress testing exercises;
and
–overseeing the Group’s approach to conduct, fairness and
preventing financial crime.
James Forese (Chair)2
Jun 2022
10/10
Geraldine Buckingham
Jun 2022
10/10
Dame Carolyn Fairbairn3
Sep 2021
7/10
Steven Guggenheimer4
May 2020
9/10
Kalpana Morparia5
Jul 2020
7/8
Brendan Nelson6
Sep 2023
3/3
David Nish
Feb 2020
10/10
Jackson Tai7
Sep 2016
4/4
Swee Lian Teo8
Oct 2023
2/2
1  These included six scheduled meetings, three ad hoc meetings and
one joint meeting with the Group Audit Committee and the
Technology Governance Working Group.
2  James Forese was appointed Chair of the Committee on 5 May
2023.
3  Dame Carolyn Fairbairn was unable to attend three meetings due to 
prior commitments.
4  Steven Guggenheimer was unable to attend one meeting due to a
prior commitment.
5  Kalpana Morparia joined the GRC on 1 March 2023. She was unable
to attend one meeting due to a prior commitment.
6  Brendan Nelson joined the GRC on 1 September 2023.
7  Jackson Tai stepped down from the GRC on 5 May 2023.
8  Swee Lian Teo joined the GRC on 1 October 2023.
 
I am pleased to present my first Group Risk Committee (‘GRC’)
report, having taken over the role of Chair of the Committee in May
2023.  I would like to take this opportunity to express my sincere
gratitude to Jackson Tai for his service to GRC, and the Group more
broadly, prior to stepping down as Committee Chair. I am also
pleased to welcome Kalpana Morparia, Brendan Nelson and Swee
Lian Teo, all of whom joined as members of the GRC during 2023,
and each of whom brings unique skills and experience to the business
of the Committee.
Geopolitical risks and the macroeconomic environment continued to
dominate the landscape in 2023, with turmoil in the financial markets
leading to the collapse of several banks in the US and Europe in the
first half of the year. Commercial real estate in both the US and Asia 
also came under increasing pressure due to the high interest rate
environment, inflationary trends and recessionary concerns. Central
banks’ efforts to lower inflation by rapidly raising interest rates also
had a wide-ranging impact on retail borrowers as the cost of living
increased globally. The GRC has closely monitored the Group’s credit
exposures, market risk and settlement limits in response to these
events, and has endorsed management’s proactive execution in
reducing high risk exposures and accelerating portfolio
transformation.
Oversight of financial risks has been critical against this external
backdrop, and the GRC has paid close focus to the Group’s ongoing
treasury, capital and liquidity risk management activities, including
early warning indicators, delivery of the interest rate risk in the
banking book strategy, prudential sensitivity analysis and capital and
liquidity adequacy. Throughout the year, the GRC reviewed and
challenged management on the Group’s regulatory submissions,
including the Bank of England’s requirements for the Resolvability
Assessment Framework, internal capital adequacy assessment
process (‘ICAAP’) and internal liquidity adequacy assessment process
(‘ILAAP’). The GRC had primary non-executive responsibility for
reviewing the outcomes of regulatory stress tests, including the 2023
annual cyclical scenario hybrid mortgage models update and the post-
wind-down business restructuring analysis.
Non-financial risks were also a key focus of the GRC in 2023.  The
GRC carefully considered the Group’s regulatory remediation and
change programmes, and worked closely with management to better
prioritise and understand where there are key interdependencies. In
particular, the Committee reviewed and challenged the Group’s data
strategy and other key areas of regulatory focus, including oversight
of the operational resilience enhancements, conduct and financial
crime, technology and cyber risk. The GRC also provided oversight
and support to risk transformation activities to develop stronger risk
management capabilities and outcomes across the Group. Climate
also continues to be a priority area of oversight with regular reports on
areas of risk, such as greenwashing, compliance with regulatory
requirements, and ESG policy changes.
Further details on these and other areas of GRC oversight during the
year are set out below.
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310
HSBC Holdings plc
Committee governance
The Group Chief Risk and Compliance Officer, Group Chief Financial
Officer, Group Chief Operating Officer, Group Company Secretary and
Chief Governance Officer, Group Chief Legal Officer, and Group Head
of Internal Audit are standing attendees at GRC meetings. The Chair
and members of the GRC also hold private meetings with the Group
Chief Risk and Compliance Officer, the Group Head of Internal Audit
and the external auditor, PwC, following scheduled GRC meetings.
The participation of our senior business leaders, including the Group
Chief Executive who attended five scheduled GRC meetings in 2023,
and the chief executive officers of the three global businesses
reaffirmed the ownership and accountability of risks in the first line of
defence.
The Chair meets regularly with the Group Chief Risk and Compliance
Officer, and, where appropriate, members of senior management, to
discuss priorities and track progress on key actions. The Chair also
meets regularly with the GRC Secretary to ensure the GRC addresses
its governance responsibilities. A summary of coverage is set out in
the ’Matters considered during 2023’ table.
Matters considered during 2023
Jan
Feb
Mar
May
Jun
Jul
Sep
Dec
Holistic enterprise risk monitoring including
Group risk profile1
l
l
l
l
l
l
l
l
Risk framework and policies
l
l
ô
ô
ô
l
ô
ô
Treasury and traded risk
l
l
l
l
l
l
l
l
Wholesale/retail credit risk
l
l
ô
l
l
l
l
ô
Financial reporting risk
ô
l
ô
ô
ô
l
ô
ô
Resilience risk (including IT and operational risk)
ô
ô
ô
l
l
ô
l
l
Financial crime risk
l
l
l
l
l
l
l
l
People and conduct risk
ô
ô
ô
l
l
ô
l
l
Regulatory compliance risk
ô
ô
l
l
ô
l
l
l
Legal risk
ô
l
ô
l
l
l
l
l
Model risk
ô
ô
ô
ô
ô
l
ô
l
Climate risk
ô
l
ô
l
l
ô
l
l
l
Matter considered
ô
Matter not considered
1  The GRC receives updates on all risk types through the Group risk profile, which is presented to the majority of meetings. The Committee also met
with the Group Chief Risk and Compliance Officer and Risk and Compliance Executive Committee members in October 2023 to review matters
relating to risk transformation, wholesale credit risk, treasury risk, model risk, operational risk, data and climate risk.
How the Committee discharged its responsibilities
Activities outside formal meetings
The GRC held a number of meetings outside its regular schedule to
facilitate deeper and more effective oversight of the risks impacting
the Group. Areas covered included capital management, stress
testing, ICAAP and ILAAP preparations, as well as briefings on the
Resolvability Assessment Framework. Further details of these
sessions are included in the ’Principal activities and significant issues
considered during 2023’ table starting on page 312.
Connectivity with principal subsidiary risk committees
During 2023, the GRC continued to actively engage with principal
subsidiary risk committees through the scheduled participation of
principal subsidiary risk committee chairs at relevant GRC meetings,
and through a quarterly connectivity meeting with the principal
subsidiary risk committee chairs. This meeting is also attended by the
Group Chief Risk and Compliance Officer. This participation and
connectivity promoted the sharing of information and best practices
between the GRC and principal subsidiary risk committees.
The GRC also received reports at its regular meetings on the key risks
facing principal subsidiaries including escalations and certifications
from the principal subsidiary risk committees. The certifications
confirmed that the principal subsidiary risk committees had
challenged management on the quality of the information provided,
reviewed the actions proposed by management to address any
emerging issues and that risk management and internal control
systems had been operating effectively.
These interactions furthered the GRC’s understanding of the risk
profile of the principal subsidiaries, leading to more comprehensive
review and challenge by the GRC.
Engagement with the Risk and Compliance Executive
Committee
During 2023, the GRC met with the Risk and Compliance Executive
Committee to promote information sharing, meet and assess the
Group Risk and Compliance function leadership team, and encourage
active engagement with executive management.
During the engagement meeting, the GRC developed a better
understanding of the efforts to strengthen our capabilities across the
Group Risk and Compliance function. There were also in-depth
discussions on the progress and remediation of key regulatory
concerns. The engagement promoted a healthy working relationship
between GRC members and executive management.
Collaborative oversight by the GRC, GAC and Technology
Governance Working Group
The GRC worked closely with the GAC and the Technology
Governance Working Group to address any areas of significant
overlap, and to oversee risk more comprehensively through inter-
committee communications and joint meetings.
The GRC, GAC and the Technology Governance Working Group
Chairs convened on two occasions to consider the Group's data
strategy and ambitions. Further details of these sessions can be
found under ’Collaboration with GAC/GRC/Technology Governance
Working Group’ in the GAC report on page 307.
The committees and working group worked closely to ensure
appropriate alignment in the review, discussion, challenge and
conclusions on topics including risk and control issues relating to
digital assets and currencies, and the transition of core Finance
capabilities to the Cloud. This ensured that the committees benefited
from each other’s expertise and challenge.
Coordination between the GRC, GAC and the Technology Governance
Working Group is supported by cross-membership. The GRC and GAC
Chairs are members of both committees, and this strengthened
connectivity and the flow of information between the committees.
Each of the co-chairs of the Technology Governance Working Group
are members of the GRC and GAC, respectively.
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311
Principal activities and significant issues considered during 2023
Risk areas
Key issues
Conclusions and actions
Holistic
enterprise risk
monitoring,
including
Group risk
profile
Macroeconomic, geopolitical and other emerging
risks have the potential to present significant
challenges to revenue growth, operational
resilience and our commitment to serve
customers and local markets.
The GRC closely monitored geopolitical and macroeconomic risks that could
impact the Group’s strategy, business performance or operations. These risks
were exacerbated by the ongoing Russia-Ukraine war and the developing Israel-
Hamas war, as well as the expected 'higher for longer' interest rate environment,
inflation and impacts on the commercial real estate portfolio.
The GRC continued to track top and emerging risks, our risk appetite and other
management information metrics, as well as other early warning measures to
understand sensitivities and the likelihood of the potential impact to our
operations, customers and stakeholders. The GRC provided oversight and
challenge of a robust book of strategic management actions to respond to
potential downside scenarios.
Reflecting the Committee’s ability to travel to different jurisdictions and regions
more frequently, the GRC requested reports on the risk profile of key business
areas in local geographies and invited principal subsidiary chairs and relevant
management to attend and participate in discussions.
Risk
framework and
policies
Effective risk management policies, frameworks
and thresholds, and oversight of these, are
essential for HSBC to safely, consistently and
sustainably support customers and deliver
strategic aims.
The Group has a risk appetite statement to define risk appetite and tolerance
thresholds, which forms the basis of the risk management procedures for the first
and second lines of defence, the Group’s capacity and capabilities to support
customers, and the achievement of strategic goals. The GRC maintained oversight
of the Group’s risk management framework, reviewing changes to the Group’s risk
appetite statements and recommending these to the Board for approval. The
agreed risk appetite statement then provided the basis for the Committee’s
interactive review of financial and non-financial risk management information at
each scheduled GRC meeting. The GRC continued to promote the development of
more dynamic and granular risk appetite statements that were both forward
looking and dynamically responsive to emerging risk drivers, and linked to the
Group's strategy, stress testing and financial resource plan. Changes were
recommended by the GRC to the Group’s risk appetite statement, including in the
areas of interest rate risk in the banking book, wholesale credit risk, climate risk,
model risk, digital assets and currencies, resilience risk, reputational risk and
regulatory reporting risk.   
Treasury risk
Capital and liquidity risk must be effectively
monitored. It presents key risks to banks globally,
as demonstrated in the first half of 2023 when
there were a number of bank failures in the US
and Europe. Similarly, developing action plans
and guardrails to cover scenarios of recovery or
resolution at a subsidiary or Group level is an
essential part of HSBC’s prudential management.
The Group takes continuous and active steps to safeguard its capital and liquidity
positions. It performs internal and regulatory stress tests to measure resilience and
performance against stress, and to consider strategic management actions that
could be applied against anticipated stress events and headwinds.
The GRC conducted its annual review and challenge of the Group’s ICAAP and
ILAAP, and provided recommendation to the Board for approval. The GRC
continued to evaluate the Group’s IRRBB strategy and progress made against the
multi-year liquidity improvement programme.
The GRC reviewed the Group’s ongoing activities to identify, manage and mitigate
treasury, capital and liquidity risks, including early warning indicators, sensitivity
analysis, capital and liquidity reporting and adequacy.
In relation to stress testing exercises, the GRC reviewed the Bank of England’s
2023 annual cyclical scenario hybrid mortgage models update. The results were
approved by the Committee in March 2023. The GRC also considered the 2024
financial resource plan and Group-wide internal stress test overview, scenarios and
outputs, which contribute to the Group’s commitment to regularly test the
resilience of the balance sheet and profit and loss under multiple scenarios of
varying severity.
In addition to oversight of capital and liquidity risk, the GRC also reviewed and
provided challenge to ongoing plans to improve balance sheet velocity across the
Group through better distribution enabling further, targeted origination and
ensuring effective use of capital to support revenue growth.
As part of its regulatory obligations, the Group is required to show how its
resolution strategy could be carried out in an orderly way and identify any risks to
successful resolution. The GRC continued its oversight of the Group’s progress in
developing its capabilities towards the Bank of England’s requirements for
recovery and resolvability. In February 2023, the GRC reviewed the planned
approach for 2023 post-wind-down business restructuring analysis, prior to
submission to the PRA. The GRC reviewed and recommended the 2023
Resolvability Assessment Framework self-assessment to the Board for approval.
The Chairs of the GRC and the GAC both received comprehensive briefings prior to
the presentation of the framework.
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HSBC Holdings plc
Principal activities and significant issues considered during 2023 (continued)
Risk areas
Key issues
Conclusions and actions
Wholesale/
retail credit risk
HSBC faces risk from the possibility of losses
resulting from the failure of a counterparty to
meet its agreed obligations to pay the Group.
The GRC reviewed updates on the strategy and approach to managing credit risk
and credit risk capabilities. The GRC received regular updates on the Group’s
expected credit losses and provisions, and the credit risk arising from the
wholesale portfolio and mortgage books. Throughout the year, the GRC focused
on oversight of management’s enhancement objectives for wholesale credit risk
management, in particular to improve the Group’s approach to country and
industry concentration risks.
The GRC continued its emphasis on building even stronger credit capabilities for
specialty sectors, the development of stronger portfolio management capabilities
and further improving the Group’s credit risk culture. A key focus area continued to
be offering support to our retail customers experiencing financial difficulty, by
maintaining appropriate tools and treatments and ensuring that conduct and good
customer outcomes was a priority.
Financial
reporting risk
HSBC is exposed to risks where controls
supporting the reporting of its financial
statements are not effective, resulting in material
error or misstatement.
While the GAC maintains primary responsibility in relation to internal financial
control systems, with further detail on pages 302 to 307, the GRC receives reports
on entity level control assessments to enable the oversight of the effectiveness of
such controls in support of the Group’s financial reporting. The GRC also receives
relevant audit reports that provide an assessment of control effectiveness for
financial reporting risks.
Resilience risk
(and
operational
risk)
Resilience risks could lead to a situation where
we may be unable to provide our customers with
critical business services due to significant
disruption. 
Technology risks could cause unmanaged
disruption to any IT system within HSBC, as a
result of malicious acts, accidental actions or
poor IT practice, or IT system failure.
The GRC continued its oversight of the Group’s implementation of operational
resilience capabilities in line with PRA and FCA policies. The GRC reviewed and
challenged the operational resilience self-assessment against regulatory
expectations, and worked with management to ensure that ownership and the
delivery of resilience outcomes were embedded within the business and with
function leaders. The GRC also received reports on system incidents and outages
experienced across the Group, including reports on immediate actions being taken
to enhance system continuity for, and communicate with customers, and
measures being implemented to improve resilience-related controls to prevent
reoccurrence.
The GRC regularly reviewed reports on the Group’s technology risk profile, as well
as receiving bi-annual updates in relation to the risk and control environment,  as
well as the current threat landscape and emerging risks. The GRC (working with
the newly-created Group Technology Committee as appropriate) will consider
further the risks and opportunities inherent in the use of AI (generative and
advanced) in 2024.
The GRC maintained a strong focus on understanding the Group’s data risk
landscape, its data strategy and data management programme. The GRC
collaborated with the GAC and the Technology Governance Working Group on data
strategy, the execution plan and timeline for data remediation, the governance
approach and the investment model. Further details on the joint meetings are
included in the 'Collaboration with GAC/GRC/Technology Governance Working
Group’ section on page 311.
Financial crime
risk
There is a risk that HSBC’s products and services
could be exploited for criminal activity, including
fraud, bribery and corruption, tax evasion,
sanctions and export control violations, money
laundering, terrorist financing and proliferation
financing. 
The GRC reviewed the Group’s approach to managing its financial crime risk
across geographies and businesses. This included reviewing updates to the
Group’s financial crime policy, enhancing the approach to insider risk, and
monitoring the fraud landscape and strategies for managing fraud risk.
The ongoing Russia-Ukraine war has necessitated continued oversight of the ever-
changing and increasingly complex international sanctions landscape in which the
Group and its customers operate, as well as the Group’s approach to managing its
compliance with multiple and differing sanctions regimes globally.
People and
conduct risk
People are central to everything HSBC does and
it is essential to manage the risk of not having
the right people with the right skills, and to
ensure staff always have the customer’s interest
at the forefront.
The GRC monitored people risk and employee conduct, with support from the
Group Chief Human Resources Officer and Group Chief Risk and Compliance
Officer. The GRC considered people risk issues with a focus on the four 'c’s:
capacity, capability, culture and conduct. It also considered remuneration risks, and
strategies to retain talent and acquire new capabilities in key areas.
Of key importance, the GRC placed strong emphasis on policies and practices
relating to conduct and fairness to customers, especially vulnerable customers
given heightened macroeconomic pressures and stress on customers across
markets.
The GRC met in November to review the Group’s risk and reward alignment
framework to promote sound and effective risk management in meeting PRA and
FCA remuneration rules and expectations.
Regulatory
compliance
risk
As a result of operating in multiple jurisdictions
globally, HSBC is exposed to risks associated
with inappropriate market conduct or breaching
related financial services regulatory standards or
expectations.
The GRC and its members actively engage with regulators and act on feedback.
The Committee closely monitors the progress of any regulatory remediation
activities, with support from the Group Chief Risk and Compliance Officer as well
as principal subsidiary risk committee chairs. Throughout the year, the GRC had
oversight over reports providing feedback from regulators, including a summary of
regulatory deliverables to ensure HSBC remains in line with regulatory standards
and expectations.
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313
Principal activities and significant issues considered during 2023 (continued)
Risk areas
Key issues
Conclusions and actions
Legal risk
HSBC is exposed to the risk of financial loss,
legal or regulatory action resulting from
contractual risk, dispute management risk,
breach of competition law or intellectual property
risk.
The GRC oversees and receives regular updates on key legal developments and
material legal issues from the Group Chief Legal Officer. The updates also cover
material litigation and regulatory enforcement matters and an overview of the legal
risk profile of HSBC.
Model risk
If models have been inadequately designed,
implemented or used, or do not perform in line
with expectations and predictions, then HSBC
can face risks from inappropriate or incorrect
business decisions arising from their use.
The GRC continued to oversee the Group’s progress in managing model risk
through the Group Chief Risk and Compliance Officer’s Group risk profile report.
The GRC oversaw the progress in achieving our model risk vision, strengthening
our model risk management capabilities and addressing regulatory requirements
across global jurisdictions. In particular, the GRC reviewed the PRA Supervisory
Statement 1/23 and the impact on the Group. The GRC reviewed the new
guidance, potential resource implications and the planned programme of changes
across all three lines of defence. It also noted the enhanced governance
expectations in relation to model oversight.
Climate risk
Environmental, social and governance risks
present significant risks to organisations both in
terms of their own operations and how they
engage with stakeholders and communities.
The GRC remained focused on climate risk and greenwashing risk. The GRC
received reports on climate risk management and energy policies, while
maintaining oversight of delivery plans to ensure that the Group develops robust
climate risk management capabilities. 
The GRC approved the 2023 internal climate scenario analysis and nature scenario
analysis pilot in July 2023. The outcomes will be used to respond to multiple
regional regulatory climate exercises as well as meeting regulatory expectations on
incorporating climate change within the Group’s strategic plans and ICAAP.
Committee evaluation
2022/2023
During 2023, the GRC implemented the recommendations of the
2022 committee evaluation conducted by Lintstock in consultation
with the Group Company Secretary and Chief Governance Officer and
Chief Risk and Compliance Officer. This included the need for
continued focus on the quality of reporting, the importance of
focusing limited agenda time to the most critical issues, and further
clarity in roles and coordination between the GRC and other Board
committees. The outcomes of the evaluation were reported to the
Board, and progress was tracked by the GRC through the year.
2023/2024
During the year, the annual review of the effectiveness of the Board
committees, including the GRC, was conducted externally by
Independent Board Evaluation. The review determined that the GRC
continued to operate effectively.
Areas for enhancement were identified, including the need for:
increased focus on the most significant enterprise risks recognising
the breadth of the risk agenda; continued close engagement with
subsidiaries; and enhancement of induction programmes for new
members given the complexity of much of the subject matter under
discussion. A review of escalation parameters and filters will also be
undertaken by the GRC in 2024.
The outcomes of the evaluation have been reported to the Board and
the GRC will track progress in implementing recommendations during
2024.
Further details of the annual review of effectiveness can be found on
pages 296 to 297.
The Committee will continue to monitor progress to deliver
enhancements in response to feedback from the evaluations in 2024.
Focus of future activities
The GRC’s focus for 2024 will include the following activities:
–oversee risk transformation activities to develop even stronger risk
management capabilities, including the continued enhancement of
the Group's risk appetite and risk management framework,
especially in light of continued geopolitical and macroeconomic
headwinds;
–continue to assess the Group’s operational resilience capability
and the implementation of enhancements to the operating model;
–continue to oversee treasury risk to strengthen our capital and
liquidity management capabilities;
–monitor delivery against our climate ambitions and the
development of appropriate data and model management tools
and capabilities;
–continue the oversight of recovery and resolution planning
activities to assess our resolvability capabilities if such situation
arises;
–continue the oversight of the delivery of technology-related
programmes including the data remediation programme, and
enhancement of the Group’s IT systems/platform;
–continue to oversee financial crime risk and the strengthening of
the financial crime control framework, including proactive
management by the business; and
–assess our strategic opportunities and risks including exposures to
digital currencies or assets and use of timely application of
technology such as machine learning or artificial intelligence.
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HSBC Holdings plc
Directors’ remuneration report
Carolyn fairbairn square.jpg
"The Group’s financial and strategic performance is reflected in the positive remuneration outcomes for our
colleagues, and we remain committed to sharing the benefits of our performance with shareholders."
Dame Carolyn Fairbairn
Chair
Group Remuneration Committee
Membership1
Key responsibilities
Member
since
Meeting attendance
in 2023
The Committee’s key responsibilities include:
–making recommendations to the Board, for approval by
shareholders, on the Group's remuneration policy;
–setting the overarching principles, parameters and governance
framework of the Group’s remuneration policy;
–approving the remuneration of executive Directors and other senior
Group employees; and
–regularly reviewing the effectiveness of the remuneration policy of
the Group and its subsidiaries in the context of consistent and
effective risk management.
Dame Carolyn Fairbairn (Chair)
Sep 2021
7/7
Geraldine Buckingham
May 2022
7/7
Rachel Duan
Sep 2021
7/7
James Forese2
May 2020
3/3
Ann Godbehere3
Sep 2023
2/2
José Antonio Meade
Kuribreña
May 2021
7/7
Eileen Murray4
May 2023
4/4
1  All members of the Committee are independent non-executive
Directors of HSBC Holdings plc.
2  James Forese stepped down from the Committee on 5 May 2023.
3  Ann Godbehere joined the Committee on 1 September 2023.
4  Eileen Murray joined the Committee on 5 May 2023.
All disclosures in the Directors’ remuneration report are unaudited unless otherwise stated. Disclosures marked as audited should be
considered audited in the context of financial statements taken as a whole.
Dear Shareholder
I am delighted to present our 2023 Directors’ remuneration report on
behalf of the members of the Group Remuneration Committee.
I would like to thank Jamie Forese for the counsel he provided to us
all as a member of the Group Remuneration Committee. We
welcomed Eileen Murray and Ann Godbehere as members. They
have already made valuable contributions since their respective
appointments in 2023.
2023 was a year of good performance and positive progress for the
Group. Our colleagues were critical to delivering those outcomes,
remaining committed to serving our customers and clients around the
world. Against that backdrop, the Committee’s focus in 2023 was on
ensuring we deliver an exceptional experience to colleagues. This is
crucial to attract, retain and energise the people we need to sustain
our performance and grow in markets that are highly competitive.
We also spent considerable time in 2023 thinking about executive
Director remuneration, in the context of our strategy, performance
and the removal of the 2:1 UK regulatory cap between variable and
fixed pay. We have started to consider policy options ahead of the
renewal of the Directors' remuneration policy in 2025.
The Committee reflected on feedback from investors following the
vote on the implementation of our current policy at the Annual
General Meeting (’AGM’) in 2023, which received 79.75% of votes
cast in favour.
We explained in our statements of 5 May 2023 and 3 November 2023
that our largest shareholder voted against the Board’s
recommendations on a number of resolutions including the Directors’
remuneration report, which impacted the voting results on these
resolutions. The Board was pleased that a large majority of
shareholders voting at the AGM supported HSBC’s approach. I have
met with several of our large institutional investors and proxy advisory
firms since the AGM, and there remains strong support for our
current Directors' remuneration policy.
We will continue to engage with our major shareholders and listen to
their views as we develop the Directors' remuneration policy next
year.
Performance in 2023
Financial performance
Our financial performance in 2023 reflected the strength of our
balance sheet in a higher interest rate environment and the good
progress made executing our strategy over the last four years.
We delivered a reported profit before tax of $30.3bn, which was up
$13.3bn compared with 2022. This included a favourable year-on-year
impact of $2.5bn relating to the sale of our retail banking operations in
France and a provisional gain of $1.6bn recognised on the acquisition
of Silicon Valley Bank UK Limited (’SVB UK’), which were partly offset
by the recognition of a $3.0bn impairment charge relating to the
investment in our associate, Bank of Communications Co., Limited
(‘BoCom’).
Reported revenue of $66.1bn grew by 30% or $15.4bn compared
with 2022, due to good performance by all three businesses reflecting
higher net interest income from interest rate rises.
Reported costs fell by 2% to $32.1bn, primarily due to the non-
recurrence of restructuring and other related costs. On our cost target
basis, 2023 costs grew by 6% versus our target of approximately 3%
compared with 2022.
Our return on average tangible equity (‘RoTE‘) for 2023 was 14.6%,
compared with 10.0% in 2022. Excluding strategic transactions and
the BoCom impairment, our RoTE was 15.6%.
This performance together with our 50% payout ratio commitment for
2023 (excluding material notable items and related impacts) enables
us to approve a full year dividend of $0.61 per share.
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315
Strategic performance
In 2023, there was further good progress in executing our strategy
across the four strategic pillars aligned to our purpose, values and
ambition. The completion of the sale of our retail banking operations
in France on 1 January 2024 was an important milestone in the
turnaround of our business. However, the strategic focus has shifted
to investing for growth. The acquisition of SVB UK, and subsequent
launch of HSBC Innovation Banking, is a good example of this.
We continued to capitalise on our strengths, which are our two home
markets of Hong Kong and the UK, as well as our international
wholesale, transaction banking and wealth businesses. The
digitisation of our services for personal and corporate customers
helped to improve our net promoter scores in key markets and
businesses. Meanwhile the growth of transaction banking revenue,
fee income in Commercial Banking, and net new invested assets in
Wealth all underlined our focus on improving our earnings
sustainability, which remains a key priority.
Our colleagues are the driving force behind our performance and
progress, with our 2023 employee Snapshot survey demonstrating
that they are more engaged than ever. Our employee focus index,
which gauges how colleagues feel about their day-to-day work, was
76%, which was an increase of four percentage points on 2022. Our
employee engagement index is at an all time high of 77%, which was
also an increase of three percentage points and meant we matched or
exceeded the global financial services benchmark in all eight of our
indices.
We also continued to support our customers in challenging economic
times, particularly in the UK where we supported our personal and
business customers by enhancing our range of digital resources and
targeting those most in need.
Rewarding our colleagues
Our goal is to deliver a unique and exceptional experience to
colleagues so that we sustain our performance in competitive
markets. Our reward principles and commitments centre on
rewarding colleagues responsibly, recognising their success and
supporting them to grow.
Pay is a critical part of our proposition. We were encouraged by a nine
percentage point improvement to 52% in colleagues' perceptions
they are paid fairly because of actions we took through 2022. The
Committee remains very focused on the need to improve this further.
For 2024, we are putting more structure in place to improve
transparency and clarity about how we make pay decisions.
Beyond pay we have a strong proposition of benefits, well-being
support, flexible working options, and learning and career
opportunities to support our colleagues.
In 2023, we saw the maturity of the 2020 three-year Sharesave plan,
which had the highest take-up rate and contribution level in recent
years. The share price at maturity was more than double the option
price, meaning colleagues benefited from our share price growth at a
time when they needed it most. Over 90% of colleagues have access
to share ownership plans globally with 25% of our global population
taking part.
For further details, see ‘Our approach to workforce reward‘ on
page 325.
Fixed pay
For the majority of our colleagues, fixed pay is the biggest part of their
reward, and many continue to be impacted by the economic
environment including inflation and cost of living challenges. Our
focus is on ensuring that we provide financial security through fixed
pay.
Fixed pay is primarily reviewed through our annual pay cycle. Fixed
pay ranges were introduced for over 190,000 colleagues to improve
clarity and transparency and simplify decision making for our people
managers. Effective in 2024, we have awarded an overall fixed pay
increase of 4.4%. The level of increases vary by market, depending
on the economic situation and individual roles. The highest increases
were made to lower paid colleagues, and then focused on middle
management, so that we keep pace with wage inflation.
We have also established Living Wage benchmarks for every market
and were certified as a global Living Wage employer by the Fair Wage
Network for 2024. This is critical to give us further confidence in
meeting our commitments to reward colleagues responsibly.
We continued to take tangible actions to address the most significant
inflationary pressures for colleagues. For example, in Argentina and
Türkiye, we adjusted fixed pay regularly through the year. In Egypt,
we supported our colleagues with a one-off pay adjustment in
response to high inflation.
Variable pay
In determining the 2023 variable pay pool, the Committee wanted to
recognise our strong financial and strategic performance, and the
contribution colleagues have made to that.
The Committee determined an overall variable pay pool of $3,774m,
12% higher than $3,359m in 2022. This was determined based on a
review of our performance against financial and non-financial metrics
set out in the Group risk framework. The Committee considered the
strength of our financial performance in 2023, and the ratio between
variable pay and pre-variable pay profit before tax. The Committee
considered the impact of margins on interest rates in our results, and
lowered the total pool in line with our countercyclical funding
approach. We also considered our total compensation position
compared with the market, and the broader economic outlook.
The Committee considered in respect of all its remuneration decisions
for 2023 the Prudential Regulation Authority's ('PRA') 29 January
2024 Notice relating to HSBC Bank plc's and HSBC UK's compliance
with the UK Financial Services Compensation Scheme ('FSCS') and
related Depositor Protection rules. The PRA penalty was reflected in
the calculation of profitability used to determine the pool. The
Committee carefully considered input from the Group Risk
Committee ('GRC') and determined that no further discretionary
adjustment should be made to the overall variable pay pool. The
circumstances leading to the penalty require a more detailed review
internally to address potential responsibility of individuals, which will
be completed by the Committee in 2024, with any remuneration
adjustments applied once it is complete.
Total compensation across all our businesses increased relative to
2022, rewarding our colleagues for their contribution to our
performance. The distribution of the pool by business considered
relative performance against revenue, reported profit before tax and
cost targets. Strong differentiation has meant our highest performers
received the largest increases in variable pay compared with the
previous year.
Key remuneration decisions for executive Directors
Annual incentive for 2023 performance
The Group’s financial and strategic performance is reflected in the
executive Directors’ annual scorecards. The Committee believes this
reflects their individual leadership and contribution to delivery of the
Group‘s performance.
At the start of the year, the Committee set the scorecards to align
with our reported financial performance. The Committee considered
carefully the impact of strategic transactions and one-offs on the
Group's financial performance in 2023, including the favourable year-
on-year impact of $4.1bn relating to the sale of our retail banking
operations in France and the provisional gain on the acquisition of
SVB UK, balanced with the $3.0bn impairment charge relating to the
investment in BoCom.
Consistent with the approach in prior years, the Committee judged
that it was appropriate to assess financial performance for the
purpose of the annual scorecard excluding these items, to ensure that
out-turns were not impacted by one-offs. The assessment of RoTE
and profit before tax measures therefore excluded strategic
transactions and the BoCom impairment.
The Committee also considered the impact of interest rates on
performance and noted that macroeconomic fluctuations remain a
frequent driver of the Group’s business outcomes for our executives
to manage. In recent years these factors have not led to discretionary
scorecard adjustments for our executive Directors, either positive or
negative, which the Committee continues to believe is appropriate.
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HSBC Holdings plc
As part of its deliberations, the Committee reflected on the overall
risk management in the year, and in respect of the PRA Notice: the
nature of the failings identified; the regulator’s finding that the
breaches identified were not deliberate or reckless; fines levied; and
the tenure and specific responsibilities of the executive Directors in
relation to the issues covered.
Taking into account inputs from the GRC and the overall accountability
of the Group Chief Executive for the performance and risk
management of the Group in 2023, the Committee used its
judgement and applied a downward adjustment of 7.50% to Noel
Quinn’s scorecard outcome.
This results in a final scorecard outcome of 70.24% of the maximum
opportunity for Group Chief Executive Noel Quinn (2022: 75.35%) and
an annual incentive of £2,018,000, which is 7% lower than
£2,164,000 in 2022.
The scorecard for Group Chief Financial Officer Georges Elhedery was
76.75%, resulting in an annual incentive of £1,287,000.
The Committee considered that these final outcomes were a
balanced and appropriate reflection of Group and individual
performance delivered in 2023, and appropriate in the context of the
pay decisions made for the wider workforce.
2021–2023 long-term incentive ('LTI') vesting
Noel Quinn and Ewen Stevenson (the former Group Chief Financial
Officer) participated in the 2021–2023 LTI that will vest in March
2024. As disclosed in our 2020 Directors’ remuneration report, the
Committee considered windfall gains at the time of award and
determined no adjustment was appropriate.
The maximum RoTE and relative total shareholder return (‘TSR’)
targets were exceeded. The capital reallocation to Asia measure was
not met and the environment and sustainability measures were
assessed to be 100% met. Overall, 75.00% of the original award will
vest on a pro-rata basis over the next five years. Ewen Stevenson’s
awards have been pro-rated for time in employment.
As this is the first LTI vesting for Noel Quinn, his single figure of
remuneration for 2023 is materially changed. The 2023 single figure of
remuneration for Noel Quinn is £10,641,000 (compared with
£5,562,000 for 2022). The value of the LTI award reflects the Group's
improvement in performance, shareholder returns and share price
over 2021 to 2023, and Noel Quinn's leadership in reshaping the
Group to deliver more sustainable returns to shareholders.
Noel Quinn's LTI vesting also means that the pay ratio measuring the
total pay of the Group Chief Executive against the median pay of our
UK employees has increased to 169:1 compared with 95:1 last year.
Excluding the LTI vesting in respect of the year, the median ratio
remained broadly in line with prior years at 86:1. This is consistent
with the pay and progression policies for our UK workforce,
considering the diverse mix of employees, the pay mix for various
roles and the differences in pay structure compared with executive
Directors.
2024–2026 LTI awards
We have reviewed the performance measures for LTI awards
considering the next phase of our strategy over 2024 to 2026. We will
retain Group RoTE, relative TSR and environment targets, reflecting
our strategic commitments, and to measure relative performance
compared with peers. The capital reallocation to Asia measure was
previously included to retain focus on repositioning the Group’s capital
base through the transformation of the business. While our
operations in Asia continue to be of significant strategic importance to
the Group, it was the Committee’s view that this measure no longer
appropriately incentivises the delivery of sustainable returns
achievable across wider markets in which HSBC operates. We are
simplifying the 2024–2026 LTI by removing this metric and increasing
the weighting of RoTE and relative TSR.
The relative TSR peer group was amended for 2023 to include more
Asian peers to better reflect our growth and investment focus. We do
not propose to make any changes for 2024 other than the removal of
the Credit Suisse Group following its acquisition by UBS Group.
Noel Quinn and Georges Elhedery will each receive a 2024–2026 LTI
award of 320% of base salary in respect of their performance for
2023 (Noel Quinn: £4,275,000; Georges Elhedery: £2,496,000).
Subject to performance over the next three years, awards will vest
over a further five years with a one-year retention period on vesting
shares. Further details on our targets can be found on page 322.
Fixed pay for 2024
We have increased the base salary of our executive Directors by 3%,
effective from 1 March 2024. The increase is lower than the overall
fixed pay increase of 4.4% for our wider workforce.
Remuneration in 2024
The Committee welcomes the change announced by the PRA and the
Financial Conduct Authority ('FCA') to remove the existing limits on
the ratio between fixed and variable pay.
The announcement, together with the wider considerations on the
overall competitiveness of the UK capital markets, provides us an
opportunity to consider the competitiveness of our remuneration
arrangements for our executive Directors and wider workforce.
At the 2024 AGM, we will seek shareholder approval to provide the
Committee with discretion, where regulations allow, to set an
appropriate variable to fixed pay ratio considering all relevant factors,
including our business activities and associated prudential and
conduct risks.
This will improve flexibility in the structure of remuneration to
increase the amount of pay that is variable, subject to the delivery of
performance. It will also strengthen our ability to recruit and retain
people in competitive markets where many of our international
competitors do not have similar restrictions.
We remain very supportive of the use of deferral mechanisms and the
requirements to deliver a substantial portion of variable remuneration
in shares to ensure alignment between shareholders, good risk
management and individual reward.
For our executive Directors, we have started early engagement with
institutional shareholders and proxy advisory bodies ahead of the
renewal of our Directors' remuneration policy in 2025. Over several
years, the Committee has expressed concerns around the
competitiveness of the executive Director remuneration opportunity
and indicated that our preference would be to operate a policy with a
higher proportion of the package based on variable pay linked to
performance. The Committee continues to believe in a more
performance-based structure, and we will seek shareholder approval
for a new Directors' remuneration policy at the 2025 AGM in line with
the normal three-year cycle after engaging with shareholders through
2024.
Conclusion
On behalf of the Committee, I would like to thank our shareholders
for the time taken to engage with us during the year. We welcome
the feedback on our approach to remuneration and I look forward to
engaging with you further in the year ahead as we continue our
review of the Directors’ remuneration policy, in advance of the 2025
AGM.
As Chair of the Committee, I hope you will support the 2023
Directors’ remuneration report and the resolution to remove the 2:1
cap on variable pay for our Material Risk Takers at this year's AGM.
Dame Carolyn Fairbairn
Chair
Group Remuneration Committee
21 February 2024
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317
Executive remuneration at a glance
This section sets out an overview of our performance, 2023 remuneration outcomes for executive Directors and a summary of the policy
approved by shareholders at our 2022 AGM, including how we will implement the policy in 2024. 
Our performance
Reported profit before
tax
$30.3bn
(2022: $17.1bn)
Net new invested
assets
$84bn
(2022: $80bn)
Operating expenses
$32.1bn
(2022: $32.7bn)
Return on average
tangible equity
14.6%
(2022: 10.0%)
Employee engagement
index1
77%
(2022: 74%)
Inclusion index
78%
(2022: 76%)
Percentage of colleagues of
Asian heritage in senior
leadership roles
37.8%
(2022: 34.0%)
Percentage of women in
senior leadership roles2
34.1%
(2022: 33.3%)
1The 2022 employee engagement index score has been recalculated to reflect a change in the composition of questions in the 2023 index to ensure
comparisons remain valid. In 2022 the employee engagement index was reported as 73%.
2The percentage of women in senior leadership roles excluded the Canada business held for sale.
Remuneration outcomes for executive Directors
Summary remuneration outcomes for 2023 are set out below. Further details are set out in our annual report on Directors‘ remuneration on
pages 320 to 322.
Noel Quinn
Georges Elhedery
Annual incentive outcome (£000)
194063802404532
195163314032400
Long-term incentive outcome (£000)
194063802404652
Georges Elhedery did not participate in the
2021–2023 long-term incentive
Single figure of remuneration (£000)
241892558216223
241892558216224
Shareholding (% of base salary)
17592186045775
228698418683279
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HSBC Holdings plc
Remuneration policy summary – executive Directors
Our Directors' remuneration policy was approved at the AGM on 29 April 2022. The full policy can be found on pages 257 to 265 of our Annual
Report and Accounts 2021 and in the Directors’ Remuneration Policy Supplement, which is available under Group results and reporting in the
‘Investors‘ section of www.hsbc.com. 
Elements and objectives
Operation
Implementation in 2024
Base salary
–Base salary is paid in cash on a monthly basis.
–Other than in exceptional circumstances, the base salary for the current executive
Directors will not increase by more than 15% above the level at the start of the policy
period in total for the duration of the policy.
Base salary will increase by
3% for 2024 and will be:
–Noel Quinn: £1,376,000
–Georges Elhedery:
£803,000
Fixed pay allowance (‘FPA’)
–The FPA is granted in instalments of immediately vested shares.
–On vesting, the net number of shares delivered (after those withheld to cover any income
tax and social security) are subject to a retention period and released annually on a pro-rata
basis over five years, starting from the March immediately following the end of the
financial year for which the shares are granted.
–Dividends are paid on the vested shares held during the retention period.
FPA will not be increased for
2024 and will remain:
–Noel Quinn: £1,700,000
–Georges Elhedery:
£1,085,000
Cash in lieu of pension
–10% of base salary is paid on a monthly basis.
–This allowance, as a percentage of salary, is aligned with the maximum contribution rate
that HSBC could make for a majority of employees who are defined contribution members
of the HSBC Bank (UK) Pension Scheme.
–No change to percentage of
base salary.
Annual incentive
–The maximum opportunity is up to 215% of base salary.
–Performance is measured against an individual scorecard.
–At least 50% of any award is delivered in shares, which are normally immediately vested.
–On vesting, the net number of shares that have vested (after those sold to cover any
income tax and social security payable) will be held for a retention period of up to one year,
or such period as required by regulators.
–Awards will be subject to clawback (i.e. repayment or recoupment of paid vested awards)
for a period of seven years from the date of award, extending to 10 years in the event of
an ongoing internal/regulatory investigation at the end of the seven-year period. Any
unvested awards will be subject to malus (i.e. reduction and/or cancellation) during any
applicable deferral period.
–No change to opportunity.
–See page 324 for 2024
measures.
Long-term incentive (‘LTI’)
–The maximum opportunity is up to 320% of base salary.
–The LTI award is granted if the Committee considers that there has been satisfactory
performance over the prior year, and is subject to a forward-looking three-year
performance period from the start of the financial year in which the awards are granted.
–At the end of the performance period, awards will vest in five equal instalments, with the
first vesting on or around the third anniversary of the grant date and the last instalment
vesting on or around the seventh anniversary of the grant date.
–On vesting, the net number of shares that have vested (after those sold to cover any
income tax and social security payable) will be held for a retention period of up to one year,
or such period as required by regulators.
–Awards are subject to malus provisions prior to vesting. Vested shares are subject to
clawback on the same terms as the annual incentive.
–Awards may be entitled to dividend equivalents during the vesting period, paid on vesting.
Where awards do not receive dividend equivalents, the number of shares awarded can be
determined using the share price discounted for the expected dividend yield.
–No change to opportunity.
–See page 323 for details of
the 2024–2026 LTI awards.
Benefits
–Benefits include the provision of medical insurance, accommodation, car, club
membership, independent legal advice in relation to a matter arising out of the
performance of employment duties for HSBC, tax return assistance or preparation, and
travel assistance (including any associated tax due, where applicable).
–Additional benefits may also be provided when an executive is relocated or spends a
substantial proportion of his/her time in more than one jurisdiction for business needs.
–Benefits to be provided as
per policy and details
disclosed in the Annual
Report and Accounts 2024
single figure of
remuneration table.
Shareholding guidelines
Executive Directors are expected to satisfy the following shareholding requirement as a
percentage of base salary within five years from the date of their appointment:
–Group Chief Executive: 400%
–Group Chief Financial Officer: 300%
–No change to percentage of
base salary.
All-employee share plans
Executive Directors are eligible to participate in all-employee share plans, such as HSBC
Sharesave, on the same basis as all other employees.
–Participation will be
disclosed in the respective
Annual Report and
Accounts, as required.
HSBC Holdings plc
319
Annual report on Directors’ remuneration
This section sets out how our approved Directors’ remuneration policy was implemented during 2023.
Determining executive Directors’ incentive outcomes
(Audited) 
For any annual incentive award to be made, each executive Director
must achieve a minimum standard of conduct and values-aligned
behaviour. Both executive Directors met this requirement for 2023.
The award is determined by applying the outcome of their annual
scorecard to the maximum opportunity, set at 215% of base salary.
The financial measures, weightings and targets were set at the start
of the financial year to align with our reported financial performance
and before significant changes in the interest rate environment. They
considered the 2023 financial plan, data from 2022, external
commitments, scenario testing of upside and downside risks in the
plan, and analyst consensus where relevant.
The Committee considered carefully the wider context in which
performance was delivered and the impact of strategic transactions
and one-offs on the Group's financial performance in 2023, including
the favourable year-on-year impact of $4.1bn relating to the sale of
our retail banking operations in France and the provisional gain on the
acquisition of SVB UK, balanced with the $3.0bn impairment charge
relating to the investment in BoCom.
Consistent with the approach in prior years, the Committee judged
that it was appropriate to assess financial performance for the
purpose of the annual scorecard excluding these items, to ensure that
out-turns were not impacted by one-offs. The assessment of RoTE
and profit before tax measures therefore excluded strategic
transactions and the BoCom impairment.
The Committee also considered the impact of interest rates on
performance and noted that macroeconomic fluctuations remain a
frequent driver of the Group’s business outcomes for our executives
to manage. In recent years these factors have not led to discretionary
scorecard adjustments for our executive Directors, either positive or
negative, which the Committee continues to believe is appropriate.
Performance was above the maximum targets for Group profit before
tax, Group RoTE and Asia RoTE. On our cost target basis, growth was
6% versus our target of approximately 3% compared with 2022 and
below the performance range.
For strategic measures, diversity representation targets were set
based on a trajectory to meet our external commitments. Other
measures were set based on maintaining or improving when
compared with 2022 performance and/or market benchmarks.
The Inclusion index in our employee Snapshot survey exceeded
target, and was significantly above the financial services benchmark.
We met or exceeded our senior leadership diversity representation
targets. Our customer net promoter score ('NPS') performance was
largely positive relative to our competitors in most areas of our
business.
The Committee considered that the scorecard outcome for personal
measures for both Noel Quinn and Georges Elhedery was appropriate
against the targets set at the start of the year.
Overall, this resulted in a formulaic scorecard outcome of 75.93% of
the maximum for Noel Quinn and 76.75% for Georges Elhedery.
The Committee discussed at length whether the risk and compliance
modifier should be applied for 2023 for the Group’s performance
against key risk metrics, including the historical failings identified by
the PRA in its Notice of 29 January 2024.
As part of its deliberations, the Committee reflected on the overall
risk management in the year, and in respect of the PRA Notice: the
nature of the failings identified; the regulator’s finding that the
breaches identified were not deliberate or reckless; fines levied; and
the tenure and specific responsibilities of the executive Directors in
relation to the issues covered.
Taking into account inputs from the Group Risk Committee and Noel
Quinn's overall accountability for the performance and risk
management of the Group in 2023, the Committee used its
judgement and applied a downward adjustment of 7.50% to his
scorecard outcome.
This results in a final outcome of 70.24% of the maximum opportunity
for Noel Quinn (2022: 75.35%) and an annual incentive of £2,018,000,
which is 7% lower than £2,164,000 in 2022.
No risk and compliance modifier was applied for Georges Elhedery
who was appointed as Group Chief Financial Officer on 1 January
2023, after all underlying issues identified by the PRA had been fully
remediated. Georges Elhedery's scorecard outcome of 76.75%
results in an annual incentive of £1,287,000.
Annual incentive scorecard assessment
(Audited)
Summary assessment
Minimum
(25.0%
payout)
Maximum
(100.0%
payout)
Noel Quinn
Georges Elhedery
Performance2
Weighting
(%)
Assessment
(%)
Outcome
(%)
Weighting
(%)
Assessment
(%)
Outcome
(%)
Profit before tax1 ($bn)
25.8
30.3
31.6
15.0
100.00
15.00
15.0
100.00
15.00
Target basis operating
expenses ($bn)
31.0
30.5
31.6
15.0
—
—
15.0
—
—
Group RoTE1
12.0%
14.5%
15.6%
15.0
100.00
15.00
15.0
100.00
15.00
Asia RoTE1
12.8%
15.0%
16.8%
5.0
100.00
5.00
5.0
100.00
5.00
Fee income ($bn)
11.8
13.1
11.84
5.0
25.55
1.28
5.0
25.55
1.28
Growth in
net new
invested
assets ($bn)
Total (ex
Hong Kong)
36.6
56.8
55.1
2.5
93.73
2.34
2.5
93.73
2.34
Total
58.8
79.0
84.3
2.5
100.00
2.50
2.5
100.00
2.50
Customer satisfaction
See following tables for commentary
15.0
91.67
13.75
15.0
91.67
13.75
Employee experience
15.0
93.75
14.06
15.0
93.75
14.06
Personal objectives
10.0
7.00
10.0
7.81
Total
100.0
75.93
100.0
76.75
Scorecard outcome (000)
£2,181
£1,287
7.50% risk adjustment per
Committee judgement (000)
£(163)
£0
Annual incentive (000)
£2,018
£1,287
1  Assessed excluding strategic transactions and BoCom impairment.
2  The CET1 capital ratio underpin was met.
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HSBC Holdings plc
Stakeholder measures for Noel Quinn and Georges Elhedery
Measures
Weighting (%)
Assessment considerations by the Committee
Assessment (%)
Outcome (%)
Customer
satisfaction
Maintain and
improve NPS
in the UK
and Hong
Kong, in
digital
markets, and
in key
growth
markets
15.0%
–NPS is sourced from our strategic NPS surveys with results gathered
through independent third-party research agencies. The assessment is
against quantitative targets set based on the level of improvement from the
prior year and in rank position.
–In the UK and Hong Kong, we met our maximum NPS target and largely met
the target in digital markets. Across other growth markets we met our
maximum NPS target.
–In WPB, our NPS increased in five of our six key markets (Hong Kong,
mainland China, Mexico, India and Singapore). In the UK, the slight decline
of our NPS was driven by mass affluent customers. We ranked among the
top three banks in three of our six key markets. In Hong Kong, we remained
in first place overall, leading the market with our mobile app performance.
Our rank remained in the top three in mainland China, and rose to the top in
India.
–In CMB, we ranked among the top three banks in four of our six key
markets. We were first place in Hong Kong and within the top three in
mainland China, Singapore and Mexico.
–In GBM, we ranked in first place globally for NPS and digital satisfaction.
91.67%
13.75%
Employee
experience
Improve
diversity and
inclusion
15.0%
–The Inclusion index in our employee Snapshot survey increased by two
percentage points and exceeded the maximum target of 77%. The score is
seven points above the external financial services benchmark.
–The percentage of Black heritage colleagues in senior leadership roles
increased by 0.5 percentage points to 3.0%, meeting the maximum target
and on track to meet our external commitment of 3.4% by 2025.
–We made a 3.8 percentage point year-on-year net gain in senior leadership
representation of colleagues with Asian heritage, against a 2022 year-end
baseline of 34.0%
–The percentage of women in senior leadership roles increased by
0.8 percentage points to 34.1%, meeting the target, and below the
maximum. The targets excluded the Canada business held for sale.
Including colleagues in HSBC Canada, gender representation in senior
leadership is 34.2%.
93.75%
14.06%
Personal objectives for Noel Quinn and Georges Elhedery
For each executive Director, personal objectives were set at the start of the year and measured by the Committee against agreed targets and key performance
indicators.
Noel Quinn
Weighting
Assessment
Performance achievement
Technology
transformation
4.0%
50.00%
–Our Cloud adoption rate, which is the percentage of our technology services on the private or public Cloud,
increased to 43% (2022: 35%). At the end of 2023, about 54% of our WPB customers were 'mobile active'
users (2022: 49%) and the proportion of WPB sales completed digitally increased to 49% (2022: 43%).
–The Committee's assessment balanced strong progress automating our organisation at scale against the
targets set, and progress to deliver our wider multi-year technology strategy.
Progress on
innovation
programmes
4.0%
100.00%
–Several strategic investments were made in Asia including Meditrust, a unicorn start-up, which will support
HSBC Life’s Pinnacle proposition in mainland China. Investments were made in a joint venture with
Tradeshift, an existing Ventures investment, which will support the trade finance business to deploy a range
of technology solutions.
–In 2023, Zing, our new international payments business aimed at non-HSBC customers, was launched, and
a digital currency capability with eHKD was piloted in Hong Kong. We became the first bank to pioneer
quantum protection for foreign exchange trading, and were one of the first international banks to participate
in China’s eCNY programme.
–Progress was made on several generative AI use cases including developer productivity, knowledge
management and content generation. Our first AI patent to be used to detect cyber threats, was filed.
Simplification of
processes and
organisation
2.0%
50.00%
–Strong progress was made with the completion of the exit from Greece, merger in Oman, and sale of the
New Zealand WPB mortgage portfolio.
–The sale of our retail banking portfolio in France was completed on 1 January 2024 and we remain on track
to sell our retail banking operations in Canada in the first quarter of 2024.
–The timing of our planned exit from our business in Russia was impacted by dependency on the regulatory
and government approval process, which is outside of HSBC’s control.
–Exits from our WPB business in Mauritius and our hedge fund administration business were announced.
Total
7.00% out of 10.00%
Georges Elhedery
Weighting
Assessment
Performance achievement
Deliver activities
relating to
regulatory priorities
2.5%
58.33%
–The Integrity of Regulatory Reporting programme continues to remediate against known gaps to deliver
improvements in quality of regulatory returns.
–The Bank of England Resolvability Assessment Framework self-assessment was submitted, demonstrating
an uplift in the Group’s capabilities.
–Certain climate considerations have been assessed and incorporated into the annual financial planning cycle.
We also enhanced our climate scenario analysis capabilities in line with plan.
Deliver Finance
change
transformation and
digitisation
2.5%
62.50%
–For the remediation of interest rate risk in the banking book, all 2023 targeted actions were completed from
a first line of defence perspective, subject to second and third line of defence review and confirmation in
early 2024 as planned.
–Identified Finance change transformation activities have been deployed in line with plans.
More energised
Finance workforce
2.5%
100.00%
–  Global Finance employee engagement index increased to 79% (2022: 74%), exceeding the target set.
–  Global Finance career index increased to 69% (2022: 65%), exceeding the target set.
Drive liquidity and
capital management
across the Group
2.5%
91.67%
–The Group’s CET1 capital ratio was delivered above our target operating range.
–Planned liquidity optimisation outcomes were successfully met.
–Targets relating to earnings stabilisation were assessed as met.
Total
7.81% out of 10.00%
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321
Single figure of remuneration
(Audited)
The following table shows the single figure of remuneration of each executive Director for 2023, together with comparative figures. This is the
first vesting LTI for Noel Quinn since his appointment as Group Chief Executive in 2020 and so materially changes the composition of his single
figure of remuneration for 2023.
Single figure of remuneration
Noel Quinn
Georges Elhedery1
(£000)
2023
2022
2023
2022
Base salary
1,336
1,329
780
—
Fixed pay allowance (’FPA’)
1,700
1,700
1,085
—
Cash in lieu of pension
134
133
78
—
Taxable benefits2
127
119
4
—
Non-taxable benefits
89
86
52
—
Total fixed
3,386
3,367
1,999
—
Annual incentive3
2,018
2,164
1,287
—
Notional returns4
43
31
6
—
Replacement award
—
—
—
—
Long-term incentive5
5,195
—
—
—
Total variable
7,256
2,195
1,293
—
Total fixed and variable
10,641
5,562
3,292
—
1Georges Elhedery was appointed Group Chief Financial Officer from 1 January 2023.
2Taxable benefits include the provision of medical insurance, car benefit, accommodation and tax return assistance (including any associated tax due,
where applicable). Non-taxable benefits include the provision of life assurance and other insurance cover.
3Annual incentive awards to the executive Directors are awarded 50% in cash and 50% in shares. The shares portion of the award vests immediately
at grant and is subject to a retention period of one year and clawback provisions.
4Deferred cash awards granted in prior years include a right to receive notional returns for the period between the grant and vesting date. This is
determined by reference to a rate of return specified at the time of grant and paid annually, with the amount disclosed on a paid basis.
5An LTI award over 1,118,554 shares was made in February 2021 (in respect of 2020) at a share price of £4.262 for which the performance period
ended on 31 December 2023. The value has been computed based on a share price of £6.192, the average share price during the three-month period
to 31 December 2023. The value attributable to share price appreciation is £1,619,106. See the following section for details of the assessment
outcomes, which resulted in 75.00% vesting due to performance.
Benefits
The values of the significant benefits in the single figure table are set out in the following table. The insurance benefit for Noel Quinn has
increased year on year because of the increase in premium at annual renewal. The car benefits for Georges Elhedery are not included in the
table below as they were not deemed significant.
Noel Quinn
Georges Elhedery
(£000)
2023
2022
2023
2022
Insurance benefit (non-taxable)
84
82
49
—
Accommodation in Hong Kong (taxable)
67
39
—
—
Car and driver in UK and Hong Kong (taxable)
47
69
—
—
Long-term incentive (’LTI’) awards
(Audited)
LTI awards over 2021 to 2023 performance period
The 2021–2023 LTI award was granted to Noel Quinn and Ewen
Stevenson in February 2021. Georges Elhedery was in a different role
at the time and did not receive the 2021–2023 LTI award.
The scorecard delivered an outcome of 75.00%, reflecting a
significant improvement in shareholder returns across the
performance period.
In line with the terms of his departure, Ewen Stevenson is a good
leaver and his award has been pro-rated for time in employment.
Based on the performance outcome, 838,915 shares will vest for
Noel Quinn and 371,697 shares will vest for Ewen Stevenson. The
awards will vest in five equal annual instalments commencing in
March 2024.
The Committee is mindful of executives not experiencing ’windfall
gains’ through the granting of LTI awards when a share price is
particularly low. We introduced an upfront windfall gains check for the
2021–2023 LTI award such that if the LTI grant share price
experienced a greater than 30% decline since the previous grant,
then a downward adjustment would be made. The Committee
determined that there were no windfall gains to consider for this
award given the share price at grant (£4.26) was 24% below the
share price at the previous LTI grant (£5.62).
The 2021–2023 LTI award is subject to a risk and compliance
modifier. The Committee received input from the GRC who assessed
that the performance targets were delivered with appropriate risk
management. On this basis, the Committee considered that no
adjustment for risk should be made to the 2021–2023 LTI award. The
CET1 capital ratio underpin for the 2021–2023 LTI award was also
met.
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HSBC Holdings plc
Assessment of the 2021–2023 LTI awards
Measures (weighting)1
Minimum   
(25.0% payout)
Target       
(50.0% payout)
Maximum 
(100.0% payout)
Actual
Assessment
Outcome
RoTE with CET1 capital ratio underpin2
(25.0%)
8.0%
9.0%
10.0%
14.6%
100.0%
25.00%
Capital reallocation to Asia with CET1
capital ratio underpin3 (25.0%)
45.0%
47.0%
50.0%
43.4%
0.0%
0.00%
Transition to net
zero4 (25.0%)
Carbon reduction
(own emissions)
42.0%
48.0%
51.0%
57.3%
100.0%
12.50%
Sustainable finance
and investment
$200.0bn
$240.0bn
$260.0bn
$294.0bn
100.0%
12.50%
Relative TSR5 (25.0%)
At median of the
peer group
Straight-line
vesting between
minimum and
maximum
At upper quartile
of the peer group
Above upper
quartile
100.0%
25.00%
Total
75.00%
1  Awards vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set out in this table.
2  Assessed based on RoTE in the 2023 financial year. The CET1 capital ratio underpin was met.
3  Assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2023,
which was not met.
4  Carbon reduction assessed on percentage reduction in total energy and travel emissions achieved by 31 December 2023 using 2019 as the baseline.
Sustainable finance and investment assessed on cumulative financing provided over the performance period.
5  The peer group was: Bank of America, Barclays, BNP Paribas, Citigroup, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds
Banking Group, Morgan Stanley, Standard Chartered and UBS Group. Credit Suisse Group was removed from the peer group following its acquisition
by UBS Group in June 2023.
LTI awards over 2024 to 2026 performance period
After taking into account performance for 2023, the Committee
decided to grant Noel Quinn an LTI award of £4,275,000 and Georges
Elhedery an LTI award of £2,496,000 (both 320% of base salary).
The awards will have a three-year performance period starting on
1 January 2024.
The Committee has reviewed the performance measures considering
feedback from shareholders and the next phase of our strategy. We
are simplifying and improving the focus on shareholder returns by
assessing performance on three measures, including RoTE and
relative TSR which are equally-weighted financial measures, and a
third measure linked to our climate ambitions.
The capital reallocation to Asia measure was previously included to
retain focus on repositioning the Group’s capital base through the
transformation of the business. While our operations in Asia continue
to be of significant strategic importance to the Group, it was the
Committee’s view that this measure no longer appropriately
incentivised the delivery of sustainable returns achievable across
wider markets in which HSBC operates.
Targets have been set to balance stretch and achievability so that
awards act as an effective incentive for management, and incentivise
outperformance, aligned to our external strategic commitments.
–The minimum threshold for the RoTE measure is aligned to our
external commitment of mid-teens RoTE over the medium term.
–The relative TSR peer group was amended for 2023 to include
more Asian peers to better reflect our growth and investment
focus. No changes have been made for 2024 other than the
removal of the Credit Suisse Group following its acquisition by
UBS Group.
–Our emissions reduction targets have been set based on meeting
our commitments to procure 90% renewable energy by 2025 and
halve energy consumption and travel emissions by 2030.
–Our sustainable finance and investments measure is based on our
ambition announced in 2020 to provide $750bn to $1tn of
financing and investment by 2030. Although the target range is
lower than for the 2023–2025 LTI awards, we are on track to meet
our 2030 ambition, with changing market conditions slightly
impacting our year-on-year trajectory.
The LTI is subject to a risk and compliance modifier, which gives the
Committee the discretion to ensure performance targets are delivered
with appropriate risk management.
The RoTE measure is subject to a CET1 capital ratio underpin. If the
CET1 capital ratio at the end of the performance period is below the
CET1 risk tolerance level set in the risk appetite statement, then the
assessment for this measure will be reduced to nil.
The number of shares to be awarded will be adjusted to reflect the
expected dividend yield of the shares over the vesting period, as
awards are not entitled to dividend equivalents in accordance with
regulatory requirements.
To the extent performance conditions are satisfied at the end of the
three-year performance period, the awards will vest in five equal
annual instalments commencing from around the third anniversary of
the grant date. On vesting, shares equivalent to the net number of
shares that have vested (after those sold to cover any income tax and
social security payable) will be held for a retention period of up to one
year, or such period as required by regulators.
HSBC Holdings plc
323
Performance conditions for the 2024–2026 LTI awards
Measures (weighting)1
Minimum               
(25.0% payout)
Target                         
(50.0% payout)
Maximum                   
(100.0% payout)
RoTE with CET1 capital ratio underpin2 (37.5%)
14.0%
16.0%
17.0%
Environment3 (25.0%)
Carbon reduction
(own emissions)
66.0%
70.0%
74.0%
Sustainable finance
and investment
$539.0bn
$641.0bn
$693.0bn
Relative TSR4 (37.5%)
At the median of the peer
group
Straight-line vesting
between minimum and
maximum
At the upper quartile of the
peer group
Subject to risk and compliance modifier
The Group Remuneration Committee retains the discretion to revise down the formulaic outcome taking into account performance against risk and compliance
factors during the performance period.
1Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2To be assessed based on RoTE at the end of the performance period, subject to the CET1 capital ratio underpin.
3Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2026 using 2019 as
the baseline. The sustainable finance and investment metric will assess the cumulative amount provided and facilitated over the period ending
31 December 2026.
4The peer group for the 2023 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings,
J.P. Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.
Annual incentive measures for 2024
The 2024 annual incentive scorecard measures for our executive
Directors have been set to incentivise the delivery of the next phase
of our strategy.
We have reduced the number of financial measures, reflecting
feedback from shareholders to simplify our approach and ensure
focus on our key strategic commitments. The weighting of Group
RoTE has increased to 25% (from 15% in 2023). The overall
weighting of financial measures remains at 60%.
Financial measures will be assessed on a reported basis excluding
notable items so that the outcome reflects performance excluding the
impact of one-off and items not controlled by management.
Our first net zero transition plan was launched in January 2024 setting
out our approach to net zero and the actions we are taking. To
support our ambition, a sustainability measure has been added to the
annual scorecard, which will be assessed based on the execution of
our sustainability commitments against Board approved plans.
Personal measures have been set to ensure meaningful weighting for
the most critical objectives for each executive Director.
The Committee will continue to retain discretion to adjust the
formulaic outcomes of scorecards, taking into account factors such as
Group profits, wider business performance and stakeholder
experience, to ensure executive reward is aligned with underlying
Group performance and the broader stakeholder experience.
The weightings and performance measures for the 2024 annual
incentive scorecard for executive Directors are in the adjacent table.
The targets have been set to reflect the Group’s 2024 plan, while
considering macroeconomic uncertainty, including the interest rate
environment and inflation. The performance targets are commercially
sensitive and it would be detrimental to the Group’s interests to
disclose them at the start of the financial year. Subject to commercial
sensitivity, we will disclose the targets in the 2024 Directors’
remuneration report.
2024 annual incentive performance measures
Weighting
Financial (all measures subject to CET1 capital ratio
underpin, and excluding notable items)
60.0%
Profit before tax
15.0%
Operating expenses
15.0%
Group RoTE
25.0%
Asia RoTE
5.0%
Stakeholders
30.0%
Customer satisfaction
Improvement in NPS scores/rank
15.0%
Employee experience
Gender and ethnicity representation and Inclusion index score
10.0%
Execution of our sustainability commitments against Board
approved plans
5.0%
Personal measures
–Group Chief Executive: Technology transformation and
enhanced Board information
–Group Chief Financial Officer: Delivery of regulatory change
programmes (including regulatory reporting), enhancement of
external disclosures and robust liquidity and capital
management 
10.0%
Subject to risk and compliance modifier
The Group Remuneration Committee retains the discretion to
revise down the formulaic outcome taking into account
performance against risk and compliance factors during the
performance period.
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Our approach to workforce reward
Our goal is to deliver a unique and exceptional experience to energise
colleagues to perform at their best. This is critical to strengthening our
ability to attract, retain and motivate the people we need, in
competitive markets where employee expectations continue to
evolve.
Our approach is centred on our purpose and values, and our reward
principles and commitments are:
–We will reward our colleagues responsibly through fixed pay
security and protection through core benefits, a competitive total
compensation opportunity, pay equity, and a more inclusive and
sustainable benefits proposition over time.
–We will recognise colleagues' success through our performance
culture and routines, including feedback and recognition, pay for
performance, and all employee share ownership opportunities.
–We will support our colleagues to grow through our proposition
beyond pay, with a focus on future skills and development,
support for well-being, and flexibility.
Pay is an important part of our overall proposition. Our focus is
improving transparency and clarity for colleagues so they understand
better how we make pay decisions.
For 2024, we will introduce a new variable pay structure for over
150,000 junior and middle management colleagues, providing more
clarity around the variable pay levels for on-target performance, while
retaining flexibility to differentiate outcomes for performance.
We have been certified by the Fair Wage Network as a global Living
Wage employer for 2024. This is an important commitment to give
colleagues confidence that our fixed pay levels are sufficient to
provide financial security.
The section below highlights some of our achievements in 2023.
We will reward you responsibly
78% ▲ up 5% from 2022
of colleagues say pay recommendations
determined regardless of personal
characteristics
Many of our colleagues found 2023 to be a challenging year. While inflation has
fallen from levels seen in 2022, it remains high across many of our markets, which
has resulted in continued pressures on the cost of living.
Fixed pay increases for 2024 were determined based on consistent principles to
help address wage inflation in the markets where we operate. Across the Group,
there was an overall increase in fixed pay of 4.4%. The level of increases varied by
market, depending on the economic situation and individual roles. Increases were
targeted towards more junior and middle management colleagues where fixed pay
is a larger proportion of overall pay.
We continued to take action outside of our annual cycle to address inflation
pressures for colleagues, where the local context required this. In Argentina and
Türkiye, we gave our colleagues fixed pay increases throughout the year. In Egypt,
we supported our colleagues with a one-off pay adjustment in response to high
inflation.
52% ▲ up 9% from 2022
of colleagues say they are paid fairly for
what they do
59%  same as 2022
of colleagues say my benefits meet my
(and my family's) needs well
We will recognise your success
81% ▲ up 7% from 2022
of colleagues say they receive feedback
helping them improve performance
Over 90% of colleagues have access to share ownership plans globally, with 25%
of our global employee population taking part. In the UK, following the maturity of
the three-year 2020 Sharesave plan with an option price of £2.627, colleagues
benefited from significant share price growth at a time when they needed it most.
The 2020 plan had the highest take up rate and contribution level in recent years.
1.4 million recognitions
the highest since the At Our Best
recognition platform was launched in 2015
We will support you to grow
78% ▲ up 20% from 2022
of colleagues work flexibly and split their
time between home and the workplace
Our approach to benefits and well-being balances local market practice with global
minimum standards. More than 95% of colleagues have private medical insurance,
a retirement plan and life insurance.
Our well-being programme focuses on mental, physical, financial and social well-
being. In our employee Snapshot survey, 83% of colleagues said their mental
health was positive. HSBC has been ranked top tier for mental health in the global
CCLA Corporate Mental Health Benchmark.
We have prioritised supporting colleagues to work flexibly, balancing customer
needs, social connection and individual flexibility. Flexible working remains one of
the most cited reasons why colleagues would recommend HSBC as a place to
work, and a third of new joiners say it is what attracted them to HSBC.
We have delivered a world-class talent marketplace and learning experience
platform, providing learning pathways, projects and networking opportunities to
more than 200,000 colleagues. An average of 23.9 hours of training was delivered
per FTE in 2023.
71% ▲ up 3% from 2022
our career index is higher than the
financial services benchmark by 6%
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Remuneration structure for employees
We set out below the key features of our remuneration framework, which applies on a Group-wide basis, subject to compliance with local laws:
Remuneration
components and
objectives
Application for Group employees
Approach for executive Directors
Fixed pay
Attract and retain
employees with market
competitive pay for the
role, skills and
experience required.
–Fixed pay may include base salary, fixed pay allowance, cash in lieu of pension and other
cash allowances in accordance with local market practice.
–It is based on predetermined criteria, non-discretionary, transparent and not reduced
based on performance.
–It represents a higher proportion of total compensation for more junior colleagues.
–Fixed pay may change to reflect an individual’s position, role or grade, cost of living in the
country, individual skills, capabilities and experience.
–Fixed pay is generally delivered in cash on a monthly basis.
–Consistent with approach for
Group colleagues except
fixed pay allowance paid in
shares.
Benefits
Support the physical,
mental and financial
health of a diverse
workforce in
accordance with local
market practice.
–Benefits may include, but are not limited to, the provision of a pension, medical
insurance, life insurance, health assessment and relocation support.
–Provision of medical
insurance, life insurance, car
and tax return assistance.
Group Chief Executive is
eligible to receive
accommodation and a car
benefit in Hong Kong.
Annual incentive
Incentivise and reward
performance based on
annual financial and
non-financial measures
consistent with the
medium- to long-term
strategy, stakeholder
interests and values-
aligned behaviours.
–All employees are eligible to be considered for a discretionary variable pay award.
Individual awards are determined against objectives for performance set at the start of
the year.   
–Variable pay represent a higher proportion of total compensation for more senior
colleagues and will be more closely aligned to Group and business performance as
seniority increases.
–Variable pay for Group employees identified as Material Risk Takers (’MRTs’) under
European Union Regulatory Technical Standard (’RTS’) 2021/923 is limited to 200% of
fixed pay, as approved by shareholders at the 2014 AGM held on 23 May 2014 (98% in
favour).
–Awards are generally paid in cash and shares. For MRTs, at least 50% of the awards are
in shares and/or where required by regulations, in units linked to asset management
funds.
–Annual incentive is
determined based on the
outcomes of annual
scorecard of financial and
non-financial measures.
–Executive Directors and
Group Executives are also
eligible to be considered for a
long-term incentive award,
which is subject to three-year
forward-looking performance
measures.
Buy-out awards
Support recruitment of
key individuals.
–Buy-out awards may be offered if an individual holds any outstanding unvested awards
that are forfeited on resignation from the previous employer.
–The terms of the buy-out awards will not be more generous than the terms attached to
the awards forfeited on cessation of employment with the previous employer.
–For new hires, the approach
is consistent with the
approach taken for
employees and policy
approved by shareholders.
New hire indicative
variable pay
Support recruitment of
key individuals.
–New hire indicative variable pay is awarded in exceptional circumstances, and is limited to
an individual's first year of employment only, and is subject to a number of factors (such
as the respective performance of the Group, business unit and individual), and the final
value paid remains at the full discretion of HSBC.
–The exceptional circumstances would typically involve a critical new hire and depend on
factors such as the seniority of the individual, whether the new hire candidate is forfeiting
any awards and the timing of the hire during the performance year.
–For new hires, the approach
is consistent with the
approach taken for
employees and policy
approved by shareholders.
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Remuneration
components and
objectives (continued)
Application for Group employees
Approach for executive Directors
Deferral
Align employee
interests with the
medium- to long-term
strategy, stakeholder
interests and values-
aligned behaviours.
–A Group-wide deferral approach is applicable to all employees. A portion of annual
incentive awards above a specified threshold is deferred in shares vesting annually over a
three-year period (33% vesting on the first and second anniversaries of grant and 34% on
the third).
–For MRTs, awards are generally subject to a minimum 40% deferral (60% for awards of
£500,000 or more) over a minimum period of four years.
–A deferral period of five years is applied for senior management and individuals in
specified roles with managerial responsibilities as prescribed under the PRA and FCA
remuneration rules and seven years for individuals in PRA-designated senior management
functions.
–In line with the PRA and FCA remuneration rules, and in compliance with local
regulations, the deferral requirement for MRTs is not applied to individuals where their
total variable pay is £44,000 or less and variable pay is not more than one-third of total
compensation. For these individuals, the Group standard deferral applies.
–Individuals based outside the UK and identified as MRTs under local regulations, would be
subject to local requirements where necessary.
–All deferred awards are subject to malus provisions, subject to compliance with local
laws. Awards granted to MRTs on or after 1 January 2015 and awards granted to non-
MRTs on or after 1 January 2022 are subject to clawback.
–HSBC operates an anti-hedging policy for all employees, which prohibits employees from
entering into any personal hedging strategies in respect of HSBC securities.
–For all Group MRTs and the majority of local MRTs, excluding executive Directors, a
minimum 50% of the deferred awards is in HSBC shares and the rest into deferred cash.
Local regulatory requirements would also apply where necessary.
–For some employees in our asset management business, where required by the relevant
regulations, at least 50% of the deferred award is linked to fund units reflective of funds
managed by those entities, with the remaining portion in deferred cash awards.
–Variable pay awards made in HSBC shares or linked to relevant fund units granted to
MRTs are generally subject to a one-year retention period post-vesting.
–MRTs who are subject to a five-year deferral period, except senior management or
individuals in PRA- and FCA-designated senior management functions, have a six-month
retention period applied to their awards.
–Where an employee is subject to more than one regulation, the requirement specific to
the sector and/or country in which the individual is working is applied.
–All of the LTI award, or at
least 60% of the total variable
award (including LTI), is
deferred. The deferred
awards will vest in five equal
annual instalments, with the
first vesting on or around the
third anniversary of the grant
date and the last instalment
vesting on or around the
seventh anniversary of the
grant date.
–All deferred awards are in
HSBC shares and subject to a
post-vesting retention period
of one year.
Severance payments
Adhere to contractual
agreements with
involuntary leavers.
–Where an individual’s employment is terminated involuntarily for gross misconduct then,
subject to compliance with local laws, the Group’s policy is not to make any severance
payment and all outstanding unvested awards are forfeited.
–For other cases of involuntary termination of employment, the determination of any
severance will take into consideration the performance of the individual, contractual
notice period, applicable local laws and circumstances of the case.
–Generally, for good leavers, all outstanding unvested awards will normally continue to
vest in line with the applicable vesting dates. Where relevant, any performance conditions
attached to the awards, and malus and clawback provisions, will remain applicable to
those awards.
–Severance amounts awarded to MRTs are not considered as variable pay for the purpose
of application of the deferral and variable pay cap rules under the PRA and FCA
remuneration rules where such amounts include: (i) payments of fixed remuneration that
would have been payable during the notice and/or consultation period; (ii) statutory
severance payments; (iii) payments determined in accordance with any approach
applicable in the relevant jurisdictions; and (iv) payments made to settle a potential or
actual dispute.
–Any payments will be in line
with the policy on loss of
office.
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327
Payments on loss of office
The table below sets out the basis on which payments on loss of office may be made. Other than as set out in the table, there are no further
obligations which could give rise to remuneration payments or payments for loss of office.
Payments on loss of office
Component of remuneration
Approach taken
Fixed pay and benefits
Executive Directors may be entitled to payments in lieu of:
–notice, which may consist of base salary, FPA, pension entitlements and other contractual benefits, or an amount
in lieu of; and/or
–accrued but untaken holiday entitlement.
Payments may be made in instalments or a lump sum, and may be subject to mitigation, and subject to applicable
tax and social security deductions.
Annual incentive and LTI
In exceptional circumstances, as determined by the Committee, an executive Director may be eligible for the grant
of annual and/or long-term incentives under the HSBC Share Plan based on the time worked in the performance year
and on the individual’s contribution.
Unvested awards
All unvested awards will be forfeited when an executive Director ceases employment voluntarily and is not deemed
a good leaver. An executive Director may be considered a good leaver, under the HSBC Share Plan, if their
employment ceases in specified circumstances which includes:
–ill health, injury or disability, as established to the satisfaction of the Committee;
–retirement with the agreement and approval of the Committee;
–the employee’s employer ceasing to be a member of the Group;
–redundancy with the agreement and approval of the Committee; or
–any other reason at the discretion of the Committee.
If an executive Director is considered a good leaver, unvested awards will normally continue to vest in line with the
applicable vesting dates, subject to performance conditions, the share plan rules, and malus and clawback
provisions.
In the event of death, unvested awards will vest and will be released to the executive Director’s estate as soon as
practicable.
In respect of outstanding unvested awards, the Committee may determine that good leaver status is contingent
upon the Committee being satisfied that the executive has no current or future intention at the date of leaving HSBC
of being employed by any competitor financial services firm. The Committee determines the list of competitor firms
from time to time, and the length of time for which this restriction applies. If the Committee becomes aware of any
evidence to the contrary before vesting, the award will lapse.
Post-departure benefits
Executive Directors can be provided certain benefits for up to a maximum of seven years from date of departure for
those who depart under good leaver provisions under the HSBC Share Plan, in accordance with the terms of the
policy. Benefits may include, but are not limited to, medical coverage, tax return preparation assistance and legal
expenses.
The Committee also has the discretion to extend the post-departure benefit of medical coverage to former executive
Directors, up to a maximum of seven years from their date of departure.
Other
Where an executive Director has been relocated as part of their employment, the Committee retains the discretion
to pay the repatriation costs. This may include, but is not restricted to, airfare, accommodation, shipment, storage,
utilities, and any tax and social security that may be due in respect of such benefits.
Except in the case of gross misconduct or resignation, an executive Director may also receive retirement gifts.
Legal claims
The Committee retains the discretion to make payments (including professional and outplacement fees) to mitigate
against legal claims, subject to any such payments being made in accordance with the terms of an appropriate
settlement agreement waiving all claims against the Group.
Change of control
In the event of a change of control, outstanding awards will be treated in line with the provisions set out in the
respective plan rules.
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HSBC Holdings plc
Committee governance
The Group Chief Executive, the Group Chief Risk and Compliance
Officer, the Group Company Secretary and Chief Governance Officer,
the Group Chief Human Resources Officer, and the Group Head of
Performance, Reward and Employee Relations routinely and
selectively attend Committee meetings. As detailed below, the Chair
of the Group Remuneration Committee held regular meetings with
management, and Committee advisers to discuss specific issues as
they arose during the year outside the formal Committee process.
The Committee Secretary regularly met with the Chair to ensure the
Committee fulfilled its governance responsibilities, to consider input
from stakeholders when finalising meeting agendas and track
progress on actions and Committee priorities. The Committee
Secretary will continue to support the Chair in ensuring that the
Committee has fulfilled its governance responsibilities.
A copy of the Committee’s terms of reference can be found on our
website at www.hsbc.com/who-we-are/leadership-and-governance/
board-committees.
Matters considered during 2023
Jan
Feb
May
Jun
Jul
Sep
Dec
Remuneration framework and governance
Group variable pay pool, workforce performance and pay matters, pay gap report, and employee insights
l
l
l
l
l
l
l
Directors’ remuneration policy design
ô
ô
ô
l
l
l
l
Executive Director remuneration policy implementation, scorecards and pay proposals
l
l
l
ô
l
l
l
Remuneration for other senior executives of the Group
l
l
l
ô
l
ô
l
Directors’ remuneration report
l
l
ô
ô
ô
ô
l
Regulatory, risk and governance
Material risk and audit events, and performance and remuneration impacts for individuals involved
l
l
l
ô
l
l
l
Regulatory updates, including approach and outcomes for the identification of Material Risk Takers
l
l
l
l
l
l
l
Governance matters
l
l
l
l
l
l
l
Principal subsidiaries
Matters from subsidiary committees
l
ô
l
l
ô
l
l
l
Matter considered
ô
Matter not considered
Advisers
The Committee received input and advice from different advisers on
specific topics during 2023. Deloitte provided independent advice to
the Committee. Deloitte also provided tax compliance and other
advisory services to the Group in 2023. Deloitte is a founding member
of the Remuneration Consultants Group and voluntarily operates
under the code of conduct in relation to executive remuneration
consulting in the UK.
The Committee also received advice from Willis Towers Watson on
market data and remuneration trends. Willis Towers Watson also
provides actuarial support to Global Finance, benchmarking data for
the wider workforce and services related to benefits administration
for our Group employees. The Committee was satisfied the advice
provided by Deloitte and Willis Towers Watson was objective and
independent in 2023.
For 2023, total fees of £292,800 and £51,492 were incurred in relation
to remuneration advice provided by Deloitte and Willis Towers
Watson, respectively. This was based on pre-agreed fees and a time-
and-materials basis.
Attendees and interaction with other Board
committees
During the year, Noel Quinn as the Group Chief Executive provided
regular briefings to the Committee. In addition, the Committee
engaged with, and received updates from, the following:
–Mark Tucker, Group Chairman;
–Elaine Arden, Group Chief Human Resources Officer;
–Georges Elhedery, Group Chief Financial Officer;
–Jenny Craik, Group Head of Performance, Reward and Employee
Relations;
–Pam Kaur, Group Chief Risk and Compliance Officer;
–Bob Hoyt, Group Chief Legal Officer; and
–Aileen Taylor, Group Company Secretary and Chief Governance
Officer.
The Committee also received feedback and input from the Group Risk
Committee and Group Audit Committee on risk, conduct and
compliance-related matters relevant to remuneration.
No Director is present at Committee meetings when their own
remuneration is discussed.
In addition to the meetings above, the Chair took the opportunity to
meet with the Chair of the Group Risk Committee and Group Audit
Committee to consider the Group’s risk and reward alignment
framework, which is designed to promote sound and effective risk
management in meeting PRA and FCA remuneration rules and
expectations.
Committee effectiveness
In 2023, the annual review of the effectiveness of the Board
committees, including the Group Remuneration Committee, was
conducted externally by Ffion Hague, Independent Board Evaluation.
The review determined that the Committee continued to operate
effectively.
Areas for enhancement were identified, including continued focus on
the relationship between the Group and its subsidiary entities,
building on the efforts taken under the direction of the Committee
Chair, which will be kept under review in 2024.
The outcomes of the evaluation have been reported to the Board, and
the Committee will track the progress in implementing
recommendations during 2024.
As highlighted in the Board effectiveness review disclosure on
page 297, the Board considered that further improvement is required
to ensure reporting is succinct and supported by relevant key
performance indicators. Further details of the annual review of the
Board effectiveness review can be found on pages 296 to 297.
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Additional remuneration disclosures
This section provides further information and disclosure in relation to
executive Director and wider workforce remuneration as required
under the Directors' Remuneration Report Regulations, the UK
Corporate Governance Code, Hong Kong Ordinances, Hong Kong
Listing Rules and the Pillar 3 remuneration disclosures.
For the purpose of the Pillar 3 remuneration disclosures, executive
Directors and non-executive Directors are considered to be members
of the management body. Members of the Group Executive
Committee other than the executive Directors are considered as
senior management.
Policy alignment with UK Corporate Governance Code
The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in
respect of the Directors' remuneration policy:
Provision
Approach
Clarity
–The Committee regularly engages and consults with major shareholders to take into account
shareholder feedback and to ensure there is transparency on our policy and its implementation.
–Details of our remuneration practices and our remuneration policy for Directors are published and
available to all our employees.
Remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce.
Simplicity
–Our Directors' remuneration policy has been designed so that it is easy to understand and
transparent, while complying with the provisions set out in the UK Corporate Governance Code
and the remuneration rules of the UK's PRA and FCA, as well as meeting the expectations of our
shareholders. The objective of each remuneration element is explained and the amount paid in
respect of each element is clearly set out.
Remuneration structures should avoid complexity
and their rationale and operation should be easy
to understand.
Risk
–In line with regulatory requirements, our remuneration practices promote sound and effective risk
management while supporting our business objectives.
–The Group Chief Risk and Compliance Officer attends Committee meetings and updates the
Committee on the overall risk profile of the Group. The Committee also seeks inputs from the
Group Risk Committee when making remuneration decisions.
–Risk and conduct considerations are taken into account in setting the variable pay pool, from
which any executive Director variable pay is funded.
–Executive Directors' annual incentive and LTI scorecards include a mix of financial and non-
financial measures. Financial measures are subject to a CET1 underpin to ensure CET1 remains
within risk tolerance levels while achieving financial targets. In addition, the overall scorecard
outcome is subject to a risk and compliance modifier.
–The deferred portion of any awards granted to executive Directors is subject to a seven-year
deferral period during which our malus policy can be applied. All variable pay awards that have
vested are subject to our clawback policy for a period of up to seven years from the award date
(extending to 10 years where an investigation is ongoing).
Remuneration structures should identify and
mitigate against reputational and other risks from
excessive rewards, as well as behavioural risks
that can arise from target-based incentive plans.
Predictability
–The charts set out in our shareholder approved policy report (available in our Annual Report and
Accounts 2021) show how the total value of remuneration and its composition vary under different
performance scenarios for executive Directors.
The range of possible values of rewards to
individual Directors and any other limits or
discretions should be identified and explained at
the time of approving the policy.
Proportionality
–The annual incentive and LTI scorecards reward achievement of our financial and resource plan
targets, as well as long-term financial and shareholder value creation targets.
–The Committee retains the discretion to adjust the annual incentive and LTI payout based on the
outcome of the relevant scorecards, if it considers that the payout determined does not
appropriately reflect the overall position and performance of the Group during the performance
period.
The link between individual awards, the delivery
of strategy and the long-term performance of the
Group should be clear and outcomes should not
reward poor performance.
Alignment with culture
–In order for any annual incentive award to be made, each executive Director must achieve a
required behaviour rating, which is assessed by reference to the HSBC Values.
–Annual incentive and LTI scorecards contain non-financial measures linked to our wider social
strategy. These include measures related to reducing the environmental impact of our operations,
improving customer satisfaction, diversity and inclusion.
–Each year senior employees participate in a 360 survey, which gathers feedback on values-aligned
behaviours from peers, direct reports, skip level reports and managers.
Incentive schemes should drive behaviours
consistent with the Group's purpose, values and
strategy.
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Link between risk, performance and reward
Our remuneration practices promote sound and effective risk management to support our business objectives and the delivery of our strategy.
We set out below the key features of our framework, which enable us to align between risk, performance and reward, subject to compliance
with local laws and regulations:
Framework
elements
Application
Variable pay
pool
–The Group variable pay pool is expected to reflect Group performance, based on a range of financial and non-financial factors. We
use a countercyclical funding methodology, with both a floor and a ceiling, with the payout ratio generally reducing as performance
increases to avoid pro-cyclicality. The floor recognises that even in challenging times, remaining competitive is important. The ceiling
recognises that at higher levels of performance it is not always necessary to continue to increase the variable pay pool, thereby
limiting the risk of inappropriate behaviour to drive financial performance.
–The main quantitative and qualitative performance and risk metrics used for assessment of performance include:
–Group and business unit financial performance, considering contextual factors driving performance, and capital requirements;
–current and future risks, taking into consideration performance against the risk appetite, financial and resourcing plan and global
conduct outcomes; and
–fines, penalties and provisions for customer redress, which are automatically included in the Committee’s definition of profit for
determining the pool.
–In the event that the Group was unable to distribute dividends to shareholders for reasons such as capital adequacy, then the Group
may determine that as a year of weak performance. In such a year, the Group may withhold some, or all, variable pay for
employees including unvested share awards, using the metrics outlined above as a basis for that determination.
Individual
performance
–Assessment of individual performance is made with reference to clear and relevant financial and non-financial objectives. Objectives
for senior management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint;
facilitating financing to help clients with their transition to net zero; employee diversity; and risk and compliance measures.
–A mandatory global risk and compliance objective is included for all other employees. Employees receive a behaviour rating as well
as a performance rating, which ensures performance is assessed not only on what is achieved but also on how it is achieved.
Control
function staff
–Group policy is for control functions staff to report into their respective function. Remuneration decisions for senior functional roles
are made by the global function head.
–The performance and reward of individuals in control functions, including risk and compliance colleagues, are assessed according to
a balanced scorecard of objectives specific to the functional role they undertake.
–Their remuneration is determined independent of the performance of the business areas they oversee.
–Remuneration is carefully benchmarked with the market and internally to ensure it is set at an appropriate level.
–The Committee is responsible for approving the remuneration for the Group Chief Risk and Compliance Officer and Group Head of
Internal Audit.
Variable pay
adjustments
and conduct
recognition
–Variable pay awards may be adjusted downwards in circumstances including:
–detrimental conduct, including conduct that brings HSBC into disrepute;
–involvement in events resulting in significant operational losses, or events that have caused or have the potential to cause
significant harm to HSBC; and
–non-compliance with the values-aligned behaviours and other mandatory requirements or policies.
–Rewarding positive conduct may take the form of use of our global recognition programme, At Our Best, or positive adjustments to
variable pay awards.
Malus
–Malus can be applied to unvested deferred awards (up to 100% of awards) granted in prior years in circumstances including:
–detrimental conduct, including conduct that brings the business into disrepute;
–past performance being materially worse than originally reported;
–restatement, correction or amendment of any financial statements; and
–improper or inadequate risk management.
Clawback
–Clawback can be applied to vested or paid awards granted to MRTs on or after 1 January 2015 (and awards granted to non-MRTs
on or after 1 January 2022) for a period of seven years, extended to 10 years for employees in PRA and FCA designated senior
management functions in the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may
be applied in circumstances including:
–participation in, or responsibility for, conduct that results in significant losses;
–failing to meet appropriate standards and propriety;
–reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a
contract of employment; and
–a material failure of risk management suffered by HSBC or a business unit in the context of Group risk-management standards,
policies and procedures.
–Clawback can also be applied to vested or paid awards granted to designated Executive Officers as defined by the US Securities
and Exchange Commission ('SEC') for a period of three years in the event of an accounting restatement due to material non-
compliance with any financial reporting requirement under the US securities laws.
Sales
incentives
–We generally do not operate commission-based sales plans, unless aligned with local market practice and with appropriate
safeguards to avoid incentivising inappropriate sales behaviours.
Identification
of MRTs
–We identify individuals as MRTs based on qualitative and quantitative criteria set out in the PRA's and FCA's Remuneration Rules.
Our identification process is underpinned by the following key principles:
–MRTs are identified at Group, HSBC Bank (consolidated) and HSBC UK Bank level.
–MRTs are also identified at other solo regulated entity level as required by the regulations.
–When identifying an MRT, HSBC considers a colleague’s role within its matrix management structure. The global business and
function that an individual works within takes precedence, followed by the geographical location in which they work.
–We also identify additional MRTs based on our own internal criteria, which include compensation thresholds and individuals in
certain roles and grades who otherwise would not be identified as MRTs under the Remuneration Rules.
HSBC Holdings plc
331
Summary of shareholder return and Group Chief Executive remuneration
The graph shows HSBC TSR performance (based on the daily spot
Return Index in sterling) against the FTSE 100 Total Return Index for
the 10-year period ended 31 December 2023.
The FTSE 100 Total Return Index has been chosen as a recognised
broad equity market index of which HSBC Holdings is a member.
The single figure remuneration for the Group Chief Executive over the
past 10 years, together with the outcomes of the respective
annual incentive and LTI awards, are presented in the following table.
HSBC TSR and FTSE 100 Total Return Index
568
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Group Chief Executive
Stuart
Gulliver
Stuart
Gulliver
Stuart
Gulliver
Stuart
Gulliver
Stuart
Gulliver
John
Flint
John
Flint
Noel
Quinn
Noel
Quinn
Noel
Quinn
Noel
Quinn
Noel
Quinn
Total single figure £000
7,619
7,340
5,675
6,086
2,387
4,582
2,922
1,977
4,154
4,895
5,562
10,641
Annual incentive1 (% of maximum)
54%
45%
64%
80%
76%
76%
61%
66%
32%
57%
75%
70%
Long-term incentive1,2,3 (% of maximum)
44%
41%
–%
–%
100%
–%
–%
–%
–%
–%
–%
75%
1The 2012 annual incentive figure for Stuart Gulliver included 60% of the annual incentive disclosed in the 2012 Directors’ remuneration report, which
was deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US
Department of Justice, entered into in December 2012 (’AML DPA’) as determined by the Committee. The AML DPA performance condition was met
and the award vested in 2018. The value of the award at vesting was in the 2018 single figure of remuneration and included as long-term incentive for
2018.
2Long-term incentive awards are included in the single figure of remuneration for the year in which the performance period is deemed to be
substantially completed. For Group Performance Share Plan (’GPSP’) awards, this is the end of the financial year preceding the date of grant. GPSP
awards shown in 2014 to 2015 are therefore related to awards granted in 2015 to 2016.
3The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made. LTI awards have a three-year
performance period and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total
single figure of remuneration of the year in which the performance period ends. Noel Quinn received the 2021–2023 LTI award that had a
performance period which ended on 31 December 2023. This was the first LTI award granted to him as Group Chief Executive.
Voting results from Annual General Meeting
2023 Annual General Meeting voting results
For
Against
Withheld
Remuneration report (votes cast)
79.75%
20.25%
––
8,251,001,243
2,094,952,768
32,990,533
Remuneration policy (votes cast from 2022 Annual General Meeting)
95.73%
4.27%
––
7,666,488,029
342,320,697
7,773,468
As set out in the Committee Chair's letter, the Committee reflected
on feedback from investors following the vote on the implementation
of our current policy at last year’s AGM. We explained in our
statements of 5 May 2023 and 3 November 2023 that our largest
shareholder voted against the Board’s recommendations on a number
of resolutions including the Directors’ remuneration report, which
impacted the results of these resolutions.
The Board was pleased that a large majority of shareholders voting at
the AGM supported HSBC’s strategy. The Committee Chair has met
with several of our large institutional investors and proxy advisory
firms since the AGM, and there remains strong support for the
current remuneration policy.
Report of the Directors | Corporate governance report | Directors’ remuneration report
332
HSBC Holdings plc
Pay ratio
The following table shows the ratio between the total pay of the
Group Chief Executive and the lower quartile, median and upper
quartile pay of our UK employees.
Total pay and benefits for the Group Chief Executive is the single
figure of remuneration for Noel Quinn. The increase in median ratio is
primarily driven by the vesting of the 2021–2023 long-term incentive
('LTI'), which is the first he has received as Group Chief Executive.
Excluding the LTI vesting in respect of the year, the ratio remained
broadly in line with prior years at 86:1 at median.
Total pay ratio
Method
Lower
quartile
Median
Upper
quartile
2023
A
291:1
169:1
88:1
2022
A
167:1
95:1
49:1
2021
A
154:1
90:1
46:1
2020
A
139:1
85:1
43:1
2019
A
169:1
105:1
52:1
Total pay and benefits amounts used to calculate the ratio
(£)
Method
Lower quartile
Median
Upper quartile
Total
pay and
benefits
Total
salary
Total
pay and
benefits
Total
salary
Total
pay and
benefits
Total
salary
2023
A
36,528
27,680
63,000
45,536
121,223
89,506
2022
A
33,284
24,615
58,257
41,000
113,778
95,000
2021
A
31,727
27,666
54,678
41,500
106,951
84,000
2020
A
29,833
23,264
48,703
36,972
96,386
75,000
2019
A
28,920
24,235
46,593
41,905
93,365
72,840
The total pay and benefits for the median employee for 2023 was
£63,000, an 8.1% increase compared with 2022.
Our UK workforce comprises a diverse mix of colleagues across
different businesses and levels of seniority, from junior cashiers in our
retail branches to senior executives managing our global business
units. We aim to deliver market-competitive pay for each role, taking
into consideration the skills and experience required for the business.
Pay structure varies across roles in order to deliver an appropriate mix
of fixed and variable pay. Junior colleagues have a greater portion of
their pay delivered in a fixed component, which does not vary with
performance and allows them to predictably meet their day-to-day
needs. Our senior management, including executive Directors,
generally have a higher portion of their total remuneration opportunity
structured as variable pay and linked to the performance of the Group,
given their role and ability to influence the strategy and performance
of the Group. Executive Directors also have a higher proportion of
their variable pay delivered in shares, which vest over a period of
seven years with a post-vesting retention period of one year. During
this deferral and retention period, the awards are linked to the share
price so the value of award realised by them after the vesting and
retention period will be aligned to the performance of the Group.
We are satisfied that the median pay ratio is consistent with the pay
and progression policies for our UK workforce, taking into account the
diverse mix of our UK employees, the pay mix applicable to each role
and our objective of delivering market competitive pay for each role
subject to Group, business and individual performance.
Our ratios have been calculated using the option ‘A’ methodology
prescribed under the UK Companies (Miscellaneous Reporting)
Regulations 2018. Under this option, the ratios are calculated using
full-time equivalent pay and benefits of all employees providing
services in the UK at 31 December 2023. We believe this approach
provides accurate information and representation of the ratios. The
ratio has been computed taking into account the pay and benefits of
nearly 33,000 UK employees, other than the Group Chief Executive.
We calculated our pay quartiles and benefits information for our UK
employees using:
–full-time equivalent annualised fixed pay, which includes base
salary and allowances, at 31 December 2023;
–variable pay awards for 2023;
–return on deferred cash awards granted in prior years. The
deferred cash portion of the annual incentive granted in prior years
includes a right to receive notional returns for the period between
the grant date and vesting date, which is determined by reference
to a rate of return specified at the time of grant. A payment of
notional return is made annually and the amount is disclosed on a
paid basis in the year in which the payment is made;
–gains realised from exercising awards from taxable employee
share plans; and
–full-time equivalent value of taxable benefits and pension
contributions.
Full-time equivalent fixed pay and benefits for each employee have
been calculated by using each employee’s data as at 31 December
2023. Where an employee works part-time, fixed pay and benefits are
grossed up, where appropriate, to full-time equivalent. One-off
benefits have not been included in calculating the ratios as these are
not permanent in nature and in some cases, depending on individual
circumstances, may not truly reflect a benefit to the employee.
The reported ratios may not be comparable to our international and
listed peers on the FTSE 100, given differences in business mix and
size; employment and compensation practices; methodologies for
computing pay ratios; and assumptions used by companies.
Relative importance of spend on pay
The following chart shows the change in:
–total employee pay between 2022 and 2023; and
–dividends and share buy-backs in respect of 2022 and 2023.
In 2023, total spend on pay was slightly higher than in 2022. The total
return to shareholders increased by 156% compared with 2022,
reflecting a higher dividend and $7bn of capital return to shareholders
through share buy-backs, which included the up to $3bn buy-back
announced at our third quarter of 2023 results. In addition, the Group
has announced the intention to initiate a further up to $2bn buy-back.
Dividends include an approximation of the amount payable in April
2024 in relation to the fourth interim dividend of $0.31 per ordinary
share.
Relative importance of spend on pay
Total return to
shareholder
2023  —
$11,816m
$7,000m
$18,816m
↑
156%
2022  —
$6,343m
$1,000m
$7,343m1
Employee pay
2023  —
$18,220m
↑
1%
2022  —
$18,003m
Employee pay
Dividends
Share buy-back
1    In our Annual Report and Accounts 2022, we disclosed that the total
return to shareholders was $9,144m, of which $8,144m related to
dividends in 2022. This was an error and has been corrected in the
chart above.
HSBC Holdings plc
333
Comparison of Directors’ and employees’ pay
The following table compares the changes in each Director’s base
salary, taxable benefits and annual incentive between 2020 and 2023
with the percentage change in each of those elements of pay for UK-
based employees of HSBC Group Management Services Limited, the
employing entity of the executive Directors.
There were no changes to the fees or benefits of the non-executive
Directors between 2020 and 2023. The year-on-year percentage
change in fees noted in the table below is primarily driven by any pro-
rated fees received by the non-executive Director for 2020, 2021,
2022 and 2023 based on time served by them on the Board and the
relevant Board committees and any additional responsibilities taken
on by the non-executive Director during each year. The value of
benefits received by the non-executive Directors reflect the taxable
expense reimbursements claimed, and the associated gross-up tax, in
relation to attending the Board meetings in each year. Page 338
provides the underlying single figure of remuneration for non-
executive Directors used to calculate the figures above.
Non-executive Directors who joined after 1 January 2023 are not
included, which includes Ann Godbehere, Kalpana Morparia, Brendan
Nelson and Swee Lian Teo.
Annual percentage change in remuneration
Base salary/fees
Benefits
Annual incentive
Director/employees
2023
2022
2021
2020
2023
2022
2021
2020
2023
2022
2021
2020
Executive Directors
Noel Quinn1,2
0.5
3.2
1.7
151.7
6.7
25.3
(48.9)
353.7
(6.7)
36.1
99.0
20.2
Georges Elhedery3
—
—
—
—
—
—
—
—
—
—
—
—
Non-executive Directors
Geraldine Buckingham4
57.4
—
—
—
—
—
—
—
—
—
—
—
Rachel Duan5,6
8.4
235.8
—
—
(100.0)
—
—
—
—
—
—
—
Dame Carolyn Fairbairn6,7
5.3
231.1
—
—
(100.0)
—
—
—
—
—
—
—
James Forese8
10.2
20.5
257.5
—
—
—
—
—
—
—
—
—
Steven Guggenheimer9
0.8
4.8
86.6
—
(90.0)
—
—
—
—
—
—
—
José Antonio Meade Kuribreña10
0.8
8.5
10.4
28.7
(71.4)
—
(100.0)
100.0
—
—
—
—
Eileen Murray5
10.7
(1.5)
121.7
—
—
—
—
—
—
—
—
—
David Nish
0.4
(1.0)
0.4
108.7
(13.6)
120.0
25.0
(50.0)
—
—
—
—
Jackson Tai10,11
(65.0)
7.7
(1.4)
(10.8)
(24.0)
—
(100.0)
(78.9)
—
—
—
—
Mark Tucker
—
—
—
—
(54.9)
242.4
(36.5)
(77.5)
—
—
—
—
Employee group12
5.0
3.1
1.0
2.0
5.7
7.0
1.3
2.3
11.7
3.7
25.2
(20.0)
1Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on
17 March 2020. The annual percentage change in 2020 for Noel Quinn is based on remuneration reported in his 2019 single figure of remuneration (for
the period 5 August 2019 to 31 December 2019) and his 2020 single figure of remuneration (for the period 1 January 2020 to 31 December 2020).
Based on his annualised 2019 compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 2.1%,
85.2% and -50.9%, respectively for 2020.
2Noel Quinn voluntarily waived the cash portion of his 2020 annual incentive. The year-on-year percentage change between 2020 and 2021 would be
-1% without this cash waiver.
3Georges Elhedery succeeded Ewen Stevenson as Group Chief Financial Officer with effect from 1 January 2023. Year-on-year comparison for
Georges Elhedery will be available from 2024 onwards.
4Geraldine Buckingham joined the Board on 1 May 2022.
5Rachel Duan and Eileen Murray were appointed members of the Group Audit Committee on 1 June 2022.
6Rachel Duan and Dame Carolyn Fairbairn did not receive taxable benefits in 2023, resulting in a 100% reduction in benefits from the prior year.
7Dame Carolyn Fairbairn was appointed as Chair of the Group Remuneration Committee effective 29 April 2022.
8James Forese was appointed as non-executive Chair of HSBC North America Holdings, Inc in 2021. Fees for 2021 included fees in relation to this role.
9Steven Guggenheimer joined the Board on 1 May 2020 and therefore received fees for only part of 2020.
10José Antonio Meade Kuribreña and Jackson Tai did not receive taxable benefits in 2021, resulting in a 100% reduction in benefits from the prior year.
11Jackson Tai retired from the Board on 5 May 2023.
12Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no
individuals are employed directly by HSBC Holdings.
Report of the Directors | Corporate governance report | Directors’ remuneration report
334
HSBC Holdings plc
Scheme interests awarded during 2023
(Audited)
The table below sets out the scheme interests granted to executive Directors during 2023 in respect of the 2022 performance year, as
disclosed in the 2022 Directors’ remuneration report. No non-executive Directors received scheme interests during the financial year. The below
table includes details of immediate shares and fixed pay allowances in compliance with Chapter 17 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited.
Scheme awards in 2023
(Audited)
Type of interest
awarded
Basis on which
award made
Date of award
Face
value
awarded
£000
Percentage
receivable for
minimum
performance
Number of
shares
awarded
End of
performance
period
Noel Quinn
LTI deferred shares1
% of base salary
27 February 2023
5,476
25
861,422
31 December 2025
Immediate shares2
% of base salary
27 February 2023
1,082
N/A
170,206
31 December 2022
Fixed pay allowance3
N/A
15 May 2023
300
N/A
50,080
N/A
21 August 2023
300
N/A
51,435
N/A
7 November 2023
300
N/A
49,291
N/A
Georges Elhedery
LTI deferred shares1
% of base salary
27 February 2023
1,599
25
251,474
31 December 2025
Immediate shares2
% of base salary
27 February 2023
716
N/A
112,568
31 December 2022
Fixed pay allowance3
N/A
15 May 2023
192
N/A
31,962
N/A
21 August 2023
192
N/A
32,827
N/A
7 November 2023
192
N/A
31,459
N/A
1In accordance with the remuneration policy approved by shareholders at the 2022 AGM, the LTI award was determined at 320% of base salary for
Noel Quinn and 160% of base salary for Georges Elhedery. The number of shares to be granted was determined by taking HSBC’s closing share price
of £6.357 taken on 24 February 2023, and applying a discount based on HSBC’s expected dividend yield of 5% per annum for the vesting period
(£4.963). LTI awards are conditional share awards subject to a three-year forward-looking performance period and vest in five equal annual
instalments, between the third and seventh anniversary of the award date, subject to performance achieved. Awards are subject to malus and
clawback for a maximum period of 10 years from the date of the award and are not eligible for dividend equivalents.
2Immediate share awards are granted based on the previous years' performance as part of the annual incentive and are not subject to forward-looking
performance conditions. On vesting, awards will be subject to a one-year retention period. The face value of the immediate share awards have been
computed using HSBC’s closing share price of £6.357 taken on 24 February 2023. Awards are subject to clawback for a maximum period of 10 years
from the date of the award.
3Fixed pay allowance awards are granted in instalments in accordance with the remuneration policy approved by shareholders at the 2022 AGM, and
are not subject to forward-looking performance conditions. Individual tax liabilities were satisfied in cash, therefore the face value awarded represents
the net of tax value of the shares and the number of shares awarded reflects the net of tax number of shares. The fixed pay allowance awards have
been computed using HSBC's closing share price of £5.997 taken on 12 May 2023, £5.839 taken on 18 August 2023 and £6.093 taken on
6 November 2023. These awards vest immediately and are subject to a retention period and released annually on pro-rata basis over five years,
starting in March 2024.
Performance conditions for the 2023–2025 LTI awards
(Audited)
Measures (weighting)1
Minimum
(25% payout)
Target
(50% payout)
Maximum
(100% payout)
RoTE (with CET1 capital ratio underpin)2 (25.0%)
13.0%
14.3%
15.5%
Capital reallocation to Asia (with CET1 capital ratio underpin)3
(25.0%)
49.0%
50.5%
52.0%
Environment and
sustainability4 (25.0%)
Carbon reduction
64.0%
68.0%
72.0%
Sustainable finance and
investment
$588.0bn
$700.0bn
$756.0bn
Relative TSR5 (25.0%)
At median of the
peer group
Straight-line vesting
between minimum and
maximum
At upper quartile of
peer group
1Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2To be assessed based on RoTE at the end of the performance period.
3To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December
2025.
4Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2025 using 2019 as
the baseline. The sustainable finance and investment metric will assess the cumulative amount provided and facilitated over the period ending
31 December 2025.
5The peer group for the 2022 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings,
J.P. Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.
HSBC Holdings plc
335
Executive Directors’ interests in shares
(Audited)
The shareholdings of executive Directors in 2023, including the
shareholdings of their connected persons, at 31 December 2023 (or
the date they stepped down from the Board, if earlier) are set out
below. The following table shows the comparison of shareholdings
with the company shareholding guidelines. There have been no
changes in the shareholdings of the executive Directors from
31 December 2023 to the date of this report.
Individuals have five years from their appointment date to build up the
recommended levels of shareholding. In line with investor guidance,
for executive Directors, unvested shares that are not subject to
forward-looking performance conditions (on a net of tax basis) can
count towards their shareholding requirement under the shareholder-
approved policy.
The Committee reviews compliance with the shareholding
requirement, taking into account shareholder expectations and
guidelines. The Committee also has full discretion in determining any
penalties for non-compliance.
With regard to post-employment shareholding arrangements, we
believe that our remuneration structure achieves the objective of
ensuring there is ongoing alignment of executive Directors’ interests
with shareholder experience post-cessation of their employment due
to the following features of the policy:
–Shares delivered to executive Directors as part of the fixed pay
allowance have a five-year retention period, which continues to
apply following a departure of an executive Director.
–Shares delivered as part of an annual incentive award are subject
to a one-year retention period, which continues to apply following
a departure of an executive Director.
–LTI awards have a seven-year vesting period with a one-year post-
vesting retention period, which is not accelerated on departure.
The weighted average holding period of an LTI award within HSBC is
therefore six years, in excess of the five-year holding period typically
implemented by FTSE-listed companies.
HSBC operates a policy under which individuals are not permitted to
enter into any personal hedging strategies in relation to HSBC shares
subject to a vesting and/or retention period.
Shares
(Audited)
Shareholding
guidelines
(% of salary)
Shareholding at
31 Dec 20232
(% of salary)
At 31 December 2023
Scheme interests
Share
interests
(number
of shares)
Share
options3
Shares awarded
subject to deferral1
without
performance
conditions
with
performance
conditions4
Executive Directors
Noel Quinn5
400%
797%
1,721,465
—
308,610
2,963,315
Georges Elhedery5
300%
598%
753,467
—
714,008
475,463
1The gross number of shares is disclosed. A portion will be sold at vesting to cover any income tax and social security that falls due at the time of
vesting.
2The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2023 (£6.192), and
does not include any unvested interests.
3At 31 December 2023, Noel Quinn and Georges Elhedery did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).
4LTI awards granted in February 2022 and 2023 are subject to the performance conditions as set out in the preceding sections.
5Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment. Noel Quinn and Georges
Elhedery were appointed on 5 August 2019 and 1 January 2023, respectively.
Service contracts
The service contracts of executive Directors do not have a fixed term.
The notice periods of executive Directors are set at the discretion of
the Committee, taking into account market practice, governance
considerations, and the skills and experience of the particular
candidate at that time.
Service agreements for each executive Director are available for
inspection at HSBC Holdings’ registered office. Consistent with the
best interests of the Group, the Committee will seek to minimise
termination payments. Directors may be eligible for a payment in
relation to statutory rights.
Contract date (rolling)
Notice period
(Director and HSBC)
Noel Quinn
18 March 2020
12 months
Georges Elhedery
1 January 2023
12 months
Total pension entitlements
(Audited)
No employees who served as executive Directors during the year
have a right to amounts under any HSBC final salary pension scheme
for their services as executive Directors or are entitled to additional
benefits in the event of early retirement. There is no retirement age
set for Directors, but the normal retirement age for colleagues is 65.
Payments to past Directors
(Audited)
HSBC has received a formal request from the former employer of
Ewen Stevenson to reduce the buy-out award granted to him in 2019
by £82,980, which will be offset against the next available vesting for
this award. The reduction will be made in line with PRA regulations,
acting on the decision made by Ewen Stevenson’s former employer.
We understand the reduction was part of a collective adjustment and
there are no concerns over Ewen Stevenson's conduct or the
discharge of his individual accountabilities.
Payments Ewen Stevenson received after he stepped down as an
executive Director are set out in the following section.
In line with the terms of his departure disclosed in our Annual Report
and Accounts 2022, Ewen Stevenson was granted good leaver status
and is therefore eligible to receive vesting of the 2021–2023 LTI
award, which was pro-rated for time in employment. Ewen’s good
leaver status is conditional upon satisfaction of non-compete
provisions under which he cannot undertake a role with a defined list
of competitor financial services firms for 12 months after his
employment ceases with HSBC. Details of the 2021–2023 LTI
outcome are outlined on page 322.
No other payments were made to, or in respect of, former Directors
in the year in excess of the minimum threshold of £50,000 set for this
purpose.
Report of the Directors | Corporate governance report | Directors’ remuneration report
336
HSBC Holdings plc
Payments for loss of office
(Audited)
Departure terms for Ewen Stevenson
Ewen Stevenson left the Group on 30 April 2023.
In accordance with the approved Directors' remuneration policy and
contractual terms agreed for the period between 1 January 2023 and
25 October 2023, Ewen received payments totalling £703,519 in lieu
of his base salary and pension allowance. Ewen also received his
fixed pay allowance in respect of the same period, which totalled
£885,836 and was awarded in immediately vested shares, which are
subject to a retention period. In accordance with the approved
Directors' remuneration policy, Ewen received cash in lieu of unused
holiday totalling £73,621 on expiry of his notice period.
External appointments
During 2023, executive Directors did not receive any fees from
external appointments.
Directors’ emoluments
The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2023 are set out below:
Emoluments
Noel Quinn
Georges Elhedery
Non-executive Directors1
2023
2022
2023
2022
2023
2022
£000
£000
£000
£000
£000
£000
Directors' base salary, allowances and benefits in kind
3,386
3,367
1,999
—
Non-executive Directors' fees and benefits in kind
4,920
4,644
Pension contributions
—
—
—
—
—
—
Performance-related pay paid or receivable2
6,293
6,439
3,783
—
—
—
Inducements to join paid or receivable
—
—
—
—
—
—
Compensation for loss of office
—
—
—
—
—
—
Notional return on deferred cash
43
31
6
—
—
—
Total
9,722
9,837
5,788
—
4,920
4,644
Total ($000)
12,083
12,226
7,194
—
6,115
5,772
1Fees and benefits in kind for 2022 reflects the population as per the single figure table for non-executive Directors, which excludes individuals who
have stepped down from the Board during 2022.
2Includes the value of the deferred and LTI awards at grant.
The aggregate amount of Directors’ emoluments (including both
executive Directors and non-executive Directors) for the year ended
31 December 2023 was $25,391,977. As per our policy, benefits in
kind may include, but are not limited to, the provision of medical
insurance, income protection insurance, health assessment,
life assurance, club membership, tax assistance, car benefit, travel
assistance, provision of company owned-accommodation and
relocation costs (including any tax due, where applicable).
Total benefits in kind of £25,304 ($31,450) were provided to Ewen
Stevenson until he left the Group. This included income protection
benefits valued at £16,414 ($20,401), life assurance benefits of £935
($1,162) and other non-taxable expenses of £7,955 ($9,887).
Post-employment medical insurance benefits were provided to former
Directors, including Douglas Flint valued at £6,721 ($8,354), Stuart
Gulliver valued at £6,721 ($8,354), John Flint valued at £9,706
($12,064), Marc Moses valued at £15,886 ($19,745) and Ewen
Stevenson valued at £377 ($469). Tax return support was also
provided to John Flint valued at £5,441 ($6,763), Marc Moses valued
at £2,500 ($3,107) and Ewen Stevenson valued at £1,320 ($1,641).
The total aggregate value of benefits provided to former executive
Directors was £73,976 ($91,945). The aggregate value of Director
retirement benefits for current Directors is nil. Amounts are converted 
into US dollars based on the average exchange rates for the year.
There were payments under retirement benefit arrangements with
three former Directors of £1,381,674. The provision at 31 December
2023 in respect of unfunded pension obligations to two former
Directors amounted to £340,208. This relates to unfunded
unapproved retirement benefits schemes.
Emoluments of senior management and five highest paid
employees
The following tables set out the emoluments paid to senior
management, which in this case comprises executive Directors and
members of the Group Executive Committee, for the year ended
31 December 2023, or for the period of appointment in 2023 as a
Director or member of the Group Executive Committee. Details of the
remuneration paid and share awards granted to the five highest paid
employees, comprising one executive Director and four Group
Executives for the year ended 31 December 2023, are also presented.
Five highest paid employees – share awards (HSBC Share Plan 2011)
Dates of award
Purchase
price (£)
HSBC Holdings ordinary share awards
Usually vesting
At 1 Jan
2023
Granted in
period
Vested in
period1
Lapsed
in period
Cancelled in
period
At 31 Dec 2023
from
to
2013 to 2022
0
1 Mar 2023
30 Mar 2029
5,603,050
—
445,705
—
—
5,157,345
27 Feb 20232
0
27 Feb 2023
30 Mar 2030
—
2,533,801
687,935
—
—
1,845,866
15 May 20233
0
15 May 2023
15 May 2023
—
50,080
50,080
—
—
—
21 Aug 20234
0
21 Aug 2023
21 Aug 2023
—
51,435
51,435
—
—
—
7 Nov 20235
0
7 Nov 2023
7 Nov 2023
—
49,291
49,291
—
—
—
1 Jan to 31 Dec 20236
0
1 Mar 2023
30 Mar 2024
—
3,345
982
—
—
2,363
5,603,050
2,687,952
1,285,428
—
—
7,005,574
1  The weighted average closing price of the shares immediately before the dates on which the awards were vested was £5.9681.
2  The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting
standard. The fair values, which vary based on the length of the vesting period, range between £2.8390 and £6.3180. These awards include LTI
awards and other awards which are subject to satisfaction of performance conditions. LTI awards are subject to a combination of financial and non-
financial metrics that are detailed in the Directors’ remuneration report in this Form 20-F.
3  The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting
standard. The fair value of the award was £6.1100.
4  The closing price on the day before the grant date was £5.8390. The fair values of the awards were calculated according to the IFRS 2 accounting
standard. The fair value of the award was £5.8330.
5  The closing price on the day before the grant date was £6.093. The fair values of the awards were calculated according to the IFRS 2 accounting
standard. The fair value of the award was £6.0830.
HSBC Holdings plc
337
6  Relates to the allocation of dividend equivalent shares in relation to eligible awards.
Emoluments
£000s
Five highest paid employees
Senior management
Basic salaries, allowances and benefits in kind
13,357
38,960
Pension contributions
100
640
Performance-related pay paid or receivable1
24,259
59,286
Inducements to join paid or receivable
—
—
Compensation for loss of office
—
—
Total
37,716
98,886
Total ($000)
46,877
122,906
1  Includes the value of deferred share awards at grant.
Emoluments by bands
Hong Kong dollars
US dollars
Number of highest paid employees
Number of senior management
$19,000,001 – $19,500,000
$2,426,967 – $2,490,834
—
1
$22,500,001 – $23,000,000
$2,874,040 – $2,937,907
—
1
$25,000,001 – $25,500,000
$3,193,377 – $3,257,245
—
1
$38,000,001 – $38,500,000
$4,853,933 – $4,917,801
—
1
$41,000,001 – $41,500,000
$5,237,139 – $5,301,006
—
1
$42,000,001 – $42,500,000
$5,364,874 – $5,428,741
—
1
$42,500,001 – $43,000,000
$5,428,741 – $5,492,609
—
2
$48,000,001 – $48,500,000
$6,131,284 – $6,195,152
—
1
$49,000,001 – $49,500,000
$6,259,019 – $6,322,887
—
1
$51,500,001 – $52,000,000
$6,578,357 – $6,642,224
—
1
$56,000,001 – $56,500,000
$7,153,165 – $7,217,032
—
2
$59,000,001 – $59,500,000
$7,536,370 – $7,600,238
—
1
$61,000,001 – $61,500,000
$7,791,840 – $7,855,708
1
1
$63,500,001 – $64,000,000
$8,111,178 – $8,175,046
1
1
$72,500,001 – $73,000,000
$9,260,794 – $9,324,661
1
1
$75,000,001 – $75,500,000
$9,580,132 – $9,643,999
1
1
$94,000,001 – $94,500,000
$12,007,098 – $12,070,966
1
1
Non-executive Directors
(Audited)
The following table shows the total fees and benefits of non-executive Directors for 2023, together with comparative figures for 2022.
Fees and benefits
(Audited)
Fees1
Benefits2
Total
(£000)
2023
2022
2023
2022
2023
2022
Geraldine Buckingham
244
155
5
—
249
155
Rachel Duan
244
225
—
5
244
230
Dame Carolyn Fairbairn
279
265
—
1
279
266
James Forese3
759
689
1
—
760
689
Ann Godbehere4
68
—
—
—
68
—
Steven Guggenheimer
264
262
1
10
265
272
José Antonio Meade Kuribreña
244
242
4
14
248
256
Kalpana Morparia5
170
—
—
—
170
—
Eileen Murray6
290
262
3
—
293
262
Brendan Nelson7
81
—
12
—
93
—
David Nish
479
477
19
22
498
499
Jackson Tai8
132
377
19
25
151
402
Swee Lian Teo9
51
—
—
—
51
—
Mark Tucker
1,500
1,500
51
113
1,551
1,613
Total (£000)
4,805
4,454
115
190
4,920
4,644
Total ($000)
5,972
5,536
143
236
6,115
5,772
1Fees are in line with the Directors’ remuneration policy that was approved at the 2022 AGM. Non-executive Directors receive a pro-rata payment of
£4,000 travel allowance per annum.
2Benefits include taxable expenses such as accommodation, travel and subsistence relating to attendance at Board and other meetings at HSBC
Holdings' registered offices. Tax for non-executive Director benefits is met by HSBC, therefore amounts disclosed have been grossed up using a tax
rate of 47%, where relevant.
3Appointed as Chair of the Group Risk Committee on 5 May 2023. Stepped down as a member of the Group Remuneration Committee and joined the
Group Audit Committee as a member on 5 May 2023. Includes fee of £443,000 (2022: £447,000) in relation to his role as Chair of HSBC North
America Holdings, Inc.
4Appointed to the Board, Nomination & Corporate Governance Committee and Group Remuneration Committee on 1 September 2023.
5Appointed to the Board, Nomination & Corporate Governance Committee and Group Risk Committee on 1 March 2023.
6Appointed as a member of the Group Remuneration Committee on 5 May 2023.
7Appointed to the Board, Nomination & Corporate Governance Committee, Group Audit Committee and Group Risk Committee on 1 September 2023.
8Retired from the Board and retired as Chair of the Group Risk Committee and member of the Group Audit Committee and member of the Nomination
& Corporate Governance Committee on 5 May 2023.
9Appointed to the Board, Nomination & Corporate Governance Committee and Group Risk Committee on 1 October 2023.
Report of the Directors | Corporate governance report | Directors’ remuneration report
338
HSBC Holdings plc
Non-executive Directors’ interests in shares
(Audited)
The shareholdings of persons who were non-executive Directors in
2023, including the shareholdings of their connected persons, at
31 December 2023, or date of cessation as a Director if earlier, are
set out below. There have been no changes in the shareholdings of
the non-executive Directors from 31 December 2023 to the date of
this report.
Non-executive Directors are expected to meet the shareholding
guidelines of 15,000 shares within five years of the date of their
appointment. All non-executive Directors who had been appointed for
five years or more at 31 December 2023 met the guidelines.
Shares
Shareholding
guidelines (number
of shares)
Share interests
(number of shares)
Geraldine Buckingham
15,000
15,000
Rachel Duan
15,000
15,000
Dame Carolyn Fairbairn
15,000
15,000
James Forese
15,000
115,000
Ann Godbehere (appointed to the Board on 1 September 2023)
15,000
15,000
Steven Guggenheimer
15,000
15,000
José Antonio Meade Kuribreña
15,000
15,000
Kalpana Morparia (appointed to the Board on 1 March 2023)
15,000
15,000
Eileen Murray
15,000
75,000
Brendan Nelson (appointed to the Board on 1 September 2023)
15,000
—
David Nish
15,000
50,000
Jackson Tai (retired on 5 May 2023)
15,000
66,515
Swee Lian Teo (appointed to the Board on 1 October 2023)
15,000
15,200
Mark Tucker
15,000
307,352
2024 fees for non-executive Directors
Following a review of fees during 2023, and in accordance with the shareholder approved Directors’ Remuneration Policy at the Company’s
2022 Annual General Meeting, the Board approved increases to certain of the fees payable to the non-executive Directors and for roles on the
Board Committees with effect from 1 January 2024. As a result, each non-executive Director receives a fee of £136,500 per annum. The
separate travel allowance of £4,000 per annum has been incorporated within this fee – a separate travel allowance is no longer paid. The fees
paid to non-executive Directors who are standing for election or re-election as members of Board Committees are set out in the table below
(these Board Committees’ fees and Board fees are pro-rated for part year service where relevant).
2024 fees
Position
£
Non-executive Group Chairman1
1,500,000
Non-executive Director (base fee)
136,500
Senior Independent Director
200,000
Group Risk Committee
Chair
150,000
Member
42,000
Group Audit Committee, Group Remuneration Committee and Group Technology Committee
Chair
78,750
Member
42,000
Nomination & Corporate Governance Committee
Chair
––
Member
34,650
Designated workforce engagement non-executive Director
40,000
1The Group Chairman does not receive a base fee or any other fee in respect of chairing of the Nomination & Corporate Governance Committee.
Non-executive Director appointment and re-election
Non-executive Directors and the Chair are appointed for fixed terms
not exceeding three years, which may be renewed subject to their re-
election by shareholders at AGMs. Non-executive Directors and the
Chair do not have service contracts, but are bound by letters of
appointment issued for and on
behalf of HSBC Holdings, which are available for inspection at HSBC
Holdings’ registered office. There are no obligations in the non-
executive Directors’ or Chair's letters of appointment that could give
rise to remuneration payments or payments for loss of office.
2024 AGM
2025 AGM
2026 AGM
James Forese
Rachel Duan
Geraldine Buckingham
Ann Godbehere1
Dame Carolyn Fairbairn
Kalpana Morparia
Steven Guggenheimer
José Antonio Meade Kuribreña
Eileen Murray
Brendan Nelson1
Swee Lian Teo1
1Ann Godbehere, Brendan Nelson and Swee Lian Teo were appointed following the 2023 AGM and therefore their initial three-year appointment terms
are subject to approval of their election by shareholders at the 2024 AGM. Their initial three-year term of appointment will end at the conclusion of the
2027 AGM, subject to annual re-election by shareholders at the relevant AGMs.
HSBC Holdings plc
339
MRT remuneration disclosures
The following tables set out the remuneration disclosures for
individuals identified as MRTs for HSBC Holdings.
Remuneration information for individuals who are only identified as
MRTs at HSBC Bank plc, HSBC UK Bank plc or other solo-regulated
entity levels is included, where relevant, in those entities’ disclosures.
The 2023 variable pay information included in the following tables is
based on the market value of awards. For share awards, the market
value is based on HSBC Holdings’ share price at the date of grant
(unless indicated otherwise). For cash awards, it is the value of
awards expected to be paid to the individual over the deferral period.
Remuneration awarded for the financial year (REM1)
Supervisory
function
Management
function
Other senior
management
Other
identified
staff
Fixed
remuneration
Number of identified staff
13.0
2.0
16.9
1,238.0
Total fixed pay ($m)
5.9
6.7
39.8
690.3
–  of which: cash-based ($m)1
5.9
3.2
39.8
690.3
–  of which: shares or equivalent ownership interests ($m)2
—
3.5
—
—
–  of which: share-linked instruments or equivalent non-cash instruments ($m)
—
—
—
—
–  of which: other instruments ($m)
—
—
—
—
–  of which: other forms ($m)
—
—
—
—
Variable
remuneration3
Number of identified staff
13.0
2.0
16.9
1,238.0
Total variable remuneration ($m)4
—
15.6
67.4
740.2
–  of which: cash-based ($m)
—
2.1
30.5
371.2
–  of which: deferred ($m)
—
—
18.3
174.5
–  of which: shares or equivalent ownership interests ($m)2
—
13.5
36.9
354.6
–  of which: deferred ($m)
—
11.5
24.7
201.6
–  of which: share-linked instruments or equivalent non-cash instruments ($m)
—
—
—
10.1
–  of which: deferred ($m)
—
—
—
5.6
–  of which: other instruments ($m)
—
—
—
—
–  of which: deferred ($m)
—
—
—
—
–  of which: other forms ($m)
—
—
—
4.3
–  of which: deferred ($m)
—
—
—
2.7
Total remuneration ($m)
5.9
22.3
107.2
1,430.5
1Cash-based fixed remuneration is paid immediately.
2Paid in HSBC shares. Vested shares are subject to a retention period of up to one year.
3Variable pay awarded in respect of 2023. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable
component of remuneration for any one year is limited to 200% of fixed component of the total remuneration. HSBC has continued to use the
discount rate previously published as PRA remuneration rule 15.13 for 17 individuals for the purpose of calculating the ratio between fixed and variable
components of 2023 total remuneration.
426 identified staff members were exempt from the application of the remuneration structure requirements for MRTs under the PRA and FCA
remuneration rules. Their total remuneration is $6.2m, of which $5.1m is fixed pay and $1.1m is variable remuneration.
Special payments to staff whose professional activities have a material impact on institutions’ risk profile (REM2)
Supervisory
function
Management
function
Other senior
management
Other
identified
staff
Guaranteed variable remuneration awards1
Number of identified staff
—
—
—
—
Total amount ($m)
—
—
—
—
–  of which guaranteed variable remuneration awards paid during the financial year, that are not
taken into account in the bonus cap ($m)
—
—
—
—
Severance payments awarded in previous periods, that have been paid out during the financial year2
Number of identified staff
—
—
—
—
Total amount ($m)
—
—
—
—
Severance payments awarded during the financial year2
Number of identified staff
—
—
—
59.8
Total amount ($m)
—
—
—
37.0
–  of which paid during the financial year ($m)
—
—
—
32.8
–  of which deferred ($m)
—
—
—
—
–  of which severance payments paid during the financial year, that are not taken into account in
the bonus cap ($m)
—
—
—
37.0
–  of which highest payment that has been awarded to a single person ($m)
—
—
—
3.4
1No guaranteed variable remuneration was awarded in 2023. HSBC would offer a guaranteed variable remuneration award in exceptional
circumstances for new hires, and for the first year of employment only. It would typically involve a critical new hire, and would also depend on factors
such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance
year.
2Includes payments such as payment in lieu of notice, statutory severance, outplacement service, legal fees, ex-gratia payments and settlements
(excludes pre-existing benefit entitlements triggered on terminations).
Report of the Directors | Corporate governance report | Directors’ remuneration report
340
HSBC Holdings plc
Deferred remuneration at 31 December1 (REM3)
$m
Total amount
of deferred
remuneration
awarded for
previous
performance
periods
of which:
due to
vest in
the
financial
year
of which:
vesting in
subsequent
financial
years
Amount of
performance
adjustment
made in the
financial year
to deferred
remuneration
that was due
to vest in the
financial year
Amount of
performance
adjustment
made in the
financial year
to deferred
remuneration
that was due
to vest in
future
performance
years
Total
amount of
adjustment
during the
financial
year due to
ex post
implicit
adjustments
Total amount
of deferred
remuneration
awarded
before the
financial year
actually paid
out in the
financial year
Total amount
of deferred
remuneration
awarded for
previous
performance
period that
has vested
but is subject
to retention
periods
Supervisory function
—
—
—
—
—
—
—
—
Cash-based
—
—
—
—
—
—
—
—
Shares
—
—
—
—
—
—
—
—
Share-linked instruments
—
—
—
—
—
—
—
—
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Management function
52.4
12.0
40.4
-2.3
—
3.7
6.3
4.2
Cash-based
7.5
1.0
6.5
—
—
—
1.0
—
Shares
44.9
11.0
33.9
-2.3
—
3.7
5.3
4.2
Share-linked instruments
—
—
—
—
—
—
—
—
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Other senior management
149.0
20.1
128.9
—
—
12.3
19.7
5.1
Cash-based
51.4
6.6
44.8
—
—
—
6.5
—
Shares
97.2
13.1
84.1
—
—
12.3
12.8
4.9
Share-linked instruments
0.4
0.4
—
—
—
—
0.4
0.2
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Other identified staff
1,097.3
301.4
795.9
—
—
63.7
290.5
54.9
Cash-based
408.0
89.0
319.0
—
—
—
87.7
—
Shares
663.6
200.2
463.4
—
—
60.7
192.9
50.2
Share-linked instruments
15.3
7.9
7.4
—
—
2.0
7.7
3.5
Other instruments
—
—
—
—
—
—
—
—
Other forms
10.4
4.3
6.1
—
—
1.0
2.2
1.2
Total amount
1,298.7
333.5
965.2
-2.3
—
79.7
316.5
64.2
1This table provides details of balances and movements during performance year 2023. For details of variable pay awards granted for 2023, refer to the
’Remuneration awarded for the financial year’ table. Deferred remuneration is made in cash and/or shares. Share-based awards are made in HSBC
shares.
Identified staff - remuneration by band1 (REM4)
Identified staff that are high
earners as set out in Article
450(i) CRR
€1,000,000 – 1,500,000
260
€1,500,000 – 2,000,000
125
€2,000,000 – 2,500,000
54
€2,500,000 – 3,000,000
20
€3,000,000 – 3,500,000
14
€3,500,000 – 4,000,000
6
€4,000,000 – 4,500,000
8
€4,500,000 – 5,000,000
7
€5,000,000 – 6,000,000
8
€6,000,000 – 7,000,000
3
€7,000,000 – 8,000,000
4
€8,000,000 – 9,000,000
—
€9,000,000 – 10,000,000
2
€10,000,000 – 11,000,000
—
€11,000,000 – 12,000,000
—
€12,000,000 – 13,000,000
1
1Table prepared in euros in accordance with Article 450 of the European Union Capital Requirements Regulation, using the exchange rates published by
the European Commission for financial programming and budget for December of the reported year as published on its website.
HSBC Holdings plc
341
Information on remuneration of staff whose professional activities have a material impact on institutions’ risk profile (REM5)
Management body
Business areas
Total
Supervisory
function
Management
function
Total
Investment
banking
Retail
banking
Asset
management
Corporate
function
Independent
internal
control
function
All
other
Total number of
identified staff
1,269.9
–  of which members of
the Board
13.0
2.0
15.0
–  of which senior
management
1.0
2.0
—
5.9
2.0
6.0
–  of which other
identified staff
506.5
298.0
31.0
153.0
180.9
68.6
Total remuneration of
identified staff ($m)
5.9
22.3
28.2
712.7
305.9
40.9
200.7
141.2
136.3
–  of which variable
remuneration ($m)1
—
15.6
15.6
392.0
155.6
21.6
100.5
63.8
74.1
–  of which fixed
remuneration ($m)
5.9
6.7
12.6
320.7
150.3
19.3
100.2
77.4
62.2
1Variable pay awarded in respect of 2023. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable
component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.
Share plan matters considered by the Group Remuneration Committee
The Group Remuneration Committee and its delegates considered
various matters relating to the HSBC share plans during the financial
year.
The HSBC International Employee Share Purchase Plan
(‘ShareMatch’) and The HSBC Holdings Savings-Related Share Option
Plan (UK) (‘Sharesave’) were offered in 2023. ShareMatch was
offered in the Philippines for the first time. The HSBC variable pay
deferral approach for the 2023 performance year was approved, for
which certain minor updates were made to comply with legal and
regulatory requirements. The structure and quantum of LTI awards for
the executive Directors and members of the Group Executive
Committee were approved for the 2023 performance year. Other
awards with performance conditions were approved for certain
strategically important projects during 2023.
Certain awards were granted to executive Directors or senior
managers with vesting periods of less than 12 months:
–Fixed pay allowance awards were granted to executive Directors
in accordance with the approved Directors’ remuneration policy,
which vest immediately and are subject to a retention period.
These awards are not subject to clawback on the basis that they
form part of the executive Directors’ fixed pay. The awards were
granted under the HSBC Share Plan 2011.
–Immediate share awards were granted to executive Directors and
senior managers in compliance with our regulatory requirements
to deliver a portion of non-deferred variable pay in instruments.
These awards vest immediately, and are subject to a retention
period and clawback provisions.
Report of the Directors | Corporate governance report | Directors’ remuneration report
342
HSBC Holdings plc
Share capital and other related governance disclosures
Share buy-back programme
On 10 May 2023, HSBC Holdings commenced a share buy-back
programme of its ordinary shares of $0.50 each up to a maximum
consideration of $2.0bn. This programme concluded on 27 July 2023,
with 129,000,963 ordinary shares repurchased for cancellation on UK
trading venues and 128,774,800 ordinary shares repurchased for
cancellation on The Stock Exchange of Hong Kong Limited (’HKEx’).
On 3 August 2023, HSBC Holdings commenced a further share buy-
back programme of its ordinary shares of $0.50 each up to a
maximum consideration of $2.0bn. This programme concluded on
26 October 2023, with 129,814,790 ordinary shares repurchased for
cancellation on UK trading venues and 129,109,200 ordinary shares
repurchased for cancellation on HKEx.
On 1 November 2023, HSBC Holdings commenced a further share
buy-back programme of its ordinary shares of $0.50 each up to a
maximum consideration of $3.0bn.
As at 31 December 2023, 143,374,864 ordinary shares had been
repurchased on UK trading venues and 100,547,200 ordinary shares
were repurchased on HKEx.
The purpose of the buy-back programmes was to reduce HSBC’s
number of outstanding ordinary shares.
As at 31 December 2023, the total number of ordinary shares
repurchased during the year was 760,621,817, representing a nominal
value of $380,310,908.50 and an aggregate consideration paid by
HSBC of £2,470,004,997 on UK trading venues and
HK$21,646,177,512 on HKEx. The shares repurchased represent
3.95% of the shares in issue. Of the repurchased shares, 44,237,528
were awaiting cancellation as at 31 December 2023.
The table that follows outlines details of the shares repurchased and
cancelled on a monthly basis during 2023.
Number of shares
repurchased and
cancelled
Highest price
paid per share
Lowest price
paid per share
Average price
paid per share
Aggregate
price paid
First share buy-back on UK trading venues in 2023
£
£
£
£
Month shares cancelled
May 2023
31,169,005
6.2000
5.8710
6.0716
189,244,725
Jun 2023
52,376,598
6.1900
5.8810
6.0754
318,208,161
Jul 2023
45,455,360
6.4570
5.9840
6.2246
282,943,198
Total
129,000,963
790,396,084
Number of shares
repurchased
Highest price
paid per share
Lowest price
paid per share
Average price 
paid per share
Aggregate
price paid
First share buy-back on HKEx in 2023
(HK$)
(HK$)
(HK$)
(HK$)
Month shares repurchased
May 2023
37,500,000
59.9500
57.2000
59.0377
2,213,913,666
Jun 2023
50,900,000
61.4500
57.1000
60.0303
3,055,542,282
Jul 2023
40,374,800
65.0000
60.3000
62.6018
2,527,536,243
Total
128,774,800
7,796,992,191
Number of shares
repurchased and
cancelled
Highest price
paid per share
Lowest price
paid per share
Average price
paid per share
Aggregate
price paid
Second share buy-back on UK trading venues in 2023
£
£
£
£
Month shares cancelled
Aug 2023
41,102,164
6.4470
5.7940
6.0941
250,481,897
Sep 2023
48,597,672
6.4950
5.7690
6.1120
297,030,003
Oct 2023
40,114,954
6.5750
5.9550
6.3949
256,532,508
Total
129,814,790
804,044,408
Number of shares
repurchased
Highest price
paid per share
Lowest price
paid per share
Average price 
paid per share
Aggregate
price paid
Second share buy-back on HKEx in 2023
(HK$)
(HK$)
(HK$)
(HK$)
Month shares repurchased
Aug 2023
46,350,400
64.6000
57.9500
60.7539
2,815,966,340
Sep 2023
51,388,400
62.2000
56.8500
59.7717
3,071,570,280
Oct 2023
31,370,400
63.6500
56.6500
61.7430
1,936,902,040
Total
129,109,200
7,824,438,660
Number of shares
repurchased and
cancelled
Highest price
paid per share
Lowest price
paid per share
Average price
paid per share
Aggregate
price paid
Third share buy-back on UK trading venues in 2023
£
£
£
£
Month shares repurchased/cancelled
Nov 2023
70,595,556
6.2070
5.8910
6.0717
428,636,659
Dec 2023
72,779,308
6.3640
5.9000
6.1409
446,927,846
Total
143,374,864
875,564,505
HSBC Holdings plc
343
Number of shares
repurchased
Highest price
paid per share
Lowest price
paid per share
Average price 
paid per share
Aggregate
price paid
Third share buy-back on HKEx in 2023
(HK$)
(HK$)
(HK$)
(HK$)
Month shares repurchased
Nov 2023
51,083,600
60.5500
56.4500
59.0032
3,014,094,399
Dec 2023
49,463,600
63.2500
59.1500
60.8660
3,010,652,262
Total
100,547,200
6,024,746,661
Dividends
Dividends for 2023
First, second and third interim dividends for 2023, each of $0.10 per
ordinary share, were paid on 23 June 2023, 21 September 2023 and
21 December 2023. For further details of the dividends approved in
2023, see Note 8 on the financial statements.
On 21 February 2024, the Directors approved a fourth interim
dividend for 2023 of $0.31 per ordinary share, making a total of $0.61
for the 2023 full-year. The fourth interim dividend for 2023 will be
payable on 25 April 2024 in cash in US dollars, or in sterling or Hong
Kong dollars at exchange rates to be determined on 15 April 2024.
The fourth interim dividend for 2023 of $1.55 per American
Depositary Share, each of which represents five ordinary shares, will
be payable by the depositary in US dollars. As the fourth interim
dividend for 2023 was approved after 31 December 2023, it has not
been included in the balance sheet of HSBC as a liability. The
distributable reserves of HSBC Holdings at 31 December 2023 were
$30.9bn.
A quarterly dividend of £0.01 per Series A sterling preference share
was paid on 15 March, 15 June, 15 September and 15 December
2023.
Dividends for 2024
The Group intends to pay quarterly dividends on its ordinary shares
during 2024.
A quarterly dividend of £0.01 per Series A sterling preference share is
payable on 15 March, 17 June, 16 September and 16 December 2024
for the quarter then ended at the sole and absolute discretion of the
Board of HSBC Holdings plc. Accordingly, the Board of HSBC
Holdings plc has approved a quarterly dividend to be payable on
15 March 2024 to holders of record on 29 February 2024.
Share capital
Issued share capital
The nominal value of HSBC Holdings’ issued share capital paid up at
31 December 2023 was $9,631,364,096.50 divided into
19,262,728,193 ordinary shares of $0.50 each and one non-
cumulative preference share of £0.01, representing approximately
100.00% and 0.00% respectively of the nominal value of HSBC
Holdings’ total issued share capital paid up at 31 December 2023.
Rights, obligations and restrictions
attaching to shares
The rights and obligations attaching to each class of ordinary and non-
cumulative preference shares in our share capital are set out in full in
our Articles of Association. The Articles of Association may be
amended by special resolution of the shareholders and can be found
on our website at www.hsbc.com/who-we-are/leadership-and-
governance/board-responsibilities.
Ordinary shares
HSBC Holdings has one class of ordinary share, which carries no right
to fixed income. There are no voting restrictions on the issued
ordinary shares, all of which are fully paid. On a show of hands, each
member present has the right to one vote at general meetings. On a
poll, each member present or voting by proxy is entitled to one vote
for every $0.50 nominal value of share capital held.
There are no specific restrictions on transfers of ordinary shares,
which are governed by the general provisions of the Articles of
Association and prevailing legislation.
Information on the policy adopted by the Board for paying interim
dividends on the ordinary shares may be found in the ’Shareholder
information’ section on page 462.
Dividend waivers
The Group’s employee benefit trusts, which hold shares in HSBC
Holdings in connection with the operation of its share plans, have
lodged standing instructions to waive dividends on shares held by
them that have not been allocated to employees. Shares held by
custodians in connection with the vesting of employee share awards
also lodged instructions to waive dividends. The total amount of
dividends waived during 2023 was $27.16m.
Preference shares
The preference shares, which have preferential rights to income and
capital, do not, in general, confer a right to attend and vote at general
meetings.
There are three classes of preference shares in the share capital of
HSBC Holdings: non-cumulative US dollar preference shares of $0.01
each (‘dollar preference shares’); non-cumulative preference shares of
£0.01 each (‘sterling preference shares’); and non-cumulative
preference shares of €0.01 (‘euro preference shares’).
The sterling preference share in issue is a Series A sterling preference
share. There are no dollar preference shares or euro preference
shares in issue.
Information on dividends approved for 2022 and 2023 may be found
in Note 8 on the financial statements on page 398.
Further details of the rights and obligations attaching to the HSBC
Holdings’ issued share capital may be found in Note 33 on the
financial statements.
Compliance with Hong Kong Listing Rule
13.25A(2)
HSBC Holdings has been granted a waiver from strict compliance
with Rule 13.25A(2) of the Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited.
Under this waiver, HSBC’s obligation to file a Next Day Return
following the issue of new shares, pursuant to the vesting of share
awards granted under its share plans to persons who are not
Directors, would only be triggered where it falls within one of the
circumstances set out under Rule 13.25A(3).
Share capital changes in 2023
In addition to the share buy-back programme, the following events
occurred during the year in relation to the ordinary share capital of
HSBC Holdings:
Scrip dividends
There were no scrip dividends issued during the year.
Treasury shares
On 30 October 2023, HSBC Holdings cancelled 325,273,407 ordinary
shares which were held in treasury, and no longer holds any ordinary
shares in treasury.
Report of the Directors | Corporate governance report
344
HSBC Holdings plc
All-employee share plans1
HSBC Holdings
ordinary shares issued
Aggregate
nominal value
Market value per share
from
to
$
£
£
HSBC International Employee Share Purchase Plan
179,676
89,838
6.386
6.386
1  In respect of the HSBC Holdings Savings Related Share Option Plan (UK), no new shares were issued under this plan. All exercises were satisfied by
market purchased shares. See page 351 for details of options granted, exercised and lapsed.
HSBC share plans
HSBC Holdings
ordinary shares issued
Aggregate
nominal value
Market value per share
from
to
$
£
£
Vesting of awards under the HSBC Share Plan 2011
10,598,803
5,299,401.50
5.421
6.357
Authorities to allot and to purchase shares
and pre-emption rights
At the AGM in 2023, shareholders renewed the general authority for
the Directors to allot new shares up to 13,314,186,248 ordinary
shares, 15,000,000 non-cumulative preference shares of £0.01 each,
15,000,000 non-cumulative preference shares of $0.01 each and
15,000,000 non-cumulative preference shares of €0.01 each.
Shareholders also renewed the authority for the Directors to make
market/off-market purchases of up to 1,997,127,937 ordinary shares.
The Directors exercised their market/off-market purchase authority
from the 2023 AGM and repurchased 760,621,817 ordinary shares
during the year.
In addition, shareholders gave authority for the Directors to grant
rights to subscribe for, or to convert any security into, no more than
3,994,255,874 ordinary shares in relation to any issue by HSBC
Holdings or any member of the Group of contingent convertible
securities that automatically convert into or are exchanged for
ordinary shares in HSBC Holdings in prescribed circumstances. For
further details on the issue of contingent convertible securities, see
Note 33 on the financial statements.
Other than as disclosed in the tables above headed ‘Share capital
changes in 2023’, the Directors did not allot any shares during 2023.
Debt securities
In 2023, HSBC Holdings issued the equivalent of $24.5bn of debt
securities in the public capital markets in a range of currencies and
maturities, of which $17.2bn were in the form of senior securities to
ensure it meets the current and proposed regulatory rules, including
those relating to the availability of adequate total loss-absorbing
capacity. For details of capital instruments and subordinated bail-
inable debt, see Notes 29 and 33 on pages 433 and 441.
Treasury shares
In accordance with the terms of a waiver granted by The Stock
Exchange of Hong Kong Limited on 19 December 2005, HSBC
Holdings will comply with the applicable law and regulation in the UK
in relation to the holding of any shares in treasury and with the
conditions of the waiver in connection with any shares it may hold in
treasury.
HSBC Holdings does not hold any ordinary shares in treasury.
Notifiable interests in share capital
During 2023, HSBC Holdings did not receive any notification of major
holdings of voting rights pursuant to the requirements of Rule 5 of the
Disclosure Guidance and Transparency Rules (’Rule 5 of the DTRs’).
No notifications had been received between 31 December 2023 and
15 February 2024. Previous notifications received are as follows:
–BlackRock, Inc. gave notice on 3 March 2020 that on 2 March
2020 it had the following: an indirect interest in HSBC Holdings
ordinary shares of 1,235,558,490; qualifying financial instruments
with 7,294,459 voting rights that may be acquired if the
instruments are exercised or converted; and financial instruments
with a similar economic effect to qualifying financial instruments,
which refer to 2,441,397 voting rights, representing 6.07%, 0.03%
and 0.01%, respectively, of the total voting rights at 2 March 2020.
–Ping An Asset Management Co., Ltd. gave notice on 6 December
2017 that on 4 December 2017 it had an indirect interest in HSBC
Holdings ordinary shares of 1,007,946,172, representing 5.04% of
the total voting rights at that date.
At 31 December 2023, according to the register maintained by HSBC
Holdings pursuant to section 336 of the Securities and Futures
Ordinance of Hong Kong:
–BlackRock, Inc. gave notice on 9 March 2022 that on 4 March
2022 it had the following interests in HSBC Holdings ordinary
shares: a long position of 1,701,656,169 shares and a short
position of 19,262,061 shares, representing 8.27% and 0.09%,
respectively, of the ordinary shares in issue at that date.
–Ping An Asset Management Co., Ltd. gave notice on
25 September 2020 that on 23 September 2020 it had a long
position of 1,655,479,531 in HSBC Holdings ordinary shares,
representing 8.00% of the ordinary shares in issue at that date.
Sufficiency of float
In compliance with the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited, at least 25% of the total
issued share capital has been held by the public at all times during
2023 and up to the date of this report.
Dealings in HSBC Holdings listed securities
The Group has policies and procedures that, except where permitted
by statute and regulation, prohibit specified transactions in respect of
its securities listed on The Stock Exchange of Hong Kong Limited.
Except for dealings as intermediaries or as trustees by subsidiaries of
HSBC Holdings, and purchases by HSBC Holdings under the share
buy-back programme, neither HSBC Holdings nor any of its
subsidiaries has purchased, sold or redeemed any of its securities
listed on The Stock Exchange of Hong Kong Limited during the year
ended 31 December 2023.
Directors’ interests
Pursuant to the requirements of the UK Listing Rules and according to
the register of Directors’ interests maintained by HSBC Holdings
pursuant to section 352 of the Securities and Futures Ordinance of
Hong Kong, the Directors of HSBC Holdings at 31 December 2023
had certain interests, all beneficial unless otherwise stated, in the
shares or debentures of HSBC Holdings and its associated
corporations.
Save as stated in the following table, no further interests were held
by Directors, and no Directors or their connected persons were
awarded or exercised any right to subscribe for any shares or
debentures in any HSBC corporation during the year.
No Directors held any short position as defined in the Securities and
Futures Ordinance of Hong Kong in the shares or debentures of
HSBC Holdings and its associated corporations.
HSBC Holdings plc
345
Directors’ interests – shares and debentures
At 31 Dec 2023 or date of cessation, if earlier
At 1 Jan 2023, or
date of
appointment,
if later
Beneficial
owner
Child
under 18
or spouse
Jointly
with
another
person
Trustee
Total
interests
HSBC Holdings ordinary shares
Geraldine Buckingham1
15,000
15,000
—
—
—
15,000
Rachel Duan1
15,000
15,000
—
—
—
15,000
Georges Elhedery2 (appointed to the Board on 1 Jan 2023)
572,575
753,467
—
—
—
753,467
Dame Carolyn Fairbairn
15,000
15,000
—
—
—
15,000
James Forese1
115,000
115,000
—
—
—
115,000
Ann Godbehere1 (appointed to the Board on 1 Sep 2023)
15,000
—
15,000
—
—
15,000
Steven Guggenheimer1
15,000
—
15,000
—
—
15,000
José Antonio Meade Kuribreña1
15,000
15,000
—
—
—
15,000
Kalpana Morparia1 (appointed to the Board on 1 Mar 2023)
—
15,000
—
—
—
15,000
Eileen Murray1
75,000
75,000
—
—
—
75,000
Brendan Nelson (appointed to the Board on 1 Sep 2023)
—
—
—
—
—
—
David Nish
50,000
—
50,000
—
—
50,000
Noel Quinn2
1,422,650
1,721,465
—
—
—
1,721,465
Jackson Tai1,3(retired on 5 May 2023)
66,515
32,800
11,965
21,750
—
66,515
Swee Lian Teo (appointed to the Board on 1 Oct 2023)
—
15,200
—
—
—
15,200
Mark Tucker
307,352
307,352
—
—
—
307,352
1Geraldine Buckingham has an interest in 3,000, Rachel Duan has an interest in 3,000, James Forese has an interest in 23,000, Ann Godbehere has an
interest in 3,000, Steven Guggenheimer has an interest in 3,000, José Antonio Meade Kuribreña has an interest in 3,000, Kalpana Morparia has an
interest in 3,000, Eileen Murray has an interest in 15,000 and Jackson Tai has an interest in 13,303 listed American Depositary Shares (’ADS’), which
are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings
ordinary shares.
2Executive Directors’ other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the
HSBC Share Plan 2011 are set out in the Scheme interests in the Directors’ remuneration report on page 315. At 31 December 2023, the aggregate
interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee
share plans and the interests above were: Noel Quinn – 4,993,390; and Georges Elhedery – 1,942,938, representing approximately 0.03% and 0.01%
of the shares in issue respectively.
3Jackson Tai has a non-beneficial interest in 11,965 shares of which he is custodian.
There have been no changes in the shares or debentures of the
current Directors from 31 December 2023 to the date of this report.
Listing Rule 9.8.4 and other
disclosures
This section of the Annual Report and Accounts 2023 forms part of –
and includes certain disclosures required – in the Report of the
Directors incorporated by cross-reference, including under Listing
Rule 9.8.4 and otherwise as applicable by law.
Content
Page references
Long-term incentives
322
Dividend waivers
344
Dividends
344
Share buy-back
343
Emissions
45
Energy efficiency
45, 49, 51
Principal activities of HSBC
11, 30, 112, 422
Business review and future developments
11–40, 42, 160, 181, 453
Board governance
Appointment and re-election of Directors
For details on the processes governing the appointment and re-
election of Directors, see the Nomination & Corporate Governance
Committee report from page 298.
Commitments
For details on the processes governing Director commitments, see
the Nomination & Corporate Governance Committee report from
page 298.
Conflicts of interest
The Board has an established policy and set of procedures to ensure
that the Board’s management of Directors’ conflicts of interest is
effective. The Board has the power to authorise conflicts where they
arise, in accordance with the Companies Act 2006 and HSBC
Holdings’ Articles of Association. Details of all Directors’ conflicts of
interest are recorded in the register of conflicts. Upon appointment,
new Directors are advised of the policy and procedures for managing
conflicts. Directors are required to notify the Board of any actual or
potential conflicts of interest and to update the Board with any
changes to the facts and circumstances surrounding such conflicts.
Directors are requested to review and confirm their own and their
respective closely associated persons’ outside interests and
appointments twice each year. The Board has considered, and
authorised (with or without conditions) where appropriate, potential
conflicts as they have arisen during the year in accordance with its
conflicts policy and procedures. All non-executive Directors are
subject to re-vetting by the Group's compliance team on a triennial
basis following appointment. As part of this re-vetting process, all
conflicts checks are refreshed.
Joint Company Secretary
Aileen Taylor is the Group Company Secretary and Chief Governance
Officer.
Hannah Ashdown (47) was appointed as Deputy Group Secretary in
December 2021 and for administrative purposes, in October 2022,
was appointed as Joint Company Secretary. She is a Fellow of the
Chartered Governance Institute UK and Ireland. Hannah has over 20
years’ governance and regulatory experience across multiple sectors
including financial services, asset management, energy, leisure and
retail.
Report of the Directors | Corporate governance report
346
HSBC Holdings plc
Directors’ indemnity
The Articles of Association of HSBC Holdings contain a qualifying
third-party indemnity provision, which entitles Directors and other
officers to be indemnified out of the assets of HSBC Holdings against
claims from third parties in respect of certain liabilities.
HSBC Holdings has granted, by way of deed poll, indemnities to the
Directors, including former Directors, against certain liabilities arising
in connection with their position as a Director of HSBC Holdings or of
any Group company. Directors are indemnified to the maximum
extent permitted by law.
The indemnities that constitute a ’qualifying third-party indemnity
provision’, as defined by section 234 of the Companies Act 2006,
remained in force for the whole of the financial year (or, in the case of
Directors appointed during 2023, from the date of their appointment).
The deed poll is available for inspection at the registered office of
HSBC Holdings.
Additionally, Directors and pension trustees have the benefit of both
Directors’ and officers’ liability insurance and pension trustees’ liability
insurance.
Qualifying pension scheme indemnities have also been granted to the
trustees of the Group’s pension schemes, which were in force for the
whole of the financial year and remain in force as at the date of this
report.
Contracts of significance
During 2023, none of the Directors had a material interest, directly or
indirectly, in any contract of significance with any HSBC company.
During the year, all Directors were reminded of their obligations in
respect of transacting in HSBC securities and following specific
enquiry all Directors have confirmed that they have complied with
their obligations.
Shareholder engagement and
communication
The Board is directly accountable to, and gives high priority to
communicating with, HSBC’s shareholders. Information about HSBC
and its activities is provided to shareholders in its Interim Reports and
the Annual Report and Accounts as well as on www.hsbc.com.
The Board seeks to understand investor needs through ongoing
dialogue between members of the Board and institutional investors
throughout the year. For examples of such engagement, see 'Board
engagement with shareholders' on page 292 and the Group
Remuneration Committee Chair’s letter on page 315. During 2023,
approximately 643 meetings were held with institutional investors and
analysts globally.
Our shareholder communications policy summarises how we
communicate with our shareholders, including through financial
reporting, general shareholder meetings, investor and analyst
meetings and our website. The policy is reviewed annually by the
Board, and in 2023 the Board confirmed that it was satisfied with its
implementation and effectiveness. The policy can be found at
www.hsbc.com/who-we-are/leadership-and-governance/board-
responsibilities.
We also publish our current and past financial results, investor
presentations and shareholder information such as dividend payments
and shareholder meeting details. Stock exchange announcements are
also accessible on our website along with information for fixed
income investors. For further details, see www.hsbc.com/investors.
Directors are encouraged to develop an understanding of the views of
shareholders. Enquiries from individuals on matters relating to their
shareholdings and HSBC’s business are welcomed.
Any individual or institutional investor can make an enquiry by
contacting the investor relations team, Group Chairman, Group Chief
Executive, Group Chief Financial Officer and Group Company
Secretary and Chief Governance Officer. Our Senior Independent
Director is also available to shareholders if they have concerns that
cannot be resolved or for which the normal channels would not be
appropriate. They can be contacted via the Group Company Secretary
and Chief Governance Officer at 8 Canada Square, London E14 5HQ.
The results of the poll vote at the 2023 AGM were published on
5 May 2023 and showed that on resolutions 2, 3(l), 6, 7, 14 and 15 we
received votes of between 20.04% to 23.30% against the Board’s
recommendations. In our statement of 5 May 2023, it was noted that
our largest shareholder, Ping An, voted against the Board’s
recommendations on the above resolutions and a number of others.
Ping An’s votes accounted for approximately 18% to 19% of all votes
cast at the 2023 AGM based on a turnout of around 50%. The Board
was pleased that a large majority of shareholders voting at the 2023
AGM supported HSBC’s strategy and since the AGM there have been
no concerns expressed by shareholders regarding the above
resolutions. As referenced in the announcement released on 3
November 2023, we continue to have constructive dialogue and
provide corporate access to all our institutional shareholders, including
Ping An and respect and listen to their views.
Annual General Meeting
The AGM in 2024 is planned to be held in London, UK at 11:00am on
Friday, 3 May 2024. Information on how to vote and participate, both
in advance and on the day, can be found in the Notice of the 2024
AGM, which will be sent to shareholders on 22 March 2024 and be
available on www.hsbc.com/agm. A live webcast will be available on
www.hsbc.com. A recording of the proceedings will be available on
www.hsbc.com shortly after the conclusion of the AGM.
Shareholders should monitor our website and announcements for any
changes to these arrangements. Shareholders may send enquiries to
the Board in writing via the Group Company Secretary and Chief
Governance Officer, HSBC Holdings plc, 8 Canada Square, London
E14 5HQ or by sending an email to shareholderquestions@hsbc.com.
General meetings and resolutions
Shareholders may require the Directors to call a general meeting
other than an AGM, as provided by the UK Companies Act 2006. A
valid request to call a general meeting may be made by members
representing at least 5% of the paid-up capital of HSBC Holdings as
carries the right of voting at its general meetings (excluding any paid-
up capital held as treasury shares). A request must state the general
nature of the business to be dealt with at the meeting and may
include the text of a resolution that may properly be moved and is
intended to be moved at the meeting. At any general meeting
convened on such request, no business may be transacted except
that stated by the requisition or proposed by the Board.
Shareholders may request the Directors to send a resolution to
shareholders for consideration at an AGM, as provided by the UK
Companies Act 2006. A valid request must be made by
(i) members representing at least 5% of the paid-up capital of HSBC
Holdings as carries the right of voting at its general meetings
(excluding any paid-up capital held as treasury shares), or (ii) at least
100 members who have a right to vote on the resolution at the AGM
in question and hold shares in HSBC Holdings on which there has
been paid up an average sum, per member, of at least £100.
The request must be received by HSBC Holdings not later than (i) six
weeks before the AGM in question; or (ii) if later, the time at which
the notice of AGM is published.
A request may be in hard copy form or in electronic form, and must
be authenticated by the person or persons making it. A request may
be made in writing to HSBC Holdings at its UK address, referred to in
the paragraph above or by sending an email to
shareholderquestions@hsbc.com.
Articles of Association
The Articles of Association were last approved at the 2022 AGM. The
Articles of Association can be found at www.hsbc.com/who-we-are/
leadership-and-governance/board-responsibilities.
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347
Events after the balance sheet date
For details of events after the balance sheet date, see Note 39 on the
financial statements.
Change of control
The Group is not party to any significant agreements that take effect,
alter or terminate following a change of control of the Group. The
Group does not have agreements with any Director or employee that
would provide compensation for loss of office or employment
resulting from a takeover bid.
Branches
The Group provides a wide range of banking and financial services
through branches and offices in the UK and overseas.
Research and development activities
During the ordinary course of business, the Group develops new
products and services within the global businesses.
Political donations
HSBC does not make any political donations or incur political
expenditure within the ordinary meaning of those words. We have no
intention of altering this policy. However, the definitions of political
donations, political parties, political organisations and political
expenditure used in the UK Companies Act 2006 are very wide. As a
result, they may cover routine activities that form part of the normal
business activities of the Group and are an accepted part of engaging
with stakeholders. To ensure that neither the Group nor any of its
subsidiaries inadvertently breaches the UK Companies Act 2006,
authority is sought from shareholders at the AGM to make political
donations.
HSBC provides administrative support to two political action
committees (’PACs’) in the US funded by voluntary political
contributions by eligible employees. We do not control the PACs, and
all decisions regarding the amounts and recipients of contributions are
directed by a voluntary Board Finance Committee, which consists of
contributing eligible employees. The PACs recorded combined
political donations of $110,004 during 2023 (2022: $100,250).
Charitable contributions
For details of charitable contributions, see page 86.
Internal control
The Board is responsible for maintaining and reviewing the
effectiveness of the Group’s risk management and internal control
systems, and for determining the level and type of risks the Group is
willing to take in achieving its strategic objectives.
To meet this requirement and to discharge its obligations under the
FCA Handbook and the PRA Rulebook, procedures have been
designed: for safeguarding assets against unauthorised use or
disposal; for maintaining proper accounting records; and for ensuring
the reliability and usefulness of financial information used within the
business or for publication.
These procedures provide reasonable assurance against material
misstatement, errors, losses or fraud. They are designed to provide
effective internal control within the Group and accord with the
Financial Reporting Council‘s guidance for Directors, issued in 2014,
on risk management, internal control and related financial and
business reporting. The procedures have been in place throughout the
year and up to 21 February 2024, the date of publication of the Annual
Report and Accounts 2023.
The Board, the GRC and the GAC monitored the effectiveness of the
Group’s system of risk management and internal control throughout
the year. In particular, this focused on the Group’s regulatory
remediation and change programmes, and involved working closely
with management to better prioritise and understand where there are
key interdependencies. In 2024, continued focus will be placed on
overseeing emerging risks and potential risks arising from new
products and offerings.
To support the work of the Board, the GRC and the GAC in
discharging their responsibilities in this regard, assurance was also
provided by executive management confirming that a risk assessment
had been undertaken and controls were in place to mitigate the risks
arising from the Group’s key activities. Necessary actions will be
taken to remedy any failings or weaknesses identified from these
activities and included the implementation of additional assurance
procedures including in relation to the Group's externally driven ESG
and climate-related disclosures, change programmes and regulatory
reporting. 
The key risk management and internal control procedures include the
following:
Global Principles
The Group’s Global Principles set an overarching standard for all
policies and procedures and are fundamental to the Group’s risk
management structure. They inform and connect our purpose, values,
strategy and risk management principles, guiding us to do the right
thing and treat our customers and our colleagues fairly at all times. In
2024, the Global Principles will be replaced by a more concise and
targeted version of the document, known as the HSBC Book.
Risk management framework
The risk management framework supports our Global Principles, and
going forward, our HSBC Book. It outlines the key principles and
practices that we employ in managing material risks. It applies to all
categories of risk and supports a consistent approach in identifying,
assessing, managing and reporting the risks we accept and incur in
our activities.
Delegation of authority within limits set by the Board
Subject to certain matters reserved for the Board, the Group Chief
Executive has been delegated authority limits and powers within
which to manage the day-to-day affairs of the Group. A new
delegation of authorities framework was implemented in April 2023
with the aim of providing a simpler Group structure within which the
Board and its subsidiaries can manage their delegated powers. These
delegated authorities can be used for the approval, signing and
execution of specific written agreements and documents such as
procurement contracts.
The delegation of authorities framework is either granted via a
separate board resolution or power of attorney or is set out in the
relevant Group policy with clear systems of control that are
appropriate to the business or function. Authorities to enter into credit
and market risk exposures are delegated with limits to line
management of Group companies in line with Group policy. Credit
and market risks are measured and reported at subsidiary company
level and aggregated for risk concentration analysis on a Group-wide
basis.
Risk identification and monitoring
Systems and procedures are in place to identify, assess, control and
monitor the material risk types facing HSBC as set out in the risk
management framework. The Group‘s risk measurement and
reporting systems are designed to help ensure that material risks are
captured with all the attributes necessary to support well-founded
decisions, that those attributes are accurately assessed and that
information is delivered in a timely manner for those risks to be
successfully managed and mitigated.
Changes in market conditions/practices
Processes are in place to identify new risks arising from changes in
market conditions/practices or customer behaviours, which could
expose the Group to heightened risk of loss or reputational damage.
The Group employs both a top and emerging risks process to provide
forward-looking views of issues with the potential to threaten the
execution of our strategy or operations over the medium to long term.
We remain committed to investing in the reliability and resilience of
our IT systems and critical services, including those provided by third
parties, that support all parts of our business. We do so to help
protect our customers, affiliates and counterparties, and to help
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HSBC Holdings plc
ensure that we minimise any disruption to services that could result in
reputational and regulatory consequences. In our approach to defend
against these threats, we invest in business and technical controls to
help us detect, manage and recover from issues, including data loss,
in a timely manner.
We continue our focus on the quality and timeliness of the data used
to inform management decisions, through measures such as early
warning indicators, prudent active risk management of our risk
appetite, and ensuring regular communication with our Board and
other key stakeholders.
Responsibility for risk management
All employees are responsible for identifying and managing risk within
the scope of their role as part of the three lines of defence model.
This is an activity-based model to delineate management
accountabilities and responsibilities for risk management and the
control environment. The second line of defence sets the policy and
guidelines for managing specific risk areas, provides advice and
guidance in relation to the risk, and challenges the first line of defence
(the risk owners) on effective risk management.
The Board delegated authority to the GAC to annually review the
independence, autonomy and effectiveness of the Group’s policies
and procedures on whistleblowing, including the procedures for the
protection of staff who raise concerns of detrimental treatment.
Strategic plans
Strategic plans are prepared for global businesses, global functions
and geographical regions within the framework of the Group’s overall
strategy. Financial resource plans, informed by detailed analysis of
risk appetite describing the types and quantum of risk that the Group
is prepared to take in executing its strategy, are prepared and adopted
by all major Group operating companies and set out the key business
initiatives and the likely financial effects of those initiatives.
Internal control over financial reporting
HSBC is required to comply with section 404 of the US Sarbanes-
Oxley Act of 2002 and assess its effectiveness of internal control over
financial reporting at 31 December 2023. In 2014, the GAC endorsed
the adoption of the principles of the Committee of Sponsoring
Organizations of the Treadway Commission (’COSO’) 2013
framework for the monitoring of risk management and internal control
systems to satisfy the requirements of section 404 of the Sarbanes-
Oxley Act.
The primary mechanism through which comfort over risk
management and internal control systems is achieved is through
annual assessments of the effectiveness of controls to manage risk,
and the reporting of issues on a regular basis through the various risk
management and risk governance forums.
The key risk management and internal control procedures over
financial reporting include the following:
Entity level controls
Entity level controls are a defined suite of internal controls that have a
pervasive influence over the entity as a whole and meet the principles
of the COSO framework. They include controls related to the control
environment, such as the Group's values and ethics, the promotion of
effective risk management and the overarching governance exercised
by the Board and its non-executive committees. The design and
operational effectiveness of entity level controls are assessed on an
ongoing basis. If issues are significant to the Group, they are
escalated to the GRC and also to the GAC, if concerning financial
reporting matters.
Process level transactional controls
Key process level controls that mitigate the risk of financial
misstatement are identified, recorded and monitored in accordance
with the risk framework. This includes the identification and
assessment of relevant control issues against which action plans are
tracked through to remediation. Further details of HSBC’s approach to
risk management can be found on page 159. The GAC has continued
to receive regular updates on HSBC’s ongoing activities for improving
the effective oversight of end-to-end business processes, and
management continued to identify opportunities for enhancing key
controls, such as through the use of automation technologies.
Financial reporting controls
The Group’s financial reporting process is controlled using
documented accounting policies and reporting formats, supported by
detailed instructions and guidance on reporting requirements, issued
to all reporting entities within the Group in advance of each reporting
period end. The submission of financial information from each
reporting entity is supported by a certification by the responsible
financial officer and analytical review procedures at reporting entity
and Group levels.
Group Disclosure and Controls Committee
Chaired by the Group Chief Financial Officer, the Group Disclosure
and Controls Committee supports the discharge of the Group’s
obligations under relevant legislation and regulation including the UK
and Hong Kong listing rules, the UK Market Abuse Regulation and US
Securities and Exchange Commission rules. In so doing, the Group
Disclosure and Controls Committee is empowered to determine
whether a new event or circumstance should be disclosed, including
the form and timing of such disclosure, and review certain material
disclosures made or to be made by the Group. The membership of
the Group Disclosure and Controls Committee consists of senior
management, including the Group Chief Financial Officer, Group Chief
Risk and Compliance Officer, Group Chief Legal Officer, and Group
Company Secretary and Chief Governance Officer. The Group’s
brokers, external auditors and its external legal counsel also attend as
required. The integrity of disclosures is underpinned by structures and
processes within the Global Finance and Group Risk and Compliance
functions that support rigorous analytical review of financial reporting
and the maintenance of proper accounting records. As required by the
Sarbanes-Oxley Act, the Group Chief Executive and the Group Chief
Financial Officer have certified that the Group’s disclosure controls
and procedures were effective as at the end of the period covered by
the Annual Report and Accounts 2023.
The annual review of the effectiveness of the Group’s system of risk
management and internal control over financial reporting was
conducted with reference to the COSO 2013 framework. Based on
the assessment performed, the Directors concluded that for the year
ended 31 December 2023, the Group’s internal control over financial
reporting was effective.
PwC has audited the effectiveness of HSBC’s internal control over
financial reporting and has given an unqualified opinion.
Other information included in the Annual
Report and Accounts 2023
We include other non-statutory information in the Annual Report and
Accounts to enable a broader perspective of our performance for the
period, including ESG and regulatory capital and liquidity information.
We highlight on pages 43 and 303 that we are seeking to enhance our
governance, process, systems and controls capabilities in both areas,
although the scale and nature of the challenges differ between
reporting areas. Our improvements in regulatory reporting are
intended to strengthen our global processes, improve consistency
and enhance controls in order to meet regulatory expectations. ESG
reporting continues to evolve, with a lack of globally consistent
metrics, taxonomies and best practices and a high reliance on
external data. The GAC provides oversight to our reporting
improvements in both areas, and is also focused on increasing the
level of internal and external assurance in these areas, in line with
wider market developments (set out on page 303).
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349
Going concern
The Directors considered it appropriate to prepare the financial
statements on a going concern basis.
In making the going concern assessment, the Directors have
considered a wide range of detailed information relating to present
and potential conditions, including projections for profitability, cash
flows, capital requirements and capital resources.
In carrying out their assessment of the principal risks (as detailed on
page 163 of this annual report on Form 20-F), the Directors
considered a wide range of information including:
–details of the Group’s business and operating models, and strategy
(see page 11 in this annual report on Form 20-F);
–details of the Group’s approach to managing risk and allocating
capital;
–the continued validity of our existing risk management practices,
liquidity monitoring process and metric assumptions, in light of the
high-profile US and Swiss banking failures in the first quarter of
2023;
–a summary of the Group’s financial position considering
performance, its ability to maintain minimum levels of regulatory
capital, liquidity funding and the minimum requirements for own
funds and eligible liabilities over the period of the assessment.
Notable are the risks which the Directors believe could cause the
Group’s future results or operations to adversely impact any of the
above;
–enterprise risk reports, including the Group’s risk appetite profile
(see page 159 of this annual report on Form 20-F) and top and
emerging risks (see page 163 of this annual report on Form 20-F);
–the impact on the Group due to the Russia-Ukraine and Israel-
Hamas wars; instability in China’s commercial real estate sector
and strained economic and diplomatic relations between China and
the US, the UK, the EU and other countries;
–reports and updates regarding regulatory and internal stress
testing. The 2022–2023 Bank of England annual cyclical scenario
stress test results were published on 12 July 2023. The stress
scenario explored the potential impacts of a global economic
contraction, persistently higher inflation and interest rates in
advanced economies with materially increased unemployment,
and a sharp fall in asset prices. Additionally during the second half
of 2023, the Group-wide internal stress test was completed, which
explores a prolonged global stress, depicting macroeconomic
conditions that are generally more severe than that of the 2022–
2023 annual cyclical scenario. The results of both these exercises
indicated the Group is sufficiently capitalised to withstand a severe
but plausible adverse stress;
–the results of our 2023 internal climate scenario analysis exercise.
The results of this exercise further demonstrate the Group is
sufficiently capitalised to withstand a severe stress. Further details
of the insights from the 2023 climate scenario analysis are
explained from page 66 of this annual report on Form 20-F;
–reports and updates from management on risk-related issues
selected for in-depth consideration;
–reports and updates on regulatory developments;
–legal proceedings and regulatory matters set out in Note 36 of the
financial statements in this annual report on Form 20-F; and
–reports and updates from management on the operational
resilience of the Group.
Employees
At 31 December 2023, HSBC had a total workforce equivalent to
221,000 full-time employees compared with 219,000 at the end of
2022. Our main centres of employment were India with
approximately 42,000 employees, the UK with 33,000, mainland
China with 33,000, Hong Kong with 26,000, Mexico with 17,000 and
France with 6,000.
Our business spans many cultures, communities and continents. We
aspire to provide a high-performing environment where our
colleagues can fulfil their potential by building their skills and
capabilities while focusing on the development of a diverse and
inclusive culture. We use employee surveys to assess progress and
make changes. We want to provide an open culture, where our
colleagues feel connected and supported to speak up, and where our
leaders encourage and use feedback. Where we make organisational
changes, we support our colleagues, in particular where there are job
impacts.
Employee relations
We consult with and, where appropriate, negotiate with employee
representative bodies where we have them. It is our policy to
maintain well-developed communications and consultation
programmes with all employee representative bodies. There have
been no material disruptions to our operations from labour disputes
during the past five years.
We are committed to complying with the applicable employment laws
and regulations in the jurisdictions in which we operate, including in
relation to working hours and rest periods. HSBC’s global
employment practices and relations policy provides the framework
and controls through which we seek to uphold that commitment.
Diversity and inclusion
Our customers, colleagues and communities span many cultures and
continents. We value difference and believe that diversity makes us
stronger. We are dedicated to building a diverse and connected
workforce where everyone feels a sense of belonging.
Our Group People Committee, which is made up of Group Executive
Committee members, governs our diversity and inclusion agenda. It
meets regularly to agree actions to improve diverse representation
and build a more inclusive culture. Members of our Group Executive
Committee are held to account for the actions they take on diversity
via aspirational goals contained within their performance scorecards.
We expect all colleagues at HSBC to treat each other with dignity and
respect to ensure an inclusive environment. Our policies make it clear
that we do not tolerate unlawful discrimination, bullying or
harassment on any grounds.
To align our approach to inclusion best practices, we participate in
global diversity benchmarks that help us to identify improvement
opportunities. We also track a large number of diversity and inclusion
metrics, including those included in the Group executive scorecards,
which enable us to identify inclusion barriers and take action where
required. Our approach to diversity and inclusion is set out on page 76
alongside our goals and progress.
Further details of our diversity and inclusion activity, alongside our
Gender and Ethnicity Pay Gap Reports 2023, can be found at
www.hsbc.com/diversitycommitments.
Employment of people with a disability
We strongly believe in providing equal opportunities for our
employees. The employment of people with a disability is included in
this commitment. We are committed to retaining disabled employees
in the workplace and to providing reasonable adjustments to enable
this.
Employee development
We aim to build a dynamic, inclusive culture where the best want to
develop the skills and experiences that help them fulfil their potential.
This determines how we develop our people and recruit, identify and
nurture talent. A range of resources bring this to life including:
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HSBC Holdings plc
–HSBC University, our platform for learning and development with
specific business and technical academies;
–our My HSBC Career portal, which offers career development
information and resources; and
–HSBC Talent Marketplace, our online platform that uses AI to
provide opportunities to learn as we work.
Everyone at HSBC annually completes global mandatory training. It
plays a critical role in shaping our culture by ensuring everyone is
focused on issues that are fundamental to working at HSBC, from
sustainability, to financial crime risk, to our intolerance of bullying and
harassment.
As the opportunities we face change, we provide development to key
groups of colleagues through business and technical academies. This
includes our risk academy, which helps us to develop broad
capabilities in traditional areas of risk like financial crime but also in
emerging risk issues like climate risk and the ethics of AI and data.
Our approach to learning is skills based. Our academies work with our
businesses to identify the key skills and capabilities we need in the
future. Alongside this, we help colleagues identify, assess and
develop the skills that match their ambition and aspirations. 
Our platform for learning content is Degreed. This helps colleagues
identify, assess and develop key skills through internal and external
training materials in a way that suits them. Content can range from
quick videos, articles or podcasts to packaged programmes or
learning pathways.
Effective people management and impactful leadership remain critical
to our ability to energise for growth. In 2023 we have continued to
focus on equipping our management population with the skills they
need to lead the organisation and energise our colleagues. We have
continued to run our Enterprise Leadership Programme for our most
senior leaders and developed the Managing Director Leadership
Programme further following the launch in 2022. We have also
refreshed our People Management Excellence programme which is
available to leaders at all levels of the organisation to help them
manage colleagues and nurture a productive team.
Health and safety
We are committed to providing a safe and healthy working
environment for everyone. We have adopted global policies,
mandatory procedures, and incident and information reporting
systems across the organisation that reflect our core values and are
aligned to international standards. Our global health and safety
performance is subject to ongoing monitoring and assurance to
ensure we are compliant with relevant laws and regulations.
Our chief operating officers have overall responsibility for engendering
a positive health and safety culture and ensuring that global policies,
procedures and systems are put into practice locally. They also have
responsibility for ensuring all local legal requirements are met.
We delivered a range of programmes in 2023 to help us understand
and manage our health and safety risks:
–We reinforced our advice and risk assessment and control
methodology on working from home for employees adopting a
hybrid work style, providing more awareness and best practices on
good ergonomics and well-being.
–We delivered health and safety training and awareness to 235,000
of our employees and contractors globally, ensuring roles and
responsibilities were clear and understood.
–We completed the annual safety inspection on all of our buildings
globally, to ensure we were meeting our standards and
continuously improving our safety performance.
–We maintained measures in our workplaces globally to minimise
the risks from the spread of respiratory disease, including through
the provision of hand sanitiser, improved ventilation, and guidance
on good hygiene practices.
–We continued to focus on enhancing the safety culture in our
supply chain through our SAFER Together programme, covering
the five key elements of best practice safety culture, including
speaking up about safety, and recognising excellence.
–We continued to provide our guidance and training programme for
our construction partners, focusing on our key markets globally to
reduce the likelihood of accidents occurring by helping them
understand and deliver industry-leading health and safety
performance. More than 7,500 construction workers received
safety passport training across 20 countries.
–In 2023, our Eat Well Live Well programme continued to promote
healthier and more sustainable diets among our colleagues with
30% of global food sales from HSBC catering outlets comprising
healthy options. We also extended the reach of our programme
through the launch of increased plant-based offers, monthly
events dedicated to Eat Well Live Well, and virtual teaching
kitchens accessible to all our employees.
–Protection of our colleagues and operations is of critical
importance, and we have effective controls in place to protect our
people from natural disasters (such as storms and earthquakes). In
2023, there were 27 named storms that passed over 2,010 of our
buildings, resulting in no injuries. Only five buildings in Mexico
were affected with minor business impact following Storm Otis.
Employee health and safety
2023
2022
2021
Rate of workplace fatalities per 100,000 employees
—
—
—
Number of major injuries to employees1
12
7
14
All injury rate per 100,000 employees
110
70
64
Lost days due to work injury
594
485
358
1Fractures, dislocation, concussion, loss of consciousness, overnight
admission to hospital.
Remuneration
HSBC’s pay and performance strategy is designed to reward
competitively the achievement of long-term sustainable performance
and attract and motivate the very best people, regardless of gender,
ethnicity, age, disability or any other factor unrelated to performance
or experience with the Group, while performing their role in the long-
term interests of our stakeholders.
For further details of the Group’s approach to remuneration, see
page 326.
Employee share plans
Summaries of the share options and share awards granted, exercised/
vested or lapsed during the year and other details required to be
disclosed pursuant to Chapter 17 of the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited, including
detailed summaries of the HSBC share plans, are available on our
website at www.hsbc.com/who-we-are/leadership-and-governance/
remuneration and on the website of The Stock Exchange of Hong
Kong Limited at www.hkex.com.hk, or can be obtained upon request
from the Group Company Secretary and Chief Governance Officer, 8
Canada Square, London E14 5HQ.
Particulars of options held by Directors of HSBC Holdings are set out
on page 336.
Note 5 on the financial statements gives details of share-based
payments, including discretionary awards of shares granted under
HSBC share plans.
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351
Statement of compliance
The statement of corporate governance practices set out on pages
274 to 353 and the information referred to therein constitutes the
’Corporate governance report’ and ’Report of the Directors’ of HSBC
Holdings. The websites referred to do not form part of this report.
Relevant corporate governance codes, role profiles and policies
UK Corporate Governance Code
www.frc.org.uk
Hong Kong Corporate
Governance Code (set out in
Appendix 14 to the Rules
Governing the Listing of
Securities on the Stock
Exchange of Hong Kong Limited
('HKEx'))
www.hkex.com.hk
Descriptions of the roles and
responsibilities of the:
–  Group Chairman
–  Group Chief Executive
–  Senior Independent Director
–  Board
www.hsbc.com/who-we-are/
leadership-and-governance/board-
responsibilities
Board and senior management
www.hsbc.com/who-we-are/
leadership-and-governance
Roles and responsibilities of the
Board’s committees
www.hsbc.com/who-we-are/
leadership-and-governance/board-
committees
Board’s policies on:
–  diversity and inclusion
–  shareholder communication
–  human rights
–  remuneration practices and
governance
www.hsbc.com/who-we-are/
leadership-and-governance/board-
responsibilities
Global Internal Audit Charter
www.hsbc.com/who-we-are/
leadership-and-governance/
corporate-governance-codes/
internal-control
HSBC is subject to corporate governance requirements in both the UK
and Hong Kong. During 2023, HSBC complied with the provisions and
requirements of both the UK and Hong Kong Corporate Governance
Codes.
Under the Hong Kong Code, the audit committee should be
responsible for the oversight of all risk management and internal
control systems. HSBC’s Group Risk Committee is responsible for
oversight of internal control, other than internal control over financial
reporting, and risk management systems. This is permitted under the
UK Corporate Governance Code.
HSBC Holdings has codified obligations for transactions in Group
securities in accordance with the requirements of the UK Market
Abuse Regulation and the rules governing the listing of securities on
HKEx. The Group has been granted certain waivers by HKEx from
strict compliance with the rules that take into account accepted
practices in the UK, particularly in respect of employee share plans.
During the year, all Directors were reminded of their obligations in
respect of transacting in HSBC Group securities. Following specific
enquiry all Directors have confirmed that they have complied with
their obligations.
The Group Audit Committee has reviewed and provided assurance to
the HSBC Holdings Board on the publication of the Annual Report and
Accounts 2023.
On behalf of the Board
Mark E Tucker
Group Chairman
HSBC Holdings plc
Registered number 617987
21 February 2024
Report of the Directors | Corporate governance report
352
HSBC Holdings plc Annual Report and Accounts 2023
Financial       
statements
The financial statements provide detailed
information and notes on our income,
balance sheet, cash flows and changes
in equity, alongside a report from our
independent auditors.
Report of Independent Registered Public Accounting Firm
Financial statements
Notes on the financial statements
HSBC Holdings plc
353
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of HSBC Holdings plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of HSBC Holdings plc and its subsidiaries (the “Group”) as of 31 December
2023 and 2022, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements
of changes in equity and consolidated statements of cash flows for each of the three years in the period ended 31 December 2023, including
the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Group’s internal control over
financial reporting as of 31 December 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group
as of 31 December 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended 31
December 2023 in conformity with (i) International Financial Reporting Standards as issued by the International Accounting Standards Board, (ii)
UK-adopted International Accounting Standard, and (iii) International Financial Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies to the European Union. Also in our opinion, the Group maintained, in all material respects, effective internal control over
financial reporting as of 31 December 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. 
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Group changed the manner in which it accounts for insurance contracts in
2023.
Basis for Opinions
The Group's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s assessment of
internal controls over financial reporting on page 150 of Form 20-F. Our responsibility is to express opinions on the Group's consolidated
financial statements and on the Group's internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud, and whether effective internal control over financial reporting was maintained in all material respects. 
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered
necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to
the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgements. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.
Report of Independent Registered Public Accounting Firm
354
HSBC Holdings plc
Measurement of expected credit losses
As described in Note 1.2 (i) to the consolidated financial statements, expected credit losses (‘ECL’) are recognised for loans and advances to
banks and customers, non-trading reverse repurchase agreements, other financial assets held at amortised cost, debt instruments measured at
fair value through other comprehensive income and certain loan commitments and financial guarantee contracts. As disclosed by management,
the Group's allowance for ECL was $12.0bn at 31 December 2023. The assessment of credit risk and the estimation of ECL are probability-
weighted and incorporate information about past events, current conditions and forecasts of future economic conditions at the reporting date.
Management calculates ECL using three main components: a probability of default (‘PD’), a loss given default (‘LGD’) and the exposure at
default (‘EAD’). As disclosed by management, the recognition and measurement of ECL involves the use of significant judgement and
estimation. Management form multiple economic scenarios based on economic forecasts, apply these assumptions to credit risk models to
estimate future credit losses, and probability-weight the results to determine an ECL estimate. Management judgemental adjustments are
made to account for late-breaking events, data and model limitations and deficiencies, and expert credit judgements. The ECL for wholesale
stage 3 exposures is determined on an individual basis using discounted cash flow methodologies. The ECL charge in 2023 primarily comprised
stage 3 charges, notably related to mainland China commercial real estate (‘CRE’) exposures, as well as the impact of continued economic
uncertainty, rising interest rates and inflationary pressures.
The principal considerations for our determination that performing procedures relating to the measurement of ECL is a critical audit matter are
the significant judgements by management in developing the assumptions for (i) multiple economic scenarios and the weighting of those
scenarios; (ii) estimating management judgemental adjustments; and (iii) the discounted cash flow projections for certain material credit
impaired exposures in relation to the mainland China CRE portfolio. This led to a high degree of auditor judgement, subjectivity and effort in
performing procedures and evaluating audit evidence. The audit effort involved the use of professionals with specialised skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the measurement of ECL. These
procedures also included, amongst others, testing management’s process for estimating ECL through (i) evaluating the appropriateness of the
ECL model methodologies applied by management; (ii) evaluating the reasonableness of certain economic scenarios and weightings; (iii)
evaluating management’s determination of the need for, and measurement of, judgemental adjustments; (iv) evaluating the reasonableness of
discounted cash flow projections for certain material credit impaired exposures in relation to the mainland China CRE portfolio; (v) testing the
completeness and accuracy of certain input data that is used by management to determine ECL; and (vi) evaluating the disclosures made in the
consolidated financial statements in relation to the measurement of ECL. Professionals with specialised skills and knowledge assisted in testing
the appropriateness of model methodologies, assessing the reasonableness of the selection and weighting of economic scenarios and testing
the reasonableness of discounted cash flow projections for certain material credit impaired exposures in relation to the mainland China CRE
portfolio.
Impairment assessment of investment in Bank of Communications co., Limited (‘BoCom’)
As described in Note 1.2(a) and 18 to the consolidated financial statements, the carrying value of the Group's investment in BoCom is $21.2bn
at 31 December 2023. As disclosed by management, there is significant judgement in determining the value in use, and in particular estimating
the present value of cash flows expected to arise from continuing to hold the investment, based on a number of assumptions. The fair value of
the Group's investment in BoCom has been below the carrying amount for approximately 12 years. At 31 December 2023, management
performed an impairment test on the carrying amount, which resulted in an impairment of $3.0bn, as the recoverable amount as determined by
a value-in-use (‘VIU’) calculation was lower than the carrying value. The VIU calculation uses discounted cash flow projections based on
management’s best estimates of future earnings available to ordinary shareholders. The significant assumptions used were discount rate,
operating income growth rate, cost-income ratio, ECL as a percentage of loans and advances to customers, risk-weighted assets as a
percentage of total assets, loans and advances to customers growth rate, capital requirements for capital adequacy ratio and tier 1 capital
adequacy ratio, and long-term effective tax, profit growth and asset growth rates.
The principal considerations for our determination that performing procedures relating to the impairment assessment of the investment in
BoCom is a critical audit matter are (i) the significant judgement by management when determining significant assumptions for the discount
rate, operating income growth rate, cost-income ratio, ECL as a percentage of loans and advances to customers, risk-weighted assets as a
percentage of total assets, loans and advances to customers growth rate, capital requirements for capital adequacy ratio and tier 1 capital
adequacy ratio, and long-term effective tax, profit growth and asset growth rates; (ii) a high degree of auditor judgement, subjectivity and effort
in performing procedures and evaluating management's estimate of the VIU and evaluating audit evidence; and (iii) the audit effort involved the
use of professionals with specialised skills and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s impairment
assessment of the investment in BoCom. These procedures also included, amongst others: (i) evaluating management’s VIU determination and
underlying significant assumptions; (ii) developing an independent range for discount rates; (iii) evaluating the appropriateness of the
methodology used to estimate the VIU; (iv) testing inputs used in the determination of the significant assumptions; and (v) evaluating the
disclosures made in the consolidated financial statements in relation to BoCom. Professionals with specialised skill and knowledge were used to
assist in assessing the VIU methodology and developing an independent range for discount rates.
/s/PricewaterhouseCoopers LLP
London, United Kingdom
22 February 2024
We have served as the Group’s auditor since 2015. 
Report of Independent Registered Public Accounting Firm
HSBC Holdings plc
355
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
HSBC Holdings income statement
HSBC Holdings statement of comprehensive income
HSBC Holdings balance sheet
HSBC Holdings statement of changes in equity
HSBC Holdings statement of cash flows
Consolidated income statement
for the year ended 31 December 2023
2023
20221
2021
Notes*
$m
$m
$m
Net interest income
35,796
30,377
26,489
–  interest income2,3
100,868
52,826
36,188
–  interest expense4
(65,072)
(22,449)
(9,699)
Net fee income
2
11,845
11,770
13,097
–  fee income
15,616
15,124
16,788
–  fee expense
(3,771)
(3,354)
(3,691)
Net income from financial instruments held for trading or managed on a fair value basis
3
16,661
10,278
7,744
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives,
measured at fair value through profit or loss
3
7,887
(13,831)
4,053
Net insurance premium income
—
—
10,870
Insurance finance (expense)/income
4
(7,809)
13,799
—
Insurance service result
1,078
809
—
–  insurance revenue
2,259
1,977
—
–  insurance service expense
(1,181)
(1,168)
—
Gain on acquisition5
1,591
—
—
(Impairment)/reversal of impairment relating to the sale of our retail banking operations in France6
150
(2,316)
—
Other operating (expense)/income7
(1,141)
(266)
1,687
Total operating income
66,058
50,620
63,940
Net insurance claims and benefits paid and movement in liabilities to policyholders
—
—
(14,388)
Net operating income before change in expected credit losses and other credit impairment charges8
66,058
50,620
49,552
Change in expected credit losses and other credit impairment charges
(3,447)
(3,584)
928
Net operating income
62,611
47,036
50,480
Employee compensation and benefits
5
(18,220)
(18,003)
(18,742)
General and administrative expenses
(10,383)
(10,848)
(11,592)
Depreciation and impairment of property, plant and equipment and right-of-use assets9
(1,640)
(2,149)
(2,261)
Amortisation and impairment of intangible assets
(1,827)
(1,701)
(1,438)
Goodwill impairment
—
—
(587)
Total operating expenses
(32,070)
(32,701)
(34,620)
Operating profit
30,541
14,335
15,860
Share of profit in associates and joint ventures
18
2,807
2,723
3,046
Impairment of interest in associate
18
(3,000)
—
—
Profit before tax
30,348
17,058
18,906
Tax expense
7
(5,789)
(809)
(4,213)
Profit for the year
24,559
16,249
14,693
Attributable to:
–  ordinary shareholders of the parent company
22,432
14,346
12,607
–  preference shareholders of the parent company
—
—
7
–  other equity holders
1,101
1,213
1,303
–  non-controlling interests
1,026
690
776
Profit for the year
24,559
16,249
14,693
$
$
$
Basic earnings per ordinary share
9
1.15
0.72
0.62
Diluted earnings per ordinary share
9
1.14
0.72
0.62
*For Notes on the financial statements, see page 368.
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2Interest income includes $88,657m (2022: $45,994m; 2021: $30,916m) of interest recognised on financial assets measured at amortised cost and
$12,134m (2022: $6,293m; 2021: $4,337m) of interest recognised on financial assets measured at fair value through other comprehensive income.
3Interest income is calculated using the effective interest method and comprises mainly interest recognised on financial assets measured at either
amortised cost or fair value through other comprehensive income.
4Interest expense includes $62,095m (2022: $20,798m; 2021: $8,227m) of interest on financial instruments, excluding interest on debt instruments
issued by HSBC for funding purposes that are designated under the fair value option to reduce an accounting mismatch and on derivatives managed in
conjunction with those debt instruments included in interest expense.
5  Provisional gain recognised in respect of the acquisition of SVB UK.
6 In the fourth quarter of 2023, an impairment loss of $2.0bn was recognised relating to the sale of our retail banking operations in France. This largely
offset the $2.1bn recognised in the first quarter of 2023 on the reversal of the held for sale classification at that time. In 2023, a total net $0.1bn of
credit was recognised in other operating income, reflecting the net asset value disposed under the final terms of sale. The $0.4bn impairment of
goodwill recognised in the third quarter in 2022 has not been reversed.
7  Other operating (expense)/income includes a loss on net monetary positions of $1,667m (2022: $678m; 2021: $576m) as a result of applying IAS 29
‘Financial Reporting in Hyperinflationary Economies’ and the disposal losses on capitalised Markets Treasury repositioning of $977m in 2023.
8Net operating income before change in expected credit losses and other credit impairment charges also referred to as revenue.
9  Includes depreciation of the right-of-use assets of $663m (2022: $717m; 2021: $878m).
356
HSBC Holdings plc
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023
20221
2021
$m
$m
$m
Profit for the year
24,559
16,249
14,693
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income
2,599
(7,232)
(2,139)
–  fair value gains/(losses)
2,381
(9,618)
(2,270)
–  fair value losses/(gains) transferred to the income statement on disposal
905
(18)
(464)
–  expected credit (recoveries)/losses recognised in the income statement
59
56
(49)
–  income taxes
(746)
2,348
644
Cash flow hedges
2,953
(3,655)
(664)
–  fair value gains/(losses)
2,534
(4,207)
595
–  fair value (gains)/losses reclassified to the income statement
1,463
(758)
(1,514)
–  income taxes
(1,044)
1,310
255
Share of other comprehensive income/(expense) of associates and joint ventures
47
(367)
103
–  share for the year
47
(367)
103
Net finance income/(expenses) from insurance contracts
(364)
1,775
—
–  before income taxes
(491)
2,393
—
–  income taxes
127
(618)
—
Exchange differences
(204)
(9,918)
(2,393)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation
1
280
—
Remeasurement of defined benefit liability
(314)
(1,031)
(274)
–  before income taxes
(413)
(1,723)
(107)
–  income taxes
99
692
(167)
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in
own credit risk
(1,219)
1,922
531
–  before income taxes
(1,617)
2,573
512
–  income taxes
398
(651)
19
Equity instruments designated at fair value through other comprehensive income
(120)
107
(446)
–  fair value gains/(losses)
(120)
107
(443)
–  income taxes
—
—
(3)
Effects of hyperinflation
1,604
877
315
Other comprehensive income/(expense) for the year, net of tax
4,983
(17,242)
(4,967)
Total comprehensive income/(expense) for the year
29,542
(993)
9,726
Attributable to:
–  ordinary shareholders of the parent company
27,397
(2,810)
7,765
–  preference shareholders of the parent company
—
—
7
–  other equity holders
1,101
1,213
1,303
–  non-controlling interests
1,044
604
651
Total comprehensive income/(expense) for the year
29,542
(993)
9,726
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
HSBC Holdings plc
357
Consolidated balance sheet
at 31 December 2023
At1
31 Dec
31 Dec
1  Jan
2023
2022
2022
Notes*
$m
$m
$m
Assets
Cash and balances at central banks
285,868
327,002
403,018
Items in the course of collection from other banks
6,342
7,297
4,136
Hong Kong Government certificates of indebtedness
42,024
43,787
42,578
Trading assets
11
289,159
218,093
248,842
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
14
110,643
100,101
110,795
Derivatives
15
229,714
284,159
196,882
Loans and advances to banks
112,902
104,475
82,567
Loans and advances to customers
938,535
923,561
1,044,534
Reverse repurchase agreements – non-trading
252,217
253,754
241,648
Financial investments
16
442,763
364,726
392,005
Assets held for sale
23
114,134
115,919
3,411
Prepayments, accrued income and other assets
22
165,255
156,149
136,196
Current tax assets
1,536
1,230
970
Interests in associates and joint ventures
18
27,344
29,254
29,609
Goodwill and intangible assets
21
12,487
11,419
11,169
Deferred tax assets
7
7,754
8,360
5,432
Total assets
3,038,677
2,949,286
2,953,792
Liabilities
Hong Kong currency notes in circulation
42,024
43,787
42,578
Deposits by banks
73,163
66,722
101,152
Customer accounts
1,611,647
1,570,303
1,710,574
Repurchase agreements – non-trading
172,100
127,747
126,670
Items in the course of transmission to other banks
7,295
7,864
5,214
Trading liabilities
24
73,150
72,353
84,904
Financial liabilities designated at fair value
25
141,426
127,321
145,503
Derivatives
15
234,772
285,762
191,064
Debt securities in issue
26
93,917
78,149
78,557
Liabilities of disposal groups held for sale
23
108,406
114,597
9,005
Accruals, deferred income and other liabilities
27
136,606
134,313
115,900
Current tax liabilities
2,777
1,135
699
Insurance contract liabilities
4
120,851
108,816
119,307
Provisions
28
1,741
1,958
2,566
Deferred tax liabilities
7
1,238
972
3,294
Subordinated liabilities
29
24,954
22,290
20,487
Total liabilities
2,846,067
2,764,089
2,757,474
Equity
Called up share capital
33
9,631
10,147
10,316
Share premium account
33
14,738
14,664
14,602
Other equity instruments
17,719
19,746
22,414
Other reserves
(8,907)
(9,133)
6,447
Retained earnings
152,148
142,409
135,236
Total shareholders’ equity
185,329
177,833
189,015
Non-controlling interests
19
7,281
7,364
7,303
Total equity
192,610
185,197
196,318
Total liabilities and equity
3,038,677
2,949,286
2,953,792
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data and the IFRS 17 transition impact on the balance sheet at 1 January 2022.
*For Notes on the financial statements, see page 368.
The accompanying notes on pages 368 to 461 and the audited sections in the Risk review on pages 158 to 273 (including ‘Measurement
uncertainty and sensitivity analysis of ECL estimates’ on pages 192 to 204, and ‘Directors’ remuneration report’ on pages 315 to 342 form an
integral part of these financial statements.
These financial statements were approved by the Board of Directors on 21 February 2024 and signed on its behalf by:
Mark E Tucker
Georges Elhedery
Group Chairman
Group Chief Financial Officer
Financial statements
358
HSBC Holdings plc
Consolidated statement of changes in equity
for the year ended 31 December 2023
Other reserves
Called up
share
capital
and share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
24,811
19,746
(7,038)
(3,808)
(32,575)
33,209
1,079
142,409
177,833
7,364
185,197
Profit for the year
—
—
—
—
—
—
—
23,533
23,533
1,026
24,559
Other comprehensive income
(net of tax)
—
—
2,402
3,030
(211)
1
(371)
114
4,965
18
4,983
–  debt instruments at fair value
through other
comprehensive income
—
—
2,574
—
—
—
—
—
2,574
25
2,599
–  equity instruments
designated at fair value
through other
comprehensive income
—
—
(93)
—
—
—
—
—
(93)
(27)
(120)
–  cash flow hedges
—
—
—
2,919
—
—
—
—
2,919
34
2,953
–  changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
(1,220)
(1,220)
1
(1,219)
–  property revaluation
—
—
—
—
—
1
—
—
1
—
1
–  remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(317)
(317)
3
(314)
–  share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
—
47
47
—
47
–  effects of hyperinflation
—
—
—
—
—
—
—
1,604
1,604
—
1,604
–  insurance finance income/
(expense) recognised in
other comprehensive income
—
—
—
—
—
—
(364)
—
(364)
—
(364)
–  exchange differences
—
—
(79)
111
(211)
—
(7)
—
(186)
(18)
(204)
Total comprehensive income
for the year
—
—
2,402
3,030
(211)
1
(371)
23,647
28,498
1,044
29,542
Shares issued under employee
remuneration and share plans
79
—
—
—
—
—
—
(79)
—
—
—
Capital securities issued5
—
1,996
—
—
—
—
—
—
1,996
—
1,996
Dividends to shareholders
—
—
—
—
—
—
—
(11,593)
(11,593)
(603)
(12,196)
Redemption of securities6
—
(4,023)
—
—
—
—
—
20
(4,003)
—
(4,003)
Transfers7
—
—
—
—
—
(5,130)
—
5,130
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
482
482
—
482
Share buy-back8
—
—
—
—
—
—
—
(7,025)
(7,025)
—
(7,025)
Cancellation of shares
(521)
—
—
—
—
521
—
—
—
—
—
Other movements
—
—
1,129
(255)
(967)
—
77
(843)
(859)
(524)
(1,383)
At 31 Dec 2023
24,369
17,719
(3,507)
(1,033)
(33,753)
28,601
785
152,148
185,329
7,281
192,610
HSBC Holdings plc
359
Consolidated statement of changes in equity (continued)
for the year ended 31 December 2022
Other reserves
Called up
share
capital and
share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 31 Dec 2021 (IFRS 4)
24,918
22,414
(634)
(197)
(22,769)
30,060
—
144,458
198,250
8,527
206,777
Impact on transition to IFRS 179
—
—
683
—
—
—
(696)
(9,222)
(9,235)
(1,224)
(10,459)
At 1 Jan 2022
24,918
22,414
49
(197)
(22,769)
30,060
(696)
135,236
189,015
7,303
196,318
Profit for the year
—
—
—
—
—
—
—
15,559
15,559
690
16,249
Other comprehensive income
(net of tax)
—
—
(7,089)
(3,613)
(9,806)
174
1,775
1,403
(17,156)
(86)
(17,242)
–  debt instruments at fair value
through other
comprehensive income
—
—
(7,181)
—
—
—
—
—
(7,181)
(51)
(7,232)
–equity instruments
designated at fair value
through other
comprehensive income
—
—
92
—
—
—
—
—
92
15
107
–  cash flow hedges
—
—
—
(3,613)
—
—
—
—
(3,613)
(42)
(3,655)
–  changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
1,922
1,922
—
1,922
–  property revaluation
—
—
—
—
—
174
—
—
174
106
280
–  remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(1,029)
(1,029)
(2)
(1,031)
–  share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
(367)
(367)
—
(367)
–  effects of hyperinflation
—
—
—
—
—
—
—
877
877
—
877
–  insurance finance income/
(expense) recognised in
other comprehensive income
—
—
—
—
—
—
1,775
—
1,775
—
1,775
–  exchange differences
—
—
—
—
(9,806)
—
—
—
(9,806)
(112)
(9,918)
Total comprehensive income
for the year
—
—
(7,089)
(3,613)
(9,806)
174
1,775
16,962
(1,597)
604
(993)
Shares issued under employee
remuneration and share plans
67
—
—
—
—
—
—
(67)
—
—
—
Dividends to shareholders
—
—
—
—
—
—
—
(6,544)
(6,544)
(426)
(6,970)
Redemption of securities
—
(2,668)
—
—
—
—
—
402
(2,266)
—
(2,266)
Transfers
—
—
—
—
—
2,499
—
(2,499)
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
400
400
—
400
Share buy-back
—
—
—
—
—
—
—
(1,000)
(1,000)
—
(1,000)
Cancellation of shares
(174)
—
—
—
—
174
—
—
—
—
—
Other movements
—
—
2
2
—
302
—
(481)
(175)
(117)
(292)
At 31 Dec 2022
24,811
19,746
(7,038)
(3,808)
(32,575)
33,209
1,079
142,409
177,833
7,364
185,197
Financial statements
360
HSBC Holdings plc
Consolidated statement of changes in equity (continued)
for the year ended 31 December 2021
Other reserves
Called up
share
capital and
share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2021
24,624
22,414
1,816
457
(20,375)
26,935
—
140,572
196,443
8,552
204,995
Profit for the year
—
—
—
—
—
—
—
13,917
13,917
776
14,693
Other comprehensive income
(net of tax)
—
—
(2,455)
(654)
(2,394)
—
—
661
(4,842)
(125)
(4,967)
–  debt instruments at fair value
through other
comprehensive income
—
—
(2,105)
—
—
—
—
—
(2,105)
(34)
(2,139)
–  equity instruments
designated at fair value
through other
comprehensive income
—
—
(350)
—
—
—
—
—
(350)
(96)
(446)
–  cash flow hedges
—
—
—
(654)
—
—
—
—
(654)
(10)
(664)
–  changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
531
531
—
531
–  remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(288)
(288)
14
(274)
–  share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
—
103
103
—
103
–  effects of hyperinflation
—
—
—
—
—
—
—
315
315
—
315
–  exchange differences
—
—
—
—
(2,394)
—
—
—
(2,394)
1
(2,393)
Total comprehensive income
for the year
—
—
(2,455)
(654)
(2,394)
—
—
14,578
9,075
651
9,726
Shares issued under employee
remuneration and share plans
354
—
—
—
—
—
—
(336)
18
—
18
Capital securities issued
—
2,000
—
—
—
—
—
(4)
1,996
—
1,996
Dividends to shareholders
—
—
—
—
—
—
—
(5,790)
(5,790)
(593)
(6,383)
Redemption of securities
—
(2,000)
—
—
—
—
—
—
(2,000)
—
(2,000)
Transfers
—
—
—
—
—
3,065
—
(3,065)
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
467
467
—
467
Cancellation of shares
(60)
—
—
—
—
60
—
(2,004)
(2,004)
—
(2,004)
Other movements
—
—
5
—
—
—
—
40
45
(83)
(38)
At 31 Dec 2021
24,918
22,414
(634)
(197)
(22,769)
30,060
—
144,458
198,250
8,527
206,777
1Cumulative goodwill amounting to $5,138m was charged against reserves in respect of acquisitions of subsidiaries prior to 1 January 1998, including
$3,469m charged against the merger reserve arising on the acquisition of HSBC Bank plc. The balance of $1,669m was charged against retained
earnings.
2Statutory share premium relief under section 131 of the Companies Act 1985 was taken in respect of the acquisition of HSBC Bank plc in 1992,
HSBC Continental Europe in 2000 and HSBC Finance Corporation in 2003, and the shares issued were recorded at their nominal value only. In HSBC’s
consolidated financial statements, the fair value differences of $8,290m in respect of HSBC Continental Europe and $12,768m in respect of HSBC
Finance Corporation were recognised in the merger reserve. The merger reserve created on the acquisition of HSBC Finance Corporation
subsequently became attached to HSBC Overseas Holdings (UK) Limited, following a number of intra-Group reorganisations. During 2009, pursuant to
section 131 of the Companies Act 1985, statutory share premium relief was taken in respect of the rights issue and $15,796m was recognised in the
merger reserve.
3The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France.
Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount
that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the
elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is
recognised in other comprehensive income (‘OCI’).
4At 31 December 2023, retained earnings included 256,289,431 treasury shares (2022: 554,452,437; 2021: 558,397,704). These include treasury
shares held within HSBC’s insurance business’s retirement funds for the benefit of policyholders or beneficiaries within employee trusts for the
settlement of shares expected to be delivered under employee share schemes or bonus plans, and the market-making activities in Markets and
Securities Services.
5In March 2023, HSBC Holdings issued $2,000m 8.000% contingent convertible securities on which there were $4m of external issue costs.
6In March 2023, HSBC Holdings redeemed $2,350m 6.250% contingent convertible securities. In September 2023, HSBC Holdings further redeemed
€1,000m 6.000% and SGD750m 5.000% contingent convertible securities.
7At 31 December 2023, an impairment of $5,512m of HSBC Overseas Holdings (UK) Limited was recognised, resulting in a permitted transfer of
$5,130m from the merger reserve to retained earnings and a realisation of $382m shared-based payment reserve within retained earnings.
8In May 2023, HSBC Holdings announced a share buy-back of up to $2.0bn, which was completed in July 2023. In August 2023, HSBC Holdings
announced another share buy-back of up to $2.0bn, which was completed in October 2023. In October 2023, HSBC Holdings further announced a
share buy-back of up to $3.0bn, which was completed in February 2024.
9The impact of IFRS 17 on previously reported total equity was $(10,831)m at 31 December 2022.
HSBC Holdings plc
361
Consolidated statement of cash flows
for the year ended 31 December 2023
2023
20221
2021
$m
$m
$m
Profit before tax
30,348
17,058
18,906
Adjustments for non-cash items:
Depreciation, amortisation and impairment
3,466
3,850
4,286
Net loss/(gain) from investing activities
1,213
11
(647)
Share of profit in associates and joint ventures
(2,807)
(2,723)
(3,046)
Impairment of interest in associate
3,000
—
—
(Gain)/loss on acquisition/disposal of subsidiaries, businesses, associates and joint ventures
(1,775)
2,554
—
Change in expected credit losses gross of recoveries and other credit impairment charges
3,717
3,898
(519)
Provisions including pensions
266
638
1,063
Share-based payment expense
482
400
467
Other non-cash items included in profit before tax
(4,299)
(774)
510
Elimination of exchange differences2
(10,678)
48,718
18,937
Changes in operating assets and liabilities
Change in net trading securities and derivatives
(63,247)
20,166
(9,226)
Change in loans and advances to banks and customers
(14,145)
31,649
(11,014)
Change in reverse repurchase agreements – non-trading
(2,095)
(23,405)
552
Change in financial assets designated and otherwise mandatorily measured at fair value
(9,994)
14,164
(4,254)
Change in other assets3
(10,254)
(12,858)
19,899
Change in deposits by banks and customer accounts
45,021
(91,194)
95,703
Change in repurchase agreements – non-trading
43,366
4,344
14,769
Change in debt securities in issue
11,945
12,518
(16,936)
Change in financial liabilities designated at fair value
10,097
(13,654)
(11,425)
Change in other liabilities
8,742
6,021
(10,935)
Dividends received from associates
1,067
944
808
Contributions paid to defined benefit plans
(208)
(194)
(509)
Tax paid
(4,117)
(2,776)
(3,077)
Net cash from operating activities
39,111
19,355
104,312
Purchase of financial investments3
(563,561)
(511,097)
(493,042)
Proceeds from the sale and maturity of financial investments3
504,174
492,624
521,190
Net cash flows from the purchase and sale of property, plant and equipment
(1,145)
(1,284)
(1,086)
Net cash flows from disposal of loan portfolio and customer accounts
623
(3,530)
3,059
Net investment in intangible assets
(2,550)
(3,125)
(2,479)
Net cash flow from (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures4
(453)
(989)
(106)
Net cash from investing activities
(62,912)
(27,401)
27,536
Issue of ordinary share capital and other equity instruments
1,996
—
1,996
Cancellation of shares
(5,812)
(2,285)
(707)
Net sales/(purchases) of own shares for market-making and investment purposes
(614)
(91)
(1,386)
Net cash flow from change in stake of subsidiaries
(19)
(197)
—
Redemption of preference shares and other equity instruments
(4,003)
(2,266)
(3,450)
Subordinated loan capital issued
5,237
7,300
—
Subordinated loan capital repaid5
(2,147)
(1,777)
(864)
Dividends paid to shareholders of the parent company and non-controlling interests
(12,196)
(6,970)
(6,383)
Net cash from financing activities
(17,558)
(6,286)
(10,794)
Net increase/(decrease) in cash and cash equivalents
(41,359)
(14,332)
121,054
Cash and cash equivalents at 1 Jan
521,671
574,032
468,323
Exchange differences in respect of cash and cash equivalents
10,621
(38,029)
(15,345)
Cash and cash equivalents at 31 Dec6
490,933
521,671
574,032
Financial statements
362
HSBC Holdings plc
Consolidated statement of cash flows (continued)
for the year ended 31 December 2023
2023
20221
2021
$m
$m
$m
Cash and cash equivalents comprise:
–  cash and balances at central banks
285,868
327,002
403,018
–  items in the course of collection from other banks
6,342
7,297
4,136
–  loans and advances to banks of one month or less
76,620
72,295
55,705
–  reverse repurchase agreements with banks of one month or less
64,341
68,682
76,658
–  treasury bills, other bills and certificates of deposit less than three months
33,303
26,727
28,488
–  cash collateral and net settlement accounts
15,819
19,445
11,241
–  cash and cash equivalents held for sale7
15,935
8,087
—
–  less: items in the course of transmission to other banks
(7,295)
(7,864)
(5,214)
Cash and cash equivalents at 31 Dec6
490,933
521,671
574,032
Interest received was $98,910m (2022: $55,664m; 2021: $40,175m), interest paid was $65,980m (2022: $22,856m; 2021: $12,695m) and
dividends received (excluding dividends received from associates, which are presented separately above) were $1,869m (2022: $1,638m; 2021:
$1,898m).
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details
cannot be determined without unreasonable expense.
3Post adoption of IFRS 17 ‘Insurance Contracts’, certain assets have been reclassified from ‘Investing activities’ to ‘Operating activities’. The
comparative data have not been re-presented.
4  The ‘Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures’ includes $1.2bn of net cash inflows from the
acquisition of Silicon Valley Bank UK Limited in March 2023.
5  Subordinated liabilities changes during the year are attributable to repayments of $(2.1)bn (2022: $(1.8)bn; 2021: $(0.9)bn) of securities. Non-cash
changes during the year included foreign exchange gains/(losses) of $0.6bn (2022: $(1.1)bn; 2021: $(0.3)bn) and fair value gains/(losses) of $0.8bn
(2022: $(3.1)bn; 2021: $(1.0)bn).
6  At 31 December 2023, $61.8bn (2022: $59.3bn; 2021: $33.6bn) was not available for use by HSBC due to a range of restrictions, including currency
exchange and other restrictions.
7   Includes $5.6bn (2022: $6.5bn) of cash and balances at central banks, $0.2bn (2022: $1.3bn) of reverse repurchase agreements with banks of one
month or less, $10.5bn (2022: $0.2bn) of loans and advances to banks of one month or less and items in the course of transmission to other banks
$(0.4)bn (2022: $(0.2)bn).
HSBC Holdings plc
363
HSBC Holdings income statement
for the year ended 31 December 2023
2023
2022
2021
Notes*
$m
$m
$m
Net interest expense
(5,339)
(3,074)
(2,367)
–  interest income
2,864
937
380
–  interest expense
(8,203)
(4,011)
(2,747)
Fee (expense)/income
2
(3)
(5)
Net income from financial instruments held for trading or managed on a fair value basis
3
1,063
2,129
110
Changes in fair value of designated debt and related derivatives1
3
(1,468)
2,144
349
Changes in fair value of other financial instruments mandatorily measured at fair value through profit
or loss
3
3,692
(2,409)
(420)
Gains less losses from financial investments
45
58
—
Dividend income from subsidiaries
16,824
9,478
11,404
Other operating income
332
91
230
Total operating income
15,151
8,414
9,301
Employee compensation and benefits
5
(15)
(41)
(30)
General and administrative expenses
(1,327)
(1,586)
(1,845)
(Impairment) of subsidiaries/reversal of impairment
19
(5,574)
2,493
3,065
Total operating expenses
(6,916)
866
1,190
Profit before tax
8,235
9,280
10,491
Tax credit2
977
3,077
343
Profit for the year
9,212
12,357
10,834
*For Notes on the financial statements, see page 368.
1The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2The tax credit in 2022 includes $2.2bn arising from the recognition of a deferred tax asset from historical tax losses in HSBC Holdings. This was a
result of improved profit forecasts for the UK tax group, which accelerated the expected utilisation of these losses and reduced uncertainty regarding
their recoverability. The amounts recorded within profit before tax with respect to dividend income from subsidiaries and reversal of impairment of
subsidiaries are not subject to tax.
HSBC Holdings statement of comprehensive income
for the year ended 31 December 2023
2023
2022
2021
$m
$m
$m
Profit for the year
9,212
12,357
10,834
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes
in own credit risk
(124)
326
267
–  before income taxes
(166)
435
259
–  income taxes
42
(109)
8
Other comprehensive income/(expense) for the year, net of tax
(124)
326
267
Total comprehensive income for the year
9,088
12,683
11,101
Financial statements
364
HSBC Holdings plc
HSBC Holdings balance sheet
31 Dec 2023
31 Dec 2022
Notes*
$m
$m
Assets
Cash and balances with HSBC undertakings
7,029
3,210
Financial assets with HSBC undertakings designated and otherwise mandatorily measured at fair value
59,879
52,322
Derivatives
15
3,344
3,801
Loans and advances to HSBC undertakings
27,354
26,765
Financial investments
16
19,558
19,466
Prepayments, accrued income and other assets
5,341
5,242
Current tax assets
924
464
Investments in subsidiaries
19
159,478
167,542
Intangible assets
180
189
Deferred tax assets
2,082
2,100
Total assets at 31 Dec
285,169
281,101
Liabilities and equity
Liabilities
Amounts owed to HSBC undertakings
168
314
Financial liabilities designated at fair value
25
43,638
32,123
Derivatives
15
6,090
6,922
Debt securities in issue
26
65,239
66,938
Accruals, deferred income and other liabilities
4,289
1,969
Subordinated liabilities
29
24,439
19,727
Total liabilities
143,863
127,993
Equity
Called up share capital
33
9,631
10,147
Share premium account
33
14,738
14,664
Other equity instruments
33
17,703
19,746
Merger and other reserves
35,946
40,555
Retained earnings
63,288
67,996
Total equity
141,306
153,108
Total liabilities and equity at 31 Dec
285,169
281,101
*For Notes on the financial statements, see page 368.
The accompanying notes on pages 368 to 461, the audited sections in the Risk review on pages 158 to 273 and ‘Directors’ remuneration report’
on pages 315 to 342 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 21 February 2024 and signed on its behalf by:
Mark E Tucker
Georges Elhedery
Group Chairman
Group Chief Financial Officer
HSBC Holdings plc
365
HSBC Holdings statement of changes in equity
for the year ended 31 December 2023
Other
reserves
Called up
share
capital
Share
premium
Other
equity
instruments
Retained
earnings1,2
Merger
and other
reserves
Total
shareholders’
equity
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
10,147
14,664
19,746
67,996
40,555
153,108
Profit for the year
—
—
—
9,212
—
9,212
Other comprehensive income (net of tax)
—
—
—
(124)
—
(124)
–  changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
(124)
—
(124)
Total comprehensive income for the year
—
—
—
9,088
—
9,088
Shares issued under employee share plans
5
74
—
(328)
—
(249)
Capital securities issued3
—
—
1,980
—
—
1,980
Cancellation of shares4
(521)
—
—
(7,025)
521
(7,025)
Dividends to shareholders
—
—
—
(11,593)
—
(11,593)
Redemption of capital securities5
—
—
(4,023)
20
—
(4,003)
Transfers6
—
—
—
5,130
(5,130)
—
Other movements
—
—
—
—
—
—
At 31 Dec 2023
9,631
14,738
17,703
63,288
35,946
141,306
At 1 Jan 2022
10,316
14,602
22,414
65,116
37,882
150,330
Profit for the year
—
—
—
12,357
—
12,357
Other comprehensive income (net of tax)
—
—
—
326
—
326
–  changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
326
—
326
Total comprehensive income for the year
—
—
—
12,683
—
12,683
Shares issued under employee share plans
5
62
—
(161)
—
(94)
Capital securities issued
—
—
—
—
—
—
Cancellation of shares
(174)
—
—
(1,001)
174
(1,001)
Dividends to shareholders
—
—
—
(6,544)
—
(6,544)
Redemption of capital securities
—
—
(2,668)
402
—
(2,266)
Transfers6
—
—
—
(2,499)
2,499
—
Other movements
—
—
—
—
—
—
At 31 Dec 2022
10,147
14,664
19,746
67,996
40,555
153,108
At 1 Jan 2021
10,347
14,277
22,414
65,005
34,757
146,800
Profit for the year
—
—
—
10,834
—
10,834
Other comprehensive income (net of tax)
—
—
—
267
—
267
–  changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
267
—
267
Total comprehensive income for the year
—
—
—
11,101
—
11,101
Shares issued under employee share plans
29
325
—
(103)
—
251
Capital securities issued
—
—
2,000
(20)
—
1,980
Cancellation of shares
(60)
—
—
(2,004)
60
(2,004)
Dividends to shareholders
—
—
—
(5,790)
—
(5,790)
Redemption of capital securities
—
—
(2,000)
—
—
(2,000)
Transfers6
—
—
—
(3,065)
3,065
—
Other movements
—
—
—
(8)
—
(8)
At 31 Dec 2021
10,316
14,602
22,414
65,116
37,882
150,330
Dividends per ordinary share at 31 December 2023 were $0.53 (2022: $0.27; 2021: $0.22).
1  Retained earnings include unrealised profits from intercompany transactions and share-based payment reserves, which are excluded from distributable
reserves. Distributable reserves include the distributable portions of retained earnings and the merger reserve. Distributable reserves are reduced by
ordinary dividend payments, distributions on additional tier 1 instruments, share buy-backs and impairments in investments in subsidiaries. They are
increased by profits and the realisation of retained earnings or merger reserves upon impairment of an associated investment in subsidiary.
2  At 31 December 2023, retained earnings included 20,018,490 ($100m) treasury shares (2022: 331,874,221 ($2,615m); 2021: 329,871,829 ($2,542m)).
3In March 2023, HSBC Holdings issued $2,000m 8.000% contingent convertible securities, on which there were $20m of issue costs.
4In May 2023, HSBC announced a share buy-back of up to $2.0bn, which was completed in July 2023. In August 2023, HSBC announced another share
buy-back of up to $2.0bn, which was completed in October 2023. In October 2023, HSBC further announced a share buy-back of up to $3.0bn, which
was completed in February 2024.
5In March 2023, HSBC Holdings redeemed $2,350m 6.250% contingent convertible securities. In September 2023, HSBC Holdings further redeemed
€1,000m 6.000% and SGD750m 5.000% contingent convertible securities.
6At 31 December 2023, an impairment of $5,512m of HSBC Overseas Holdings (UK) Limited was recognised, resulting in a permitted transfer of
$5,130m from the merger reserve to retained earnings, and a realisation of $382m share-based payment reserve within retained earnings. In 2022, a
part-reversal of the impairment resulted in a transfer from retained earnings back to the merger reserve of $2,499m (2021: $3,065m).
Financial statements
366
HSBC Holdings plc
HSBC Holdings statement of cash flows
for the year ended 31 December 2023
2023
2022
2021
$m
$m
$m
Profit before tax
8,235
9,280
10,491
Adjustments for non-cash items
5,611
(2,500)
(2,954)
–  depreciation, amortisation and impairment/expected credit losses
5,629
(2,428)
(2,976)
–  share-based payment expense
—
1
2
–  other non-cash items included in profit before tax
(38)
(73)
20
–  elimination of exchange differences1
20
—
—
Changes in operating assets and liabilities
Change in loans to HSBC undertakings
(1,267)
(1,657)
3,364
Change in financial assets with HSBC undertakings designated and otherwise mandatorily measured at fair value
(7,767)
(914)
(4,409)
Change in net trading securities and net derivatives
(529)
4,712
47
Change in other assets
363
51
(226)
Change in financial investments
—
196
20
Change in debt securities in issue
1,964
(5,625)
(2,833)
Change in financial liabilities designated at fair value
3,096
(4,755)
(1,396)
Change in other liabilities
1,947
(3,394)
(691)
Tax received
577
215
32
Net cash from operating activities
12,230
(4,391)
1,445
Purchase of financial investments
(7,803)
(21,481)
(16,966)
Proceeds from the sale and maturity of financial investments
20,074
17,165
16,074
Net cash flow from capital contribution, acquisition and disposal of subsidiaries
2,476
(1,836)
663
Net investment in intangible assets
(46)
(39)
(26)
Net cash from investing activities
14,701
(6,191)
(255)
Issue of ordinary share capital and other equity instruments
2,059
67
2,334
Redemption of preference shares and other equity instruments
(4,003)
(2,266)
(3,450)
Purchase of treasury shares
(855)
(438)
(28)
Cancellation of shares
(5,812)
(2,298)
(707)
Subordinated loan capital issued
5,270
7,300
—
Subordinated loan capital repaid
—
—
—
Debt securities issued
17,180
18,076
19,379
Debt securities repaid
(13,047)
(10,094)
(5,569)
Dividends paid on ordinary shares
(10,492)
(5,330)
(4,480)
Dividends paid to holders of other equity instruments
(1,101)
(1,214)
(1,310)
Net cash from financing activities
(10,801)
3,803
6,169
Net increase/(decrease) in cash and cash equivalents
16,130
(6,779)
7,359
Cash and cash equivalents at 1 January
6,756
13,535
6,176
Exchange differences in respect of cash and cash equivalents2
(72)
—
—
Cash and cash equivalents at 31 Dec
22,814
6,756
13,535
Cash and cash equivalents comprise:
–  cash at bank with HSBC undertakings
7,029
3,210
2,590
–  cash collateral and net settlement accounts
3,422
3,544
93
–  treasury and other eligible bills
12,363
2
10,852
Interest received was $5,695m (2022: $2,410m; 2021: $1,636m), interest paid was $7,754m (2022: $3,813m; 2021: $2,724m) and dividends
received were $16,824m (2022: $9,478m; 2021: $11,404m).
1  Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details
cannot be determined without unreasonable expense. As this change has immaterial impact, prior period comparatives have not been restated.
2  In 2023, additional disclosure has been made in respect of exchange differences on cash and cash equivalents. As this change has immaterial impact,
prior period comparatives have not been restated.
HSBC Holdings plc
367
Notes on the financial statements
Contents
1
Basis of preparation and material accounting policies
2
Net fee income
3
Net income/(expense) from financial instruments
measured at fair value through profit or loss
4
Insurance business
5
Employee compensation and benefits
6
Auditor’s remuneration
7
Tax
8
Dividends
9
Earnings per share
10
Segmental analysis
11
Trading assets
12
Fair values of financial instruments carried at fair value
13
Fair values of financial instruments not carried at fair value
14
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
15
Derivatives
16
Financial investments
17
Assets pledged, collateral received and assets
transferred
18
Interests in associates and joint ventures
19
Investments in subsidiaries
20
Structured entities
21
Goodwill and intangible assets
22
Prepayments, accrued income and other assets
23
Assets held for sale, liabilities of disposal groups held for
sale and business acquisitions
24
Trading liabilities
25
Financial liabilities designated at fair value
26
Debt securities in issue
27
Accruals, deferred income and other liabilities
28
Provisions
29
Subordinated liabilities
30
Maturity analysis of assets, liabilities and off-balance
sheet commitments
31
Offsetting of financial assets and financial liabilities
32
Interest rate benchmark reform
33
Called up share capital and other equity instruments
34
Contingent liabilities, contractual commitments and
guarantees
35
Finance lease receivables
36
Legal proceedings and regulatory matters
37
Related party transactions
38
Effects of adoption of IFRS 17
39
Events after the balance sheet date
40
HSBC Holdings’ subsidiaries, joint ventures and
associates
41
Non-statutory accounts
1
Basis of preparation and material accounting policies
1.1Basis of preparation
(a)Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings comply with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006, and have also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements are also prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IFRS Accounting
Standards’), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS Accounting
Standards for the periods presented. There were no unendorsed standards effective for the year ended 31 December 2023 affecting these
consolidated and separate financial statements.
Standards adopted during the year ended 31 December 2023
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, the Group adopted the requirements of IFRS 17 ‘Insurance Contracts’ retrospectively with comparatives restated from the
transition date, 1 January 2022. At transition, the Group’s total equity reduced by $10,459m. 
On adoption of IFRS 17, balances based on IFRS 4, including the present value of in-force long-term insurance business (‘PVIF’) asset in relation
to the upfront recognition of future profits of in-force insurance contracts, were derecognised. Insurance contract liabilities have been
remeasured under IFRS 17 based on groups of insurance contracts, which include the fulfilment cash flows comprising the best estimate of the
present value of the future cash flows (for example premiums and payouts for claims, benefits and expenses), together with a risk adjustment
for non-financial risk, as well as the contractual service margin (‘CSM’). The CSM represents the unearned profits that will be released and
systematically recognised in insurance revenue as services are provided over the expected coverage period.
In addition, the Group has made use of the option under the standard to re-designate certain eligible financial assets held to support insurance
contract liabilities, which were predominantly measured at amortised cost, as financial assets measured at fair value through profit or loss, with
comparatives restated from the transition date. The effects of adoption of IFRS 17 are set out in Note 38 with a description of the policy in Note
1.2(j).
The key differences between IFRS 4 and IFRS 17 are summarised in the following table:
Notes on the financial statements
368
HSBC Holdings plc
IFRS 4
IFRS 17
Balance sheet
–Insurance contract liabilities for non-linked life insurance
contracts are calculated by local actuarial principles.
Liabilities under unit-linked life insurance contracts are at
least equivalent to the surrender or transfer value, by
reference to the value of the relevant underlying funds or
indices. Grouping requirements follow local regulations.
–An intangible asset for the PVIF is recognised,
representing the upfront recognition of future profits
associated with in-force insurance contracts.
–Insurance contract liabilities are measured for groups of
insurance contracts at current value, comprising the fulfilment
cash flows and the CSM.
–The fulfilment cash flows comprise the best estimate of the
present value of the future cash flows, together with a risk
adjustment for non-financial risk.
–The CSM represents the unearned profit.
Profit emergence/
recognition
–The value of new business is reported as revenue on
Day 1 as an increase in PVIF.
–The impact of the majority of assumption changes is
recognised immediately in the income statement.
–Variances between actual and expected cash flows are
recognised in the period they arise.
–The CSM is systematically recognised in revenue as services
are provided over the expected coverage period of the group of
contracts (i.e. no Day 1 profit).
–Contracts are measured using the general measurement model
(‘GMM’) or the variable fee approach (‘VFA’) model for
insurance contracts with direct participation features upon
meeting the eligibility criteria. Under the VFA model, the
Group’s share of the investment experience and assumption
changes are absorbed by the CSM and released over time to
profit or loss. For contracts measured under GMM, the Group’s
share of the investment volatility is recorded in profit or loss as
it arises.
–Losses from onerous contracts are recognised in the income
statement immediately.
Investment return
assumptions (discount
rate)
–PVIF is calculated based on long-term investment return
assumptions based on assets held. It therefore includes
investment margins expected to be earned in future.
–Under the market consistent approach, expected future
investment spreads are not included in the investment return
assumption. Instead, the discount rate includes an illiquidity
premium that reflects the nature of the associated insurance
contract liabilities.
Expenses
–Total expenses to acquire and maintain the contract over
its lifetime are included in the PVIF calculation.
–Expenses are recognised across operating expenses and
fee expense as incurred and the allowances for those
expenses are released from the PVIF simultaneously.
–Projected lifetime expenses that are directly attributable costs
are included in the insurance contract liabilities and recognised
in the insurance service result.
–Non-attributable costs are reported in operating expenses.
Transition
In applying IFRS 17 for insurance contracts retrospectively, the full retrospective approach (‘FRA’) has been used unless it was impracticable.
When the FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an accounting policy choice to use
either the modified retrospective approach (‘MRA’) or the fair value approach (‘FVA’). The Group has applied the FRA for new business from
2018 at the earliest, subject to practicability, and the FVA for the majority of contracts for which the FRA is impracticable.
Under the FVA, the valuation of insurance liabilities on transition is based on the applicable requirements of IFRS 13 ‘Fair Value Measurement’.
This requires consideration 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 (an exit price). The CSM is calculated as the difference between what a market participant would
demand for assuming the unexpired risk associated with insurance contracts, including required profit, and the fulfilment cash flows that are
determined using IFRS 17 principles.
In determining the fair value, the Group considered the estimated profit margin that a market participant would demand in return for assuming
the insurance liabilities with the consideration of the level of capital that a market participant would be required to hold, and the discount rate
with an allowance for an illiquidity premium that takes into account the level of ‘matching’ between the Group’s assets and related liabilities.
These assumptions were set taking into account the assumptions that a hypothetical market participant operating in each local jurisdiction
would consider.
Amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’
On 23 May 2023, the International Accounting Standards Board (‘IASB’) issued amendments to IAS 12 ‘International Tax Reform – Pillar Two
Model Rules’, which became effective immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July
2023 and by the European Union on 8 November 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the
OECD’s Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. The Group has
applied the IAS 12 exception from recognising and disclosing information on associated deferred tax assets and liabilities.
There were no other new standards or amendments to standards that had an effect on these financial statements.
(b)    Differences between IFRS Accounting Standards and Hong Kong Financial Reporting Standards
There are no significant differences between IFRS Accounting Standards and Hong Kong Financial Reporting Standards in terms of their
application to HSBC, and consequently there would be no significant differences had the financial statements been prepared in accordance with
Hong Kong Financial Reporting Standards. The ‘Notes on the financial statements’, taken together with the ‘Report of the Directors’, include the
aggregate of all disclosures necessary to satisfy IFRS Accounting Standards and Hong Kong Financial Reporting Standards.
(c)Future accounting developments
Minor amendments to IFRS Accounting Standards
The IASB has published a number of minor amendments to IFRS Accounting Standards that are effective from 1 January 2024. HSBC expects
they will have an insignificant effect, when adopted, on the consolidated financial statements of HSBC and the separate financial statements of
HSBC Holdings. Additionally, in August 2023, the IASB published amendments to IAS 21 ‘Lack of Exchangeability’ effective from 1 January
2025. The Group is undertaking an assessment of the potential impact, which is not expected to be significant.
HSBC Holdings plc
369
(d)Foreign currencies
HSBC’s consolidated financial statements are presented in US dollars because the US dollar and currencies linked to it form the major currency
bloc in which HSBC transacts and funds its business. The US dollar is also HSBC Holdings’ functional currency because the US dollar and
currencies linked to it are the most significant currencies relevant to the underlying transactions, events and conditions of its subsidiaries, as
well as representing a significant proportion of its funds generated from financing activities.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Assets and liabilities denominated in
foreign currencies are translated at the rate of exchange at the balance sheet date, except non-monetary assets and liabilities measured at
historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other
comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised. Except for
subsidiaries operating in hyperinflationary economies (see Note 1.2(p)), in the consolidated financial statements, the assets and liabilities of
branches, subsidiaries, joint ventures and associates whose functional currency is not US dollars are translated into the Group’s presentation
currency at the rate of exchange at the balance sheet date, while their results are translated into US dollars at the average rates of exchange for
the reporting period. Exchange differences arising are recognised in other comprehensive income. On disposal of a foreign operation, exchange
differences previously recognised in other comprehensive income are reclassified to the income statement.
(e)Presentation of information
Certain disclosures required by IFRS Accounting Standards have been included in the sections marked as (‘Audited’) in the Annual Report and
Accounts 2023 as follows:
–Disclosures concerning the nature and extent of risks relating to insurance contracts and financial instruments are included in the ‘Risk
review’ on pages 158 to 273.
–The ‘Own funds disclosure’ is included in the ‘Risk review’ on page 243.
HSBC follows the UK Finance Disclosure Code. The UK Finance Disclosure Code aims to increase the quality and comparability of UK banks’
disclosures and sets out five disclosure principles together with supporting guidance agreed in 2010. In line with the principles of the UK
Finance Disclosure Code, HSBC assesses good practice recommendations issued from time to time by relevant regulators and standard setters,
and will assess the applicability and relevance of such guidance, enhancing disclosures where appropriate.
(f)Critical estimates and judgements
The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent
uncertainties and the high level of subjectivity involved in the recognition or measurement of items, highlighted as the ‘critical estimates and
judgements’ in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on which management’s
estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes of
these financial statements. Management’s selection of HSBC’s accounting policies that contain critical estimates and judgements reflects the
materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.
Management has considered the impact of climate-related risks on HSBC’s financial position and performance. While the effects of climate
change are a source of uncertainty, as at 31 December 2023 management did not consider there to be a material impact on our critical
judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular management
has considered the known and observable potential impacts of climate-related risks of associated judgements and estimates in our value in use
calculations.
(g)Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the
resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of
information relating to present and future conditions, including future projections of profitability, liquidity, capital requirements and capital
resources.
These considerations include stressed scenarios that reflect the uncertainty in the macroeconomic environment following rising inflation, slower
Chinese economic activity, and disrupted supply chains as a result of the ongoing Russia-Ukraine and Israel-Hamas wars. They also included
other top and emerging risks, including climate change, as well as the related impacts on profitability, capital and liquidity.
1.2Summary of material accounting policies
(a)Consolidation and related policies
Investments in subsidiaries
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 agent or principal.
Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair value or
at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. This election is made for each business
combination.
HSBC Holdings’ investments in subsidiaries are stated at cost less impairment losses.
Impairment testing is performed where there is an indication of impairment, by comparing the recoverable amount of the relevant investment to
its carrying amount. Indicators of impairment include both external and internal sources of information. Similarly, assessments are made as to
whether an impairment loss recognised in prior periods may no longer exist or may have decreased. Where this is the case, such an impairment
loss is reversed if there has been a change in the estimate used to determine the relevant recoverable amount since the last impairment loss
was recognised, and to the extent that it does not increase the carrying amount above that had no impairment loss been previously recognised.
Notes on the financial statements
370
HSBC Holdings plc
Critical estimates and judgements
Investments in subsidiaries are tested for impairment when there is an indication that the investment may be impaired, which involves estimations of
value in use reflecting management’s best estimate of the future cash flows of the investment and the rates used to discount these cash flows, both of
which are subject to uncertain factors as follows:
Judgements
Estimates
–The accuracy of forecast cash flows is subject to a
high degree of uncertainty in volatile market
conditions. Where such circumstances are
determined to exist, management re-tests for
impairment or reversal more frequently than once a
year when indicators exist. This ensures that the
assumptions on which the cash flow forecasts are
based continue to reflect current market conditions
and management’s best estimate of future
business prospects.
–The future cash flows of each investment are sensitive to the cash flows projected for the
periods for which detailed forecasts are available and to assumptions regarding the long-term
pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance
and verifiable economic data, but they reflect management’s view of future business
prospects at the time of the assessment.
–The rates used to discount future expected cash flows can have a significant effect on their
valuation, and are based on the costs of equity assigned to the investment. The cost of equity
percentage is generally derived from a capital asset pricing model and the market implied cost
of equity, which incorporates inputs reflecting a number of financial and economic variables,
including the risk-free interest rate in the country concerned and a premium for the risk of the
business being evaluated. These variables are subject to fluctuations in external market rates
and economic conditions beyond management’s control.
–Key assumptions used in estimating impairment in subsidiaries and their reversal where
relevant are described in Note 19. 
Goodwill
Goodwill is allocated to cash-generating units (’CGUs’) for the purpose of impairment testing, which is undertaken at the lowest level at which
goodwill is monitored for internal management purposes. HSBC’s CGUs are based on its main legal entities subdivided by global business,
except for Global Banking and Markets, for which goodwill is monitored on a global basis.
Impairment testing is performed at least once a year, or whenever there is an indication of impairment, by comparing the recoverable amount of
a CGU with its carrying amount.
Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within such a
CGU. The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the
portion of the CGU retained.
Critical estimates and judgements
The review of goodwill and non-financial assets (see Note 1.2(n)) for impairment reflects management’s best estimate of the future cash flows of the
CGUs and the rates used to discount these cash flows, both of which are subject to uncertain factors as follows:
Judgements
Estimates
–The accuracy of forecast cash flows is subject to
a high degree of uncertainty in volatile market
conditions. Where such circumstances are
determined to exist, management re-tests
goodwill for impairment more frequently than
once a year when indicators of impairment exist.
This ensures that the assumptions on which the
cash flow forecasts are based continue to reflect
current market conditions and management’s
best estimate of future business prospects.
–The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for
which detailed forecasts are available and to assumptions regarding the long-term pattern of
sustainable cash flows thereafter. Forecasts are compared with actual performance and
verifiable economic data, but they reflect management’s view of future business prospects at
the time of the assessment.
–The rates used to discount future expected cash flows can have a significant effect on their
valuation, and are based on the costs of equity assigned to individual CGUs. The cost of equity
percentage is generally derived from a capital asset pricing model and market implied cost of
equity, which incorporates inputs reflecting a number of financial and economic variables,
including the risk-free interest rate in the country concerned and a premium for the risk of the
business being evaluated. These variables are subject to fluctuations in external market rates
and economic conditions beyond management’s control.
–Key assumptions used in estimating goodwill and non-financial asset impairment are described
in Note 21.
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill in the next financial year,
but does consider this to be an area that is inherently judgemental.
HSBC sponsored structured entities
HSBC is considered to sponsor another entity if, in addition to ongoing involvement with the entity, it had a key role in establishing that entity or
in bringing together relevant counterparties so the transaction that is the purpose of the entity could occur. HSBC is generally not considered a
sponsor if the only involvement with the entity is merely administrative.
Interests in associates and joint arrangements
Joint arrangements are investments in which HSBC, together with one or more parties, has joint control. Depending on HSBC’s rights and
obligations, the joint arrangement is classified as either a joint operation or a joint venture.
HSBC classifies investments in entities over which it has significant influence, and which are neither subsidiaries nor joint arrangements, as
associates.
HSBC recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures are
recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates is included in the
consolidated financial statements of HSBC based on either financial statements made up to 31 December or pro-rated amounts adjusted for any
material transactions or events occurring between the date the financial statements are available and 31 December.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the
investment may be impaired, by comparing the recoverable amount of the relevant investment to its carrying amount. Goodwill on acquisitions
of interests in joint ventures and associates is not tested separately for impairment, but is assessed as part of the carrying amount of the
investment. Previously recognised impairments are assessed for reversal when there are indicators that they may no longer exist or have
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decreased. Any reversal, which may arise only from changes in estimates used to determine the prior impairment loss, is recognised to the
extent that it does not increase the carrying amount above that had no impairment loss been previously recognised.
Critical estimates and judgements
The most significant critical estimates relate to the assessment of impairment of our investment in Bank of Communications Co., Limited (‘BoCom’),
which involves estimations of value in use:
Judgements
Estimates
–The value in use calculation uses discounted cash flow projections based on
management’s best estimate of future earnings available to ordinary shareholders
prepared in accordance with IAS 36 ‘Impairment of Assets’.
–Key assumptions used in estimating BoCom’s value in use and the sensitivity of
the value in use calculations to different assumptions are described in Note 18.
(b)Income and expense
Operating income
Interest income and expense
Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value, are
recognised in ‘Interest income’ and ‘Interest expense’ in the income statement using the effective interest method. However, as an exception
to this, interest on debt instruments issued by HSBC for funding purposes that are designated under the fair value option to reduce an
accounting mismatch and on derivatives managed in conjunction with those debt instruments is included in interest expense.
Interest on credit-impaired financial assets is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount
of the asset less allowance for expected credit losses).
Non-interest income and expense
HSBC generates fee income from services provided at a fixed price over time, such as account service and card fees, or when HSBC delivers a
specific transaction at a point in time, such as broking services and import/export services. With the exception of certain fund management and
performance fees, all other fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size
of the customer portfolio and HSBC’s performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee
income is generally earned from short-term contracts with payment terms that do not include a significant financing component.
HSBC acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, HSBC
acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.
HSBC recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer.
Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement.
Where HSBC offers a package of services that contains multiple non-distinct performance obligations, such as those included in account service
packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance
obligations, the corresponding transaction price is allocated to each performance obligation based on the estimated stand-alone selling prices.
Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and
usually the date when shareholders approve the dividend for unlisted equity securities.
Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:
–‘Net income from financial instruments held for trading or managed on a fair value basis’: This comprises net trading income, which includes
all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial instruments
managed on a fair value basis, together with the related interest income, expense and dividends, excluding the effect of changes in the
credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair value of derivatives that are
managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.
–‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit
or loss’: This includes all gains and losses from changes in the fair value, together with related interest income, expense and dividends in
respect of financial assets and liabilities measured at fair value through profit or loss, and those derivatives managed in conjunction with the
above that can be separately identifiable from other trading derivatives.
–‘Changes in fair value of designated debt instruments and related derivatives’: Interest paid on debt instruments and interest cash flows on
related derivatives is presented in interest expense where doing so reduces an accounting mismatch.
–‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’: This includes interest on
instruments that fail the solely payments of principal and interest test, see (d) below.
The accounting policies for insurance service result and insurance finance income/(expenses) are disclosed in Note 1.2(j).
(c)Valuation of financial instruments
All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial
recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference
between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a
valuation technique that uses only data from observable markets, HSBC recognises the difference as a trading gain or loss at inception (a ‘day 1
gain or loss’). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the transaction
until the transaction matures, is closed out, the valuation inputs become observable or HSBC enters into an offsetting transaction. The fair value
of financial instruments is generally measured on an individual basis. However, in cases where HSBC manages a group of financial assets and
liabilities according to its net market or credit risk exposure, the fair value of the group of financial instruments is measured on a net basis but
the underlying financial assets and liabilities are presented separately in the financial statements, unless they satisfy the IFRS offsetting criteria.
Notes on the financial statements
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HSBC Holdings plc
Critical estimates and judgements
The majority of valuation techniques employ only observable market data. However, certain financial instruments are classified on the basis of valuation
techniques that feature one or more significant market inputs that are unobservable, and for them, the measurement of fair value is more judgemental:
Judgements
Estimates
–An instrument in its entirety is classified as valued using significant unobservable
inputs if, in the opinion of management, greater than 5% of the instrument’s
valuation is driven by unobservable inputs.
–‘Unobservable’ in this context means that there is little or no current market data
available from which to determine the price at which an arm’s length transaction
would be likely to occur. It generally does not mean that there is no data available
at all upon which to base a determination of fair value (consensus pricing data
may, for example, be used).
–Details on the Group’s Level 3 financial instruments and the
sensitivity of their valuation to the effect of applying reasonably
possible alternative assumptions in determining their fair value
are set out in Note 12.
(d)Financial instruments measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash
flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances
to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. HSBC accounts for
regular way amortised cost financial instruments using trade date accounting. The carrying amount of these financial assets at initial recognition
includes any directly attributable transactions costs.
HSBC may commit to underwriting loans on fixed contractual terms for specified periods of time. When the loan arising from the lending
commitment is expected to be sold shortly after origination, the commitment to lend is recorded as a derivative. When HSBC intends to hold
the loan, the loan commitment is included in the impairment calculations set out below.
Non-trading reverse repurchase, repurchase and similar agreements
When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance
sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell (‘reverse repos’) are
not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos
are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as
interest and recognised in net interest income over the life of the agreement.
Contracts that are economically equivalent to reverse repo or repo agreements (such as sales or purchases of debt securities entered into
together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with, reverse repo or repo
agreements.
(e)Financial assets measured at fair value through other comprehensive income
Financial assets managed within a business model that is achieved by both collecting contractual cash flows and selling and which contain
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at fair value
through other comprehensive income (‘FVOCI’). These comprise primarily debt securities. They are recognised on trade date when HSBC enters
into contractual arrangements to purchase and are generally derecognised when they are either sold or redeemed. They are subsequently
remeasured at fair value with changes therein (except for those relating to impairment, interest income and foreign currency exchange gains
and losses) recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses in other
comprehensive income are recognised in the income statement as ‘Gains less losses from financial instruments’. Financial assets measured at
FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.
(f)Equity securities measured at fair value with fair value movements presented in other comprehensive income
The equity securities for which fair value movements are shown in other comprehensive income are business facilitation and other similar
investments where HSBC holds the investments other than to generate a capital return. Dividends from such investments are recognised in
profit or loss. Gains or losses on the derecognition of these equity securities are not transferred to profit or loss. Otherwise, equity securities are
measured at fair value through profit or loss.
(g)Financial instruments designated at fair value through profit or loss
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and
are so designated irrevocably at inception:
–The use of the designation removes or significantly reduces an accounting mismatch.
–A group of financial assets and liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy.
–The financial liability contains one or more non-closely related embedded derivatives.
Designated financial assets are recognised when HSBC enters into contracts with counterparties, which is generally on trade date, and are
normally derecognised when the rights to the cash flows expire or are transferred. Designated financial liabilities are recognised when HSBC
enters into contracts with counterparties, which is generally on settlement date, and are normally derecognised when extinguished. Subsequent
changes in fair values are recognised in the income statement in ‘Net income from financial instruments held for trading or managed on a fair
value basis’ or ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value
through profit or loss’ or ‘Changes in fair value of designated debt and related derivatives’ except for the effect of changes in the liabilities’ credit
risk, which is presented in ‘Other comprehensive income’, unless that treatment would create or enlarge an accounting mismatch in profit or
loss.
Under the above criteria, the main classes of financial instruments designated by HSBC are:
–Debt instruments for funding purposes that are designated to reduce an accounting mismatch: The interest and/or foreign exchange
exposure on certain fixed-rate debt securities issued has been matched with the interest and/or foreign exchange exposure on certain swaps
as part of a documented risk management strategy.
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373
–Financial assets and financial liabilities under unit-linked and non-linked investment contracts: A contract under which HSBC does not accept
significant insurance risk from another party is not classified as an insurance contract, other than investment contracts with discretionary
participation features (‘DPF’), but is accounted for as a financial liability. Customer liabilities under linked and certain non-linked investment
contracts issued by insurance subsidiaries are determined based on the fair value of the assets held in the linked funds or by a valuation
method. The related financial assets and liabilities are managed and reported to management on a fair value basis. Designation at fair value
of the financial assets and related liabilities allows changes in fair values to be recorded in the income statement and presented in the same
line.
–Financial liabilities that contain both deposit and derivative components: These financial liabilities are managed and their performance
evaluated on a fair value basis.
(h)    Derivatives
Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices.
Derivatives are recognised initially and are subsequently measured at fair value through profit or loss. Derivatives are classified as assets when
their fair value is positive or as liabilities when their fair value is negative. This includes embedded derivatives in financial liabilities, which are
bifurcated from the host contract when they meet the definition of a derivative on a stand-alone basis.
Where the derivatives are managed with debt securities issued by HSBC that are designated at fair value where doing so reduces an accounting
mismatch, the contractual interest is shown in ‘Interest expense’ together with the interest payable on the issued debt.
Hedge accounting
When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge
accounting relationships where the required criteria for documentation and hedge effectiveness are met. HSBC uses these derivatives or,
where allowed, other non-derivative hedging instruments in fair value hedges, cash flow hedges or hedges of net investments in foreign
operations as appropriate to the risk being hedged.
Fair value hedge
Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in
recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in
the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the
cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income
statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income
statement immediately.
Cash flow hedge
The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of
the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the
income statement within ‘Net income from financial instruments held for trading or managed on a fair value basis’. The accumulated gains and
losses recognised in other comprehensive income are reclassified to the income statement in the same periods in which the hedged item
affects profit or loss. When a hedge relationship is discontinued, or partially discontinued, any cumulative gain or loss recognised in other
comprehensive income remains in equity until the forecast transaction is recognised in the income statement. When a forecast transaction is no
longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is immediately reclassified to the
income statement.
Net investment hedge
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. The effective portion of gains and
losses on the hedging instrument is recognised in other comprehensive income and other gains and losses are recognised immediately in the
income statement. Gains and losses previously recognised in other comprehensive income are reclassified to the income statement on the
disposal, or part-disposal, of the foreign operation.
Derivatives that do not qualify for hedge accounting
Non-qualifying hedges are derivatives entered into as economic hedges of assets and liabilities for which hedge accounting was not applied.
(i)Impairment of amortised cost and FVOCI financial assets
Expected credit losses (‘ECL’) are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements,
other financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee
contracts. At initial recognition, an allowance (or provision in the case of some loan commitments and financial guarantees) is recognised for
ECL resulting from possible default events within the next 12 months, or less, where the remaining life is less than 12 months (’12-month
ECL’). In the event of a significant increase in credit risk, an allowance (or provision) is recognised for ECL resulting from all possible default
events over the expected life of the financial instrument (‘lifetime ECL’). Financial assets where 12-month ECL is recognised are considered to
be ‘stage 1’; financial assets which are considered to have experienced a significant increase in credit risk are in ‘stage 2’; and financial assets
for which there is objective evidence of impairment, and so are considered to be in default or otherwise credit impaired are in ‘stage 3’.
Purchased or originated credit-impaired financial assets (‘POCI’) are treated differently as set out below.
Credit impaired (stage 3)
HSBC determines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether
contractual payments of either principal or interest are past due for more than 90 days, there are other indications that the borrower is unlikely
to pay such as that a concession has been granted to the borrower for economic or legal reasons relating to the borrower’s financial condition,
or the loan is otherwise considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due. Therefore, the
definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or
otherwise credit impaired.
Interest income is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount less allowance for ECL).
Notes on the financial statements
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HSBC Holdings plc
Write-off
Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of
recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the
net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.
Forbearance
Loans are identified as forborne and classified as either performing or non-performing when HSBC modifies the contractual terms due to
financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet the curing
criteria, as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of default have
been present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon entering forbearance
would not be reversed.
The Group applies the EBA Guidelines on the application of definition of default for our retail portfolios, which affect credit risk policies and our
reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof). Further details are provided under
‘Forborne loans and advances’ on page 184.
Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable curing criteria (for example, they
continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is either
stage 1 or stage 2 as determined by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms)
and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms).
A forborne loan is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the
terms of an existing agreement are modified such that the forborne loan is a substantially different financial instrument. Any new loans that
arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be disclosed as forborne.
Loan modifications other than forborne loans
Loan modifications that are not identified as forborne are considered to be commercial restructurings. Where a commercial restructuring results
in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC’s
rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The
rights to cash flows are generally considered to have expired if the commercial restructuring is at market rates and no payment-related
concession has been provided. Modifications of certain higher credit risk wholesale loans are assessed for derecognition, having regard to
changes in contractual terms that either individually or in combination are judged to result in a substantially different financial instrument.
Mandatory and general offer loan modifications that are not borrower specific, for example market-wide customer relief programmes, generally
do not result in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL
impairment policy. Changes made to these financial instruments that are economically equivalent and required by interest rate benchmark
reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective interest
rate to be updated to reflect the change of the interest rate benchmark.
Significant increase in credit risk (stage 2)
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering
the change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or implicitly compares
the risk of default occurring at the reporting date compared with that at initial recognition, taking into account reasonable and supportable
information, including information about past events, current conditions and future economic conditions. The assessment is unbiased,
probability-weighted, and to the extent relevant, uses forward-looking information consistent with that used in the measurement of ECL. The
analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its weight compared with other factors
depends on the type of product, the characteristics of the financial instrument and the borrower, and the geographical region. Therefore, it is not
possible to provide a single set of criteria that will determine what is considered to be a significant increase in credit risk, and these criteria will
differ for different types of lending, particularly between retail and wholesale. However, unless identified at an earlier stage, all financial assets
are deemed to have suffered a significant increase in credit risk when 30 days past due. In addition, wholesale loans that are individually
assessed, which are typically corporate and commercial customers, and included on a watch or worry list, are included in stage 2.
For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime probability of default (‘PD’), which encompasses a
wide range of information including the obligor’s customer risk rating (‘CRR’), macroeconomic condition forecasts and credit transition
probabilities. For origination CRRs up to 3.3, significant increase in credit risk is measured by comparing the average PD for the remaining term
estimated at origination with the equivalent estimation at the reporting date. The quantitative measure of significance varies depending on the
credit quality at origination as follows:
Origination CRR
Significance trigger – PD to increase by
0.1–1.2
15bps
2.1–3.3
30bps
For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has
doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to
relative changes in external market rates.
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For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future
macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be
approximated assuming through-the-cycle PDs and through-the-cycle migration probabilities, consistent with the instrument’s underlying
modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-
based thresholds, as set out in the table below:
Origination CRR
Additional significance criteria – number of CRR grade notches
deterioration required to identify as significant credit
deterioration (stage 2) (> or equal to)
0.1
5 notches
1.1–4.2
4 notches
4.3–5.1
3 notches
5.2–7.1
2 notches
7.2–8.2
1 notch
8.3
0 notch
Further information about the 23-grade scale used for CRR can be found on page 184.
For retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internal models, which incorporate all available
information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is
considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogenous portfolios,
generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD
greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk
judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a PD higher than
would be expected from loans that are performing as originally expected and higher than that which would have been acceptable at origination.
It therefore approximates a comparison of origination to reporting date PDs.
We continue to refine the retail transfer criteria approach for certain portfolios as additional data becomes available, in order to utilise a more
relative approach. These enhancements take advantage of the increase in origination-related data in the assessment of significant increases in
credit risk by comparing remaining lifetime PD to the comparable remaining term lifetime PD at origination based on portfolio-specific origination
segments.
Unimpaired and without significant increase in credit risk (stage 1)
ECL resulting from default events that are possible within the next 12 months (‘12-month ECL’) are recognised for financial instruments that
remain in stage 1.
Purchased or originated credit impaired
Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This
population includes new financial instruments recognised in most cases following the derecognition of forborne loans. The amount of change in
lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan is derecognised, even if the lifetime ECL are less than the amount
of ECL included in the estimated cash flows on initial recognition.
Movement between stages
Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since
initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased
since initial recognition based on the assessments described above. In the case of non-performing forborne loans, such financial instruments are
transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing criteria as described above.
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information which is
relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future
events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money and
considers other factors such as climate-related risks.
In general, HSBC calculates ECL using three main components: a probability of default (‘PD’), a loss given default (’LGD’) and the exposure at
default (‘EAD’).
The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead. The
12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument
respectively.
The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to
the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the
event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and
the time value of money.
Notes on the financial statements
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HSBC Holdings plc
HSBC makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following
table:
Model
Regulatory capital
IFRS 9
PD
–Through the cycle (represents long-run average PD throughout
a full economic cycle)
–The definition of default includes a backstop of 90+ days past
due
–Point in time (based on current conditions, adjusted to take into
account estimates of future conditions that will impact PD)
–Default backstop of 90+ days past due for all portfolios
EAD
–Cannot be lower than current balance
–Amortisation captured for term products
LGD
–Downturn LGD (consistent losses expected to be suffered
during a severe but plausible economic downturn)
–Regulatory floors may apply to mitigate risk of underestimating
downturn LGD due to lack of historical data
–Discounted using cost of capital
–All collection costs included
–Expected LGD (based on estimate of loss given default
including the expected impact of future economic conditions
such as changes in value of collateral)
–No floors
–Discounted using the original effective interest rate of the loan
–Only costs associated with obtaining/selling collateral included
Other
–Discounted back from point of default to balance sheet date
While 12-month PDs are recalibrated from IRB models where possible, the lifetime PDs are determined by projecting the 12-month PD using a
term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the
CRR bands over its life.
The ECL for wholesale stage 3 is determined primarily on an individual basis using a discounted cash flow (‘DCF’) methodology. The expected
future cash flows are based on estimates as of the reporting date, reflecting reasonable and supportable assumptions and projections of future
recoveries and expected future receipts of interest.
Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its
estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral.
The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under up to
four different scenarios are probability-weighted by reference to the status of the borrower, economic scenarios applied more generally by the
Group and judgement in relation to the likelihood of the work-out strategy succeeding or receivership being required. For less significant cases
where an individual assessment is undertaken, the effect of different economic scenarios and work-out strategies results in an ECL calculation
based on a most likely outcome which is adjusted to capture losses resulting from less likely but possible outcomes. For certain less significant
cases, the bank may use a LGD-based modelled approach to ECL assessment, which factors in a range of economic scenarios.
Period over which ECL is measured
Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it
12-month or lifetime ECL) is the maximum contractual period over which HSBC is exposed to credit risk. However, where the financial
instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn
commitment does not serve to limit HSBC’s exposure to credit risk to the contractual notice period, the contractual period does not determine
the maximum period considered. Instead, ECL is measured over the period HSBC remains exposed to credit risk that is not mitigated by credit
risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to
default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these
facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset component. As a result,
the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision. For wholesale overdraft facilities, credit risk management actions are taken no less
frequently than on an annual basis.
Forward-looking economic inputs
HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of
its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit losses in most economic
environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios or adjustments, to
reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in ‘Measurement
uncertainty and sensitivity analysis of ECL estimates’ on page 192.
Critical estimates and judgements
The calculation of the Group’s ECL under IFRS 9 requires the Group to make a number of judgements, assumptions and estimates. The most significant
are set out below:
Judgements
Estimates
–Defining what is considered to be a significant increase in credit risk
–Determining the lifetime and point of initial recognition of overdrafts and credit cards
–Selecting and calibrating the PD, LGD and EAD models, which support the calculations,
including making reasonable and supportable judgements about how models react to current
and future economic conditions
–Selecting model inputs and economic forecasts, including determining whether sufficient and
appropriately weighted economic forecasts are incorporated to calculate unbiased expected
credit loss
–Making management adjustments to account for late-breaking events, model and data
limitations and deficiencies, and expert credit judgements
–Selecting applicable recovery strategies for certain wholesale credit-impaired loans
–The section ‘Measurement uncertainty and
sensitivity analysis of ECL estimates’, marked as
audited from page 192, sets out the assumptions
used in determining ECL, and provides an
indication of the sensitivity of the result to the
application of different weightings being applied
to different economic assumptions
 
HSBC Holdings plc
377
(j)  Insurance contracts
A contract is classified as an insurance contract where the Group accepts significant insurance risk from another party by agreeing to
compensate that party if it is adversely affected by a specified uncertain future event. An insurance contract may also transfer financial risk, but
is accounted for as an insurance contract if the insurance risk is significant. In addition, the Group issues investment contracts with DPF, which
are also accounted under IFRS 17 ’Insurance Contracts’.
Aggregation of insurance contracts
Individual insurance contracts that are managed together and subject to similar risks are identified as a portfolio. Contracts that are managed
together usually belong to the same product group, and have similar characteristics such as being subject to a similar pricing framework or
similar product management, and are issued by the same legal entity. If a contract is exposed to more than one risk, the dominant risk of the
contract is used to assess whether the contract features similar risks. Each portfolio is further separated by the contract’s expected profitability.
The portfolios are split by their profitability into: (i) contracts that are onerous at initial recognition; (ii) contracts that at initial recognition have no
significant possibility of becoming onerous subsequently; and (iii) the remaining contracts. These profitability groups are then divided by issue
date, with most contracts the Group issues after the transition date being grouped into calendar quarter cohorts. For multi-currency groups of
contracts, the Group considers its groups of contracts as being denominated in a single currency.
The measurement of the insurance contract liability is based on groups of insurance contracts as established at initial recognition, and will
include fulfilment cash flows as well as the CSM representing the unearned profit. The Group has elected to update the estimates used in the
measurement on a year-to-date basis.
Fulfilment cash flows
The fulfilment cash flows comprise the following:
Best estimates of future cash flows
The cash flows within the contract boundary of each contract in the Group include amounts expected to be collected from premiums and
payouts for claims, benefits and expenses, and are projected using a range of scenarios and assumptions in an unbiased way based on the
Group’s demographic and operating experience along with external mortality data where the Group’s own experience data is not sufficiently
large in size to be credible.
Adjustment for the time value of money and financial risks associated with the future cash flows
The estimates of future cash flows are adjusted to reflect the time value of money (i.e. discounting) and the financial risks to derive an expected
present value. The Group generally makes use of stochastic modelling techniques in the estimation for products with options and guarantees.
A bottom-up approach is used to determine the discount rate to be applied to a given set of expected future cash flows. This is derived as the
sum of the risk-free yield and an illiquidity premium. The risk-free yield is determined based on observable market data, where such markets are
considered to be deep, liquid and transparent. When information is not available, management judgement is applied to determine the
appropriate risk-free yield. Illiquidity premiums reflect the liquidity characteristics of the associated insurance contracts.
Risk adjustment for non-financial risk
The risk adjustment reflects the compensation required for bearing the uncertainty about the amount and timing of future cash flows that arises
from non-financial risk. It is calculated as a 75th percentile level of stress over a one-year period. The level of the stress is determined with
reference to external regulatory stresses and internal economic capital stresses.
For the main insurance manufacturing entity in these locations, the one-year 75th percentile level of stress corresponds to the following
percentiles based on an ultimate view of risk over all future years:
–Asia-Pacific (Hong Kong): 60th percentile (2022: 59th percentile).
–Europe (France): 60th percentile (2022: 60th percentile).
–Latin America (Mexico): 65th percentile (2022: 66th percentile).
The Group does not disaggregate changes in the risk adjustment between insurance service result (comprising insurance revenue and insurance
service expense) and insurance finance income or expenses. All changes are included in the insurance service result.
Measurement models
The variable fee approach (‘VFA’) measurement model is used for most of the contracts issued by the Group, which is mandatory upon meeting
the following eligibility criteria at inception: 
–the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
–the Group expects to pay to the policyholder a substantial share of the fair value returns on the underlying items. The Group considers that a
substantial share is a majority of returns; and
–the Group expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value
of the underlying items. The Group considers that a substantial proportion is a majority proportion of change on a present value probability-
weighted average of all scenarios.
For some contracts measured under VFA, the other comprehensive income (‘OCI’) option is used. The OCI option is applied where the
underlying items held by the Group are not accounted for at fair value through profit or loss. Under this option, only the amount that matches
income or expenses recognised in profit or loss on underlying items is included in finance income or expenses for these insurance contracts,
and hence results in the elimination of accounting mismatches. The remaining amount of finance income or expenses for these insurance
contracts issued for the period is recognised in OCI. In addition, the risk mitigation option is used for a number of economic offsets against the
instruments that meet specific requirements.
The remaining contracts issued and the reinsurance contracts held are accounted for under the general measurement model (‘GMM’).
Notes on the financial statements
378
HSBC Holdings plc
CSM and coverage units
The CSM represents the unearned profit and results in no income or expense at initial recognition when the group of contracts is profitable. The
CSM is adjusted at each subsequent reporting period for changes in fulfilment cash flows relating to future service (e.g. changes in non-
economic assumptions, including mortality and morbidity rates). For initial recognition of onerous groups of contracts and when groups of
contracts become onerous subsequently, losses are recognised in insurance service expense immediately.
For groups of contracts measured using the VFA, changes in the Group’s share of the underlying items, and economic experience and economic
assumption changes adjust the CSM, whereas these changes do not adjust the CSM under the GMM, but are recognised in profit or loss as
they arise. However, under the risk mitigation option for VFA contracts, the changes in the fulfilment cash flows and the changes in the Group’s
share in the fair value return on underlying items that the instruments mitigate are not adjusted in CSM but recognised in profit or loss. The risk
mitigating instruments are primarily reinsurance contracts held.
The CSM is systematically recognised in insurance revenue to reflect the insurance contract services provided, based on the coverage units of
the group of contracts. Coverage units are determined by the quantity of benefits and the expected coverage period of the contracts.
The Group identifies the quantity of the benefits provided as follows:
–Insurance coverage: This is based on the expected net policyholder insurance benefit at each period after allowance for decrements, where
net policyholder insurance benefit refers to the amount of sum assured less the fund value or surrender value.
–Investment services (including both investment-return service and investment-related service): This is based on a constant measure basis
which reflects the provision of access for the policyholder to the facility.
For contracts that provide both insurance coverage and investment services, coverage units are weighted according to the expected present
value of the future cash outflows for each service.
Insurance service result
Insurance revenue reflects the consideration to which the Group expects to be entitled in exchange for the provision of coverage and other
insurance contract services (excluding any investment components). Insurance service expenses comprise the incurred claims and other
incurred insurance service expenses (excluding any investment components), and losses on onerous groups of contracts and reversals of such
losses.
Insurance finance income and expenses
Insurance finance income and expenses comprise the change in the carrying amount of the group of insurance contracts arising from the
effects of the time value of money, financial risk and changes therein. For VFA contracts, changes in the fair value of underlying items (excluding
additions and withdrawals) are recognised in insurance finance income or expenses.
(k)Employee compensation and benefits
Share-based payments
HSBC enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the
provision of their services.
The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in respect of
the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement. Expenses are
recognised when the employee starts to render service to which the award relates.
Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting
recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the
amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.
Post-employment benefit plans
HSBC operates a number of pension schemes including defined benefit, defined contribution and post-employment benefit schemes.
Payments to defined contribution schemes are charged as an expense as the employees render service.
Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly
comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.
Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets excluding interest
and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net defined
benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets (see Note 1.2(c)),
after applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and reductions in
future contributions to the plan.
The costs of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.
Critical estimates and judgements
The most significant critical estimates relate to the determination of key assumptions applied in calculating the defined benefit pension obligation for the
principal plan.
Judgements
Estimates
–A range of assumptions could be applied, and different assumptions could
significantly alter the defined benefit obligation and the amounts recognised in
profit or loss or OCI.
–The calculation of the defined benefit pension obligation includes assumptions with
regard to the discount rate, inflation rate, pension payments and deferred
pensions, pay and mortality. Management determines these assumptions in
consultation with the plan’s actuaries.
–Key assumptions used in calculating the defined benefit pension obligation for the
principal plan and the sensitivity of the calculation to different assumptions are
described in Note 5.
HSBC Holdings plc
379
(l)  Tax
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to
items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related
item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years.
HSBC provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the
amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods
in which the assets will be realised or the liabilities settled.
In assessing the probability and sufficiency of future taxable profit, management considers the availability of evidence to support the recognition
of deferred tax assets, taking into account the inherent risks in long-term forecasting, including climate change-related, and drivers of recent
history of tax losses where applicable. Management also considers the future reversal of existing taxable temporary differences and tax
planning strategies, including corporate reorganisations.
Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
Critical estimates and judgements
The recognition of deferred tax assets depends on judgements and estimates.
Judgements
Estimates
–Specific judgements supporting deferred tax assets are described in Note 7.
–The recognition of deferred tax assets is sensitive to estimates of
future cash flows projected for periods for which detailed forecasts
are available and to assumptions regarding the long-term pattern of
cash flows thereafter, on which forecasts of future taxable profit are
based, and which affect the expected recovery periods and the
pattern of utilisation of tax losses and tax credits. See Note 7 for
further detail.
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of deferred tax assets in the next
financial year, but does consider this to be an area that is inherently judgemental.
(m)Provisions, contingent liabilities and guarantees
Provisions
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive
obligation that has arisen as a result of past events and for which a reliable estimate can be made.
Critical estimates and judgements
The recognition and measurement of provisions requires the Group to make a number of judgements, assumptions and estimates. The most significant
are set out below:
Judgements
Estimates
–Determining whether a present obligation exists. Professional advice is
taken on the assessment of litigation and similar obligations.
–Provisions for legal proceedings and regulatory matters typically require a
higher degree of judgement than other types of provisions. When matters
are at an early stage, accounting judgements can be difficult because of the
high degree of uncertainty associated with determining whether a present
obligation exists, and estimating the probability and amount of any outflows
that may arise. As matters progress, management and legal advisers
evaluate on an ongoing basis whether provisions should be recognised,
revising previous estimates as appropriate. At more advanced stages, it is
typically easier to make estimates around a better defined set of possible
outcomes.
–Provisions for legal proceedings and regulatory matters remain very
sensitive to the assumptions used in the estimate. There could be a
wider range of possible outcomes for any pending legal proceedings,
investigations or inquiries. As a result it is often not practicable to
quantify a range of possible outcomes for individual matters. It is also
not practicable to meaningfully quantify ranges of potential outcomes
in aggregate for these types of provisions because of the diverse
nature and circumstances of such matters and the wide range of
uncertainties involved.
Contingent liabilities, contractual commitments and guarantees
Contingent liabilities
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related to
legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of settlement is
remote.
Financial guarantee contracts
Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is
generally the fee received or present value of the fee receivable.
(n)Impairment of non-financial assets
Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible
assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of
impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In addition,
impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are considered to be the
principal operating legal entities divided by global business.
Notes on the financial statements
380
HSBC Holdings plc
Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of the fair
value less costs of disposal or the value in use. The carrying amount of a CGU comprises the carrying amount of its assets and liabilities,
including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and consistent
basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping of CGUs. The
recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent and
qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs (see Note 21).
When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the
extent that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of
their respective individual recoverable amount or nil. Impairment is not allocated to the financial assets in a CGU.
Impairment losses recognised in prior periods for non-financial assets are reversed when there has been a change in the estimate used to
determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would not
exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior
periods.
Critical estimates and judgements
The review of goodwill and other non-financial assets for impairment reflects management’s best estimate of the future cash flows of the CGUs and
the rates used to discount these cash flows, both of which are subject to uncertain factors as described in the ‘Critical estimates and judgements’ in
Note 1.2(a).
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill and non-financial assets in
the next financial year, but does consider this to be an area that is inherently judgemental.
(o)Non-current assets and disposal groups held for sale
HSBC classifies non-current assets or disposal groups (including assets and liabilities) as held for sale when their carrying amounts will be
recovered principally through sale rather than through continuing use. To be classified as held for sale, the non-current asset or disposal group
must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or
disposal groups), and the sale must be highly probable. For a sale to be highly probable, the appropriate level of management must be
committed to a plan to sell the asset (or disposal group) and an active programme to locate a buyer and complete the plan must have been
initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value.
In addition, the sale should be expected to qualify as a completed sale within one year from the date of classification and actions required to
complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. 
Held for sale assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to sell except for those
assets and liabilities that are not within the scope of the measurement requirements of IFRS 5. If the carrying amount of the non-current asset
(or disposal group) is greater than the fair value less costs to sell, an impairment loss for any initial or subsequent write-down of the asset or
disposal group to fair value less costs to sell is recognised. Any such impairment loss is first allocated against the non-current assets that are in
scope of IFRS 5 for measurement. This first reduces the carrying amount of any goodwill allocated to the disposal group, and then to the other
non-current assets of the disposal group pro rata on the basis of the carrying amount of each asset in the disposal group. Thereafter, any
impairment loss in excess of the carrying amount of the non-current assets in scope of IFRS 5 for measurement is recognised against the total
assets of the disposal group.
Critical judgements
The classification as held for sale depends on certain judgements:
Judgements
Management judgement is required in determining whether the IFRS 5 held for sale criteria are met, including whether a sale is highly probable and
expected to complete within one year of classification. The exercise of judgement will normally consider the likelihood of successfully securing any
necessary regulatory or governmental approvals, which are almost always required for sales of banking businesses, and sanctions risk. For large and
complex plans, judgement will also include an assessment of the enforceability of any binding sale agreement, the nature and magnitude of any
disincentives for non-performance, and the ability of the counterparty to undertake necessary pre-completion preparatory work, comply with conditions
precedent, and otherwise be able to comply with contractual undertakings to achieve completion within the expected timescale. Once classified as
held for sale, judgement is required to be applied on a continuous basis to ensure that classification remains appropriate in future accounting periods.
(p)Hyperinflationary accounting
Hyperinflationary accounting is applied to those subsidiary operations in countries where the three-year cumulative inflation rate is approaching
or exceeding 100%. In 2023, this affected the Group’s operations in Argentina and Türkiye. The Group applies IAS 29 to the underlying financial
information of relevant subsidiaries to restate their local currency results and financial position so as to be stated in terms of the measuring unit
current at the end of the reporting period. Those restated results are translated into the Group’s presentation currency of US dollars for
consolidation at the closing rate at the balance sheet date. Group comparatives are not restated for inflation and consequential adjustments to
the opening balance sheet in relation to hyperinflationary subsidiaries are presented in other comprehensive income. The hyperinflationary gain
or loss in respect of the net monetary position of the relevant subsidiary is included in profit or loss.
When applying hyperinflation accounting for the first time, the underlying financial information is restated in terms of the measuring unit current
at the end of the reporting period as if the relevant economy had always been hyperinflationary. Group comparatives are not restated for such
historical adjustments.
HSBC Holdings plc
381
2
Net fee income
Net fee income by global business
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,763
71
539
—
2,373
Cards
2,385
353
38
—
2,776
Credit facilities
103
856
615
—
1,574
Broking income
463
22
592
—
1,077
Account services
402
788
347
—
1,537
Unit trusts
727
10
1
—
738
Underwriting
—
3
583
—
586
Global custody
128
6
730
—
864
Remittances
86
389
347
1
823
Imports/exports
—
470
154
—
624
Insurance agency commission
280
18
—
—
298
Other
1,433
1,161
2,458
(2,706)
2,346
Fee income
7,770
4,147
6,404
(2,705)
15,616
Less: fee expense
(2,416)
(210)
(3,858)
2,713
(3,771)
Net fee income
5,354
3,937
2,546
8
11,845
20221
Wealth and
Personal
Banking
Commercial
Banking2
Global
Banking and
Markets2
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,765
107
500
(12)
2,360
Cards
2,146
313
32
—
2,491
Credit facilities
100
783
591
—
1,474
Broking income
576
40
635
—
1,251
Account services
337
730
344
1
1,412
Unit trusts
682
14
—
—
696
Underwriting
1
2
443
(5)
441
Global custody
140
19
762
—
921
Remittances
72
380
346
1
799
Imports/exports
—
493
141
—
634
Insurance agency commission
283
16
1
—
300
Other
1,330
1,102
2,376
(2,463)
2,345
Fee income
7,432
3,999
6,171
(2,478)
15,124
Less: fee expense
(2,128)
(212)
(3,459)
2,445
(3,354)
Net fee income
5,304
3,787
2,712
(33)
11,770
2021
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,984
126
546
—
2,656
Cards
1,949
240
23
1
2,213
Credit facilities
103
833
690
1
1,627
Broking income
863
69
669
—
1,601
Account services
429
677
340
6
1,452
Unit trusts
1,065
23
—
—
1,088
Underwriting
4
6
1,009
(2)
1,017
Global custody
167
24
787
—
978
Remittances
75
357
343
—
775
Imports/exports
1
474
145
—
620
Insurance agency commission
324
17
—
—
341
Other
1,305
1,077
2,503
(2,465)
2,420
Fee income
8,269
3,923
7,055
(2,459)
16,788
Less: fee expense
(2,375)
(284)
(3,452)
2,420
(3,691)
Net fee income
5,894
3,639
3,603
(39)
13,097
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data
have been re-presented accordingly.
Notes on the financial statements
382
HSBC Holdings plc
Net fee income included $6,971m of fees earned on financial assets that were not at fair value through profit or loss, other than amounts
included in determining the effective interest rate (2022: $6,410m; 2021: $6,742m), $1,872m of fees payable on financial liabilities that were not
at fair value through profit or loss, other than amounts included in determining the effective interest rate (2022: $1,613m; 2021: $1,520m),
$3,452m of fees earned on trust and other fiduciary activities (2022: $3,492m; 2021: $3,849m) and $333m of fees payable relating to trust and
other fiduciary activities (2022: $370m; 2021: $305m).
3
Net income/(expense) from financial instruments measured at fair value
through profit or loss
2023
20221
2021
$m
$m
$m
Net income/(expense) arising on:
Net trading activities
20,391
2,372
6,668
Other instruments managed on a fair value basis
(3,730)
7,906
1,076
Net income from financial instruments held for trading or managed on a fair value basis
16,661
10,278
7,744
Financial assets held to meet liabilities under insurance and investment contracts
8,086
(14,392)
4,134
Liabilities to customers under investment contracts
(199)
561
(81)
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives,
measured at fair value through profit or loss
7,887
(13,831)
4,053
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
HSBC Holdings
2023
2022
2021
$m
$m
$m
Net income/(expense) arising on:
–  trading activities
(546)
2,094
87
–  other instruments managed on a fair value basis
1,609
35
23
Net income from financial instruments held for trading or managed on a fair value basis
1,063
2,129
110
Derivatives managed in conjunction with HSBC Holdings-issued debt securities
426
(1,529)
(625)
Other changes in fair value
(1,894)
3,673
974
Changes in fair value of designated debt and related derivatives
(1,468)
2,144
349
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
3,692
(2,409)
(420)
Year ended 31 Dec
3,287
1,864
39
4
Insurance business
Insurance service result
Year ended 31 Dec 2023
Year ended 31 Dec 2022¹
Life direct
participating
and investment
DPF contracts2
Life other
contracts3
Total
Life direct
participating and
investment DPF
contracts2
Life other
contracts3
Total
$m
$m
$m
$m
$m
$m
Insurance revenue
Amounts relating to changes in liabilities for remaining coverage
1,626
470
2,096
1,399
446
1,845
Contractual service margin recognised for services provided
975
151
1,126
781
151
932
Change in risk adjustment for non-financial risk for risk expired
21
15
36
17
17
34
Expected incurred claims and other insurance service expenses
594
304
898
528
278
806
Other
36
—
36
73
—
73
Recovery of insurance acquisition cash flows
109
54
163
102
30
132
Total insurance revenue
1,735
524
2,259
1,501
476
1,977
Insurance service expenses
Incurred claims and other insurance service expenses
(615)
(292)
(907)
(573)
(280)
(853)
Losses and reversal of losses on onerous contracts
(32)
(77)
(109)
(84)
(86)
(170)
Amortisation of insurance acquisition cash flows
(109)
(54)
(163)
(102)
(30)
(132)
Adjustments to liabilities for incurred claims
(1)
(1)
(2)
(2)
(11)
(13)
Total insurance service expenses
(757)
(424)
(1,181)
(761)
(407)
(1,168)
Total insurance service results
978
100
1,078
740
69
809
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2  ‘Life direct participating and investment DPF contracts’ are substantially measured under the variable fee approach measurement model.
3  ‘Life other contracts’ are measured under the general measurement model and excludes reinsurance contracts.
HSBC Holdings plc
383
Net investment return
Year ended 31 Dec 2023
Year ended 31 Dec 2022¹
Life direct
participating
and
investment
DPF contracts
Life other
contracts
Total
Life direct
participating
and
investment
DPF contracts
Life other
contracts
Total
$m
$m
$m
$m
$m
$m
Investment return
Amounts recognised in profit or loss2
7,663
214
7,877
(13,520)
(181)
(13,701)
Amounts recognised in OCI3
493
—
493
(2,392)
—
(2,392)
Total investment return (memorandum)
8,156
214
8,370
(15,912)
(181)
(16,093)
Net finance income/(expense)
Changes in fair value of underlying items of direct participating contracts
(7,995)
—
(7,995)
15,937
—
15,937
Effect of risk mitigation option
(35)
—
(35)
99
—
99
Interest accreted
—
(127)
(127)
—
(80)
(80)
Effect of changes in interest rates and other financial assumptions
(12)
(121)
(133)
—
233
233
Effect of measuring changes in estimates at current rates and adjusting
the CSM at rates on initial recognition
—
(10)
(10)
—
3
3
Total net finance income/(expense) from insurance contracts
(8,042)
(258)
(8,300)
16,036
156
16,192
Represented by:
Amounts recognised in profit or loss
(7,551)
(258)
(7,809)
13,643
156
13,799
Amounts recognised in OCI
(491)
—
(491)
2,393
—
2,393
Total net investment results
114
(44)
70
124
(25)
99
Represented by:
Amounts recognised in profit or loss
112
(44)
68
123
(25)
98
Amounts recognised in OCI
2
—
2
1
—
1
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2  Total Group ‘Net income/(expense) from assets and liabilities of insurance business, including related derivatives, measured at fair value through profit
or loss’ of $7,886m gain (2022: $13,831m loss) includes returns on assets and liabilities supporting insurance policies of $7,627m (2022: $13,949m
loss) and on shareholder assets of $259m (2022: $118m gain). Investment returns of $7,877m (2022: $13,701m loss) include gains of $7,627m (2022:
$13,949m loss) on underlying assets supporting insurance liabilities reported in ‘Net income/(expense) from assets and liabilities of insurance
businesses, including related derivatives, measured at fair value through profit or loss’, $257m gains (2022: $248m gain) reported in ‘Net interest
income’ and $7m loss (2022: nil) reported in ‘Other operating income’. 
3  ‘Amounts recognised in OCI’ gross of tax for the year ended 31 December 2023 included fair value gains of $497m (2022: $2,396m loss) and
impairment of $4m (2022: $4m impairment reversals).
Reconciliation of amounts included in other comprehensive income for financial assets measured at fair value through other comprehensive
income – assets supporting contracts measured under the modified retrospective approach
2023
2022
$m
$m
Balance at 1 Jan
(973)
622
Net change in fair value
451
(2,099)
Net amount reclassified to profit or loss
(6)
(2)
Related income tax
(115)
543
Foreign exchange and other
(27)
(37)
Balance at 31 Dec
(670)
(973)
Notes on the financial statements
384
HSBC Holdings plc
Movements in carrying amounts of insurance contracts – analysis by remaining coverage and incurred claims
Year ended 31 Dec 2023
Life direct participating and investment DPF
contracts
Life other contracts
Liabilities for remaining
coverage:
Liabilities for remaining
coverage:
Excluding
loss
component
Loss
component
Incurred
claims
Total
Excluding
loss
component
Loss
component
Incurred
claims
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(5)
—
—
(5)
(187)
21
35
(131)
(136)
Opening liabilities
104,676
114
355
105,145
3,359
109
203
3,671
108,816
Net opening balance at 1 Jan 2023
104,671
114
355
105,140
3,172
130
238
3,540
108,680
Changes in the statement of profit or
loss and other comprehensive income
Insurance revenue
Contracts under the fair value approach
(508)
—
—
(508)
(196)
—
—
(196)
(704)
Contracts under the modified
retrospective approach
(148)
—
—
(148)
(22)
—
—
(22)
(170)
Other contracts2
(1,079)
—
—
(1,079)
(306)
—
—
(306)
(1,385)
Total insurance revenue
(1,735)
—
—
(1,735)
(524)
—
—
(524)
(2,259)
Insurance service expenses
Incurred claims and other insurance
service expenses
—
(6)
621
615
—
(24)
316
292
907
Amortisation of insurance acquisition
cash flows
109
—
—
109
54
—
—
54
163
Losses and reversal of losses on
onerous contracts
—
32
—
32
—
77
—
77
109
Adjustments to liabilities for incurred
claims
—
—
1
1
—
—
1
1
2
Total insurance service expenses
109
26
622
757
54
53
317
424
1,181
Investment components
(8,104)
—
8,104
—
(818)
—
818
—
—
Insurance service result
(9,730)
26
8,726
(978)
(1,288)
53
1,135
(100)
(1,078)
Net finance (income)/expense from
insurance contracts3
8,042
—
—
8,042
254
3
1
258
8,300
Other movements recognised in the
statement of profit or loss
513
(5)
(214)
294
(8)
4
(13)
(17)
277
Effect of movements in exchange rates
942
1
6
949
25
(2)
8
31
980
Total changes in the statement of
profit or loss and other
comprehensive income
(233)
22
8,518
8,307
(1,017)
58
1,131
172
8,479
Cash flows
Premiums received
12,616
—
—
12,616
1,256
—
—
1,256
13,872
Claims and other insurance service
expenses paid, including investment
components, and other cash flows
(15)
—
(8,502)
(8,517)
1
—
(1,112)
(1,111)
(9,628)
Insurance acquisition cash flows
(522)
—
—
(522)
(282)
—
—
(282)
(804)
Total cash flows
12,079
—
(8,502)
3,577
975
—
(1,112)
(137)
3,440
Other movements
14
(14)
—
—
(9)
(13)
22
—
—
Net closing balance at 31 Dec 2023
116,531
122
371
117,024
3,121
175
279
3,575
120,599
Closing assets
(15)
1
1
(13)
(279)
(16)
56
(239)
(252)
Closing liabilities
116,546
121
370
117,037
3,400
191
223
3,814
120,851
Net closing balance at 31 Dec 2023
116,531
122
371
117,024
3,121
175
279
3,575
120,599
HSBC Holdings plc
385
Movements in carrying amounts of insurance contracts – analysis by remaining coverage and incurred claims (continued)
Year ended 31 Dec 20221
Life direct participating and investment DPF
contracts
Life other contracts
Liabilities for remaining
coverage:
Liabilities for remaining
coverage:
Excluding
loss
component
Loss
component
Incurred
claims
Total
Excluding
loss
component
Loss
component
Incurred
claims
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
—
—
—
—
(159)
7
36
(116)
(116)
Opening liabilities
114,952
93
226
115,271
3,825
67
144
4,036
119,307
Net opening balance at 1 Jan 2022
114,952
93
226
115,271
3,666
74
180
3,920
119,191
Changes in the statement of profit or loss
and other comprehensive income
Insurance revenue
Contracts under the fair value approach
(571)
—
—
(571)
(234)
—
—
(234)
(805)
Contracts under the modified retrospective
approach
(147)
—
—
(147)
(24)
—
—
(24)
(171)
Other contracts2
(783)
—
—
(783)
(218)
—
—
(218)
(1,001)
Total insurance revenue
(1,501)
—
—
(1,501)
(476)
—
—
(476)
(1,977)
Insurance service expenses
Incurred claims and other insurance service
expenses
—
5
568
573
—
(6)
286
280
853
Amortisation of insurance acquisition cash
flows
102
—
—
102
30
—
—
30
132
Losses and reversal of losses on onerous
contracts
—
84
—
84
—
86
—
86
170
Adjustments to liabilities for incurred claims
—
—
2
2
—
—
11
11
13
Total insurance service expenses
102
89
570
761
30
80
297
407
1,168
Investment components
(5,487)
—
5,487
—
(549)
—
549
—
—
Insurance service result
(6,886)
89
6,057
(740)
(995)
80
846
(69)
(809)
Net finance (income)/expense from
insurance contracts3
(16,038)
—
2
(16,036)
(154)
2
(4)
(156)
(16,192)
Effect of movements in exchange rates
(2,159)
(4)
(11)
(2,174)
(88)
(2)
(3)
(93)
(2,267)
Total changes in the statement of profit or
loss and other comprehensive income
(25,083)
85
6,048
(18,950)
(1,237)
80
839
(318)
(19,268)
Cash flows
Premiums received
12,740
—
—
12,740
882
—
—
882
13,622
Claims and other insurance service
expenses paid, including investment
components, and other cash flows
—
—
(5,783)
(5,783)
—
—
(880)
(880)
(6,663)
Insurance acquisition cash flows
(423)
—
—
(423)
(162)
—
—
(162)
(585)
Total cash flows
12,317
—
(5,783)
6,534
720
—
(880)
(160)
6,374
Acquisition of subsidiaries and other
movements
2,485
(64)
(136)
2,285
23
(24)
99
98
2,383
Net closing balance at 31 Dec 2022
104,671
114
355
105,140
3,172
130
238
3,540
108,680
Closing assets
(5)
—
—
(5)
(187)
21
35
(131)
(136)
Closing liabilities
104,676
114
355
105,145
3,359
109
203
3,671
108,816
Net closing balance at 31 Dec 2022
104,671
114
355
105,140
3,172
130
238
3,540
108,680
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2  ‘Other contracts’ are those contracts measured by applying IFRS 17 from inception of the contracts. These include contracts measured under the full
retrospective approach at transition and contracts incepted after transition and excludes reinsurance contracts.
3  ‘Net finance (income)/expense from insurance contracts’ expense of $8,300m (2022: $16,192m income) comprises expense of $7,809m (2022:
$13,799m income) recognised in the statement of profit or loss and expense of $491m (2022: $2,393m income) recognised in the statement of other
comprehensive income.
Notes on the financial statements
386
HSBC Holdings plc
Movements in carrying amounts of insurance contracts – analysis by measurement component
Year ended 31 Dec 2023
Life direct participating and investment DPF contracts
Life other contracts
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Contracts
under the
fair value
approach
Contracts
under the
modified
retros-
pective
approach
Other
contracts2
Total
Contracts
under the
fair value
approach
Contracts
under the
modified
retros-
pective
approach
Other
contracts2
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(18)
3
—
10
(5)
(308)
86
—
91
(131)
(136)
Opening liabilities
96,174
4,364
792
3,815
105,145
3,162
325
18
166
3,671
108,816
Net opening balance at
1 Jan 2023
96,156
4,367
792
3,825
105,140
2,854
411
18
257
3,540
108,680
Changes in the
statement of profit or
loss and other
comprehensive income
Changes that relate to
current services
Contractual service
margin recognised for
services provided
—
(188)
(70)
(717)
(975)
—
(69)
(6)
(76)
(151)
(1,126)
Change in risk adjustment
for non-financial risk
expired
(21)
—
—
—
(21)
(15)
—
—
—
(15)
(36)
Experience adjustments
21
—
—
—
21
(12)
—
—
—
(12)
9
Changes that relate to
future services
Contracts initially
recognised in the year
(1,606)
—
—
1,619
13
(176)
—
—
207
31
44
Changes in estimates that
adjust the contractual
service margin
(771)
368
(33)
436
—
21
26
6
(53)
—
—
Changes in estimates that
result in losses and
reversal of losses on
onerous contracts
19
—
—
—
19
46
—
—
—
46
65
Changes that relate to
past services
Adjustments to liabilities
for incurred claims
1
—
—
—
1
1
—
—
—
1
2
Other movements
recognised in insurance
service result
(36)
—
—
—
(36)
—
—
—
—
—
(36)
Insurance service result
(2,393)
180
(103)
1,338
(978)
(135)
(43)
—
78
(100)
(1,078)
Net finance (income)/
expense from insurance
contracts3
8,042
—
—
—
8,042
235
11
—
12
258
8,300
Other movements
recognised in the
statement of profit or loss
145
133
(1)
17
294
(43)
6
—
20
(17)
277
Effect of movements in
exchange rates
883
2
27
37
949
—
12
1
18
31
980
Total changes in the
statement of profit or
loss and other
comprehensive income
6,677
315
(77)
1,392
8,307
57
(14)
1
128
172
8,479
Cash flows
Premiums received
12,616
—
—
—
12,616
1,256
—
—
—
1,256
13,872
Claims, other insurance
service expenses paid
(including investment
components) and other
cash flows
(8,517)
—
—
—
(8,517)
(1,111)
—
—
—
(1,111)
(9,628)
Insurance acquisition cash
flows
(522)
—
—
—
(522)
(282)
—
—
—
(282)
(804)
Total cash flows
3,577
—
—
—
3,577
(137)
—
—
—
(137)
3,440
Net closing balance at
31 Dec 2023
106,410
4,682
715
5,217
117,024
2,774
397
19
385
3,575
120,599
Closing assets
(30)
3
—
14
(13)
(339)
36
—
64
(239)
(252)
Closing liabilities
106,440
4,679
715
5,203
117,037
3,113
361
19
321
3,814
120,851
Net closing balance at
31 Dec 2023
106,410
4,682
715
5,217
117,024
2,774
397
19
385
3,575
120,599
HSBC Holdings plc
387
Movements in carrying amounts of insurance contracts – analysis by measurement component (continued)
Year ended 31 Dec 20221
Life direct participating and investment DPF contracts
Life other contracts
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Contracts
under the
fair value
approach
Contracts
under the
modified
retros-
pective
approach
Other
contracts2
Total
Contracts
under the
fair value
approach
Contracts
under the
modified
retros-
pective
approach
Other
contracts2
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
—
—
—
—
—
(236)
57
—
63
(116)
(116)
Opening liabilities
105,861
5,823
704
2,883
115,271
3,532
331
26
147
4,036
119,307
Net opening balance at 1 Jan
2022
105,861
5,823
704
2,883
115,271
3,296
388
26
210
3,920
119,191
Changes in the statement of
profit or loss and other
comprehensive income
Changes that relate to current
services
Contractual service margin
recognised for services
provided
—
(297)
(69)
(415)
(781)
—
(69)
(6)
(76)
(151)
(932)
Change in risk adjustment for
non-financial risk expired
(17)
—
—
—
(17)
(17)
—
—
—
(17)
(34)
Experience adjustments
45
—
—
—
45
2
—
—
—
2
47
Changes that relate to future
services
Contracts initially recognised
in the year
(1,092)
—
—
1,101
9
(110)
—
—
117
7
16
Changes in estimates that
adjust contractual service
margin
820
(1,349)
208
321
—
(7)
23
—
(16)
—
—
Changes in estimates that
result in losses and reversal of
losses on onerous contracts
75
—
—
—
75
79
—
—
—
79
154
Changes that relate to past
services
Adjustments to liabilities for
incurred claims
2
—
—
—
2
11
—
—
—
11
13
Other movements recognised
in insurance service result
(73)
—
—
—
(73)
—
—
—
—
—
(73)
Insurance service result
(240)
(1,646)
139
1,007
(740)
(42)
(46)
(6)
25
(69)
(809)
Net finance (income)/expense
from insurance contracts3
(16,025)
(10)
—
(1)
(16,036)
(169)
7
—
6
(156)
(16,192)
Effect of movements in
exchange rates
(2,082)
(16)
(51)
(25)
(2,174)
(74)
(17)
(2)
—
(93)
(2,267)
Total changes in the
statement of profit or loss and
other comprehensive income
(18,347)
(1,672)
88
981
(18,950)
(285)
(56)
(8)
31
(318)
(19,268)
Cash flows
Premiums received
12,740
—
—
—
12,740
882
—
—
—
882
13,622
Claims, other insurance
service expenses paid
(including investment
components) and other cash
flows
(5,783)
—
—
—
(5,783)
(880)
—
—
—
(880)
(6,663)
Insurance acquisition cash
flows
(423)
—
—
—
(423)
(162)
—
—
—
(162)
(585)
Total cash flows
6,534
—
—
—
6,534
(160)
—
—
—
(160)
6,374
Acquisition of subsidiaries and
other movements
2,108
216
—
(39)
2,285
3
79
—
16
98
2,383
Net closing balance at
31 Dec 2022
96,156
4,367
792
3,825
105,140
2,854
411
18
257
3,540
108,680
Closing assets
(18)
3
—
10
(5)
(308)
86
—
91
(131)
(136)
Closing liabilities
96,174
4,364
792
3,815
105,145
3,162
325
18
166
3,671
108,816
Net closing balance at
31 Dec 2022
96,156
4,367
792
3,825
105,140
2,854
411
18
257
3,540
108,680
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2  ‘Other contracts' are those contracts measured by applying IFRS 17 from inception of the contracts. These include contracts measured under the full
retrospective approach at transition and contracts incepted after transition and excludes reinsurance contracts.
3  ‘Net finance (income)/expense from insurance contracts’ expense of $8,300m (2022: $16,192m income) comprises expense of $7,809m (2022:
$13,799m income) recognised in the statement of profit or loss and expense of $491m (2022: $2,393m income) recognised in the statement of other
comprehensive income.
Notes on the financial statements
388
HSBC Holdings plc
Effect of contracts initially recognised in the year
Year ended 31 Dec 2023
Year ended 31 Dec 20221
Profitable
contracts
issued
Onerous
contracts
issued
Total
Profitable
contracts
issued
Onerous
contracts
issued
Total
$m
$m
$m
$m
$m
$m
Life direct participating and investment DPF contracts
Estimates of present value of cash outflows
12,418
215
12,633
9,714
123
9,837
–  insurance acquisition cash flows
602
21
623
401
16
417
–  claims and other insurance service expenses payable
11,816
194
12,010
9,313
107
9,420
Estimates of present value of cash inflows
(14,074)
(204)
(14,278)
(10,844)
(115)
(10,959)
Risk adjustment for non-financial risk
37
2
39
29
1
30
Contractual service margin
1,619
—
1,619
1,101
—
1,101
Losses recognised on initial recognition
—
(13)
(13)
—
(9)
(9)
Life other contracts
Estimates of present value of cash outflows
1,116
464
1,580
640
111
751
–  insurance acquisition cash flows
106
50
156
57
9
66
–  claims and other insurance service expenses payable
1,010
414
1,424
583
102
685
Estimates of present value of cash inflows
(1,350)
(438)
(1,788)
(778)
(105)
(883)
Risk adjustment for non-financial risk
27
5
32
21
1
22
Contractual service margin
207
—
207
117
—
117
Losses recognised on initial recognition
—
(31)
(31)
—
(7)
(7)
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Present value of expected future cash flows of insurance contract liabilities and contractual service margin
Less than
1 year
1–2
years
2–3
years
3–4
years
4–5
years
5–10
years
10–20
years
Over 20
years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Insurance liability future cash flows
Life direct participating and investment DPF contracts
(2,620)
(545)
2,321
2,419
3,344
11,695
23,351
65,897
105,862
Life other contracts
1,276
362
(347)
4
(45)
36
102
1,628
3,016
Insurance liability future cash flows at 31 Dec 2023
(1,344)
(183)
1,974
2,423
3,299
11,731
23,453
67,525
108,878
Remaining contractual service margin
Life direct participating and investment DPF contracts
917
848
783
722
666
2,597
2,653
1,428
10,614
Life other contracts
172
113
84
74
61
141
115
41
801
Remaining contractual service margin at 31 Dec 2023
1,089
961
867
796
727
2,738
2,768
1,469
11,415
Insurance liability future cash flows
Life direct participating and investment DPF contracts
(5,049)
(1,891)
180
1,417
1,685
9,585
30,108
59,762
95,797
Life other contracts
695
770
395
(13)
38
172
182
859
3,098
Insurance liability future cash flows at 31 Dec 20221
(4,354)
(1,121)
575
1,404
1,723
9,757
30,290
60,621
98,895
Remaining contractual service margin
Life direct participating and investment DPF contracts
757
689
638
590
547
2,177
2,293
1,293
8,984
Life other contracts
194
64
56
48
42
134
99
49
686
Remaining contractual service margin at 31 Dec 20221
951
753
694
638
589
2,311
2,392
1,342
9,670
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Discount rates
The discount rates applied to expected future cash flows are determined through a bottom-up approach as set out in Note 1.2(j) ‘Summary of
material accounting policies – Insurance contracts’ on page 378. The blended average of discount rates used within our most material
manufacturing entities are as follows:
HSBC Life (International) Ltd
Hang Seng Insurance Co Ltd
HSBC Assurances
Vie (France)
HK$
US$
HK$
US$
€
At 31 Dec 2023
10-year discount rate (%)
4.02
4.47
4.16
4.62
2.96
20-year discount rate (%)
4.21
4.91
4.34
5.06
2.97
At 31 Dec 2022
10-year discount rate (%)
4.56
4.59
4.70
4.80
3.66
20-year discount rate (%)
4.63
4.96
4.76
5.17
3.33
HSBC Holdings plc
389
5
Employee compensation and benefits
2023
2022
2021
$m
$m
$m
Employee compensation and benefits1
18,220
18,003
18,742
Capitalised wages and salaries2
1,403
1,285
870
Gross employee compensation and benefits for the year ended 31 Dec
19,623
19,288
19,612
Consists of:
Wages and salaries
17,359
16,970
17,072
Social security costs
1,507
1,403
1,503
Post-employment benefits
757
915
1,037
Year ended 31 Dec
19,623
19,288
19,612
1  In 2023 and 2022, employee compensation and benefits are presented in the income statement net of software capitalisation costs and costs included
in the insurance contract fulfilment cash flow liabilities under IFRS 17. In 2021, employee compensation and benefits are presented net of software
capitalisation costs in the income statement.
2  Comprises $1,043m (2022: $922m; 2021: $870m) software capitalisation costs and $360m (2022: $363m; 2021: n/a) costs included in the insurance
contract fulfilment cash flow liabilities under IFRS 17.
Average number of persons employed by HSBC during the year by global business1
2023
2022
2021
Wealth and Personal Banking
132,336
135,676
138,026
Commercial Banking
46,826
48,004
44,992
Global Banking and Markets
48,043
48,597
48,179
Corporate Centre
347
365
359
Year ended 31 Dec
227,552
232,642
231,556
1  Average number of persons employed represents the number of persons with contracts of service with the Group.
Average number of persons employed by HSBC during the year by legal entity1
2023
2022
2021
HSBC UK Bank plc
20,415
20,501
21,447
HSBC Bank plc
14,809
15,405
16,823
The Hongkong and Shanghai Banking Corporation Limited
54,321
54,792
55,253
HSBC Bank Middle East Limited
3,316
3,338
3,429
HSBC North America Holdings Inc.
6,046
6,749
8,197
HSBC Bank Canada
4,354
4,241
4,369
Grupo Financiero HSBC, S.A. de C.V.
14,412
14,484
14,529
Other trading entities2
9,247
10,026
10,442
Holding companies, shared service centres and intra-Group eliminations
100,632
103,106
97,067
Year ended 31 Dec
227,552
232,642
231,556
1  Average number of persons employed represents the number of persons with contracts of service with the Group.
2  Other trading entities includes entities located in Oman, Türkiye, Egypt and Saudi Arabia.
Reconciliation of total incentive awards granted to income statement charge
2023
2022
2021
$m
$m
$m
Total incentive awards approved for the current year
3,774
3,359
3,495
Less: deferred bonuses awarded, expected to be recognised in future periods
(353)
(343)
(379)
Total incentives awarded and recognised in the current year
3,421
3,016
3,116
Add: current year charges for deferred bonuses from previous years
375
239
270
Other
(56)
(22)
4
Income statement charge for incentive awards
3,740
3,233
3,390
Share-based payments
‘Wages and salaries’ includes the effect of share-based payments arrangements, of which $482m was equity settled (2022: $400m;
2021: $467m), as follows:
2023
2022
2021
$m
$m
$m
Conditional share awards
499
402
479
Savings-related and other share award option plans
23
22
27
Year ended 31 Dec
522
424
506
Notes on the financial statements
390
HSBC Holdings plc
HSBC share awards
Award
Policy
Deferred share awards
(including annual
incentive awards, long-
term incentive (‘LTI’)
awards delivered in
shares)
An assessment of performance over the relevant period ending on 31 December is used to determine the amount
of the award to be granted.
–Deferred awards generally require employees to remain in employment over the vesting period and are generally not
subject to performance conditions after the grant date. An exception to these are LTI awards, which are subject to
performance conditions.
–Deferred share awards generally vest over a period of three, four, five or seven years.
–Vested shares may be subject to a retention requirement post-vesting.
–Awards are generally subject to malus and clawback provisions.
International Employee
Share Purchase Plan
(‘ShareMatch’)
The plan was first introduced in Hong Kong in 2013 and now includes employees based in 30 jurisdictions.
–Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency.
–Matching awards are added at a ratio of one free share for every three purchased. In mainland China, matching
awards are settled in cash.
–Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum
period of two years and nine months.
Movement on HSBC share awards
2023
2022
Number
Number
(000s)
(000s)
Conditional share awards outstanding at 1 Jan
126,246
109,364
Additions during the year
72,289
90,190
Released in the year
(70,054)
(67,718)
Forfeited in the year
(3,458)
(5,590)
Conditional share awards outstanding at 31 Dec
125,023
126,246
Weighted average fair value of awards granted ($)
5.84
5.60
HSBC share option plans
Main plans
Policy
Savings-related share
option plans (‘Sharesave’)
–From 2014, employees eligible for the UK plan could save up to £500 per month with the option to use the savings to
acquire shares.
–These are generally exercisable within six months following either the third or fifth anniversary of the
commencement of a three-year or five-year contract, respectively.
–The exercise price is set at a 20% (2022: 20%) discount to the market value immediately preceding the date of
invitation.
Calculation of fair values
The fair values of share options are calculated using a Black-Scholes model. The fair value of a share award is based on the share price at the
date of the grant.
Movement on HSBC share option plans
Savings-related
share option plans
Number
WAEP1
(000s)
£
Outstanding at 1 Jan 2023
115,651
2.89
Granted during the year2
23,382
4.70
Exercised during the year3
(49,007)
2.73
Expired during the year
(3,832)
3.78
Forfeited during the year
(2,200)
2.88
Outstanding at 31 Dec 2023
83,994
3.42
–  of which exercisable
7,165
2.70
Weighted average remaining contractual life (years)
2.41
Outstanding at 1 Jan 2022
123,197
2.85
Granted during the year2
8,928
4.24
Exercised during the year3
(3,483)
3.49
Expired during the year
(9,047)
3.55
Forfeited during the year
(3,944)
2.79
Outstanding at 31 Dec 2022
115,651
2.89
–  of which exercisable
4,029
4.11
Weighted average remaining contractual life (years)
2.26
1Weighted average exercise price.
2The weighted average fair value of options granted during the year was $1.92 (2022: $1.45).
3The weighted average share price at the date the options were exercised was $7.39 (2022: $6.22).
HSBC Holdings plc
391
Post-employment benefit plans
The Group operates pension plans throughout the world for its employees. ‘Pension risk management processes’ on page 242 contains details
of the policies and practices associated with these pension plans, some of which are defined benefit plans. The largest defined benefit plan is
the HBUK section of the HSBC Bank (UK) Pension Scheme (‘the principal plan’), created as a result of the HSBC Bank (UK) Pension Scheme
being fully sectionalised in 2018 to meet the requirements of the Banking Reform Act. For further details of how the trustee of the HSBC Bank
(UK) Pension Scheme manages climate risk, see ’Managing climate risk’ on page 65.
HSBC holds on its balance sheet the net surplus or deficit, which is the difference between the fair value of plan assets and the discounted
value of scheme liabilities at the balance sheet date for each plan. Surpluses are only recognised to the extent that they are recoverable through
reduced contributions in the future or through potential future refunds from the schemes. In assessing whether a surplus is recoverable, HSBC
has considered its current right to obtain a future refund or a reduction in future contributions together with the rights of third parties such as
trustees.
The principal plan
The principal plan has a defined benefit section and a defined contribution section. The defined benefit section was closed to future benefit
accrual in 2015, with defined benefits earned by employees at that date continuing to be linked to their salary while they remain employed by
HSBC. The plan is overseen by an independent corporate trustee, who has a fiduciary responsibility for the operation of the plan. Its assets are
held separately from the assets of the Group.
The investment strategy of the plan is to hold the majority of assets in bonds, with the remainder in a diverse range of investments. It also
includes some interest rate swaps to reduce interest rate risk, inflation swaps to reduce inflation risk and longevity swaps to reduce the impact
of longer life expectancy.
The principal plan is subject to the statutory funding objective requirements of the UK Pensions Act 2004, which requires that it be funded to at
least the level of technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built up under the plan).
Where a funding valuation is carried out and identifies a deficit, the employer and trustee are required to agree to a deficit recovery plan.
The latest funding valuation of the plan at 31 December 2019 was carried out by Colin G Singer of Willis Towers Watson Limited, who is a
Fellow of the UK Institute and Faculty of Actuaries, using the projected unit credit method. At that date, the market value of the plan’s assets
was £31.1bn ($41.1bn) and this exceeded the value placed on its liabilities on an ongoing basis by £2.5bn ($3.3bn), giving a funding level of
109%. These figures include defined contribution assets amounting to £2.4bn ($3.2bn). The main differences between the assumptions used
for assessing the defined benefit liabilities for this funding valuation and those used for IAS 19 are that an element of prudence is contained in
the funding valuation assumptions for discount rate, inflation rate and life expectancy. The funding valuation is used to judge the amount of cash
contributions the Group needs to put into the pension scheme. It will always be different to the IAS 19 accounting surplus, which is an
accounting rule concerning employee benefits and shown on the balance sheet of our financial statements. The next funding valuation, with an
effective date of 31 December 2022, is currently underway and will be concluded no later than the regulatory deadline of 31 March 2024. The
plan is estimated to remain in a comfortable surplus relative to the funding liabilities as at the end of 2022, based on assumptions consistent
with those used to determine the funding liabilities for the 2019 valuation.
The actuary also assessed the value of the liabilities if the plan were to have been stopped and an insurance company asked to secure all future
pension payments. This is generally larger than the amount needed on the ongoing basis described above because an insurance company would
use more prudent assumption, which would allow for reserves and include an explicit allowance for the future administrative expenses of the
plan. Under this approach, the amount of assets needed was estimated to be £33bn ($44bn) at 31 December 2019.
The trust deed gives the ability for HSBC UK to take a refund of surplus assets after the plan has been run down such that no further
beneficiaries remain. In assessing whether a surplus is recoverable, HSBC UK has considered its right to obtain a future refund together with
the rights of third parties such as trustees. On this basis, any net surplus in the HBUK section of the plan is recognised in HSBC UK’s financial
statements and the Group’s financial statements.
Income statement charge/(credit)
2023
2022
2021
$m
$m
$m
Defined benefit pension plans
(151)
42
243
Defined contribution pension plans
874
845
767
Pension plans
723
887
1,010
Defined benefit and contribution healthcare plans
34
28
27
Year ended 31 Dec
757
915
1,037
Net assets/(liabilities) recognised on the balance sheet in respect of defined benefit plans
Fair value of
plan assets
Present value of
defined benefit obligations
Effect of limit on plan
surpluses
Total
$m
$m
$m
$m
Defined benefit pension plans
33,897
(27,011)
—
6,886
Defined benefit healthcare plans
107
(403)
—
(296)
At 31 Dec 2023
34,004
(27,414)
—
6,590
Total employee benefit liabilities (within Note 27 ‘Accruals, deferred
income and other liabilities’)
(1,160)
Total employee benefit assets (within Note 22 ‘Prepayments,
accrued income and other assets’)
7,750
Defined benefit pension plans
32,171
(25,693)
—
6,478
Defined benefit healthcare plans
96
(388)
—
(292)
At 31 Dec 2022
32,267
(26,081)
—
6,186
Total employee benefit liabilities (within Note 27 ‘Accruals, deferred
income and other liabilities’)
(1,096)
Total employee benefit assets (within Note 22 ‘Prepayments,
accrued income and other assets’)
7,282
Notes on the financial statements
392
HSBC Holdings plc
HSBC Holdings
Employee compensation and benefit expense in respect of HSBC Holdings’ employees in 2023 amounted to $15m (2022: $41m). The average
number of persons employed during 2023 was 29 (2022: 42). A small number of employees are members of defined benefit pension plans.
These employees are members of the HSBC Bank (UK) Pension Scheme. HSBC Holdings pays contributions to such plan for its own employees
in accordance with the schedules of contributions determined by the trustees of the plan and recognises these contributions as an expense as
they fall due.
Defined benefit pension plans
Net asset/(liability) under defined benefit pension plans
Fair value of plan
assets
Present value of
defined benefit
obligations
Effect of the asset
ceiling
Net defined benefit
asset/(liability)
Principal1
plan
Other
plans
Principal1
plan
Other
plans
Principal1
plan
Other
plans
Principal1
plan
Other
plans
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
25,121
7,050
(18,787)
(6,906)
—
—
6,334
144
Service cost
—
—
(10)
(150)
—
—
(10)
(150)
–  current service cost
—
—
(14)
(135)
—
—
(14)
(135)
–  past service cost and gains/(losses) from settlements
—
4
(15)
—
—
4
(15)
Net interest income/(cost) on the net defined benefit asset/
(liability)
1,247
298
(925)
(286)
—
—
322
12
Remeasurement effects recognised in other
comprehensive income
(225)
110
7
(300)
—
—
(218)
(190)
–  return on plan assets (excluding interest income)
(225)
110
—
—
—
—
(225)
110
–  actuarial gains/(losses) financial assumptions
—
—
(123)
(327)
—
—
(123)
(327)
–  actuarial gains/(losses) demographic assumptions
—
—
357
17
—
—
357
17
–  actuarial gains/(losses) experience adjustments
—
—
(227)
10
—
—
(227)
10
–  other changes
—
—
—
—
—
—
—
—
Exchange differences
1,472
228
(1,098)
(190)
—
—
374
38
Benefits paid
(1,063)
(548)
1,063
629
—
—
—
81
Other movements2
38
169
(32)
(26)
—
—
6
143
At 31 Dec 2023
26,590
7,307
(19,782)
(7,229)
—
—
6,808
78
At 1 Jan 2022
41,384
10,047
(32,255)
(10,022)
—
(23)
9,129
2
Service cost
—
—
(30)
(170)
—
—
(30)
(170)
–  current service cost
—
—
(12)
(161)
—
—
(12)
(161)
–  past service cost and losses from settlements
—
—
(18)
(9)
—
—
(18)
(9)
Net interest income/(cost) on the net defined benefit asset/
(liability)
703
198
(546)
(202)
—
(1)
157
(5)
Remeasurement effects recognised in other
comprehensive income
(11,505)
(2,181)
9,532
2,360
—
(3)
(1,973)
176
–  return on plan assets (excluding interest income)
(11,505)
(2,181)
—
—
—
—
(11,505)
(2,181)
–  actuarial gains/(losses) financial assumptions
—
—
10,543
2,383
—
—
10,543
2,383
–  actuarial gains/(losses) demographic assumptions
—
—
(123)
24
—
—
(123)
24
–  actuarial gains/(losses) experience adjustments
—
—
(888)
(47)
—
—
(888)
(47)
–  other changes
—
—
—
—
—
(3)
—
(3)
Exchange differences
(4,288)
(180)
3,325
35
—
2
(963)
(143)
Benefits paid
(1,222)
(616)
1,222
686
—
—
—
70
Other movements2
49
(218)
(35)
407
—
25
14
214
At 31 Dec 2022
25,121
7,050
(18,787)
(6,906)
—
—
6,334
144
1For further details of the principal plan, see page 392.
2Other movements include contributions by HSBC, contributions by employees, administrative costs and taxes paid by plan.
HSBC expects to make $113m of contributions to defined benefit pension plans during 2024, consisting of $nil for the principal plan and $113m
for other plans. Benefits expected to be paid from the plans to retirees over each of the next five years, and in aggregate for the five years
thereafter, are as follows:
Benefits expected to be paid from plans
2024
2025
2026
2027
2028
2029-2033
$m
$m
$m
$m
$m
$m
The principal plan1,2
1,125
1,160
1,196
1,234
1,273
6,988
Other plans1
465
473
456
478
476
2,403
1The duration of the defined benefit obligation is 12.9 years for the principal plan under the disclosure assumptions adopted (2022: 13.2 years) and 10.3
years for all other plans combined (2022: 10.2 years).
2For further details of the principal plan, see page 392.
HSBC Holdings plc
393
Fair value of plan assets by asset classes
31 Dec 2023
31 Dec 2022
Value
Quoted
market price
in active
market
No quoted
market price
in active
market
Thereof
HSBC1
Value
Quoted
market price
in active
market
No quoted
market price
in active
market
Thereof
HSBC1
$m
$m
$m
$m
$m
$m
$m
$m
The principal plan2
Fair value of plan assets
26,590
15,006
11,584
547
25,121
13,915
11,206
510
–  equities3
83
—
83
—
112
—
112
—
–  bonds fixed income
5,262
4,739
523
—
5,285
4,822
463
—
–  bonds index-linked
10,300
10,300
—
—
9,479
9,479
—
—
–  derivatives
1,061
—
1,061
547
1,203
—
1,203
510
–  property
830
—
830
—
842
—
842
—
–  pooled investment vehicles
9,087
—
9,087
—
8,586
—
8,586
—
–  other
(33)
(33)
—
—
(386)
(386)
—
—
Other plans
Fair value of plan assets
7,307
5,361
1,946
39
7,050
5,848
1,202
37
–  equities
556
556
—
3
639
486
153
2
–  bonds fixed income
3,624
3,623
1
5
3,571
3,472
99
4
–  bonds index-linked
90
90
—
—
58
58
—
—
–  bonds other
447
415
32
—
1,357
1,007
350
—
–  derivatives
2
(1)
3
—
4
(1)
5
—
–  property
112
108
4
—
109
104
5
—
–  other
2,476
570
1,906
31
1,312
722
590
31
1The fair value of plan assets includes derivatives entered into with HSBC Bank plc as detailed in Note 37.
2For further details of the principal plan, see page 392.
3Includes $83m (2022: $112m) in relation to private equities.
Post-employment defined benefit plans’ principal actuarial financial assumptions
HSBC determines the discount rates to be applied to its obligations in consultation with the plans’ local actuaries, on the basis of current
average yields of high-quality (AA-rated or equivalent) debt instruments with maturities consistent with those of the defined benefit obligations.
Key actuarial assumptions for the principal plan1
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Rate of increase for pensions
Rate of pay increase
%
%
%
%
%
UK
At 31 Dec 2023
4.65
3.23
2.67
3.14
3.42
At 31 Dec 2022
4.93
3.39
2.84
3.27
3.34
1For further details of the principal plan, see page 392.
Mortality tables and average life expectancy at age 60 for the principal plan1
Mortality
table
Life expectancy at age 60 for
a male member currently:
Life expectancy at age 60 for
a female member currently:
Aged 60
Aged 40
Aged 60
Aged 40
UK
At 31 Dec 2023
SAPS S32
26.2
27.7
28.3
29.8
At 31 Dec 2022
SAPS S3
27.1
28.6
28.4
29.9
1For further details of the principal plan, see page 392.
2Self-administered pension scheme (‘SAPS’) S3 table, with different tables and multipliers adopted based on gender, pension amount and member
status, reflecting the Scheme’s actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation’s
CMI 2022 core projection model with an initial addition to improvement of 0.25% per annum, a long-term rate of improvement of 1.25% per annum, a
0% weighting to 2020 and 2021 mortality experience, and a 25% weighting to 2022 mortality experience reflecting updated long-term view on
mortality improvements post-pandemic.
The effect of changes in key assumptions on the principal plan1
Impact on HBUK section of the
HSBC Bank (UK) Pension Scheme obligation2
Financial impact of increase
Financial impact of decrease
2023
2022
2023
2022
$m
$m
$m
$m
Discount rate – increase/decrease of 0.25%
(599)
(582)
631
612
Inflation rate (RPI and CPI) – increase/decrease of 0.25%
500
466
(497)
(446)
Pension payments and deferred pensions – increase/decrease of 0.25%
622
551
(590)
(519)
Pay – increase/decrease of 0.25%
8
10
(6)
(10)
Change in mortality – increase/decrease of 1 year
613
470
(613)
(489)
1For further details of the principal plan, see page 392.
2  Sensitivities allow for HSBC UK’s convention of rounding pension assumptions during 2023 to the nearest 0.01% (2022: 0.01%).
Notes on the financial statements
394
HSBC Holdings plc
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely
to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit
method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet. The
methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the prior period.
Directors’ emoluments
Details of Directors’ emoluments, pensions and their interests are disclosed in the Directors’ remuneration report on page 315.
6
Auditor’s remuneration
2023
2022
2021
$m
$m
$m
Audit fees payable to PwC1
109.8
97.6
88.1
Other audit fees payable
2.2
1.6
2.0
Year ended 31 Dec
112.0
99.2
90.1
Fees payable by HSBC to PwC
2023
2022
2021
$m
$m
$m
Fees for HSBC Holdings’ statutory audit2
24.1
21.9
19.5
Fees for other services provided to HSBC
131.8
126.2
109.9
–  audit of HSBC’s subsidiaries
85.7
75.7
68.6
–  audit-related assurance services3
26.0
26.4
18.7
–  other assurance services4,5
20.1
24.1
22.6
Year ended 31 Dec
155.9
148.1
129.4
1Audit fees payable to PwC in 2023 included adjustments made to the prior year audit fee after finalisation of the 2022 financial statements.
2Fees payable to PwC for the statutory audit of the consolidated financial statements of HSBC and the separate financial statements of HSBC
Holdings. They include amounts payable for services relating to the consolidation returns of HSBC Holdings’ subsidiaries, which are clearly identifiable
as being in support of the Group audit opinion.
3Including services for assurance and other services that relate to statutory and regulatory filings, including interim reviews.
4Including permitted services relating to attestation reports on internal controls of a service organisation primarily prepared for and used by third-party
end users, including comfort letters.
5  Includes reviews of PRA regulatory reporting returns.
No fees were payable by HSBC to PwC as principal auditor for the following types of services: internal audit services and services related to
litigation, recruitment and remuneration.
Fees payable by HSBC’s associated pension schemes to PwC
2023
2022
2021
$000
$000
$000
Audit of HSBC’s associated pension schemes
297
480
382
Year ended 31 Dec
297
480
382
No fees were payable by HSBC’s associated pension schemes to PwC as principal auditor for the following types of services: internal audit
services, other assurance services, services related to corporate finance transactions, valuation and actuarial services, litigation, recruitment and
remuneration, and information technology.
In addition to the above, the estimated fees paid to PwC by third parties associated with HSBC amounted to $12.3m (2022: $13.1m;
2021: $6.3m). In these cases, HSBC was connected with the contracting party and may therefore have been involved in appointing PwC. These
fees arose from services such as auditing mutual funds managed by HSBC and reviewing the financial position of corporate concerns that
borrow from HSBC.
Fees payable for non-audit services for HSBC Holdings are not disclosed separately because such fees are disclosed on a consolidated basis for
the Group.
7
Tax
Tax expense
2023
2022
2021
$m
$m
$m
Current tax1
5,718
2,984
3,250
–  for this year
5,737
3,264
3,182
–  adjustments in respect of prior years
(19)
(280)
68
Deferred tax
71
(2,175)
963
–  origination and reversal of temporary differences
19
(2,278)
874
–  effect of changes in tax rates
17
(293)
132
–  adjustments in respect of prior years
35
396
(43)
Year ended 31 Dec2
5,789
809
4,213
1  Current tax included Hong Kong profits tax of $1,328m (2022: $604m; 2021: $813m). The Hong Kong tax rate applying to the profits of subsidiaries
assessable in Hong Kong was 16.5% (2022: 16.5%; 2021: 16.5%).
2  In addition to amounts recorded in the income statement, a tax credit of $41m (2022: credit of $145m) was recorded directly to equity.
HSBC Holdings plc
395
Tax reconciliation
The tax charged to the income statement differs from the tax charge that would apply if all profits had been taxed at the UK corporation tax rate
as follows:
2023
2022
2021
$m
%
$m
%
$m
%
Profit before tax
30,348
17,058
18,906
Tax expense
Taxation at UK corporation tax rate of 23.5% (2022: 19.0%, 2021: 19.0%)
7,132
23.5
3,241
19.0
3,592
19.0
Impact of differently taxed overseas profits in overseas locations
(612)
(2.0)
459
2.7
280
1.5
UK banking surcharge
350
1.2
283
1.7
332
1.8
Items increasing tax charge in 2023:
–  impairment of interest in associate
705
2.3
—
—
—
—
–  local taxes and overseas withholding taxes
419
1.4
346
2.0
360
1.9
–  impacts of hyperinflation
348
1.1
171
1.0
68
0.4
–  other permanent disallowables
227
0.7
363
2.1
414
2.2
–  bank levy
112
0.4
59
0.3
93
0.5
–  impact of changes in tax rates
17
0.1
(293)
(1.7)
132
0.7
–  adjustments in respect of prior period
16
0.1
116
0.7
25
0.1
–  tax impact of sale of French retail banking business
—
—
115
0.7
(434)
(2.3)
–  impact of differences between French tax basis and IFRSs
—
—
—
—
434
2.3
Items reducing tax charge in 2023:
–  non-taxable income and gains
(1,189)
(3.9)
(825)
(4.8)
(641)
(3.4)
–  effect of profits in associates and joint ventures
(571)
(1.9)
(504)
(3.1)
(414)
(2.2)
–  movements in provisions for uncertain tax positions
(472)
(1.6)
27
0.2
15
0.1
–  accounting gain on acquisition of SVB UK
(442)
(1.5)
—
—
—
—
–  deductions for AT1 coupon payments
(229)
(0.7)
(246)
(1.4)
(270)
(1.4)
–  movements in unrecognised deferred tax
(22)
(0.1)
(2,503)
(14.7)
227
1.1
Year ended 31 December
5,789
19.1
809
4.7
4,213
22.3
The Group’s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable tax rates for
2023 include Hong Kong (16.5%), the US (21%) and the UK (23.5%). If the Group’s profits were taxed at the statutory rates of the countries in
which the profits arose, then the tax rate for the year would have been 22.6% (2022: 23.3%).
The effective tax rate for the year of 19.1% was higher than in the previous year (2022: 4.7%). The effective tax rate for the year was increased
by 2.3% by the non-taxable impairment of the Group’s interest in BoCom, reduced by 1.6% by the release of provisions for uncertain tax
positions and reduced by 1.5% by the non-taxable accounting gain on the acquisition of SVB UK. The effective tax rate for 2022 was reduced by
14.7% as a result of the recognition of previously unrecognised losses in the UK of $2.2bn and France of $0.3bn, in light of improved forecast
profitability.
On 20 June 2023, legislation was substantively enacted in the UK to introduce the ‘Pillar Two’ global minimum tax model rules of the OECD’s
Inclusive Framework on Base Erosion and Profit Shifting (’BEPS’) and a UK qualified domestic minimum top-up tax, with effect from 1 January
2024. Under these rules, a top-up tax liability arises where the effective tax rate of the Group’s operations in a jurisdiction, calculated using
principles set out in the Pillar Two legislation, is below 15%. Any resulting tax is payable by HSBC Holdings plc, being the Group’s ultimate
parent, to HMRC. In response to the OECD’s Pillar Two global minimum tax rules, many national governments have announced their intention
to introduce domestic minimum tax rules that are closely aligned to the OECD’s Pillar Two model rules. Where such qualifying domestic
minimum tax rules are introduced, they may be expected to have the effect of increasing local tax liabilities to the 15% minimum rate,
eliminating the top-up tax liability payable in the UK by HSBC Holdings plc in such cases. Based on the Group’s forecasts, top-up tax liabilities
are expected to arise in approximately 10 jurisdictions as a result of low or 0% statutory tax rates, in particular in respect of the Group’s banking
operations in Bermuda and the Channel Islands. Additionally, the application of local tax laws in Hong Kong and mainland China, particularly with
regard to the non-taxation of dividend income and income on government bonds, has typically resulted in effective tax rates of below 15%. This
is expected to create future top-up tax liabilities in these jurisdictions, which have statutory tax rates of 16.5% and 25%, respectively. The
application of the Pillar Two global minimum tax rules and the introduction of new domestic minimum tax regimes are currently forecast to
increase the Group’s annual effective tax rate by around 0.5 and 1.0 percentage points.
Accounting for taxes involves some estimation because tax law is uncertain and its application requires a degree of judgement, which
authorities may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice where
appropriate. Exposures relating to legacy tax cases were reassessed during 2023, resulting in a credit of $472m to the income statement. We
do not expect significant liabilities to arise in excess of the amounts provided. HSBC only recognises current and deferred tax assets where
recovery is probable.
Notes on the financial statements
396
HSBC Holdings plc
Movement of deferred tax assets and liabilities
Loan
impairment
provisions
Unused tax
losses and
tax credits
Financial
assets at
FVOCI
Cash flow
hedges
Retirement
obligations
Other
Total
$m
$m
$m
$m
$m
$m
$m
Assets
1,062
4,397
850
1,271
—
3,048
10,628
Liabilities
—
—
—
—
(1,673)
(1,567)
(3,240)
At 1 Jan 2023
1,062
4,397
850
1,271
(1,673)
1,481
7,388
Income statement
(39)
102
541
1
(114)
(562)
(71)
Other comprehensive income
—
—
(598)
(974)
99
399
(1,074)
Foreign exchange and other adjustments
135
45
83
121
(126)
15
273
At 31 Dec 2023
1,158
4,544
876
419
(1,814)
1,333
6,516
Assets1
1,158
4,544
876
419
—
2,933
9,930
Liabilities1
—
—
—
—
(1,814)
(1,600)
(3,414)
Assets2
1,151
2,001
382
154
—
1,744
5,432
Liabilities2
—
—
—
—
(2,819)
(475)
(3,294)
At 1 Jan 2022
1,151
2,001
382
154
(2,819)
1,269
2,138
Income statement
7
2,425
(1,127)
1
217
652
2,175
Other comprehensive income
—
—
2,281
1,159
692
(1,260)
2,872
Foreign exchange and other adjustments
(96)
(29)
(686)
(43)
237
820
203
At 31 Dec 2022
1,062
4,397
850
1,271
(1,673)
1,481
7,388
Assets1
1,062
4,397
850
1,271
—
3,048
10,628
Liabilities1
—
—
—
—
(1,673)
(1,567)
(3,240)
1After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets of $7,754m (2022: $8,360m)
and deferred tax liabilities of $1,238m (2022: $972m).
2From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
In applying judgement in recognising deferred tax assets, management has assessed all relevant information, including future business profit
projections and the track record of meeting forecasts. Management’s assessment of the likely availability of future taxable profits against which
to recover deferred tax assets is based on the most recent financial forecasts approved by management, which cover a five-year period and are
extrapolated where necessary, and takes into consideration the reversal of existing taxable temporary differences and past business
performance. When forecasts are extrapolated beyond five years, a number of different scenarios are considered, reflecting different downward
risk adjustments, in order to assess the sensitivity of our recognition and measurement conclusions in the context of such longer-term
forecasts.
The Group’s net deferred tax asset of $6.5bn (2022: $7.4bn) included $3.3bn (2022: $4.0bn) of deferred tax assets relating to the UK, $3.1bn
(2022: $3.3bn) of deferred tax assets relating to the US and a net deferred asset of $0.9bn (2022: $1.0bn) in France.
The UK deferred tax asset of $3.3bn excluded a $1.9bn deferred tax liability arising on the UK pension scheme surplus, the reversal of which is
not taken into account when estimating future taxable profits. The UK deferred tax assets are supported by forecasts of taxable profit, also
taking into consideration the history of profitability in the relevant businesses. The majority of the deferred tax asset relates to tax attributes
which do not expire and are forecast to be recovered within four years and as such are less sensitive to changes in long-term profit forecasts.
The net US deferred tax asset of $3.1bn included $1.3bn related to US tax losses, of which $1.0bn expire in 10 to 15 years. Management
expects the US deferred tax asset to be substantially recovered within 14 years, with the majority recovered in the first nine years.
The net deferred tax asset in France of $0.9bn included $0.7bn related to tax losses, which are expected to be substantially recovered within 12
years.
Unrecognised deferred tax
The amount of gross temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance
sheet was $10.4bn (2022: $9.2bn). This amount included unused US state tax losses of $4.0bn (2022: $4.1bn) which are forecast to expire
before they are recovered and unused UK tax losses of $4.5bn (2022: $3.5bn), which arose prior to 1 April 2017 and can only be recovered
against future taxable profits of HSBC Holdings. No deferred tax was recognised on these losses due to the absence of convincing evidence
regarding the availability of sufficient future taxable profits against which to recover them. Deferred tax asset recognition is reassessed at each
balance sheet date based on the available evidence. Of the total amounts unrecognised, $5.1bn (2022: $3.6bn) had no expiry date, $0.5bn
(2022: $1.2bn) was scheduled to expire within 10 years and the remaining balance is expected to expire after 10 years.
Deferred tax is not recognised in respect of the Group’s investments in subsidiaries and branches where HSBC is able to control the timing of
remittance or other realisation and where remittance or realisation is not probable in the foreseeable future. The aggregate temporary
differences relating to unrecognised deferred tax liabilities arising on investments in subsidiaries and branches was $14.4bn (2022: $11.7bn) and
the corresponding unrecognised deferred tax liability was $0.7bn (2022: $0.7bn).
HSBC Holdings plc
397
8
Dividends
Dividends to shareholders of the parent company
2023
2022
2021
Per
share
Total
Per
share
Total
Per
share
Total
$
$m
$
$m
$
$m
Dividends paid on ordinary shares
In respect of previous year:
–  second interim dividend
0.23
4,589
0.18
3,576
0.15
3,059
In respect of current year:
–  first interim dividend
0.10
2,001
0.09
1,754
0.07
1,421
–  second interim dividend
0.10
1,956
—
—
—
—
–  third interim dividend
0.10
1,946
—
—
—
—
Total
0.53
10,492
0.27
5,330
0.22
4,480
Total dividends on preference shares classified as equity (paid quarterly)1
—
—
—
—
4.99
7
Total coupons on capital securities classified as equity
1,101
1,214
1,303
Dividends to shareholders
11,593
6,544
5,790
1  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.
Total coupons on capital securities classified as equity
2023
2022
2021
Total
Total
Total
First call date
Per security
$m
$m
$m
Perpetual subordinated contingent convertible securities1
$2,000m issued at 6.875%2
Jun 2021
$68.750
—
—
69
$2,250m issued at 6.375%
Sep 2024
$63.750
143
143
143
$2,450m issued at 6.375%
Mar 2025
$63.750
156
156
156
$3,000m issued at 6.000%
May 2027
$60.000
180
180
180
$2,350m issued at 6.250%3
Mar 2023
$62.500
52
147
147
$1,800m issued at 6.500%
Mar 2028
$65.000
117
117
117
$1,500m issued at 4.600%
Dec 2030
$46.000
69
69
69
$1,000m issued at 4.000%4
Mar 2026
$40.000
40
40
20
$1,000m issued at 4.700%5
Mar 2031
$47.000
47
47
24
$2,000m issued at 8.000%6
Mar 2028
$80.000
80
—
—
€1,500m issued at 5.250%7
Sep 2022
€52.500
—
76
93
€1,000m issued at 6.000%8
Sep 2023
€60.000
56
63
70
€1,250m issued at 4.750%
Jul 2029
€47.500
64
65
72
£1,000m issued at 5.875%
Sep 2026
£58.750
72
70
80
SGD1,000m issued at 4.700%9
Jun 2022
SGD47.000
—
14
35
SGD750m issued at 5.000%10
Sep 2023
SGD50.000
25
27
28
Total
1,101
1,214
1,303
1Discretionary coupons are paid semi-annually, based on the denominations of each security.
2This security was called by HSBC Holdings on 15 April 2021 and was redeemed and cancelled on 1 June 2021.
3This security was called by HSBC Holdings on 30 January 2023 and was redeemed and cancelled on 23 March 2023.
4This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six calendar months prior to the reset date of
9 September 2026.
5This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six calendar months prior to the reset date of
9 September 2031.
6This security was issued by HSBC Holdings on 7 March 2023. The first call period commences six calendar months prior to the reset date of
7 September 2028.
7This security was called by HSBC Holdings on 9 August 2022 and was redeemed and cancelled on 16 September 2022.
8This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 29 September 2023.
9This security was called by HSBC Holdings on 4 May 2022 and was redeemed and cancelled on 8 June 2022.
10This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 25 September 2023.
On 21 February 2024, the Directors approved a fourth interim dividend in respect of the financial year ended 31 December 2023 of $0.31 per
ordinary share, a distribution of approximately $5,913m. The fourth interim dividend for 2023 will be payable on 25 April 2024 to holders on the
Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 8 March 2024. No liability
was recorded in the financial statements in respect of the fourth interim dividend for 2023.
On 4 January 2024, HSBC paid a coupon on its €1,250m subordinated capital securities, representing a total distribution of €30m ($33m). No
liability was recorded in the balance sheet at 31 December 2023 in respect of this coupon payment.
Notes on the financial statements
398
HSBC Holdings plc
9
Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted
average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the
basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary
shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of
dilutive potential ordinary shares.
Basic and diluted earnings per share
2023
2022¹
2021
Profit
Number
of shares
Per
share
Profit
Number
of shares
Per
share
Profit
Number
of shares
Per
share
$m
(millions)
$
$m
(millions)
$
$m
(millions)
$
Basic2
22,432
19,478
1.15
14,346
19,849
0.72
12,607
20,197
0.62
Effect of dilutive potential
ordinary shares
122
137
105
Diluted2
22,432
19,600
1.14
14,346
19,986
0.72
12,607
20,302
0.62
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted).
The number of anti-dilutive employee share options excluded from the weighted average number of dilutive potential ordinary shares was
23 million (2022: 9.4 million; 2021: 8.6 million).
10
Segmental analysis
The Group Chief Executive, supported by the rest of the Group Executive Committee (‘GEC’), is considered the Chief Operating Decision Maker
(‘CODM’) for the purposes of identifying the Group’s reportable segments. Global business results are assessed by the CODM on the basis of
constant currency performance that removes the effects of currency translation from reported results. Therefore, we disclose these results on a
constant currency basis as required by IFRS Accounting Standards. The 2022 and 2021 income statements are converted at the average rates of
exchange for 2023, and the balance sheets at 31 December 2022 and 31 December 2021 at the prevailing rates of exchange on 31 December
2023.
Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and
expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully
attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree
of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-
business line transactions. All such transactions are undertaken on arm’s length terms. Measurement of segmental assets, liabilities, income
and expenses is in accordance with the Group’s accounting policies. Shared costs are included in segments on the basis of actual recharges.
The intra-Group elimination items for the global businesses are presented in Corporate Centre.
Resegmentation
In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our Global Banking customers within our entities in Latin America was transferred from Global Banking and Markets to
Commercial Banking for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from Global
Banking and Markets to Commercial Banking were also undertaken within our entities in Australia and Indonesia, where comparative data have
not been re-presented.
Our global businesses
We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and
services offered to customers are organised by these global businesses.
–Wealth and Personal Banking (‘WPB’) provides a full range of retail banking and wealth products to our customers from personal banking to
ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts,
mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management
services, including insurance and investment products, global asset management services, investment management and private wealth
solutions for customers with more sophisticated and international requirements.
–Commercial Banking (‘CMB’) offers a broad range of products and services to serve the needs of our commercial customers, including small
and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables
finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and
investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and
Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.
–Global Banking and Markets (‘GBM’) provides tailored financial solutions to major government, corporate and institutional clients and private
investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and
transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities
services, and principal investment activities.
HSBC Holdings plc
399
HSBC constant currency profit before tax and balance sheet data
2023
Wealth and
Personal
Banking
Commercial
Banking3
Global
Banking and
Markets3
Corporate
Centre
Total
$m
$m
$m
$m
$m
Net operating income/(expense) before change in expected credit losses
and other credit impairment charges2
27,275
22,867
16,115
(199)
66,058
–  external
19,107
24,209
28,021
(5,279)
66,058
–  inter-segment
8,168
(1,342)
(11,906)
5,080
—
–  of which: net interest income/(expense)4
20,492
17,147
7,141
(8,984)
35,796
Change in expected credit losses and other credit impairment charges
(1,058)
(2,062)
(326)
(1)
(3,447)
Net operating income/(expense)
26,217
20,805
15,789
(200)
62,611
Total operating expenses
(14,738)
(7,524)
(9,865)
57
(32,070)
Operating profit/(loss)
11,479
13,281
5,924
(143)
30,541
Share of profit/(loss) in associates and joint ventures less impairment5
65
(1)
—
(257)
(193)
Constant currency profit before tax
11,544
13,280
5,924
(400)
30,348
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
38.0
43.8
19.5
(1.3)
100.0
Constant currency cost efficiency ratio
54.0
32.9
61.2
28.6
48.5
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
454,878
309,422
173,966
269
938,535
Interests in associates and joint ventures
551
28
111
26,654
27,344
Total external assets
937,079
632,406
1,331,395
137,797
3,038,677
Customer accounts
804,863
475,666
330,522
596
1,611,647
2022¹
Net operating income/(expense) before change in expected credit losses and
other credit impairment charges2
20,884
16,283
14,602
(1,898)
49,871
–  external
18,299
16,973
18,744
(4,145)
49,871
–  inter-segment
2,585
(690)
(4,142)
2,247
—
–  of which: net interest income/(expense)4
15,971
11,763
4,696
(2,668)
29,762
Change in expected credit losses and other credit impairment charges
(1,186)
(1,862)
(573)
(9)
(3,630)
Net operating income/(expense)
19,698
14,421
14,029
(1,907)
46,241
Total operating expenses
(14,248)
(6,894)
(9,338)
(1,822)
(32,302)
Operating profit/(loss)
5,450
7,527
4,691
(3,729)
13,939
Share of profit/(loss) in associates and joint ventures
30
—
(2)
2,574
2,602
Constant currency profit/(loss) before tax
5,480
7,527
4,689
(1,155)
16,541
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
33.1
45.6
28.3
(7.0)
100.0
Constant currency cost efficiency ratio
68.2
42.3
64.0
(96.0)
64.8
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
434,122
316,863
190,202
361
941,548
Interests in associates and joint ventures
514
33
93
28,143
28,783
Total external assets
893,867
620,193
1,341,575
152,049
3,007,684
Customer accounts
793,310
472,424
332,303
458
1,598,495
Notes on the financial statements
400
HSBC Holdings plc
HSBC constant currency profit before tax and balance sheet data (continued)
2021
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Net operating income/(expense) before change in expected credit losses and
other credit impairment charges2
20,972
12,699
13,086
(678)
46,079
–  external
20,787
12,685
14,533
(1,926)
46,079
–  inter-segment
185
14
(1,447)
1,248
—
–  of which: net interest income/(expense)4
13,445
8,467
3,419
(714)
24,617
Change in expected credit losses and other credit impairment charges
195
339
221
3
758
Net operating income/(expense)
21,167
13,038
13,307
(675)
46,837
Total operating expenses
(15,338)
(6,691)
(9,255)
(960)
(32,244)
Operating profit/(loss)
5,829
6,347
4,052
(1,635)
14,593
Share of profit in associates and joint ventures
36
1
—
2,770
2,807
Constant currency profit/(loss) before tax
5,865
6,348
4,052
1,135
17,400
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
33.7
36.5
23.3
6.5
100.0
Constant currency cost efficiency ratio
73.1
52.7
70.7
(141.6)
70.0
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
473,304
340,603
196,193
712
1,010,812
Interests in associates and joint ventures
493
31
101
27,036
27,661
Total external assets
905,024
605,696
1,171,909
178,074
2,860,703
Customer accounts
834,767
495,492
322,306
622
1,653,187
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective
needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data
have been re-presented accordingly.
4  Net interest expense recognised in Corporate Centre includes $8.7bn (2022: $2.5bn; 2021: undisclosed) of interest expense in relation to the internal
cost to fund trading and fair value net assets; and the funding cost of foreign exchange swaps in our Markets Treasury function. In the second quarter
of 2023, we implemented a consistent reporting approach across the most material entities that contribute to our trading and fair value net assets,
which resulted in an increase to the associated funding costs reported through the intersegment elimination in Corporate Centre.
5  Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 418.
Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for
reporting the results or advancing the funds:
2023
2022¹
2021
$m
$m
$m
Reported external net operating income/(expense) by country/territory2
66,058
50,620
49,552
–  UK
11,027
11,710
10,909
–  Hong Kong
20,185
15,454
14,245
–  US
3,816
3,893
3,795
–  France
4,208
(177)
2,179
–  other countries/territories
26,822
19,740
18,424
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Constant currency results reconciliation
2023
2022¹
2021
Reported
and
constant
currency
Constant
currency
Currency
translation
Reported
Constant
currency
Currency
translation
Reported
$m
$m
$m
$m
$m
$m
$m
Revenue2
66,058
49,871
(749)
50,620
46,079
(3,473)
49,552
ECL
(3,447)
(3,630)
(46)
(3,584)
758
(170)
928
Operating expenses
(32,070)
(32,302)
399
(32,701)
(32,244)
2,376
(34,620)
Share of profit in associates and joint ventures
less impairment3
(193)
2,602
(121)
2,723
2,807
(239)
3,046
Profit before tax
30,348
16,541
(517)
17,058
17,400
(1,506)
18,906
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3  Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 418.
HSBC Holdings plc
401
Constant currency balance sheet reconciliation
2023
2022¹
2021
Reported and
constant
currency
Constant
currency
Currency
translation
Reported
Constant
currency
Currency
translation
Reported
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers (net)
938,535
941,548
(17,987)
923,561
1,010,812
35,002
1,045,814
Interests in associates and joint ventures
27,344
28,783
471
29,254
27,661
1,948
29,609
Total external assets
3,038,677
3,007,684
(58,398)
2,949,286
2,860,703
97,236
2,957,939
Customer accounts
1,611,647
1,598,495
(28,192)
1,570,303
1,653,187
57,387
1,710,574
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
Notable items
2023
2022
2021
$m
$m
$m
Year ended 31 Dec
Notable items
Revenue
Disposals, acquisitions and related costs1,2
1,298
(2,737)
—
Fair value movements on financial instruments3
14
(618)
(221)
Restructuring and other related costs
—
(247)
(307)
Disposal losses on Markets Treasury repositioning
(977)
—
—
Operating expenses
Disposals, acquisitions and related costs
(321)
(18)
—
Impairment of non-financial items
—
—
(587)
Restructuring and other related costs4
136
(2,882)
(1,836)
Impairment of interests in associates5
(3,000)
—
—
1Includes the impact of the sale of our retail banking operations in France.
2  Includes the provisional gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3  Fair value movements on non-qualifying hedges in HSBC Holdings.
4  Amounts in 2023 relate to reversals of restructuring provisions recognised during 2022.
5  Relates to an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 418.
11
Trading assets
2023
2022
$m
$m
Treasury and other eligible bills
24,433
22,897
Debt securities
106,108
78,126
Equity securities
123,663
88,026
Trading securities
254,204
189,049
Loans and advances to banks1
9,761
8,769
Loans and advances to customers1
25,194
20,275
Year ended 31 Dec
289,159
218,093
1Loans and advances to banks and customers include reverse repos, stock borrowing and other accounts.
12
Fair values of financial instruments carried at fair value
Control framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the
risk taker.
Where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price
determination or validation is used. For inactive markets, HSBC sources alternative market information, with greater weight given to information
that is considered to be more relevant and reliable. Examples of the factors considered are price observability, instrument comparability,
consistency of data sources, underlying data accuracy and timing of prices.
For fair values determined using valuation models, the control framework includes development or validation by independent support functions
of the model logic, inputs, model outputs and adjustments. Valuation models are subject to a process of due diligence before becoming
operational and are calibrated against external market data on an ongoing basis.
Changes in fair value are generally subject to a profit and loss analysis process and are disaggregated into high-level categories including
portfolio changes, market movements and other fair value adjustments.
The majority of financial instruments measured at fair value are in GBM. GBM’s fair value governance structure comprises its Finance function,
Valuation Committees and a Valuation Committee Review Group. Finance is responsible for establishing procedures governing valuation and
ensuring fair values are in compliance with accounting standards. The fair values are reviewed by the Valuation Committees, which consist of
independent support functions. These committees are overseen by the Valuation Committee Review Group, which considers all material
subjective valuations.
Notes on the financial statements
402
HSBC Holdings plc
Financial liabilities measured at fair value
In certain circumstances, HSBC records its own debt in issue at fair value, based on quoted prices in an active market for the specific
instrument. When quoted market prices are unavailable, the own debt in issue is valued using valuation techniques, the inputs for which are
either based on quoted prices in an inactive market for the instrument or are estimated by comparison with quoted prices in an active market for
similar instruments. In both cases, the fair value includes the effect of applying the credit spread that is appropriate to HSBC’s liabilities. The
change in fair value of issued debt securities attributable to the Group’s own credit spread is computed as follows: for each security at each
reporting date, an externally verifiable price is obtained or a price is derived using credit spreads for similar securities for the same issuer. Then,
using discounted cash flow, each security is valued using an appropriate market discount curve. The difference in the valuations is attributable to
the Group’s own credit spread. This methodology is applied consistently across all securities.
Structured notes issued and certain other hybrid instruments are reported as financial liabilities designated at fair value. The credit spread
applied to these instruments is derived from the spreads at which HSBC issues structured notes.
Gains and losses arising from changes in the credit spread of liabilities issued by HSBC, recorded in other comprehensive income, reverse over
the contractual life of the debt, provided that the debt is not repaid at a premium or a discount.
Fair value hierarchy
Fair values of financial assets and liabilities are determined according to the following hierarchy:
–Level 1 – valuation technique using quoted market price. These are financial instruments with quoted prices for identical instruments in
active markets that HSBC can access at the measurement date.
–Level 2 – valuation technique using observable inputs. These are financial instruments with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all
significant inputs are observable.
–Level 3 – valuation technique with significant unobservable inputs. These are financial instruments valued using valuation techniques where
one or more significant inputs are unobservable.
Financial instruments carried at fair value and bases of valuation
2023
20221
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
Recurring fair value measurements at 31 Dec
Assets
Trading assets
202,020
82,833
4,306
289,159
148,592
64,684
4,817
218,093
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
27,030
63,825
19,788
110,643
23,146
59,548
17,407
100,101
Derivatives
931
226,714
2,069
229,714
2,917
279,278
1,964
284,159
Financial investments
215,228
76,591
2,618
294,437
181,659
71,040
2,961
255,660
Liabilities
Trading liabilities
53,354
19,318
478
73,150
44,787
27,092
474
72,353
Financial liabilities designated at fair value
1,266
129,232
10,928
141,426
1,125
115,764
10,432
127,321
Derivatives
1,918
230,285
2,569
234,772
2,399
280,443
2,920
285,762
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
The table below provides the fair value levelling of assets held for sale and liabilities of disposal groups that have been classified as held for sale
in accordance with IFRS 5. For further details, see Note 23.
Financial instruments carried at fair value and bases of valuation – assets and liabilities held for sale
2023
2022
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
Recurring fair value measurements at 31 Dec
Assets
Trading assets
2,403
61
—
2,465
2,932
244
—
3,176
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
—
15
49
64
—
14
47
61
Derivatives
—
528
—
528
—
866
—
866
Financial investments
9,357
—
28
9,385
11,184
—
—
11,184
Liabilities
Trading liabilities
1,352
64
—
1,417
2,572
182
—
2,754
Financial liabilities designated at fair value
—
2,370
—
2,370
—
3,523
—
3,523
Derivatives
—
615
—
615
—
813
—
813
HSBC Holdings plc
403
Transfers between Level 1 and Level 2 fair values
Assets
Liabilities
Financial
investments
Trading
assets
Designated and otherwise
mandatorily measured
at fair value
Derivatives
Trading
liabilities
Designated
at fair
value
Derivatives
$m
$m
$m
$m
$m
$m
$m
At 31 Dec 2023
Transfers from Level 1 to Level 2
13,200
8,066
1,709
—
54
—
—
Transfers from Level 2 to Level 1
9,975
5,758
2,477
—
309
—
—
At 31 Dec 2022
Transfers from Level 1 to Level 2
4,721
5,284
2,565
—
113
—
—
Transfers from Level 2 to Level 1
8,208
5,964
3,340
—
233
—
—
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.
Fair value adjustments
We adopt the use of fair value adjustments when we take into consideration additional factors not incorporated within the valuation model that
would otherwise be considered by a market participant. We classify fair value adjustments as either ‘risk-related’ or ‘model-related’. The majority
of these adjustments relate to GBM. Movements in the amount of fair value adjustments do not necessarily translate in equivalent movements
of profits or losses within the income statement, as these movements can be compensated by other related profits or loss effects. For
example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the
related positions are unwound, but this may not result in profit or loss.
Global Banking and Markets fair value adjustments
2023
2022
GBM
Corporate
Centre
GBM
Corporate
Centre
$m
$m
$m
$m
Type of adjustment
Risk-related
692
41
650
40
–  bid-offer
414
—
426
—
–  uncertainty
75
3
86
—
–  credit valuation adjustment
164
35
245
35
–  debit valuation adjustment
(54)
—
(175)
—
–  funding fair value adjustment
93
3
68
5
Model-related
63
—
61
—
–  model limitation
63
—
61
—
Inception profit (Day 1 P&L reserves)
86
—
97
—
At 31 Dec
841
41
808
40
The increase in fair value adjustments was predominantly driven by the reduction in the debit valuation adjustment including a consideration of
the overlap with the funding fair value adjustment. This was partly offset by reductions from changes to exposure, and tightening of credit and
liquidity market spreads.
Bid-offer
IFRS 13 ‘Fair Value Measurement’ requires the use of the price within the bid-offer spread that is most representative of fair value. Valuation
models will typically generate mid-market values. The bid-offer adjustment reflects the extent to which bid-offer costs would be incurred if
substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding the position.
Uncertainty
Certain model inputs may be less readily determinable from market data and/or the choice of model itself may be more subjective. In these
circumstances, an adjustment may be necessary to reflect the likelihood that market participants would adopt more conservative values for
uncertain parameters and/or model assumptions than those used in HSBC’s valuation model.
Credit and debit valuation adjustments
The credit valuation adjustment (‘CVA’) is an adjustment to the valuation of over-the-counter (‘OTC’) derivative contracts to reflect the possibility
that the counterparty may default and that HSBC may not receive the full market value of the transactions.
The debit valuation adjustment (‘DVA’) is an adjustment to the valuation of OTC derivative contracts to reflect the possibility that HSBC may
default, and that it may not pay the full market value of the transactions. The DVA considers the overlap with the funding fair value adjustment.
HSBC calculates a separate CVA and DVA for each legal entity, and for each counterparty to which the entity has exposure. With the exception
of central clearing parties, all third-party counterparties are included in the CVA and DVA calculations, and these adjustments are not netted
across Group entities.
HSBC calculates the CVA by applying the probability of default (‘PD’) of the counterparty, conditional on the non-default of HSBC, to HSBC’s
expected positive exposure to the counterparty and multiplying the result by the loss expected in the event of default. Conversely, HSBC
calculates the DVA by applying the PD of HSBC, conditional on the non-default of the counterparty, to the expected positive exposure of the
counterparty to HSBC and multiplying the result by the loss expected in the event of default. Both calculations are performed over the life of the
potential exposure.
For most products HSBC uses a simulation methodology, which incorporates a range of potential exposures over the life of the portfolio, to
calculate the expected positive exposure to a counterparty. The simulation methodology includes credit mitigants, such as counterparty netting
agreements and collateral agreements with the counterparty.
Notes on the financial statements
404
HSBC Holdings plc
The methodologies do not, in general, account for ‘wrong-way risk’. Wrong-way risk is an adverse correlation between the counterparty’s
probability of default and the mark-to-market value of the underlying transaction. The risk can either be general, perhaps related to the currency
of the issuer country, or specific to the transaction concerned. When there is significant wrong-way risk, a trade-specific approach is applied to
reflect this risk in the valuation.
Funding fair value adjustment
The funding fair value adjustment (‘FFVA’) is calculated by applying future market funding spreads to the expected future funding exposure of
any uncollateralised component of the OTC derivative portfolio. The expected future funding exposure is calculated by a simulation
methodology, where available, and is adjusted for events that may terminate the exposure, such as the default of HSBC or the counterparty.
Model limitation
Models used for portfolio valuation purposes may be based upon a simplified set of assumptions that do not capture all current and future
material market characteristics. In these circumstances, model limitation adjustments are adopted.
Inception profit (Day 1 P&L reserves)
Inception profit adjustments are adopted when the fair value estimated by a valuation model is based on one or more significant unobservable
inputs. The accounting for inception profit adjustments is discussed in Note 1.
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique with significant unobservable inputs – Level 3
Assets
Liabilities
Financial
investments
Trading
assets
Designated
and otherwise
mandatorily
measured at
fair value
through profit
or loss
Derivatives
Total
Trading
liabilities
Designated
at fair
value
Derivatives
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Private equity including strategic
investments
507
7
17,640
—
18,154
—
1
—
1
Asset-backed securities
309
128
8
—
445
—
—
—
—
Structured notes
—
—
3
—
3
—
10,331
—
10,331
Other derivatives
—
—
—
2,069
2,069
—
—
2,569
2,569
Other portfolios
1,802
4,171
2,137
—
8,110
478
596
—
1,074
At 31 Dec 2023
2,618
4,306
19,788
2,069
28,781
478
10,928
2,569
13,975
Private equity including strategic
investments
647
19
15,653
—
16,319
92
—
—
92
Asset-backed securities
438
208
95
—
741
—
—
—
—
Structured notes
—
—
—
—
—
—
10,432
—
10,432
Other derivatives
—
—
—
1,964
1,964
—
—
2,920
2,920
Other portfolios
1,876
4,590
1,659
—
8,125
382
—
—
382
At 31 Dec 2022
2,961
4,817
17,407
1,964
27,149
474
10,432
2,920
13,826
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 asset-backed securities 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 (‘NAV’) 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.
HSBC Holdings plc
405
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy
Movement in Level 3 financial instruments
Assets
Liabilities
Financial
investments
Trading
assets
Designated and
otherwise
mandatorily
measured at fair
value through
profit or loss
Derivatives
Trading
liabilities
Designated
at fair
value
Derivatives
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
2,961
4,817
17,407
1,964
474
10,432
2,920
Total gains/(losses) recognised in profit or loss
(44)
266
921
692
75
97
910
–  net income/(losses) from financial instruments held
for trading or managed on a fair value basis
—
266
—
692
75
97
910
–  changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss
—
—
921
—
—
—
—
–  gains less losses from financial investments at fair
value through other comprehensive income
(44)
—
—
—
—
—
—
Total gains/(losses) recognised in other comprehensive
income (‘OCI’)1
28
108
87
81
24
523
111
–  financial investments: fair value gains/(losses)
(44)
—
—
—
—
335
—
–  exchange differences
72
108
87
81
24
188
111
Purchases
353
2,276
3,555
—
291
—
—
New issuances
—
2
—
—
2
5,389
—
Sales
(290)
(2,478)
(658)
—
(320)
(2)
—
Settlements
(352)
(872)
(1,886)
(1,018)
(74)
(3,258)
(1,565)
Transfers out
(662)
(922)
(156)
(240)
(45)
(2,881)
(358)
Transfers in
624
1,109
518
590
51
628
551
At 31 Dec 2023
2,618
4,306
19,788
2,069
478
10,928
2,569
Unrealised gains/(losses) recognised in profit or loss
relating to assets and liabilities held at 31 Dec 2023
—
(152)
82
737
—
(433)
(903)
–  net income/(losses) from financial instruments held
for trading or managed on a fair value basis
—
(152)
—
737
—
—
(903)
–  changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss
—
—
82
—
—
(433)
—
At 1 Jan 2022
3,389
2,662
14,238
2,478
785
7,880
3,088
IFRS 17 impacts
(12)
—
1,468
—
—
—
—
At 1 Jan 2022 (as restated)
3,377
2,662
15,706
2,478
785
7,880
3,088
Total gains/(losses) recognised in profit or loss
(4)
(245)
132
390
(52)
(1,334)
1,014
–  net income/(losses) from financial instruments held
for trading or managed on a fair value basis
—
(245)
—
390
(52)
—
1,014
–  changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss
—
—
132
—
—
(1,334)
—
–  gains less losses from financial investments at fair
value through other comprehensive income
(4)
—
—
—
—
—
—
Total gains/(losses) recognised in other comprehensive
income (‘OCI’)1
(325)
(137)
(217)
(219)
(11)
(345)
(226)
–  financial investments: fair value gains/(losses)
(202)
—
—
—
—
82
—
–  exchange differences
(123)
(137)
(217)
(219)
(11)
(427)
(226)
Purchases
1,048
3,436
4,410
—
178
—
—
New issuances
1
—
—
—
8
4,183
—
Sales
(240)
(1,102)
(801)
—
(152)
(94)
—
Settlements
(464)
(1,273)
(1,883)
(918)
(644)
182
(993)
Transfers out
(489)
(442)
(76)
(409)
(18)
(1,296)
(632)
Transfers in
57
1,918
136
642
380
1,256
669
At 31 Dec 2022
2,961
4,817
17,407
1,964
474
10,432
2,920
Unrealised gains/(losses) recognised in profit or loss
relating to assets and liabilities held at 31 Dec 2022
—
(100)
(158)
707
2
100
2,779
–  net income/(losses) from financial instruments held
for trading or managed on a fair value basis
—
(100)
—
707
2
—
2,779
–  changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss
—
—
(158)
—
—
100
—
1Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of
comprehensive income.
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of
levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.
Notes on the financial statements
406
HSBC Holdings plc
Effect of changes in significant unobservable assumptions to reasonably possible
alternatives
Sensitivity of fair values to reasonably possible alternative assumptions
2023
2022
Reflected in profit or loss
Reflected in OCI
Reflected in profit or loss
Reflected in OCI
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
$m
$m
$m
$m
$m
$m
$m
$m
Derivatives, trading assets and trading
liabilities1
492
(531)
—
—
264
(291)
—
—
Financial assets and liabilities designated
and otherwise mandatorily measured at
fair value through profit or loss
1,092
(1,100)
—
—
981
(978)
—
—
Financial investments
13
(12)
61
(66)
11
(11)
65
(55)
At 31 Dec
1,597
(1,643)
61
(66)
1,256
(1,280)
65
(55)
1‘Derivatives, trading assets and trading liabilities’ are presented as one category to reflect the manner in which these instruments are risk-managed.
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 2023.
Quantitative information about significant unobservable inputs in Level 3 valuations
Fair value
2023
2022
Assets
Liabilities
Key valuation
techniques
Key unobservable
inputs
Full range
of inputs
Full range
of inputs
$m
$m
Lower
Higher
Lower
Higher
Private equity including strategic
investments
18,154
1
See below
See below
Asset-backed securities
445
—
–  collateralised loan/debt obligation
44
—
Market proxy
Bid quotes
—
94
—
92
–  other ABSs
401
—
Market proxy
Bid quotes
—
220
—
99
Structured notes
3
10,331
–  equity-linked notes
3
7,054
Model – Option model
Equity volatility
6%
154%
6%
142%
Model – Option model
Equity correlation
34%
100%
32%
99%
–  Foreign exchange-linked notes
—
1,733
Model – Option model
Foreign exchange
volatility
1%
34%
3%
37%
–  other
—
1,544
Derivatives
2,069
2,569
 
 
–  interest rate derivatives
864
784
 
 
  securitisation swaps
146
136
Model – Discounted cash flow
Prepayment rate
5%
10%
5%
10%
  long-dated swaptions
57
69
Model – Option model
Interest rate
volatility
11%
37%
8%
53%
  other
661
579
–  Foreign exchange derivatives
308
427
  Foreign exchange options
255
356
Model – Option model
Foreign exchange
volatility
1%
31%
1%
46%
  other
53
71
–  equity derivatives
600
981
  long-dated single stock options
391
609
Model – Option model
Equity volatility
6%
110%
7%
153%
  other
209
372
–  credit derivatives
297
377
Other portfolios
8,110
1,074
–  repurchase agreements
1,090
310
Model – Discounted cash flow
Interest rate curve
3%
8%
1%
9%
–  bonds
3,278
1
Market proxy
Mid quotes
—
101
—
102
–  other1
3,742
763
At 31 Dec 2023
28,781
13,975
1‘Other’ includes a range of smaller asset holdings.
The range of values above shows the highest and lowest unobservable inputs that have been used to value significant Level 3 exposures and
reflects the diversity of the underlying financial instruments in scope and subsequent differentiation in pricing.
HSBC Holdings plc
407
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.
The valuation approach includes using a range of inputs that include company-specific financials, traded comparable companies multiples,
published net asset values and qualitative assumptions, which are not directly comparable or quantifiable.
Prepayment rates
Prepayment rates are a measure of the anticipated future speed at which a loan portfolio will be repaid in advance of the due date. They vary
according to the nature of the loan portfolio and expectations of future market conditions, and may be estimated using a variety of evidence,
such as prepayment rates implied from proxy observable security prices, current or historical prepayment rates and macroeconomic modelling.
Market proxy
Market proxy pricing may be used for an instrument when specific market pricing is not available but there is evidence from instruments with
common characteristics. In some cases it might be possible to identify a specific proxy, but more generally evidence across a wider range of
instruments will be used to understand the factors that influence current market pricing and the manner of that influence.
Volatility
Volatility is a measure of the anticipated future variability of a market price. It varies by underlying reference market price, and by strike and
maturity of the option. Certain volatilities, typically those of a longer-dated nature, are unobservable and are estimated from observable data. The
range of unobservable volatilities reflects the wide variation in volatility inputs by reference market price.
Correlation
Correlation is a measure of the inter-relationship between two market variables 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 variable. 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 variable 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
2023
2022
$m
$m
Valuation technique using observable inputs: Level 2
Assets at 31 Dec
–  derivatives
3,344
3,801
–  designated and otherwise mandatorily measured at fair value through profit or loss
59,879
52,322
Liabilities at 31 Dec
–  designated at fair value
43,638
32,123
–  derivatives
6,090
6,922
Notes on the financial statements
408
HSBC Holdings plc
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
Carrying
amount
Quoted market
price Level 1
Observable
inputs Level 2
Significant
unobservable
inputs Level 3
Total
$m
$m
$m
$m
$m
At 31 Dec 2023
Assets
Loans and advances to banks
112,902
2
111,263
1,479
112,744
Loans and advances to customers
938,535
—
13,258
911,124
924,382
Reverse repurchase agreements – non-trading
252,217
—
252,243
—
252,243
Financial investments – at amortised cost
148,326
115,383
30,765
440
146,588
Liabilities
Deposits by banks
73,163
—
73,176
—
73,176
Customer accounts
1,611,647
—
1,611,795
—
1,611,795
Repurchase agreements – non-trading
172,100
—
172,081
—
172,081
Debt securities in issue
93,917
—
93,196
706
93,902
Subordinated liabilities
24,954
—
27,151
—
27,151
At 31 Dec 20221
Assets
Loans and advances to banks
104,475
4
103,641
814
104,459
Loans and advances to customers
923,561
—
8,791
903,107
911,898
Reverse repurchase agreements – non-trading
253,754
—
253,668
—
253,668
Financial investments – at amortised cost
109,066
84,087
21,850
475
106,412
Liabilities
Deposits by banks
66,722
—
66,831
—
66,831
Customer accounts
1,570,303
—
1,570,209
—
1,570,209
Repurchase agreements – non-trading
127,747
—
127,500
—
127,500
Debt securities in issue
78,149
—
76,640
381
77,021
Subordinated liabilities
22,290
—
22,723
—
22,723
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
Fair values of financial instruments not carried at fair value and bases of valuation – assets and disposal groups held for sale
Fair value
Carrying
amount
Quoted market
price Level 1
Observable
inputs Level 2
Significant
unobservable
inputs Level 3
Total
$m
$m
$m
$m
$m
At 31 Dec 2023
Assets
Loans and advances to banks
10,487
—
10,487
—
10,487
Loans and advances to customers
73,376
—
90
72,200
72,290
Reverse repurchase agreements – non-trading
2,723
—
2,723
—
2,723
Financial investments – at amortised cost
7,624
7,530
—
5
7,535
Liabilities
Deposits by banks
78
—
78
—
78
Customer accounts
85,950
—
86,475
—
86,475
Repurchase agreements – non-trading
2,768
—
2,768
—
2,768
Debt securities in issue
9,084
—
8,820
—
8,820
Subordinated liabilities
8
—
7
—
7
At 31 Dec 2022
Assets
Loans and advances to banks
253
—
257
—
257
Loans and advances to customers
80,687
—
111
78,048
78,159
Reverse repurchase agreements – non-trading
4,646
—
4,646
—
4,646
Financial investments – at amortised cost
6,165
6,042
—
—
6,042
Liabilities
Deposits by banks
64
—
64
—
64
Customer accounts
85,274
—
85,303
—
85,303
Repurchase agreements – non-trading
3,266
—
3,266
—
3,266
Debt securities in issue
12,928
—
12,575
—
12,575
Subordinated liabilities
8
—
7
—
7
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.
HSBC Holdings plc
409
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. This may be different from the theoretical economic value attributed from an instrument’s cash
flows 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 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; recent origination
pricing 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 amount. 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
2023
2022
Carrying amount
Fair value1
Carrying amount
Fair value1
$m
$m
$m
$m
Assets at 31 Dec
Loans and advances to HSBC undertakings
27,354
27,878
26,765
26,962
Financial investments – at amortised cost
19,558
19,531
19,466
19,314
Liabilities at 31 Dec
Debt securities in issue
65,239
65,172
66,938
65,364
Subordinated liabilities
24,439
26,651
19,727
20,644
1Fair 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
2023
2022¹
Designated at
fair value
Mandatorily
measured at
fair value
Total
Designated at
fair value
Mandatorily
measured at
fair value
Total
$m
$m
$m
$m
$m
$m
Securities
2,353
101,152
103,505
3,096
91,936
95,032
–  treasury and other eligible bills
695
724
1,419
649
869
1,518
–  debt securities
1,658
60,045
61,703
2,447
56,633
59,080
–  equity securities
—
40,383
40,383
—
34,434
34,434
Loans and advances to banks and customers
371
5,495
5,866
—
3,455
3,455
Other
—
1,272
1,272
—
1,614
1,614
At 31 Dec
2,724
107,919
110,643
3,096
97,005
100,101
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
Notes on the financial statements
410
HSBC Holdings plc
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
9,463,768
63,547
99,014
935
99,949
99,949
780
100,729
Interest rate
14,853,397
361,312
223,534
5,119
228,653
225,443
4,080
229,523
Equities
677,149
—
14,427
—
14,427
17,603
—
17,603
Credit
153,606
—
1,351
—
1,351
1,861
—
1,861
Commodity and other
90,007
—
1,820
—
1,820
1,542
—
1,542
Gross total fair values
25,237,927
424,859
340,146
6,054
346,200
346,398
4,860
351,258
Offset (Note 31)
(116,486)
(116,486)
At 31 Dec 2023
25,237,927
424,859
340,146
6,054
229,714
346,398
4,860
234,772
Foreign exchange
8,434,453
38,924
122,206
525
122,731
123,088
166
123,254
Interest rate
15,213,232
276,589
285,449
5,066
290,515
287,876
3,501
291,377
Equities
570,410
—
9,325
—
9,325
9,176
—
9,176
Credit
183,995
—
1,091
—
1,091
1,264
—
1,264
Commodity and other
78,414
—
1,484
—
1,484
1,678
—
1,678
Gross total fair values
24,480,504
315,513
419,555
5,591
425,146
423,082
3,667
426,749
Offset (Note 31)
(140,987)
(140,987)
At 31 Dec 2022
24,480,504
315,513
419,555
5,591
284,159
423,082
3,667
285,762
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
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 decreased during 2023, 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 amount
Assets
Liabilities
Trading
Hedging
Trading
Hedging
Total
Trading
Hedging
Total
$m
$m
$m
$m
$m
$m
$m
$m
Foreign exchange
66,711
—
486
—
486
1,705
—
1,705
Interest rate
33,480
92,268
1,730
1,128
2,858
747
3,638
4,385
At 31 Dec 2023
100,191
92,268
2,216
1,128
3,344
2,452
3,638
6,090
Foreign exchange
60,630
—
502
—
502
1,683
—
1,683
Interest rate
34,322
81,873
2,386
913
3,299
826
4,413
5,239
At 31 Dec 2022
94,952
81,873
2,888
913
3,801
2,509
4,413
6,922
Use of derivatives
For details regarding the use of derivatives, see page 256 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.
HSBC Holdings plc
411
Hedge accounting derivatives
HSBC applies hedge accounting to manage the following risks: interest rate and foreign exchange risks. Further details of how these risks arise
and how they are managed by the Group can be found in the ‘Risk review’.
Hedged risk components
HSBC designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign
currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or otherwise
separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest rates generally are
regarded as being both separately identifiable and reliably measurable, except for the Interest Rate Benchmark Reform Phase 2 transition where
HSBC designates alternative benchmark rates as the hedged risk which may not have been separately identifiable upon initial designation,
provided HSBC reasonably expects it will meet the requirement within 24 months from the first designation date. The designated risk
components account for a significant portion of the overall changes in fair value or cash flows of the hedged items.
HSBC uses net investment hedges to hedge the structural foreign exchange risk related to net investments in foreign operations including
subsidiaries and branches whose functional currencies are different from that of the parent. When hedging with foreign exchange forward
contracts, the spot rate component of the foreign exchange risk is designated for an amount of net assets as the hedged 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.
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
Notional amount1
Assets
Liabilities
Balance sheet
presentation
Change in fair value2
Hedged risk
$m
$m
$m
$m
Interest rate3
172,985
3,729
2,965
Derivatives
(1,043)
At 31 Dec 2023
172,985
3,729
2,965
(1,043)
Interest rate3
162,062
4,973
2,573
Derivatives
4,064
At 31 Dec 2022
162,062
4,973
2,573
4,064
1The 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.
2Used in effectiveness testing, which uses the full fair value change of the hedging instrument not excluding any component.
3The hedged risk ‘interest rate’ includes inflation risk.
HSBC hedged item by hedged risk
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in
fair value2
Recognised
in profit
and loss
Assets
Liabilities
Assets
Liabilities
Balance sheet
presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
82,321
(2,282)
Financial investments -
measured at fair value
through other
comprehensive income
2,053
5
Net income from
financial instruments
held for trading or
managed on a fair
value basis
514
32
Financial investments -
measured at amortised
cost
32
4,701
(18)
Loans and advances to
customers
122
—
—
Reverse repurchase
agreements – non-
trading
15
64,269
(2,147)
Debt securities in issue
(1,179)
—
—
Deposits by banks
—
—
—
Subordinated liabilities
5
At 31 Dec 2023
87,536
64,269
(2,268)
(2,147)
1,048
5
Notes on the financial statements
412
HSBC Holdings plc
HSBC hedged item by hedged risk (continued)
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in fair
value2
Recognised
in profit and
loss
Assets
Liabilities
Assets
Liabilities
Balance sheet presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
82,792
(5,100)
Financial investments -
measured at fair value through
other comprehensive income
(8,005)
(59)
Net income from
financial instruments
held for trading or
managed on a fair
value basis
3,415
(210)
Loans and advances to
customers
(233)
519
(18)
Reverse repurchase
agreements – non-trading
(17)
49,180
(2,006)
Debt securities in issue
4,138
83
—
Deposits by banks
(5)
At 31 Dec 2022
86,726
49,263
(5,328)
(2,006)
(4,122)
(59)
1The 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 $136m (2022: $252m) for FVOCI assets and liabilities of $1,256m (2022: $916m) for debt issued.
2Used in effectiveness testing, which comprise an amount attributable to the designated hedged risk that can be a risk component.
3The hedged risk ‘interest rate’ includes inflation risk.
HSBC Holdings hedging instrument by hedged risk
Hedging instrument
Carrying amount
Notional amount1,2
Assets
Liabilities
Balance sheet
presentation
Change in fair value3
Hedged risk
$m
$m
$m
$m
Interest rate4
92,268
1,128
3,638
Derivatives
1,426
At 31 Dec 2023
92,268
1,128
3,638
1,426
Interest rate4
81,873
913
4,413
Derivatives
(5,599)
At 31 Dec 2022
81,873
913
4,413
(5,599)
1The 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.
2The notional amount of non-dynamic fair value hedges is equal to $92,268m (2022: $81,873m), of which the weighted-average maturity date is
May 2029 and the weighted-average swap rate is 2.46% (2022: 2.33%). The majority of these hedges are internal to the Group.
3Used in effectiveness testing, comprising the full fair value change of the hedging instrument not excluding any component.
4The hedged risk ‘interest rate’ includes foreign exchange risk.
HSBC Holdings hedged item by hedged risk
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in
fair value2
Recognised
in
profit and
loss
Assets
Liabilities
Assets
Liabilities
Balance sheet
presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
80,889
(2,971)
Debt securities
in issue
(1,716)
29
Net income from
financial instruments
held for trading or
managed on a fair value
basis
7,772
(490)
Loans and
advances to banks
319
At 31 Dec 2023
7,772
80,889
(490)
(2,971)
(1,397)
29
Interest rate3
68,223
(3,829)
Debt securities
in issue
6,258
(34)
Net income from financial
instruments held for
trading or managed on a
fair value basis
6,812
(789)
Loans and
advances to banks
(693)
At 31 Dec 2022
6,812
68,223
(789)
(3,829)
5,565
(34)
1The 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 $1,299m (2022: $971m) for debt issued.
2Used in effectiveness testing, comprising amount attributable to the designated hedged risk that can be a risk component.
3The hedged risk ‘interest rate’ includes foreign exchange risk.
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.
HSBC Holdings plc
413
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
Hedging instrument
Hedged item
Ineffectiveness
Carrying amount
Change in
fair value2
Change in fair
value3
Recognised
in profit and
loss
Profit and loss
presentation
Notional
amount1
Assets
Liabilities
Balance
sheet
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Foreign currency
29,772
935
257
Derivatives
977
977
—
Net income from
financial instruments
held for trading or
managed on a fair
value basis
Interest rate
188,327
1,390
1,116
Derivatives
1,542
1,512
30
At 31 Dec 2023
218,099
2,325
1,373
2,519
2,489
30
Foreign currency
8,781
418
166
Derivatives
659
659
—
Net income from
financial instruments
held for trading or
managed on a fair
value basis
Interest rate
114,527
93
950
Derivatives
(4,997)
(4,973)
(24)
At 31 Dec 2022
123,308
511
1,116
(4,338)
(4,314)
(24)
1The 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.
2Used in effectiveness testing, comprising the full fair value change of the hedging instrument not excluding any component.
3Used in effectiveness assessment, comprising amount attributable to the designated hedged risk that can be a risk component.
Reconciliation of equity and analysis of other comprehensive income by risk type
Interest rate
Foreign currency
$m
$m
Cash flow hedging reserve at 1 Jan 2023
(3,387)
(421)
Fair value gains/(losses)
1,512
977
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 loss1
2,196
(718)
Income taxes
(937)
(29)
Others
(285)
59
Cash flow hedging reserve at 31 Dec 2023
(901)
(132)
Cash flow hedging reserve at 1 Jan 2022
8
(205)
Fair value gains/(losses)
(4,973)
659
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
325
(926)
Income taxes
1,123
28
Others
130
23
Cash flow hedging reserve at 31 Dec 2022
(3,387)
(421)
1  Hedged items that have affected profit or loss are primarily recorded within interest income.
Net investment hedges
The Group applies hedge accounting in respect of certain net investments in non-US dollar functional currency foreign operations for changes in
spot exchange rates only. Hedging could be undertaken for Group structural exposure to changes in the US dollar to foreign currency exchange
rates using forward foreign exchange contracts or by financing with foreign currency borrowings. An economic relationship exists between the
hedged net investment and hedging instrument due to the shared foreign currency risk exposure. For further details of our structural foreign
exchange exposures, see page 241.
Notes on the financial statements
414
HSBC Holdings plc
The aggregate positions at the reporting date and the performance indicators of both live and de-designated hedges are summarised below.
Hedges of net investment in foreign operations
Carrying amount
Nominal
amount
Amounts
recognised
in OCI1
Change in
fair value2
Hedge ineffectiveness
recognised in income
statement
Derivative
assets
Derivative
liabilities
Description of hedged risk
$m
$m
$m
$m
$m
$m
2023
Pound sterling-denominated structural foreign exchange
(404)
16,415
604
(843)
—
Swiss franc-denominated structural foreign exchange
(23)
526
49
(62)
—
Hong Kong dollar-denominated structural foreign exchange
—
5,792
—
2
—
Other structural foreign exchange3
(96)
11,042
477
102
—
Total
—
(523)
33,775
1,130
(801)
—
2022
Pound sterling-denominated structural foreign exchange
264
—
14,000
1,447
1,573
—
Swiss franc-denominated structural foreign exchange
—
(21)
727
111
10
—
Hong Kong dollar-denominated structural foreign exchange
—
(19)
4,597
(2)
(7)
—
Other structural foreign exchange3
—
(117)
10,819
375
369
—
Total
264
(157)
30,143
1,931
1,945
—
1  Amount recognised in OCI for Swiss franc includes $110m (2022: $110m) related to de-designated hedge.
2  Used in effectiveness assessment, comprising amount attributable to the designated hedged risk that can be a risk component.
3  Other currencies include euro, New Taiwan dollar, Singapore dollar, Canadian dollar, Omani rial, South Korean won, UAE dirham, Indian rupee, Chinese
renminbi, Kuwaiti dinar, Qatari riyal, Saudi riyal, Indonesian rupiah and Philippine peso.
Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 ‘Financial Instruments’
HSBC has applied both the first set of amendments (‘Phase 1’) and the second set of amendments (‘Phase 2’) to IFRS 9 and IAS 39 applicable
to hedge accounting. The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance
sheet as ‘Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income’, ‘Loans and
advances to customers’, ‘Debt securities in issue’ and ‘Deposits by banks’. The notional value of the derivatives impacted by the Ibor reform,
including those designated in hedge accounting relationships, is disclosed in Note 32. For further details of Ibor transition, see ‘Ibor transition’ 
on page 162.
For some of the Ibors included under the ‘Other’ header in the table below, judgement has been needed to establish whether a transition is
required, since there are Ibor benchmarks that are subject to computation methodology improvements and insertion of fallback provisions
without full clarity being provided by their administrators on whether these Ibor benchmarks will be demised.
The notional amounts of interest rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure
managed by the Group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are
shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not
significant and have not been presented below.
Hedging instrument impacted by Ibor reform
Hedging instrument
Impacted by Ibor reform
Not impacted
by Ibor
reform
Notional
amount3
€1
£
$
Other2
Total
$m
$m
$m
$m
$m
$m
$m
Fair value hedges
16,907
—
—
4,384
21,291
151,694
172,985
Cash flow hedges
10,850
—
—
3,504
14,354
173,973
188,327
At 31 Dec 2023
27,757
—
—
7,888
35,645
325,667
361,312
Fair value hedges
12,756
—
2,015
12,643
27,414
134,648
162,062
Cash flow hedges
8,865
—
—
27,830
36,695
77,832
114,527
At 31 Dec 2022
21,621
—
2,015
40,473
64,109
212,480
276,589
1The notional contract amounts of euro interest rate derivatives impacted by Ibor reform consist of hedges with a Euribor benchmark.
2Other benchmarks impacted by Ibor reform consist mainly of Emirates interbank offered rate, Mexican interbank equilibrium interest rate (‘TIIE’) and
Korean won-related derivatives. In 2022, the Hong Kong interbank offered rate (‘HIBOR’) was included in ‘Other‘ given that reform in the benchmark
was considered possible. At 31 December 2023, HIBOR was no longer expected to be directly affected by Ibor reform following the successful
transition of all Libor settings and the HKMA’s affirmation that there are no plans to discontinue HIBOR. As a result HIBOR has been moved from
‘Other‘ to ‘Not impacted by Ibor reform‘.
3The 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 and they do not represent amounts at risk.
HSBC Holdings plc
415
Hedging instrument impacted by Ibor reform held by HSBC Holdings
Hedging instrument
Impacted by Ibor reform
Not impacted
by Ibor
reform
Notional
amount
€
£
$
Other
Total
$m
$m
$m
$m
$m
$m
$m
Fair value hedges
19,614
—
—
583
20,197
72,071
92,268
At 31 Dec 2023
19,614
—
—
583
20,197
72,071
92,268
Fair value hedges
15,210
—
2,000
1,336
18,546
63,327
81,873
At 31 Dec 2022
15,210
—
2,000
1,336
18,546
63,327
81,873
16
Financial investments
Carrying amount of financial investments
2023
2022¹
$m
$m
Financial investments measured at fair value through other comprehensive income
294,437
255,660
–  treasury and other eligible bills
102,438
86,749
–  debt securities
190,119
167,107
–  equity securities
1,447
1,696
–  other instruments
433
108
Debt instruments measured at amortised cost
148,326
109,066
–  treasury and other eligible bills
30,733
34,507
–  debt securities
117,593
74,559
At 31 Dec
442,763
364,726
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
Equity instruments measured at fair value through other comprehensive income
Fair value
Dividends
recognised
Type of equity instruments
$m
$m
Investments required by central institutions
609
27
Business facilitation
793
35
Others
45
2
At 31 Dec 2023
1,447
64
Investments required by central institutions
690
24
Business facilitation
954
28
Others
52
2
At 31 Dec 2022
1,696
54
Weighted average yields of investment debt securities
Up to 1
year
1 to 5
years
5 to 10
years
Over 10
years
Yield
Yield
Yield
Yield
%
%
%
%
Debt securities measured at fair value through other comprehensive income
US Treasury
2.1
2.0
2.0
2.4
US Government agencies
3.6
3.1
3.3
3.0
US Government-sponsored agencies
1.0
2.6
2.1
1.8
UK Government
0.2
2.8
0.8
2.5
Hong Kong Government
1.0
1.4
1.6
—
Other governments
3.2
3.5
3.3
2.9
Asset-backed securities
1.4
6.6
4.8
5.3
Corporate debt and other securities
5.5
3.1
3.1
2.4
Debt securities measured at amortised cost
US Treasury
8.9
3.7
3.7
2.1
US Government agencies
7.9
7.8
5.8
4.5
US Government-sponsored agencies
2.3
3.7
3.4
2.9
UK Government
—
—
0.9
4.5
Hong Kong Government
—
2.6
—
—
Other governments
2.7
3.5
5.3
—
Asset-backed securities
4.7
—
7.7
—
Corporate debt and other securities
2.6
2.6
3.5
5.2
Notes on the financial statements
416
HSBC Holdings plc
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 2023 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
2023
2022
$m
$m
Debt instruments measured at amortised cost
–  treasury and other eligible bills
15,629
12,796
–  debt securities
3,929
6,670
At 31 Dec
19,558
19,466
Weighted average yields of investment debt securities
Up to 1
year
1 to 5
years
5 to 10
years
Over 10
years
Yield
Yield
Yield
Yield
%
%
%
%
Debt securities measured at amortised cost
US Treasury
3.2
4.3
—
—
The weighted average yield for each range of maturities is calculated by dividing the annualised interest income for the year ended
31 December 2023 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 pledged1
Financial assets pledged as collateral
2023
2022
$m
$m
Treasury bills and other eligible securities
20,504
18,364
Loans and advances to banks
13,636
10,198
Loans and advances to customers
27,490
27,627
Debt securities
88,367
60,542
Equity securities
40,280
26,902
Other
61,223
67,576
Assets pledged at 31 Dec
251,500
211,209
Assets pledged as collateral include all assets categorised as encumbered in the disclosure on page 27 of the Pillar 3 Disclosures at
31 December 2023, except for assets held for sale.
The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the case of
securitisations and covered bonds, the amount of liabilities issued plus mandatory over-collateralisation is less than the book value of the pool of
assets available for use as collateral. This is also the case where assets are placed with a custodian or a settlement agent that has a floating
charge over all the assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary 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
2023
2022
$m
$m
Trading assets
77,847
56,894
Financial investments
39,324
27,841
At 31 Dec
117,171
84,735
Collateral received1
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 $495,653m (2022: $449,896m). The
fair value of any such collateral sold or repledged was $284,108m (2022: $228,245m).
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.
HSBC Holdings plc
417
Assets transferred1
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.
Transferred financial assets not qualifying for full derecognition and associated financial liabilities
Carrying amount of:
Transferred
assets
Associated
liabilities
$m
$m
At 31 Dec 2023
Repurchase agreements
81,486
74,517
Securities lending agreements
46,663
3,826
At 31 Dec 2022
Repurchase agreements
52,604
48,501
Securities lending agreements
39,134
4,613
1  Excludes assets classified as held for sale.
18
Interests in associates and joint ventures
Carrying amount of HSBC’s interests in associates and joint ventures
2023
2022
$m
$m
Interests in associates
27,200
29,127
Interests in joint ventures
144
127
Interests in associates and joint ventures
27,344
29,254
Principal associates of HSBC
2023
2022
Carrying amount
Fair value1
Carrying amount
Fair value1
$m
$m
$m
$m
Bank of Communications Co., Limited
21,210
8,812
23,307
8,141
Saudi Awwal Bank
4,659
6,438
4,494
6,602
1Principal 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 2023
Jurisdiction of incorporation
and principal place of
business
Principal activity
HSBC’s interest1
%
Bank of Communications Co., Limited
Mainland China
Banking services
19.03
Saudi Awwal Bank
Saudi Arabia
Banking services
31.00
1  There has been no percentage change in HSBC’s shareholding interest in the principal associates when compared with 2022.
Share of profit in associates and joint ventures
2023
2022
$m
$m
Bank of Communications Co., Limited
2,250
2,377
Saudi Awwal Bank
538
342
Other associates and joint ventures
19
4
Share of profit in associates and joint ventures
2,807
2,723
Less: Impairment of interest in BoCom
(3,000)
—
A list of all associates and joint ventures is set out in Note 40.
Notes on the financial statements
418
HSBC Holdings plc
Bank of Communications Co., Limited
We maintain a 19.03% interest in Bank of Communications Co., Limited (‘BoCom’). The Group’s investment in 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 agreement (‘RES’). 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 ‘Investments in Associates and Joint Ventures’, whereby the investment is initially recognised at cost and
adjusted thereafter for the post-acquisition change in the Group’s share of associate’s net assets. An impairment test is required if there is any
indication of impairment.
Impairment testing
The fair value of the Group’s investment in BoCom had been below the carrying amount for approximately 12 years. We have previously
disclosed that the excess of the value in use (‘VIU’) calculation over its balance sheet value has been marginal in recent years, and that
reasonably possible changes in assumptions could generate an impairment.
Recent macroeconomic, policy and industry-wide factors resulted in a wider range of possible VIU calculation outcomes, and our VIU calculation
uses both historical experience and market participant views to estimate future cash flows, relevant discount rates and associated capital
assumptions. At 31 December 2023, the Group performed an impairment test on the carrying amount, which resulted in an impairment of
$3.0bn, as the recoverable amount as determined by a VIU calculation was lower than the carrying value.
At 31 Dec 2023
At 31 Dec 2022
VIU
Carrying value
Fair value
VIU
Carrying value
Fair value
$bn
$bn
$bn
$bn
$bn
$bn
BoCom
21.2
21.2
8.8
23.5
23.3
8.1
The impairment test will be updated in future periods, reflecting updated assumptions in the VIU impairment calculation. Going forward, the
carrying value will be aligned to the updated VIU calculation and capped at carrying value that would have been determined had no impairment
loss been recognised, rather than at cost and adjusted thereafter for the post-acquisition change in the Group’s share of associate’s net assets,
and therefore there is a risk of reversals or further impairments 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 increases or reductions in the VIU include changes in BoCom’s short-
term performance, a change in regulatory capital requirements or revisions to the forecast of BoCom’s future profitability.
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 value.
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 ’Impairment of Assets’. 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. Forecast
earnings growth over the short to medium term is lower than recent (within the last five years) actual growth, and reflects the impact of recent
macroeconomic, policy and industry factors in mainland China. As a result of management‘s intent to continue to retain its investment, 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 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 CMC reflects the revised capital
requirements arising from revisions of the ratio of risk-weighted assets to total assets assumption. The principal inputs to the CMC calculation
include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital requirements. An increase in the
CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other 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% (2022: 3%) for periods after 2027, which does not exceed forecast GDP growth in mainland China and is
similar to forecasts by external analysts.
–Long-term asset growth rate: 3% (2022: 3%) for periods after 2027, which is the rate that assets are expected to grow to achieve long-term
profit growth of 3%.
–Discount rate: 9.00% (2022: 10.04%), which is based on a capital asset pricing model (‘CAPM’), using market data. The discount rate used is
within the range of 7.9% to 9.7% (2022: 8.4% to 10.4%) indicated by the CAPM, and decreased as a consequence of a market-driven
reduction in beta. While the CAPM range sits at the lower end of the range adopted by selected external analysts of 8.8% to 13.5%
(2022: 8.8% to 13.5%), we continue to regard the CAPM range as the most appropriate basis for determining this assumption.
–Expected credit losses (‘ECL’) as a percentage of loans and advances to customers: ranges from 0.80% to 0.97% (2022: 0.99% to 1.05%) in
the short to medium term, reflecting reported credit experience in mainland China. For periods after 2027, the ratio is 0.97% (2022: 0.97%),
which is higher than BoCom’s average ECL as a percentage of loans and advances to customers in recent years prior to the pandemic.
–Risk-weighted assets as a percentage of total assets: ranges from 62.0% to 63.7% (2022: 61.0% to 64.4%) in the short to medium term,
reflecting higher risk-weights in the short term followed by an expected reversion to recent historical levels. For periods after 2027, the ratio
is 62.0% (2022: 61.0%), which is similar to BoCom’s actual results in recent years.
–Loans and advances to customers growth rate: ranges from 9.0% to 10.0% (2022: 7.1% to 11.0%) in the short to medium term, reflecting
higher growth rate in loans and advances to customers as a result of recent macroeconomic, policy and industry factors in mainland China.
Increases in the forecast growth rate of loans and advances to customers results in higher forecast ECL.
HSBC Holdings plc
419
–Operating income growth rate: ranges from -0.4% to 9.7% (2022: 1.9% to 7.7%) in the short to medium term, which is lower than BoCom’s
actual results in recent years, and is impacted by projections of net interest income in the short term as a consequence of recent
macroeconomic, policy and industry factors in mainland China.
–Cost-income ratio: ranges from 35.5% to 39.8% (2022: 35.5% to 36.3%) in the short to medium term. These ratios are higher than BoCom‘s
actual results in recent years and forecasts disclosed by external analysts.
–Effective tax rate (‘ETR’): ranges from 5.3% to 15.0% (2022: 4.4% to 15.0%) 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 2027, the rate is 15.0%
(2022: 15.0%), which is higher than the recent historical average, and aligned to the minimum tax rate as proposed by the OECD/Group of 20
(‘G20’) Inclusive Framework on Base Erosion and Profit Shifting.
–Capital requirements: capital adequacy ratio of 12.5% (2022: 12.5%) and tier 1 capital adequacy ratio of 9.5% (2022: 9.5%), based on
BoCom’s capital risk appetite and capital requirements respectively.
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. Loans and advances to customers growth rate has been added to the list of key assumptions detailed in the table to reflect the greater
potential variability associated with the assumption as a result of recent macroeconomic, policy and industry factors in mainland China. The
selected rates of reasonably possible changes to key assumptions are based on external analysts’ forecasts, statutory requirements and other
relevant external data sources, which can change period to period. Unless specified, favourable and unfavourable changes are consistently
applied throughout short-to-medium and long-term forecast years, based on a straight-line average of the base case assumption.
Sensitivity of VIU to reasonably possible changes in key assumptions
Favourable change
Unfavourable change
Increase in
VIU
VIU
Decrease in
VIU
VIU
bps
$bn
$bn
bps
$bn
$bn
At 31 Dec 2023
Long-term profit growth rate1
58
3.3
24.5
(79)
(3.4)
17.8
Long-term asset growth rate1
(79)
4.5
25.7
58
(4.0)
17.2
Discount rate
(110)
4.5
25.7
280
(6.1)
15.1
Expected credit losses as a percentage
of loans and advances to customers
2023 to 2027: 78
2028 onwards: 91
2.9
24.1
2023 to 2027: 120
2028 onwards: 104
(4.4)
16.8
Risk-weighted assets as a percentage of total assets
(150)
0.9
22.1
216
(1.6)
19.6
Loans and advances to customers growth rate
(213)
3.2
24.4
207
(2.9)
18.3
Operating income growth rate
57
2.6
23.8
(81)
(2.6)
18.6
Cost-income ratio
(212)
0.8
22.0
99
(2.9)
18.3
Long-term effective tax rate
(426)
1.6
22.8
1,000
(3.5)
17.7
Capital requirements – capital adequacy ratio
—
—
21.2
215
(7.5)
13.7
Capital requirements – tier 1 capital adequacy ratio
—
—
21.2
248
(3.7)
17.5
At 31 Dec 2022
Long-term profit growth rate1
75
3.6
27.1
(71)
(2.7)
20.8
Long-term asset growth rate1
(71)
3.1
26.6
75
(4.1)
19.4
Discount rate
(164)
6.9
30.4
136
(3.7)
19.8
Expected credit losses as a percentage
of loans and advances to customers
2022 to 2026: 95
2027 onwards: 91
1.9
25.4
2022 to 2026: 120
2027 onwards: 104
(2.9)
20.6
Risk-weighted assets as a percentage of total assets
(118)
0.1
23.6
239
(2.3)
21.2
Loans and advances to customers growth rate
(75)
1.1
24.6
295
(3.2)
20.3
Operating income growth rate
44
1.3
24.8
(83)
(2.5)
21.0
Cost-income ratio
(122)
1.0
24.5
174
(2.1)
21.4
Long-term effective tax rate
(426)
1.5
25.0
1,000
(3.6)
19.9
Capital requirements – capital adequacy ratio
—
—
23.5
191
(6.3)
17.2
Capital requirements – tier 1 capital adequacy ratio
—
—
23.5
266
(3.2)
20.3
1  The favourable and unfavourable ranges of the long-term profit growth rate and long-term asset growth rate assumptions reflect the close relationship
between these assumptions, which would result in offsetting changes to each assumption.
Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is
$13.1bn to $28.8bn (2022: $16.9bn to $28.7bn), acknowledging that the fair value of the Group’s investment has ranged from $6.8bn to $11.6bn
over the last five years as at the date of the impairment tests. The possible range of VIU is based on impacts set out in the table above arising
from the favourable/unfavourable change in the earnings in the short to medium term, the long-term expected credit losses as a percentage of
loans and advances to customers, and a 50bps increase/decrease in the discount rate. All other long-term assumptions, 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 2023, HSBC included the associate’s
results on the basis of the financial statements for the 12 months ended 30 September 2023, taking into account any known changes in the
subsequent period from 1 October 2023 to 31 December 2023 that would have materially affected the results.
Notes on the financial statements
420
HSBC Holdings plc
Selected balance sheet information of BoCom
At 30 Sep
At 31 Dec
2023
2022
$m
$m
Cash and balances at central banks
112,800
116,942
Due from and placements with banks and other financial institutions
100,464
100,160
Loans and advances to customers
1,087,613
1,035,151
Other financial assets
587,949
583,898
Other assets
59,215
48,796
Total assets
1,948,041
1,884,947
Due to and placements from banks and other financial institutions
292,065
295,205
Deposits from customers
1,216,611
1,153,184
Other financial liabilities
251,246
249,230
Other liabilities
36,776
37,153
Total liabilities
1,796,698
1,734,772
Total equity
151,343
150,175
Reconciliation of BoCom’s total shareholders’ equity to the carrying amount in HSBC’s consolidated financial statements
At 30 Sep
2023
2022
$m
$m
HSBC’s share of total shareholders’ equity
23,746
22,828
Goodwill originally arising on acquisition
464
479
Impairment
(3,000)
—
Carrying amount 
21,210
23,307
Selected income statement information of BoCom
For the 9 months ended 30 Sep
2023
2022
$m
$m
Net interest income
17,519
19,004
Net fee and commission income
4,815
5,181
Credit and impairment losses
(6,836)
(7,641)
Depreciation and amortisation
(1,977)
(1,785)
Tax expense
(552)
(436)
Profit for the year
9,835
10,102
Other comprehensive income
631
(37)
Total comprehensive income
10,466
10,065
Dividends received from BoCom
736
749
Saudi Awwal Bank
The Group’s investment in Saudi Awwal Bank (‘SAB’) is classified as an associate. HSBC is the largest shareholder in SAB with a shareholding
of 31%. Significant influence in SAB 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
There were no indicators of impairment at 31 December 2023. The fair value of the Group’s investment in SAB of $6.4bn was above the
carrying amount of $4.7bn.
HSBC Holdings plc
421
19
Investments in subsidiaries
Main subsidiaries of HSBC Holdings1
At 31 Dec 2023
Place of
incorporation or
registration
HSBC’s
interest
%
Share class
Europe
HSBC Bank plc
England and Wales
100
£1 Ordinary, $0.01 Non-Cumulative Third Dollar
Preference
HSBC UK Bank plc
England and Wales
100
£1 Ordinary
HSBC Continental Europe
France
99.99
€5 Actions
HSBC Trinkaus & Burkhardt GmbH
Germany
99.99
€1 Ordinary
Asia
Hang Seng Bank Limited2
Hong Kong
62.14
HK$5 Ordinary
HSBC Bank (China) Company Limited
People’s Republic of
China
100
CNY1 Ordinary
HSBC Bank Malaysia Berhad
Malaysia
100
RM0.5 Ordinary
HSBC Life (International) Limited
Bermuda
100
HK$1 Ordinary
The Hongkong and Shanghai Banking Corporation Limited
Hong Kong
100
Ordinary no par value
Middle East, North Africa and Türkiye
HSBC Bank Middle East Limited
United Arab Emirates
100
$1 Ordinary and $1 Cumulative Redeemable Preference
shares
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  Main subsidiaries are either held directly or indirectly via intermediate holding companies. There has been no material percentage change in HSBC’s
shareholding for its main subsidiaries since 2022.
2  In addition to the strategic holding disclosed above, the Group held 0.09% (2022: 0.07%) shareholding as part of its trading books.
Details of the debt, subordinated debt and preference shares issued by the main subsidiaries to parties external to the Group are included in
Note 26 ‘Debt securities in issue’ and Note 29 ‘Subordinated liabilities’, respectively.
A list of all related undertakings is set out in Note 40. The principal countries and territories 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 financial resource 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.
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 2023, consistent with the Group’s capital plan, the Group’s material 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 from material subsidiaries. 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 34.
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.
Impairment testing of investments in subsidiaries
At each reporting period end, HSBC Holdings reviews investments in subsidiaries for indicators of impairment. An impairment is recognised
when the carrying amount exceeds the recoverable amount for that investment. The recoverable amount is the higher of the investment’s fair
value less costs of disposal and its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting management’s
cash flow projections for the investment. The cash flows represent the free cash flows based on the subsidiary’s binding capital requirements.
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: The cash flow projections for each investment are based on the latest approved
plans, which include forecast capital available for distribution based on the capital requirements of the subsidiary, taking into account
minimum and core capital requirements. For the impairment test as at 31 December 2023, cash flow projections until the end of 2028 were
considered in line with our internal planning horizon. Our cash flow projections include known and observable climate-related opportunities
and costs associated with our sustainable products and operating model.
–Long-term growth rates: The long-term growth rate is used to extrapolate the free cash flows in perpetuity because of the long-term
perspective of the legal entity. The growth rate reflects long-term inflation for the country or territory within which the investment operates.
Notes on the financial statements
422
HSBC Holdings plc
–Discount rates: The rate used to discount the cash flows is based on the cost of capital assigned to each investment, which is derived using
a CAPM and market implied cost of equity. CAPM depends on a number of inputs reflecting financial and economic variables, including the
risk-free rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s
assessment of the economic variables and management’s judgement. The discount rates for each investment are refined to reflect the rates
of inflation for the countries or territories within which the investment operates. In addition, for the purposes of testing investments for
impairment, management supplements this process by comparing the discount rates derived using the internally generated CAPM, with cost
of capital rates produced by external sources for businesses operating in similar markets. The impacts from climate risk are included to the
extent that they are observable in discount rates and asset prices.
As at 31 December 2023, the carrying amount of HSBC Holdings’ investments in subsidiaries was $159.5bn (2022: $167.5bn). The net year-on-
year reduction was predominantly due to the recognition of a $5.5bn impairment of HSBC Holdings’ investment in HSBC Overseas Holdings
(UK) Limited, resulting in a cumulative impairment of $10.2bn (2022: $4.7bn), and a carrying amount of $25.8bn as at 31 December 2023 (2022:
$32.8bn).
The recoverable amount of HSBC Overseas Holdings (UK) Limited is assessed as the aggregate of the recoverable amounts of its subsidiaries.
During 2023, the principal subsidiaries of HSBC Overseas Holdings (UK) Limited were HSBC North America Holdings Limited, HSBC Bank
Canada and HSBC Bank Bermuda. In October 2023, HSBC Bank Bermuda was transferred to HSBC Bank plc. As at 31 December 2023, the
adjusted net asset value of HSBC Overseas Holdings (UK) Limited fell below the carrying amount therefore management assessed that
indicators of impairment were present and an impairment test was performed. The recoverable amount reduced owing to lower projected
profits and higher projected capital requirements for HSBC North America Holdings, the transfer of HSBC Bank Bermuda to HSBC Bank plc at
its book value which stood below its assessed recoverable amount, and higher prevailing discount rates, as a result of which a $5.5bn
impairment was recognised.
As HSBC Overseas Holdings (UK) Limited has entered into a sales purchase agreement with Royal Bank of Canada to dispose of our banking
business in Canada, the sales purchase agreement has been used to support the recoverable amount of $11.0bn (2022: $10.8bn) (inclusive of
the preferred shares) under a fair value less costs of disposal basis. The fair value less costs of disposal of HSBC Bank Canada is at a $3.7bn
(2022: $3.7bn) premium to the book value recorded in HSBC Overseas Holdings (UK) Limited. In 2024, a distribution of the proceeds from the
planned sale of our banking business in Canada to HSBC Holdings from HSBC Overseas Holdings (UK) Limited could lead to a future
impairment. In respect of distributable reserves, an impairment would be offset by the dividend income recognised on the distributions from
sales proceeds.
Impairment test results
Investments
Recoverable
amount
Discount
rate
Long-term growth
rate
At 31 Dec 2023
$m
%
%
HSBC North America Holdings Limited
12,756
10.50
2.17
At 31 Dec 2022
HSBC North America Holdings Limited
18,363
10.00
2.22
Sensitivities of key assumptions in calculating VIU
At 31 December 2023, the recoverable amount of HSBC Overseas Holdings (UK) Limited remained sensitive to reasonably possible changes in
key assumptions impacting its principal subsidiary, HSBC North America Holdings Limited.
In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in respect of each input to
the model. These include the external range of observable discount rates, historical performance against forecast, and risks attached to the key
assumptions underlying cash flow.
The following table presents a summary of the key assumptions underlying the most sensitive inputs to the model for HSBC North America
Holdings Limited, the key risks attached to each, and details of a reasonably possible change to assumptions where, in the opinion of
management, these could result in a change in VIU.
Reasonably possible changes in key assumptions
Input
Key assumptions
Associated risks
Reasonably possible
change
Investment
HSBC North America Holdings
Limited (subsidiary of HSBC
Overseas Holdings (UK) Limited)
Free cash flows projections
–Level of interest rates
and yield curves.
–Competitors’ positions
within the market.
–Strategic actions
relating to revenue
and costs are not
achieved.
–Free cash flow
projections decrease
by 10%.
Discount rate
–Discount rate used is a
reasonable estimate of
a suitable market rate
for the profile of the
business.
–External evidence
arises to suggest that
the rate used is not
appropriate to the
business.
–Discount rate
decreases by 1%.
–Discount rate
increases by 1%.
HSBC Holdings plc
423
Sensitivity of VIU to reasonably possible changes in key assumptions
In $bn (unless otherwise stated)
HSBC North America
Holdings Limited
At 31 December 2023
VIU
12.8
Impact on VIU
100bps decrease in the discount rate – single variable1
1.6
100bps increase in the discount rate – single variable1, 2 
(1.2)
10% decrease in forecast profitability – single variable1, 2
(1.3)
1  The recoverable amount of HSBC Overseas Holdings (UK) Limited represents the aggregate of recoverable amounts of the underlying subsidiaries.
Single variable sensitivity analysis on a single subsidiary may therefore not be representative of the aggregate impact of the change in the variable.
2  As at 31 December 2022, the impact on the VIU of HSBC North America Holdings Limited of a 100bps increase in the discount rate was $(1.7)bn and
a 10% decrease in forecast profitability was $(1.8)bn, respectively on a single variable basis.
Subsidiaries with significant non-controlling interests
2023
2022¹
Hang Seng Bank Limited
Proportion of ownership interests and voting rights held by non-controlling interests (%)2
37.86
37.86
Place of business
Hong Kong
Hong Kong
$m
$m
Profit attributable to non-controlling interests
889
574
Accumulated non-controlling interests of the subsidiary
6,877
6,513
Dividends paid to non-controlling interests
490
361
Summarised financial information:
–  total assets
214,321
235,630
–  total liabilities
194,621
216,917
–  net operating income before changes in expected credit losses and other credit impairment charges
5,210
4,379
–  profit for the year
2,356
1,518
–  total comprehensive income for the year
2,723
1,428
1  From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
2  In addition to the strategic holding disclosed above, the Group held 0.09% (2022: 0.07%) shareholding as part of its trading books.
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
Conduits
Securitisations
HSBC managed funds
Other
Total
$bn
$bn
$bn
$bn
$bn
At 31 Dec 2023
3.6
7.8
5.5
8.2
25.1
At 31 Dec 2022
4.2
7.2
4.8
7.5
23.7
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 2023, Solitaire, HSBC’s principal SIC, held $1.0bn of ABSs (2022: $1.3bn). It is currently funded entirely by commercial
paper (‘CP’) issued to HSBC. At 31 December 2023, HSBC held $1.3bn of CP (2022: $1.5bn).
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 $6.1bn at 31 December 2023 (2022: $6.2bn). First
loss protection is provided by the originator of the assets, and not by HSBC, through transaction-specific credit enhancements. A layer of
secondary loss protection is provided by HSBC in the form of programme-wide enhancement facilities.
Securitisations
HSBC uses structured entities to securitise customer loans and advances it originates in order to diversify its sources of funding for asset
origination and capital efficiency purposes. The loans and advances are transferred by HSBC to the structured entities for cash or synthetically
through credit default swaps, and the structured entities issue debt securities to investors.
HSBC managed funds
HSBC has established a number of money market and non-money market funds. Where it is deemed to be acting as principal rather than agent
in its role as investment manager, HSBC controls these funds.
Other
HSBC has entered into a number of transactions in the normal course of business, which include asset and structured finance transactions
where it has control of the structured entity. In addition, HSBC is deemed to control a number of third-party managed funds through its
involvement as a principal in the funds.
Notes on the financial statements
424
HSBC Holdings plc
Unconsolidated structured entities
The term ‘unconsolidated structured entities’ refers to all structured entities not controlled by HSBC. The Group enters into transactions with
unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment opportunities.
Nature and risks associated with HSBC interests in unconsolidated structured entities
Securitisations
HSBC managed
funds
Non-HSBC
managed funds
Other
Total
Total asset values of the entities ($m)
0–500
120
337
1,271
42
1,770
500–2,000
4
96
1,069
3
1,172
2,000–5,000
—
39
418
—
457
5,000–25,000
—
24
217
—
241
25,000+
—
3
11
—
14
Number of entities at 31 Dec 2023
124
499
2,986
45
3,654
$bn
$bn
$bn
$bn
$bn
Total assets in relation to HSBC’s interests in the unconsolidated
structured entities
3.2
13.9
20.7
3.3
41.1
–  trading assets
—
0.6
—
—
0.6
–  financial assets designated and otherwise mandatorily
measured at fair value
—
12.6
19.7
—
32.3
–  loans and advances to customers
3.2
—
0.6
2.5
6.3
–  financial investments
—
0.7
0.4
—
1.1
–  other assets
—
—
—
0.8
0.8
Total liabilities in relation to HSBC’s interests in the
unconsolidated structured entities
—
—
—
0.3
0.3
–  other liabilities
—
—
—
0.3
0.3
Other off-balance sheet commitments
0.1
1.9
5.0
1.2
8.2
HSBC’s maximum exposure at 31 Dec 2023
3.3
15.8
25.7
4.2
49.0
Total asset values of the entities ($m)
0–500
85
338
1,321
41
1,785
500–2,000
8
102
929
4
1,043
2,000–5,000
—
28
388
—
416
5,000–25,000
—
18
206
—
224
25,000+
—
5
24
—
29
Number of entities at 31 Dec 2022
93
491
2,868
45
3,497
$bn
$bn
$bn
$bn
$bn
Total assets in relation to HSBC’s interests in the unconsolidated
structured entities
2.5
10.7
19.7
2.6
35.5
–  trading assets
—
0.4
0.1
—
0.5
–  financial assets designated and otherwise mandatorily
measured at fair value
—
9.7
18.7
—
28.4
–  loans and advances to customers
2.5
—
0.5
1.9
4.9
–  financial investments
—
0.6
0.4
—
1
–  other assets
—
—
—
0.7
0.7
Total liabilities in relation to HSBC’s interests in the
unconsolidated structured entities
—
—
—
0.4
0.4
–  other liabilities
—
—
—
0.4
0.4
Other off-balance sheet commitments
0.2
1.5
4.6
1.8
8.1
HSBC’s maximum exposure at 31 Dec 2022
2.7
12.2
24.3
4
43.2
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
amount 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 131.
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.
HSBC Holdings plc
425
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 2023 and 2022 was not significant.
21
Goodwill and intangible assets
2023
2022¹
$m
$m
Goodwill
4,323
4,156
Other intangible assets2
8,164
7,263
At 31 Dec
12,487
11,419
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2Included within other intangible assets is internally generated software with a net carrying amount of $6,895m (2022: $6,166m). During the year,
capitalisation of internally generated software was $2,306m (2022: $2,663m), reversal of impairment was $285m (2022: impairment of $125m) and
amortisation was $1,877m (2022: $1,447m).
Movement analysis of goodwill
2023
2022
$m
$m
Gross amount
At 1 Jan
18,965
22,215
Exchange differences
523
(776)
Reclassified to held for sale and additions1
73
(2,485)
Other
(1)
11
At 31 Dec
19,560
18,965
Accumulated impairment losses
At 1 Jan
(14,809)
(17,182)
Exchange differences
(428)
482
Reclassified to held for sale1
—
1,891
At 31 Dec
(15,237)
(14,809)
Net carrying amount at 31 Dec
4,323
4,156
1Includes goodwill allocated to disposal groups as a result of the sales of our retail banking operations in France and branch operations in Greece, and
planned sale of our banking business in Canada, offset by goodwill arising from the acquisition of L&T Investment Management Limited. For further
details, see Note 23.
Goodwill
Impairment testing
The Group’s impairment test in respect of goodwill allocated to each cash-generating unit (‘CGU’) is performed at 1 October each year. A review
for indicators of impairment is undertaken at each subsequent quarter-end and at 31 December 2023. No indicators of impairment were
identified as part of these reviews.
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. 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 2023
Carrying
amount at
1 Oct 2023
of which
goodwill
Value in
use at
1 Oct 2023
Discount
rate
Growth
rate
beyond
initial
cash flow
Carrying
amount at
1 Oct 2022
of which
goodwill
Value in
use at
1 Oct 2022
Discount
rate
Growth
rate
beyond initial
cash flow
projections
$m
$m
$m
%
%
$m
$m
$m
%
%
HSBC UK
Bank plc –
WPB1
11,167
2,597
27,933
10.4
2.0
N/A
N/A
N/A
N/A
N/A
Europe –
WPB1
N/A
N/A
N/A
N/A
N/A
15,215
2,643
46,596
9.9
2.0
1  Following change in the Reporting Framework the Group’s CGUs are main legal entities subdivided by global business effective 1 January 2023.
Notes on the financial statements
426
HSBC Holdings plc
At 1 October 2023, aggregate goodwill of $1,599m (1 October 2022: $1,464m) 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 Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill in the next financial year,
but does consider this to be an area that is inherently judgemental. The cash flow projections for each CGU are based on forecast profitability
plans approved by the Board and minimum capital levels required to support the business operations of a CGU. 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 2023 impairment test, cash flow projections until the end of 2028 were considered, in line with our
internal planning horizon. Key assumptions underlying cash flow projections reflect management’s outlook on interest rates and inflation, as well
as business strategy, including the scale of investment in technology and automation. Our cash flow projections include known and observable
climate-related opportunities and costs associated with our sustainable products and operating model. As required by IFRS Accounting
Standards, 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 equity assigned to each CGU, which is derived using a capital asset pricing
model (‘CAPM’) and market implied cost of equity. 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 equity rates produced
by external sources for businesses operating in similar markets. The impacts of climate risk are included to the extent that they are observable
in discount rates and asset prices.
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 1 October 2023, given the extent by which VIU exceeds carrying amount, the HBUK WPB CGU was not 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 VIU calculation, such as the external range of discount rates
observable, historical performance against forecast and risks attaching to the key assumptions underlying cash flow projections. None of the
remaining CGUs are individually significant.
Other intangible assets
Impairment testing
Impairment of other intangible assets is assessed in accordance with our policy explained in Note 1.2(n) by comparing the net carrying amount
of CGUs containing intangible assets with their recoverable amounts. Recoverable amounts are determined by calculating an estimated VIU or
fair value, as appropriate, for each CGU. No significant impairment was recognised during the year.
Key assumptions in VIU calculation
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of other intangible assets in the next
financial year, but does consider this to be an area that is inherently judgemental. 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, current market conditions and our
macroeconomic outlook to estimate future earnings. As required by IFRS Accounting Standards, 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 may not be included in the impairment assessment, including capital releases. Our cash flow projections include
known and observable climate-related opportunities and costs associated with our sustainable products and operating model.
–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 combination of CAPM and market-implied calculations considering market data for the businesses and
geographies in which the Group operates. The impacts of climate risk are included to the extent that they are observable in discount rates
and asset prices.
Sensitivity of estimates relating to non-financial assets
As explained in Note 1.2(a), estimates of future cash flows for 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. 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
31 December 2023 none of the CGUs were 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 VIU calculation, such as the external range of discount rates observable, historical performance against forecast and risks
attaching to the key assumptions underlying cash flow projections.
HSBC Holdings plc Annual Report and Accounts 2022
427
22
Prepayments, accrued income and other assets
2023
2022¹
$m
$m
Prepayments and accrued income
13,854
10,279
Settlement accounts
32,853
19,565
Cash collateral and margin receivables
57,058
63,421
Bullion
13,701
15,752
Endorsements and acceptances
7,939
8,407
Insurance contract assets (Note 4)
252
136
Reinsurance contract assets
4,728
4,310
Employee benefit assets (Note 5)
7,750
7,282
Right-of-use assets
2,456
2,219
Owned property, plant and equipment
10,478
10,365
Other accounts
14,186
14,413
At 31 Dec
165,255
156,149
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
Prepayments, accrued income and other assets include $122,863m (2022: $112,464m) of financial assets, the majority of which are measured
at amortised cost.
23
Assets held for sale, liabilities of disposal groups held for sale and
business acquisitions
2023
2022
$m
$m
Held for sale at 31 Dec
Disposal groups
115,836
118,055
Unallocated impairment losses1
(1,975)
(2,385)
Non-current assets held for sale
273
249
Assets held for sale
114,134
115,919
Liabilities of disposal groups held for sale
108,406
114,597
1  This represents impairment losses in excess of the carrying value of the non-current assets, excluded from the measurement scope of IFRS 5.
Disposal groups and other planned disposals
Sale of our retail banking operations in France
On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking business in France to CCF, a subsidiary of Promontoria
MMB SAS (‘My Money Group’). The sale also included HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3%
ownership interest in Crédit Logement.
In the first quarter of 2023, the sale had become less certain, as a result of which we recognised a $2.1bn partial reversal of the impairment loss
recognised in 2022, when the disposal group was classified as held for sale. In the fourth quarter of 2023, following the receipt of regulatory
approvals and the satisfaction of other relevant conditions, we reclassified the disposal group as held for sale, and it was subsequently
remeasured at the lower of the carrying amount and fair value less costs to sell. This resulted in the reinstatement of a €1.8bn ($2.0bn) pre-tax
impairment loss reflecting the final terms of the sale, giving rise to a net reversal of impairment recognised in other operating income in the year
of $0.1bn.
Upon completion and in accordance with the terms of the sale, HSBC Continental Europe received a €0.1bn ($0.1bn) profit participation interest
in the ultimate holding company of My Money Group. The associated impacts on initial recognition of this stake at fair value were recognised as
part of the pre-tax loss on disposal. In addition, we recognised the reversal of a €0.4bn ($0.4bn) deferred tax liability, which had arisen as a
consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible
in the French tax return in 2021.
In accordance with the terms of the sale, HSBC Continental Europe retained a portfolio of €7.1bn ($7.8bn) consisting of home and certain other
loans, in respect of which it may consider on-sale opportunities at a suitable time, and the CCF brand, which it licensed to the buyer under a
long-term licence agreement. Additionally, HSBC Continental Europe’s subsidiaries, HSBC Assurances Vie (France) and HSBC Global Asset
Management (France), have entered into distribution agreements with the buyer. Ongoing costs associated with the retention of the home and
certain other loans, net of income on distribution agreements and the brand licence, are estimated to have an after-tax loss impact of €0.1bn
($0.1bn) in 2024 based on expected funding rates.
Planned sale of our banking business in Canada
On 29 November 2022, HSBC Holdings plc announced that its wholly-owned subsidiary, HSBC Overseas Holdings (UK) Limited, had entered
into an agreement for the sale of its banking business in Canada to the Royal Bank of Canada. Completion of the transaction is expected to
occur in the first quarter of 2024 and the required governmental approvals have been obtained. The majority of the estimated gain on sale of
$5.2bn (as at 31 December 2023) will be recognised on completion, reduced by earnings recognised by the Group in the period to completion.
There would be no tax on the gain recognised at completion. This estimated gain would also have been reduced by $0.3bn in fair value losses
recognised on the related foreign exchange hedges in 2023. The estimated pre-tax profit on the sale will be recognised through a combination
of the consolidation of HSBC Canada’s results into the Group’s financial statements (between the 30 June 2022 net asset reference date and
until completion), and the remaining gain on sale recognised at completion. At 31 December 2023, total assets of $87.9bn and total liabilities of
$81.5bn met the criteria to be classified as held for sale in accordance with IFRS 5.
Notes on the financial statements
428
HSBC Holdings plc Annual Report and Accounts 2023
Planned sale of our business in Russia
On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc)
entered into an agreement for the sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). In 2022, a $0.3bn
impairment loss on the planned sale was recognised, upon classification as held for sale in accordance with IFRS 5. As at 31 December 2023,
following US sanctions designation of the buyer, the outcome of the planned sale became less certain. This resulted in the reversal of $0.2bn of
the previously recognised loss, as the business was no longer classified as held for sale. However, owing to restrictions impacting the
recoverability of assets in Russia, we recognised charges of $0.2bn in other operating income. Completion of the planned sale remains subject
to regulatory approval. On completion, accumulated foreign currency translation reserves will be recycled to the income statement.
Our branch operations in Greece
On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta
Bank SA. In the second quarter of 2022, we recognised a loss of $0.1bn upon reclassification as held for sale in accordance with IFRS 5. At
completion on 28 July 2023, the disposal group included $0.3bn of loans and advances to customers and $1.1bn of customer accounts.
Merger of our business in Oman
In November 2022, HSBC Bank Oman SAOG entered into a binding merger agreement with Sohar International Bank SAOG, under which the
two banks agreed to take the necessary steps to implement a merger by incorporation, whereby HSBC Bank Oman would merge into Sohar
International Bank. Following regulatory and shareholder approvals, the merger was completed on 17 August 2023 by way of dissolution and
transfer of all the assets and liabilities of HSBC Bank Oman to Sohar International Bank, with the shareholders of HSBC Bank Oman receiving
the consideration in cash and shares in Sohar International Bank. Separately, HSBC Bank Middle East Limited is in the process of establishing a
new wholesale banking branch in Oman subject to regulatory approvals.
Our New Zealand loan portfolio
In August 2023, the Hongkong and Shanghai Banking Corporation Limited (acting through its New Zealand branch) entered into an agreement
with Pepper New Zealand Limited, a wholly-owned subsidiary of Pepper Money Limited, to sell its New Zealand retail mortgage loan portfolio.
The sale was classified as held for sale in the third quarter of 2023 and was completed on 1 December 2023.
Our retail business in Mauritius
In November 2023, the Hongkong and Shanghai Banking Corporation Limited (acting through its Mauritius branch) entered into an agreement
with ABSA Bank (Mauritius) Limited, a wholly-owned subsidiary of ABSA Bank Group Limited, to sell its Wealth and Personal Banking business.
The sale is expected to complete in the second half of 2024 subject to regulatory approvals.
At 31 December 2023, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment
losses, were as follows:
Canada
Retail banking
operations in France
Other1
Total
$m
$m
$m
$m
Assets of disposal groups held for sale
Cash and balances at central banks2
5,370
226
—
5,596
Trading assets
2,465
—
—
2,465
Financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
15
49
—
64
Derivatives
528
—
—
528
Loans and advances to banks2
154
10,333
—
10,487
Loans and advances to customers 
56,129
16,902
254
73,285
Reverse repurchase agreements – non-trading
2,723
—
—
2,723
Financial investments3
16,978
33
17,011
Goodwill
225
—
225
Prepayments, accrued income and other assets
3,318
132
2
3,452
Total assets at 31 Dec 2023
87,905
27,675
256
115,836
Liabilities of disposal groups held for sale
Trading liabilities
1,417
—
—
1,417
Deposits by banks
78
—
—
78
Customer accounts 
63,001
22,307
642
85,950
Repurchase agreements – non-trading
2,768
—
—
2,768
Financial liabilities designated at fair value
—
2,370
—
2,370
Derivatives
608
7
—
615
Debt securities in issue 
7,707
1,377
—
9,084
Subordinated liabilities
8
—
—
8
Accruals, deferred income and other liabilities
5,916
196
4
6,116
Total liabilities at 31 Dec 2023
81,503
26,257
646
108,406
Expected date of completion
First quarter of 2024
1 January 2024
Operating segment
All global businesses
WPB
1  Includes balances classified as held for sale in respect of the planned sale of our retail business in Mauritius and planned sale of our global hedge fund
administration business across several markets.
2  Under the financial terms of the sale of our retail banking operations in France, HSBC Continental Europe will transfer the business with a net asset
value of €1.7bn ($1.8bn) for a consideration of €1. Any required increase to the net asset value of the business to achieve this will be satisfied by the
inclusion of additional cash. Based upon the net liabilities of the disposal group at 31 December 2023, HSBC would be expected to include a cash
contribution of $11bn, of which $10.5bn was reclassified as held for sale at 31 December 2023 (‘Loans and advances to banks’, $10.3bn, ‘Cash and
balances at central bank’, $0.2bn).
3  Includes financial investments measured at fair value through other comprehensive income of $9.4bn and debt instruments measured at amortised
cost of $7.6bn.
HSBC Holdings plc Annual Report and Accounts 2023
429
At 31 December 2022, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment
losses, were as follows:
Canada
Retail banking
operations in France
Other
Total
$m
$m
$m
$m
Assets of disposal groups held for sale
Cash and balances at central banks
4,664
71
1,811
6,546
Trading assets
3,168
—
8
3,176
Financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
13
47
1
61
Derivatives
866
—
—
866
Loans and advances to banks
99
—
154
253
Loans and advances to customers 
55,197
25,029
350
80,576
Reverse repurchase agreements – non-trading
4,396
—
250
4,646
Financial investments1
17,243
—
106
17,349
Goodwill
225
—
—
225
Prepayments, accrued income and other assets
4,245
75
26
4,357
Total assets at 31 Dec 2022
90,127
25,222
2,706
118,055
Liabilities of disposal groups held for sale
Trading liabilities
2,751
—
3
2,754
Deposits by banks
62
—
2
64
Customer accounts 
60,606
22,348
2,320
85,274
Repurchase agreements – non-trading
3,266
—
—
3,266
Financial liabilities designated at fair value
—
3,523
—
3,523
Derivatives
806
7
—
813
Debt securities in issue 
11,602
1,326
—
12,928
Subordinated liabilities
8
—
—
8
Accruals, deferred income and other liabilities
5,727
159
81
5,967
Total liabilities at 31 Dec 2022
84,828
27,363
2,406
114,597
Expected date of completion
Second half of 2023
Second half of 2023
Operating segment
All global businesses
WPB
1  Includes financial investments measured at fair value through other comprehensive income of $11.2bn and debt instruments measured at amortised
cost of $6.2bn.
Business acquisitions
Acquisition of Silicon Valley Bank UK Limited
In March 2023, HSBC UK Bank plc acquired Silicon Valley Bank UK Limited (‘SVB UK’), and in June 2023 changed its legal entity name to HSBC
Innovation Bank Limited. The acquisition was funded from existing resources and brought the staff, assets and liabilities of SVB UK into the
HSBC portfolio. On acquisition, we performed a preliminary assessment of the fair value of the assets and liabilities purchased. We established
an opening balance sheet on 13 March 2023 and applied the result of the fair value assessment, which resulted in a reduction in net assets of
$0.2bn. The provisional gain on acquisition of $1.6bn represents the difference between the consideration paid of £1 and the net assets
acquired. Further due diligence has been performed post-acquisition, resulting in the recognition of an additional gain of $0.1bn at 30 September
2023, as required by IFRS 3 ‘Business Combinations’.
HSBC Innovation Bank Limited contributed $0.5bn of revenue and $0.2bn to the Group profit after tax for the period from 13 March 2023 to
31 December 2023. As per the disclosure requirements set out in IFRS 3 ‘Business Combinations’, if HSBC Innovation Bank Limited had been
acquired on 1 January 2023, management estimates that for the 12 months to 31 December 2023, consolidated revenue would have been
$66bn and consolidated profit after tax would have been $25bn. In determining these amounts, management has assumed that the previously
determined fair value adjustments, which arose on acquisition would have been the same if the acquisition had occurred on 1 January 2023.
The details of the business combination at acquisition are as follows:
At
13 Mar
2023
$m
Fair value of assets acquired
11,367
Fair value of liabilities acquired
(9,776)
Fair value of net assets acquired
1,591
Provisional gain on acquisition
1,591
Consideration transferred settled in cash
—
Cash and cash equivalents acquired
1,243
Net cash inflow on acquisition
1,243
Notes on the financial statements
430
HSBC Holdings plc Annual Report and Accounts 2023
Acquisition of Citibank China’s wealth management portfolio
In October 2023, HSBC Bank (China) Company Limited, a wholly-owned subsidiary of The Hongkong and Shanghai Banking Corporation Limited,
entered into an agreement to acquire Citibank China’s retail wealth management portfolio in mainland China. The portfolio comprises assets
under management and deposits and the associated wealth customers. Upon completion, the acquired business will be integrated into HSBC
Bank China’s Wealth and Personal Banking operations. The transaction is expected to complete in the first half of 2024.
Acquisition of Silkroad Property Partners Singapore
In October 2023, HSBC Global Asset Management Singapore Limited entered into an agreement to acquire 100% of the shares of Silkroad
Property Partners Pte Ltd (‘Silkroad’) and for HSBC Global Asset Management Limited to acquire Silkroad’s affiliated General Partner entities.
Silkroad is a Singapore headquartered Asia-Pacific-focused, real estate investment manager. The acquisition was completed on 31 January
2024.
24
Trading liabilities
2023
2022
$m
$m
Deposits by banks1
6,779
9,332
Customer accounts1
8,955
10,724
Other debt securities in issue (Note 26)
27
978
Other liabilities – net short positions in securities
57,389
51,319
At 31 Dec
73,150
72,353
1‘Deposits by banks’ and ‘Customer accounts’ include fair value repos, stock lending and other amounts.
25
Financial liabilities designated at fair value
HSBC
2023
2022¹
$m
$m
Deposits by banks and customer accounts2
21,043
19,171
Liabilities to customers under investment contracts
5,103
5,374
Debt securities in issue (Note 26)
103,803
93,140
Subordinated liabilities (Note 29)
11,477
9,636
At 31 Dec
141,426
127,321
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
2Structured deposits placed at HSBC Bank USA are insured by the Federal Deposit Insurance Corporation, a US government agency, up to $250,000
per depositor.
The carrying amount of financial liabilities designated at fair value was $4,421m less than the contractual amount at maturity (2022: $8,124m
less). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of $1,286m (2022: profit of $234m).
HSBC Holdings
2023
2022
$m
$m
Debt securities in issue (Note 26)
35,189
25,423
Subordinated liabilities (Note 29)
8,449
6,700
At 31 Dec
43,638
32,123
The carrying amount of financial liabilities designated at fair value was $246m less than the contractual amount at maturity (2022: $2,405m less).
The cumulative amount of change in fair value attributable to changes in credit risk was a loss of $682m (2022: $516m).
26
Debt securities in issue
HSBC
2023
2022
$m
$m
Bonds and medium-term notes
160,632
145,240
Other debt securities in issue
37,115
27,027
Total debt securities in issue
197,747
172,267
Included within:
–  trading liabilities (Note 24)
(27)
(978)
–  financial liabilities designated at fair value (Note 25)
(103,803)
(93,140)
At 31 Dec
93,917
78,149
HSBC Holdings plc Annual Report and Accounts 2023
431
HSBC Holdings
2023
2022
$m
$m
Debt securities
100,428
92,361
Included within:
–  financial liabilities designated at fair value (Note 25)
(35,189)
(25,423)
At 31 Dec
65,239
66,938
27
Accruals, deferred income and other liabilities
2023
2022
$m
$m
Accruals and deferred income
16,814
12,605
Settlement accounts
28,423
18,178
Cash collateral and margin payables
56,832
70,298
Endorsements and acceptances
7,911
8,379
Employee benefit liabilities (Note 5)
1,160
1,096
Reinsurance contract liabilities
819
748
Lease liabilities
2,813
2,767
Other liabilities
21,834
20,242
At 31 Dec
136,606
134,313
1  Accruals, deferred income and other liabilities include $129,401m (2022: $125,957m) of financial liabilities, the majority of which are measured at
amortised cost.
2From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
28
Provisions
Restructuring
costs
Legal
proceedings
and regulatory
matters
Customer
remediation
Other
provisions
Total
$m
$m
$m
$m
$m
Provisions (excluding contractual commitments)
At 1 Jan 2023
445
409
195
397
1,446
Additions
255
236
37
170
698
Amounts utilised
(288)
(231)
(69)
(68)
(656)
Unused amounts reversed
(149)
(30)
(41)
(95)
(315)
Exchange and other movements
21
(4)
8
16
41
At 31 Dec 2023
284
380
130
420
1,214
Contractual commitments1
At 1 Jan 2023
512
Net change in expected credit loss provision and other movements
15
At 31 Dec 2023
527
Total provisions
At 31 Dec 2022
1,958
At 31 Dec 2023
1,741
Provisions (excluding contractual commitments)
At 1 Jan 2022
383
619
386
558
1,946
Additions
434
271
60
206
971
Amounts utilised
(288)
(393)
(106)
(168)
(955)
Unused amounts reversed
(87)
(82)
(109)
(125)
(403)
Exchange and other movements
3
(6)
(36)
(74)
(113)
At 31 Dec 2022
445
409
195
397
1,446
Contractual commitments1
At 1 Jan 2022
620
Net change in expected credit loss provision and other movements
(108)
At 31 Dec 2022
512
Total provisions
At 31 Dec 2021
2,566
At 31 Dec 2022
1,958
1Contractual commitments include the expected credit loss provision in relation to off-balance sheet financial guarantee contracts and commitments
where HSBC has become party to an irrevocable commitment, as defined under IFRS 9 ‘Financial Instruments’; and provisions for performance and
other guarantee contracts.
Further details of ‘Legal proceedings and regulatory matters’ are set out in Note 36. 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’ refers 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.
Notes on the financial statements
432
HSBC Holdings plc Annual Report and Accounts 2023
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.
For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in ‘Contractual commitments’,
see Note 34. Further analysis of the movement in the expected credit loss provision is disclosed within the ‘Reconciliation of changes in gross
carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees‘
table on page 205.
Brazil PIS and COFINS tax matters
Beginning in the late 1990s, HSBC Bank Brasil S.A. – Banco Múltiplo (‘HSBC Brazil’) and other financial services firms brought legal proceedings
in Brazil challenging the assessment of PIS and COFINS taxes, which are federal taxes imposed on gross revenues earned by legal entities in
Brazil. The Supreme Court of Brazil selected three cases – one involving an insurer, in 2007, and two involving other banks, in 2011 – to set
standards that would apply to all of these proceedings. In June 2023, the court ruled against the financial services firms in all three cases. The
standards set by the court in this ruling have not yet been applied to HSBC Brazil’s legacy cases, liability for which remained with HSBC after
the sale of HSBC’s operations in Brazil to Bradesco in 2016. There are many factors that may affect the range of outcomes and any resulting
financial impact for HSBC. Based upon the information currently available, a provision was recognised in respect of one legacy case. The
remaining additional tax liability subject to challenge on all legacy PIS and COFINS cases is up to $0.4bn.
29
Subordinated liabilities
HSBC’s subordinated liabilities
2023
2022
$m
$m
At amortised cost
24,954
22,290
–  subordinated liabilities
23,149
20,547
–  preferred securities
1,805
1,743
Designated at fair value (Note 25)
11,477
9,636
–  subordinated liabilities
11,477
9,636
–  preferred securities
—
—
At 31 Dec
36,431
31,926
Issued by HSBC subsidiaries
4,154
6,094
Issued by HSBC Holdings
32,277
25,832
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 relevant market 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 subordinated liabilities: subsidiaries
2023
2022
$m
$m
Additional tier 1 capital securities issued by HSBC subsidiaries
1,672
1,584
Tier 2 securities issued by HSBC subsidiaries
–  Tier 2 securities issued by HSBC Bank plc
764
2,427
–  Tier 2 securities issued by The Hongkong and Shanghai Banking Corporation Limited
—
400
–  Tier 2 securities issued by HSBC Bank USA Inc
223
223
–  Tier 2 securities issued by HSBC Bank USA N.A.
1,449
1,405
–  Tier 2 securities issued by HSBC Bank Canada1
—
—
Securities issued by other HSBC subsidiaries
46
55
Subordinated liabilities issued by HSBC subsidiaries at 31 Dec
4,154
6,094
1  Liability accounts for HSBC Bank Canada have been reclassified to ‘Liabilities of disposal groups held for sale’.
HSBC Holdings’ subordinated liabilities
2023
2022
$m
$m
At amortised cost
24,439
19,727
Designated at fair value (Note 25)
8,449
6,700
At 31 Dec
32,888
26,427
HSBC Holdings’ subordinated liabilities in issue
2023
2022
$m
$m
Tier 2 securities issued by HSBC Holdings
Amounts owed to third parties
31,975
25,527
Amounts owed to HSBC undertakings
913
900
Subordinated liabilities issued by HSBC Holdings at 31 Dec
32,888
26,427
HSBC Holdings plc Annual Report and Accounts 2023
433
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 qualified as additional tier 1 capital for
HSBC under CRR II until 31 December 2021 by virtue of the application of grandfathering provisions. The capital security guaranteed by HSBC
Bank plc also qualified as additional tier 1 capital for HSBC Bank plc (on a solo and a consolidated basis) under CRR II until 31 December 2021 by
virtue of the same grandfathering process. Since 31 December 2021, these securities have no longer qualified as regulatory capital for HSBC or
HSBC Bank plc.
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.
30
Maturity analysis of assets, liabilities and off-balance sheet commitments
The table on page 435 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 included in ‘other financial liabilities’ are irrespective of contractual maturity included in the ‘Due over 5
years’ time bucket in the maturity table provided below. An analysis of the present value of expected future cash flows of insurance contract
liabilities and contractual service margin is provided on page 438. 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.
Notes on the financial statements
434
HSBC Holdings plc Annual Report and Accounts 2023
HSBC
Maturity analysis of assets, liabilities and off-balance sheet commitments
Due not
more
than
1 month
Due over
1 month
but not
more
than
3 months
Due over
3 months
but not
more
than
6 months
Due over
6 months
but not
more
than
9 months
Due over
9 months
but not
more
than
1 year
Due over
1 year
but not
more
than
2 years
Due over
2 years
but not
more
than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash and balances at central banks
285,868
—
—
—
—
—
—
—
285,868
Items in the course of collection from other
banks
6,342
—
—
—
—
—
—
—
6,342
Hong Kong Government certificates of
indebtedness
42,024
—
—
—
—
—
—
—
42,024
Trading assets
284,865
2,010
637
363
555
165
564
—
289,159
Financial assets designated or otherwise
mandatorily measured at fair value
5,530
697
821
753
581
4,839
11,917
85,505
110,643
Derivatives
227,343
138
134
71
35
383
570
1,040
229,714
Loans and advances to banks
76,524
18,662
6,487
2,689
3,281
2,756
2,328
175
112,902
Loans and advances to customers
142,803
66,425
52,218
40,135
36,323
94,206
175,381
331,044
938,535
–  personal
44,105
9,558
6,960
6,422
6,127
19,606
54,365
297,512
444,655
–  corporate and commercial
83,281
50,268
38,250
24,685
24,566
61,612
106,598
30,592
419,852
–  financial
15,417
6,599
7,008
9,028
5,630
12,988
14,418
2,940
74,028
Reverse repurchase agreements – non-trading
164,826
43,893
23,840
6,708
5,126
6,113
1,711
—
252,217
Financial investments
48,969
69,816
44,493
16,348
18,603
46,124
106,117
92,293
442,763
Assets held for sale2
39,882
2,929
7,041
4,176
3,261
17,085
33,015
7,943
115,332
Accrued income and other financial assets
108,138
6,574
4,404
550
698
220
764
1,513
122,861
Financial assets at 31 Dec 2023
1,433,114
211,144
140,075
71,793
68,463
171,891
332,367
519,513
2,948,360
Non-financial assets
—
—
—
—
—
—
—
90,317
90,317
Total assets at 31 Dec 2023
1,433,114
211,144
140,075
71,793
68,463
171,891
332,367
609,830
3,038,677
Off-balance sheet commitments received
Loan and other credit-related commitments
39,836
—
—
—
—
—
—
—
39,836
Financial liabilities
Hong Kong currency notes in circulation
42,024
—
—
—
—
—
—
—
42,024
Deposits by banks
52,747
2,758
2,324
381
94
1,458
13,064
337
73,163
Customer accounts
1,343,858
138,117
78,611
20,832
17,724
7,785
4,616
104
1,611,647
–  personal
621,112
84,909
61,286
14,794
12,465
5,507
2,742
2
802,817
–  corporate and commercial
545,207
43,562
14,525
4,605
3,393
2,165
1,527
92
615,076
–  financial
177,539
9,646
2,800
1,433
1,866
113
347
10
193,754
Repurchase agreements – non-trading
158,882
10,311
1,759
300
847
1
—
—
172,100
Items in the course of transmission to other
banks
7,295
—
—
—
—
—
—
—
7,295
Trading liabilities
66,548
6,302
300
—
—
—
—
—
73,150
Financial liabilities designated at
fair value
22,080
8,366
7,823
7,197
6,239
16,679
39,497
33,545
141,426
–  debt securities in issue: covered bonds
—
—
—
—
—
—
—
—
—
–  debt securities in issue: unsecured
10,383
2,760
5,748
6,225
5,390
14,090
34,757
23,898
103,251
–  subordinated liabilities and preferred
securities
—
1,995
—
—
—
1,471
3,429
4,581
11,476
–  other
11,697
3,611
2,075
972
849
1,118
1,311
5,066
26,699
Derivatives
233,134
113
25
9
47
73
1,223
148
234,772
Debt securities in issue
6,891
6,664
10,816
6,896
6,427
6,317
27,452
22,454
93,917
–  covered bonds
—
—
—
—
—
—
1,273
—
1,273
–  otherwise secured
447
44
62
58
55
188
861
1,679
3,394
–  unsecured
6,444
6,620
10,754
6,838
6,372
6,129
25,318
20,775
89,250
Liabilities of disposal groups held for sale3
69,868
5,231
5,479
6,728
6,541
4,730
7,918
1,511
108,006
Accruals and other financial liabilities
104,264
11,827
6,007
1,205
1,414
1,053
1,491
2,137
129,398
Subordinated liabilities
—
13
—
—
—
1,790
897
22,254
24,954
Total financial liabilities at 31 Dec 2023
2,107,591
189,702
113,144
43,548
39,333
39,886
96,158
82,490
2,711,852
Non-financial liabilities
—
—
—
—
—
—
—
134,215
134,215
Total liabilities at 31 Dec 2023
2,107,591
189,702
113,144
43,548
39,333
39,886
96,158
216,705
2,846,067
Off-balance sheet commitments given
Loan and other credit-related commitments
895,140
95
126
72
171
439
807
300
897,150
–  personal
256,272
21
30
46
107
279
745
192
257,692
–  corporate and commercial
472,507
74
26
26
64
160
62
108
473,027
–  financial
166,361
—
70
—
—
—
—
—
166,431
HSBC Holdings plc Annual Report and Accounts 2023
435
Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
Due not
more
than
1 month
Due over
1 month
but not
more
than
3 months
Due over
3 months
but not
more
than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash and balances at central banks
327,002
—
—
—
—
—
—
—
327,002
Items in the course of collection from other
banks
7,297
—
—
—
—
—
—
—
7,297
Hong Kong Government certificates of
indebtedness
43,787
—
—
—
—
—
—
—
43,787
Trading assets
213,234
1,333
1,343
338
425
808
222
390
218,093
Financial assets designated at fair value
3,282
718
1,369
1,178
479
1,967
13,353
77,755
100,101
Derivatives
281,724
132
29
21
65
261
1,052
875
284,159
Loans and advances to banks
72,240
13,965
8,323
860
2,328
3,058
3,569
132
104,475
Loans and advances to customers
139,934
75,486
58,951
35,633
33,730
99,933
173,076
306,818
923,561
–  personal
41,834
9,141
6,659
5,745
5,773
18,326
51,050
273,487
412,015
–  corporate and commercial
84,955
60,067
45,695
24,430
22,629
68,473
108,418
30,231
444,898
–  financial
13,145
6,278
6,597
5,458
5,328
13,134
13,608
3,100
66,648
Reverse repurchase agreements – non-trading
171,173
51,736
16,164
5,840
2,776
3,999
2,066
—
253,754
Financial investments
46,493
79,309
30,722
11,798
13,067
40,710
67,951
74,676
364,726
Assets held for sale2
33,781
3,755
3,452
3,044
3,263
15,369
40,017
14,697
117,378
Accrued income and other financial assets
99,113
6,042
3,766
620
703
543
302
1,295
112,384
Financial assets at 31 Dec 2022
1,439,060
232,476
124,119
59,332
56,836
166,648
301,608
476,638
2,856,717
Non-financial assets
—
—
—
—
—
—
—
92,569
92,569
Total assets at 31 Dec 2022
1,439,060
232,476
124,119
59,332
56,836
166,648
301,608
569,207
2,949,286
Off-balance sheet commitments received
Loan and other credit-related commitments
27,340
—
—
—
—
—
—
—
27,340
Financial liabilities
Hong Kong currency notes in circulation
43,787
—
—
—
—
—
—
—
43,787
Deposits by banks
46,994
359
3,510
205
136
1,455
13,737
326
66,722
Customer accounts
1,388,297
93,108
47,712
14,244
17,295
4,719
4,607
321
1,570,303
–  personal
657,413
55,252
35,430
10,431
12,374
2,835
2,351
2
776,088
–  corporate and commercial
555,539
31,624
10,385
3,080
3,824
1,667
2,146
274
608,539
–  financial
175,345
6,232
1,897
733
1,097
217
110
45
185,676
Repurchase agreements – non-trading
121,193
3,804
685
170
645
1,250
—
—
127,747
Items in the course of transmission to other
banks
7,864
—
—
—
—
—
—
—
7,864
Trading liabilities
66,027
5,668
281
113
113
116
35
—
72,353
Financial liabilities designated at fair value
16,430
7,398
6,562
4,308
5,325
19,287
34,886
33,125
127,321
–  debt securities in issue: covered bonds
—
—
—
—
—
—
—
—
—
–  debt securities in issue: unsecured
7,056
3,620
4,793
3,157
4,288
16,234
29,941
23,510
92,599
–  subordinated liabilities and preferred 
securities
—
—
—
—
—
1,971
3,675
3,990
9,636
–  other
9,374
3,778
1,769
1,151
1,037
1,082
1,270
5,625
25,086
Derivatives
284,412
73
18
46
57
171
849
136
285,762
Debt securities in issue
4,514
7,400
7,476
4,745
3,585
9,198
19,240
21,991
78,149
–  covered bonds
—
—
—
—
—
—
601
—
601
–  otherwise secured
705
28
40
38
36
124
656
1,346
2,973
–  unsecured
3,809
7,372
7,436
4,707
3,549
9,074
17,983
20,645
74,575
Liabilities of disposal groups held for sale3
76,928
4,342
5,374
6,599
8,606
2,343
8,653
1,479
114,324
Accruals and other financial liabilities
104,295
9,576
4,776
967
1,564
1,028
2,016
1,725
125,947
Subordinated liabilities
—
—
11
160
—
—
1,689
20,430
22,290
Total financial liabilities at 31 Dec 2022
2,160,741
131,728
76,405
31,557
37,326
39,567
85,712
79,533
2,642,569
Non-financial liabilities
—
—
—
—
—
—
—
121,520
121,520
Total liabilities at 31 Dec 2022
2,160,741
131,728
76,405
31,557
37,326
39,567
85,712
201,053
2,764,089
Off-balance sheet commitments given
Loan and other credit-related commitments
825,781
184
75
59
210
242
975
328
827,854
–  personal
242,953
2
3
—
110
199
811
300
244,378
–  corporate and commercial
449,843
176
72
59
84
43
163
28
450,468
–  financial
132,985
6
—
—
16
—
1
—
133,008
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2Unallocated impairment losses in relation to disposal groups of $2.0bn (2022: $2.4bn) and non-financial assets of $0.9bn (2022: $1bn) that are
presented within assets held for sale on the balance sheet have been included within non-financial assets in the table above.
3A total of $0.4bn (2022: $0.3bn) of non-financial liabilities that are presented within liabilities of disposal groups held for sale on the balance sheet have
been included within non-financial liabilities in the table above.
Notes on the financial statements
436
HSBC Holdings plc Annual Report and Accounts 2023
HSBC Holdings
Maturity analysis of assets, liabilities and off-balance sheet commitments
Due not
more
than
1 month
Due over
1 month
but not
more than
3 months
Due over
3 months
but not
more than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due
over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash at bank and in hand:
–  balances with HSBC undertakings
7,029
—
—
—
—
—
—
—
7,029
Financial assets with HSBC undertakings
designated and otherwise mandatorily
measured at fair value
—
—
—
—
—
3,815
26,284
29,780
59,879
Derivatives
2,217
—
—
—
—
18
675
434
3,344
Loans and advances to HSBC undertakings
—
—
120
—
—
1,016
6,783
19,435
27,354
Financial investments
10,365
6,017
898
750
757
771
—
—
19,558
Accrued income and other financial assets
3,511
860
254
229
5
—
—
—
4,859
Total financial assets at 31 Dec 2023
23,122
6,877
1,272
979
762
5,620
33,742
49,649
122,023
Non-financial assets
—
—
—
—
—
—
—
163,146
163,146
Total assets at 31 Dec 2023
23,122
6,877
1,272
979
762
5,620
33,742
212,795
285,169
Financial liabilities
Amounts owed to HSBC undertakings
—
168
—
—
—
—
—
—
168
Financial liabilities designated at fair value
—
—
—
—
—
5,287
19,604
18,747
43,638
–  debt securities in issue
—
—
—
—
—
3,816
16,175
15,198
35,189
–  subordinated liabilities and preferred
securities
—
—
—
—
—
1,471
3,429
3,549
8,449
Derivatives
2,452
209
7
59
75
558
1,318
1,412
6,090
Debt securities in issue
—
—
816
2,158
—
4,920
33,735
23,610
65,239
Accruals and other financial liabilities
1,437
1,599
1,049
127
34
—
—
23
4,269
Subordinated liabilities
—
1,987
—
—
—
1,600
880
19,972
24,439
Total financial liabilities 31 Dec 2023
3,889
3,963
1,872
2,344
109
12,365
55,537
63,764
143,843
Non-financial liabilities
—
—
—
—
—
—
—
20
20
Total liabilities at 31 Dec 2023
3,889
3,963
1,872
2,344
109
12,365
55,537
63,784
143,863
Financial assets
Cash at bank and in hand:
–  balances with HSBC undertakings
3,210
—
—
—
—
—
—
—
3,210
Financial assets with HSBC undertakings
designated and otherwise mandatorily
measured at fair value
—
—
—
—
—
9,007
16,230
27,085
52,322
Derivatives
2,889
—
—
—
—
—
796
116
3,801
Loans and advances to HSBC undertakings
—
2,163
240
—
—
2,035
4,414
17,913
26,765
Financial investments
1,517
2,712
8,870
1,020
2,194
3,153
—
—
19,466
Accrued income and other financial assets
68
4,147
179
90
4
—
14
—
4,502
Total financial assets at 31 Dec 2022
7,684
9,022
9,289
1,110
2,198
14,195
21,454
45,114
110,066
Non-financial assets
—
—
—
—
—
—
—
171,035
171,035
Total assets at 31 Dec 2022
7,684
9,022
9,289
1,110
2,198
14,195
21,454
216,149
281,101
Financial liabilities
Amounts owed to HSBC undertakings
48
266
—
—
—
—
—
—
314
Financial liabilities designated at fair value
—
—
—
—
—
1,447
16,459
14,217
32,123
–  debt securities in issue
—
—
—
—
—
1,447
12,784
11,192
25,423
–  subordinated liabilities and preferred
securities
—
—
—
—
—
—
3,675
3,025
6,700
Derivatives
2,540
—
35
—
102
460
1,638
2,147
6,922
Debt securities in issue
—
—
1,972
448
714
11,046
25,380
27,378
66,938
Accruals and other financial liabilities
722
450
648
61
35
—
14
31
1,961
Subordinated liabilities
—
—
—
—
—
1,941
1,492
16,294
19,727
Total financial liabilities at 31 Dec 2022
3,310
716
2,655
509
851
14,894
44,983
60,067
127,985
Non-financial liabilities
—
—
—
—
—
—
—
8
8
Total liabilities at 31 Dec 2022
3,310
716
2,655
509
851
14,894
44,983
60,075
127,993
HSBC Holdings plc Annual Report and Accounts 2023
437
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, loan 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 not
more
than 1
month
Due over
1 month but
not more
than
3 months
Due over
3 months but
not more than
1 year
Due over
1 year but
not
more than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
Deposits by banks
52,938
2,898
3,304
17,123
362
76,625
Customer accounts
1,345,006
141,348
119,660
13,423
109
1,619,546
Repurchase agreements – non-trading
159,264
10,457
2,996
1
—
172,718
Trading liabilities
73,150
—
—
—
—
73,150
Financial liabilities designated at fair value
22,262
9,156
26,033
63,960
44,886
166,297
Derivatives
232,598
609
1,295
2,445
2,910
239,857
Debt securities in issue
6,837
7,407
24,117
43,513
27,119
108,993
Subordinated liabilities
39
135
1,465
9,020
34,920
45,579
Other financial liabilities1
149,904
9,752
5,943
2,555
2,109
170,263
2,041,998
181,762
184,813
152,040
112,415
2,673,028
Loan and other credit-related commitments
895,156
95
371
1,437
91
897,150
Financial guarantees2
16,966
4
39
—
—
17,009
At 31 Dec 2023
2,954,120
181,861
185,223
153,477
112,506
3,587,187
Proportion of cash flows payable in period
83%
5%
5%
4%
3%
Deposits by banks
47,082
406
4,024
16,050
359
67,921
Customer accounts
1,387,125
96,474
80,608
9,961
346
1,574,514
Repurchase agreements – non-trading
121,328
3,852
1,535
1,268
—
127,983
Trading liabilities
72,353
—
—
—
—
72,353
Financial liabilities designated at fair value
16,687
7,859
18,740
63,606
43,475
150,367
Derivatives
283,512
171
1,181
2,222
1,059
288,145
Debt securities in issue
4,329
8,217
17,522
34,283
26,428
90,779
Subordinated liabilities
37
168
1,395
7,321
32,946
41,867
Other financial liabilities1
153,597
8,670
5,994
3,230
1,704
173,195
2,086,050
125,817
130,999
137,941
106,317
2,587,124
Loan and other credit-related commitments
825,781
184
344
1,217
328
827,854
Financial guarantees2
18,696
25
62
—
—
18,783
At 31 Dec 2022
2,930,527
126,026
131,405
139,158
106,645
3,433,761
Proportion of cash flows payable in period
85%
4%
4%
4%
3%
1Excludes financial liabilities of disposal groups.
2Excludes 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 and maintain an appropriate liquidity buffer. 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
2023, consistent with the Group’s capital plan, the Group’s material 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 from
material subsidiaries. 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 and forecast requirements. Liquidity risk in HSBC Holdings is overseen by
Holdings ALCO.
Notes on the financial statements
438
HSBC Holdings plc Annual Report and Accounts 2023
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
HSBC Holdings 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, loan 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 Holdings under financial liabilities by remaining contractual maturities
Due not
more
than 1
month
Due over 1
month but
not
more than 3
months
Due over 3
months but
not more
than
1 year
Due over 1
year but not
more than 5
years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
Amounts owed to HSBC undertakings
—
168
—
—
—
168
Financial liabilities designated at fair value
23
405
1,437
31,050
25,610
58,525
Derivatives
1,244
556
1,651
2,227
726
6,404
Debt securities in issue
—
680
4,787
46,909
27,745
80,121
Subordinated liabilities
46
2,163
1,360
8,239
30,862
42,670
Other financial liabilities
1,436
1,620
1,210
—
23
4,289
2,749
5,592
10,445
88,425
84,966
192,177
Loan commitments
—
—
—
—
—
—
Financial guarantees1
—
—
—
—
—
—
At 31 Dec 2023
2,749
5,592
10,445
88,425
84,966
192,177
Amounts owed to HSBC undertakings
48
266
—
—
—
314
Financial liabilities designated at fair value
11
72
1,139
22,921
19,196
43,339
Derivatives
1,182
177
1,089
4,231
1,321
8,000
Debt securities in issue
—
544
4,899
44,608
32,540
82,591
Subordinated liabilities
46
161
1,068
8,262
27,045
36,582
Other financial liabilities
721
458
745
14
31
1,969
2,008
1,678
8,940
80,036
80,133
172,795
Loan commitments
—
—
—
—
—
—
Financial guarantees1
—
—
—
—
—
—
At 31 Dec 2022
2,008
1,678
8,940
80,036
80,133
172,795
1Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied. Prior period comparatives have been
restated. Refer to footnote 1 in Note 34.
31
Offsetting of financial assets and financial liabilities
In the offsetting of financial assets and financial liabilities, the net amount is reported in the balance sheet when the offset criteria are met. This
is achieved when there is a legally enforceable right to offset the recognised amounts and there is either an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously.
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
–cash and non-cash collateral (debt securities and equities) has been received/pledged for derivatives and reverse repurchase/repurchase,
stock borrowing/lending and similar agreements to cover net exposure in the event of a default or other predetermined events.
The effect of over-collateralisation is excluded.
‘Amounts not subject to enforceable netting agreements’ include contracts executed in jurisdictions where the rights of offset may not be
upheld under the local bankruptcy laws, and transactions where a legal opinion evidencing enforceability of the right of offset may not have
been sought, or may have been unable to obtain.
For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored and the
relevant customer agreements are subject to review and updated, as necessary, to ensure the legal right to set off remains appropriate.
HSBC Holdings plc Annual Report and Accounts 2023
439
Offsetting of financial assets and financial liabilities
Amounts subject to enforceable netting arrangements
Amounts not
subject to
enforceable
netting
arrangements1
Total
Amounts not set off in the
balance sheet
Gross
amounts
Amounts
offset
Net
amounts
in the
balance
sheet
Financial
instruments,
including
non-cash
collateral
Cash
collateral
Net
amount
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Derivatives (Note 15)2
341,473
(116,486)
224,987
(198,743)
(22,926)
3,318
4,727
229,714
Reverse repos, stock borrowing and similar
agreements classified as:3
–  trading assets
29,152
(602)
28,550
(28,513)
(34)
3
2,633
31,183
–  non-trading assets
365,922
(135,210)
230,712
(230,240)
(80)
392
21,653
252,365
Loans and advances to customers4
34,173
(15,792)
18,381
(15,613)
(93)
2,675
2
18,383
At 31 Dec 2023
770,720
(268,090)
502,630
(473,109)
(23,133)
6,388
29,015
531,645
Derivatives (Note 15)2
419,020
(140,987)
278,033
(236,372)
(36,486)
5,175
6,126
284,159
Reverse repos, stock borrowing and similar
agreements classified as:3
–  trading assets
24,370
(236)
24,134
(24,105)
(29)
—
1,369
25,503
–  non-trading assets
335,193
(102,888)
232,305
(231,432)
(449)
424
21,689
253,994
Loans and advances to customers4
28,336
(12,384)
15,952
(13,166)
—
2,786
267
16,219
At 31 Dec 20226
806,919
(256,495)
550,424
(505,075)
(36,964)
8,385
29,451
579,875
Financial liabilities
Derivatives (Note 15)2
344,799
(116,486)
228,313
(198,640)
(23,748)
5,925
6,459
234,772
Repos, stock lending and similar
agreements classified as:3
–  trading liabilities
15,686
(172)
15,514
(15,453)
—
61
6
15,520
–  non-trading liabilities
270,493
(135,640)
134,853
(134,095)
(669)
89
37,247
172,100
Customer accounts6
42,522
(15,792)
26,730
(15,613)
(93)
11,024
13
26,743
At 31 Dec 2023
673,500
(268,090)
405,410
(363,801)
(24,510)
17,099
43,725
449,135
Derivatives (Note 15)2
419,992
(140,987)
279,005
(239,234)
(29,276)
10,495
6,757
285,762
Repos, stock lending and similar
agreements classified as:3
–  trading liabilities
20,026
(236)
19,790
(19,790)
—
—
5
19,795
–  non-trading liabilities
206,827
(102,888)
103,939
(103,296)
(249)
394
23,809
127,748
Customer accounts6
37,164
(12,384)
24,780
(13,166)
—
11,614
14
24,794
At 31 Dec 20226
684,009
(256,495)
427,514
(375,486)
(29,525)
22,503
30,585
458,099
1These 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.
2  At 31 December 2023, the amount of cash margin received that had been offset against the gross derivatives assets was $5,105m (2022 $8,357m).
The amount of cash margin paid that had been offset against the gross derivatives liabilities was $7,142m (2022: $10,918m).
3For the amount of repos, reverse repos, stock lending, stock borrowing and similar agreements recognised on the balance sheet within ‘Trading
assets’ of $31,183m (2022: $25,503m) and ‘Trading liabilities’ of $15,520m (2022: $19,795m), see the ‘Funding sources and uses’ table on page 247.
4At 31 December 2023, the total amount of ‘Loans and advances to customers’ was $938,535m (2022: $923,561m), of which $18,381m (2022:
$15,952m) was subject to offsetting.
5From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data.
6At 31 December 2023, the total amount of ‘Customer accounts’ was $1,611,647m (2022: $1,570,303m), of which $26,730m (2022: $24,780m) was
subject to offsetting.
Notes on the financial statements
440
HSBC Holdings plc Annual Report and Accounts 2023
32
Interest rate benchmark reform
Financial instruments yet to transition to alternative benchmarks, by main
benchmark
USD Libor
GBP Libor3
JPY Libor
CDOR
TIIE
Others1
At 31 Dec 2023
$m
$m
$m
$m
$m
$m
Non-derivative financial assets2
2,644
45
—
2,132
3,961
1,941
Non-derivative financial liabilities
905
2,054
558
181
1,323
9
Derivative notional contract amount
12,013
—
—
134,636
32,836
11,821
At 31 Dec 2022
Non-derivative financial assets2
54,348
304
—
1,695
3,635
4,144
Non-derivative financial liabilities
25,564
1,804
1,179
176
—
—
Derivative notional contract amount
2,348,412
68
—
119,832
17,698
56,759
1Comprises financial instruments referencing other significant benchmark rates yet to transition to alternative benchmarks (euro Libor, SOR, THBFIX,
MIFOR, Sibor and Johannesburg interbank average rate (‘JIBAR’)). An announcement was made by the South African regulator during the first half of
2023 on the cessation of the JIBAR. Therefore, JIBAR is also included in ‘Others‘ during the current period.
2Gross carrying amount excluding allowances for expected credit losses.
3 Non-derivative assets exposure relates to contracts for clients requiring additional time for loan restructuring or repayment. The limited number of
remaining contracts are expected to be transitioned prior to cessation of ‘synthetic’ GBP Libor from 31 March 2024. Non-derivative financial liabilities
relate to MREL instruments that include references to GBP Libor in their contractual terms but are currently using a fixed interest rate. HSBC remains
committed to seeking to remediate and/or mitigate the risks associated with these contracts by the relevant interest rate calculation dates.
The amounts in the above table relate to HSBC’s main operating entities where HSBC has material exposures impacted by Ibor reform,
including in the UK, Hong Kong, France, the US, Mexico, Canada, Singapore, the UAE, Bermuda, Australia, Qatar, Germany, Thailand, India and
Japan. The amounts provide an indication of the extent of the Group’s exposure to the Ibor benchmarks that are due to be replaced. Amounts
are in respect of financial instruments that:
–contractually reference an interest rate benchmark that is planned to transition to an alternative benchmark;
–have a contractual maturity date beyond the date by which the reference interest rate benchmark is expected to cease; and
–are recognised on HSBC’s consolidated balance sheet.
33
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
2023
2022
Number
$m
Number
$m
At 1 Jan
20,293,607,410
10,147
20,631,520,439
10,316
Shares issued under HSBC employee share plans
10,778,479
5
10,226,221
5
Shares issued in lieu of dividends
—
—
—
—
Less: shares repurchased and cancelled
716,384,289
358
348,139,250
174
Less: treasury shares cancelled
325,273,407
163
—
—
At 31 Dec1
19,262,728,193
9,631
20,293,607,410
10,147
HSBC Holdings share premium
2023
2022
$m
$m
At 31 Dec
14,738
14,664
Total called up share capital and share premium
2023
2022
$m
$m
At 31 Dec
24,369
24,811
1All HSBC Holdings ordinary shares in issue confer identical rights, including in respect of capital, dividends and voting.
HSBC Holdings non-cumulative preference share of £0.01
The one non-cumulative sterling preference share of £0.01 (‘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.
HSBC Holdings plc Annual Report and Accounts 2023
441
Other equity instruments
HSBC Holdings has included two types of additional tier 1 capital securities in its tier 1 capital, including 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 29 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, subject to anti-dilution adjustments.
HSBC’s additional tier 1 capital – contingent convertible securities in issue which are accounted for in equity
Original nominal
amount (LCY)
First call
date
2023
2022
$m
$m
$2,250m
6.375% perpetual subordinated contingent convertible securities
Sep 2024
2,250
2,250
$2,450m
6.375% perpetual subordinated contingent convertible securities
Mar 2025
2,450
2,450
$3,000m
6.000% perpetual subordinated contingent convertible securities
May 2027
3,000
3,000
$2,350m
6.250% perpetual subordinated contingent convertible securities1
Mar 2023
—
2,350
$1,800m
6.500% perpetual subordinated contingent convertible securities
Mar 2028
1,800
1,800
$1,500m
4.600% perpetual subordinated contingent convertible securities2
Dec 2030
1,500
1,500
€1,000m
4.000% perpetual subordinated contingent convertible securitiess3
Mar 2026
1,000
1,000
$1,000m
4.700% perpetual subordinated contingent convertible securities4
Mar 2031
1,000
1,000
$2,000m
8.000% perpetual subordinated contingent convertible securities5
Mar 2028
1,980
—
€1,000m
6.000% perpetual subordinated contingent convertible securities6
Sep 2023
—
1,123
€1,250m
4.750% perpetual subordinated contingent convertible securities
Jul 2029
1,422
1,422
S$750m
5.000% perpetual subordinated contingent convertible securities7
Sep 2023
—
550
€1,000m
5.875% perpetual subordinated contingent convertible securities
Sep 2026
1,301
1,301
At 31 Dec
17,703
19,746
1  This security was called by HSBC Holdings on 30 January 2023 and redeemed and cancelled on 23 March 2023.
2  This security was issued by HSBC Holdings on 17 December 2020. The first call period commences six months prior to reset date of 17 June 2031.
3  This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six months prior to reset date of 9 September 2026.
4  This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six months prior to reset date of 9 September 2031.
5  This security was issued by HSBC Holdings on 7 March 2023. The first call period commences six months prior to reset date of 7 September 2028.
This security has been accounted for net of directly attributable transaction costs.
6  This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 29 September 2023.
7  This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 25 September 2023.
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 2023
31 Dec 2022
Number of
HSBC Holdings
ordinary shares
Usual period of
exercise
Exercise price
Number of
HSBC Holdings
ordinary shares
Usual period of
exercise
Exercise price
83,993,678
2022 to 2029
£2.6270–£5.4490
115,650,723
2021 to 2028
£2.6270–5.9640
Maximum obligation to deliver HSBC Holdings ordinary shares
At 31 December 2023, 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 long-term incentive awards and deferred share awards granted under the
HSBC Share Plan 2011, was 208,539,316 (2022: 240,612,019). The total number of shares at 31 December 2023 held by employee benefit
trusts that may be used to satisfy such obligations to deliver HSBC Holdings ordinary shares was 20,902,218 (2022: 12,315,711).
Notes on the financial statements
442
HSBC Holdings plc Annual Report and Accounts 2023
34
Contingent liabilities, contractual commitments and guarantees
HSBC
HSBC Holdings1
2023
2022
2023
2022
$m
$m
$m
$m
Guarantees and other contingent liabilities:
–  financial guarantees
17,009
18,783
—
—
–  performance and other guarantees
94,277
88,240
7,723
17,707
–  other contingent liabilities
636
676
—
90
At 31 Dec
111,922
107,699
7,723
17,797
Commitments:2
–  documentary credits and short-term trade-related transactions
7,818
8,241
—
—
–  forward asset purchases and forward deposits placed
78,535
50,852
—
—
–  standby facilities, credit lines and other commitments to lend
810,797
768,761
—
—
At 31 Dec
897,150
827,854
—
—
1  Guarantees by HSBC Holdings are in favour of other Group entities. These include contracts that provide protection against credit risk on a specified
exposure but do not meet the definition of financial guarantees, which have been reclassified to ‘performance and other guarantees’. Prior period
comparatives have been restated and the full balance reclassified.
2Includes $661,015m of commitments at 31 December 2023 (31 December 2022: $618,788m), 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 28.
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 28 and 36.
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 be estimated reliably. It is dependent on various uncertain factors including the
potential recovery of assets by the FSCS, changes in the level of protected products (including deposits and investments) and the population of
FSCS members at the time.
Associates
HSBC’s share of associates’ contingent liabilities, contractual commitments and guarantees amounted to $69.9bn at 31 December 2023 (2022:
$64.8bn). No matters arose where HSBC was severally liable.
35
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.
The table below excludes finance lease receivables reclassified on the balance sheet to ‘Assets held for sale’ in accordance with IFRS 5. Net
investment in finance leases of $1,595m (2022: $1,502m) was reclassified to ‘Assets held for sale’ as a result of the planned sale of our banking
business in Canada.
2023
2022
Total future
minimum
payments
Unearned
finance
income
Present
value
Total future
minimum
payments
Unearned
finance
income
Present
value
$m
$m
$m
$m
$m
$m
Lease receivables:
No later than one year
2,355
(308)
2,047
2,159
(236)
1,923
One to two years
1,954
(249)
1,705
1,652
(201)
1,451
Two to three years
1,380
(189)
1,191
1,391
(161)
1,230
Three to four years
930
(153)
777
906
(131)
775
Four to five years
593
(132)
461
613
(112)
501
Later than one year and no later than five years
4,857
(723)
4,134
4,562
(605)
3,957
Later than five years
4,116
(838)
3,278
4,064
(736)
3,328
At 31 Dec
11,328
(1,869)
9,459
10,785
(1,577)
9,208
HSBC Holdings plc Annual Report and Accounts 2023
443
36
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 2023 (see Note 28). Where an individual provision is material, the fact that a provision has been made is stated and
quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of
wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory
matters as a class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US
whose assets were invested with Bernard L. Madoff Investment Securities LLC (‘Madoff Securities’). Based on information provided by Madoff
Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff.
Based on information available to HSBC, the funds’ actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities
during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as
defendants in lawsuits arising out of Madoff Securities’ fraud.
US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of alleged
transfers from Madoff Securities to HSBC in the amount of $543m (plus interest), and these lawsuits remain pending in the US Bankruptcy
Court for the Southern District of New York (the ‘US Bankruptcy Court’).
Certain Fairfield entities (together, ‘Fairfield’) (in liquidation) 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 the amount of $382m (plus interest). Fairfield’s
claims against most of the HSBC companies have been dismissed by the US Bankruptcy Court and the US District Court for the Southern
District of New York, but remain pending on appeal before the US Court of Appeals for the Second Circuit. Fairfield’s claims against HSBC
Private Bank (Suisse) SA and HSBC Securities Services Luxembourg (‘HSSL’) have not been dismissed and their appeals are also pending
before the US Court of Appeals for the Second Circuit. Meanwhile, proceedings before the US Bankruptcy Court with respect to the claims
against HSBC Private Bank (Suisse) SA and HSSL are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales,
seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been
specified.
Cayman Islands litigation: In February 2013, Primeo Fund (‘Primeo’) (in liquidation) brought an action against 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.
Following dismissal of Primeo’s action by the Grand Court and Court of Appeal of the Cayman Islands, in 2019, Primeo appealed to the Judicial
Committee of the Privy Council. In November 2023, the Privy Council issued a judgment upholding the dismissal of Primeo’s claims. This matter
is now closed.
Luxembourg litigation: In 2009, Herald Fund SPC (‘Herald’) (in liquidation) brought an action against HSSL before the Luxembourg District
Court, seeking restitution of cash and securities in the amount of $2.5bn (plus interest), or damages in the amount of $2bn (plus interest). In
2018, HSBC Bank plc was added to the claim and Herald increased the amount of the alleged damages claim to $5.6bn (plus interest). The
Luxembourg District Court has dismissed Herald’s securities restitution claim, but reserved Herald’s cash restitution and damages claims.
Herald has appealed this dismissal to the Luxembourg Court of Appeal, where the matter is pending.
Beginning in 2009, various HSBC companies have been named as defendants in a number of actions brought by Alpha Prime Fund Limited
(‘Alpha Prime’) in the Luxembourg District Court seeking damages for alleged breach of contract and negligence in the amount of $1.16bn (plus
interest). These matters are currently pending before the Luxembourg District Court.
Beginning in 2014, HSSL and the Luxembourg branch of HSBC Bank plc have been named as defendants in a number of actions brought by
Senator Fund SPC (‘Senator’) before the Luxembourg District Court seeking restitution of securities in the amount of $625m (plus interest), or
damages in the amount of $188m (plus interest). These matters are currently pending before the Luxembourg District Court.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including the
timing or any possible impact on HSBC, which could be significant.
US Anti-Terrorism Act litigation
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, alleged victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided
and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act, or provided banking services to
customers alleged to have connections to terrorism financing. Seven actions, which seek damages for unspecified amounts, remain pending
and HSBC’s motions to dismiss have been granted in three of these cases. These dismissals are subject to appeals and/or the plaintiffs re-
pleading their claims. The four other actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Notes on the financial statements
444
HSBC Holdings plc Annual Report and Accounts 2023
Interbank offered rates investigation and litigation
Euro interest rate derivatives: In December 2016, the European Commission (‘EC’) issued a decision finding that HSBC, among other banks,
engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based
on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January 2023, the European
Court of Justice dismissed an appeal by HSBC and upheld the EC’s findings on HSBC’s liability. A separate appeal by HSBC concerning the
amount of the fine remains pending before the General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of individual and putative class
action lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under
various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act (‘US CEA’). HSBC has concluded
class settlements with five groups of plaintiffs, and several class action lawsuits brought by other groups of plaintiffs have been voluntarily
dismissed. A number of individual US dollar Libor-related actions seeking damages for unspecified amounts remain pending.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including the
timing or any possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
In 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, which remains ongoing.
Since 2017, HSBC Bank plc, among other financial institutions, has been defending a complaint filed by the Competition Commission of South
Africa before the South African Competition Tribunal for alleged anti-competitive behaviour in the South African foreign exchange market. In
2020, a revised complaint was filed which also named HSBC Bank USA N.A. (‘HSBC Bank USA’) as a defendant. In January 2024, the South
African Competition Appeal Court dismissed HSBC Bank USA from the revised complaint, but denied HSBC Bank plc’s application to dismiss.
The Competition Commission has appealed the dismissal of HSBC Bank USA to the Constitutional Court of South Africa.
Since 2015, various HSBC companies and other banks have been named as defendants in a putative class action in the US District Court for the
Southern District of New York filed by a group of retail customers who dealt in foreign exchange products. The plaintiffs allege that the
defendants conspired to manipulate foreign exchange rates and seek damages for unspecified amounts. This action has been dismissed but
remains pending on appeal.
In January 2023, HSBC Bank plc and HSBC Holdings reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in the
local courts alleging foreign exchange-related misconduct. The settlement remains subject to court approval. Lawsuits alleging foreign
exchange-related misconduct remain pending against HSBC and other banks in courts in Brazil.
In February 2024, HSBC Bank plc and HSBC Holdings were joined to an existing claim brought in the UK Competition Appeals Tribunal against
various other banks alleging historical anti-competitive behaviour in the foreign exchange market and seeking damages for unspecified amounts.
This matter is 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 the pending matters, which could be
significant.
Precious metals fix-related litigation
US litigation: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District
Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the
price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May
2023, this action, which seeks damages for unspecified amounts, was dismissed but remains pending on appeal.
HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US
District Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate
the price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In
February 2023, the court reversed an earlier dismissal of the plaintiffs’ third amended complaint and this action, which seeks damages for
unspecified amounts, is proceeding.
Canada litigation: HSBC and other financial institutions are defending putative class actions filed in the Ontario and Quebec Superior Courts of
Justice alleging that the defendants conspired to manipulate the price of silver, gold and related derivatives in violation of the Canadian
Competition Act and common law. These actions each seek CA$1bn in damages plus CA$250m in punitive damages. Two of the actions are
proceeding and the others have been stayed.
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.
Tax-related investigations
Various tax administration, regulatory and law enforcement authorities around the world are conducting investigations in connection with
allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation. HSBC continues to cooperate with
these investigations.
In March 2023, the French National Financial Prosecutor announced an investigation into a number of banks, including HSBC Continental Europe
and the Paris branch of HSBC Bank plc, in connection with alleged tax fraud related to the dividend withholding tax treatment of certain trading
activities. HSBC Bank plc and HSBC Germany also continue to cooperate with investigations by the German public prosecutor into numerous
financial institutions and their employees, in connection with the dividend withholding tax treatment of certain trading activities.
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.
HSBC Holdings plc Annual Report and Accounts 2023
445
Gilts trading investigation and litigation 
Since 2018, the UK Competition and Markets Authority (‘CMA’) has been investigating HSBC and four other banks for suspected anti-
competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC
Bank plc and HSBC Holdings; both HSBC companies are contesting the CMA’s allegations.
In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks, were named as defendants in a putative class action filed in
the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market and seeking
damages for unspecified amounts. In September 2023, the defendants filed a motion to dismiss which remains pending. It is possible that
additional civil actions will be initiated against HSBC in relation to its historical gilts trading activities.
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.
UK depositor protection arrangements investigation
In January 2022, the UK Prudential Regulation Authority (‘PRA’) commenced an investigation into HSBC Bank plc’s and HSBC UK Bank plc’s
compliance with depositor protection arrangements under the Financial Services Compensation Scheme in the UK. In January 2024, the PRA
concluded its investigation and imposed a £57m fine on HSBC Bank plc and HSBC UK Bank plc, which has been paid, and this matter is now
closed.
UK collections and recoveries investigation
Since 2019, the FCA has been investigating HSBC Bank plc’s, HSBC UK Bank plc’s and Marks and Spencer Financial Services plc’s compliance
with regulatory standards relating to collections and recoveries operations in the UK between 2017 and 2018. HSBC continues to cooperate
with this investigation.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of this matter, which could be significant.
Korean short selling investigation
In December 2023, the Korean Securities and Futures Commission issued a decision to impose a fine on The Hongkong and Shanghai Banking
Corporation Limited in connection with trades in breach of Korean short selling rules and to refer the case to the Korean Prosecutors’ Office for
investigation.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of this matter, which could be significant.
Silicon Valley Bank (‘SVB’) litigation
In May 2023, First-Citizens Bank & Trust Company (‘First Citizens’) brought a lawsuit in the US District Court for the Northern District of
California against various HSBC companies and seven US-based HSBC employees who had previously worked for SVB. The lawsuit seeks $1bn
in damages and alleges, among other things, that the various HSBC companies conspired with the individual defendants to solicit employees
from First Citizens and that the individual defendants took confidential information belonging to SVB and/or First Citizens. In January 2024, the
court denied the defendants’ motion to dismiss in part and granted it in part, and directed the plaintiff to amend its complaint to specify its
allegations as to each defendant. In February 2024, First Citizens filed its amended complaint. This action is ongoing.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any
possible impact on HSBC, which could be significant.
Film Finance litigation
In June 2020, two separate investor groups issued claims against HSBC UK Bank plc (as successor to HSBC Private Bank (UK) Limited (‘PBGB’))
in the High Court of England and Wales seeking damages for unspecified amounts in connection with PBGB’s role in the development of
Eclipse film finance schemes. These actions are ongoing.
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.
US mortgage securitisation litigation
Beginning in 2014, a number of lawsuits were filed in various state and federal courts in the US against HSBC Bank USA, as a trustee of more
than 280 mortgage securitisation trusts, seeking unspecified damages for losses in collateral value allegedly sustained by the trusts. HSBC Bank
USA has reached settlements with a number of plaintiffs to resolve nearly all of these lawsuits. The remaining two actions are pending in a New
York state court. HSBC Bank USA and certain of its affiliates continue to defend a mortgage loan repurchase action seeking unspecified
damages and specific performance brought by the trustee of a mortgage securitisation trust in New York state court.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be
significant.
Mexican government bond litigation
HSBC Mexico S.A. and other banks are named as defendants in a consolidated putative class action pending in the US District Court for the
Southern District of New York alleging anti-competitive conduct in the Mexican government bond market between 2006 and 2017 and seeking
damages for unspecified amounts. In February 2024, the US Court of Appeals for the Second Circuit reversed an earlier dismissal of this lawsuit
and this matter is proceeding.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any
possible impact on HSBC, which could be significant.
Stanford litigation
Since 2009, HSBC Bank plc has been named as a defendant in numerous claims filed in courts in the UK and the US arising from the collapse of
Stanford International Bank Ltd, for which it was a correspondent bank from 2003 to 2009. In February 2023, HSBC Bank plc reached
settlements with the plaintiffs to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.
Notes on the financial statements
446
HSBC Holdings plc Annual Report and Accounts 2023
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are also subject to a number of other enquiries and examinations, requests for information,
investigations and reviews by various regulators and competition and law enforcement authorities, as well as legal proceedings including
litigation, arbitration and other contentious proceedings, in connection with various matters arising out of their ordinary course businesses and
operations.
At the present time, HSBC does not expect the ultimate resolution of any of these matters to be material to the Group’s financial position;
however, given the uncertainties involved in legal proceedings and regulatory matters, there can be no assurance regarding the eventual
outcome of a particular matter or matters.
37
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 275 to 282 except for the roles of Group Chief Legal Officer, Group Head of Internal Audit, Group Chief
Human Resources Officer, Group Chief Sustainability Officer, Group Head of Strategy, Group Chief Communications and Brand Officer, and
Group Company Secretary and Chief Governance Officer who do 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 interests in shares are disclosed in the ‘Directors’ remuneration report’ on pages 315 to 342.
IAS 24 ‘Related Party Disclosures’ requires the following additional information for key management compensation.
Compensation of Key Management Personnel
2023
2022
2021
$m
$m
$m
Short-term employee benefits
51
52
50
Post-employment benefits
1
1
—
Other long-term employee benefits
10
8
6
Share-based payments
29
26
27
Year ended 31 Dec
91
87
83
Shareholdings, options and other securities of Key Management Personnel
2023
2022
(000s)
(000s)
Number of options held over HSBC Holdings ordinary shares under employee share plans
32
35
Number of HSBC Holdings ordinary shares held beneficially and non-beneficially
20,409
18,185
Number of other HSBC securities held
228
228
At 31 Dec
20,669
18,448
Advances and credits, guarantees and deposit balances during the year with Key Management Personnel
2023
2022
Balance at
31 Dec
Highest amounts
outstanding
during year
Balance at
31 Dec
Highest amounts
outstanding
during year
$m
$m
$m
$m
Key Management Personnel
Advances and credits1
11
16
16
25
Deposits
60
130
53
123
1Advances and credits entered into by subsidiaries of HSBC Holdings plc during 2023 with Directors and former Directors, disclosed pursuant to
section 413 of the Companies Act 2006, totalled $2.6m (2022: $2.5m).
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.
HSBC Holdings plc Annual Report and Accounts 2023
447
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
2023
2022
Highest balance
during the year
Balance at
31 Dec
Highest balance
during the year
Balance at
31 Dec
$m
$m
$m
$m
Unsubordinated amounts due from joint ventures
98
94
140
90
Unsubordinated amounts due from associates
7,907
5,910
7,378
6,594
Amounts due to associates
3,002
1,668
2,548
1,295
Amounts due to joint ventures
95
61
57
53
Fair value of derivative assets with associates
1,514
795
1,205
841
Fair value of derivative liabilities with associates
4,388
2,962
4,319
3,648
Guarantees and commitments
503
331
513
293
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 2023, $3.1bn (2022: $2.9bn) of HSBC post-employment benefit plan assets were under management by HSBC companies,
earning management fees of $13m in 2023 (2022: $13m). At 31 December 2023, HSBC’s post-employment benefit plans had placed deposits
of $402m (2022: $369m) with its banking subsidiaries, earning interest payable to the schemes of $2m (2022: nil). 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 2023, the gross notional value of the swaps was $7.1bn (2022: $6.6bn). These swaps had a
positive fair value to the scheme of $0.5bn (2022: $0.5bn); and HSBC had delivered collateral of $0.6bn (2022: $0.5bn) 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 40.
Transactions and balances during the year with subsidiaries
2023
2022
Highest balance
during the year
Balance at
31 Dec
Highest balance
during the year
Balance at
31 Dec
$m
$m
$m
$m
Assets
Cash and balances with HSBC undertakings
8,396
7,029
7,421
3,210
Financial assets with HSBC undertakings designated and otherwise mandatorily
measured at fair value
60,309
59,879
52,322
52,322
Derivatives
4,010
3,344
5,380
3,801
Loans and advances to HSBC undertakings
28,213
27,354
26,765
26,765
Prepayments, accrued income and other assets
7,417
5,145
4,893
4,803
Investments in subsidiaries
167,542
159,478
167,542
167,542
Total related party assets at 31 Dec
275,887
262,229
264,323
258,443
Liabilities
Amounts owed to HSBC undertakings
179
168
314
314
Derivatives
9,309
6,090
8,318
6,922
Accruals, deferred income and other liabilities
505
341
1,375
429
Subordinated liabilities
927
913
900
900
Total related party liabilities at 31 Dec
10,920
7,512
10,907
8,565
Guarantees and commitments
7,723
7,723
17,707
17,707
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.
Notes on the financial statements
448
HSBC Holdings plc Annual Report and Accounts 2023
38
Effects of adoption of IFRS 17
On 1 January 2023, the Group adopted IFRS 17 ‘Insurance Contracts’, and as required by the standard applied the requirements retrospectively,
with comparatives restated from the transition date, 1 January 2022. The tables below provide the transition restatement impact on the Group’s
consolidated balance sheet as at 1 January 2022, as well as the Group consolidated income statement and the Group consolidated statement of
comprehensive income for the year ended 31 December 2022.
Further information about the effect of the adoption of IFRS 17 is provided in Note 1 ‘Basis of preparation and material accounting policies’ on
page 368.
IFRS 17 transition impact on the Group consolidated balance sheet at 1 January 2022
Under
IFRS 4
Removal of
PVIF and 
IFRS 4
balances
Remeasure-
ment effect
of IFRS 9 re-
designations
Recognition
of IFRS 17
fulfilment
cash flows
Recognition
of IFRS 17
contractual
service
margin
Tax effect
Under
IFRS 17
Total
movements
$m
$m
$m
$m
$m
$m
$m
$m
Assets
Financial assets designated and otherwise
mandatorily measured at fair value through
profit or loss
49,804
—
60,991
—
—
—
110,795
60,991
Loans and advances to banks
83,136
—
(569)
—
—
—
82,567
(569)
Loans and advances to customers
1,045,814
—
(1,280)
—
—
—
1,044,534
(1,280)
Financial investments
446,274
—
(54,269)
—
—
—
392,005
(54,269)
Goodwill and intangible assets
20,622
(9,453)
—
—
—
—
11,169
(9,453)
Deferred tax assets
4,624
—
—
—
—
808
5,432
808
All other assets
1,307,665
(4,468)
—
4,198
(105)
—
1,307,290
(375)
Total assets
2,957,939
(13,921)
4,873
4,198
(105)
808
2,953,792
(4,147)
Liabilities and equity
Liabilities
Insurance contract liabilities
112,745
(112,745)
—
109,393
9,914
—
119,307
6,562
Deferred tax liabilities
4,673
—
—
—
—
(1,379)
3,294
(1,379)
All other liabilities
2,633,744
78
—
1,102
(51)
—
2,634,873
1,129
Total liabilities
2,751,162
(112,667)
—
110,495
9,863
(1,379)
2,757,474
6,312
Total shareholders’ equity
198,250
92,738
4,558
(99,631)
(8,847)
1,947
189,015
(9,235)
Non-controlling interests
8,527
6,008
315
(6,666)
(1,121)
240
7,303
(1,224)
Total equity
206,777
98,746
4,873
(106,297)
(9,968)
2,187
196,318
(10,459)
Total liabilities and equity
2,957,939
(13,921)
4,873
4,198
(105)
808
2,953,792
(4,147)
Transition drivers
Removal of PVIF and IFRS 4 balances
The PVIF intangible asset of $9,453m previously reported under IFRS 4 within ‘Goodwill and intangible assets’ arose from the upfront
recognition of future profits associated with in-force insurance contracts. The PVIF intangible asset is no longer reported following the transition
to IFRS 17, as future profits are deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within ‘All other assets’) and
insurance contract liabilities are removed on transition, to be replaced with IFRS 17 balances.
Remeasurement effect of IFRS 9 re-designations
Loans and advances of $1,849m and debt securities of $53,201m, both supporting associated insurance liabilities, were re-designated from an
amortised cost classification to fair value through profit and loss. Debt securities supporting the associated insurance liabilities of $1,068m were
reclassified from fair value through other comprehensive income to fair value through profit or loss. The re-designations were made in order to
more closely align the asset accounting with the valuation of the associated insurance liabilities. The re-designation of amortised cost assets
generated a net increase to assets of $4,873m because the fair value measurement on transition was higher than the previous amortised cost
carrying amount.
Recognition of the IFRS 17 fulfilment cash flows
The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for
fulfilling the insurance contracts, such as premiums, directly attributable expenses, insurance benefits and claims including policyholder returns
and the cost of guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the
risk adjustment for non-financial risk.
Recognition of the IFRS 17 contractual service margin
The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts that
will be released to the profit and loss over the expected coverage period.
Tax effect
The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible asset, and new deferred tax assets are
reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.
HSBC Holdings plc Annual Report and Accounts 2023
449
IFRS 17 transition impact on the reported Group consolidated income statement for the year ended 31 December 2022
Under
IFRS 4
Removal
of PVIF
and 
IFRS 4
balances
Remeasure-
ment effect
of IFRS 9 re-
designations
Insurance
finance
income/
expense
Contrac
- tual
service
margin
Onerous
contracts
Experience
variance
and other
Attribut-
able
expenses
Tax
effect
Under
IFRS 17
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
32,610
—
(2,233)
—
—
—
—
—
—
30,377
Net fee income
11,451
—
—
—
—
—
—
319
—
11,770
Net income from financial
instruments held for trading or
managed on a fair value basis
10,469
—
(191)
—
—
—
—
—
—
10,278
Net expense from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through profit
or loss
(3,394)
—
(10,437)
—
—
—
—
—
—
(13,831)
Net insurance premium income
12,825
(12,825)
—
—
—
—
—
—
—
—
Insurance finance income/(expense)
—
—
—
13,799
—
—
—
—
—
13,799
Insurance service result
—
—
—
—
965
(186)
30
—
—
809
–  insurance revenue
—
—
—
—
965
—
1,012
—
—
1,977
–  insurance service expense
—
—
—
—
—
(186)
(982)
—
—
(1,168)
Other operating income/(loss)
(2,365)
(265)
—
48
—
—
—
—
—
(2,582)
Total operating income
61,596
(13,090)
(12,861)
13,847
965
(186)
30
319
—
50,620
Net insurance claims and benefits
paid and movement in liabilities to
policyholders
(9,869)
9,869
—
—
—
—
—
—
—
—
Net operating income before
change in expected credit losses
and other credit impairment
charges
51,727
(3,221)
(12,861)
13,847
965
(186)
30
319
—
50,620
Change in expected credit losses and
other credit impairment charges
(3,592)
—
8
—
—
—
—
—
—
(3,584)
Net operating income
48,135
(3,221)
(12,853)
13,847
965
(186)
30
319
—
47,036
Total operating expenses
(33,330)
—
—
—
—
—
—
629
—
(32,701)
Operating profit
14,805
(3,221)
(12,853)
13,847
965
(186)
30
948
—
14,335
Share of profit in associates and joint
ventures
2,723
—
—
—
—
—
—
—
—
2,723
Profit before tax
17,528
(3,221)
(12,853)
13,847
965
(186)
30
948
—
17,058
Tax expense
(858)
—
—
—
—
—
—
—
49
(809)
Profit for the period
16,670
(3,221)
(12,853)
13,847
965
(186)
30
948
49
16,249
Transition drivers
Removal of IFRS 4-based revenue items
As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of $265m for the year ended 31 December
2022 that was previously reported within ‘Other operating income/(loss)’ is no longer reported under IFRS 17. This includes the removal of the
value of new business and changes to PVIF intangible asset from valuation adjustments and experience variances.
On the implementation of IFRS 17, new income statement line items associated with insurance contract accounting were introduced.
Consequently, the previously reported IFRS 4 line items ‘Net insurance premium income’ and ‘Net insurance claims and benefits paid and
movement in liabilities to policyholders’ were also removed.
Remeasurement effect of IFRS 9 re-designations
Following the re-designation of financial assets supporting associated insurance liabilities to fair value through profit or loss classification, the
related income statement reporting also changed. Under our previous IFRS 4-based reporting convention, these assets generated interest
income of $2,233m for the year ended 31 December 2022, which is no longer reported in ‘Net interest income’ under IFRS 17. To the extent
that this interest income was shared with policyholders, the corresponding policyholder sharing obligation was previously included within the
‘net insurance claims and benefits paid and movement in liabilities to policyholders’ line.
Following re-designation to fair value through profit or loss, gains and losses from changes in the fair value of underlying assets, together with
interest income earned, are both reported within ‘Net expense from assets and liabilities of insurance businesses, including related derivatives,
measured at fair value through profit or loss’. Similar to an IFRS 4 basis, IFRS 17 accounting provides for an offset. While this offset was
reported within the claims line under IFRS 4, under IFRS 17 it is reported within the ‘Insurance finance income/(expense)’ line described below.
Notes on the financial statements
450
HSBC Holdings plc Annual Report and Accounts 2023
Introduction of IFRS 17 income statement
Insurance finance income/(expense)
Insurance finance income/(expense) of $13,799m for the year ended 31 December 2022 represents the change in the carrying amount of
insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For variable fee approach contracts,
which represent more than 90% of HSBC’s insurance contracts, the insurance finance income/(expense) includes the changes in the fair value
of underlying items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying
assets supporting insurance contracts. This includes an offsetting impact to the gains and losses on assets re-designated on transition to fair
value through profit or loss, and which is now included in ‘Net expense from assets and liabilities of insurance businesses, including related
derivatives, measured at fair value through profit or loss’.
Contractual service margin
Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9%
during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time
primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, the Group’s
share of investment experience, or changes to assumptions.
Onerous contracts
Losses on onerous contracts are taken to the income statement as incurred.
Experience variance and other
‘Experience variance and other’ represents the expected expenses, claims and recovery of acquisition cash flows, which are reported as part of
the insurance revenue. This is offset with the actual expenses and claims incurred in the year and amortisation of acquisition cash flows, which
are reported as part of insurance service expense.
Attributable expenses
Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs
include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable
overheads, which are included within the fulfilment cash flows and are no longer shown on the operating expenses line, whereas non-
attributable expenses remain in the operating expenses.
IFRS 17 transition impact on the Group comprehensive income
Year ended 31 Dec 2022
Under
IFRS 17
Under
IFRS 4
$m
$m
Total equity at 1 Jan
196,318
206,777
of which
–  retained earnings
135,236
144,458
–  financial assets at FVOCI reserve
49
(634)
–  insurance finance reserve
(696)
—
Profit for the period
16,249
16,670
Debt instruments at fair value through other comprehensive income
(7,232)
(5,468)
Equity instruments designated at fair value through other comprehensive income
107
107
Insurance finance income recognised in other comprehensive income
1,775
—
Other comprehensive expense for the period, net of tax
(11,892)
(11,940)
Total comprehensive (expense)/income for the period
(993)
(631)
Other movements
(10,128)
(10,118)
Total equity at 31 Dec
185,197
196,028
Transition drivers
Insurance finance reserve
The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in
France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only
the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses,
resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these
insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of $696m was recognised and following transition,
gains net of tax of $1,775m were recorded in the year ended 31 December 2022. An offsetting fair value through other comprehensive income
reserve of $683m recorded on transition represents the accumulated fair value movements on assets supporting these insurance contract
liabilities, with associated losses net of tax of $1,898m recorded within the fair value through other comprehensive income reserve for the year
ended 31 December 2022.
HSBC Holdings plc Annual Report and Accounts 2023
451
Group‘s consolidated balance sheet at the transition date and at 31 December 2022
Under IFRS 17
Under IFRS 4
31 Dec
1 Jan
31 Dec
1 Jan
2022
2022
2022
2022
$m
$m
$m
$m
Assets
Cash and balances at central banks
327,002
403,018
327,002
403,018
Items in the course of collection from other banks
7,297
4,136
7,299
4,136
Hong Kong Government certificates of indebtedness
43,787
42,578
43,787
42,578
Trading assets
218,093
248,842
218,093
248,842
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
100,101
110,795
45,063
49,804
Derivatives
284,159
196,882
284,146
196,882
Loans and advances to banks
104,475
82,567
104,882
83,136
Loans and advances to customers
923,561
1,044,534
924,854
1,045,814
Reverse repurchase agreements – non-trading
253,754
241,648
253,754
241,648
Financial investments
364,726
392,005
425,563
446,274
Assets held for sale
115,919
3,411
115,919
3,411
Prepayments, accrued income and other assets
156,149
136,196
156,865
136,571
Current tax assets
1,230
970
1,230
970
Interests in associates and joint ventures
29,254
29,609
29,254
29,609
Goodwill and intangible assets
11,419
11,169
21,321
20,622
Deferred tax assets
8,360
5,432
7,498
4,624
Total assets
2,949,286
2,953,792
2,966,530
2,957,939
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation
43,787
42,578
43,787
42,578
Deposits by banks
66,722
101,152
66,722
101,152
Customer accounts
1,570,303
1,710,574
1,570,303
1,710,574
Repurchase agreements – non-trading
127,747
126,670
127,747
126,670
Items in the course of transmission to other banks
7,864
5,214
7,864
5,214
Trading liabilities
72,353
84,904
72,353
84,904
Financial liabilities designated at fair value
127,321
145,503
127,327
145,502
Derivatives
285,762
191,064
285,764
191,064
Debt securities in issue
78,149
78,557
78,149
78,557
Liabilities of disposal groups held for sale
114,597
9,005
114,597
9,005
Accruals, deferred income and other liabilities
134,313
115,900
133,240
114,773
Current tax liabilities
1,135
699
1,135
698
Insurance contract liabilities
108,816
119,307
114,844
112,745
Provisions
1,958
2,566
1,958
2,566
Deferred tax liabilities
972
3,294
2,422
4,673
Subordinated liabilities
22,290
20,487
22,290
20,487
Total liabilities
2,764,089
2,757,474
2,770,502
2,751,162
Equity
Called up share capital 
10,147
10,316
10,147
10,316
Share premium account
14,664
14,602
14,664
14,602
Other equity instruments
19,746
22,414
19,746
22,414
Other reserves
(9,133)
6,447
(9,141)
6,460
Retained earnings
142,409
135,236
152,068
144,458
Total shareholders‘ equity
177,833
189,015
187,484
198,250
Non-controlling interests
7,364
7,303
8,544
8,527
Total equity
185,197
196,318
196,028
206,777
Total liabilities and equity
2,949,286
2,953,792
2,966,530
2,957,939
Notes on the financial statements
452
HSBC Holdings plc Annual Report and Accounts 2023
39
Events after the balance sheet date 
On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking business in France to CCF, a subsidiary of Promontoria
MMB SAS (‘My Money Group’). The sale also included HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3%
ownership interest in Crédit Logement. In the fourth quarter of 2023, a loss of $2.0bn was recognised upon reclassification to held for sale, in
accordance with IFRS 5, which net of the $2.1bn partial reversal of impairment recognised in the first quarter of 2023, gave rise to a net reversal
of impairment recognised in the year of $0.1bn.
On 30 January 2024, the PRA concluded its investigation into HSBC Bank plc’s and HSBC UK Bank plc’s compliance with depositor protection
arrangements under the Financial Services Compensation Scheme in the UK. The PRA imposed a fine of $73m (£57m) on these entities, which
was fully provided for as at 31 December 2023, and has now been paid.
On 31 January 2024, HSBC Global Asset Management Limited, through its indirect subsidiary HSBC Global Asset Management Singapore
Limited, completed the acquisition of the Asia-Pacific-focused real estate investment manager Silkroad Property Partners Pte Ltd. HSBC Global
Asset Management Limited also acquired Silkroad’s affiliated General Partner entities as part of the transaction.
On 6 February 2024, HSBC Europe B.V., an indirect subsidiary of HSBC Holdings plc, signed an agreement to sell HSBC Bank Armenia CJSC, its
wholly-owned subsidiary, to Ardshinbank CJSC subject to regulatory approvals. The transaction is expected to complete within the next 12
months.
A fourth interim dividend for 2023 of $0.31 per ordinary share (a distribution of approximately $5,913m) was approved by the Directors after
31 December 2023. On 21 February 2024, HSBC Holdings announced a share buy-back programme to purchase its ordinary shares up to a
maximum consideration of $2.0bn, which is expected to commence shortly and complete by our first quarter 2024 results announcement.
HSBC Holdings called $2,500m 3.803% and $500m floating rate senior unsecured debt securities on 25 January 2024. These securities are
expected to be redeemed and cancelled on 11 March 2024. These accounts were approved by the Board of Directors on 21 February 2024 and
authorised for issue.
40
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 2023 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.
HSBC Holdings plc Annual Report and Accounts 2023
453
Subsidiaries
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
452 TALF SPV LLC
100.00
1, 15
AI Nominees (UK) One Limited
100.00
1, 16
AI Nominees (UK) Two Limited
100.00
116
Almacenadora Banpacifico S.A. (In
Liquidation)
99.99
17
Assetfinance December (F) Limited
100.00
18
Assetfinance December (H) Limited
100.00
16
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
18
Assetfinance Limited (In Liquidation)
100.00
19
Assetfinance March (B) Limited
100.00
20
Assetfinance March (D) Limited
100.00
18
Assetfinance March (F) Limited
100.00
16
Assetfinance September (F) Limited
100.00
16
Assetfinance September (G) Limited
100.00
18
B&Q Financial Services Limited
100.00
16
Banco HSBC S.A.
100.00
21
Banco Nominees (Guernsey) Limited
100.00
22
Banco Nominees 2 (Guernsey) Limited
100.00
22
Banco Nominees Limited
100.00
23
Beau Soleil Limited Partnership
N/A
0, 24
Beijing HSBC Real Estate Leasing Company
Limited
100.00
1, 12, 25
Beijing Miyun HSBC Rural Bank Company
Limited
100.00
12, 26
BentallGreenOak China Real Estate
Investments, L.P.
N/A
0, 1, 27
Canada Crescent Nominees (UK) Limited
100.00
16
Canada Square Nominees (UK) Limited
100.00
16
Canada Water Nominees (UK) Limited (In
Liquidation)
100.00
19
Capco/Cove, Inc.
100.00
28
Card-Flo #1, Inc.
100.00
15
Card-Flo #3, Inc.
100.00
15
CC&H Holdings LLC
100.00
29
CCF & Partners Asset Management Limited
100.00
(99.99)
16
CCF Holding (Liban) S.A.L. (In Liquidation)
74.99
30
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
Limited
100.00
12, 31
Chongqing Fengdu HSBC Rural Bank
Company Limited
100.00
12, 32
Chongqing Rongchang HSBC Rural Bank
Company Limited
100.00
12, 33
COIF Nominees Limited
N/A
0, 16
Corsair IV Financial Services Capital Partners -
B LP
N/A
0, 1, 34
Dalian Pulandian HSBC Rural Bank Company
Limited
100.00
12, 35
Decision One Mortgage Company, LLC
N/A
0, 36
Dempar 1
100.00
(99.99)
4, 37
Desarrollo Turistico, S.A. de C.V. (In
Liquidation)
100.00
(99.99)
17
Electronic Data Process México, S.A. de C.V.
100.00
1, 38
Eton Corporate Services Limited
100.00
22
Flandres Contentieux S.A.
100.00
(99.99)
4, 37
Foncière Elysées
100.00
(99.99)
4, 37
Fujian Yongan HSBC Rural Bank Company
Limited
100.00
12, 39
Fulcher Enterprises Company Limited
100.00
(62.14)
40
Fundacion HSBC, A.C.
100.00
(99.99)
11, 17
Giller Ltd.
100.00
28
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
GPIF Co-Investment, LLC
N/A
0, 15
Griffin International Limited
100.00
16
Grupo Financiero HSBC, S. A. de C. V.
99.99
17
Guangdong Enping HSBC Rural Bank
Company Limited
100.00
12, 41
Guangzhou HSBC Real Estate Company Ltd
(广州汇丰房地产有限公司)
100.00
1, 12, 42
Hang Seng (Nominee) Limited
100.00
(62.14)
40
Hang Seng Bank (China) Limited
N/A
0, 12, 43
Hang Seng Bank (Trustee) Limited
100.00
(62.14)
40
Hang Seng Bank Limited
62.14
40
Hang Seng Bullion Company Limited
100.00
(62.14)
40
Hang Seng Credit Limited
100.00
(62.14)
40
Hang Seng Data Services Limited
100.00
(62.14)
40
Hang Seng Finance Limited
100.00
(62.14)
40
Hang Seng Financial Information Limited
100.00
(62.14)
40
Hang Seng Indexes (Netherlands) B.V.
N/A
0, 1, 44
Hang Seng Indexes Company Limited
100.00
(62.14)
40
Hang Seng Insurance Company Limited
100.00
(62.14)
40
Hang Seng Investment Management Limited
100.00
(62.14)
40
Hang Seng Investment Services Limited
100.00
(62.14)
40
Hang Seng Qianhai Fund Management
Company Limited
N/A
0, 12, 45
Hang Seng Real Estate Management Limited
100.00
(62.14)
40
Hang Seng Securities Limited
100.00
(62.14)
40
Hang Seng Security Management Limited
100.00
(62.14)
40
HASE Wealth Limited
100.00
(62.14)
1, 40
Haseba Investment Company Limited
100.00
(62.14)
40
HFC Bank Limited (In Liquidation)
100.00
19
High Time Investments Limited
100.00
(62.14)
40
HLF
100.00
(99.99)
4, 37
Honey Blue Enterprises Limited (亨京企業有
限公司)
100.00
1, 46
Honey Green Enterprises Ltd.
100.00
47
Honey Grey Enterprises Limited (亨穗企業有
限公司)
100.00
1, 48
Honey Silver Enterprises Limited (亨深企業有
限公司)
100.00
1, 48
Household International Europe Limited (In
Liquidation)
100.00
5, 49
Household Pooling Corporation
100.00
50
Housing (USA) LLP
N/A
0, 1, 29
HSBC (BGF) Investments Limited
100.00
16
HSBC (General Partner) Limited
100.00
2, 51
HSBC (Guernsey) GP PCC Limited
100.00
22
HSBC (Kuala Lumpur) Nominees Sdn Bhd
100.00
52
HSBC (Malaysia) Trustee Berhad
100.00
53
HSBC (Singapore) Nominees Pte Ltd
100.00
54
HSBC Agency (India) Private Limited
100.00
55
HSBC Alternative Investments Limited
100.00
16
HSBC Amanah Malaysia Berhad
100.00
52
HSBC Americas Corporation (Delaware)
100.00
15
HSBC Argentina Holdings S.A.
100.00
56
HSBC Asia Holdings B.V.
100.00
16
HSBC Asia Holdings Limited
100.00
2, 48
HSBC Asia Pacific Holdings (UK) Limited
100.00
5, 16
HSBC Asset Finance (UK) Limited
100.00
16
HSBC Asset Finance M.O.G. Holdings (UK)
Limited
100.00
16
HSBC Asset Management (Fund Services UK)
Limited
100.00
1, 16
HSBC Asset Management (India) Private
Limited
99.99
3, 57
HSBC Asset Management (Japan) Limited
100.00
58
HSBC Assurances Vie (France)
100.00
(99.99)
4, 59
HSBC Australia Holdings Pty Limited
100.00
5, 60
Notes on the financial statements
454
HSBC Holdings plc Annual Report and Accounts 2023
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC BANK (CHILE)
100.00
61
HSBC Bank (China) Company Limited
N/A
0, 12, 62
HSBC Bank (General Partner) Limited
100.00
51
HSBC Bank (Mauritius) Limited
100.00
63
HSBC Bank (RR) (Limited Liability Company)
N/A
0, 13, 64
HSBC Bank (Singapore) Limited
100.00
54
HSBC Bank (Taiwan) Limited
100.00
65
HSBC Bank (Uruguay) S.A.
100.00
66
HSBC Bank (Vietnam) Ltd.
100.00
67
HSBC Bank A.S.
100.00
(99.99)
68
HSBC Bank Argentina S.A.
99.99
56
HSBC Bank Armenia cjsc
100.00
69
HSBC Bank Australia Limited
100.00
60
HSBC Bank Bermuda Limited
100.00
23
HSBC Bank Canada
100.00
3, 70
HSBC Bank Capital Funding (Sterling 1) LP
N/A
0, 51
HSBC Bank Capital Funding (Sterling 2) LP
N/A
0, 51
HSBC Bank Egypt S.A.E
99.62
(94.54)
71
HSBC Bank Malaysia Berhad
100.00
3, 52
HSBC Bank Malta p.l.c.
70.03
72
HSBC Bank Middle East Limited
100.00
3, 73
HSBC Bank Middle East Limited
Representative Office Morocco SARL (In
Liquidation)
100.00
74
HSBC Bank Pension Trust (UK) Limited
100.00
16
HSBC Bank plc
100.00
2, 3, 16
HSBC Bank USA, National Association
100.00
3, 75
HSBC Branch Nominee (UK) Limited
100.00
18
HSBC Brasil Holding S.A.
100.00
21
HSBC Broking Forex (Asia) Limited
100.00
48
HSBC Broking Futures (Asia) Limited
100.00
48
HSBC Broking Futures (Hong Kong) Limited
100.00
48
HSBC Broking Securities (Asia) Limited
100.00
48
HSBC Broking Securities (Hong Kong) Limited
100.00
48
HSBC Broking Services (Asia) Limited
100.00
48
HSBC Canadian Covered Bond (Legislative)
GP Inc.
100.00
76
HSBC Canadian Covered Bond (Legislative)
Guarantor Limited Partnership
N/A
0, 76
HSBC Capital (USA), Inc.
100.00
3, 15
HSBC Capital Funding (Dollar 1) L.P.
N/A
0, 51
HSBC Card Services Inc.
100.00
15
HSBC Casa de Bolsa, S.A. de C.V., Grupo
Financiero HSBC
100.00
(99.99)
17
HSBC Cayman Limited
100.00
192
HSBC Cayman Services Limited
100.00
77
HSBC City Funding Holdings (In Liquidation)
100.00
19
HSBC Client Holdings Nominee (UK) Limited
100.00
16
HSBC Client Nominee (Jersey) Limited
100.00
78
HSBC Columbia Funding, LLC
N/A
0, 15
HSBC Continental Europe
99.99
4, 37
HSBC Corporate Advisory (Malaysia) Sdn Bhd
100.00
52
HSBC Corporate Finance (Hong Kong) Limited
100.00
48
HSBC Corporate Secretary (UK) Limited
100.00
1, 2, 16
HSBC Corporate Services (Shanghai) Co., Ltd
N/A
0, 1, 79
HSBC Corporate Trustee Company (UK)
Limited
100.00
16
HSBC Custody Nominees (Australia) Limited
100.00
60
HSBC Custody Services (Guernsey) Limited
100.00
22
HSBC Daisy Investments (Mauritius) Limited
100.00
80
HSBC Diversified Loan Fund General Partner
Sarl
N/A
0, 81
HSBC Electronic Data Processing
(Guangdong) Limited
N/A
0, 12, 82
HSBC Electronic Data Processing (Malaysia)
Sdn Bhd
100.00
83
HSBC Electronic Data Processing
(Philippines), Inc.
99.99
84
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Electronic Data Processing India
Private Limited
100.00
85
HSBC Electronic Data Processing Lanka
(Private) Limited
100.00
86
HSBC Electronic Data Service Delivery
(Egypt) S.A.E.
100.00
87
HSBC Epargne Entreprise (France)
100.00
(99.99)
4, 59
HSBC Equipment Finance (UK) Limited
100.00
18
HSBC Equity (UK) Limited
100.00
16
HSBC Europe B.V.
100.00
16
HSBC Executor & Trustee Company (UK)
Limited
100.00
18
HSBC Factoring (France)
100.00
(99.99)
4, 37
HSBC Finance (Netherlands)
100.00
2, 16
HSBC Finance Corporation
100.00
3, 15
HSBC Finance Limited
100.00
16
HSBC Finance Mortgages Inc.
100.00
88
HSBC Finance Transformation (UK) Limited
100.00
16
HSBC Financial Advisors Singapore Pte. Ltd.
100.00
1, 54
HSBC Financial Services (Lebanon) s.a.l.
99.80
89
HSBC Financial Services (Uruguay) S.A. (In
Liquidation)
100.00
90
HSBC FinTech Services (Shanghai) Company
Limited
N/A
0, 1, 91
HSBC Global Asset Management (Bermuda)
Limited
100.00
3, 23
HSBC Global Asset Management (Canada)
Limited
100.00
70
HSBC Global Asset Management
(Deutschland) GmbH
100.00
(99.99)
6, 92
HSBC Global Asset Management (France)
100.00
(99.99)
4, 59
HSBC Global Asset Management (Hong
Kong) Limited
100.00
24
HSBC Global Asset Management (Malta)
Limited
100.00
(70.03)
93
HSBC Global Asset Management (México),
S.A. de C.V., Sociedad Operadora de Fondos
de Inversión, Grupo Financiero HSBC
100.00
(99.99)
17
HSBC Global Asset Management (Singapore)
Limited
100.00
54
HSBC Global Asset Management
(Switzerland) AG
100.00
4, 94
HSBC Global Asset Management (Taiwan)
Limited
100.00
95
HSBC Global Asset Management (UK)
Limited
100.00
16
HSBC Global Asset Management (USA) Inc.
100.00
96
HSBC Global Asset Management Argentina
S.A. Sociedad Gerente de Fondos Comunes
de Inversión
100.00
(99.99)
97
HSBC Global Asset Management Holdings
(Bahamas) Limited
100.00
98
HSBC Global Asset Management Limited
100.00
2, 16
HSBC Global Custody Nominee (UK) Limited
100.00
16
HSBC Global Custody Proprietary Nominee
(UK) Limited
100.00
1, 16
HSBC Global Services (Canada) Limited
100.00
88
HSBC Global Services (China) Holdings
Limited
100.00
16
HSBC Global Services (Hong Kong) Limited
100.00
99
HSBC Global Services (UK) Limited
100.00
16
HSBC Global Services Limited
100.00
2, 16
HSBC Group Management Services Limited
100.00
16
HSBC Group Nominees UK Limited
100.00
2, 16
HSBC Holdings B.V.
100.00
16
HSBC IM Pension Trust Limited
100.00
16
HSBC Infrastructure Debt GP 1 S.à r.l.
N/A
0, 1, 100
HSBC Infrastructure Debt GP 2 S.à r.l.
N/A
0, 1, 100
HSBC Holdings plc Annual Report and Accounts 2023
455
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Infrastructure Limited (In Liquidation)
100.00
19
HSBC Innovation Bank Limited
100.00
1, 101
HSBC INSN (Non Operating) Pte. Ltd. (In
Liquidation)
100.00
54
HSBC Institutional Trust Services (Asia)
Limited
100.00
48
HSBC Institutional Trust Services (Bermuda)
Limited
100.00
23
HSBC Institutional Trust Services (Mauritius)
Limited
100.00
102
HSBC Institutional Trust Services (Singapore)
Limited
100.00
54
HSBC Insurance (Asia-Pacific) Holdings
Limited
100.00
103
HSBC Insurance (Asia) Limited
100.00
104
HSBC Insurance (Bermuda) Limited
100.00
105
HSBC Insurance Agency (USA) Inc.
100.00
106
HSBC Insurance Brokerage Company Limited
N/A
0, 1, 107
HSBC Insurance Brokers Greater China
Limited
100.00
1, 108
HSBC Insurance Holdings Limited (In
Liquidation)
100.00
2, 16
HSBC Insurance SAC 1 (Bermuda) Limited
100.00
23
HSBC Insurance SAC 2 (Bermuda) Limited
100.00
1, 109
HSBC Insurance Services Holdings Limited
100.00
16
HSBC International Finance Corporation
(Delaware)
100.00
110
HSBC International Trustee (BVI) Limited
100.00
10, 111
HSBC International Trustee (Holdings) Pte.
Limited
100.00
54
HSBC International Trustee Limited
100.00
112
HSBC Inversiones S.A.
100.00
61
HSBC InvestDirect (India) Private Limited
99.99
57
HSBC InvestDirect Financial Services (India)
Limited
99.99
57
HSBC InvestDirect Sales & Marketing (India)
Limited
98.99
113
HSBC InvestDirect Securities (India) Private
Limited
99.99
57
HSBC Investment and Insurance Brokerage,
Philippines Inc.
99.99
114
HSBC Investment Bank Holdings B.V.
100.00
16
HSBC Investment Bank Holdings Limited
100.00
16
HSBC Investment Company Limited
100.00
2, 16
HSBC Investment Funds (Canada) Inc.
100.00
5, 115
HSBC Investment Funds (Hong Kong) Limited
100.00
24
HSBC Investment Funds (Luxembourg) SA
100.00
116
HSBC Invoice Finance (UK) Limited
100.00
18
HSBC Issuer Services Common Depositary
Nominee (UK) Limited
100.00
16
HSBC Issuer Services Depositary Nominee
(UK) Limited (In Liquidation)
100.00
19
HSBC Latin America B.V.
100.00
16
HSBC Latin America Holdings (UK) Limited
100.00
2, 16
HSBC Leasing (Asia) Limited
100.00
48
HSBC Life (Bermuda) Limited
100.00
1, 23
HSBC Life (Cornell Centre) Limited
100.00
104
HSBC Life (Edwick Centre) Limited
100.00
104
HSBC Life (International) Limited
100.00
23
HSBC Life (Property) Limited
100.00
104
HSBC Life (Singapore) Pte. Ltd.
100.00
1, 54
HSBC Life (Tsing Yi Industrial) Limited
100.00
104
HSBC Life (UK) Limited
100.00
16
HSBC Life (Workshop) Limited
100.00
1, 104
HSBC Life Assurance (Malta) Limited
100.00
(70.03)
93
HSBC Life Insurance Company Limited
N/A
0, 12, 117
HSBC LU Nominees Limited
100.00
16
HSBC Management (Guernsey) Limited
100.00
118
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Markets (USA) Inc.
100.00
15
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
17
HSBC Middle East Asset CO. LLC
100.00
119
HSBC Middle East Holdings B.V.
100.00
2, 3, 73
HSBC Middle East Leasing Partnership
N/A
0, 120
HSBC Middle East Securities L.L.C
100.00
121
HSBC Mortgage Corporation (Canada)
100.00
122
HSBC Mortgage Corporation (USA)
100.00
15
HSBC Nominees (Asing) Sdn Bhd
100.00
52
HSBC Nominees (Hong Kong) Limited
100.00
48
HSBC Nominees (New Zealand) Limited
100.00
123
HSBC Nominees (Tempatan) Sdn Bhd
100.00
52
HSBC North America Holdings Inc.
100.00
3, 15
HSBC Operational Services GmbH
100.00
(99.99)
6, 92
HSBC Overseas Holdings (UK) Limited
100.00
2, 3, 16
HSBC Overseas Investments Corporation
(New York)
100.00
124
HSBC Overseas Nominee (UK) Limited
100.00
16
HSBC Participaciones (Argentina) S.A.
100.00
(99.99)
56
HSBC PB Corporate Services 1 Limited
100.00
125
HSBC PB Services (Suisse) SA
100.00
126
HSBC Pension Trust (Ireland) DAC
100.00
127
HSBC Pensiones, S.A. (In Liquidation)
100.00
(99.99)
17
HSBC Philanthropy Foundation Beijing
N/A
0, 191
HSBC PI Holdings (Mauritius) Limited
100.00
128
HSBC Portfoy Yonetimi A.S.
100.00
129
HSBC Preferential LP (UK)
100.00
16
HSBC Private Bank (Luxembourg) S.A.
100.00
(99.99)
116
HSBC Private Bank (Suisse) SA
100.00
130
HSBC Private Bank (UK) Limited
100.00
16
HSBC Private Banking Holdings (Suisse) SA
100.00
126
HSBC Private Banking Nominee 3 (Jersey)
Limited
100.00
125
HSBC Private Equity Investments (UK)
Limited
100.00
16
HSBC Private Investment Counsel (Canada)
Inc.
100.00
3, 115
HSBC Private Markets Management SARL
N/A
0, 1, 131
HSBC Private Trustee (Hong Kong) Limited
100.00
48
HSBC Professional Services (India) Private
Limited
100.00
132
HSBC Property (UK) Limited
100.00
16
HSBC Property Funds (Holding) Limited
100.00
16
HSBC Provident Fund Trustee (Hong Kong)
Limited
100.00
48
HSBC Qianhai Securities Limited
N/A
0, 12, 133
HSBC Real Estate Leasing (France)
100.00
(99.99)
4, 37
HSBC REGIO Fund General Partner S.à r.l.
N/A
0, 1, 100
HSBC REIM (France)
100.00
(99.99)
4, 59
HSBC Retirement Benefits Trustee (UK)
Limited
100.00
1, 2, 16
HSBC Retirement Services Limited
100.00
1, 16
HSBC Saudi Arabia, Closed Joint Stock
Company
100.00
(66.18)
134
HSBC Savings Bank (Philippines) Inc.
99.99
135
HSBC Securities (Canada) Inc.
100.00
88
HSBC Securities (Egypt) S.A.E. (In
Liquidation)
100.00
(94.65)
71
HSBC Securities (Japan) Co., Ltd.
100.00
1, 58
HSBC Securities (Japan) Limited (In
Liquidation)
100.00
16
HSBC Securities (Singapore) Pte Limited
100.00
54
HSBC Securities (South Africa) (Pty) Limited
100.00
136
HSBC Securities (Taiwan) Corporation Limited
100.00
65
Notes on the financial statements
456
HSBC Holdings plc Annual Report and Accounts 2023
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Securities (USA) Inc.
100.00
15
HSBC Securities and Capital Markets (India)
Private Limited
99.99
5, 113
HSBC Securities Brokers (Asia) Limited
100.00
48
HSBC Securities Investments (Asia) Limited
100.00
48
HSBC Securities Services (Bermuda) Limited
100.00
23
HSBC Securities Services (Guernsey) Limited
100.00
22
HSBC Securities Services (Ireland) DAC
100.00
127
HSBC Securities Services (Luxembourg) S.A.
100.00
116
HSBC Securities Services Holdings (Ireland)
DAC
100.00
127
HSBC Securities Services Nominees Limited
100.00
1, 48
HSBC Seguros de Retiro (Argentina) S.A.
100.00
(99.99)
56
HSBC Seguros de Vida (Argentina) S.A.
100.00
(99.99)
56
HSBC Seguros, S.A de C.V., Grupo Financiero
HSBC
100.00
(99.99)
17
HSBC Service Company Germany GmbH
100.00
(99.99)
1, 6, 92
HSBC Service Delivery (Polska) Sp. z o.o.
100.00
137
HSBC Services (France)
100.00
(99.99)
4, 37
HSBC Services Japan Limited
100.00
138
HSBC Services USA Inc.
100.00
139
HSBC Servicios Financieros, S.A. de C.V
100.00
(99.99)
17
HSBC Servicios, S.A. DE C.V., Grupo
Financiero HSBC
100.00
(99.99)
17
HSBC SFH (France)
100.00
(99.99)
59
HSBC SFT (C.I.) Limited
100.00
22
HSBC Software Development (Guangdong)
Limited
N/A
0, 12, 140
HSBC Software Development (India) Private
Limited
100.00
(99.99)
141
HSBC Software Development (Malaysia) Sdn
Bhd
100.00
83
HSBC Specialist Investments Limited
100.00
3, 16
HSBC Technology & Services (China) Limited
N/A
0, 12, 142
HSBC Technology & Services (USA) Inc.
100.00
15
HSBC Transaction Services GmbH
100.00
(99.99)
6, 92
HSBC Trinkaus & Burkhardt (International)
S.A.
100.00
(99.99)
143
HSBC Trinkaus & Burkhardt Gesellschaft fur
Bankbeteiligungen mbH
100.00
(99.99)
92
HSBC Trinkhaus & Burkhardt GmbH
100.00
(99.99)
1, 6, 144
HSBC Trinkaus Family Office GmbH
100.00
(99.99)
6, 92
HSBC Trinkaus Real Estate GmbH
100.00
(99.99)
6, 92
HSBC Trust Company (Canada)
100.00
122
HSBC Trust Company (Delaware), National
Association
100.00
110
HSBC Trust Company (UK) Limited
100.00
16
HSBC Trustee (C.I.) Limited
100.00
125
HSBC Trustee (Cayman) Limited
100.00
145
HSBC Trustee (Guernsey) Limited
100.00
22
HSBC Trustee (Hong Kong) Limited
100.00
48
HSBC Trustee (Singapore) Limited
100.00
54
HSBC UK Bank plc
100.00
2, 18
HSBC UK Client Nominee Limited
100.00
18
HSBC UK Holdings Limited (In Liquidation)
100.00
2, 3, 146
HSBC UK Societal Projects Limited
N/A
0, 1, 18
HSBC USA Inc.
100.00
3, 124
HSBC Ventures USA Inc.
100.00
15
HSBC Violet Investments (Mauritius) Limited
100.00
80
HSBC Wealth Client Nominee Limited
100.00
1, 18
HSBC Yatirim Menkul Degerler A.S.
100.00
68
HSI Asset Securitization Corporation
100.00
15
HSI International Limited
100.00
(62.14)
40
HSIL Investments Limited
100.00
16
Hubei Macheng HSBC Rural Bank Company
Limited
N/A
0, 12, 147
Hubei Suizhou Cengdu HSBC Rural Bank
Company Limited
N/A
0, 12, 148
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Hubei Tianmen HSBC Rural Bank Company
Limited
N/A
0, 12, 149
Hunan Pingjiang HSBC Rural Bank Company
Limited
N/A
0, 12, 150
Imenson Limited
100.00
(62.14)
40
INKA Internationale Kapitalanlagegesellschaft
mbH
100.00
(99.99)
92
Inmobiliaria Bisa, S.A. de C.V.
99.98
17
Inmobiliaria Grufin, S.A. de C.V.
100.00
(99.99)
17
Inmobiliaria Guatusi, S.A. de C.V.
100.00
(99.99)
17
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
48
Lion International Corporate Services Limited
100.00
1, 151
Lion International Management Limited
100.00
151
Lion Management (Hong Kong) Limited
100.00
1, 48
Lyndholme Limited
100.00
48
Marks and Spencer Financial Services plc
100.00
152
Marks and Spencer Unit Trust Management
Limited
100.00
152
Midcorp Limited
100.00
16
Midland Bank (Branch Nominees) Limited
100.00
18
Midland Nominees Limited
100.00
18
MP Payments Group Limited
100.00
1, 16
MP Payments Netherlands B.V.
100.00
1, 153
MP Payments Operations Limited
100.00
1, 16
MP Payments Singapore Pte. Ltd.
100.00
1, 154
MP Payments UK Limited
100.00
1, 16
MW Gestion SA
100.00
56
Prudential Client HSBC GIS Nominee (UK)
Limited
100.00
16
PT Bank HSBC Indonesia
99.99
(98.93)
155
PT HSBC Sekuritas Indonesia
100.00
(85.00)
155
R/CLIP Corp.
100.00
15
Real Estate Collateral Management Company
100.00
15
Republic Nominees Limited
100.00
22
RLUKREF Nominees (UK) One Limited
100.00
1, 16
RLUKREF Nominees (UK) Two Limited
100.00
1, 16
S.A.P.C. - Ufipro Recouvrement
99.99
11, 37
Saf Baiyun
100.00
(99.99)
4, 37
Saf Guangzhou
100.00
(99.99)
4, 37
SCI HSBC Assurances Immo
100.00
(99.99)
11, 59
Serai Limited
100.00
48
Serai Technology Development (Shanghai)
Limited (丝睿科技开发（上海）有限公司)
N/A
0, 1, 12,
156
SFM
100.00
(99.99)
4, 37
SFSS Nominees (Pty) Limited
100.00
136
Shandong Rongcheng HSBC Rural Bank
Company Limited
N/A
0, 12, 157
Shenzhen HSBC Development Company Ltd
N/A
0, 1, 12,
158
Sico Limited
100.00
159
SNC Les Oliviers D'Antibes
60.00
(59.99)
11, 59
SNCB/M6-2008 A
100.00
(99.99)
4, 37
SNCB/M6-2007 A
100.00
(99.99)
4, 37
SNCB/M6-2007 B
100.00
(99.99)
4, 37
Société Française et Suisse
100.00
(99.99)
4, 37
Somers Dublin DAC
100.00
(99.99)
127
Somers Nominees (Far East) Limited
100.00
23
Sopingest
100.00
(99.99)
4, 37
South Yorkshire Light Rail Limited
100.00
16
St Cross Trustees Limited
100.00
18
Sterling Credit Limited
100.00
183
Sun Hung Kai Development (Lujiazui III)
Limited
N/A
0, 12, 160
HSBC Holdings plc Annual Report and Accounts 2023
457
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Swan National Limited (In Liquidation)
100.00
19
The Hongkong and Shanghai Banking
Corporation Limited
100.00
5, 48
The Venture Catalysts Limited (In Liquidation)
100.00
19
Tooley Street View Limited
100.00
2, 16
Trinkaus Europa Immobilien-Fonds Nr.3
Objekt Utrecht Verwaltungs-GmbH
100.00
(99.99)
6, 92
Trinkaus Immobilien-Fonds
Geschaeftsfuehrungs-GmbH
100.00
(99.99)
6, 92
Trinkaus Immobilien-Fonds Verwaltungs-
GmbH
100.00
(99.99)
6, 92
Trinkaus Private Equity Management GmbH
100.00
(99.99)
6, 92
Trinkaus Private Equity Verwaltungs GmbH
100.00
(99.99)
6, 92
Turnsonic (Nominees) Limited
100.00
18
Valeurs Mobilières Elysées
100.00
(99.99)
4, 37
Wardley Limited
100.00
48
Wayfoong Nominees Limited
100.00
48
Westminster House, LLC
N/A
0, 15
Woodex Limited
100.00
23
Yan Nin Development Company Limited
100.00
(62.14)
40
Joint ventures
The undertakings below are joint ventures and equity accounted.
Joint ventures
% of share class
held by
immediate parent
company (or by
the Group where
this varies)
Footnotes
Climate Asset Management Limited
40.00
1, 161
Global Payments Technology Mexico S.A. De
C.V
50.00
162
HCM Holdings Limited (In Liquidation)
50.99
19
MK HoldCo Limited
50.32
1, 163
Pentagreen Capital Pte. Ltd
50.00
1, 164
ProServe Bermuda Limited
50.00
165
The London Silver Market Fixing Limited
N/A
0, 1, 166
Vaultex UK Limited
50.00
167
Associates
The undertakings below are associates and equity accounted.
Associates
% of share class
held by
immediate parent
company (or by
the Group where
this varies)
Footnotes
Bank of Communications Co., Ltd.
19.03
168
Barrowgate Limited
15.31
169
BGF Group plc
24.62
170
Bud Financial Limited
4.84
1, 171
Canara HSBC Life Insurance Company
Limited
26.00
172
Contour Pte Ltd
9.87
1, 173
Divido Financial Services Limited
7.70
1, 174
Electronic Payment Services Company (Hong
Kong) Limited
38.66
48
Episode Six Inc.
5.69
1, 175
EPS Company (Hong Kong) Limited
38.66
48
Euro Secured Notes Issuer
16.67
176
HSBC Jintrust Fund Management Company
Limited
N/A
0, 177
HSBC UK Covered Bonds (LM) Limited
20.00
1, 178
HSBC UK Covered Bonds LLP
N/A
0, 1, 18
Liquidity Match LLC
N/A
0, 1, 179
London Precious Metals Clearing Limited
30.00
1, 180
MENA Infrastructure Fund (GP) Ltd
33.33
181
Monese Ltd
5.39
1, 182
Quantexa Ltd
9.36
183
RadiantESG Global Investors LLC
N/A
0, 1, 184
Saudi Awwal Bank
31.00
186
Services Epargne Entreprise
14.18
187
The London Gold Market Fixing Limited
N/A
0, 188
Threadneedle Software Holdings Limited
7.10
1, 189
Trade Information Network Limited
12.76
1, 161
Trinkaus Europa Immobilien-Fonds Nr. 7
Frankfurt Mertonviertel KG
N/A
0, 92
We Trade Innovation Designated Activity
Company (In Liquidation)
9.88
1, 190
Notes on the financial statements
458
HSBC Holdings plc Annual Report and Accounts 2023
Footnotes for Note 40
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
Liquidating Share Class
9
Nominal Shares
10
Non-Participating Voting Shares
11
Parts
12
Registered Capital Shares
13
Russian Limited Liability Company Shares
14
Stückaktien
Registered offices
15
c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware, United States of America, 19801
16
8 Canada Square, London, United Kingdom, E14 5HQ
17
Paseo de la Reforma 347 Col. Cuauhtemoc, Mexico, 06500
18
1 Centenary Square, Birmingham, United Kingdom, B1 1HQ
19
C/O Teneo Financial Advisory Limited, The Colmore Building, 20
Colmore Circus, Queensway, Birmingham, United Kingdom, B4
6AT
20
5 Donegal Square South , Northern Ireland, Belfast, United
Kingdom, BT1 5JP
21
1909 Avenida Presidente Juscelino Kubitschek, 19° andar, Torre
Norte, São Paulo Corporate Towers, São Paulo, Brazil, 04551-903
22
Arnold House, St Julians Avenue, St Peter Port, Guernsey, GY1
3NF
23
37 Front Street, Harbourview Centre, Ground Floor, Hamilton,
Pembroke, Bermuda, HM 11
24
HSBC Main Building, 1 Queen's Road Central, Hong Kong
25
2401-55 24/F, Office Tower Two 1 Jianguomenwai Street,
Chaoyang District, Beijing, China
26
First Floor, Xinhua Bookstore Xindong Road (SE of roundabout),
Miyun District, Beijing, China
27
Oak House Hirzel Street, St Peter Port, Guernsey, GY1 2NP
28
2929 Walden Avenue, Depew, New York, United States of
America, 14043
29
Corporation Service Company 251 Little Falls Drive, Wilmington,
Delaware, United States of America, 19808
30
Solidere - Rue Saad Zaghloul Immeuble - 170 Marfaa, P.O. Box
17 5476 Mar Michael, Beyrouth, Lebanon, 11042040
31
No 1, Bei Huan East Road Dazu County, Chongqing, China
32
No 107 Ping Du Avenue (E), Sanhe Town, Fengdu County,
Chongqing, China
33
No. 3, 5, 7, Haitang Erzhi Road Changyuan, Rongchang,
Chongqing, China, 402460
34
c/o Walkers Corporate Services Limited Walker House, 87 Mary
Street, George Town, Grand Cayman, Cayman Islands, KY1-9005
Registered offices
35
First & Second Floor, No.3 Nanshan Road, Pulandian, Dalian,
Liaoning, China
36
160 Mine Lake CT, Ste 200, Raleigh, North Carolina, United
States of America, 27615-6417
37
38 Avenue Kléber, Paris, France, 75116
38
Avenida de las Granjas 972, Building A, Floor 2, Colonia Santa
Bárbara, Alcaldía Azcapotzalco, Mexico City, Mexico, 02230
39
No. 1 1211 Yanjiang Zhong Road, Yongan, Fujian, China
40
83 Des Voeux Road Central, Hong Kong
41
No. 44 Xin Ping Road Central, Encheng, Enping, Guangdong,
China, 529400
42
Room 311, Cheng Hui No. 2, Nan Sha Street, Nan Sha District,
Guangzhou, Guangdong, China
43
34/F, 36/F, Unit 031 of 45/F, and 46/F, Hang Seng Bank Tower
1000 Lujiazui Ring Road, Pilot Free Trade Zone, Shanghai, China,
200120
44
Gustav Mahlerplein 2 1082 MA, Amsterdam, Netherlands
45
1001 T2 Office Building, Qianhai Kerry Business Center, Qianhai
Avenue, Nanshan Street, Qianhai Shenzhen-Hong Kong
Cooperation Zone, Shenzhen, Guangdong, China
46
1 Queen’s Road Central, Hong Kong
47
Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town,
Tortola, British Virgin Islands, VG1110
48
1 Queen's Road Central, Hong Kong
49
156 C/O Teneo Financial Advisory Limited, Great Charles Street,
Queensway, West Midlands, Birmingham, United Kingdom, B3
3HN
50
701 S CARSON ST STE 200, Carson City, Nevada, United States
of America, 89701
51
HSBC House Esplanade, St. Helier, Jersey, JE4 8UB
52
Level 21, Menara IQ, Lingkaran TRX, Tun Razak Exchange, Kuala
Lumpur, Malaysia, 55188
53
Level 19, Menara IQ, Lingkaran TRX, Tun Razak Exchange, Kuala
Lumpur, Malaysia, 55188
54
10 Marina Boulevard, #48-01 Marina Bay Financial Centre,
Singapore, 018983
55
52/60, M G Road Fort, Mumbai, India, 400 001
56
557 Bouchard Level 20, Ciudad de Buenos Aires, Federal Capital,
Argentina, C1106ABG
57
9-11 Floors, NESCO IT Park Building No. 3 Western Express
Highway, Goregaon (East), Mumbai, India, 400063
58
HSBC Building 11-1, Nihonbashi 3-chome, Chuo-ku, Tokyo,
Japan, 103-0027
59
Immeuble Cœur Défense 110 esplanade du Général de Gaulle,
Courbevoie, France, 92400
60
Level 36 Tower 1 International Towers Sydney, 100 Barangaroo
Avenue, Sydney, New South Wales, Australia, 2000
61
Isidora Goyenechea 2800 23rd floor, Las Condes, Santiago,
Chile, 7550647
62
HSBC Building Shanghai ifc, 8 Century Avenue, Pudong,
Shanghai, China, 200120
63
IconEbene, Level 5 Office 1 (West Wing), Rue de L’institut,
Ebene, Mauritius
64
2 Paveletskaya Square Building 2, Moscow, Russia, 115054
65
54F, 7 Xinyi Road Sec. 5 Xinyi District, Taipei, Taiwan
66
1266 Dr Luis Bonativa 1266 Piso 30 (Torre IV WTC), Montevideo,
Uruguay, CP 11.000
67
The Metropolitan 235 Dong Khoi Street, District 1, Ho Chi Minh
City, Vietnam
68
Esentepe Mah. Büyükdere Caddesi No.128 Şişli, Istanbul,
Turkiye, 34394
69
90 Area 42 Paronyan Street, Yerevan, Armenia, 0015
70
885 West Georgia Street 3rd Floor, Vancouver, British Columbia,
Canada, V6C 3E9
71
306 Corniche El Nil, Maadi, Egypt, 11728
HSBC Holdings plc Annual Report and Accounts 2023
459
Registered offices
72
116 Archbishop Street, Valletta, Malta
73
Unit 401, Level 4 Gate Precinct Building 2, Dubai International
Financial Centre, P. O. Box 30444, Dubai, United Arab Emirates
74
Majer Consulting, Office 54/44, Building A1, Residence Ryad
Anfa, Boulevard Omar El Khayam, Casa Finance City (CFC),
Casablanca, Morocco
75
1800 Tysons Boulevard Suite 50, Tysons, Virginia, United States
of America, 22102
76
66 Wellington Street West, Suite 5300, Toronto, Ontario,
Canada, M5K 1E6
77
P.O. Box 1109, Strathvale House, Ground floor, 90 North Church
Street, George Town, Grand Cayman, Cayman Islands, KY1-1102
78
HSBC House Esplanade, St. Helier, Jersey, JE1 1HS
79
RM 2113 HSBC Building, Shanghai ifc, No. 8 Century Avenue,
Pudong, Shanghai, China, 200120
80
c/o Rogers Capital St. Louis Business Centre, Cnr Desroches &
St Louis Streets, Port Louis, Mauritius
81
49 avenue J.F. Kennedy, Luxembourg, 1855
82
4-17/F, Office Tower 2 TaiKoo Hui, No. 381 Tian He Road, Tian
He District, Guangzhou, Guangdong, China
83
Suite 1005, 10th Floor, Wisma Hamzah Kwong, Hing No. 1,
Leboh Ampang, Kuala Lumpur, Malaysia, 50100
84
Building C-1 UP Ayala Technohub, Commonwealth Avenue,
Diliman, Quezon City, Metro Manila, Philippines
85
HSBC House Plot No.8 Survey No.64 (Part), Hightec City Layout
Madhapur, Hyderabad, India, 500081
86
Mireka City 324/9 Havelock Road, Colombo 05, Sri Lanka, 00500
87
Smart Village 28th Km Cairo- Alexandria Desert Road Building,
Cairo, Egypt
88
16 York Street, 6th Floor, Toronto, Ontario, Canada, M5J 0E6
89
Centre Ville 1341 Building - 4th Floor Patriarche Howayek Street,
PO Box Riad El Solh, Lebanon, 9597
90
World Trade Center Montevideo Avenida Luis Alberto de Herrera
1248, Torre 1, Piso 15, Oficina 1502, Montevideo, Uruguay, CP
11300
91
Room 655, Building A, No.888 Huan Hu West 2nd Road, Lingang
New Area, China (Shanghai) Pilot Free Trade Zone, Shanghai,
China
92
Hansaallee 3, Düsseldorf, Germany, 40549
93
80 Mill Street, Qormi, Malta, QRM 3101
94
Gartenstrasse 26, Zurich, Switzerland, 8002
95
36F., No. 68 Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City,
Taiwan, 110419
96
452 Fifth Avenue, New York, United States of America, NY10018
97
Bouchard 557, Piso 18° , Cdad. Autónoma de Buenos Aires,
Argentina, 1106
98
Mareva House 4 George Street, Nassau, Bahamas
99
1 Queen’s Road Central, Hong Kong
100
4 rue Peternelchen, Howald, Luxembourg, 2370
101
Alphabeta 14-18 Finsbury Square, London, United Kingdom,
EC2A 1BR
102
IConEbene Rue de L’institut, Ebene, Mauritius
103
HSBC Main Building, 1 Queen's Road Central, Hong Kong
104
18th Floor Tower 1, HSBC Centre 1 Sham Mong Road, Kowloon,
Hong Kong
105
37 Front Street, Harbourview Center, Ground Floor, Hamilton,
Pembroke, Bermuda, HM 11
106
CT Corporation System 28 Liberty Street, New York, New York,
United States of America, 10005
107
Unit 201, Floor 2, Building 3 No. 12, Anxiang Street, Shunyi
District, Beijing, China
108
HSBC Main Building, 1 Queen’s Road Central, Hong Kong
109
37 Front Street, Harbourview Centre, Ground Floor, Hamilton
Pembroke, Bermuda, HM 11
Registered offices
110
300 Delaware Avenue Suite 1401, Wilmington, Delaware, United
States of America, 19801
111
Woodbourne Hall, Road Town, Tortola, British Virgin Islands, P.O.
Box 916
112
Craigmuir Chambers, Road Town Tortola, British Virgin Islands,
VG1110
113
52/60 M G Road Fort, Mumbai, India, 400 001
114
5/F HSBC Centre 3058 Fifth Ave West, Bonifacio Global City,
Taguig City, Philippines
115
300-885 West Georgia Street, Vancouver, British Columbia,
Canada, V6C 3E9
116
18 Boulevard de Kockelscheuer, Luxembourg, 1821
117
Unit 2002 of 20/F, Unit 2101 of 21/F HSBC Building, 8 Century
Avenue, China (Shanghai) Pilot Free Trade Zone, Shanghai,
China, 200120
118
Arnold House, St Julians Avenue, St Peter Port, Guernsey, GY1
1WA
119
HSBC Tower, Downtown Dubai, P.O. Box 66. United Arab
Emirates
120
Unit 401, Level 4, Gate Precinct Building 2, Dubai International
Financial Centre, P. O. Box 506553, Dubai, United Arab Emirates
121
Level 16, HSBC Tower, Downtown Dubai, P.O. Box 66, United
Arab Emirates
122
885 West Georgia Street, Suite 300, Vancouver, British
Columbia, Canada, V6C 3E9
123
HSBC Tower, Level 21, 188 Quay Street, Auckland, New
Zealand, 1010
124
The Corporation Trust Incorporated, 2405 York Road, Suite 201,
Lutherville Timonium, Maryland, United States of America,
21093
125
HSBC House Esplanade, St. Helier, Jersey, JE1 1GT
126
Quai des Bergues 9-17 , Geneva, Switzerland, 1201
127
1 Grand Canal Square Grand Canal Harbour, Dublin 2, Ireland,
D02 P820
128
6th floor HSBC Centre 18, Cybercity, Ebene, Mauritius, 72201
129
Esentepe Mah. Büyükdere Caddesi No.128, 34394, Şişli,
Istanbul, Turkiye
130
Quai des Bergues 9-17, Geneva, Switzerland, 1201
131
5 rue Heienhaff, Senningerberg, Luxembourg, L-1736
132
52/60 M G Road, Fort, Mumbai, India, 400 001
133
Unit 2201, 22/F, Qianhai Chow Tai Fook Finance Tower (Phase I)
No. 66 Shu Niu Avenue, Nanshan Subdistrict, the Shenzhen
Qianhai Shenzhen-Hong Kong Cooperation Zone, the PRC,
Shenzhen, China, 518054
134
HSBC Building 7267 Olaya - Al Murrooj , Riyadh, Kingdom of
Saudi Arabia, 12283 - 2255
135
Unit 1 GF The Commerical Complex Madrigal Avenue, Ayala
Alabang Village, Muntinlupa City, Philippines, 1780
136
1 Mutual Place, 107 Rivonia Road, Sandton, Gauteng, South
Africa, 2196
137
Kapelanka 42A , Krakow, Poland, 30-347
138
Mareva House, 4 George Street, Nassau, Bahamas
139
C T Corporation System 820 Bear Tavern Road, West Trenton,
New Jersey, United States of America, 08628
140
L22, Office Tower 2, Taikoo Hui, 381 Tianhe Road, Tianhe
District, Guangzhou, Guangdong, China
141
Business Bay, Wing 2 Tower B, Survey no 103, Hissa no. 2,
Airport Road, Yerwada, Pune, India, 411006
142
Room 3102, L31 HSBC Building, Shanghai ifc, 8 Century Avenue,
China (Shanghai) Free Trade Zone, Shanghai, China, 200120
143
16 Boulevard d'Avranches, Luxembourg, L-1160
144
3 Hansaallee, Düsseldorf, Nordrhein-Westfalen, Germany, 40549
145
P.O. Box 309 Ugland House, Grand Cayman, Cayman Islands,
KY1-1104
Notes on the financial statements
460
HSBC Holdings plc Annual Report and Accounts 2023
Registered offices
146
c/o Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus, Queensway, Birmingham, United Kingdom, B4
6AT
147
No. 56 Yu Rong Street, Macheng, China, 438300
148
No. 205 Lie Shan Road, Suizhou, Hubei, China
149
Building 3, Yin Zuo Di Jing Wan Tianmen New City, Tianmen,
Hubei Province, China
150
RM101, 102 & 106 Sunshine Fairview, Sunshine Garden,
Pedestrian Walkway, Pingjiang, China
151
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands,
VG1110
152
Kings Meadow Chester Business Park, Chester, United
Kingdom, CH99 9FB
153
De Entree, 236 , Amsterdam, Netherlands, 1101 EE
154
10 Marina Boulevard, #48-01 Marina Bay Financial Centre,
Singapore, 018983
155
5th Floor, World Trade Center 1, Jl. Jend. Sudirman Kav. 29-31,
Jakarta, Indonesia, 12920
156
Room 667, 6/F, Tower A, No. 8 Century Avenue, Pudong District,
Shanghai, China
157
No.198-2 Chengshan Avenue (E), Rongcheng, China, 264300
158
Room 1303-13062 Marine Center Main Tower, 59 Linhai Rd,
Nanshan District, Shenzhen, China
159
Woodbourne Hall, Road Town, Tortola, British Virgin Islands, P.O.
Box 3162
160
RM 2112, HSBC Building, Shanghai ifc No. 8 Century Road,
Pudong, Shanghai, China, 200120
161
3 More London Riverside, London, United Kingdom, SE1 2AQ
162
296, Floor 18, Office A Paseo de la Reforma, Mexico City,
Mexico, 06600
163
35 Ballards Lane, London, United Kingdom, N3 1XW
164
1 Raffles Quay #23-01, Singapore, 048583
165
c/o MUFG Fund Services (Bermuda) Limited, Cedar House, 4th
Floor North, 41 Cedar Avenue, Hamilton, Bermuda, HM12
166
27 Old Gloucester Street, London, United Kingdom, WC1N 3AX
167
All Saints Triangle Caledonian Road, London, United Kingdom,
N1 9UT
168
188 Yin Cheng Zhong Lu (Shanghai) Pilot Free Trade Zone, China
169
50/F, Lee Garden One, 33 Hysan Avenue, Hong Kong
170
13-15 York Buildings, London, United Kingdom, WC2N 6JU
171
167-169 Great Portland Street, 5th Floor, London, United
Kingdom, W1W 5PF
172
Unit No. 208, 2nd Floor, Kanchenjunga Building, 18 Barakhamba
Road, New Delhi, India, 110001
173
1 Harbourfront Avenue, #14-07 Keppel Bay Tower, Singapore,
098632
174
Office 7, 35-37 Ludgate Hill, London, United Kingdom, EC4M
7JN
175
251 Little Falls Drive, New Castle, Wilmington, United States of
America, 19808
176
3 Avenue de l'Opera , Paris, France, 75001
177
17F, HSBC Building, Shanghai ifc 8 Century Avenue, Pudong,
Shanghai, China
178
10th Floor 5 Churchill Place, London, United Kingdom, E14 5HU
179
100 Town Square Place, Suite 201, Jersey City, New Jersey,
United States of America, 07310
180
7th Floor, 62 Threadneedle Street, London, United Kingdom,
EC2R 8HP
181
Unit 705, Level 7, Currency House-Tower 2, Dubai International
Financial Centre, P.O. BOX 506553, Dubai, United Arab Emirates
182
Eagle House, 163 City Road, London, United Kingdom, EC1V
1NR
183
Hill House, 1 Little New Street, London, United Kingdom, EC4A
3TR
184
4482 Deer Ridge Road, Danville, CA, Delaware, United States of
America, 94506
185
9004 Al Ulaya - Al Olaya Dis. Unit no. 1, Riyadh, Kingdom of
Saudi Arabia, 12214-2652
186
7206 Prince Abdul Aziz Bin Musaid Bin Jalawi, 4065 Al Murabba
District, 12613 Riyadh, Kingdom of Saudi Arabia
187
32 Rue du Champ de Tir, Nantes, France, 44300
188
c/o Hackwood Secretaries Limited, One Silk Street, London,
United Kingdom, EC2Y 8HQ
189
2nd Floor, Regis House, 45 King William Street, London, United
Kingdom, EC4R 9AN
190
10 Earlsfort Terrace, Dublin, Ireland, D02 T380
191
Meeting Room 18.R005, 18/F Fortune Financial Center, No. 5
Dongsanhuan Zhong Road, Chaoyang District, Beijing, 100020,
China
192
P.O. Box, 309 Ugland House, Grand Cayman, Cayman Islands,
KY1-1104
41 Non-statutory accounts
The information set out in these accounts does not constitute the Company’s statutory accounts for the years ended 31 December 2023 or
2022. Those accounts have been reported on by the Company’s auditors: their reports were unqualified and did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006.
The accounts for 2022 have been delivered to the Registrar of Companies and those for 2023 will be delivered in due course.
HSBC Holdings plc Annual Report and Accounts 2023
461
Shareholder information
Contents
Fourth interim dividend for 2023
Information made about the enforceability of judgments made in
the US
Interim dividends for 2024
Other equity instruments
Exchange controls and other limitations affecting equity security
2023 Annual General Meeting
Dividends on the ordinary shares of HSBC Holdings
Earnings releases and interim results
American Depository Shares
Shareholder enquiries and communications
Nature of trading market
Stock symbols
Memorandum and Articles of Association
Investor relations
Differences in HSBC Holdings/New York Stock Exchange corporate
Where more information about HSBC is available
Glossary of accounting terms and US equivalents
Taxation of shares and dividends
Reconciliations
Abbreviations
This section gives important information for our shareholders, including contact information. It also includes an overview of key abbreviations
and terminology used throughout this Form 20-F.
A glossary of terms used in the Annual Report and Accounts can be found in the Investors section of www.hsbc.com.
Fourth interim dividend for 2023
The Directors have approved a fourth interim dividend for 2023 of $0.31 per ordinary share. Information on the currencies in which shareholders
may elect to have the cash dividend paid can be viewed at www.hsbc.com/investors. The interim dividend will be paid in cash. The timetable for
the interim dividend is:
Announcement
21 February 2024
Shares quoted ex-dividend in London, Hong Kong and Bermuda and American Depositary Shares (‘ADS’) quoted ex-dividend in New York
7 March 2024
Record date – London, Hong Kong, New York, Bermuda1
8 March 2024
Mailing of Annual Report and Accounts 2023 and/or Strategic Report 2023
22 March 2024
Final date for dividend election changes including Investor Centre electronic instructions and revocations of standing instructions for dividend
elections
11 April 2024
Exchange rate determined for payment of dividends in pounds sterling and Hong Kong dollars
15 April 2024
Payment date
25 April 2024
1Removals to and from the Overseas Branch register of shareholders in Hong Kong will not be permitted on this date.
Interim dividends for 2024
For the financial year 2023, the Group reverted to paying quarterly dividends, and achieved a dividend payout ratio of 50% of reported earnings
per ordinary share (’EPS’), in line with our published target for 2023 and 2024. EPS for this purpose excludes material notable items and related
impacts (including those associated with the sale of our retail banking operations in France, the agreed sale of our banking business in Canada
and our acquisition of SVB UK). The Board has adopted a dividend policy designed to provide sustainable cash dividends, while retaining the
flexibility to invest and grow the business in the future, supplemented by additional shareholder distributions, if appropriate.
Dividends are approved in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, pounds
sterling and Hong Kong dollars. 
Other equity instruments
Additional tier 1 capital – contingent convertible securities
HSBC continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital
securities. For further details on these securities, see Note 33 on the financial statements.
HSBC issued $2,000m 8.000% perpetual contingent convertible securities on 7 March 2023.
2023 Annual General Meeting
With the exception of the shareholder requisitioned Resolutions 16, 17 and 18, which the Board recommended that shareholders vote against,
all resolutions considered at the 2023 AGM held at 11:00am on 5 May 2023 at The Eastside Rooms, 2 Woodcock Street, Birmingham, B7 4BL,
UK, were passed on a poll.
Additional information
462
HSBC Holdings plc
Earnings releases and interim results
First and third quarter results for 2024 will be released on 30 April 2024 and 29 October 2024, respectively. The interim results for the six
months to 30 June 2024 will be issued on 31 July 2024.
Shareholder enquiries and communications
Enquiries
Any enquiries relating to shareholdings on the share register (for example, transfers of shares, changes of name or address, lost share
certificates or dividend cheques) should be sent to the Registrars at the address given below. The Registrars offer an online facility, Investor
Centre, which enables shareholders to manage their shareholding electronically.
Principal Register:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ,
United Kingdom
Telephone: +44 (0) 370 702 0137
www.investorcentre.co.uk/contactus
Investor Centre: www.investorcentre.co.uk
Hong Kong Overseas Branch
Register:
Computershare Hong Kong Investor Services Limited
Rooms 1712–1716, 17th Floor Hopewell Centre, 183
Queen’s Road East, Hong Kong
Telephone: +852 2862 8555
hsbc.ecom@computershare.com.hk
Investor Centre: www.investorcentre.com/hk
Bermuda Overseas Branch Register:
Investor Relations Team
HSBC Bank Bermuda Limited, 37 Front Street,
Hamilton, HM 11, Bermuda
hbbm.shareholder.services@hsbc.bm
Investor Centre: www.investorcentre.com/bm
ADS Depositary:
The Bank of New York Mellon
Shareowner Services, P.O. Box 43006, Providence RI
02940-3078, USA
Telephone (US): +1 877 283 5786
Telephone (International): +1 201 680 6825
shrrelations@cpushareownerservices.com
www.mybnymdr.com
If you have elected to receive general shareholder communications directly from HSBC Holdings, it is important to remember that your main
contact for all matters relating to your investment remains the registered shareholder, or custodian or broker, who administers the investment
on your behalf. Therefore, any changes or queries relating to your personal details and holding (including any administration of it) must continue
to be directed to your existing contact at your investment manager or custodian or broker. HSBC Holdings cannot guarantee dealing with
matters directed to it in error.
Shareholders who wish to receive a hard copy of the Annual Report and Accounts 2023 should contact HSBC’s Registrars. Please visit
www.hsbc.com/investors/investor-contacts for further information. You can also download an online version of the report from www.hsbc.com.
Electronic communications
Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on
HSBC’s website. To receive notifications of the availability of a corporate communication on HSBC’s website by email, or revoke or amend an
instruction to receive such notifications by email, go to www.hsbc.com/investors/shareholder-information/manage-your-shareholding. If you
received a notification of the availability of this document on HSBC’s website and would like to receive a printed copy, or if you would like to
receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the
appropriate Registrars at the address given above. Printed copies will be provided without charge.
HSBC Holdings plc
463
Chinese translation
A Chinese translation of the Annual Report and Accounts 2023 will be available upon request after 22 March 2024 from the Registrars (contact
details above). Please also contact the Registrars if you wish to receive Chinese translations of future documents, or if you have received a
Chinese translation of this document and do not wish to receive them in future.
《2023 年報及賬目》備有中譯本，各界人士可於2024年3月22日之後，向上列股份登記處索閱。
閣下如欲於日後收取相關文件的中譯本，或已收到本文件的中譯本但不希望繼續收取有關譯本，均請聯絡股份登記處。
Stock symbols
HSBC Holdings ordinary shares trade under the following stock symbols:
London Stock Exchange
HSBA*
New York Stock Exchange (ADS)
HSBC
Hong Kong Stock Exchange
5
Bermuda Stock Exchange
HSBC.BH
∗  HSBC’s Primary market
Investor relations
Enquiries relating to HSBC’s strategy or operations may be directed to:
Neil Sankoff, Global Head of Investor Relations
Yafei Tian, Head of Investor Relations, Asia-Pacific
HSBC Holdings plc
The Hongkong and Shanghai Banking
8 Canada Square
Corporation Limited
London E14 5HQ
1 Queen’s Road Central
United Kingdom
Hong Kong
Telephone: +44 (0) 20 7991 5072
Telephone: +852 2899 8909
Email: investorrelations@hsbc.com
Email: investorrelations@hsbc.com.hk
Where more information about HSBC is available
The Annual Report and Accounts 2023 and other information on HSBC may be downloaded from HSBC’s website: www.hsbc.com.
Reports, statements and information that HSBC Holdings files with the Securities and Exchange Commission are available at www.sec.gov.
Investors can also request hard copies of these documents upon payment of a duplicating fee by writing to the SEC at the Office of Investor
Education and Advocacy, 100 F Street N.E., Washington, DC 20549-0213 or by emailing PublicInfo@sec.gov. Investors should call the
Commission at (1) 202 551 8090 if they require further assistance. Investors may also obtain the reports and other information that HSBC
Holdings files at www.nyse.com (telephone number (1) 212 656 3000).
HM Treasury has transposed the requirements set out under CRD IV and issued the Capital Requirements Country-by-Country Reporting
Regulations 2013. The legislation requires HSBC Holdings to publish additional information in respect of the year ended 31 December 2023 by
31 December 2024. This information will be available on HSBC’s website: www.hsbc.com/tax.
Additional information
464
HSBC Holdings plc
Taxation of shares and dividends
Taxation – UK residents
The following is a summary, under current law (unless otherwise
noted) and the current published practice of HM Revenue and
Customs (‘HMRC’), of certain UK tax considerations that are likely to
be material to the ownership and disposition of HSBC Holdings
ordinary shares. The summary does not purport to be a
comprehensive description of all the tax considerations that may be
relevant to a holder of shares. In particular, the summary deals with
shareholders who are resident solely in the UK for UK tax purposes
and only with holders who hold the shares as investments and who
are the beneficial owners of the shares, and does not address the tax
treatment of certain classes of holders such as dealers in securities.
Holders and prospective purchasers should consult their own advisers
regarding the tax consequences of an investment in shares in light of
their particular circumstances, including the effect of any national,
state or local laws.
Taxation of dividends
Currently, no tax is withheld from dividends paid by HSBC Holdings.
UK resident individuals
UK resident individuals are generally entitled to a tax-free annual
allowance in respect of dividends received. The amount of the
allowance for the tax year beginning 6 April 2023 is £1,000. To the
extent that dividend income received by an individual in the relevant
tax year does not exceed the allowance, a nil tax rate will apply.
Dividend income in excess of this allowance will be taxed at 8.75%
for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35%
for additional rate taxpayers.
UK resident companies
Shareholders that are within the charge to UK corporation tax should
generally be entitled to an exemption from UK corporation tax on any
dividends received from HSBC Holdings. However, the exemptions
are not comprehensive and are subject to anti-avoidance rules.
If the conditions for exemption are not met or cease to be satisfied, or
a shareholder within the charge to UK corporation tax elects for an
otherwise exempt dividend to be taxable, the shareholder will be
subject to UK corporation tax on dividends received from HSBC
Holdings at the rate of corporation tax applicable to that shareholder. 
Taxation of capital gains
The computation of the capital gains tax liability arising on disposals of
shares in HSBC Holdings by shareholders subject to UK tax on capital
gains can be complex, partly depending on whether, for example, the
shares were purchased since April 1991, acquired in 1991 in
exchange for shares in The Hongkong and Shanghai Banking
Corporation Limited, or acquired subsequent to 1991 in exchange for
shares in other companies.
For capital gains tax purposes, the acquisition cost for ordinary shares
is adjusted to take account of subsequent rights and capitalisation
issues. Any capital gain arising on a disposal of shares in HSBC
Holdings by a UK company may also be adjusted to take account of
indexation allowance if the shares were acquired before 1 January
2018, although the level of indexation allowance that is given in
calculating the gain would be frozen at the value that would have
been applied to a disposal of those shares in December 2017. If in
doubt, shareholders are recommended to consult their professional
advisers.
Stamp duty and stamp duty reserve tax
Transfers of shares by a written instrument of transfer generally will
be subject to UK stamp duty at the rate of 0.5% of the consideration
paid for the transfer (rounded up to the next £5), and such stamp duty
is generally payable by the transferee. An agreement to transfer
shares, or any interest therein, normally will give rise to a charge to
stamp duty reserve tax at the rate of 0.5% of the consideration.
However, provided an instrument of transfer of the shares is
executed pursuant to the agreement and duly stamped before the
date on which the stamp duty reserve tax becomes payable, under
the current published practice of HMRC it will not be necessary to pay
the stamp duty reserve tax, nor to apply for such tax to be cancelled.
Stamp duty reserve tax is generally payable by the transferee.
Paperless transfers of shares within CREST, the UK’s paperless share
transfer system, are liable to stamp duty reserve tax at the rate of
0.5% of the consideration. In CREST transactions, the tax is
calculated and payment made automatically. Deposits of shares into
CREST generally will not be subject to stamp duty reserve tax, unless
the transfer into CREST is itself for consideration. Until 31 December
2023, the charge to stamp duty reserve tax at 1.5% on the issue of
shares (and transfers integral to capital raising) to a depositary receipt
issuer or a clearance service was incompatible with European Union
law as retained in the UK following the UK’s departure from the
European Union, and was not imposed by HMRC. If the UK Finance
Bill 2023-24 is enacted in the form it stands as at the date hereof, that
1.5% charge will be repealed with retrospective effect from 1 January
2024.
Taxation – US residents
The following is a summary, under current law, of the principal UK tax
and US federal income tax considerations that are likely to be material
to the ownership and disposition of shares or American Depositary
Shares (‘ADSs’) by a holder that is a US holder, as defined below, and
who is not resident in the UK for UK tax purposes.
The summary does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a holder of shares
or ADSs. In particular, the summary deals only with US holders that
hold shares or ADSs as capital assets, and does not address the tax
treatment of holders that are subject to special tax rules. These
include banks, tax-exempt entities, insurance companies, dealers in
securities or currencies, persons that hold shares or ADSs as part of
an integrated investment (including a ‘straddle’ or ‘hedge’) comprised
of a share or ADS and one or more other positions, and persons that
own directly or indirectly 10% or more (by vote or value) of the stock
of HSBC Holdings. This discussion is based on laws, treaties, judicial
decisions and regulatory interpretations in effect on the date hereof,
all of which are subject to change.
For the purposes of this discussion, a ‘US holder’ is a beneficial holder
that is a citizen or resident of the United States, a US domestic
corporation or otherwise is subject to US federal income taxes on a
net income basis in respect thereof.
Holders and prospective purchasers should consult their own advisers
regarding the tax consequences of an investment in shares or ADSs
in light of their particular circumstances, including the effect of any
national, state or local laws.
Any US federal tax advice included in the Annual Report and Accounts
2023 is for informational purposes only. It was not intended or written
to be used, and cannot be used, for the purpose of avoiding US
federal tax penalties.
Taxation of dividends
Currently, no tax is withheld from dividends paid by HSBC Holdings.
For US tax purposes, a US holder must include cash dividends paid on
the shares or ADSs in ordinary income on the date that such holder or
the ADS depositary receives them, translating dividends paid in UK
pounds sterling into US dollars using the exchange rate in effect on
the date of receipt. A US holder that elects to receive shares in lieu of
a cash dividend must include in ordinary income the fair market value
of such shares on the dividend payment date, and the tax basis of
those shares will equal such fair market value.
Subject to certain exceptions for positions that are held for less than
61 days, and subject to a foreign corporation being considered a
‘qualified foreign corporation’ (which includes not being classified for
US federal income tax purposes as a passive foreign investment
company), certain dividends (‘qualified dividends’) received by an
individual US holder generally will be subject to US taxation at
preferential rates.
HSBC Holdings plc
465
Based on the company’s audited financial statements and relevant
market and shareholder data, HSBC Holdings does not believe that it
was a passive investment company for its 2023 taxable year and does
not anticipate becoming a passive foreign investment company in
2024 or the foreseeable future. Accordingly, dividends paid on the
shares or ADSs generally should be eligible for qualified dividends
treatment.
Taxation of capital gains
Gains realised by a US holder on the sale or other disposition of
shares or ADSs normally will not be subject to UK taxation unless at
the time of the sale or other disposition the holder carries on a trade,
profession or vocation in the UK through a branch or agency or
permanent establishment and the shares or ADSs are or have been
used, held or acquired for the purposes of such trade, profession,
vocation, branch or agency or permanent establishment. Such gains
will be included in income for US tax purposes, and will be long-term
capital gains if the shares or ADSs were held for more than one year.
A long-term capital gain realised by an individual US holder generally
will be subject to US tax at preferential rates.
Inheritance tax
Shares or ADSs held by an individual whose domicile is determined to
be the US for the purposes of the United States–United Kingdom
Double Taxation Convention relating to estate and gift taxes (the
‘Estate Tax Treaty’) and who is not for such purposes a national of the
UK will not, provided any US federal estate or gift tax chargeable has
been paid, be subject to UK inheritance tax on the individual’s death
or on a lifetime transfer of shares or ADSs except in certain cases
where the shares or ADSs (i) are comprised in a settlement (unless, at
the time of the settlement, the settlor was domiciled in the US and
was not a national of the UK), (ii) are part of the business property of a
UK permanent establishment of an enterprise, or (iii) pertain to a UK
fixed base of an individual used for the performance of independent
personal services. In such cases, the Estate Tax Treaty generally
provides a credit against US federal tax liability for the amount of any
tax paid in the UK in a case where the shares or ADSs are subject to
both UK inheritance tax and to US federal estate or gift tax.
Stamp duty and stamp duty reserve tax – ADSs
If shares are transferred to a clearance service or American
Depositary Receipt (‘ADR’) issuer (which will include a transfer of
shares to the depositary) UK stamp duty and/or stamp duty reserve
tax will be payable unless the UK Finance Bill 2023-24 is enacted in
the form it stands as at the date hereof and the transfer is, or is
treated as being, in the course of a capital raising arrangement. The
stamp duty or stamp duty reserve tax is generally payable on the
consideration for the transfer and is payable at the aggregate rate of
1.5%.
The amount of stamp duty reserve tax payable on such a transfer will
be reduced by any stamp duty paid in connection with the same
transfer.
No stamp duty will be payable on the transfer of, or agreement to
transfer, an ADS, provided that the ADR and any separate instrument
of transfer or written agreement to transfer remain at all times
outside the UK, and provided further that any such transfer or written
agreement to transfer is not executed in the UK. No stamp duty
reserve tax will be payable on a transfer of, or agreement to transfer,
an ADS effected by the transfer of an ADR.
US information reporting and backup withholding tax
Distributions made on shares or ADSs and proceeds from the sale of
shares or ADSs that are paid within the US, or through certain
financial intermediaries to US holders, are subject to US information
reporting and may be subject to a US ‘backup’ withholding tax.
General exceptions to this rule happen when the US holder:
establishes that it is a corporation (other than an S corporation) or
other exempt holder; or provides a correct taxpayer identification
number, certifies that no loss of exemption from backup withholding
has occurred and otherwise complies with the applicable
requirements of the backup withholding rules. Holders that are not US
persons (as defined in the US Internal Revenue Code of 1986, as
amended) generally are not subject to US information reporting or
backup withholding tax, but may be required to comply with
applicable certification procedures to establish that they are not US
persons in order to avoid the application of such US information
reporting requirements or backup withholding tax to payments
received within the US or through certain financial intermediaries.
Information about the enforceability
of judgments made in the US
HSBC Holdings is a public limited company incorporated in England
and Wales.
Most of the Directors and executive officers live outside the US. As a
result, it may not be possible to serve process on such persons or
HSBC Holdings in the US or to enforce judgments obtained in US
courts against them or HSBC Holdings based on civil liability
provisions of the securities laws of the US.
There is doubt as to whether English courts would enforce:
–civil liabilities under US securities laws in original actions; or
–judgments of US courts based upon these civil liability provisions.
In addition, awards of punitive damages in actions brought in the US
or elsewhere may be unenforceable in the UK.
The enforceability of any judgment in the UK will depend on the
particular facts of the case as well as the laws and treaties in effect at
the time.
Exchange controls and other
limitations affecting equity security
holders
Other than certain economic sanctions that may be in force from time
to time, there are currently no UK laws, decrees or regulations that
would prevent the import or export of capital or remittance of
distributable profits by way of dividends and other payments to
holders of HSBC Holdings’ equity securities who are not residents of
the UK. There are also no restrictions under the laws of the UK or the
terms of the Memorandum and Articles of Association concerning the
right of non-resident or foreign owners to hold HSBC Holdings’ equity
securities or, when entitled to vote, to do so.
Additional information
466
HSBC Holdings plc
Dividends on the ordinary shares of HSBC Holdings
The HSBC Holdings dividends approved, per ordinary share, in respect of each of the last five years were:
First interim
Second interim
Third interim
Fourth interim1
Total2
2023
$
0.100
0.100
0.100
0.310
0.610
£
0.079
0.080
0.080
0.243
0.482
HK$
0.783
0.783
0.780
2.422
4.768
2022
$
0.090
0.230
0.320
£
0.079
0.185
0.264
HK$
0.706
1.804
2.510
2021
$
0.070
0.180
–
–
0.250
£
0.051
0.138
–
–
0.189
HK$
0.545
1.412
–
–
1.957
2020
$
–
–
–
0.150
0.150
£
–
–
–
0.108
0.108
HK$
–
–
–
1.165
1.165
2019
$
0.100
0.100
0.100
–
0.300
£
0.078
0.080
0.078
–
0.236
HK$
0.781
0.782
0.783
–
2.346
1The fourth interim dividend for 2023 of $0.31 per ordinary share will be paid on 25 April 2024. The fourth interim dividend for 2023 has been translated
into pounds sterling and Hong Kong dollars at the closing rate on 31 December 2023.
2The above dividends approved are accounted for as disclosed in Note 8 on the Financial Statements.
3The above dividend amounts for pounds sterling and Hong Kong dollars have been rounded.
American Depositary Shares
A holder of HSBC Holdings’ American Depositary Shares (‘ADSs’)
may have to pay, either directly or indirectly (via the intermediary
through whom their ADSs are held) fees to the Bank of New York
Mellon as depositary.
Fees may be paid or recovered in several ways: by deduction from
amounts distributed; by selling a portion of distributable property; by
deduction from dividend distributions; by directly invoicing the holder;
or by charging the intermediaries who act for them.
Fees for the holders of the HSBC ADSs include:
For:
HSBC ADS holders must pay:
Each issuance of HSBC ADSs, including as a result of a distribution of shares (including
through a stock dividend, stock split or distribution of rights or other property)
$5.00 (or less) per 100 HSBC ADSs or portion thereof
Each cancellation of HSBC ADSs, including if the deposit agreement terminates
$5.00 (or less) per 100 HSBC ADSs or portion thereof
Transfer and registration of shares on our share register to/from the holder’s name to/
from the name of The Bank of New York Mellon or its agent when the holder deposits
or withdraws shares
Registration or transfer fees (of which there currently are
none)
Conversion of non-US currency to US dollars
Charges and expenses incurred by The Bank of New York
Mellon with respect to the conversion
Each cash distribution to HSBC ADS holders
$0.02 or less per ADS
Transfers of HSBC ordinary shares to the depositary in exchange for HSBC ADSs
Any applicable taxes and/or other governmental charges
Distribution of securities by the depository to HSBC ADS holders
A fee equivalent to the fee that would be payable if securities
distributed to you had been shares and those shares had
been deposited for issuance of ADSs
Any other charges incurred by the depositary or its agents for servicing shares or other
securities deposited
As applicable
The depositary may generally refuse to provide fee-attracting services
until its fees for those services are paid.
The depositary has agreed to reimburse us for expenses we incur,
and to pay certain out-of-pocket expenses and waive certain fees, in
connection with the administration, servicing and maintenance of our
ADS programme. There are limits on the amount of expenses for
which the depositary will reimburse us. During the year ended
31 December 2023, the depositary reimbursed, paid and/or waived
fees and expenses totalling $1,516,730.03 in connection with the
administration, servicing and maintenance of the programme.
Nature of trading market
HSBC Holdings ordinary shares are listed or admitted to trading on
the London Stock Exchange (‘LSE’), the Hong Kong Stock Exchange
(‘HKSE’), the Bermuda Stock Exchange and on the New York Stock
Exchange (‘NYSE’) in the form of ADSs. HSBC Holdings maintains its
principal share register in England and overseas branch share
registers in Hong Kong and Bermuda (collectively, the ‘share
register’).
As at 31 December 2023, there were a total of 172,243 holders of
record of HSBC Holdings ordinary shares on the share register.
As at 31 December 2023, a total of 16,561,194 of the HSBC Holdings
ordinary shares were registered in the HSBC Holdings’ share register
in the name of 13,917 holders of record with addresses in the US.
These shares represented 0.09% of the total HSBC Holdings ordinary
shares in issue.
As at 31 December 2023, there were 4,679 holders of record of ADSs
holding approximately 82.33m ADSs, representing approximately
411.65m HSBC Holdings ordinary shares, 4,599 of these holders had
addresses in the US, holding approximately 82.30m ADSs,
representing approximately 411.52m HSBC Holdings ordinary shares.
As at 31 December 2023, approximately 2.14% of the HSBC Holdings
ordinary shares were represented by ADSs held by holders of record
with addresses in the US.
HSBC Holdings plc
467
Memorandum and Articles of
Association
The disclosure under the caption ‘Memorandum and Articles of
Association’ contained in Form 20-F for the years ended 31 December
2000, 2001, 2014, 2018 and 2022 is incorporated by reference herein.
Differences in HSBC Holdings/New
York Stock Exchange corporate
governance practices
Under the NYSE’s corporate governance rules for listed companies
and the applicable rules of the SEC, as a NYSE-listed foreign private
issuer, HSBC Holdings must disclose any significant ways in which its
corporate governance practices differ from those followed by US
companies subject to NYSE listing standards. HSBC Holdings believes
the following to be the significant differences between its corporate
governance practices and NYSE corporate governance rules
applicable to US companies.
US companies listed on the NYSE are required to adopt and disclose
corporate governance guidelines. The Listing Rules of the FCA require
each listed company incorporated in the UK to include in its annual
report and accounts a statement of how it has applied the principles
of the UK Corporate Governance Code issued by the Financial
Reporting Council and a statement as to whether or not it has
complied with the code provisions of The UK Corporate Governance
Code throughout the accounting period covered by the annual report
and accounts. A company that has not complied with the code
provisions, or complied with only some of the code provisions or (in
the case of provisions whose requirements are of a continuing nature)
complied for only part of an accounting period covered by the report,
must specify the code provisions with which it has not complied, and
(where relevant) for which part of the reporting period such non-
compliance continued, and give reasons for any non-compliance.
During 2023, HSBC complied with the applicable code provisions of
the UK Corporate Governance Code. The UK Corporate Governance
Code does not require HSBC Holdings to disclose the full range of
corporate guidelines with which it complies.
Under NYSE standards, companies are required to have a nominating/
corporate governance committee composed entirely of directors
determined to be independent in accordance with the NYSE’s
corporate governance rules. All of the members of the Nomination &
Corporate Governance Committee (excluding the Group Chairman)
during 2023 were independent non-executive Directors, as
determined in accordance with the UK Corporate Governance Code.
The terms of reference of our Nomination & Corporate Governance
Committee, which comply with the UK Corporate Governance Code,
require a majority of members to be independent non-executive
Directors. In addition to identifying individuals qualified to become
Board members, a nominating/corporate governance committee must
develop and recommend to the Board a set of corporate governance
principles.
The Nomination & Corporate Governance Committee’s terms of
reference do not require it to develop and recommend corporate
governance principles for HSBC Holdings, as HSBC Holdings is
subject to the corporate governance principles of the UK Corporate
Governance Code.
The Board of Directors is responsible under its terms of reference for
the development and review of Group policies and practices on
corporate governance.
Under the NYSE standards, companies are required to have a
compensation committee composed entirely of directors determined
to be independent in accordance with the NYSE’s corporate
governance rules. All of the members of the Group Remuneration
Committee during 2023 were independent non-executive Directors,
as determined in accordance with the UK Corporate Governance
Code. The terms of reference of our Group Remuneration Committee,
which comply with the UK Corporate Governance Code, require at
least three members to be independent non-executive Directors. A
compensation committee must review and approve corporate goals
and objectives relevant to chief executive officer compensation and
evaluate a chief executive officer’s performance in light of these goals
and objectives. The Group Remuneration Committee’s terms of
reference require it to review and approve performance-based
remuneration of the executive Directors by reference to corporate
goals and objectives that are set by the Board of Directors.
Pursuant to NYSE listing standards, non-management directors must
meet on a regular basis without management present and
independent directors must meet separately at least once per year.
The Group Chairman meets with the independent non-executive
Directors without the executive Directors in attendance after each
scheduled Board meeting and otherwise, as necessary. HSBC
Holdings’ practice, in this regard, complies with the UK Corporate
Governance Code.
In accordance with the requirements of the UK Corporate Governance
Code, HSBC Holdings discloses in its Annual Report and Accounts
how the Board, its committees and the Directors are evaluated (on
page 352) and provides extensive information regarding Directors’
compensation in the Directors’ remuneration report (on page 315).
The terms of reference of HSBC Holdings’ Group Audit, Nomination &
Corporate Governance, Group Remuneration and Group Risk
Committees are available at www.hsbc.com/who-we-are/leadership-
and-governance/board-committees.
NYSE listing standards require US companies to adopt a code of
business conduct and ethics for directors, officers and employees,
and promptly disclose any waivers of the code for directors or
executive officers.
In 2021, the Board endorsed the Statement of Business Principles
and Code of Conduct, which, pursuant to the requirements of the
Sarbanes-Oxley Act, incorporates the Sarbanes-Oxley code of ethics
(the “Sarbanes-Oxley Principles”) applicable to the Group Chief
Executive, as the principal executive officer, and to the Group Chief
Financial Officer and Global Financial Controller. The Statement of
Business Principles and Code of Conduct remains in force and applies
to the employees of all our companies. The Statement of Business
Principles and Code of Conduct is available on www.hsbc.com/who-
we-are/esg-and-responsible-business/our-conduct or from the Group
Company Secretary and Chief Governance Officer at 8 Canada
Square, London E14 5HQ. During 2023, HSBC Holdings granted no
waivers from its code of ethics.
Under NYSE listing rules applicable to US companies, independent
directors must comprise a majority of the board of directors.
Currently, more than three-quarters of HSBC Holdings’ Directors are
independent.
Under the UK Corporate Governance Code, the HSBC Holdings Board
determines whether a Director is independent in character and
judgement and whether there are relationships or circumstances that
are likely to affect, or could appear to affect, the Director’s
judgement.
Under the NYSE rules, a director cannot qualify as independent unless
the board affirmatively determines that the director has no material
relationship with the listed company; in addition, the NYSE rules
prescribe a list of circumstances in which a director cannot be
independent. The UK Corporate Governance Code requires a
company’s board to assess director independence by affirmatively
concluding that the director is independent of management and free
from any business or other relationship that could materially interfere
with the exercise of independent judgement. Lastly, a chief executive
officer of a US company listed on the NYSE must annually certify that
he or she is not aware of any violation by the company of NYSE
corporate governance standards. In accordance with NYSE listing
rules applicable to foreign private issuers, HSBC Holdings’ Group
Chief Executive is not required to provide the NYSE with this annual
compliance certification. However, in accordance with rules applicable
to both US companies and foreign private issuers, the Group Chief
Executive is required promptly to notify the NYSE in writing after any
executive officer becomes aware of any material non-compliance with
the NYSE corporate governance standards applicable to HSBC
Holdings. HSBC Holdings is required to submit annual and interim
written affirmations of compliance with applicable NYSE corporate
governance standards, similar to the affirmations required of NYSE-
listed US companies.
Additional information
468
HSBC Holdings plc
Glossary of accounting terms and US equivalents
Accounting term
US equivalent or brief description
Accounts
Financial Statements
Articles of Association
Articles of incorporation
Called up share capital
Shares issued and fully paid
Creditors
Payables
Debtors
Receivables
Deferred tax
Deferred income tax
Finance lease
Capital lease
Freehold
Ownership with absolute rights in perpetuity
Interests in associates and joint
ventures
Interests in entities over which we have significant influence or joint control, which are accounted for using the equity
method
Loans and advances
Loans
Loan capital
Long-term debt
Nominal value
Par value
One-off
Non-recurring
Ordinary shares
Common stock
Overdraft
A line of credit, contractually repayable on demand unless a fixed-term has been agreed, established through a customer’s
current account
Preference shares
Preferred stock
Premises
Property
Provisions
Liabilities of uncertain timing or amount
Share premium account
Additional paid-in capital
Shares in issue
Shares outstanding
Write-offs
Charge-offs
HSBC Holdings plc
469
Reconciliations
Form 20-F Item Number and Caption
Location
Page
PART1
1. Identity of Directors, Senior Management and Advisers 
Not required for Annual Report
—
2. Offer statistics and Expected Timetable
Not required for Annual Report
—
3. Key information
A. [Reserved]
B. Capitalisation and Indebtedness
Not required for Annual Report
—
C. Reasons for the Offer and use of Proceeds
Not required for Annual Report
—
D. Risk Factors
Risk Review - Risk factors
168-180
4. Information on the Company
A. History and Development of the Company
Shareholder information
463,464,474
Strategic Report
1-40
ESG Review
42-96
Financial Review
99-157
Risk Review
158-273
Report of the Directors: Corporate Governance Report
274-352
B. Business review
Strategic Report
1-40
Financial Review
99-157
Note 10 on the Financial Statements - Segmental analysis
399-402
C. Organisational Structure
Strategic Report
1-40
Report of the Directors: Corporate Governance Report - Subsidiary governance
286-287
Note 19 on the Financial Statements - Investments in subsidiaries
422-424
Note 40 on the Financial Statements - HSBC Holdings’ subsidiaries, joint ventures
and associates
453-461
D. Property, Plants and Equipment
Note 22 on the Financial Statements - Prepayments, accrued income and other
assets
428
4 A..Unresolved Staff Comments
Not Applicable
—
5. Operating and Financial Review and Prospects
A. Operating Results
Strategic Report
1-40
Financial Review
99-157
Risk Review
158-273
Note 15 on the Financial Statements - Derivatives
411-416
B. Liquidity and Capital Resources
Financial Review - Loan maturity and interest sensitivity analysis
120
Risk Review - Capital and Liquidity Risk
242-248
Risk Review - Insurance Manufacturing Operations Risk
269-273
Note 30 on the Financial Statements - Maturity analysis of assets, liabilities and off-
balance sheet commitments
434-439
Note 34 on the Financial Statements - Contingent liabilities, contractual commitments
and guarantees
443
C. Research and Development, Patents and Licences, etc.
Not Applicable
—
D. Trend Information
Strategic Report
1-40
Financial Review
99-157
Risk Review
158-273
E. Critical Accounting Estimates
Not Applicable
—
6. Directors, Senior Management and Employees
A. Directors and Senior Management
Report of the Directors: Corporate Governance Report
274-352
B. Compensation
Report of the Directors: Corporate Governance Report - Directors’ Remuneration
Report
315-342
Note 5 on the Financial Statements - Employee compensation and benefits
390-395
Note 37 on the Financial Statements - Related party transactions
447-448
C. Board Practices
Report of the Directors: Corporate Governance Report
274-352
Report of the Directors: Corporate Governance Report - Directors’ Remuneration
Report
315-342
D. Employees
Report of the Directors: Corporate Governance Report
274-352
Strategic Report
1-40
ESG Review - Social
75-84
Note 5 on the Financial Statements - Employee compensation and benefits
390-395
Note 37 on the Financial Statements - Related party transactions
447-448
E. Share Ownership
Report of the Directors: Corporate Governance Report
274-352
Report of the Directors: Corporate Governance Report - Directors’ Remuneration
Report
315-342
Note 5 on the Financial Statements - Employee compensation and benefits
439-395
Note 33 on the Financial Statements - Called up share capital and other equity
instruments
441-442
F. Disclosure of a registrant’s action to recover erroneously
awarded compensation
Not Applicable
—
Additional information
470
HSBC Holdings plc
Form 20-F Item Number and Caption
Location
Page
7. Major Shareholders and Related Party Transactions
A. Major Shareholders
Report of the Directors: Corporate Governance Report
274-352
B. Related Party Transactions
Note 37 on the Financial Statements - Related party transactions
447-448
C. Interests of Experts and Counsel
Not required for Annual Report
—
8. Financial Information
A. Consolidated Statements and Other Financial
Information
Financial Statements
353-461
Report of Independent Registered Public Accounting Firm to the Board of Directors and
Shareholders of HSBC Holdings plc
354-355
Shareholder Information
462-474
B. Significant Changes
Note 39 on the Financial Statements - Events after the Balance Sheet date
453
9. The Offer and Listing
A. Offer and Listing Details
Not required for Annual Report
—
B. Plan of Distribution
Not required for Annual Report
—
C. Markets
Shareholder Information
462-474
D. Exchange Controls
Not required for Annual Report
—
E. Taxation
Not required for Annual Report
—
F. Dividends and Paying Agents
Not required for Annual Report
—
10. Additional Information
A. Share Capital
Not required for Annual Report
—
B. Memorandum and Articles of Association
Shareholder Information
468
C. Material Contracts
Report of the Directors: Corporate Governance Report - Directors’ Remuneration
Report
336
Corporate Governance Report - Contracts of significance
347
Note 36 on the Financial Statements - Legal proceedings and regulatory matters
454-457
D. Exchange Controls
Shareholder Information
466
E. Taxation
Shareholder Information
465-466
F. Dividends and Paying Agents
Not required for Annual Report
—
G. Statements by Experts
Not required for Annual Report
—
H. Documents on Display
Shareholder Information
463-464
I. Subsidiary Information
Not applicable
—
J. Annual Report to Security Holders
Not applicable
—
11. Quantitative and Qualitative Disclosures About Market
Risk
Risk Review
251-252,
and 271-272
Risk Review - Market risk
254-256
Note 15 on the Financial Statements - Derivatives
411-416
Note 16 on the Financial Statements - Financial investments
416-417
12. Description of Securities Other than Equity Securities
A. Debt Securities
Not required for Annual Report
—
B. Warrants and Rights
Not required for Annual Report
—
C. Other Securities
Not required for Annual Report
—
D. American Depository Shares
Taxation of shares and dividends
467
Shareholder information
462-469
PART II
13. Defaults, Dividends Arrearages and Delinquencies
Not applicable
—
14. Material Modifications to the Rights of Securities
Holders and Use of Proceeds
Not applicable
—
15. Controls and Procedures
Report of Independent Registered Public Accounting Firm to the Board of Directors and
Shareholders of HSBC Holdings plc
354-355
Financial Review: Other Information
140-147
Financial Review: Other information - Management's review of internal controls over
financial reporting
150
16A. Audit Committee Financial Expert
Report of the Directors: Corporate Governance
274-352
16B. Code of Ethics
Shareholder Information
467-468
16C. Principal Accountant Fees and Services
Report of the Directors: Corporate Governance
274-352
Note 6 on the Financial Statements - Auditors’ remuneration
395
16D. Exemptions from the Listing Standards for Audit
Committees
Not applicable
—
16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
Report of the Directors: Corporate Governance
274-352
16F. Change in Registrant’s Certifying Accountant
Not applicable
—
16G. Corporate Governance
Shareholder Information
462-474
16H. Mine Safety Disclosure
Not applicable
—
16I. Disclosure Regarding Foreign Jurisdictions that
Prevent Inspections
Not applicable
—
16J. Insider Trading Policies
Not applicable
—
16K. Cybersecurity
ESG Review - Cybersecurity
98
Risk Review - Top and Emerging risks
163-167
Risk review - Risk factors
168-180
Report of the Directors: Corporate Governance Report - Group Risk Committee
310-314
HSBC Holdings plc
471
PART III
17. Financial Statements
Not applicable
—
18. Financial Statements
Financial Statements
353-461
19. Exhibits (including Certifications)
*
Additional information
472
HSBC Holdings plc
Abbreviations
Currencies
£
British pound sterling
CA$
Canadian dollar
€
Euro
HK$
Hong Kong dollar
MXN
Mexican peso
RMB
Chinese renminbi
SGD
Singapore dollar
$
United States dollar
A
ABS¹
Asset-backed security
ADR
American Depositary Receipt
ADS
American Depositary Share
AGM
Annual General Meeting
AI
Artificial intelligence
AIEA
Average interest-earning assets
ALCO
Asset and Liability Management Committee
AML
Anti-money laundering
AML DPA
Five-year deferred prosecution agreement with the US
Department of Justice, entered into in December 2012
ANP
Annualised new business premium
ASEAN
Association of Southeast Asian Nations
AT1
Additional tier 1
B
Basel
Committee
Basel Committee on Banking Supervision
Basel II¹
2006 Basel Capital Accord
Basel III¹
Basel Committee’s reforms to strengthen global capital and
liquidity rules
Basel 3.1
Outstanding measures to be implemented from the Basel
III reforms
BEPS
Base Erosion and Profit Shifting
BGF
Business Growth Fund, an investment firm that provides
growth capital for small and mid-sized businesses in the UK
and Ireland
BoCom
Bank of Communications Co., Limited, one of China’s
largest banks
BoE
Bank of England
Bps¹
Basis points. One basis point is equal to one-hundredth of a
percentage point
BVI
British Virgin Islands
C
CAPM
Capital asset pricing model
CDS¹
Credit default swap
CEA
Commodity Exchange Act (US)
CET1¹
Common equity tier 1
CGUs
Cash-generating units
CMB
Commercial Banking, a global business
CMC
Capital maintenance charge
CODM
Chief Operating Decision Maker
COSO
2013 Committee of Sponsoring Organizations of the
Treadway Commission (US)
Corporate
Centre
Corporate Centre comprises Central Treasury, our legacy
businesses, interests in our associates and joint ventures,
central stewardship costs and consolidation adjustments
CP¹
Commercial paper
CRD IV¹
Capital Requirements Regulation and Directive
CRR¹
Customer risk rating
CRR II¹
The regulatory requirements of the Capital Requirements
Regulation and Directive, the CRR II regulation and the PRA
Rulebook
CSA
Credit support annex
CSM
Contractual service margin
CVA¹
Credit valuation adjustment
D
Deferred shares
Awards of deferred shares define the number of HSBC
Holdings ordinary shares to which the employee will
become entitled, generally between one and seven years
from the date of the award, and normally subject to the
individual remaining in employment
DPD
Days past due
DPF
Discretionary participation feature of insurance and
investment contracts
DVA¹
Debit valuation adjustment
E
EAD¹
Exposure at default
EBA
European Banking Authority
EC
European Commission
ECB
European Central Bank
ECL
Expected credit losses. In the income statement, ECL is
recorded as a change in expected credit losses and other
credit impairment charges. In the balance sheet, ECL is
recorded as an allowance for financial instruments to which
only the impairment requirements in IFRS 9 are applied
EEA
European Economic Area
Eonia
Euro Overnight Index Average
EPC
Energy performance certificate
EPS
Earnings per ordinary share
ESG
Environmental, social and governance
EU
European Union
Euribor
Euro interbank offered rate
EVE
Economic value of equity
F
FAST-Infra
Finance to Accelerate the Sustainable Transition-
Infrastructure
FCA
Financial Conduct Authority (UK)
FDIC
Federal Deposit Insurance Corporation
FFVA
Funding fair value adjustment estimation methodology on
derivative contracts
FPA
Fixed pay allowance
FRB
Federal Reserve Board (US)
FRC
Financial Reporting Council
FSCS
Financial Services Compensation Scheme
FTE
Full-time equivalent staff
FTSE
Financial Times Stock Exchange index
FVOCI¹
Fair value through other comprehensive income
FX
Foreign exchange
G
GAAP
Generally accepted accounting principles
GAC
Group Audit Committee
GBM
Global Banking and Markets, a global business
GDP
Gross domestic product
GEC
Group Executive Committee
GFANZ
Glasgow Financial Alliance for Net Zero
GMP
Guaranteed minimum pension
GPS
Global Payments Solutions, the business formerly known as
Global Liquidity and Cash Management
GPSP
Group Performance Share Plan
GRC
Group Risk Committee
Group
HSBC Holdings together with its subsidiary undertakings
GTRF
Global Trade and Receivables Finance
H
Hang Seng Bank
Hang Seng Bank Limited, one of Hong Kong’s largest banks
HKEx
The Stock Exchange of Hong Kong Limited
HKMA
Hong Kong Monetary Authority
HMRC
HM Revenue and Customs
Holdings ALCO
HSBC Holdings Asset and Liability Management Committee
Hong Kong
Hong Kong Special Administrative Region of the People’s
Republic of China
HQLA
High-quality liquid assets
HSBC
HSBC Holdings together with its subsidiary undertakings
HSBC Bank plc
HSBC Bank plc, also known as the non-ring-fenced bank
HSBC Bank
Middle East
HSBC Bank Middle East Limited
HSBC Bank
USA
HSBC Bank USA, N.A., HSBC’s retail bank in the US
HSBC Canada
The sub-group, HSBC Bank Canada, HSBC Trust Company
Canada, HSBC Mortgage Corporation Canada and HSBC
Securities Canada, consolidated for liquidity purposes
HSBC Holdings plc
473
HSBC
Continental
Europe
HSBC Continental Europe
HSBC Finance
HSBC Finance Corporation, the US consumer finance
company (formerly Household International, Inc.)
HSBC Holdings
HSBC Holdings plc, the parent company of HSBC
HSBC Private
Bank (Suisse)
HSBC Private Bank (Suisse) SA, HSBC’s private bank in
Switzerland
HSBC UK
HSBC UK Bank plc, also known as the ring-fenced bank
HSBC USA
The sub-group, HSBC USA Inc (the holding company of
HSBC Bank USA) and HSBC Bank USA, consolidated for
liquidity purposes
HSI
HSBC Securities (USA) Inc.
HSSL
HSBC Securities Services (Luxembourg)
I
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IBE
Independent Board Evaluation
Ibor
Interbank offered rate
ICAAP
Internal capital adequacy assessment process
ICMA
International Capital Market Association
IEA
International Energy Agency
IFRS Accounting
Standards
International Financial Reporting Standards as issued by the
International Accounting Standards Board
ILAAP
Internal liquidity adequacy assessment process
IMA
Internal model approach
IMM
Internal model method
IRB¹
Internal ratings-based
ISDA
International Swaps and Derivatives Association
ISSB
International Sustainability Standard Board
JV
Joint venture
K
KMP
Key Management Personnel
L
LCR
Liquidity coverage ratio
LGBTQ+
Lesbian, gay, bisexual, transgender and queer. The plus
sign denotes other non-mainstream groups on the
spectrums of sexual orientation and gender identity
LGD¹
Loss given default
Libor
London interbank offered rate
Long term
For our financial targets, we define long term as five to six
years, commencing 1 January 2024
LTI
Long-term incentive
LTV¹
Loan to value
M
Mainland China
People’s Republic of China excluding Hong Kong and
Macau
Medium term
For our financial targets, we define medium term as three
to four years, commencing 1 January 2024
MENAT
Middle East, North Africa and Türkiye
MREL
Minimum requirement for own funds and eligible liabilities
MRT¹
Material Risk Taker
MSS
Markets and Securities Services, HSBC’s capital markets
and securities services businesses in Global Banking and
Markets
N
Net operating
income
Net operating income before change in expected credit
losses and other credit impairment charges
NGO
Non-governmental organisation
NII
Net interest income
NIM
Net interest margin
NPS
Net promoter score
NSFR
Net stable funding ratio
NYSE
New York Stock Exchange
NZBA
Net-Zero Banking Alliance
O
OCI
Other comprehensive income
OECD
Organisation of Economic Co-operation and Development
OTC¹
Over-the-counter
P
PBT
Profit before tax
PCAF
Partnership for Carbon Accounting Financials
PD¹
Probability of default
Performance
shares¹
Awards of HSBC Holdings ordinary shares under employee
share plans that are subject to corporate performance
conditions
Ping An
Ping An Insurance (Group) Company of China, Ltd, the
second-largest life insurer in the PRC
POCI
Purchased or originated credit-impaired financial assets
PRA
Prudential Regulation Authority (UK)
PRC
People’s Republic of China
Principal plan
HSBC Bank (UK) Pension Scheme
PVIF
Present value of in-force long-term insurance business and
long-term investment contracts with DPF
PwC
The member firms of the PwC network, including
PricewaterhouseCoopers LLP
R
RAS
Risk appetite statement
Repo¹
Sale and repurchase transaction
Revenue
Net operating income before ECL
Reverse repo
Security purchased under commitments to sell
RNIV
Risk not in VaR
RoE
Return on average ordinary shareholders’ equity
RoTE
Return on average tangible equity
RWA¹
Risk-weighted asset
S
SAB
Saudi Awwal Bank
SAPS
Self-administered pension scheme
SASB
Sustainability Accounting Standards Board
SBTi
Science Based Targets initiative
SDG
United Nation’s Sustainable Development Goals
SEC
Securities and Exchange Commission (US)
ServCo group
Separately incorporated group of service companies
established in response to UK ring-fencing requirements
Sibor
Singapore interbank offered rate
SIC
Securities investment conduit
SME
Small and medium-sized enterprise
Solitaire
Solitaire Funding Limited, a special purpose entity managed
by HSBC
SPE¹
Special purpose entity
SVB UK
Silicon Valley Bank UK Limited, now HSBC Innovation Bank
Limited
T
TCFD¹
Task Force on Climate-related Financial Disclosures
THBFIX
Thai Baht Interest Rate Fixing
TNFD
Taskforce on Nature-related Financial Disclosures
TSR¹
Total shareholder return
U
UAE
United Arab Emirates
UK
United Kingdom
UN
United Nations
US
United States of America
V
VaR¹
Value at risk
VIU
Value in use
W
WEF
World Economic Forum
WPB
Wealth and Personal Banking, a global business
1A full definition is included in the glossary to the Annual Report and
Accounts 2023 which is available at www.hsbc.com/investors.
Additional information
474
HSBC Holdings plc
HSBC Holdings plc
Incorporated in England on 1 January 1959 with
limited liability under the UK Companies Act
Registered in England: number 617987
Registered Office and Group Head Office
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888
Facsimile: 44 020 7992 4880
Web: www.hsbc.com
Corporate Brokers
Morgan Stanley & Co. International plc
25 Cabot Square
London E14 4QA
United Kingdom
Bank of America Securities
2 King Edward Street
London EC1A 1HQ
United Kingdom
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
HSBC Holdings plc
475
© Copyright HSBC Holdings plc 2024
All rights reserved
No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior
written permission of HSBC Holdings plc
Published by Global Finance, HSBC Holdings plc, London
Designed by Design Bridge and Partners, London (Strategic Report
and ESG review) and by Global Finance with Design Bridge and
Partners (rest of Annual Report and Accounts)
Printed by Park Communications Limited, London, on Nautilus
SuperWhite board and paper using vegetable oil-based inks. Made in
Austria, the stocks comprise 100% de-inked post-consumer waste.
Pulps used are totally chlorine-free.
The FSC® recycled logo identifies a paper that contains 100% post-
consumer recycled fibre certified in accordance with the rules of the
Forest Stewardship Council®.
fscrecycledladscpeblack.jpg
Additional information
476
HSBC Holdings plc
Item 19. Exhibits
Documents filed as exhibits to this annual report on Form 20-F:
Exhibit NumberDescription
1.1Memorandum and Articles of Association of HSBC Holdings plc (incorporated by reference to Exhibit 1.1 to HSBC Holding plc’s Form
20-F filed with the SEC on February 22, 2023).
2.1Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934.
4.1Undertaking by HSBC Holdings plc to the Financial Services Authority (incorporated by reference to Exhibit 99.3 to HSBC Holdings
plc’s Form 6-K filed with the Securities and Exchange Commission on December 12, 2012), as replaced by the Direction by the Financial
Conduct Authority to HSBC Holdings plc (incorporated by reference to HSBC Holdings plc’s Form 6-K filed with the Securities and Exchange
Commission on April 12, 2013), as further replaced by the Direction by the Financial Conduct Authority to HSBC Holdings plc dated July 7, 2020.
4.2Amendment dated January 16, 2024 to Paragraph 5 of the Annex to the Direction by the Financial Conduct Authority to HSBC
Holdings plc dated July 7, 2020.
4.3Service Agreement dated October 25, 2022 between HSBC Holdings plc and Georges Elhedery (incorporated by reference to Exhibit
4.2 to HSBC Holdings plc’s Form 20-F filed with the SEC on February 22,2023).
4.4      Service Agreement dated March 18, 2020 between HSBC Holdings plc and Noel Quinn (incorporated by reference to Exhibit 4.9 to
HSBC Holdings plc’s Form 20-F filed with the Securities and Exchange Commission on February, 24, 2021).
4.5      Engagement Letter dated March 12, 2017, between HSBC Holdings plc and Mark Tucker (incorporated by reference to Exhibit 4.11 to
HSBC Holdings plc’s Form 20-F filed with the Securities and Exchange Commission on February 20, 2018).
8.1        Subsidiaries of HSBC Holdings plc (set forth in Note 40 to the consolidated financial statements included in this annual report on Form
20-F).
12.1      Certificate of HSBC Holdings plc’s Group Chief Executive pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2      Certificate of HSBC Holdings plc’s Group Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1      Annual Certification of HSBC Holdings plc’s Group Chief Executive and Group Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
15.1      Consent of PricewaterhouseCoopers LLP.
15.2      Pages of HSBC Holdings plc’s 2000 Form 20-F/A dated February 26, 2001 relating to the Memorandum and Articles of Association of
HSBC Holdings plc (incorporated by reference to Exhibit 14.2 to HSBC Holdings plc’s Form 20-F filed with the Securities and Exchange
Commission on March 20, 2006).
15.3      Page of HSBC Holdings plc’s 2001 Form 20-F dated March 13, 2002 relating to the Memorandum and Articles of Association of HSBC
Holdings plc (incorporated by reference to Exhibit 14.3 to HSBC Holdings plc’s Form 20-F filed with the Securities and Exchange Commission on
March 20, 2006).
15.4      Page of HSBC Holdings plc’s 2018 Form 20-F dated February 20, 2019 relating to the Memorandum and Articles of Association of
HSBC Holdings plc (incorporated by reference to Exhibit 15.4 to HSBC Holdings plc’s Form 20-F filed with the Securities and Exchange
Commission on February 19, 2020).
15.5      Page of HSBC Holdings plc’s 2022 Form 20-F dated February 22, 2023 relating to the Memorandum and Articles of Association of HSBC
Holdings plc.
15.6      Consent of C G Singer.
97          HSBC Holdings plc Policy for the Recovery of Erroneously Awarded Compensation.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
                                                                                                                 
HSBC Holdings plc
By:
/s/ Georges Elhedery
Name:
Georges Elhedery
Title:
Group Chief Financial Officer
Date: February 22, 2024

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