Annual Financial Report - 44x of 48

RNS Number : 3944B

HSBC Holdings PLC

03 April 2013

 



24    Property, plant and equipment

	Freehold  land and buildings		Long leasehold  land and buildings		Short leasehold   land and buildings1		Equipment,    fixtures             and fittings2		Equipment              on operating       leases		Total3
	US$m		US$m		US$m		US$m		US$m		US$m
Cost or fair value
At 1 January 2012 .....................................	3,537		1,800		3,872		11,579		71		20,859
Additions at cost4 ......................................	135		89		209		1,016		50		1,499
Fair value adjustments ...............................	(35)		31		76		-		-		72
Disposals ...................................................	(141)		-		(68)		(915)		(14)		(1,138)
Reclassified to held for sale ........................	(10)		(36)		(6)		(70)		-		(122)
Transfers ...................................................	59		(7)		(55)		3		-		-
Exchange differences .................................	(59)		10		40		195		4		190
Other changes ...........................................	9		(23)		-		(148)		-		(162)
At 31 December 2012 ...............................	3,495		1,864		4,068		11,660		111		21,198
Accumulated depreciation and impairment
At 1 January 2012 .....................................	(544)		(332)		(1,181)		(7,909)		(28)		(9,994)
Depreciation charge for the year ...............	(72)		(57)		(201)		(1,055)		(12)		(1,397)
Disposals ...................................................	44		-		53		844		13		954
Reclassified to held for sale ........................	13		1		1		27		-		42
Transfers ...................................................	(26)		1		22		3		-		-
Impairment losses recognised ....................	(9)		(4)		(11)		(63)		-		(87)
Exchange differences .................................	(8)		(2)		(15)		(137)		(1)		(163)
Other changes ...........................................	(67)		3		12		84		3		35
At 31 December 2012 ...............................	(669)		(390)		(1,320)		(8,206)		(25)		(10,610)
Net carrying amount at 31 December 2012 ...............................................................	2,826		1,474		2,748		3,454		86		10,588
Cost or fair value
At 1 January 2011 .....................................	3,952		1,673		4,004		12,529		53		22,211
Additions at cost4 ......................................	353		114		180		1,183		19		1,849
Fair value adjustments ...............................	(15)		44		89		-		-		118
Disposals ...................................................	(188)		(19)		(279)		(1,400)		-		(1,886)
Reclassified to held for sale ........................	(424)		(19)		(158)		(260)		-		(861)
Transfers ...................................................	(12)		(35)		25		10		-		(12)
Exchange differences .................................	(203)		1		15		(395)		(1)		(583)
Other changes ...........................................	74		41		(4)		(88)		-		23
At 31 December 2011 ...............................	3,537		1,800		3,872		11,579		71		20,859
Accumulated depreciation and impairment
At 1 January 2011 .....................................	(586)		(307)		(1,268)		(8,506)		(23)		(10,690)
Depreciation charge for the year ...............	(88)		(51)		(211)		(1,157)		(9)		(1,516)
Disposals ...................................................	60		2		262		1,319		-		1,643
Reclassified to held for sale ........................	133		13		80		138		-		364
Transfers ...................................................	5		35		(34)		(6)		-		-
Impairment losses recognised ....................	(13)		-		(16)		(25)		-		(54)
Exchange differences .................................	18		(1)		8		260		1		286
Other changes ...........................................	(73)		(23)		(2)		68		3		(27)
At 31 December 2011 ...............................	(544)		(332)		(1,181)		(7,909)		(28)		(9,994)
Net carrying amount at 31 December 2011 ...............................................................	2,993		1,468		2,691		3,670		43		10,865

1  Including assets held on finance leases with a net book value of US$5m (2011: US$7m).

2  Including assets held on finance leases with a net book value of US$182m (2011: US$210m).

3  Including assets with a net book value of US$39m (2011: US$33m) pledged as security for liabilities.

4  At 31 December 2012, HSBC had US$412m (2011: US$517m) of contractual commitments to acquire property, plant and equipment.

Leasehold land and buildings

Leasehold land and buildings are considered to be held under finance lease contracts where the value of the land cannot reliably be separated from the value of the lease and the respective contracts do not meet the criteria for classification as operating leases. Included within 'Short leasehold land and buildings' are the following amounts in respect of assets classed as improvements to buildings, which are carried at depreciated historical cost:

Leasehold land and buildings

	2012				2011
	Cost		Accumulated  depreciation		Cost		Accumulated     depreciation
	US$m		US$m		US$m		US$m
At 1 January ......................................................................	1,669		(751)		1,944		(933)
Additions ...........................................................................	119		-		171		-
Disposals ............................................................................	(65)		47		(269)		262
Depreciation charge for the year ........................................	-		(133)		-		(139)
Impairment loss recognised ................................................	-		(6)		-		(15)
Exchange differences .........................................................	28		(13)		(13)		2
Reclassified as held for sale .................................................	(10)		(1)		(154)		73
Other changes ....................................................................	(23)		(9)		(10)		(1)
At 31 December .................................................................	1,718		(866)		1,669		(751)
Net carrying amount at 31 December .................................	852				918

Investment properties

Movement on the fair value of investment properties

	Freehold         land and        buildings		Long        leasehold         land and        buildings		Short        leasehold         land and        buildings		Total
	US$m		US$m		US$m		US$m
Fair value
At 1 January 2012 .............................................................	745		192		402		1,339
Additions at cost ................................................................	9		-		-		9
Fair value adjustments ........................................................	(35)		31		76		72
Reclassified to held for sale ................................................	-		(29)		-		(29)
Exchange differences .........................................................	(64)		-		1		(63)
Other changes ....................................................................	(3)		1		8		6
p
At 31 December 2012 ........................................................	652		195		487		1,334
Fair value
At 1 January 2011 .............................................................	667		156		310		1,133
Additions at cost ................................................................	242		-		-		242
Fair value adjustments ........................................................	(15)		44		89		118
Disposals ............................................................................	(47)		(17)		-		(64)
Exchange differences .........................................................	(22)		1		1		(20)
Other changes ....................................................................	(80)		8		2		(70)
At 31 December 2011 ........................................................	745		192		402		1,339

Investment properties are valued on a market value basis as at 31 December each year by independent professional valuers who have recent experience in the location and type of properties. Investment properties in Hong Kong, the Macau Special Administrative Region and mainland China, which represent more than 51% by value of HSBC's investment properties subject to revaluation, were valued by DTZ Debenham Tie Leung Limited whose valuers are members of the Hong Kong Institute of Surveyors. Properties in other countries, which represent 49% by value of HSBC's investment properties, were valued by different independent professionally qualified valuers.

HSBC Holdings had no investment properties at 31 December 2012 or 2011.

HSBC properties leased to customers

HSBC properties leased to customers included US$694m at 31 December 2012 (2011: US$618m) let under operating leases, net of accumulated depreciation of US$16m (2011: US$12m). None was held by HSBC Holdings.

At 31 December 2012, the classification of land and buildings in Hong Kong in accordance with Hong Kong Companies Ordinance requirements was freehold nil (2011: nil), long leasehold US$1,319m (2011: US$1,363m), medium leasehold US$1,600m (2011: US$1,484m) and short leasehold US$3m (2011: US$4m).

25    Investments in subsidiaries

Principal subsidiaries of HSBC Holdings

	At 31 December 2012
	Country of incorporation or registration		HSBC's interest in equity capital %		Issued equity capital		Share                             class
Europe
HSBC Asset Finance (UK) Limited ........................	England		100		£265m		Ordinary £1
HSBC Bank A.S. ....................................................	Turkey		100		TRL652m		A-Common TRL1      B-Common TRL1
HSBC Bank Malta p.l.c. .........................................	Malta		70.03		€88m		Ordinary €0.30
HSBC Bank plc ......................................................	England		100		£797m		Ordinary £1 Preferred Ordinary £1            Series 2 Third Dollar Preference US$0.01               Third Dollar Preference US$0.01
HSBC France .........................................................	France		99.99		€337m		Shares €5.00
HSBC Bank International Limited .........................	Jersey		100		£1m		Ordinary £1
HSBC Life (UK) Limited .......................................	England		100		£94m		Ordinary £1
HSBC Private Banking Holdings (Suisse) SA ..........	Switzerland		100		CHF1,363m		Ordinary CHF1,000
HSBC Trinkaus & Burkhardt AG ...........................	Germany		80.62		€28m		Shares of no par value
Marks and Spencer Retail Financial Services Holdings Limited ...............................................	England		100		£67m		Ordinary £1
Hong Kong
Hang Seng Bank Limited1 ......................................	Hong Kong		62.14		HK$9,559m		Ordinary HK$5.00
HSBC Insurance (Asia) Limited .............................	Hong Kong		100		HK$2,798m		Ordinary HK$1,000
HSBC Life (International) Limited ........................	Bermuda		100		HK$2,778m		Ordinary HK$1.00
The Hongkong and Shanghai Banking Corporation Limited ..............................................................	Hong Kong		100		HK$58,969m		Ordinary HK$2.50             CIP2 US$1.00            CRP3 US$1.00              NIP4 US$1.00
Rest of Asia-Pacific
HSBC Bank Australia Limited ................................	Australia		100		A$751m		Ordinary no par value
					A$60m		Pref shares of           no par value
HSBC Bank (China) Company Limited ..................	PRC5		100		RMB12,400m		Ordinary CNY1.00
HSBC Bank Malaysia Berhad .................................	Malaysia		100		RM115m		Ordinary RM0.50
Middle East and North Africa
HSBC Bank Middle East Limited ...........................	Jersey		100		US$931m		Ordinary US$1.00            CRP3 US$1.00
HSBC Bank Egypt S.A.E. ......................................	Egypt		94.53		EGP2,079m		Ordinary EGP84.00
North America
HSBC Bank Bermuda Limited ................................	Bermuda		100		BMD30m		Common BMD1.00
HSBC Bank Canada ...............................................	Canada		100		C$1,571m		Class 1 Pref of NPV6 Class 2 Pref of NPV6      Common of NPV6
HSBC Bank USA, N.A. ..........................................	US		100		US$2m		Common US$100
HSBC Finance Corporation ...................................	US		100		-7		Common US$0.01
HSBC Securities (USA) Inc. ...................................	US		100		-7		Common US$0.05
Latin America
HSBC Bank Argentina S.A. ....................................	Argentina		99.99		ARS1,244m		Ordinary-A ARS1.00               Ordinary-B ARS1.00
HSBC Bank Brasil S.A. - Banco Múltiplo ..............	Brazil		100		BRL5,994m		Shares of no par value
HSBC Mexico, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC .....................................	Mexico		99.99		MXN5,261m		Ordinary MXN2.00
HSBC Bank (Panama) S.A. ....................................	Panama		100		US$10m		Ordinary PAB1.00

1  Listed in Hong Kong.		5  People's Republic of China.
2  Cumulative Irredeemable Preference shares.		6  Preference shares of nil par value.
3  Cumulative Redeemable Preference shares.		7  Issued equity capital is less than US$1m.
4  Non-cumulative Irredeemable Preference shares.

Details of the debt, subordinated debt and preference shares issued by the principal subsidiaries to parties external to the Group are included in the Notes 29 'Debt securities in issue', 33 'Subordinated liabilities' and 37 'Non-controlling  interests', respectively.

All the above subsidiaries are included in the HSBC consolidated financial statements.

Details of all HSBC subsidiaries will be annexed to the next Annual Return of HSBC Holdings filed with the UK Registrar of Companies.

All the above make their financial statements up to 31 December except for HSBC Bank Argentina S.A., whose financial statements are made up to 30 June annually.

The principal countries of operation are the same as the countries of incorporation except for HSBC Bank Middle East Limited which operates mainly in the Middle East and North Africa and HSBC Life (International) Limited which operates mainly in Hong Kong.

In February 2013, we announced an agreement to sell HSBC Bank (Panama) S.A. to Bancolombia S.A. For further details see Note 45.

During 2012 and 2011, none of the Group's subsidiaries experienced significant restrictions on paying dividends or repaying loans and advances.

Acquisitions

In June 2012, HSBC merged its operations in Oman with the Oman International Bank S.A.O.G. for total consideration of US$0.2bn. HSBC owns 51% of the combined entity, HSBC Bank Oman S.A.O.G., which had net assets of US$0.8bn immediately following the merger.

In October 2012, HSBC acquired the onshore retail and commercial banking business of Lloyds Banking Group in the United Arab Emirates for a total consideration of US$0.1bn. As a result of the transaction HSBC acquired net assets of US$0.2bn.

SPEs consolidated by HSBC where HSBC owns less than 50% of the voting rights

	Carrying value of total consolidated assets				Nature of SPE
	2012		2011
	US$bn		US$bn
Barion Funding Limited .......................................................	3.9		3.8		Securities investment conduit
Bryant Park Funding LLC ...................................................	0.9		2.8		Conduit
HSBC Home Equity Loan Corporation I ..............................	2.0		2.1		Securitisation
HSBC Home Equity Loan Corporation II ............................	2.2		2.4		Securitisation
HSBC Receivables Funding, Inc. II .......................................	-		1.9		Securitisation
Malachite Funding Limited ..................................................	3.4		3.6		Securities investment conduit
Mazarin Funding Limited .....................................................	8.0		8.0		Securities investment conduit
Metrix Funding Ltd .............................................................	-		0.7		Securitisation
Metrix Securities plc ............................................................	-		0.4		Securitisation
Regency Assets Limited .......................................................	10.1		7.5		Conduit
Solitaire Funding Ltd ...........................................................	11.3		12.5		Securities investment conduit

In addition to the above, HSBC consolidates a number of individually insignificant SPEs with total assets of US$17bn. For further details, see Note 42.

In each of the above cases, HSBC has less than 50% of the voting rights, but consolidates because it has the majority of risks and rewards of ownership of the SPE, or the substance of the relationship with the SPE is such that its activities are conducted on behalf of HSBC according to its specific business needs so that HSBC obtains benefit from the SPE's operation. The consolidation of SPEs sponsored by HSBC is discussed on page 384.

26   Assets held for sale and other assets

Assets held for sale

	2012		2011
	US$m		US$m
Disposal groups .......................................................................................................................	5,797		38,903
Non-current assets held for sale:	13,472		655
-  property, plant and equipment ............................................................................................	500		589
-  investment in Ping An ........................................................................................................	8,168		-
-  loans and advances to customers .........................................................................................	3,893		-
-  other ...................................................................................................................................	911		66
	19,269		39,558

Disposal groups

At 31 December 2012, the following businesses represented the majority of disposal groups held for sale:

·     Latin American businesses, which include banking operations in Peru, Colombia and Paraguay.

·     US life insurance businesses.

The following significant businesses that were held for sale at 31 December 2011 were sold in 2012:

·     The sale of the US Card and Retail Services business that was completed on 1 May 2012 with a gain on disposal of US$3.1bn.

·     The sale of 195 US branches were completed in several stages in 2012. 138 branches were sold on 18 May 2012, recognising a gain of US$661m. The remaining branches were sold in the third quarter of 2012 with a gain of US$203m.

·     Central American businesses, which include banking operations in Costa Rica, El Salvador and Honduras were sold in November and December 2012 with a loss on disposal of US$62m.

The major classes of assets and associated liabilities of disposal groups held for sale were as follows:

	At 31 December 2012
	South          America      businesses		US life       insurance      businesses		Other		Total
	US$m		US$m		US$m		US$m
Assets of disposal groups held for sale
Trading assets .................................................	4		-		-		4
Loans and advances to banks ..........................	344		-		164		508
Loans and advances to customers ...................	1,929		-		302		2,231
Financial investments .....................................	364		1,396		229		1,989
Prepayments and accrued income ...................	27		15		5		47
Goodwill and intangible assets .........................	33		53		60		146
Other assets of disposal groups .......................	622		109		141		872
Total assets ....................................................	3,323		1,573		901		5,797
Liabilities of disposal groups held for sale (Note 30)
Deposits by banks ...........................................	26		-		10		36
Customer accounts .........................................	2,154		-		836		2,990
Debt securities in issue ....................................	566		-		(1)		565
Liabilities under insurance contracts ...............	-		998		162		1,160
Other liabilities of disposal groups ..................	132		39		96		267
Total liabilities ...............................................	2,878		1,037		1,103		5,018
Net unrealised losses recognised in 'other operating income' as a result of reclassification to held for sale ...............	(96)		-		-		(96)
Expected date of completion ..........................	Q4 2013		Q1 2013
Operating segment .........................................	Latin America		North America

Property, plant and equipment

The property, plant and equipment classified as held for sale is the result of repossession of property that had been pledged as collateral by customers. Substantially all of these assets are disposed of within 12 months of acquisition. The majority arose within the North America operating segment.

Investment in Ping An

On 5 December 2012, we entered into an agreement to dispose of our entire 15.57% shareholding in Ping An for US$9.4bn. The disposal was carried out in two tranches, an initial tranche of 256,694,218 shares representing 3.24% of Ping An's issued share capital, then the remaining 976,121,395 shares representing 12.33% of Ping An's issued share capital. The selling price for both the tranches was fixed at HK$59 per share.

The first tranche of shares was disposed on 7 December 2012. Following this disposal, HSBC no longer had significant influence over Ping An and ceased to account for it as an associate. The gain from the disposal of the first tranche of shares and the gain from the consequent discontinuance of associate accounting for the remaining 12.33% shareholding in Ping An totalled US$3bn, and was recognised in the income statement. The remaining 12.33% shareholding was recognised as an available-for-sale investment, measured initially at fair value on the date of discontinuance of associate accounting, and thereafter carried at fair value with unrealised gains or losses recorded in other comprehensive income.

The fixing of the sale price gave rise to a contingent forward sale contract, the fair value of which at year end was based on the difference between the agreed sale price and the market price for the shares, adjusted for an assessment of the probability of the transaction being completed. The adverse fair value of this contract was US$553m at 31 December 2012, recorded in net trading income.

At 31 December 2012, the fair value of our 12.33% shareholding in Ping An was US$8.2bn included within 'Assets held for sale' above, with US$737m accumulated unrealised gains in other comprehensive income which arose after the date of the agreement and represent the difference between Ping An's share price at the year-end and the share price on the date of recognition as an available-for-sale investment.

The sale of the second tranche was completed on 6 February 2013 where the net impact of the change in fair value of the contingent forward sale contract to the point of delivery of the shares and the derecognition of the available-for-sale investment resulted in an income statement gain before tax in 2013 of US$553m.

Loans and advances to customers

Loans and advances to customers held for sale at 31 December 2012 include US personal loan balances of US$3.4bn, net of impairment allowances.

Other assets

	At 31 December
	2012		2011
	US$m		US$m
Bullion ....................................................................................................................................	26,508		19,824
Reinsurers' share of liabilities under insurance contracts (Note 31) ..........................................	1,407		1,801
Endorsements and acceptances ................................................................................................	12,032		11,010
Retirement benefit assets ........................................................................................................	2,846		2,497
Other accounts ........................................................................................................................	11,923		13,567
	54,716		48,699

27    Trading liabilities

	At 31 December
	2012              US$m		2011               US$m
Deposits by banks ...................................................................................................................	61,686		47,506
Customer accounts ..................................................................................................................	150,705		123,344
Other debt securities in issue (Note 29) ...................................................................................	31,198		29,987
Other liabilities - net short positions in securities ...................................................................	60,974		64,355
	304,563		265,192

At 31 December 2012, the cumulative amount of change in fair value attributable to changes in HSBC credit risk was a loss of US$29m (2011: gain of US$599m).

Deposits by banks held for trading

	At 31 December
	2012              US$m		2011               US$m
Repos ......................................................................................................................................	26,740		16,687
Settlement accounts ................................................................................................................	7,647		7,221
Stock lending ..........................................................................................................................	4,523		2,821
Other ......................................................................................................................................	22,776		20,777
	61,686		47,506

Customer accounts held for trading

	At 31 December
	2012              US$m		2011               US$m
Repos ......................................................................................................................................	103,483		70,151
Settlement accounts ................................................................................................................	9,461		6,909
Stock lending ..........................................................................................................................	2,295		1,774
Other ......................................................................................................................................	35,466		44,510
	150,705		123,344

28    Financial liabilities designated at fair value

HSBC

	At 31 December
	2012		2011
	US$m		US$m
Deposits by banks and customer accounts ................................................................................	496		517
Liabilities to customers under investment contracts ................................................................	12,456		11,399
Debt securities in issue (Note 29) ............................................................................................	53,209		52,197
Subordinated liabilities (Note 33) .............................................................................................	16,863		17,503
Preferred securities (Note 33) .................................................................................................	4,696		4,108
	87,720		85,724

The carrying amount at 31 December 2012 of financial liabilities designated at fair value was US$7,032m more than the contractual amount at maturity (2011: US$1,377m more). The cumulative amount of the change in fair value attributable to changes in credit risk was a loss of US$88m (2011: gain of US$5,118m).

HSBC Holdings

	At 31 December
	2012		2011
	US$m		US$m
Debt securities in issue (Note 29):
- owed to third parties .........................................................................................................	8,577		5,753
Subordinated liabilities (Note 33):
- owed to third parties .........................................................................................................	10,358		11,443
- owed to HSBC undertakings ..............................................................................................	4,260		3,955
	23,195		21,151

The carrying amount at 31 December 2012 of financial liabilities designated at fair value was US$3,199m more than the contractual amount at maturity (2011: US$722m more). The cumulative amount of the change in fair value attributable to changes in credit risk was a loss of US$164m (2011: gain of US$2,096m).

29    Debt securities in issue

	At 31 December
	2012		2011
	US$m		US$m
Bonds and medium-term notes ................................................................................................	155,661		151,367
Other debt securities in issue ....................................................................................................	48,207		61,830
	203,868		213,197
Of which debt securities in issue reported as:
- trading liabilities (Note 27) ...............................................................................................	(31,198)		(29,987)
- financial liabilities designated at fair value (Note 28) ........................................................	(53,209)		(52,197)
	119,461		131,013

Certain debt securities in issue are managed on a fair value basis as part of HSBC's interest rate risk management policies. The debt securities being hedged are presented within the balance sheet caption 'Financial liabilities designated at fair value', with the remaining debt securities included within 'Trading liabilities'. The following table analyses the carrying amount of bonds and medium-term notes in issue at 31 December with original maturities greater than one year:

Bonds and medium-term notes

HSBC

	At 31 December
	2012		2011
	US$m		US$m
Fixed rate
Secured financing:
0.01% to 3.99%: until 2056 ................................................................................................	7,514		8,259
4.00% to 4.99%: until 2013 ................................................................................................	231		1,307
5.00% to 5.99%: until 2019 ................................................................................................	189		332
8.00% to 9.99%: until 2028 ................................................................................................	252		276
Other fixed rate senior debt:
0.01% to 3.99%: until 2078 ................................................................................................	48,620		38,346
4.00% to 4.99%: until 2046 ................................................................................................	18,722		15,515
5.00% to 5.99%: until 2041 ................................................................................................	14,766		17,525
6.00% to 6.99%: until 2046 ................................................................................................	5,207		7,056
7.00% to 7.99%: until 2026 ................................................................................................	713		3,083
8.00% to 9.99%: until 2036 ................................................................................................	199		379
10.00% or higher: until 2028 ..............................................................................................	108		437
	96,521		92,515
Variable interest rate
Secured financings - 0.01% to 13.99%: until 2068 ..................................................................	7,897		7,279
FHLB advances - 0.01% to 0.99%: until 2036 ........................................................................	1,000		1,000
Other variable interest rate senior debt - 0.01% to 12.99%: until 2057 ..................................	43,104		47,393
	52,001		55,672

	At 31 December
	2012		2011
	US$m		US$m
Brought forward ......................................................................................................................	148,522		148,187
Structured notes
Interest rate, equity, equity index or credit-linked ...................................................................	7,139		3,180
	155,661		151,367

HSBC Holdings

	At 31 December
	2012		2011
	US$m		US$m
Debt securities .........................................................................................................................	11,268		8,366
Of which debt securities in issue reported as:
-  financial liabilities designated at fair value (Note 28) .......................................................	(8,577)		(5,753)
	2,691		2,613
Fixed rate senior debt, unsecured
3.00% to 3.99%: until 2016 ................................................................................................	1,258		1,177
4.00% to 4.99%: until 2022 ................................................................................................	4,945		2,573
5.00% to 5.99%: until 2021 ................................................................................................	2,990		2,730
6.00% to 6.99%: until 2042 ................................................................................................	2,075		1,886
	11,268		8,366

30    Liabilities of disposal groups held for sale and other liabilities

Liabilities of disposal groups held for sale

	HSBC
	2012		2011
	US$m		US$m
Liabilities of disposal groups held for sale1 ...............................................................................	5,018		22,200

1  An analysis of liabilities of disposal groups held for sale is provided on page 471.

Other liabilities

	HSBC				HSBC Holdings
	2012		2011		2012		2011
	US$m		US$m		US$m		US$m
Amounts due to investors in funds consolidated by HSBC ...	564		720		-		-
Obligations under finance leases (Note 41) .........................	304		428		-		-
Dividend declared and payable by HSBC Holdings (Note 10) .......................................................................................	-		885		-		885
Endorsements and acceptances ...........................................	12,031		11,009		-		-
Other liabilities ..................................................................	20,963		14,925		30		26
	33,862		27,967		30		911

31    Liabilities under insurance contracts

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
At 31 December 2012
Non-life insurance liabilities
Unearned premium provision .......................................................................	34		(6)		28
Notified claims .............................................................................................	29		(6)		23
Claims incurred but not reported ...................................................................	12		-		12
Other ...........................................................................................................	6		(2)		4
	81		(14)		67

Liabilities under insurance contracts (continued)

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
Brought forward ...........................................................................................	81		(14)		67
Life insurance liabilities to policyholders
Life (non-linked) ..........................................................................................	30,684		(938)		29,746
Investment contracts with discretionary participation features1 ....................	24,374		-		24,374
Life (linked) .................................................................................................	13,056		(455)		12,601
	68,114		(1,393)		66,721
	68,195		(1,407)		66,788
At 31 December 2011
Non-life insurance liabilities
Unearned premium provision .......................................................................	621		(112)		509
Notified claims .............................................................................................	510		(91)		419
Claims incurred but not reported ...................................................................	449		(51)		398
Other ...........................................................................................................	55		4		59
	1,635		(250)		1,385
Life insurance liabilities to policyholders
Life (non-linked) ..........................................................................................	26,926		(649)		26,277
Investment contracts with discretionary participation features1 ....................	21,488		-		21,488
Life (linked) .................................................................................................	11,210		(903)		10,307
	59,624		(1,552)		58,072
	61,259		(1,802)		59,457

1  Though investment contracts with discretionary participation features are financial instruments, HSBC treats them as insurance contracts as permitted by IFRS 4.

Movement on non-life insurance liabilities

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
2012
Unearned premium reserve ('UPR')
At 1 January .................................................................................................	621		(112)		509
Changes in UPR recognised as (income)/expense ..........................................	44		3		47
Gross written premiums ............................................................................	760		(104)		656
Gross earned premiums .............................................................................	(716)		107		(609)
Disposals.......................................................................................................	(497)		91		(406)
Exchange differences and other movements .................................................	(134)		12		(122)
At 31 December ...........................................................................................	34		(6)		28
Notified and incurred but not reported claims
At 1 January .................................................................................................	959		(142)		817
Notified claims .........................................................................................	510		(91)		419
Claims incurred but not reported ...............................................................	449		(51)		398
Claims paid in current year ...........................................................................	(339)		57		(282)
Claims incurred in respect of current year .....................................................	341		(53)		288
Claims incurred in respect of prior years .......................................................	1		(5)		(4)
Disposals.......................................................................................................	(486)		137		(349)
Exchange differences and other movements .................................................	(435)		-		(435)
At 31 December ...........................................................................................	41		(6)		35
Notified claims .........................................................................................	29		(6)		23
Claims incurred but not reported ...............................................................	12		-		12
Other ...........................................................................................................	6		(2)		4
Total non-life insurance liabilities ................................................................	81		(14)		67

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
2011
Unearned premium reserve ('UPR')
At 1 January .................................................................................................	727		(129)		598
Changes in UPR recognised as (income)/expense ..........................................	31		(2)		29
Gross written premiums ............................................................................	1,175		(182)		993
Gross earned premiums .............................................................................	(1,144)		180		(964)
Exchange differences and other movements .................................................	(137)		19		(118)
At 31 December ...........................................................................................	621		(112)		509
Notified and incurred but not reported claims
At 1 January .................................................................................................	1,624		(305)		1,319
Notified claims .........................................................................................	879		(230)		649
Claims incurred but not reported ...............................................................	745		(75)		670
Claims paid in current year ...........................................................................	(631)		81		(550)
Claims incurred in respect of current year .....................................................	481		(99)		382
Claims incurred in respect of prior years .......................................................	(46)		14		(32)
Disposals ......................................................................................................	(317)		129		(188)
Exchange differences and other movements .................................................	(152)		38		(114)
At 31 December ...........................................................................................	959		(142)		817
Notified claims .........................................................................................	510		(91)		419
Claims incurred but not reported ...............................................................	449		(51)		398
Other ...........................................................................................................	55		4		59
Total non-life insurance liabilities ................................................................	1,635		(250)		1,385

Life insurance liabilities to policyholders

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
2012
Life (non-linked)
At 1 January .................................................................................................	26,926		(649)		26,277
Benefits paid ................................................................................................	(1,566)		160		(1,406)
Increase in liabilities to policyholders ...........................................................	6,558		(479)		6,079
Exchange differences and other movements .................................................	(1,234)		30		(1,204)
At 31 December ...........................................................................................	30,684		(938)		29,746
Investment contracts with discretionary participation features
At 1 January .................................................................................................	21,488		-		21,488
Benefits paid ................................................................................................	(2,525)		-		(2,525)
Increase in liabilities to policyholders ...........................................................	3,645		-		3,645
Exchange differences and other movements1 ................................................	1,766		-		1,766
At 31 December ...........................................................................................	24,374		-		24,374
Life (linked)
At 1 January .................................................................................................	11,210		(903)		10,307
Benefits paid ................................................................................................	(1,810)		681		(1,129)
Increase in liabilities to policyholders ...........................................................	3,984		223		4,207
Exchange differences and other movements2 ................................................	(328)		(456)		(784)
At 31 December ...........................................................................................	13,056		(455)		12,601
Total liabilities to policyholders ...................................................................	68,114		(1,393)		66,721

Life insurance liabilities to policyholders (continued)

	Gross		Reinsurers' share		Net
	US$m		US$m		US$m
2011
Life (non-linked)
At 1 January .................................................................................................	23,583		(673)		22,910
Benefits paid ................................................................................................	(1,793)		164		(1,629)
Increase in liabilities to policyholders ...........................................................	5,729		(254)		5,475
Exchange differences and other movements .................................................	(593)		114		(479)
At 31 December ...........................................................................................	26,926		(649)		26,277
Investment contracts with discretionary participation features
At 1 January .................................................................................................	22,074		-		22,074
Benefits paid ................................................................................................	(2,628)		-		(2,628)
Increase in liabilities to policyholders ...........................................................	3,005		-		3,005
Exchange differences and other movements1 ................................................	(963)		-		(963)
At 31 December ...........................................................................................	21,488		-		21,488
Life (linked)
At 1 January .................................................................................................	10,496		(760)		9,736
Benefits paid ................................................................................................	(1,129)		56		(1,073)
Increase in liabilities to policyholders ...........................................................	2,462		(111)		2,351
Exchange differences and other movements2 ................................................	(619)		(88)		(707)
At 31 December ...........................................................................................	11,210		(903)		10,307
Total liabilities to policyholders ...................................................................	59,624		(1,552)		58,072

1  Includes movement in liabilities relating to discretionary profit participation benefits due to policyholders arising from net unrealised investment gains recognised in other comprehensive income.

2  Includes amounts arising under reinsurance agreements.

The increase in liabilities to policyholders represents the aggregate of all events giving rise to additional liabilities to policyholders in the year. The key factors contributing to the movement in liabilities to policyholders include death claims, surrenders, lapses, liabilities to policyholders created at the initial inception of the policies, the declaration of bonuses and other amounts attributable to policyholders.

32   Provisions

	Restruc- turing costs		Contingent liabilities and contractual commitments		Legal proceedings and regulatory matters		Customer remediation		Other provisions		Total
	US$m		US$m		US$m		US$m		US$m		US$m
At 1 January 2012 ........................	169		206		1,473		1,067		409		3,324
Additional provisions/increase in provisions .............................	434		73		2,779		2,473		376		6,135
Provisions utilised ........................	(320)		(2)		(2,510)		(1,022)		(153)		(4,007)
Amounts reversed .........................	(89)		(58)		(104)		(137)		(63)		(451)
Unwinding of discounts .................	-		-		42		1		5		48
Exchange differences and other movements ...............................	57		82		(13)		5		72		203
At 31 December 2012 ................	251		301		1,667		2,387		646		5,252
At 1 January 2011 ........................	21		405		969		442		301		2,138
Additional provisions/increase in provisions .............................	221		14		896		1,078		184		2,393
Provisions utilised ........................	(58)		(5)		(367)		(386)		(71)		(887)
Amounts reversed .........................	(14)		(41)		(28)		(87)		(86)		(256)
Unwinding of discounts .................	-		1		56		-		5		62
Exchange differences and other movements ...............................	(1)		(168)		(53)		20		76		(126)
At 31 December 2011 ..................	169		206		1,473		1,067		409		3,324

Further details of legal proceedings and regulatory matters are set out in Note 43. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim) or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the actions of, regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC. In December 2012, HSBC made payments totalling US$1,921m to US authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws. Further details of the agreements reached with the US authorities are set out on page 510.

Customer remediation refers to activities carried out by HSBC to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and not necessarily initiated by regulatory action.

Payment protection insurance

An increase in provisions of US$1,681m was recognised during the year 2012 in respect of the estimated liability for redress regarding the mis-selling of payment protection insurance ('PPI') policies in previous years. Cumulative provisions made since the Judicial Review ruling in 2011 amount to US$2,397m, of which US$957m has been paid in 2012 (2011: US$325m). At 31 December 2012, the provision amounted to US$1,321m (2011: US$506m).

The estimated liability for redress is calculated based on the total premiums paid by the customer plus simple interest of 8% per annum (or the rate inherent in the related loan product where higher). The basis for calculating the redress liability is the same for single premium and regular premium policies. Future estimated redress levels are based on historically observed redress per policy.

A total of 5.4 million PPI policies have been sold by HSBC since 2000, which generated estimated revenues of US$4.1bn at 2012 average exchange rates. The gross written premiums on these polices was approximately US$5.1bn at 2012 average exchange rates. At 31 December 2012, the estimated total complaints expected to be received was 1.4 million, representing 25% of total policies sold. It is estimated that contact will be made with regard to 1.8 million policies, representing 33% of total policies sold. This estimate includes inbound complaints as well as HSBC's proactive contact exercise on certain policies ('outbound contact').

During 2012, we increased the estimate of the total number of policies to be ultimately redressed, as the level of complaints received was higher in volume and over a more sustained period than previously assumed. This change in assumptions contributed approximately US$1.2bn to the increased provision for the year with the balance consisting of US$0.2bn attributable to regulatory changes and US$0.3bn other assumption and model changes.

The following table details the cumulative number of complaints received at 31 December 2012 and the number of claims expected in the future:

	Cumulative to 31 December                2012		Future         expected
Inbound complaints1 (000s of policies) ..................................................................................	801		348
Outbound contact (000s of policies) ......................................................................................	43		547
Response rate to outbound contact ........................................................................................	37%		38%
Average uphold rate per claim2 ..............................................................................................	78%		79%
Average redress per claim (US$) ............................................................................................	2,325		2,290

1  Excludes invalid claims where the complainant has not held a PPI policy.

2  Claims include inbound and responses to outbound contact.

The main assumptions involved in calculating the redress liability are the volume of inbound complaints, the projected period of inbound complaints, the decay rate of complaint volumes, the population identified as systemically mis-sold and the number of policies per customer complaint. The main assumptions are likely to evolve over time as root cause analysis continues, more experience is available regarding customer initiated complaint volumes received, and we handle responses to our ongoing outbound contact.

A 100,000 increase/decrease in the total inbound complaints would increase/decrease the redress provision by approximately US$180m. Each 1% increase/decrease in the response rate to our outbound contact exercise would increase/decrease the redress provision by approximately US$10m.

In addition to these factors and assumptions, the extent of the required redress will also depend on the facts and circumstances of each individual customer's case. For these reasons, there is currently a high degree of uncertainty as to the eventual costs of redress for this matter.

Interest rate derivatives

A provision of US$598m was recognised relating to the estimated liability for redress in respect of the possible mis-selling of interest rate derivatives in the UK. Of this provision, US$272m related to the estimated redress payable to customers in respect of historical payments under derivative contracts, US$254m covered the expected write-off by the bank of open derivative contracts balances, and US$72m covers estimated project costs.

Following an FSA review of the sale of interest rate derivatives, HSBC agreed to pay redress to customers where mis-selling of these products has occurred under the FSA's criteria. On 31 January 2013, the FSA announced the findings from their review of pilot cases completed by the banks. Following its review, the FSA clarified the eligibility criteria to ensure the programme is focused on those small businesses that were unlikely to understand the risks associated with those products. HSBC has also been working with the FSA and an independent 'skilled person' adviser to clarify the standards against which it should assess sales, and how redress should be calculated (for example, when it would be appropriate to assume a customer would have taken an alternative interest rate product).

The extent to which HSBC is required to pay redress depends on the responses of contacted and other customers during the review period and the facts and circumstances of each individual case. For these reasons, there is currently a high degree of uncertainty as to the eventual costs of redress related to this programme.

Brazilian labour, civil and fiscal claims

Within 'legal proceedings and regulatory matters' above are labour, civil and fiscal litigation provisions of US$506m (2011: US$481m) which includes provisions in respect of labour and overtime litigation claims brought by past employees against HSBC operations in Brazil following their departure from the bank. The main assumptions involved in estimating the liability are the expected number of departing employees, individual salary levels and the facts and circumstances of each individual case.

33   Subordinated liabilities

HSBC

	At 31 December
	2012		2011
	US$m		US$m
Subordinated liabilities
At amortised cost ..........................................................................................................................	29,479		30,606
- subordinated liabilities ................................................................................................................	25,119		25,543
- preferred securities ....................................................................................................................	4,360		5,063
Designated at fair value (Note 28) .................................................................................................	21,559		21,611
- subordinated liabilities ................................................................................................................	16,863		17,503
- preferred securities ....................................................................................................................	4,696		4,108
	51,038		52,217
Subordinated liabilities
HSBC Holdings ..............................................................................................................................	20,569		21,456
Other HSBC ..................................................................................................................................	30,469		30,761
	51,038		52,217

Subordinated liabilities are capital securities which have been included in the capital base of HSBC and were issued in accordance with the rules and guidance in the FSA's General Prudential Sourcebook ('GENPRU'). Where applicable, these capital securities may be called and redeemed by HSBC subject to prior notification to the FSA and, where relevant, the consent of the local banking regulator. If not redeemed at the first call date, interest coupons payable may step-up or become floating rate related to interbank rates, and in some cases may be subject to a floor.

Interest rates on the floating rate capital securities are generally related to interbank offered rates. On the remaining capital securities, interest is payable at fixed rates of up to 10.176%.

The balance sheet amounts disclosed below are presented on an IFRSs basis and do not reflect the amount that the instruments contribute to regulatory capital. The IFRSs accounting and regulatory treatments differ due to the inclusion of issuance costs and regulatory amortisation.

HSBC's subordinated liabilities

Tier 1 capital securities

Tier 1 capital securities are perpetual subordinated securities on which investors are entitled, subject to certain conditions, to receive distributions which are non-cumulative. Such securities do not generally carry voting rights but rank above ordinary shares for coupon payments and in the event of a winding-up.

HSBC has the following qualifying tier 1 capital securities in issue which are accounted for as liabilities:

				At 31 December
		First call date		2012 US$m		2011 US$m
Tier 1 capital securities guaranteed by HSBC Holdings1
€600m	8.03% non-cumulative step-up perpetual preferred securities2 ...............	Jun 2012		-		776
US$1,250m	4.61% non-cumulative step-up perpetual preferred securities ................	Jun 2013		1,250		1,163
€1,400m	5.3687% non-cumulative step-up perpetual preferred securities ............	Mar 2014		1,933		1,693
£500m	8.208% non-cumulative step-up perpetual preferred securities ..............	Jun 2015		806		771
€750m	5.13% non-cumulative step-up perpetual preferred securities ................	Mar 2016		1,033		872
US$900m	10.176% non-cumulative step-up perpetual preferred securities, series 2 ..............................................................................................................	Jun 2030		891		891
				5,913		6,166
Tier 1 capital securities guaranteed by HSBC Bank plc1
£300m	5.862% non-cumulative step-up perpetual preferred securities ..............	Apr 2020		480		378
£700m	5.844% non-cumulative step-up perpetual preferred securities ..............	Nov 2031		1,131		1,084
				1,611		1,462

1  See paragraph below, 'Guaranteed by HSBC Holdings or HSBC Bank plc'.

2  In June 2012, HSBC redeemed these securities at par.

Guaranteed by HSBC Holdings or HSBC Bank plc

The five capital securities guaranteed, on a subordinated basis, by HSBC Holdings and the two capital securities guaranteed, on a subordinated basis, by HSBC Bank are non-cumulative step-up perpetual preferred securities issued by Jersey limited partnerships. The proceeds of the issues were on-lent to the respective guarantor by the limited partnerships in the form of subordinated notes. The above preferred securities qualify as tier 1 capital for HSBC Group and the two capital securities guaranteed by HSBC Bank also qualify as tier 1 capital for HSBC Bank (on a solo and consolidated basis).

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 has insufficient distributable reserves (as defined) respectively.

HSBC Holdings and HSBC Bank 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 its ordinary shares, or effect repurchases or redemptions of its ordinary shares, until the distribution on preferred securities has been paid in full.

With respect to preferred securities guaranteed by HSBC Holdings - if (i) HSBC's total capital ratio falls below the regulatory minimum ratio required, or (ii) the Directors expect that, in view of the deteriorating financial condition of HSBC Holdings, that (i) will occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Holdings which have economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together.

With respect to preferred securities guaranteed by HSBC Bank - if (i) any of the two issues of preferred securities are outstanding in April 2049 or November 2048, respectively, or (ii) the total capital ratio of HSBC Bank on a solo and consolidated basis falls below the regulatory minimum ratio required, or (iii) in view of the deteriorating financial condition of HSBC Bank, the Directors expect (ii) to occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Bank having economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together.

Upper tier 2 capital securities

Upper tier 2 capital securities are perpetual subordinated securities on which there is an obligation to pay coupons. Such securities rank below lower tier 2 securities for coupon payments and in the event of a winding-up.

HSBC has the following qualifying upper tier 2 securities in issue:

				At 31 December
		First call date		2012 US$m		2011 US$m
HSBC Bank plc
US$750m	Undated floating rate primary capital notes ..........................................	Jun 1990		750		750
US$500m	Undated floating rate primary capital notes ..........................................	Sep 1990		499		500
US$300m	Undated floating rate primary capital notes, series 3 .............................	Jun 1992		301		300
				1,550		1,550
The Hongkong and Shanghai Banking Corporation Ltd
US$400m	Primary capital undated floating rate notes ...........................................	Aug 1990		405		406
US$400m	Primary capital undated floating rate notes (second series) ....................	Dec 1990		402		403
US$400m	Primary capital undated floating rate notes (third series) .......................	Aug 1991		400		400
				1,207		1,209
Other HSBC subsidiaries
	Other perpetual subordinated loan capital less than US$100m ...............			21		21

Lower tier 2 capital securities

Lower tier 2 capital securities are dated securities on which there is an obligation to pay coupons. In accordance with the FSA's GENPRU, the capital contribution of lower tier 2 securities is amortised for regulatory purposes on a straight-line basis in their final five years before maturity.

HSBC has the following qualifying lower tier 2 securities in issue:

						At 31 December
		First call date		Maturity date		2012 US$m		2011 US$m
HSBC Bank plc
£350m	Callable subordinated variable coupon notes1 ...................	Jun 2012		Jun 2017		-		550
£500m	4.75% callable subordinated notes2 ..................................	Sep 2015		Sep 2020		844		759
£350m	5.00% callable subordinated notes3 ..................................	Mar 2018		Mar 2023		630		533
£300m	6.50% subordinated notes ................................................	-		Jul 2023		483		463
£350m	5.375% callable subordinated step-up notes4 ....................	Nov 2025		Nov 2030		630		493
£500m	5.375% subordinated notes ..............................................	-		Aug 2033		925		678
£225m	6.25% subordinated notes ................................................	-		Jan 2041		362		346
£600m	4.75% subordinated notes ................................................	-		Mar 2046		958		917
€500m	Callable subordinated floating rate notes5 .........................	Sep 2015		Sep 2020		606		550
US$300m	7.65% subordinated notes ................................................	-		May 2025		394		374
						5,832		5,663
Hang Seng Bank Limited
US$300m	Callable subordinated floating rate notes1 .........................	Jul 2012		Jul 2017		-		300
						-		300
HSBC Bank Australia Limited
AUD200m	Callable subordinated floating rate notes ..........................	Nov 2015		Nov 2020		207		203
AUD42m	Callable subordinated floating rate notes6 .........................	Mar 2013		Mar 2018		44		42
						251		245
HSBC Bank Malaysia Berhad
MYR500m	4.35% subordinated bonds ................................................	Jun 2017		Jun 2022		164		158
MYR500m	5.05% subordinated bonds ................................................	Nov 2022		Nov 2027		168		162
						332		320

						At 31 December
		First call date		Maturity date		2012 US$m		2011 US$m
HSBC USA Inc.
US$200m	7.808% capital securities .................................................	Dec 2006		Dec 2026		200		200
US$200m	8.38% capital securities ...................................................	May 2007		May 2027		200		200
US$150m	9.50% subordinated debt ..................................................	-		Apr 2014		152		154
US$150m	7.75% Capital Trust pass through securities .....................	Nov 2016		Nov 2026		150		150
US$750m	5.00% subordinated notes ................................................	-		Sep 2020		745		744
US$250m	7.20% subordinated debentures ........................................	-		Jul 2097		214		214
	Other subordinated liabilities each less than US$150m .....					302		394
						1,963		2,056
HSBC Bank USA, N.A.
US$1,000m	4.625% subordinated notes ..............................................	-		Apr 2014		1,002		1,009
US$500m	6.00% subordinated notes  ...............................................	-		Aug 2017		516		505
US$1,250m	4.875% subordinated notes ..............................................	-		Aug 2020		1,263		1,259
US$1,000m	5.875% subordinated notes  .............................................	-		Nov 2034		1,151		951
US$750m	5.625% subordinated notes  .............................................	-		Aug 2035		864		712
US$700m	7.00% subordinated notes  ...............................................	-		Jan 2039		694		681
						5,490		5,117
HSBC Finance Corporation
US$1,000m	5.911% trust preferred securities7 ....................................	Nov 2015		Nov 2035		995		994
US$2,939m	6.676% senior subordinated notes8 ..................................	-		Jan 2021		2,180		2,177
						3,175		3,171
HSBC Bank Brazil S.A.
BRL383m	Subordinated certificates of deposit ..................................	-		Feb 2015		289		206
BRL500m	Subordinated floating rate certificates of deposit ..............	-		Dec 2016		464		268
	Other subordinated liabilities each less than US$150m9 ....					491		1,156
						1,244		1,630
HSBC Mexico, S.A.
MXN1,818m	Non-convertible subordinated obligations10 ......................	-		Sep 2018		139		130
MXN2,273m	Non-convertible subordinated obligations10 ......................	-		Dec 2018		173		162
US$300m	Non-convertible subordinated obligations10,11 ..................	-		Jun 2019		240		232
						552		524
HSBC Bank Canada
CAD400m	4.80% subordinated notes ................................................	Apr 2017		Apr 2022		438		417
CAD200m	4.94% subordinated debentures ........................................	-		Mar 2021		201		195
CAD39m	Floating rate debentures ...................................................	-		Nov 2083		39		39
						678		651
Other HSBC subsidiaries
	Other subordinated liabilities each less than US$200m9 ....					650		676
						650		676
Total of subordinated liabilities issued by HSBC subsidiaries ...............................................................						30,469		30,761
Amounts owed to third parties by HSBC Holdings (page 480) ............................................................						20,569		21,456
						51,038		52,217

  1 In June2012 and July 2012, HSBC redeemed its £350m callable subordinated variable coupon note and its US$300m callable subordinated floating rate notes respectively at par.

  2 The interest rate payable after September 2015 is the sum of the three-month sterling Libor plus 0.82%.

  3 The interest rate payable after March 2018 is the sum of the gross redemption yield of the then prevailing five-year UK gilt plus 1.80%.

  4 The interest rate payable after November 2025 is the sum of the three-month sterling Libor plus 1.50%.

  5 The interest margin increases by 0.5% from September 2015.

  6 In February 2013, HSBC gave notice that it will call and redeem the notes at par in March 2013.

  7 The distributions change in November 2015 to three-month dollar Libor plus 1.926%.

  8 Approximately 25% of the senior subordinated notes is held by HSBC Holdings.

  9 Some securities included here are ineligible for inclusion in the capital base of HSBC in accordance with guidance in FSA's GENPRU.

10 These securities are ineligible for inclusion in the capital base of HSBC in accordance with FSA's GENPRU.

11 Approximately US$60m of the subordinated obligations are held by HSBC Holdings.

HSBC Holdings

	At 31 December
	2012		2011
	US$m		US$m
Subordinated liabilities:
-. at amortised cost .......................................................................................................................	11,907		12,450
-. designated at fair value (Note 28) ..............................................................................................	14,618		15,398
	26,525		27,848

HSBC Holdings' subordinated liabilities

						At 31 December
		First call date		Maturity date		2012 US$m		2011 US$m
Amounts owed to third parties1
US$1,400m	5.25% subordinated notes ................................................	-		Dec 2012		-		1,438
US$488m	7.625% subordinated notes ..............................................	-		May 2032		579		578
US$222m	7.35% subordinated notes ................................................	-		Nov 2032		258		257
US$2,000m	6.5% subordinated notes ..................................................	-		May 2036		2,034		2,048
US$2,500m	6.5% subordinated notes ..................................................	-		Sep 2037		3,202		2,634
US$1,500m	6.8% subordinated notes ..................................................	-		Jun 2038		1,486		1,486
£250m	9.875% subordinated bonds2 ............................................	Apr 2013		Apr 2018		442		445
£900m	6.375% callable subordinated notes3 ................................	Oct 2017		Oct 2022		1,648		1,416
£650m	5.75% subordinated notes ................................................	-		Dec 2027		1,210		926
£650m	6.75% subordinated notes ................................................	-		Sep 2028		1,041		997
£750m	7.0% subordinated notes ..................................................	-		Apr 2038		1,264		1,205
£900m	6.0% subordinated notes ..................................................	-		Mar 2040		1,431		1,369
€1,000m	5.375% subordinated notes ..............................................	-		Dec 2012		-		1,327
€1,600m	6.25% subordinated notes ................................................	-		Mar 2018		2,118		2,073
€1,750m	6.0% subordinated notes ..................................................	-		Jun 2019		2,882		2,388
€700m	3.625% callable subordinated notes4 ................................	Jun 2015		Jun 2020		974		869
						20,569		21,456
Amounts owed to HSBC undertakings
€600m	8.03% subordinated step-up cumulative notes5 .................	Jun 2012		Jun 2040		-		775
US$1,250m	4.61% fixed/floating subordinated notes ..........................	Jun 2013		Jun 2043		1,264		1,223
€1,400m	5.3687% fixed/floating subordinated notes ......................	Mar 2014		Dec 2043		1,952		1,791
£500m	8.208% subordinated step-up cumulative notes ................	Jun 2015		Jun 2040		806		771
€750m	5.13% fixed/floating subordinated notes ..........................	Mar 2016		Dec 2044		1,043		941
US$900m	10.176% subordinated step-up cumulative notes ..............	Jun 2030		Jun 2040		891		891
						5,956		6,392
						26,525		27,848

1  Amounts owed to third parties represent securities included in the capital base of HSBC as lower tier 2 securities in accordance with guidance in the FSA's GENPRU.

2  In February 2013, HSBC Holdings gave notice that it will call and redeem the bonds at par in April 2013.

3  The interest rate payable after October 2017 is the sum of the three-month sterling Libor plus 1.3%.

4  The interest rate payable after June 2015 is the sum of the three-month Euribor plus 0.93%.

5  In June 2012, HSBC Holdings redeemed its €600m 8.03% subordinated step-up cumulative notes at par.

 

END

 

 

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