Annual Financial Report - Part 7

RNS Number : 5850Q

HSBC Holdings PLC

21 February 2023

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 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.

Contents


240	The Board
244	Senior management
248	How we are governed
255	Board activities during 2022
257	Board and committee effectiveness, performance and accountability
259	Board committees
276	Directors' remuneration report
301	Share capital and other related disclosures
306	Internal control
308	Employees
310	Statement of compliance
311	Directors' responsibility statement

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.

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 E Tucker (65) ^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.

Other 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

• Chairman of the Multinational Chairman's Group

• Co-Chair of the Indian B20 Taskforce on Financial Inclusion for Economic Empowerment

• Director, Peterson Institute for International Economics

• Director, Institute of International Finance

• Asia Society Board of Trustees

Noel Quinn (61)

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.

Other appointments:

• Chair of the Financial Services Task Force of the Sustainable Markets Initiative

• Member of the Advisory Council of the Sustainable Markets Initiative

• Founding member of CNBC ESG Council

• Member of the Advisory Board of the China Children Development Fund

• Principal member of the Glasgow Financial Alliance for Net Zero

• Member of the World Economic Forum's International Business Council

Georges Elhedery (48)

Group Chief Financial Officer

Appointed to the Board: January 2023

Skills and experience: Georges has 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 programme 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 members, see www.hsbc.com/who-we-are/leadership-and-governance.

Independent non-executive Directors

Geraldine Buckingham (45) ^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.

Other appointments:

• Independent non-executive Director of Brunswick Group Partnership Ltd

• Member of the Advisory Board of ClimateWorks Centre Australia

Rachel Duan (52) ^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.

Other 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

Dame Carolyn Fairbairn (62) ^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, Director-General of the Confederation of British Industry, and held senior executive positions at 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.

Other appointments:

• Honorary Fellow of Gonville and Caius College, Cambridge

• Honorary Fellow of Nuffield College, Oxford

• Chair of Trustees at Royal Mencap Society

James Forese (59) ^2,3,4

Independent non-executive Director

Appointed to the Board: May 2020

Skills and experience: James 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: James 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.

Other appointments:

• Non-executive Chair of HSBC North America Holdings Inc

• Non-executive Chairman of Global Bamboo Technologies

• Trustee of Colby College

Steven Guggenheimer (57) ^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, where he held a variety of senior leadership roles. These included: Corporate Vice President, Artificial Intelligence and Independent Software Vendor Engagement; and Corporate Vice President, Original Equipment Manufacturer.

Other 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

• Independent non-executive Director of Software Acquisition Group

Dr José Antonio Meade Kuribreña (53) ^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.

Other 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

Eileen Murray (64) ^1,4

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.

Other appointments:

• Independent non-executive Director of Guardian Life Insurance Company of America

• Independent non-executive Director of Broadridge Financial Solutions, Inc

• Independent non-executive Director and Chair of Carbon Arc

• Strategic Adviser of Invisible Urban Charging

• Adviser of ConsenSys

David Nish (62) ^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.

Other appointments:

• Independent non-executive Director of Vodafone Group plc

• Honorary Professor of University of Dundee Business School

Jackson Tai (72) ^1,2C,4

Independent non-executive Director

Appointed to the Board: September 2016

Skills and experience: Jackson has held senior operating and governance roles across Asia, North America and Europe.

Career: Jackson was Vice Chairman and Chief Executive Officer of DBS Group and DBS Bank Ltd, having previously served as Chief Financial Officer and President and Chief Operating Officer. He worked for 25 years in the investment banking division of J.P. Morgan & Co. Incorporated, holding roles as Chairman of the Asia-Pacific Management Committee and Head of Japan Capital Markets. Former non-executive Director appointments included Canada Pension Plan Investment Board, Royal Philips N.V., Bank of China Limited, Singapore Airlines, NYSE Euronext, ING Groep N.V., CapitaLand Ltd, SingTel Ltd. and Jones Lang LaSalle Inc. He also served as Vice Chairman of Islamic Bank of Asia.

Other appointments:

• Independent non-executive Director of Eli Lilly and Company

• Independent non-executive Director of MasterCard Incorporated

• Member of the Advisory Panel of the Russell Reynolds Associates Board and CEO Advisory Group

• Member of the Board of Trustees of the Rensselaer Polytechnic Institute

• Member of the Association of the Metropolitan Opera Board

Aileen Taylor (50)

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

Irene Lee

Irene Lee retired from the Board on 29 April 2022

Pauline van der Meer Mohr

Pauline van der Meer Mohr retired from the Board on 29 April 2022

Ewen Stevenson

Ewen Stevenson resigned from the Board on 31 December 2022

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 members, see
www.hsbc.com/who-we-are/leadership-and-governance.

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.

Elaine Arden, 54

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 Royal Bank of Scotland Group for six years. She has held a number of human resources and employee relations roles throughout her career in financial services, including with Clydesdale Bank and 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.

Colin Bell, 55

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. He previously held the role of Group Chief Compliance Officer. Before HSBC, 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 within operational tours of Iraq and Northern Ireland, and roles in the Ministry of Defence and NATO.

Jonathan Calvert-Davies, 54

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 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.

Greg Guyett, 59

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.

Dr Celine Herweijer, 45

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 is also co-chair of the Group's ESG Committee. 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.

John Hinshaw, 52

Group Chief Operating Officer

John became Group Chief Operating Officer in February 2020, having joined HSBC in December 2019. He has extensive background in transforming and digitising organisations across a range of industries. 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.

Bob Hoyt, 58

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.

Steve John, 49

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.

Pam Kaur, 59

Group Chief Risk and Compliance Officer

Pam was appointed Group Chief Risk and Compliance Officer in 2021, having held the position of Group Chief Risk Officer since 2020. Since joining HSBC in 2013, her roles included Group Head of Internal Audit and Head of Wholesale Market and Credit Risk. Pam has also held a variety of audit, compliance, finance and operations roles in the banking industry, including with Deutsche Bank, Royal Bank of Scotland Group, Lloyds TSB and Citigroup. She serves as a non-executive Director of abrdn plc, and was previously a non-executive Director of Centrica plc.

David Liao, 50

Co-Chief Executive Officer, Asia-Pacific - The Hongkong and Shanghai Banking Corporation Limited

David was appointed co-Chief Executive Officer of the Asia-Pacific region in 2021. He is a Director of the Hongkong and Shanghai Banking Corporation Limited, 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.

Nuno Matos, 55

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 a Director of HSBC Global Asset Management Limited.

Stephen Moss, 56

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 The Saudi British Bank.

Barry O'Byrne, 47

Chief Executive Officer, Global Commercial Banking

Barry was appointed Chief Executive 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.

Michael Roberts, 62

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.

Surendra Rosha, 54

Co-Chief Executive Officer, Asia-Pacific - The Hongkong and Shanghai Banking Corporation Limited

Surendra was appointed co-Chief Executive Officer 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.

John David Stuart (known as Ian Stuart), 59

Chief Executive Officer, HSBC UK Bank plc

Ian has been Chief Executive Officer of HSBC UK Bank plc since 2017 and has worked in financial services for over four decades. He joined HSBC as Head of Commercial Banking in the UK and Europe in 2014, having previously led the corporate and business banking businesses at Barclays. He has also held various roles at the Royal Bank of Scotland Group, and started his career at Bank of Scotland. Ian is a business ambassador for Meningitis Now, and a member of the Economic Crime Strategic Board and UK Finance Board.

Additional members of the Group Executive Committee

Noel Quinn

Georges Elhedery

Aileen Taylor

Biographies are provided on pages 240 and 243.

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 2022. This includes tenure, age, skills and experience, gender and ethnic representation.

Gender and ethnic diversity

The Financial Conduct Authority, in its capacity as the UK Listing Authority, introduced new rules during 2022 that require listed companies to publish information on female and ethnic heritage representation on the Board and in senior management within the Annual Report and Accounts 2023. The tables below outline the current gender and ethnic diversity of the HSBC Holdings Board and executive management in advance of these requirements becoming applicable.

Gender

Board Executive management

	Board members			Executive management²
	Number	%	Number of senior positions¹	Number	%
Male	8	67	4	17	81
Female	4	33	0	4	19
Other	-	-	-	-	-
Not specified/prefer not to say	-	-	-	-	-

Board Executive management

Ethnic diversity

	Board members			Executive management²
	Number	%	Number of senior positions¹	Number	%
White British or other White (including minority-White groups)	9	75	4	14	66
Mixed/multiple ethnic groups	-	-	-	1	5
Asian/Asian British	2	17	-	4	19
Black/African/Caribbean/Black British	-		-	-	-
Other ethnic groups, including Arab	1	8	-	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 10 Non-executive Directors

Tenure on the Board

Age

Skills and experience

The Board, through its Nomination & Corporate Governance Committee, regularly reviews the skills and experience it requires to effectively discharge its responsibilities. A skills matrix, which is a key tool used by the Board to inform its succession planning discussions, is reviewed at least annually by the Board. An extract of the skills matrix, showing a selection of the current skills and experience of the non-executive Directors, is shown below.

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. We comply with the UK Corporate Governance Code and the applicable requirements of the Hong Kong Corporate Governance Code.

Board's role, Directors' responsibilities and meeting attendance

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;

• 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;

• approving the appointment and remuneration of Directors, including Board roles; and

• reviewing the Group's overall corporate governance arrangements.

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 259. 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 2022, the Board comprised the Group Chairman, nine non-executive Directors, and two executive Directors who are the Group Chief Executive and the Group Chief Financial Officer. One non-executive Director will not stand for re-election at the AGM in May 2023.

For further details of Board members' career backgrounds, skills, experience and external appointments, see their biographies on page 240, and for a breakdown of the diversity and skills of the Board and senior management, see page 247.

Operation of the Board

The Board is ordinarily scheduled to meet at least seven times a year. In 2022, the Board held 15 meetings. For further details on attendance at those meetings, see page 250. 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 activities during 2022' on page 255.

The Group Company Secretary and Chief Governance Officer, the Group Chief Risk and Compliance Officer, the Group Chief Legal Officer and the non-executive Chairman of The Hongkong and Shanghai Banking Corporation Limited are all regular attendees at Board meetings. Other senior executives attend Board meetings for specific items as required.

In addition to formal Board meetings, the Board Oversight Sub-Group met in advance of each Board meeting during 2022. Such meetings were established following the appointment of Noel Quinn as Group Chief Executive and changes to the senior management team as an informal mechanism for a smaller group of Board members and management to discuss emerging issues and upcoming Board matters. Standing attendees comprise the Group Chairman, the Chair of the Group Audit Committee (who is also the Senior Independent Director), the Chair of the Group Risk Committee, the Chair of the Group Remuneration Committee, the Group Chief Executive, the Group Chief Financial Officer, the Group Chief Risk and Compliance Officer, and the Group Company Secretary and Chief Governance Officer. Other non-executive Directors and senior management are invited on an ad hoc basis, depending on the subject matter to be discussed. The forum is not decision making but provides regular opportunities for Board members to communicate with senior management to deepen their understanding of, and provide input into, key issues facing the Group. Following a review by the Group Chairman and Group Chief Executive of the role of the Board Oversight Sub-Group, it was agreed that it would only be used on an ad hoc basis where necessary going forward.

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, regional chief executive officers and functional heads. For further details of the senior management team, see page 244.

The Directors are encouraged to have contact with management at all levels, and have full access to all relevant information. Non-executive Directors are encouraged to visit local business operations and meet local management when they attend Board meetings in different locations, and when travelling for other reasons. Board and senior management travel resumed in 2022, which allowed for more opportunities for Board members to meet together in person and with key stakeholders. As Covid-19 restrictions remained in place for some markets, and with the safety of colleagues and customers a priority, several virtual meetings with senior executives continued to take place, which included business meetings, induction meetings and subject matter 'deep dives'.

Executive governance

The Group's executive governance is underpinned by the Group operating rhythm, which helps facilitate end-to-end governance between senior leadership and the Board, and sets out the Board and executive engagement schedule.

The Group operating rhythm has the following three pillars:

• The GEC normally meets every week to discuss current and emerging issues.

• On a monthly basis, the GEC reviews the performance of each of the global businesses in principal geographical areas and legal entities. These performance reviews are supplemented by operating unit performance review meetings between the Group Chief Financial Officer and each of the chief executive officers of the respective global businesses, regions and principal subsidiaries. The Group Chief Risk and Compliance Officer usually attends these meetings.

• The GEC holds a strategy and governance meeting two weeks in advance of each Board meeting.

In addition, during the year, the Group Chief Executive independently conducts several business reviews on focus areas such as costs and the financial reporting plan.

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 251.

To further support our senior management, we have dedicated corporate governance officers supporting our global businesses and global functions to assist in effective end-to-end governance, consistency and connectivity.

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, locations and the sectors in which they operate.

Certain subsidiaries are designated formally as principal subsidiaries by approval of the Board. In addition to their obligations under their respective local laws and regulation, principal subsidiaries, supported by regional company secretaries, perform an important role in supporting effective and high standards of governance across the Group.

The designated principal subsidiaries are:


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 it had entered into an agreement to sell HSBC Bank Canada, subject to regulatory and governmental approvals. The sale is expected to complete in late 2023.

Principal subsidiaries play a critical role in overseeing the implementation of the subsidiary accountability framework in the regions for which they are responsible. The subsidiary accountability

framework, refreshed by the Board in 2021, aims to provide subsidiaries with a shared understanding and a consistent approach towards the Group's strategic objectives, culture and values, and ensure that corporate governance best practice is applied throughout. The framework sets clear overarching principles for subsidiaries to follow to improve communications and connectivity within the Group.

It 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 any 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 its Nomination & Corporate Governance Committee and is updated to ensure that there is clarity for the directors and officers of their respective roles and responsibilities.

Since the revised framework was implemented in 2021, there has been a notable improvement in the diversity of subsidiary board composition.

To continue this progress, HSBC in 2022 launched a Bank Director Programme to develop and equip internal talent to undertake non-executive employee director roles on subsidiary boards. This programme is delivered in partnership with an external business school, and provides certified qualifications to its participants in becoming highly skilled and knowledgeable subsidiary director candidates.

The Group Chairman interacts regularly with the chairs of the principal subsidiaries, including through the Chairman's Forum, which brings together the chairs of the principal subsidiaries and the chairs of the Group's audit, risk and remuneration committees, and depending on the topic for discussion, also the Group Chief Executive, non-executive Directors and relevant executive management, advisers and/or external experts. In 2022, the Chairman's Forum covered strategic business considerations, geopolitics, global public health, liability pricing, shareholder engagements, ESG insights, delegations of authority, employee engagement and financial performance. The Non-Executive Director Summits, hosted by the Group Chairman, are also effective subsidiary directors' engagement events.

During 2022, the Group Chairman hosted two virtual Non-Executive Director Summits in March and September, where approximately 180 independent non-executive directors from the Group's subsidiaries attended along with HSBC Holdings Board Directors. The summits provide a platform for sharing key messages across subsidiaries, as well as facilitating greater connectivity and helping to build a sense of community among our subsidiaries' non-executive directors. In 2022, the non-executive directors received updates on Group-wide matters including strategy, ESG issues, technology and governance.

The annual Remuneration Committee Chairs' Forum took place in November, and provided the principal subsidiary chairs with an opportunity to discuss the Group's performance and the Group Remuneration Committee's priorities. A follow-up forum was held in late November to provide transparency around pay outcomes and allocation, with feedback from the discussion used to shape the final pay proposals, which were considered and approved by the Group Remuneration Committee.

Board members attend principal subsidiary meetings as guests from time to time. Similarly, principal subsidiary directors are invited to attend committee meetings at Group level, where relevant. The chairs of the principal subsidiary risk committees are regular attendees at the Group Risk Committee. Similarly, the Group Audit Committee Chair meets regularly with the principal subsidiary audit committee chairs to promote the sharing of information and best practices. These Group Board committees received escalated reports and certifications from the principal subsidiary risk and audit committees through the year.

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 2022. For a full description of key Board members' responsibilities, see www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.

Group Chairman Mark E Tucker^1,2	15/15	• 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 Quinn²	15/15	• 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 Ewen Stevenson^2,4,6	14/15	• 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 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 Nish^2,3	15/15	• 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. • 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 Buckingham^3,5	9/9
Rachel Duan^2,3	15/15
Dame Carolyn Fairbairn^2,3	15/15
James Forese^2,3,6	14/15
Steven Guggenheimer^2,3	14/15
Irene Lee^2,4	6/6
Dr José Antonio Meade Kuribreña^2,3	15/15
Eileen Murray^2,3,6	14/15
Jackson Tai^2,3	15/15
Pauline van der Meer Mohr^2,3,4,6	4/6
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.

1 The non-executive Group Chairman was considered to be independent on appointment.

2 Attended the AGM on 29 April 2022.

3 Independent 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.

4 Irene Lee and Pauline van der Meer Mohr retired from the Board on 29 April 2022. Ewen Stevenson retired from the Board on 31 December 2022.

5 Geraldine Buckingham joined the Board effective 1 May 2022.

6 Due to prior commitments Eileen Murray and Pauline van der Meer Mohr were not able to attend on 28 March 2022 and Steven Guggenheimer on 2 November 2022. Meetings held on 10 February 2022 and 25 November 2022 were ad hoc meetings called at short notice, and due to prior commitments, James Forese and Pauline van der Meer Mohr were unable to attend on 10 February 2022 and Ewen Stevenson was unable to attend on 25 November 2022.

Board 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 Board member 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 259.

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.

In addition to Board committees, working groups have been established to enhance Board governance, when appropriate, including the Board Oversight Sub-Group and the Technology Governance Working Group, which were first convened in 2019 and 2021, respectively. For further details of these committees, see page 248 and the box below.

The Group Executive Committee has established a number of committees to provide specialist oversight for matters delegated to the Group Chief Executive and senior management, which help fulfil their responsibilities under the Senior Managers and Certification Regime.

These committees support the Group Chief Executive and senior management in areas such as capital and liquidity, risk management, disclosure and financial reporting, restructuring and investment considerations, transformation oversight, ESG matters and talent and development.

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 Nish	Chair: Jackson Tai	Chair: Dame Carolyn Fairbairn	Chair: Mark Tucker
	See page 259	See page 262	See page 271	See page 276	Technology Governance Working Group
					Co-Chairs: Eileen Murray and Steven Guggenheimer

Group Executive Committee
Chair: Noel Quinn

Acquisitions and Disposals Committee	Disclosure and Controls Committee	Environmental, Social and Governance Committee	Group People Committee	Group Risk Management Meeting	Holdings Asset and Liability Committee	Transformation Oversight Executive Committee
Chair: Noel Quinn	Chair: Ewen Stevenson¹	Co-Chairs: Celine Herweijer and Aileen Taylor	Chair: Elaine Arden	Chair: Pam Kaur	Chair: Ewen Stevenson¹	Chair: Ewen Stevenson¹
1 Georges Elhedery took over as chair from 1 January 2023.
1 Georges Elhedery took over as chair from 1 January 2023.

With ESG issues rising up the global agenda, including with the transition to a sustainable economy, we understood the need to embed ESG considerations more deeply into our governance processes. In February 2021, the Board approved the establishment of an executive level ESG committee to support senior management in the delivery of the Group's ESG strategy and development of key policies. The ESG Committee also aims to track the Group's progress against material commitments by providing holistic oversight, coordination and management of ESG activities. The ESG Committee is jointly chaired by the Group Chief Sustainability Officer and the Group Company Secretary and Chief Governance Officer. The committee oversees all areas of environmental, social and governance issues, with support from accountable senior management in relation to their particular areas of responsibilities. Key representatives from the functions and global businesses attend to provide insights on the implementation of the ESG strategy across the Group, allowing the ESG Committee to make recommendations to the Board in respect of ESG matters.

The Technology Governance Working Group was established by the Board in early 2021 to enhance its oversight of technology strategy, governance and emerging risks, as well as to strengthen connectivity with the principal subsidiaries. The role of the working group is regularly reviewed by the Board. It was agreed in January 2022 that it should continue as an informal committee of the Board for the duration of 2022, and it was extended for a further 12 months in January 2023. The working group continues to be jointly chaired by two of the Board's non-executive Directors, Eileen Murray and Steven Guggenheimer, and members include the Group Risk Committee chair and other non-executive Directors representing our US, UK, European and Asian principal subsidiaries. The working group met formally six times in 2022. These meetings included deep dives on key strategic business initiatives, as well as updates on technology strategy implementation and cybersecurity matters, with attendance from key technology and business stakeholders. There were a number of joint sessions between the working group, the Group Audit Committee and the Group Risk Committee. For further details of these sessions, see pages 262 and 271.

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 2022, we welcomed one new non-executive Director, Geraldine Buckingham, to our Board. In October, we also announced that Ewen Stevenson would be stepping down as Group Chief Financial Officer on 31 December 2022 and be replaced by Georges Elhedery. Georges Elhedery's induction programme commenced upon announcement of his proposed appointment, which included a detailed handover prepared by the Group Chief Financial Officer prior to Georges commencing the role from 1 January 2023.

The induction programme is delivered 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.

Where possible, the induction process is initiated before appointment to allow each new Board member to contribute meaningfully from appointment. 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.

For illustrations of typical induction modules, see the 'Directors' induction and ongoing development in 2022' table below.

Directors undertook routine training during 2022 in subject matters that included: the risk management framework; financial crime; and health, safety and well-being. They were provided training by external counsel on their obligations when handling confidential and sensitive information. The Directors also participated in 'deep dive' sessions into specific areas of the Group's strategic priorities, risk appetite, approach to managing certain risks, climate-aligned finance and market abuse regulations. These training sessions included external consultants who provided insights into geopolitical matters, macroeconomics and investor sentiments. Other topics of focus included: operations and technology strategy; the resolvability assessment framework; and climate change and sustainability.

Non-executive Directors also discussed individual development areas with the Group Chairman during performance reviews and in conversations with the Group Company Secretary and Chief Governance Officer. 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. 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 in specific areas with the Board Directors as part of the Chairman's Forum.

Directors' induction and ongoing development in 2022
Director	Induction¹	Strategy and business briefings²	Risk and control³	Corporate governance, ESG and other reporting matters⁴	Board global mandatory training⁵	Chair and subsidiary non-executive Director forums⁶
Geraldine Buckingham	l	l	l	l	l	l
Rachel Duan	ô	l	l	l	l	l
Dame Carolyn Fairbairn	ô	l	l	l	l	l
James Forese	ô	l	l	l	l	l
Steven Guggenheimer	ô	l	l	l	l	l
José Antonio Meade Kuribreña	ô	l	l	l	l	l
Eileen Murray	ô	l	l	l	l	l
David Nish	ô	l	l	l	l	l
Noel Quinn	ô	l	l	l	l	l
Ewen Stevenson	ô	l	l	l	l	l
Jackson Tai	ô	l	l	l	l	l
Mark Tucker	ô	l	l	l	l	l

Matter considered

Matter not considered

1 The induction programme was delivered through formal briefings and introductory sessions 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 risk; anti-money laundering and anti-bribery; technical and business briefings; and strategy.

2 Directors participated in business strategy, market development and business briefings, which are global, regional and/or market-specific. Examples of specific sessions held in 2022 included: 'Sustainability operating model', 'Implications from the Russia-Ukraine conflict' and 'Strategy execution of Asia wealth'.

3 Directors received risk and control training and briefings. Examples of specific sessions held in 2022 included: 'Interest rate risk of the banking book strategy' and 'ICAAP/ILAAP'.

4 All Directors received training on topics such as: 'Resolvability assessment framework', 'Climate-aligned finance', 'Data literacy' and 'Cyber ransomware'.

5 Global 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, sanctions, fraud and bribery and corruption risks; our values, including workplace harassment; and data privacy and the protection of data of our customers and colleagues.

6 These included the Chairman's Forum, Remuneration Committee Chairs' Forum and the Non-Executive Director Summits.

Board stakeholder engagement during 2022

The Board is committed to engaging with key stakeholders, including colleagues, and welcomed the increased focus on bringing the employee voice into the boardroom, as envisaged by the revisions made to the UK Corporate Governance Code in 2018.

The Board had previously decided that, given HSBC's size, scale and geographical spread, the 'alternative arrangements' approach for workforce engagement under the UK Corporate Governance Code was the suitable option. The Board reviews this annually, and in light of the challenges facing the organisation and colleagues from factors outside of HSBC's control, including the Covid-19 pandemic, decided to strengthen its practices through the introduction of a non-executive Director with designated responsibility for workforce engagement. It was agreed by the Board's Nomination & Corporate Governance Committee in May 2022 to appoint José Meade to the new role of dedicated workforce engagement non-executive Director. This approach assists with the employee voice being heard in Board discussions and helps inform decision making.

The appointment of a designated workforce engagement non-executive Director does not restrict other Board members from engaging with the workforce, particularly as it is not possible for one person to represent the diversity of views across the entirety of the Group. It remains the responsibility of all Directors to consider stakeholder views, including employees.

The programme of workforce engagement for 2022 continued to be delivered through a variety of interaction styles, both in person and virtually, to accommodate the breadth of experience, geographical spread and range of seniority of our employees. Such activities included bespoke sessions with smaller groups, formal presentations and Q&A opportunities. These engagements were designed to promote and deliver open dialogue and two-way discussions between Directors and colleagues, allowing the Board to gain valuable insight on employee perspectives. This in turn informed Directors' deliberations and decision making in Board and committee meetings.

To help inform the Board of employee initiatives and sentiment and allow the Board to plan for future engagement activities, Directors received regular workforce engagement papers at Board meetings. The Board's agenda also regularly included non-executive Director workforce and other stakeholder engagement updates. These updates were addressed in the Group Chief Executive's Board report and the Group Chief Human Resources Officer's report on employee views and sentiment, particularly around employee Snapshot surveys. The Chairman's Forum meetings also discussed employee feedback from the Group's subsidiaries and received workforce engagement updates from each of the principal subsidiary chairs.

Engagement activity between the Board and the wider workforce included meetings and events between representatives of the eight employee resource groups and the non-executive Directors who have been designated to support them. These included:

• a virtual Nurture event with working parents and carers, which reflected on the HSBC colleague survey and how more relevant data could be captured and actioned;

• two Pride events with our LGBTQ+ colleagues, during which participants shared their thoughts, explored what Pride had achieved, discussed future opportunities and considered how Directors could advocate and support the work of Pride; and

• an in-person event with employee resource group leaders based in Hong Kong to discuss what motivates them to be employee resource group leaders, share achievements and discuss opportunities to align outcomes 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 non-executive Director

"I was pleased when the Board took the decision to create this role and asked me to assume the position of workforce engagement non-executive Director. Our colleagues, and the culture we promote, are key to our success in achieving our purpose of opening up a world of opportunity.

My role and responsibilities, summarised in the chart below, are clear, but I appreciate that given the scale of our organisation, and the newness of this responsibility, it is critical that I execute this role with focus and intent to understand the employee voice, and communicate this to the Board. Notwithstanding the challenges, I am dedicated to do what I can to meet and speak with a broad spectrum of our people, across global businesses, regions and functions.

With the easing of Covid-19 restrictions in 2022, and as the Board resumed travel for meetings, I used these opportunities to connect with employees on a number of topics. Each experience has been enlightening and I am encouraged to see how common themes and reflections are being addressed.

While I cannot represent and hear every employee voice, I will endeavour to listen to what our colleagues are saying around the world. With a dedicated plan of action for 2023, I see this role evolving such that I will be able to add value to - and help drive more in-depth Board discussions on - topics that affect our people.

I look forward to reporting in the future on the progress made."

Dr José Antonio Meade Kuribreña

Workforce engagement non-executive Director

Lunch with graduates

Mexico City, HSBC Tower

July 2022

Role of the workforce engagement non-executive Director at a glance

Headline responsibilities:

• Engages, understands, represents colleagues globally.

• Receives employee perspectives through formal and informal engagement.

• Represents the employee voice at Board meetings for consideration during decision making.


Feedback given and considered				↑
				Workforce engagement non-executive Director
				↑
	Data				Direct engagement
Means of engagement	Surveys/Snapshot		Employee jams	Audits	Chairs of principal subsidiaries	Virtual 'field' trips		Geographical visits
Reach	Global		Global	Sample	Regional	Specific interest groups		Direct engagement
	↑	↑	↑	↑	↑	↑	↑	↑
Likely issues/topics	Purpose, culture values	Strategy and growth	Pay	Performance management	Working conditions/ future of work	Diversity and inclusion	Change and transformation	Climate/ESG

Activities during 2022

José Meade's appointment was announced to the workforce jointly by the Group Chairman and Group Chief Executive on 1 June 2022. This was positively received by colleagues, several of whom reached out directly to José with engagement ideas.

Since his appointment, José has undertaken a variety of engagements in his role including:

Employee views - Mexico, US, India, UK, Hong Kong,

Argentina, Brazil, Chile and Uruguay

In the weeks immediately following his appointment, José had 25 meetings with colleagues in nine countries, in person and virtually, across most areas of the Group. Topics discussed included: the need for continued focus on areas such as well-being, and diversity and inclusion; and enhancement of technology. Following such discussions, several suggestions were made, including strengthening employee retention strategies, increasing career ownership within teams and improving information gathering analysis and dissemination following exit interviews to relevant colleagues in the Group.

Graduates - Mexico, US

During the year, José met with Mexican graduates in person and US graduates virtually to share experiences of HSBC's graduate programme.

GBM - UK

José participated in an in-person meeting with a diverse group of Global Banking colleagues in London to share experiences and views on people matters, women in finance, diversity and inclusion, and career development.

Global Service Centre - Mexico

José joined colleagues for a meeting with Global Service Centre employees to understand their perspective on working life.

Employee resource groups - Global

José participated in the virtual annual employee resource group summit and heard about the groups' leaders' successes and challenges. He connected with representatives in the UK, Mexico, India, Dubai, Hong Kong, Singapore and the US.

Employee resource groups - Dubai

José joined an in-person meeting with the chapter leads of the five employee resource groups active in MENA (Ability, Balance, Embrace, Generations and Nurture).

Visit to Global Service Centre, Mexico City, Tecnoparque

October 2022

Engagement highlights

65	1,500+
Sessions attended by executive and/or non-executive Directors	Number of employees engaged

38	600+
Sessions attended by workforce engagement non-executive Director	Number of employees engaged by workforce engagement non-executive Director

12+	73%
Countries of engagement	Highest employee engagement survey response

Priorities for 2023

• Review opportunities with Human Resources to ensure the right insight is being gained from employees to support and better inform the Board when taking decisions.

• Attend six larger-scale employee engagement events aligned to Board meeting agenda items to foster debate and discussion.

• Plan further international employee engagement opportunities in addition to the Board travel plans.

•

Board activities during 2022

During 2022, 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.

The Board's key areas of focus in 2022 are set out by theme below.

Strategy and business performance

The Group's strategy remains focused on increasing returns for investors, creating capacity for future investment and building a sustainable platform for growth. In 2022, each Board meeting featured the Group's strategic performance on its agenda, facilitating opportunities to track its delivery throughout the year, and providing opportunity to shape how it was developed. The Board reviewed progress within the Group's global businesses and regions, as well as against its four strategic pillars of: focus on our strengths, digitise at scale, energise for growth and transition to net zero.

The Group's strategic transformation programme came to a formal conclusion in December 2022, having delivered against its objectives to reshape underperforming businesses, simplify the organisation, reduce costs and reallocate risk-weighted assets. Transformation remains a key business focus as it is embedded throughout the organisation and its operations.

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 Group Executive Committee enhanced its governance model of ESG matters with the introduction of a dedicated ESG Committee and supporting forums. These support senior management in the delivery of the Group's ESG strategy, key policies and material commitments by providing oversight over - and management and coordination of - ESG commitments and initiatives.

In 2022, the Board oversaw the implementation of ESG strategy through regular dashboard reports and detailed updates including: reviews of net zero policies, financed emissions target setting 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 2021, the Interim Report 2022 and the first quarter and the third quarter Earnings Releases.

At the end of 2021, the Board approved the 2022 financial resourcing 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 debt issuance programme. In December 2022, the Board approved the financial resourcing plan for 2023.

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 2022, we achieved a dividend payout ratio within our 2022 target range of between 40% and 55% of reported earnings per ordinary share ('EPS'). As previously communicated, given our current returns trajectory, we are establishing a dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items (including the planned sale of our retail banking operations in France and the planned sale of our banking business in Canada).

On 22 February 2022, we announced an interim dividend of $0.18 per share for the 2021 full-year, and on 1 August 2022 we announced an interim dividend of $0.09 per share for the 2022 half-year. For further details of dividend payments, see page 418.

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;

• stress testing and capabilities required to meet the PRA's resolvability assessment framework;

• the revised terms of reference for the Board and Board committees; and

• the Group's revised delegation of authority policy.

The Board also reviewed and monitored the implications of geopolitical and macroeconomic developments during the year.

Technology

Throughout the year, the Board received regular updates on technology from the Group Chief Operating Officer, including on the implementation of the technology strategy and key strategic business initiatives. As technology is crucial to help deliver the Group's strategic objectives, including the strategic pillar 'Digitise at scale', strategy papers covered technology issues throughout the year. In December, the Board discussed a digital technology map, a new tool that could help simplify, prioritise and drive change in the Group's technology estate. For further details, see 'Principal decisions' on page 22.

The Technology Governance Working Group continued to oversee and enhance the Group's governance of technology. For further details of this working group, see page 251.

People and culture

The Board continued to dedicate time in its meetings to discuss people-related and culture-related topics, to help raise its awareness of employee and other stakeholder perspectives. The Board is committed to setting the right cultural tone, with each Board meeting beginning with a 'culture moment', which includes observations of behaviours within the Group aligned to its purpose and values.

Group subsidiary directors' approaches to workforce engagement were presented by each of the chairs from the principal subsidiaries to the Chairman's Forum, where they discussed their respective board engagement activities with the workforce, as well as what they learned as part of such engagements and other cultural insights. The Board also receives insights from the all-employee Snapshot survey, which measures employee sentiment. A culture insights report, developed in 2021, provides the Board with key data indicators, such as behaviours, sentiment, business outcomes and people to allow it to monitor culture across the Group.

Board engagement with management and the wider workforce continued to remain a strong area of attention, particularly with the appointment of a dedicated workforce engagement non-executive Director. For further details of the work of the workforce engagement non-executive Director, see page 253.

Governance

The Board continued to oversee the governance, smooth operation and oversight of the Group and its principal and material subsidiaries.

The Board and senior management supported improvements to governance initiatives to encourage simplification and promote effective decision making in the business. Such improvements included making refinements to Board and committee paper templates, and reducing unnecessary committee meetings to free management time and encourage individual accountability and decision taking.

During the year, Pauline van der Meer Mohr and Irene Lee retired as independent non-executive Directors, and Ewen Stevenson resigned as Group Chief Financial Officer. The Board appointed Geraldine Buckingham as an independent non-executive Director in May 2022, and Georges Elhedery as Group Chief Financial Officer from 1 January 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 259. For further details of diversity of the Board, see page 247.

The Board monitored its compliance with the UK Corporate Governance Code, the Hong Kong Corporate Governance Code and the Companies Act 2006 throughout the year.

Board engagements with shareholders

In 2022, Board members remained responsive to shareholder requests to engage, and certain of the Board met with key 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 19 meetings. 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.

The Group Remuneration Committee Chair also met with key investors and proxy advisory firms during the fourth quarter of 2022. These sessions provided useful insight into investor views on key areas of decision making for the Group Remuneration Committee, including our approach to the 2022 pay review for executive Directors and the wider workforce. For further details of the Group Remuneration Committee report, see page 276.

Board activities in 2022
Main topic	Sub-topic	Meetings at which topics were discussed¹
		Jan	Feb	Mar	Apr	May	Jun	Jul	Sep	Nov	Dec
Strategy	Group strategy	ô	ô	l	ô	l	l	l	l	ô	l
	Regional strategy/global business strategy	l	l	l	l	l	ô	l	l	l	l
	Environmental, social, governance	l	l	ô	l	l	ô	l	l	ô	l
Business and financial performance	Region/global business	l	l	ô	l	l	ô	l	l	ô	l
Business and financial performance	Financial performance	l	l	ô	l	l	ô	l	l	ô	l
Financial	Results and accounts	l	l	ô	ô	ô	ô	l	ô	ô	ô
	Dividends	l	l	ô	ô	ô	ô	l	ô	ô	ô
	Group financial resource planning	l	l	ô	l	l	ô	l	l	ô	l
Risk	Risk function	l	l	ô	l	l	ô	l	l	ô	l
	Risk appetite	ô	ô	l	ô	ô	ô	l	ô	ô	l
	Capital and liquidity adequacy	ô	ô	l	l	ô	ô	ô	l	ô	ô
Regulatory	Regulatory and legal matters²	l	l	l	l	l	l	l	l	ô	l
Regulatory	Regulatory matters with regulators in attendance³	ô	ô	ô	ô	ô	l	ô	ô	ô	ô
External	External insights	ô	ô	ô	l	ô	ô	ô	l	ô	ô
Technology	Strategic and operational	l	l	ô	l	l	l	l	l	ô	l
People and culture	Purpose, values and engagement	ô	l	ô	ô	ô	ô	ô	l	ô	ô
Governance	Subsidiary governance framework	ô	l	ô	ô	ô	ô	ô	ô	ô	ô
	Policies and terms of reference	l	ô	ô	l	l	ô	l	l	ô	l
	Board/committee effectiveness	l	l	ô	ô	ô	ô	l	ô	ô	ô
	Appointment and succession	ô	l	ô	ô	ô	ô	l	l	ô	l
	AGM and resolutions	l	l	ô	l	ô	ô	ô	ô	ô	ô

Matter considered

Matter not considered

1 No Board meetings were held during August and October 2022.

2 Includes resolvability assessment framework, modern slavery and human trafficking, statement of business principles and code of conduct, regional updates and listing renewals.

3 Meeting attended by members of the Prudential Regulation Authority.

Board and committee effectiveness, performance and accountability

The Board and its committees are committed to regular, independent evaluation of their effectiveness at least once every three years. The Board intends to conduct an independent evaluation in 2023.

For 2022, the Nomination & Corporate Governance Committee agreed that the evaluation of the Board and its committees would again be conducted internally. The process included the completion of a questionnaire, issued by Lintstock, an independent service provider with no other connection to the Group or any individual Director. The questions were designed by the Group Company Secretary and Chief Governance Officer, some based on themes from the 2021 evaluation findings. A summary of the effectiveness reviews of the Board and the Board committees can be found on page 258 and in the respective committee reports from page 259.

To gather qualitative feedback, the Group Company Secretary and Chief Governance Officer, together with the Deputy Group Secretary, conducted interviews with each questionnaire respondent, including all the Board Directors, regular attendees of the relevant meetings and key advisers. The Group Chairman and committee chairs also participated in additional discussions following the consolidation of feedback in respect of the individual committees.

Overall, the work of the Board was rated highly and it was viewed as operating effectively. In general, there were consistent findings across the Board and committee reviews. These included:

• a positive view of the effectiveness of the Chairs of the Board and committees and the participation of its members;

• a greater desire to be even more forward looking;

•
a need for continued focus on the quality of meeting materials to ensure that content remains focused, clear and precise; and

• continued collaboration between the Board committees.

At its January 2023 meeting, the Group Chairman led a discussion with the Board and considered the findings. The following areas of focus were discussed and actions agreed: a revised approach to tracking strategy execution; continued development of the timeline of sustainability and technology deliverables; simplification and prioritisation of deliverables and interdependencies; and enhanced focus on customer stakeholder engagement.

Actions will be monitored and addressed on an ongoing basis. Similar discussions were led by each of the committee chairs in their respective January meetings. Progress against these actions will be included in the Annual Report and Accounts 2023.

During 2022, a review of the Group Chairman's performance was led by the Senior Independent Director in consultation with the other independent non-executive Directors, management and key stakeholders. Non-executive Directors also undergo regular individual reviews with the Group Chairman. These reviews confirmed that the performance of the Group Chairman and each Director was effective and that each had met their time commitments during the year.

The review of executive Directors' performance, which helps determine their pay outcomes each year, is contained in the Directors' remuneration report on page 276.

Board and Committee evaluation process

The Board made good progress against all of the action points identified during the 2021 evaluation. In particular, the Board:

• enhanced its composition with the appointment of Geraldine Buckingham, which brought significant Asia leadership experience;

• maintained a focus on succession planning, with a view to strengthening its expertise in banking and improving its representation from Asia;

• strengthened workforce engagement, with the appointment of José Antonio Meade Kuribreña as designated non-executive Director for workforce engagement;

• devoted time to the consideration of key areas of focus, including digital opportunities and threats, ESG and strategic risk;

• continued to monitor compliance with the subsidiary accountability framework; and

• enhanced coordination and collaboration between its committees, with combined meetings of the Group Audit Committee, Group Risk Committee and Technology Governance Working Group held during the year.

Summary of 2022 Board effectiveness findings and recommendations for action:
	Findings from the evaluation	Recommendations for action
	• The Board's strategic oversight was rated positively overall, although the consistency of management's articulation, tracking and execution of progress against the Group's strategy could be strengthened. It was recommended to increase the use of metrics to show comparable progress against key deliverables. • The Board's approach to the oversight of the Group's sustainability strategy was rated positively, although the monitoring of sustainability-related key targets required greater clarity. • The Board's oversight of technology strategy was considered strong and it was suggested that the Board required a more detailed plan of digital deliverables to enable continuous monitoring and performance tracking.	• The Group Chief Executive should develop a revised set of metrics related to performance, execution and risk management, as well as other key value drivers, as appropriate. • The Group Chief Executive and relevant accountable executives should develop a timeline of ESG and technology deliverables and milestones.

	• The importance of devoting sufficient time to challenging management's progress on simplification and prioritisation was highlighted. It was suggested that the Board provide greater oversight of management prioritisation of key projects and strategic deliverables.	• A Board session should be held annually on organisational simplification and prioritisation of deliverables and interdependencies.

	• Engagement with stakeholders was strong, including the focus on the employees, in the year. The Board asked that further enhancements be considered, in particular customers given the current macroeconomic headwinds.	• The Board's stakeholder engagement plan should be reviewed to ensure that all members of the Board have sufficient opportunity to engage with, and understand the views, of the Group's key stakeholders.

	• It was recognised that meeting materials had improved considerably over recent years, but it was emphasised there was opportunity for further improvement around consistency, comparability and ownership. Stakeholder considerations could be better incorporated in Board papers to support decision making.	• Training and/or guidance should be provided to all paper authors in 2023.

Nomination & Corporate Governance Committee


"Developing our skills and experience, and diversity and inclusion ambitions remains a priority and the Committee will continue to oversee and enhance the succession pipeline at Board and senior leadership level."

Dear Shareholder

I am pleased to present the Nomination & Corporate Governance Committee report, which provides an overview of the work of the Committee and its activities during the year.

During 2022, the Committee continued to review the Board's composition, succession planning, skills, experience and diversity, to ensure that the Group operated in line with its ambition of world class governance.

On behalf of the Board, the Committee oversaw a number of changes to Board composition, including the retirements of Pauline van der Meer Mohr and Irene Lee, and the appointment of Geraldine Buckingham. The Committee also closely monitored executive succession planning, in particular the transition of the Group Chief Financial Officer, with Georges Elhedery succeeding Ewen Stevenson from 1 January 2023. Ewen leaves with our sincere thanks for the significant contribution that he has made to the Board and to the broader Group over the past four years.

Jackson Tai will retire from the Board at the conclusion of our 2023 AGM in May and will be succeeded as Chair of the Group Risk Committee by James Forese. On behalf of the Board, I wish to thank Jackson for his outstanding dedication and the significant contribution he has made to the success of the Group, in particular the improvement in our oversight and governance of risk and conduct. James' significant banking and risk experience will be invaluable in the leadership of the Group Risk Committee as the Group continues to deliver on its transformation and growth strategy, in a safe and sustainable manner.

On 1 March 2023, Kalpana Morparia will join the Board, strengthening both its collective Asia business and banking knowledge and experience, and diversity.

Developing our skills and experience, and diversity and inclusion ambitions of the Board and senior management, remains a priority and the Committee will continue to oversee and enhance the succession pipeline at Board and senior leadership level through 2023. This will build on the revised gender and ethnic representation targets introduced within the diversity and inclusion policy, and the work led by management on developing successors for senior leadership roles and under the Asia Talent programme. Our Board diversity and inclusion policy, which contains our revised targets, can be found on hsbc.com.

During 2022, we also took the decision to establish a new Board role designated with responsibility for ensuring that the employee voice is strengthened within the Board's deliberations. The creation of the role was a natural evolution of the work already undertaken to enhance stakeholder engagement within Board decision making. In this role, José Meade will lead our workforce engagement on behalf of the Board, supported by the Corporate Governance and Secretariat and Human Resource functions. Further details on the role and initial areas of focus can be found on page 253.

Membership
	Member since	Meeting attendance in 2022
Mark Tucker (Chair)	Oct 2017	7/7
Geraldine Buckingham¹	May 2022	4/4
Rachel Duan²	Sep 2021	6/7
Dame Carolyn Fairbairn	Sep 2021	7/7
James Forese	May 2020	7/7
Steven Guggenheimer	May 2020	7/7
Irene Lee³	Apr 2018	3/3
José Antonio Meade Kuribreña	Apr 2019	7/7
Eileen Murray²	Jul 2020	5/7
David Nish	Apr 2018	7/7
Jackson Tai	Apr 2018	7/7
Pauline van der Meer Mohr³	Apr 2016	3/3

1 Geraldine Buckingham was appointed to the Board and joined the Committee on 1 May 2022.

2 Rachel Duan was unable to attend the July committee meeting due to a pre-existing engagement. Eileen Murray was unable to attend the April and September meetings for personal health reasons.

3 Irene Lee and Pauline van der Meer Mohr stepped down from the Board and the Committee following the conclusion of the AGM on 29 April 2022.

The Committee's role in overseeing these changes is outlined on the following pages.

As we look ahead to 2023, the Committee will consider the changes to the UK audit, governance and regulatory regimes, including updates to the UK Corporate Governance Code, and the steps needed to ensure the Group continues to operate in line with best practice.

Mark E Tucker

Chair

Nomination & Corporate Governance Committee

21 February 2023

Key responsibilities

The Committee's key responsibilities include:

• leading the process for identifying and nominating candidates for appointment to the Board and its committees;

• overseeing succession planning and development for the Group Executive Committee and other senior executives; and

• overseeing and monitoring the corporate governance framework of the Group and ensuring that this is consistent with best practice.

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 has fulfilled its governance responsibilities.

Russell Reynolds Associates, which supported the Committee and the management team in relation to Board and senior management succession planning, regularly and selectively attended meetings during the year. It has no other connection with the Group or members of the Board.

Board composition and succession

The Committee continued its focus on ensuring that the Board and its members, both collectively and individually, possess the skills, knowledge and experience necessary to oversee, challenge and support management in the achievement of the Group's strategic and business objectives.

In addition to the retirements of Irene Lee and Pauline van der Meer Mohr, the Board welcomed Geraldine Buckingham, who most recently held the position of Head of Asia-Pacific at BlackRock. She was appointed to the Board with effect from 1 May 2022.

In October, the Group announced the appointment of Georges Elhedery as an executive Director and Group Chief Financial Officer with effect from 1 January 2023. This decision followed a review by the Committee of the composition of the Group Executive Committee with a particular focus on long-term succession planning. It was concluded, based on the recommendation of the Group Chief Executive, that Georges, who was previously co-Chief Executive Officer of Global Banking and Markets, should replace Ewen, who stepped down from the Board at the end of 2022. Georges, who has a track record of driving growth and managing change and who brings a strong focus on execution, will help the Group to accelerate delivery of improved financial performance and shareholder returns.

In advance of taking up the role, Georges spent significant time with Ewen to ensure an orderly handover of responsibilities. The Board has put in place a tailored development and support plan for Georges as he transitions to his new role, which will be overseen by the Committee.

The Committee expects that non-executive Directors serve two three-year terms, with any appointments beyond this to be determined on an annual basis with reference to the needs of the Board and the performance and contribution of the individual. In view of the importance of continuity for key roles on the Board, particularly given the current economic and geopolitical environment, the Committee agreed that David Nish's appointment should be extended for a further year to the 2024 AGM, subject to his re-election by shareholders. In taking this decision, the Committee considered the need for an effective transition in relation to the Senior Independent Director and Chair of the Group Audit Committee roles, both of which David currently holds. It is the Board's strong belief that this extension of David's appointment, given his performance and contribution to the Board during 2022, is in the best interests of the Group and all of its stakeholders.

As referenced in our 2021 report, the Committee agreed to prioritise in future appointments significant previous executive experience in banking, as well as with deep business and cultural expertise across Hong Kong and mainland China, and south-east Asia. A number of potential candidates meeting the desired skills and experiences were identified, a shortlist of which were considered and discussed by the Committee. Following meetings between various members of the Committee and priority candidates to understand their respective interests and capacities, the Board accepted the Committee's recommendations and approved the appointments of Geraldine Buckingham with effect from 1 May 2022 and Kalpana Morparia with effect from 1 March 2023.

Strengthening the Board's collective experience in these areas remains a priority, and the Committee will continue to discuss broader succession planning for key roles on the Board and committees through 2023, and beyond. In addition, succession planning will have regard to diversity and inclusion targets and expectations. The Committee is focused on identifying candidates with the following skills and experience for future appointments to the Board:

• significant executive experience in banking;

• deep business and cultural expertise across Asia, in particular Hong Kong and mainland China, and the Middle East, given the geographical mix of the Group's business and the importance of these regions to the strategy and future growth; and

• previous public company leadership experience.

The Committee will continue to monitor the market 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 and continues to be equipped to effectively discharge its responsibilities.

Board diversity

The Board recognises the importance of gender, social and ethnic diversity, and the strengths diversity brings to Board effectiveness. Diversity is taken into account in its broadest sense when considering succession plans and appointments at both Board and senior management level, as well as more broadly across the Group.

Over the past 12 months, there has been significant focus on diversity at Board level, including as a result of the updated guidance and targets issued by the FTSE Women Leaders Review (formerly the Hampton-Alexander review) and the UK Listing Authority. The Board is supportive of the proposals and, in line with the Board diversity and inclusion policy, remains committed to increasing diversity at Board and senior levels to ensure we reflect the markets and societies we serve. This policy, which was updated in 2022 to incorporate new targets on female representation, details our approach to achieving our diversity ambitions, and ensures that diversity and inclusion factors are considered in succession planning. The revised Board diversity and inclusion policy is available at www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.

At the end of 2022, the Board had 33% female representation, with four female Board members out of 12. Following our recent announcement in relation to Kalpana Morparia and Jackson Tai, this leaves us on track to meet our aspirational target of at least 40% female representation on the Board by the end of 2023, ahead of the end of 2025 expectations set by the FTSE Women Leaders Review for gender representation on Boards.

The FTSE Women Leaders Review also published revised gender representation targets, specifically the expectation that a woman holds at least one of the senior Board positions of Chair, Chief Executive Officer, Senior Independent Director or Chief Financial Officer by the end of 2025. The Committee considers succession for these key Board roles on an ongoing basis and will take into account the need for greater diversity when considering candidates for appointment to these roles in future. At the end of 2022, all those holding these senior Board positions at the Group were male. The Board is committed to achieving this target by the review's end of 2025 deadline.

The Board continued to exceed the Parker Review target of having at least one Director of diverse ethnic heritage, with three members of our Board self-identifying in line with the ethnicity/ethnic definition set by the Parker Review. Given the global and international nature of our business, including our strong presence and heritage in Asia, the Committee considers that the Board should comprise a greater proportion of diverse ethnic heritage Directors than anticipated by the Parker Review. The Board's targets were revised to reflect this commitment and therefore to maintain or improve the current representation of directors from a diverse ethnic heritage.

Further details on activities to improve diversity across senior management and the wider workforce, together with representation statistics, can be found on page 308.

Diversity of our principal subsidiary boards has also improved as a result of the Committee's focus on succession planning and regular refreshment of subsidiary boards, with gender representation improving across all seven of our principal subsidiaries. The HSBC Bank Director Programme, delivered in partnership with IMD Business School during the first half of 2022, has also helped to prepare senior talent for roles on our subsidiary boards. A number of the graduates who participated in the programme have been provided with opportunities on subsidiary boards, enhancing the skills, experience and diversity of our subsidiary boards. This programme will operate regularly with the next cohort scheduled to take place in 2024.

Independence

Independence is a critical component of good corporate governance, and is a principle that is applied consistently at both 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 2022, 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.

Senior executive succession and development

The outputs from the annual capability review, including updated succession plans for the Group Executive Committee members, were considered and approved by the Committee in December 2022. These reflected 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. This included future internal and external succession options for the Group Chief Executive, to ensure that the Committee has a robust and actionable succession plan when required.

The Committee also 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 Committee was internally facilitated in 2022. The review concluded that, overall, the Committee continued to operate effectively and in line with regulatory requirements. However, a number of areas for enhancement were identified, including the need for a continued focus on succession planning for the Group Chief Executive, the Committee Chair, the Senior Independent Director and future non-executive Directors, ensuring plans supporting the Board's objectives in relation to diversity and stakeholder needs. Other areas of focus included the continued identification of both internal and external talent, training requirements and the retention strategy for high performing individuals. Certain priority areas of focus for the Committee across 2023 were suggested, including the continued monitoring of progress of governance within material and principal subsidiaries (as defined in the subsidiary accountability framework), and the need to review the external advisers supporting the Committee. The outcomes of the evaluation have been reported to the Board, and the Committee will track the progress in implementing recommendations during 2023. In line with the UK Corporate Governance Code, the 2023 Board and Committee performance review will be externally facilitated.

The Committee has initiated the process for the selection of the independent board evaluator, with a decision on the evaluator to be taken within the first half of the year to allow the review to commence in the second half of 2023. A report on the process, findings and recommendations will be disclosed in the Annual Report and Accounts 2023.

The Committee was kept updated on progress on actions agreed following its 2021 evaluation, which were all completed.

Subsidiary governance

In line with the subsidiary accountability framework introduced in 2021, the Committee continued to oversee the corporate governance and succession arrangements across the principal and material subsidiary portfolio. Where appropriate and subject to strong rationale, the Committee approved exceptions from strict compliance with the framework, including to reflect local law and regulation, as well as market practice. The Committee has reinforced its expectations that subsidiaries take steps to achieve full compliance with the framework, with any exception requests subject to thorough review and consideration by the Group Company Secretary and Chief Governance Officer in advance of consideration by the Committee.

Matters considered during 2022
	Jan	Feb	Apr	May	Jul	Sep	Dec
Board composition and succession
Board composition, including succession planning and skills matrices	l	l	l	l	ô	l	ô
Approval of diversity and inclusion policy	ô	ô	ô	ô	l	ô	ô
Executive talent and development
Senior executive succession	ô	l	l	l	l	l	l
Approval of executive succession plans	ô	ô	ô	ô	ô	ô	l
Talent programmes	ô	l	ô	ô	ô	ô	l
Governance
Board and committee evaluation	l	ô	ô	ô	l	ô	ô
Subsidiary governance	l	ô	ô	ô	l	l	l
Subsidiary and executive appointments	l	ô	l	ô	l	l	l

Matter considered

Matter not considered

Group Audit Committee


"The Committee reviewed management's arrangements for compliance and assurance over regulatory reporting processes, and progress of HSBC-specific reviews of regulatory reporting."

Dear Shareholder

I am pleased to introduce the Group Audit Committee ('GAC') report setting out the key matters and issues considered in 2022.

We welcomed Eileen Murray, who rejoined the GAC in 2022, and Rachel Duan, who was appointed to the Committee in April 2022. Pauline van der Meer Mohr stepped down from the Board and James Forese stepped down from the GAC to assume new Board responsibilities. I would like to thank them both for their support and insightful contributions to the work of the GAC.

The GAC continued to provide oversight of change and transformation programmes to enhance the Group's internal controls over financial reporting. We challenged management on its forecasts and confidence in the delivery of externally communicated targets in an uncertain external environment. The Committee also reviewed management's arrangements for compliance and assurance over regulatory reporting processes, and progress of HSBC-specific reviews of regulatory reporting.

We 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 principal subsidiary audit committee chairs to discuss key issues, and through their attendance at GAC meetings. I also joined a number of principal subsidiary audit committee meetings throughout the Group.

The Group's whistleblowing arrangements continue to satisfy regulatory obligations and I regularly met the whistleblowing team to discuss material whistleblowing cases. Efforts were made in 2022 to drive continuous operational improvements and to provide deeper insights to support our purpose, values and conduct approach. Actions were also taken to make use of best practices across investigative functions and to enhance the experiences of colleagues when they report concerns at HSBC.

The Committee oversaw the retendering for statutory audit services for the 2025 year-end. This process included detailed qualification activities, thorough evaluation of firms, consideration of evolving UK legislation and guidelines, and engagement with regulators. The GAC recommended to the Board that PwC be reappointed for a further term of 10 years commencing 1 January 2025.

The Committee implemented all the actions from the 2022 evaluation and the 2023 review determined that the GAC continued to operate effectively.

David Nish

Chair

Group Audit Committee

21 February 2023

Membership
	Member since	Meeting attendance in 2022¹
David Nish (Chair)	May 2016	13/13
Rachel Duan²	Apr 2022	6/8
James Forese³	May 2020	5/5
Eileen Murray⁴	Jun 2022	6/8
Jackson Tai	Dec 2018	13/13
Pauline van der Meer Mohr⁵	Apr 2020	5/5

1 These included four joint meetings with the Group Risk Committee ('GRC') and the Technology Governance Working Group .

2 Rachel Duan was unable to join two meetings due to prior commitments made before becoming a GAC member.

3 James Forese stepped down from the GAC on 1 June 2022.

4 Eileen Murray rejoined the GAC on 1 June 2022, and was unable to attend two meetings due to personal circumstances.

5 Pauline van der Meer Mohr retired from the Board on 29 April 2022.

Key responsibilities

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, tenure, rotation, remuneration, independence and engagement for non-audit services;

• 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.

Committee governance

The Committee keeps the Board informed and advises on matters concerning the Group's financial reporting requirements to ensure that the Board has exercised oversight of the work carried out by management, Global Internal Audit and the external auditor.

Committee meetings usually take place a couple of days before Board meetings to allow the Committee to report its findings and recommendations in a timely and orderly manner. The Board also receives copies of the Committee agendas and minutes of meetings.

The Group Chief Executive, Group Chief Financial Officer, Group Head of Finance, 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 held regular meetings with management, Global Internal Audit and the external auditor to discuss agenda planning and specific issues as they arose during the year outside the formal Committee process. The Committee also regularly met separately with the internal and external auditors and other senior management to discuss matters in private.

The Committee Secretary regularly met with the Chair to ensure the Committee fulfilled its governance responsibilities, and to consider input from stakeholders when finalising meeting agendas, tracking progress on actions and Committee priorities.

Matters considered during 2022
	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	l	l	l	l	l	l	l	l
ESG and climate reporting	l	l	ô	ô	l	ô	l	l
Regulatory reporting-related matters	l	l	l	l	l	l	l	l
Certificates from principal subsidiary audit committees	ô	l	ô	ô	l	ô	ô	ô
Control environment
Control enhancement programmes	l	l	l	l	l	l	l	l
Group transformation	ô	ô	ô	ô	l	ô	ô	l
Review of deficiencies and effectiveness of internal financial controls	l	l	l	l	l	l	l	l
Internal audit
Reports from Global Internal Audit	l	l	l	ô	l	ô	l	l
Audit plan updates, independence and effectiveness	l	ô	l	ô	l	ô	ô	l
External audit
Reports from external audit, including external audit plan	l	l	l	l	l	l	l	l
Appointment, remuneration, non-audit services and effectiveness	l	l	l	l	l	l	ô	l
Audit tender	l	ô	l	l	l	l	ô	l
Compliance
Accounting standards and critical accounting policies	ô	l	ô	l	l	ô	l	l
Corporate governance codes and listing rules	ô	l	ô	l	l	ô	ô	ô
Whistleblowing
Whistleblowing arrangements and effectiveness	ô	l	ô	ô	ô	l	ô	l

Matter considered

Matter not considered

Compliance with regulatory requirements

The Board has confirmed that each member of the Committee is independent according to the criteria from the US Securities and Exchange Commission, and the Committee continues to have competence relevant to the sector in which the Group operates. The Board has determined that David Nish, Jackson Tai and Eileen Murray are '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 GAC Chair continued to engage with regulators, including the UK's PRA and the Financial Reporting Council. These included trilateral meetings involving the Group's external auditor, PwC.

The Committee assessed 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.

How the Committee discharged its responsibilities

Connectivity with principal subsidiary audit committees

The GAC strengthened its working relationship with the principal subsidiary audit committees through formal and informal channels. The GAC Chair regularly met the chairs of the principal subsidiary audit committees to enable close links and deeper understanding on judgements around key issues. The GAC Chair attended a number of the principal subsidiary audit committee meetings and certain chairs of the principal subsidiary audit committees also joined meetings of the GAC during the year.

This continuous engagement supported effective information sharing and targeted collaboration between audit committee chairs and management to ensure there was appropriate focus on the local implementation of programmes. Subsidiary audit committee chairs were also able to directly share local challenges, including regulatory expectations with Group management and the GAC Chair.

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.

Internal controls

The Committee devoted significant time in understanding the effect on financial reporting risk from high-impact programmes aimed at enhancing and enabling the transformation of the control environment to support financial, prudential regulatory and other regulatory reporting. The GAC provided detailed feedback and challenge to management on a number of aspects, including requesting external assurance, replanning and mobilisation of programme workstreams, resourcing and engagement throughout the Group and with regulators. Common themes from these discussions included the need to improve understanding and accountability for data capture, improve data quality from the implementation and embedding of data policies while ensuring there was a stronger appreciation throughout the Group of the downstream impact on financial and regulatory reporting. The oversight and implementation of these programmes and their component parts will remain a key focus for the Committee in 2023.

The GAC received regular updates and confirmations that management had taken, or was taking, the necessary actions to remediate any failings or weaknesses identified through the operation of the Group's framework of internal financial controls. 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.

For further details on how the Board reviewed the effectiveness of key aspects of internal control, see page 306.

Financial reporting

The Committee 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, where material, Pillar 3 disclosures and other items arising from the review of the Group Disclosure and Controls Committee. As part of its review, the GAC:

• 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 expected credit losses ('ECL'), including the key judgements and management adjustments made in relation to the forward economic guidance, underlying economic scenarios and reasonableness of the weightings;

• focused on compliance with disclosure requirements to ensure these were consistent, appropriate and acceptable under the relevant financial and governance reporting requirements;

• provided advice to the Board on the form and basis underlying the long-term viability statement; and

• gave careful consideration to the key performance metrics related to strategic priorities and ensured that the performance and outlook statements were fair, balanced and reflected the risks and uncertainties appropriately.

In conjunction with the Group Risk Committee ('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, before making a 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 42.

Fair, balanced and understandable

Following review and challenge of the disclosures, the Committee recommended to the Board that the financial statements, taken as a whole, were fair, balanced and understandable. The financial statements 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 2022 and results announcements to enable input and comment. It was supported by the work of the Group Disclosure and Controls Committee, which also reviewed and assessed the Annual Report and Accounts 2022 and investor communications.

This work enabled the GAC to provide positive assurance to the Board to assist them in making the statement required in compliance with the UK and Hong Kong Corporate Governance Codes.

Key financial metrics and strategic priorities

The Committee assessed management's assurance and preparation over external financial reporting disclosures, in particular the monitoring and tracking of key financial metrics and strategic priorities. In the second quarter of 2022, the Committee was involved at all stages in overseeing and challenging management on the revised financial targets.

The GAC challenged management on the forecasting, analysis and additional assurance work undertaken to support the revised financial targets in light of geopolitical risks, deteriorating outlook, ongoing impact of the Covid-19 pandemic in certain jurisdictions and a rising interest rate environment.

Further details can be found in the 'Principal activities and significant issues considered during 2022' table on page 266.

ESG and climate reporting

The GAC, supported by the executive-level ESG Committee and Group Disclosure and Controls Committee, provided close oversight of the disclosure risks in relation to ESG and climate reporting, amid rising stakeholder expectations.

The GAC tracked and monitored developments from a number of prominent consultations and considered them when reviewing the strategy and scope of ESG and climate disclosures in 2022. In particular, the Committee asked management to provide further

details on the pipeline of mandatory regulatory and externally committed ESG and climate-related disclosures over the next 12 to 24 months, including the delivery status. This allowed the Committee to consider management's development of methodologies, tools and data solutions holistically to fulfil external disclosure requirements and commitments.

ESG reporting is fast evolving with few globally consistent reporting standards and a high reliance on external data. The Committee focused on internal and external assurance in this area in line with wider market developments. Management updated the Committee on the verification and assurance framework to ensure that ESG and climate disclosures were materially accurate, consistent, fair and balanced. The GAC discussed the roles and work of the three lines of defence as part of this framework, discussed the nature and root cause of issues identified through the increased assurance work, as well as proposals for further limited third-party assurance to be performed over specific ESG-related metrics.

Regulatory reporting

The Committee continued to focus heavily on the quality and reliability of regulatory reporting and oversight of key programmes to strengthen the end-to-end processes to meet regulatory expectations.

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. They also discussed root cause themes, remediation of known issues and new issues identified through the increased assurance work and focus on regulatory reporting. The GAC was instrumental in the initiation of a global programme designed to deliver consistent control frameworks for our regulatory reporting globally over the next few years. 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 invited certain principal subsidiary audit committee chairs to GAC meetings to participate in discussions to ensure alignment and understanding of key issues and ongoing regulatory engagement.

UK audit reform

In May 2022, the UK government published its response to the consultation paper, 'Restoring Trust in Audit and Corporate Governance', on strengthening the UK's audit, corporate reporting and corporate governance systems. This summarised the responses received to the consultation and set out the next steps towards implementation.

One of the key changes proposed is for large public interest entities, such as HSBC, to develop and publish an audit and assurance policy every three years, setting out the approach to assurance of information beyond the financial statements. The government will also introduce a new statutory resilience statement.

The Committee received updates on the outcome of the consultation and reviewed management's proposed actions to support the future requirement for disclosure of an audit and assurance policy. This includes the work towards designing an integrated internal assurance approach across the three lines of defence, with the development during the year of an integrated assurance framework in support of the Group's risk management framework.

While the legislation and expected guidance around the form and content of an audit and assurance policy is still being drafted, it is expected that the areas below will be covered by any future disclosures. Current disclosures exist in respect of certain of these areas, although these will need to be enhanced and expanded as guidance develops. The areas highlighted below are in addition to disclosures on the statutory audit and assurance work required by regulators.


Overview of risk and internal control framework	Risk review, pages 131 to 238
Assurance over internal controls	Risk review, pages 131 to 238, 'Global Internal Audit', page 266, and 'Internal controls' page 306.
Specific information subject to assurance	Environmental, social and governance review, page 14
Resilience statement (currently viability statement)	Long-term viability and going concern statement, page 42
External auditor engagement	'External auditor', page 265
Stakeholder engagement on audit and assurance policy	No existing disclosure.

The Committee continues to focus on ESG and regulatory reporting as areas for expanded assurance, in line with the risk assessment framework established in 2021. The specific external assurance over ESG disclosures is set out in the ESG review section of the Annual Report and Accounts. The Committee continued to respond to various regulatory engagement requests and surveys, including the Financial Reporting Council's Draft Minimum Standards for Audit Committees. The Committee will continue to monitor developments as legislation is drafted to enact the requirements and the associated guidance is developed.

External auditor

The GAC has the primary responsibility for overseeing the relationship with the Group's external auditor, PwC.

PwC completed its eighth 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. The Committee reviewed the external auditor's approach and strategy for the annual audit and also received regular updates on the audit, including observations on the control environment. Critical audit matters discussed with PwC are set out in its report on page 313.

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 their approach to enhance the quality and effectiveness of the audit. Changes for the 2023 audit included more auditing being performed centrally across legal entities. The Committee also focused on PwC's increased use of technology solutions, and received detailed briefings on its approach to data and analytics.

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 Head of Audit, PwC UK 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, which would provide a balanced scorecard and transparent reporting to the GAC. 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

• outcomes and scores from annual audit surveys, independent senior partner reviews and prior period errors.

The GAC will continue to receive regular updates from PwC and management on the progress of the external audit plan and PwC performance across the audit quality indicators.

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.

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 2022.

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. The Committee acknowledges the provisions contained in the 2018 UK Corporate Governance Code in respect of audit tendering. In conformance with these requirements, the GAC oversaw the retendering of statutory audit services for the 2025 year-end, including considering the tendering and shared audit proposals from the UK government's consultation. More details on the audit tender can be found on page 267.

The Committee has recommended to the Board that PwC should be reappointed as auditor. Resolutions concerning the reappointment of PwC and its audit fee for 2023 will be proposed to shareholders at the 2023 AGM.

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 73 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; or

• other permitted services to advisory attestation reports on internal controls of a service organisation primarily prepared for and used by third-party end users.

Eleven 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 services by PwC relating to the Section 166 Financial Services and Markets Act 2000 Skilled Person report.

	2022	2021
Auditors' remuneration	$m	$m
Total fees payable	148.1	129.4
Of which fees for non-audit services	50.5	41.3

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 2022, 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 2023 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 2023 audit coverage remain as: strategy, governance and culture; financial crime, conduct and compliance; financial resilience; and operational resilience. A quarterly assessment of key risk themes will form the basis of thematic reporting and plan updates and will ultimately drive the 2024 planning process.

In 2023, Global Internal Audit will maintain significant focus on the Group transformation portfolio, increase coverage of treasury risks, financial forecasting processes and regulatory reporting, and include coverage of ESG risk, with focus on climate commitments, operationalisation and reporting. 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, following the development of the approach in 2022. 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 regularly 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 responsible for ensuring that issues raised by Global Internal Audit are 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.

Principal activities and significant issues considered during 2022

Collaborative oversight by GAC, GRC and 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.

A further development, based on 2022 evaluation findings, was to have joint meetings of the GAC, GRC and Technology Governance Working Group. These meetings would ensure there was coordinated oversight and consistent joint feedback to management on areas of significant overlap.

Areas of joint focus for the GAC, GRC and the Technology Governance Working Group during 2022 were:

Finance on the Cloud

Finance on the Cloud is a key multi-year data and reporting transformation programme using Cloud technology to enable the transformation of the Global Finance operating model and re-engineering of core reporting processes.

The committees conducted a deep dive review of Finance on the Cloud and held multiple meetings throughout 2022 to challenge management on the programme's overall objectives, scope and target end-state. As part of these discussions, the committees considered organisational realignment and programme leadership, and asked management to seek external assurance and validation of the Finance on the Cloud investment case and technology architecture. The committees also ensured that there was a greater understanding of the complexities and dependencies between Finance on the Cloud and other key programmes to ensure that deadlines for financial and regulatory reporting deliverables were met.

Digital Business Services

The committees held a joint meeting to develop a deeper understanding of the risk and internal controls issues across key components of Digital Business Services. The joint meeting discussed:

• the regulatory purpose of the service company structure, and management providing an update on initiatives to streamline, simplify and automate the services;

• actions taken by the Identity and Access Management sub-function to tackle access risks through automation and a new toolset;

• monitoring and governance activities carried out by the Global Operations and Payments teams, and its shift towards an automated control environment; and

• actions carried out within Global Procurement to enhance the risk management and control culture, in particular with regard to the oversight of critical third parties and its upgrade to a Cloud-based procurement platform.

Embedding data into our culture

The committees reviewed and challenged the Group's data strategy and the work required for the Group to embed its data policies, define the data technology landscape, and build a data-led culture. The committees also reviewed the Group's approach to harnessing and using data to better unlock value for our customers.

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 92 for further information). The GAC is responsible for the oversight of the effectiveness of the Group's whistleblowing arrangements. The Group Head of Compliance provides periodic reporting to the GAC on the efficacy of the whistleblowing arrangements, providing an assessment of controls and detailing the results of internal audit assessments. The Committee is also briefed on culture and conduct risks arising from whistleblowing cases and the associated management actions. The Chair of the GAC acts as the Group's whistleblowers' champion, with responsibility for ensuring and overseeing the integrity, independence and effectiveness of HSBC's policies and procedures on whistleblowing and the protection of whistleblowers.

The Chair continued to meet regularly throughout 2022 with the Group Head of Conduct, Policy and Whistleblowing, receiving briefings on material whistleblowing cases and the ongoing effectiveness of the whistleblowing arrangements. The Committee also received reports on actions being taken to further align our whistleblowing arrangements to actively support our purpose and values, and conduct approach. During 2023, the Committee will continue to be briefed on these actions, as well as the ongoing effectiveness of the HSBC Confidential channel.

Audit tender

Following the conclusion of a formal competitive audit tender process, the Board has approved the re-appointment of PwC as external auditor of the statutory audits of HSBC Holdings for 2025 to 2034, at which point we are required to rotate auditors in accordance with UK requirements. The audit tender process considered both large and challenger audit firms and was led by the GAC.

Scope

As a UK public interest entity, we are required to tender our audit every 10 years and rotate our auditor every 20 years. We disclosed in our Annual Report and Accounts 2021 the intention to commence an audit tender, given PwC were initially appointed for the audit of the Annual Report and Accounts 2015.

Pursuant to the tender, interested and qualified parties were invited to submit proposals for the right to provide statutory audit services to HSBC Holdings and its subsidiaries for a period of 10 years commencing from the financial year ending 31 December 2025.

HSBC's primary objective was to ensure a fair and transparent tender process and appoint the audit firm that will provide the highest quality in the most effective and efficient manner. Firms were assessed against detailed criteria which considered audit quality, capacity and capability, understanding of HSBC and future audit vision. Input was sought from principal subsidiaries' audit committee chairs as part of the GAC evaluation. Management views were advisory only to the GAC.

In accordance with best practice corporate governance requirements, the audit tender process described below was designed and led by the GAC, with direct involvement of the GAC Chair at every stage.

Pre-qualification

HSBC undertook a series of pre-qualification activities to identify vendors that satisfy our minimum requirements relating to credibility, capacity and independence. These activities were overseen by the GAC. The pre-qualification phase considered both large and challenger audit firms and explored the possibility of adopting a managed, shared audit using challenger firms.

During the pre-qualification phase, we were informed by two of the large audit firms that they were not able to participate in the tender as they believed they had insufficient capacity to perform a quality audit.

Three shortlisted audit firms were invited to respond to the formal tender, including PwC and one challenger audit firm.

Process and assessment

The shortlisted firms were invited to submit capability proposals (including written and data modelling exercises) to demonstrate their understanding of HSBC, audit quality, capabilities and their future vision of audit. Group and principal subsidiaries' audit committee chair and management meetings took place during October 2022, enabling both the audit firms and HSBC management to articulate and discuss critical success factors for the audit. Lead audit partner referrals and audit quality reports from regulators supplemented these assessments and contributed to the final evaluation of the audit firms. The capability proposals were submitted on a fee blind basis, with the fee proposal submitted directly to the GAC Chair.

The Committee considered the following during the evaluation of audit firms:

• a tender proposal, a formal document in response to the tender requirements;

• management meetings between the firms and HSBC (major legal entity audit committee chairs and senior management);

• data exercises covering audit planning and risk assessment, ECL modelling, firms' broader assurance offering and a shared audit exercise;

• public regulator audit reports for independent assessment on audit quality;

• external referees to provide a third-party opinion on the audit lead partner to support the evaluation process; and

• final presentations to the GAC.

As part of the tender process, the GAC Chair also met with Chief Executive and Head of Standards of the Financial Reporting Council to explain our audit tender process, understand views on shared audits and seek input into our evaluation of individual firm's audit quality track record.

Evaluation

The key evaluation criteria and their respective weightings used to assess the successful audit firm were proposed by management and reviewed by the Group Audit Committee. The criteria were assessed through formal capability proposals, presentations and certain supplementary evidence:

• Audit quality (30%) - regulatory evaluation, methodology, risk assessment, technology.

• Capacity and capability (30%) - footprint, partner quality and rotation, diversity, independence.

• Future audit vision (20%) - future audit developments, audit reform and innovation.

• Understanding of HSBC (20%) - knowledge of HSBC, shareholder concerns and the financial services landscape.

Final decision

The GAC considered various data points from the assessments outlined above, adopting a scorecard approach to supplement the final presentations made by the audit firms at the end of the tender process. The Committee considered the merits of appointing a challenger audit firm in a managed shared audit capacity, in line with recent UK government proposals. However, it did not have sufficient confidence that the desired audit quality outcomes could be assured in a such a large, complex, integrated and global organisation to pursue such an arrangement.

The GAC presented two audit firms to the Board for consideration of awarding the tender, recommending the re-appointment of PwC given their strong performance against our evaluation criteria and the benefits of continuity in this period of strategic change and uncertainty in the external environment.

The Board made a final decision to award the audit tender to PwC on 19 January 2023. PwC will continue to be subject to annual performance reviews (including annual effectiveness surveys and analysis of relevant audit regulator findings) in the period up to 2025 to support the annual AGM auditor re-appointment requirement.

Principal activities and significant issues considered during 2022 (continued)
Areas of focus	Key issues	Conclusions and actions
	Key financial metrics and strategic priorities The GAC considered the key judgements in relation to external reporting to track the key financial metrics and strategic priorities and to review the forecast performance and outlook.	In exercising its oversight, the Committee assessed management's assurance and preparation of external financial reporting disclosures. The Committee reviewed the draft external reporting disclosures and provided feedback and challenge on the top sensitive disclosures, including key financial metrics and strategic priorities to ensure HSBC was consistent and transparent in its messaging.
	Environmental, social and governance ('ESG') reporting The Committee considered management's efforts to enhance ESG disclosures and associated verification and assurance activities. The GAC reviewed the 2022 ESG disclosure approach in line with our external commitments.	In relation to our climate change resolution, particular attention was given to the disclosure of the financed and facilitated emissions, and thermal coal exposures. The Committee considered the key limitations and challenges relating to governance, processes, controls and data underpinning climate reporting. The Committee also discussed the nature and root cause of issues identified through the increased assurance work and ongoing enhancements to the governance, processes, controls and data underpinning climate reporting, which resulted in the deferral of disclosures on facilitated emissions and thermal coal. The Committee reviewed the ESG reporting strategy, including the broadening of ESG coverage in the Annual Report and Accounts and management's approach on integrated reporting, which will be further informed by feedback from external stakeholders.
	Regulatory reporting assurance programme The GAC monitored the progress of the regulatory reporting assurance programme to enhance the Group's regulatory reporting, impact on the control environment and oversee 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 efforts to strengthen and simplify the end-to-end operating model, including commissioning further independent external reviews of various aspects of regulatory reporting. The Committee discussed and provided feedback on management's engagement plans with the Group's regulators, including any potential impacts on some of our regulatory ratios. We continue to keep the PRA and other relevant regulators informed of our progress.

	Expected credit losses The measurement of expected credit losses involves significant judgements, particularly under current economic conditions. Despite a general recovery in economic conditions in 2022, there remains an elevated degree of uncertainty over ECL estimation under current conditions, due to macroeconomic and political uncertainties.	The measurement of expected credit losses involves significant judgements, particularly under current economic conditions. There remains an elevated degree of uncertainty over ECL estimation under current conditions, due to macroeconomic, and political uncertainties. The GAC reviewed the economic scenarios for the key countries in which the Group operates, and challenged management's judgements as to the weightings assigned to these scenarios. The GAC also challenged management's approach to making management adjustments to account for the uncertainty in outcomes arising from the Russia-Ukraine war, inflation, supply chain disruption risks, China commercial real estate and Covid-19, including the rationale for such adjustments, the controls underpinning the adjustment processes, and under what conditions such adjustments could be reduced or removed. The GAC also challenged management on the overall levels of ECL across portfolios, including looking at historical performances of portfolios and peer group comparisons.
	Goodwill, other non-financial assets and investment in subsidiaries impairment During the year, management tested for impairment goodwill, other non-financial assets and investments in subsidiaries. Key judgements in this area relate to long-term growth rates, discount factors and what cash flows to include for each cash-generating unit tested, both in terms of compliance with the accounting standards and reasonableness of the forecast.	The GAC received reports on management's approach to goodwill, other non-financial assets and investments in subsidiaries impairment testing and challenged the approach and methodologies used, with a key focus on the cash flows included within the forecasts and the discount rates used. The GAC also challenged management's key judgements and considered the reasonableness of the outcomes as a sense check against the business forecasts and strategic objectives of HSBC.
	Associates (Bank of Communications Co., Limited) During the year, management performed the impairment review of HSBC's investment in Bank of Communications Co., Ltd ('BoCom'). The impairment reviews are complex and require significant judgements, such as projected future cash flows, discount rate, and regulatory capital assumptions.	The GAC reviewed the judgements in relation to the impairment review of HSBC's investment in BoCom, including the sensitivity of the results to estimates and key assumptions such as projected future cash flows and regulatory capital assumptions. Additionally, the GAC reviewed the model's sensitivity to long-term assumptions including the continued appropriateness of the discount rates. The GAC also challenged management to review all aspects of its approach to accounting for BoCom to ensure the approach remains the most appropriate in terms of accounting judgements including compliance with the relevant accounting requirements.
	Investments 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 GAC reviewed the judgements in relation to the impairment review of HSBC Overseas Holdings (UK) Limited, and the key inputs underpinning the recoverable amounts of its subsidiaries.
	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 GAC received reports from management on the legal proceedings and regulatory matters that highlight the accounting judgements for matters where these are required. The matters requiring significant judgements were highlighted. The GAC has reviewed these reports and agrees with the conclusions reached by management.
	Valuation of defined benefit pension obligations The valuation of defined benefit pension obligations involves highly judgemental inputs and assumptions, of which the most sensitive are the discount rate, pension payments and deferred pensions, inflation rate and changes in mortality.	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. The GAC also considered the impact of changes in key assumptions on other schemes.
	Valuation of financial instruments Due to the ongoing volatile market conditions in 2022, management continuously refined its approach to valuing the Group's investment portfolio. In addition, as losses were incurred on the novation of certain derivative portfolios, management considered whether fair value adjustments were required under the fair value framework. Management's analysis provided insufficient evidence to support the introduction of these adjustments in line with IFRSs.	The GAC considered the key valuation metrics and judgements involved in the determination of the fair value of financial instruments. The GAC considered the valuation control framework, valuation metrics, significant year-end judgements and emerging valuation topics and agrees with the judgements applied by management.
	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 the Russia-Ukraine war, disrupted supply chains globally and slower Chinese economic activity, as well as considering potential impacts from 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.
	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 GAC considered the recoverability of deferred tax assets, in particular in the US, France and the UK. The GAC 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.
	Impact of acquisitions and disposals In 2022, HSBC engaged in a number of business acquisition and disposal activities, notably in Canada, France, Singapore and India. There are a number of accounting impacts that need to be considered, including the timing of recognition of assets held-for-sale, gains or losses, and the measurement of assets and liabilities on acquisition or disposal.	The GAC considered the impacts of the planned exits of the Canadian and French retail businesses, management's judgements in relation to classification as held for sale, and the timing of the accounting recognition of these transactions. The GAC also considered the financial and accounting impacts of other acquisitions and disposals.
	Transformation and sustainable control environment The GAC will oversee the impact on the risk and control environment from the Group transformation programme.	The Committee received regular updates on the Group transformation programme and the broader change framework, to review the impact on the risk and control environment, to oversee progress of the transformation programme and the continued embedding of the broader change framework. In these updates the Committee monitored the progress of the programme, focused on the continued implementation of the change framework and the progress in the management of the entire change portfolio. This oversight helped the Committee to understand the progress being made in the management of the change portfolio, through the implementation of the change framework. The committee noted the progress on simplifying our change inventory, greater rigour on tracking progress against committed business cases, and strengthening of the lessons learnt process. Management's updates were supplemented by further focus and assurance work from Global Internal Audit where a dedicated team continuously monitored and reviewed the Group transformation programme. This included carrying out targeted audit reviews, in addition to audits of significant programmes.
	Global Finance transformation The Committee reviewed the proposals for the Global Finance organisational design, the migration to Cloud and the impact on financial controls.	The Committee has oversight for the adequacy of resources and expertise, as well as succession planning for the Global Finance function. During 2022, the Committee dedicated significant time to the review and progress of the multi-year Global Finance transformation programme, particularly Finance on the Cloud, with the overall objectives being to improve the control environment and customer outcomes and to make use of technology to increase overall efficiency. The Group Chief Financial Officer had private sessions with the Committee to share his perspectives on the progress of the Global Finance transformation and where additional focus was required.

	IFRS 17 'Insurance Contracts' The Committee will oversee the transition to IFRS 17 and consider the wider strategic implications of the change on the insurance business.	During 2022 management provided updates to the Committee on preparations for the implementation of IFRS 17, which is effective from 1 January 2023 with one year of comparative restatements required. The Committee was updated on the production of the transition balance sheet and considered the financial impacts (for which a summary is provided within the Future Accounting Developments section of the Basis of Preparation on page 335), as well as the generation of comparative income statement estimated impacts (for which a high level summary based on estimated 1H22 results is provided on page 99). The Committee also received updates with respect to progress on implementing the supporting operational infrastructure, internal controls over financial reporting, key judgements considered including transition approaches selected, as well as plans for disclosure of related non-GAAP measures and key performance metrics. The first publication of results on an IFRS 17 basis will be at the 1Q23 Earnings Release, and the Committee noted that management intends to publish an IFRS 17 Transition statement together with that announcement.
	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 an update on the progress and impact of the Basel III programme on the Group. Management discussed the uncertainty over the final definition of the rules and the actions taken to ensure sufficient flexibility to make changes and mitigate risks from legislation being finalised at a later date and also on a staggered basis across each jurisdiction. The discussion highlighted the dependencies of the Basel III programme with other Group transformation programmes, in particular the dependency on adoption of the Finance on the Cloud solution, risk model development and the impact on data delivery and storage. The Committee noted the completion of the programme restructure, reviewed the ongoing management of risks, issues and dependencies and challenged management to prioritise deliverables across each jurisdiction in line with regulatory timelines, in each case, to ensure that solutions delivered to the minimum required standards. The Committee noted the overall improved status of the programme and requested an update post the Office of the Superintendent of Financial Institutions Canada implementation date of 1 April 2023.

Committee evaluation and effectiveness

The annual review of the effectiveness of the Board committees, including the GAC, was conducted internally in 2022, led by the Group Company Secretary and Chief Governance Officer. Overall, the review concluded that the GAC continued to operate effectively. The Chair's management of meetings and leadership of the audit tender process, in particular, were rated highly. The review also made certain recommendations for continuous improvement. These included a need for continued focus on the quality of reporting, oversight of prioritisation of key programmes, and continued coordination between the GAC and other Board committees on topics of mutual interest. It was also suggested that the Committee should dedicate more time to the oversight of capacity and succession planning in the Finance and Internal Audit functions. The Committee considered the outcomes of the evaluation and accepts the findings. The evaluation outcomes were reported to the Board, and the Committee will track progress against the recommendations during 2023.

Focus of future activities

In 2023, the Committee will prioritise control remediation and enhancements, particularly of controls supporting regulatory reporting. This will include developing a deeper understanding of the prioritisation and interdependencies in the delivery of key transformation and regulatory programmes to strengthen the risk and control environment. It will also monitor domestic and worldwide tax policy developments and examine the potential impact on accounting judgements. A key priority will be to further embed ESG and climate-related disclosures to meet increasing expectations of stakeholders, in particular the implementation of robust processes and controls to support these disclosures. Along with other committees of the Board, the Committee will continue to ensure root cause themes related to understanding and accountability for data capture, data quality and the implementation and embedding of data policies are addressed by management.

Group Risk Committee


"The GRC closely monitored heightened geopolitical and macroeconomic headwinds throughout the year to anticipate potential impacts to the Group's revenue, capital base and continuing ability to support customers."

Dear Shareholder

I am pleased to present the Group Risk Committee ('GRC') report.

Geopolitical risks and the macroeconomic outlook deteriorated rapidly at the start of the year due to the Russia-Ukraine war. The GRC closely monitored heightened geopolitical and macroeconomic headwinds throughout the year to anticipate potential impacts to the Group's revenue, capital base and continuing ability to support its customers. Measures included monitoring the Group's preparedness for an expected recession in key markets from rising inflation and interest rates. The Committee embraced management's development of forward-looking sensitivity analysis to assess the potential impacts on HSBC's prudential position, franchise resilience and ability to support customers.

The GRC worked closely with the Group Chief Risk and Compliance Officer to strengthen the Group's risk management framework, and to promote the development of more dynamic and granular risk appetite statements to manage HSBC's risk profile.

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 Bank of England's climate biennial exploratory scenario, and the 2022 annual cyclical scenario exercise.

The GRC carefully considered the Group's regulatory remediation and change programmes, and helped direct management to better prioritise and understand where there are interdependencies. In particular, the GRC reviewed and challenged the Group's data management plans and interest rate risk in the banking book strategy. The GRC also provided oversight and support to risk transformation activities to develop stronger risk management capabilities and outcomes across the Group.

The GRC continued to review its committee composition, skills and experience. In June, we welcomed Geraldine Buckingham and James Forese as new members, and we expressed sincere gratitude to José Antonio Meade Kuribreña and Eileen Murray, who stepped down to assume new Board governance responsibilities.

Jackson Tai

Chair

Group Risk Committee

21 February 2023

Membership
	Member since	Meeting attendance in 2022¹
Jackson Tai (Chair)	Sep 2016	18/18
Geraldine Buckingham²	June 2022	11/11
Dame Carolyn Fairbairn³	Sep 2021	17/18
James Forese⁴	June 2022	12/13
Steven Guggenheimer⁵	May 2020	16/18
José Antonio Meade Kuribreña⁶	May 2019	10/10
Eileen Murray⁷	Jul 2020	7/9
David Nish⁸	Feb 2020	16/18

1 These included seven scheduled meetings, five ad hoc meetings, four joint meetings with the Group Audit Committee and the Technology Governance Working Group, and two joint meetings with the Group Remuneration Committee.

2 Geraldine Buckingham joined the GRC on 1 June 2022.

3 Dame Carolyn Fairbairn was unable to attend one meeting due to a prior commitment.

4 James Forese joined the GRC on 1 June 2022. He was unable to attend one meeting due to a prior commitment.

5 Steven Guggenheimer was unable to attend two meetings due to personal circumstances.

6 José Antonio Meade Kuribreña stepped down from the GRC on 1 June 2022.

7 Eileen Murray stepped down from the GRC on 1 June 2022. She was unable to attend two meetings due to personal circumstances.

8 David Nish was unable to attend two meetings due to a prior commitment.

Key responsibilities

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.

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 Human Resources Officer, Group Chief Legal Officer, Group Head of Internal Audit, Group Head of Finance and Group Head of Risk Strategy and Macroeconomic Risk 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 external auditor, PwC, following scheduled GRC meetings.

The participation of our senior business leaders, including the Group Chief Executive who attended six scheduled GRC meetings in 2022, 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 to discuss priorities and track progress on key actions. The Chair also has regular meetings with members of senior management to discuss specific risk matters that arise outside formal meetings. 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 2022' table on page 272.

Matters considered during 2022
	Jan	Feb	Mar	Apr	May	Jun	Jul	Sep	Oct	Dec
Holistic enterprise risk monitoring including Group risk profile¹	l	l	l	l	l	l	l	l	ô	l
Risk framework and/or policies	l	l	ô	ô	ô	ô	l	ô	ô	ô
Treasury risk	ô	l	l	l	l	l	l	l	l	l
Wholesale/retail credit risk	ô	l	ô	l	l	ô	l	ô	l	l
Financial reporting risk	ô	l	ô	ô	ô	l	ô	ô	ô	ô
Resilience risk (including IT and operational risk)	ô	ô	l	l	l	l	l	l	ô	l
Financial crime risk	ô	l	l	l	ô	l	l	ô	ô	ô
People and conduct risk	ô	l	ô	ô	l	ô	ô	l	ô	l
Regulatory compliance risk	ô	l	ô	l	l	ô	l	l	l	l
Legal risk	ô	l	ô	l	ô	ô	l	l	ô	l
Model risk	ô	ô	ô	ô	ô	ô	ô	l	ô	ô
ESG risk	ô	ô	ô	ô	ô	ô	l	l	l	l

Matter considered

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 November 2022 to review the GRC agenda, particularly matters relating to risk transformation, financial crime and conduct.

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. In particular, Directors' education meetings and GRC Chair's preview meetings strengthened the understanding of more technical topics and promoted constructive challenge. Areas covered included risk transformation, interest rate risk in the banking book, stress testing, ICAAP and ILAAP preparations, as well as recovery and resolution planning. Further details on these sessions are included in the 'Principal activities and significant issues considered during 2022' table starting on page 273.

Connectivity with principal subsidiary risk committees

During 2022, the GRC continued to actively engage with principal subsidiary risk committees through the scheduled participation of principal subsidiary risk committee chairs at GRC meetings, and through a connectivity meeting with the principal subsidiary risk committee chairs. 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 on the key risks facing principal subsidiaries at its regular meetings and continued to review escalated reports 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 2022, the GRC met with the Risk and Compliance Executive Committee to promote information sharing 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 efforts to embed the right risk culture into our global operations to support our transformation activities. The engagement also 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 convened on four occasions to consider the Group's data strategy and ambitions, the Finance on the Cloud transformation programme, and internal control issues across key components of Digital Business Services.

Further details on each of these sessions can be found under the 'Collaborative oversight by the GAC, GRC and Technology Governance Working Group' section of the GAC report on page 266.

The committees worked closely to ensure appropriate alignment in the review, discussion, challenge and conclusions on topics including risk and control issues relating to Digital Business Services, and the transition of core capabilities to the Cloud. This ensured that the committees benefited from each other's expertise and challenge. The GRC Chair also included the GAC Chair for pre-meetings on technical matters such as interest rate risk in the banking book and stress testing.

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 in order to strengthen connectivity and the flow of information between the committees. The GRC Chair is also a member of the Technology Governance Working Group, and each of the co-Chairs of the Technology Governance Working Group are members of the GRC and GAC, respectively.

Principal activities and significant issues considered during 2022 (continued)
Risk areas	Key issues	Conclusions and actions
	Geopolitical and macroeconomic risks continue to present significant challenges to revenue growth, operational resilience, and our commitment to serve customers and local markets.	The GRC closely monitored global geopolitical and macroeconomic risks that could impact the Group's strategy, business performance or operations. These risks were exacerbated by the Russia-Ukraine conflict and by related regulatory and reputational risks impacting our operations globally. 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 encouraged management to examine and maintain a timely and up-to-date book of strategic management actions.

	The Group risk appetite statement defines the Group's risk appetite and tolerance thresholds and forms the basis of the first and second lines of defence's management of risks, 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 and changes to the Group's risk appetite statements, which 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 forward looking and risk-responsive. The GRC provided oversight for the linkage between risk appetite statements with the Group's corporate strategy, stress testing, financial resource plan, as well as the Group's move towards stronger, sustainably higher returns for shareholders. The GRC recommended changes to the Group's risk appetite statement, including in the areas of interest rate risk in the banking book, insurance risk, climate risk, resilience risk, financial crime risk, regulatory compliance and liquidity risk.


	The Group takes active steps to safeguard its capital and liquidity positions. It also performs internal and regulatory stress tests to measure its resilience and performance against stress, and to consider strategic management actions that could be applied against anticipated stress events and headwinds. The Group is also required to show how its resolution strategy could be carried out in an orderly way, and identify any risks to successful resolution.	The GRC reviewed the Group's ongoing treasury, capital and liquidity risk management activities, including early warning indicators, scenario stress testing, interest rate risk in the banking book ('IRRBB') strategy and remediation activity, capital and liquidity reporting, and capital and liquidity adequacy. The GRC conducted its annual review, challenge and recommendation of the Group's ICAAP and ILAAP to the Board for approval. GRC members previewed the ICAAP and ILAAP submissions in depth, with input from principal subsidiary risk committee chairs as appropriate. The GRC evaluated the Group's IRRBB strategy and progress on the multi-year liquidity improvement programme. The GRC will continue to monitor the Group's IRRBB strategy closely through regular updates in 2023. In relation to stress testing exercises, the GRC reviewed the Bank of England's 2022 annual cyclical scenarios, and following a detailed review of principal subsidiary and global businesses inputs, approved the results of the 2022 annual cyclical scenario exercise in December 2022. The GRC also reviewed the implications of the results of the severely adverse scenario stress test from the Federal Reserve's Comprehensive Capital Analysis and Review in relation to HSBC North America Holdings, and considered actions being progressed by management in response. The GRC continued its oversight of the Group's progress in developing its capabilities against the Bank of England's requirements for recovery and resolvability. In 2022, the GRC reviewed and challenged the Group recovery plan, including with an assessment of the financial resources and recovery capacity needed to stabilise the Group. The GRC considered views of all lines of defence to determine credibility and ability to execute the plan. In advance of the review by the GRC, the GRC and GAC Chairs met with management to consider the principal subsidiary risk committee components. The GRC was heavily involved in the governance of the resolvability assessment framework ('RAF'). This included oversight of the addendum to the Group's RAF self-assessment that set out HSBC's progress since submission of the original self-assessment in October 2021. The GRC also reviewed the RAF public disclosure prior to its submission, and considered remedial actions to address the feedback provided by the Bank of England. In addition, the GRC assessed the adequacy of the recovery and resolution planning programme that is expected to deliver improvements, in line with management expectation and the PRA's feedback.

	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 quarterly updates on the Group's expected credit losses and provisions, loan impairment charges and the credit risk arising from the wholesale portfolio and mortgage books. The GRC also reviewed the potential impact of a likely recession in our key markets due to rising inflation and interest rates to assess management's readiness and approach to drive stronger credit risk management practices. 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.

	HSBC is exposed to the risk where controls supporting the reporting of its financial statements are not effective, resulting in material error or misstatement.	The GRC receives regular 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 notable audit reports that provide an assessment of control effectiveness, where applicable. While the GAC assumes primary responsibility for the oversight of financial reporting capabilities, the GAC collaborated with the GRC and the Technology Governance Working Group to assess the progress in developing these capabilities. Further details on the joint meeting are included in the 'Collaborative oversight by the GAC, GRC and Technology Governance Working Group' section on page 272.

	Resilience risk is where we may be unable to provide our customers with critical business services due to significant disruption. Technology risk is where there may be 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 operational resilience programme defines the Group's policies and practices to strengthen its ability and readiness to serve customers in the event of unforeseen disruptions in key markets.	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 advocated for the early adoption of operational resilience requirements across key markets and businesses. The GRC will oversee the progress in extending the programme of operational resilience globally throughout 2023. The GRC regularly reviewed reports on the Group's technology risk profile, as well as reports on cybersecurity risks. The GRC also maintained a strong focus on understanding the Group's data risk landscape, its data strategy and data management programme.

	The Group is committed to closely monitoring and managing the risk that HSBC's products and services will 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 continued to review the Group's approach to managing its financial crime risk across geographies and businesses. This included reviewing the Group's progress in enhancing its transaction monitoring framework, as well as monitoring the fraud landscape and the strategies for managing such risk. In light of the Russia-Ukraine war, the GRC also maintained 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.

	The Group promotes a culture that is effective in managing risk and leads to fair conduct outcomes. It seeks to actively manage the risk of not having the right people with the right skills doing the right thing, including risks associated with employment practices and relations.	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 capacity, capability, culture and conduct. It also considered remuneration risks, and strategies to retain talent and acquire new capabilities and skills in key areas. The GRC also placed strong emphasis on policies and practices relating to conduct and fairness to customers, especially on vulnerable customers given heightened macroeconomic pressures and stress on customers across markets. The GRC and Group Remuneration Committee met jointly in September and December, and reviewed the Group's risk and reward alignment framework to promote sound and effective risk management in meeting PRA and FCA remuneration rules and expectations.

	The Group operates in multiple jurisdictions, and is exposed to risks associated with inappropriate market conduct or breaching related financial services regulatory standards or expectations.	The GRC receives feedback from regulators, and monitors the progress of any regulatory remediation activities, with the support from the Group Chief Risk and Compliance Officer as well as principal subsidiary risk committee chairs. During 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.

	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.

	HSBC faces risk from the inappropriate or incorrect business decisions arising from the use of models that have been inadequately designed, implemented or used, or from models that do not perform in line with expectations and predictions.	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 and the strengthening of our model risk management capabilities. In particular, the GRC reviewed model risk deliverables against external review findings, improvements made to enhance first line of defence engagement in the model lifecycle, progress made to transform the Model Risk Management function and the implementation of new global model risk policy and standards.

	Successful delivery of our climate ambition will be determined by our ability to measure and manage all components of environmental, social and governance ('ESG') risk, including climate risk.	The GRC remained focused on ESG risk, including climate risk, and has reviewed quarterly reports on climate risk management, while maintaining oversight of delivery plans to ensure that the Group develops robust climate risk management capabilities. The GRC also has oversight over ESG-related initiatives and reviews these to assess the risk profile. The GRC approved the Group's climate biennial exploratory scenario stress test submission to the PRA in March 2022. In preparation, the GRC reviewed the scenario and considered planned engagement with clients, strategic management actions; the challenges in relation to data, modelling and infrastructure support; and the impact of climate change on our physical risks including through our residential and corporate real estate mortgage books.

Committee evaluation

During 2022, the GRC implemented the recommendations of the external committee evaluation conducted by Lintstock in consultation with the Group Company Secretary and Chief Compliance Officer in December 2021. This included strengthening the focus of meeting agendas, and continuing the GRC's engagement with the Risk and Compliance Executive Committee and principal subsidiary risk committee chairs.

Continuing the commitment to regular evaluation, the Group Company Secretary and Chief Governance Officer performed an annual review of the effectiveness of the GRC in December 2022. The evaluation concluded that the GRC continued to operate effectively and in line with regulatory requirements, and identified enhancements. The outcomes of the evaluation have been reported to the Board, and the GRC will track the progress in implementing recommendations during 2023.

Focus of future activities

The GRC's focus for 2023 will include the following activities. It will:

• oversee risk transformation activities to develop even stronger risk management capabilities;

• oversee the continued enhancement of the Group's risk appetite and risk management framework, especially in light of continued geopolitical and macroeconomic headwinds;

• continue to oversee treasury risk to strengthen our capital and liquidity management capabilities, including proactive management of interest rate risk in the banking book;

• continue to review and challenge the consistency of our risk appetite statements, our financial resource plan, and the outcomes from our stress testing exercise;

• monitor our ESG progress, including the delivery against the climate commitments 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 adoption of Cloud platforms, 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.

Directors' remuneration report

Contents

280	Committee Chair's statement
283	Executive remuneration at a glance
287	Annual report on Directors' remuneration
308	Additional regulatory remuneration disclosures

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.


"This year we have refreshed our reward strategy to inspire a dynamic culture as we focus on energising for growth and delivering sustainable value to our shareholders, customers and colleagues."

Dear Shareholder

I am pleased to present our 2022 Directors' remuneration report on behalf of the members of the Group Remuneration Committee, and my first as Chair of the Committee. I would like to thank our previous Chair, Pauline van der Meer Mohr, for her excellent stewardship of the Committee.

I also thank you for your support of our remuneration resolutions at the 2022 Annual General Meeting ('AGM'). Our current policy and its implementation received 96% of votes in favour.

In addition to our usual agenda, the Committee has been focused on aligning performance measures and remuneration more closely with our strategy. We have been engaging with our major shareholders and other investor groups, who have shared valuable feedback.

We have refreshed our wider reward strategy and proposition for the workforce in response to the new or elevated challenges we are facing as we move beyond the Covid-19 pandemic, including the cost of living pressures many of our colleagues are experiencing. The commitments we make to colleagues are critical to support us in energising for growth and delivering sustainable performance.

Performance in 2022

Financial performance

Financial performance in 2022 was supported by a rise in global interest rates, which materially improved our net interest income, and we maintained our strong focus on cost discipline, despite inflationary pressures and continued investment in technology. While our revenue outlook remains positive, there are continued risks around inflation and increasing macroeconomic uncertainty in many of the markets in which we operate.

Adjusted profit before tax increased by $3.4bn to $24.0bn, as a rise in adjusted revenue of 18% to $55.3bn was partly offset by an adjusted expected credit losses charge of $3.6bn, compared with a net release in 2021 of $0.8bn, and growth in adjusted operating expenses of 1%. Our return on average tangible equity ('RoTE') was 9.9%, an increase of 1.6% on 2021, and we have now exceeded our ambition of $120bn of risk-weighted asset ('RWA') gross saves since the start of our programme in 2020.

Membership
	Member since	Meeting attendance in 2022
Dame Carolyn Fairbairn (Chair)	Sept 2021	6/6
Geraldine Buckingham	May 2022	4/4
Rachel Duan	Sept 2021	6/6
James Forese	May 2020	6/6
José Antonio Meade Kuribreña	May 2021	6/6
Pauline van der Meer Mohr¹	Jan 2016	2/2

1 Pauline van der Meer Mohr stepped down from the Committee and Board at the conclusion of the AGM on 29 April 2022.

In 2022, we approved dividends of $0.32 per share, equivalent to a payout ratio of 44% of reported earnings per share. We are establishing a dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items, and we intend to revert to paying quarterly dividends from the first quarter of 2023.

Non-financial performance

In our employee Snapshot survey, our Employee engagement and Inclusion indices both increased by 1% year on year to 73% and 76%, respectively, which are both above the financial services benchmarks. The percentage of Black heritage colleagues in senior leadership globally increased by 0.3% to 2.5%, meeting our stretch goal. The percentage of women in senior leadership also increased by 1.6% to 33.3% since 2021, and we are on track to meet our commitment of 35% by 2025.

For customer satisfaction, net promoter score ('NPS') performance has been positive relative to our competitors in some areas of our business, with work to do in others. In WPB, our NPS increased in the UK and Hong Kong, and we were ranked in first place in Hong Kong. In CMB, our NPS increased in Hong Kong but declined in the UK, and we were ranked in second place in Hong Kong. In GBM, our global NPS improved and our global rank remained in fifth place. In WPB and CMB digital businesses in Hong Kong, we were ranked in first and third places, respectively. In GBM globally, our digital trade finance platforms maintained first place for the quality of platforms. Our PayMe payments app was also ranked in second place for digital wallets. In WPB, our NPS increased in mainland China and Singapore, remained unchanged in Mexico, and in India saw a small decline. In CMB, our NPS increased in mainland China, Singapore and Mexico, and our rank positions in those markets either improved compared with 2021 or were in the top three against competitors.

Workforce reward

Group variable pay pool

The Committee determined an overall variable pay pool of $3,359m (2021: $3,495m) following a review of our performance against financial and non-financial metrics set out in the Group risk framework. The Committee considered our strong 2022 financial performance, with a 17% increase in adjusted profit before tax, a RoTE of 9.9% and adjusted cost growth of 1% year on year. The Committee also considered the external environment, the challenging economic outlook and projected outcomes across the market to ensure we remain competitive to attract and retain talent.

The distribution of the pool was differentiated by business performance. Overall year-on-year variable pay outcomes were strongest in CMB, followed by WPB but down in GBM to reflect relative performance. There was robust differentiation for individual performance so that our highest performers received meaningful variable pay increases on the previous year. We have protected variable pay for junior colleagues, which was up on average, recognising the inflationary and cost of living challenges experienced across most of our markets.

In determining 2023 fixed pay increases, we considered the impact of inflation in each country where we operate. Increases were targeted towards more junior and middle management colleagues as fixed pay is a larger proportion of their overall pay. Across the Group, there was an overall increase of 5.5% in fixed pay, compared with 3.6% for 2022. The level of increases varied by country, depending on the economic situation and individual roles. There were no fixed pay increases for most of our senior leaders, including our executive Directors.

Supporting colleagues in 2022

We monitored the global economic situation carefully and took action to support our colleagues according to the market, given local inflation and cost of living pressures. We continued to support our colleagues in those markets still significantly impacted by the pandemic. In mainland China and Hong Kong, we provided care packages and increased well-being sessions. In mainland China, we also delivered food essentials and provided inconvenience allowances. In Argentina and Türkiye, we made regular adjustments to fixed pay given the continuing inflationary pressures. In Sri Lanka, we made one-off payments and fixed pay increases during the year to address high inflation. In the UK, we provided almost 17,000 junior colleagues with a one-off payment of £1,500 to help with energy cost pressures.

We continued to focus on well-being, benefits, financial guidance, employee assistance programmes and access to hardship funds, as well as pay.

Key remuneration decisions for Directors

Executive Director changes

Georges Elhedery was appointed Group Chief Financial Officer from 1 January 2023. Ewen Stevenson is leaving the Group on 30 April 2023 and will receive a payment in lieu of notice until 25 October 2023. All remuneration decisions in respect of this change were made in accordance with our shareholder-approved policy, and are detailed in the annual report on remuneration.

Georges Elhedery's remuneration was set on appointment with a base salary of £780,000 per annum, a fixed pay allowance of £1,085,000 per annum, a pension allowance of 10% of his base salary (in line with most UK employees) and variable remuneration and benefits in accordance with our policy.

In recognition of the services that Ewen Stevenson provided to HSBC during his tenure and the circumstances of his departure, he has been treated as a good leaver for the purpose of unvested incentive awards. He remained eligible for a 2022 annual incentive but will not receive a long-term incentive award for the 2023 to 2025 performance period.

Executive Directors' annual incentive

The Group's financial performance was reflected in the performance against the measures in the executive Directors' annual scorecards. In particular, the Committee recognised: adjusted profit before tax was $24.0bn, which represented an increase of 17% compared with 2021; strong cost controls were demonstrated, despite inflationary pressures and continued investment in technology, with adjusted costs at $30.5bn; and RoTE was 9.9%, an improvement on the 8.3% achieved in 2021.

Overall, combined with non-financial measures, this level of performance resulted in a formulaic scorecard outcome of 79.32% of the maximum opportunity for Noel Quinn (2021: 57.30%) and 76.65% for Ewen Stevenson (2021: 60.43%). The increase relative to 2021 reflected performance against targets and is largely a result of stronger financial performance in 2022.

The annual incentive scorecard is also subject to a risk and compliance modifier, which provides the Committee with the discretion to adjust down the overall scorecard outcome. Taking into account the Group's performance against risk metrics, inputs from the Group Risk Committee and the overall accountability of the executive Directors with regards to specific matters around capital management in the year, the Committee used its judgement and applied a downward adjustment of 5% and 15% to Noel Quinn's and Ewen Stevenson's annual incentive outcomes, respectively. The difference in adjustments reflected the degree of accountability and relative proximity for capital management. This resulted in an adjusted incentive outcome of 75.35% of maximum opportunity for Noel Quinn and 65.15% for Ewen Stevenson. This represented amounts of £2,164,000 for Noel Quinn (2021: £1,590,000) and £1,091,000 for Ewen Stevenson (2021: £978,000).

The year-on-year increase in annual incentive for the Group Chief Executive is based on a formulaic assessment of performance against financial and non-financial targets set by the Board at the start of last year, taking into account the Group's 2022 financial plan and strategic priorities and commitments.

While the variable pay pool is determined by the Group's overall performance, it is not set in a formulaic manner. Our approach is to smooth the variable pay pool outcomes over time to protect overall pay for colleagues from material volatility in performance caused by market conditions. In years of lower Group performance, we protect colleagues from significant downside in pay outcomes, including in 2020 when adjusted profit before tax fell 45% year on year, but the variable pay pool decreased just 20%. In years of stronger performance, such as in 2022, a similar approach is taken on the upside.

The Committee carefully considered the executive Directors' pay outcomes in the context of pay decisions made for the wider workforce and determined that these are an appropriate reflection of Group, business and individual performance delivered in 2022.

Long-term incentive ('LTI') for executive Directors

For LTI awards for the 2023 to 2025 performance period, we will continue to use measures and targets relating to: RoTE; capital reallocation to Asia; relative total shareholder return ('TSR'); and environmental impact.

Following feedback from some of our shareholders, the Committee reviewed the TSR performance peer group, with the objective of including more Asian peers to better reflect the balance of markets and businesses of the Group. The new peer group will be used for the relative TSR measure for LTI awards with a 2023 to 2025 performance period, and now includes Bank of China (Hong Kong), China Merchants Bank and OCBC Bank. No change will be made to the performance peer group for any LTI awards granted prior to the 2023 to 2025 LTI award.

For the 2023 to 2025 performance period: Noel Quinn will receive an LTI award of £4,275,000 (320% of salary) in respect of his performance for 2022; Georges Elhedery will receive an LTI award of £1,248,000 (160% of salary) in respect of his performance for 2022 when he was not an executive Director; and Ewen Stevenson will not receive an LTI award.

Ewen Stevenson participated in the LTI for the 2020 to 2022 performance period that will vest in March 2023. The TSR and RoTE performance targets were not met and therefore these elements of the award lapsed in full. The customers measure was determined to be 57% met and therefore 19% of the overall award will vest on a pro-rata basis over the next five years.

Executive Directors' fixed pay for 2023

The Committee decided that there will be no increase to the base salary or fixed pay allowances for Noel Quinn for 2023. The fixed pay for Georges Elhedery for 2023 was set on appointment.

Ordinarily, an increase would have been considered for Noel Quinn to ensure that his total remuneration opportunity is competitive in the market. However, given the broader economic context and inflationary and cost of living pressures for colleagues across many of our markets, we targeted increases to our more junior and lower paid colleagues this year.

Looking ahead

We note the UK government's consultation around the variable to fixed pay ratio, and anticipate that this will eventually allow us to place more emphasis on variable pay in the overall package. We will keep our approach under review and consult with shareholders on any potential changes to our overall remuneration framework for executive Directors. In the meantime, our approach for 2023 will be consistent with the current approved policy and regulatory requirements.

We are committed to opening up a world of opportunity for all our people in 2023 and beyond. Our refreshed reward proposition articulates how we are building a dynamic culture where the best want to work, where we reward colleagues responsibly and reward their successes. We will continue to do the right thing for our colleagues, rewarding them fairly and supporting them to grow.

We continue to protect value for our shareholders and customers, and manage our costs. We will also continue to engage with all our stakeholders on executive pay matters.

We believe that our decisions on executive pay for 2022 have struck the right balance for all stakeholders and are also fair relative to performance. As Chair of the Committee, I hope you will support the

2022 Directors' remuneration report, which will be subject to an advisory vote at our 2023 AGM.

Dame Carolyn Fairbairn

Chair

Group Remuneration Committee

21 February 2023

Remuneration decisions in context

We have given serious consideration to how we manage competing variables when deciding pay outcomes this year. We feel the decisions that have been made strike a balance between prioritising fixed pay increases for those who need it the most, and variable pay increases for our most exceptional performers. We will continue to listen carefully to all stakeholders - colleagues, customers and shareholders, as well as our regulators - in making these important judgements.

What are we doing to support colleagues?	How was fixed and variable pay determined for executive Directors?
A key aspect of the Committee's activities this year has been ensuring that we support our colleagues through the challenges that many are facing. In recognition of the broader environment, we are spending more on fixed pay than we have in recent years, and we have increased the total funding by 5.5% globally. We want to make sure that colleagues can avoid facing financial hardship, and we support the senior leadership's decision to focus fixed pay increases on our more junior and middle management employees, where this is a larger proportion of their overall pay. We have taken a number of targeted actions to support our colleagues during 2022, taking the local context into consideration, as detailed in the Chair's letter. This includes support for those particularly impacted by inflationary pressures in Argentina, Türkiye and Sri Lanka. It also includes support in mainland China and Hong Kong where colleagues are still significantly impacted by the pandemic. In the UK, we supported colleagues facing energy cost pressures. We have continued to provide a wide range of resources to all our colleagues globally, including wider support on financial guidance, employee assistance programmes and access to hardship funds.	The Committee makes decisions on executive Director pay based on a policy that is agreed with our shareholders. The performance against targets in the executive Directors' annual scorecards reflects their individual contribution to the Group's strong financial performance in 2022. We set clear targets at the start of the year, and then the Committee assesses if they have been met or not. The annual incentive scorecard is also subject to a risk and compliance modifier. Overall, this has resulted in a higher annual incentive outcome for our executive Directors for 2022. Details of these outcomes are set out in our annual report on remuneration below. There have been no fixed pay increases for our executive Directors.
How was fixed and variable pay funding determined for all employees? The Group has increased fixed pay funding by 5.5% for 2023, compared with 3.6% for 2022. We have allocated fixed pay by market, with outcomes differentiated based on the economic circumstances, and particularly wage inflation, in each market. We have taken into account the impact of the current economic environment and targeted fixed pay increases towards more junior and middle management colleagues where fixed pay is a larger part of their total compensation and who may be most impacted by inflation and cost of living pressures. There have been no fixed pay increases for most of our senior leaders for 2023, including our executive Directors. The Group variable pay pool is determined by reviewing Group performance against key financial and non-financial metrics. Although we have improved our financial performance this year, we have kept the pool broadly flat when compared with 2021. Our approach is to smooth the variable pay pool outcomes over time to protect overall pay for colleagues from material volatility in performance caused by market conditions. Within the overall variable pay pool, there has been significant differentiation to reward our best performing businesses and recognise excellent individual performance. Outcomes for colleagues vary significantly depending on their role, business area and performance.	What are the key areas of focus for the Committee over the coming year? The Committee notes the UK government's consultation around the bonus cap, and we anticipate that this will eventually lead to a remuneration structure with a greater focus on variable pay for performance. We intend to review the remuneration arrangements for our executive Directors in due course in light of the UK government's proposals, and will consult with shareholders on any potential changes to our overall remuneration framework. The Committee continues to keep the performance metrics used for our executive scorecards under review to ensure that they continue to support the successful execution of our strategy, while also taking into account views of our major shareholders, and investor and regulatory guidance in this area. As the Group continues to progress on our environmental, social and governance ('ESG') journey, the Committee has discussed how we ensure our environmental and social commitments continue to be appropriately reflected in the performance scorecards for members of the Group Executive Committee. This is an area the Committee intends to consider further over the coming year.

Executive remuneration at a glance

This section sets out an overview of our performance, our 2022 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 2023.

Our performance

Adjusted profit before tax

$24.0bn

(2021: $20.6bn)

Net new invested assets

$80bn

(2021: $64bn)

Adjusted costs

$30.5bn

(2021: $30.1bn)

Return on average tangible equity

9.9%

(2021: 8.3%)

Employee engagement index

73%

(2021: 72%)

Inclusion index

76%

(2021: 75%)

Colleagues reporting HSBC cares about their well-being

70%

(up from 50% in 2016 when we first ran the survey)

Percentage of women in senior leadership roles

33.3%

(2021: 31.7%)

Remuneration outcomes for executive Directors

Summary remuneration outcomes for 2022 are set out below. Further details are set out in our annual report on remuneration.

Noel Quinn

Total remuneration (£000)

Ewen Stevenson

Total remuneration (£000)

Annual incentive outcome

Shareholding (% of salary)¹

1 Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment. Noel Quinn and Ewen Stevenson were appointed on 5 August 2019 and 1 January 2019 respectively.

Remuneration policy summary - executive Directors

This section summarises our remuneration policy for executive Directors. The policy was approved at the AGM on 29 April 2022. The full remuneration 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.

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 not be increased for 2023 and will remain as follows:

• Noel Quinn: £1,336,000

• Georges Elhedery: £780,000

Fixed pay allowance ('FPA')

• The FPA is granted in instalments of immediately vested shares.

• On vesting, shares equivalent to the net number of shares delivered (after those sold to cover any income tax and social security) are subject to a retention period and released annually on 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 vesting period.

FPA for 2023 will not be increased for 2023 and will remain as follows:

• Noel Quinn: £1,700,000

• Georges Elhedery: £1,085,000

Cash in lieu of pension

• Cash in lieu of pension is paid on a monthly basis as 10% of base salary.

• This allowance, as a percentage of salary, is aligned with the maximum contribution rate, as a percentage of salary, 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 for the annual incentive is up to 215% of base salary.

• Annual incentive performance is measured against an individual scorecard.

• At least 50% of any award is delivered in shares, which are normally immediately vested.

• 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.

• 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 quantum.

• See page 286 for details of 2023 annual incentive measures.

Long-term incentive ('LTI')

• The maximum opportunity for LTI awards 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 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.

• Awards are subject to malus provisions prior to vesting. Vested shares are subject to clawback 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.

• 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 quantum.

• See page 285 for details of performance measures for the LTI awards with a 2023 to 2025 performance period.

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. Details will be disclosed in the Annual Report and Accounts 2023 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 in any such plans will be disclosed in the Annual Report and Accounts 2023, as required.

Our approach to workforce reward

Our refreshed reward proposition

During 2022, the Committee refreshed our reward strategy, to strengthen our focus on inspiring a dynamic culture where the best want to work. This work was underpinned by comprehensive internal and external research, including reviewing two years of feedback and data from our Snapshot and pay surveys, and exit interviews about what makes colleagues join, leave and engaged at HSBC.

Our workforce proposition is rooted in our purpose and values. Our commitment to reward colleagues fairly, along with the opportunity to do inspiring work and contribute within our international network, creates a unique proposition for colleagues. Our refreshed principles and supporting commitments articulate the experience for employees, and provide a clear framework to creating a dynamic culture where the best talent are motivated to deliver high performance. These principles are:

• We will reward you responsibly through fixed pay security and protection through core benefits, a competitive total compensation opportunity, and pay equity with a more inclusive and sustainable benefits proposition over time.

• We will recognise your success through our performance culture and routines, including feedback and recognition, pay for performance, and all employee share ownership opportunities.

• We will support you to grow through our proposition beyond pay, with a focus on future skills and development, your mental, physical, social and financial well-being, and flexibility in working practices.

We live up to many of these commitments today. We will also set new goals to continue to improve over time, with plans to focus on improving colleague sentiment through more transparency and structure in pay design, and better communications on how we make reward decisions.

Aligned with these commitments, we have developed a roadmap to build on our strong benefits and well-being programme, including flexible working, and more inclusive and sustainable benefits.

We have set clear measures and key performance indicators to track our progress, including by listening to colleague feedback.

Supporting colleagues in 2022

In 2022, our colleagues faced a backdrop of increasing economic instability, with rising energy prices and inflation, which increased their cost of living. While we continued to focus on making responsible reward decisions for our colleagues through our annual pay review, we also took a number of actions throughout 2022.

Given this context and our focus on pay security, we allocated more to fixed pay increases than in prior years, and this was based on consistent principles to help address the impact of rising inflation in many of our locations.

In determining 2023 fixed pay increases, we considered the impact of inflation in each market where we operate. Increases were targeted towards more junior and middle management colleagues as fixed pay is a larger proportion of their overall pay. Across the Group, there was an overall increase of 5.5% in fixed pay, compared with 3.6% for 2022. The level of increases varied by market, depending on the economic situation and individual roles.

The distribution of the variable pay pool was differentiated by business performance. There was robust differentiation for individual performance so that our highest performers received meaningful variable pay increases on the previous year. We have protected variable pay for junior colleagues, which is up on average, recognising the inflationary and cost of living challenges experienced across most of our markets.

Considering the macroeconomic environment and cost of living challenges impacting colleagues, we provided specific support to those most affected. For example, in the UK and the Channel Islands we paid our more junior colleagues a one-off payment of £1,500 to help with the cost of living pressures, driven primarily by rising energy costs. In Argentina, Sri Lanka and Türkiye, where colleagues were impacted by inflationary challenges, we gave our colleagues fixed pay increases throughout the year. In other areas we provided our colleagues support in the form of meal vouchers to help with rising food costs, and we increased flexibility around how and where our colleagues work. Some of our colleagues are still significantly impacted by the pandemic and we have ensured support in these specific markets. In mainland China and Hong Kong, we provided care packages and increased well-being sessions. In mainland China, we also delivered food essentials and provided inconvenience allowances. Where colleagues have been impacted by the Russia-Ukraine war we offered free independent and professional counselling, alongside hosting regular public webinars to manage topics such as stress and dealing with anxiety. Our colleagues in Poland have been providing direct assistance to people crossing the border and we quickly made available financial resources for them to continue to directly support refugees.

The well-being of our people remained a critical focus in 2022, and in particular, the financial well-being of our colleagues and their families. Guided by data and colleague feedback, the pillars of our well-being programme are mental, physical, financial and social well-being. Despite the immense challenges, sentiment remained high. A total of 70% of colleagues believe HSBC genuinely cares about their well-being. In a September survey, 84% of colleagues rated their mental well-being as positive, 71% rated their overall physical well-being positively and 60% of colleagues reported their financial well-being as positive.

We measure our colleagues' sentiment on performance and pay through our annual pay review surveys. Considering the challenges colleagues faced, it was encouraging to see that check-ins happened regularly, with 66% of colleagues having frequent conversations with their managers (2021: 60%). Our colleagues tell us that these have a positive impact on their performance, development and well-being, and are important in motivating them to perform at their best.

Throughout the year we recognise our colleagues for demonstrating our values. The 'At Our Best' recognition online platform allows for real-time recognition and communication of positive behaviours by colleagues, in line with our purpose and values. We also run annual spotlight campaigns, with the campaign in 2022 focusing on ESG issues to recognise colleagues for exceptional actions in supporting our need to work responsibly. Our colleagues made over 1.2 million recognitions during 2022, a record high and an 11% increase on the previous year.

Annual report on Directors' remuneration

This section sets out how our approved Directors' remuneration policy was implemented during 2022.

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. For 2022, both executive Directors met this requirement.

The award is determined by applying the outcome of their annual incentive scorecard to the maximum opportunity, which was set at 215% of salary. The scorecard measures, weightings and targets were determined at the start of the financial year taking into account the Group's plan for 2022 and the Group's strategic priorities and commitments. For strategic measures, the assessment was against targets set for employee diversity, survey results for employee experience and customer satisfaction measures, as well as progress made and momentum generated to achieve our strategic priorities.

The Group's financial performance was reflected in the achievement against the measures in the executive Directors' annual scorecards. In particular, the Committee recognised:

• adjusted profit before tax was $24.0bn, which represented an increase of 17% compared with $20.6bn in 2021;

• strong cost controls were demonstrated, despite inflationary pressures and continued investment in technology, with adjusted costs at $30.5bn; and

• RoTE was 9.9%, an improvement on 8.3% in 2021.

Our Employee engagement and Inclusion indices in the Snapshot survey both increased and were above the financial services benchmarks. The percentage of Black heritage colleagues in senior leadership globally increased, as did the percentage of women in senior leadership. For customer satisfaction, NPS performance is assessed with reference to rank movements against our competitors and underlying NPS scores. Performance details for employees and customers measures are set out in the table in the section below.

Overall, this level of performance resulted in a formulaic scorecard outcome of 79.32% of the maximum for Noel Quinn and 76.65% for Ewen Stevenson.

The annual incentive scorecard is also subject to a risk and compliance modifier, which provides the Committee with the discretion to adjust down the overall scorecard outcome. Taking into account the Group's performance against risk metrics, inputs from the Group Risk Committee and the overall accountability of the executive Directors with regards to specific matters around capital management in the year, the Committee used its judgement and applied a downward adjustment of 5% to Noel Quinn's annual incentive outcome and 15% to Ewen Stevenson's. The difference in adjustments reflected the degree of accountability and relative proximity for capital management. This resulted in an adjusted incentive outcome of 75.35% of maximum opportunity for Noel Quinn and 65.15% for Ewen Stevenson. This represented amounts of £2,164,000 for Noel Quinn (2021: £1,590,000) and £1,091,000 for Ewen Stevenson (2021: £978,000).

As detailed in the Chair's letter, the Committee considered carefully 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 2022.

Annual incentive scorecard assessment

(Audited)

Summary assessment
	Minimum (25% payout)	Maximum (100% payout)		Noel Quinn			Ewen Stevenson
	Minimum (25% payout)	Maximum (100% payout)	Performance	Weighting (%)	Assessment (%)	Outcome (%)	Weighting (%)	Assessment (%)	Outcome (%)
Group adjusted profit before tax ($bn)	16.66	19.51	24.01	20.00	100.00	20.00	15.00	100.00	15.00
Group lending growth - customer loans and advances (third party)	2.96%	5.93%	1.45%	7.50	-	-	5.00	-	-
Growth in net new invested assets ($bn)	52.36	76.17	79.83	7.50	100.00	7.50	5.00	100.00	5.00
Reported RoTE	3.00%	5.00%	9.90%	15.00	100.00	15.00	15.00	100.00	15.00
Group adjusted cost total ($bn)	30.87	29.47	30.47	10.00	46.43	4.64	10.00	46.43	4.64
Customer satisfaction	See following tables for commentary			15.00	60.33	9.05	15.00	60.33	9.05
Employee experience				15.00	87.50	13.13	15.00	87.50	13.13
Personal objectives				10.00	100.00	10.00	20.00	74.15	14.83
Total				100.00		79.32	100.00		76.65
Annual incentive formulaic outcome (000)						£2,278			£1,284
Risk adjustments as a result of Committee judgement (000)						£(114) 5%			£(193) 15%
Annual incentive (000)						£2,164			£1,091

Strategic measures for Noel Quinn and Ewen Stevenson
	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	15.00%	• UK and Hong Kong (assessed at 59%). In WPB, our NPS improved in the UK and Hong Kong, and we were ranked in first place in Hong Kong. In CMB, our NPS improved in Hong Kong but fell in the UK, and we were ranked in second place in Hong Kong. In GBM, our global NPS improved and our global rank remained in fifth. • Digital markets (assessed at 68%). In WPB and CMB digital businesses in Hong Kong, we were ranked in first and third. In GBM globally, our digital trade finance platforms maintained first place for the quality of platforms. Our PayMe payments app was ranked in second place for digital wallets. • Key growth markets (assessed at 54%). In WPB, our NPS improved in mainland China and Singapore, remained unchanged in Mexico, and in India saw a small decrease. In CMB, our NPS increased in mainland China, Singapore and Mexico, and our rank positions in those markets either improved compared with 2021 or were in the top three against competitors.	60.33%	9.05%
Employee experience	Improve engagement, and diversity and inclusion	15.00%	• Our Snapshot Employee engagement and Inclusion indices both increased one percentage point year on year to 73% and 76%, respectively, above maximum targets and the financial services benchmarks. • The percentage of Black heritage colleagues in senior leadership increased by 0.3% to 2.5%, meeting our maximum target. • The percentage of women in senior leadership increased by 1.6% to 33.3% since 2021, within the target range of 33.2% to 33.7%.	87.50%	13.13%

Personal objectives for Noel Quinn and Ewen Stevenson
For each executive Director, personal objectives were set at the start of the year and measured by the Committee with respect to key performance indicators under our strategy levers.

Technology transformation	2.5%	100%	• The Committee's assessment reflects strong progress automating our organisation at scale against targets set. Our Cloud adoption rate, which is the percentage of our technology services on the private or public Cloud, increased to 35% (2021: 27%). At the end of 2022, approximately 49% of our WPB customers were 'mobile active' users (2021: 43%).
Execution of inorganic initiatives in Asia	2.5%	100%	• The targets for inorganic initiatives were delivered in 2022. We completed the acquisition of L&T Investment Management Limited, making us the 12th largest mutual fund management company in India, bringing in $10.8bn assets under management and 2.4 million active portfolios. We raised our stake in HSBC Qianhai in China to 90%, completed our acquisition of the remaining 50% shares in HSBC Life Insurance in China. We renewed our exclusive life distribution partnership with Allianz in Asia, resulting in the combined group being the fourth largest health insurer and seventh largest life insurer in Singapore.
Progress on exits identified	2.5%	100%	• The planned sales of our banking business in Canada, branch operations in Greece and business in Russia were announced, reflecting strong progress in reshaping our portfolio.
Progress on innovation programmes	2.5%	100%	• In CMB, we launched an industry-leading native bank account service with Oracle Netsuite Enterprise Resource Planning. We also launched Business Go, a platform that brings together international SMEs with providers of expert advice and business optimisation tools. In GBM, we launched HSBC Orion, our new proprietary tokenisation platform used for digital bond issuance. In WPB, we launched our international credit offering, allowing customers to gain access to credit in a new country based on credit history in their home country.
Total	10% out of 10%


Finance for the future	12%	67%	• The financial implications of financed emissions targets for the oil and gas, and power and utilities sectors and for the $750bn to $1tn target were included in our financial resource plan, meeting the objectives set. • The second round of the climate biennial exploratory scenario and stress tests for the Monetary Authority of Singapore and European Central Bank were completed, with no material issues. • Plans have been delivered for IFRS 17 compliant reporting, in line with external reporting and disclosure requirements. • The Bank of England Resolvability Assessment Framework and regulatory reporting enhancement objectives were delivered in line with the targets set. • Resolved 100% of market risk RWA-related issues and over 80% of liquidity-related issues, which were previously identified and managed under the regulatory reporting enhancement programme. • The programme to deliver timely, accurate and complete customer-centric management information using a single data Cloud platform, with enhanced controls and reduced operational risks, is on track to the agreed scope, costs and timeline.
Global Finance employee experience and function efficiency	4%	96%	• Targets were met with increased Employee engagement index at 75% favourable (2021: 68%). • Female representation in senior management roles across Finance increased to 32.1% (2021: 30.2%). • Finance costs overall were within 2022 targets. The number of FTEs at the end of 2022 was slightly higher than the maximum target, mainly due to growth in key areas where new capabilities are required.
Creating strong corporate development and Group transformation functions	4%	75%	• The Group Transformation function has made strong progress in aligning our change portfolio to the Group's strategy and systematically documenting a full change inventory. Achievements include clear reporting with associated costs on how the change portfolio is enabling the delivery of Group strategy, and stronger governance of the change portfolio, with an expanded remit of the Transformation Oversight Executive Committee to cover the entire change portfolio with improved accountability via targeted reviews of high impact programmes. • Major transactions included planned sales of our banking business in Canada, branch operations in Greece and business in Russia were announced; the planned merger of Oman operations with Sohar International Bank; the completion of the Axa Singapore acquisition; the sale of US domestic mass market retail banking; and the acquisition of L&T Investment Management Limited in India.
Total	14.83% out of 20%

Single figure of remuneration

(Audited)

The following table shows the single figure of total remuneration of each executive Director for 2022, together with comparative figures.

Single figure of remuneration

(£000)	2022	2021	2022	2021
Base salary¹	1,329	1,288	775	751
Fixed pay allowance ('FPA')¹	1,700	1,700	1,085	1,062
Cash in lieu of pension	133	129	77	75
Taxable benefits²	119	95	7	3
Non-taxable benefits²	86	71	50	42
Total fixed	3,367	3,283	1,994	1,933
Annual incentive	2,164	1,590	1,091	978
Notional returns³	31	22	-	-
Replacement award⁴	-	-	1,180	754
Long term incentive⁵	-	-	436	-
Total variable	2,195	1,612	2,707	1,732
Total fixed and variable	5,562	4,895	4,701	3,665

1 Executive Directors made the personal decision to donate 100% of their base salary increases for 2021 to charity. Ewen Stevenson also donated his FPA increase for 2021 to charity. Figures in the table above are the gross figures before charitable donations.

2 Taxable benefits include the provision of medical insurance, car and tax return assistance (including any associated tax due, where applicable). Non-taxable benefits include the provision of life assurance and other insurance cover.

3 The deferred 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.

4 In 2019, Ewen Stevenson was granted replacement awards to replace unvested awards, which were forfeited as a result of him joining HSBC. The awards, in general, match the performance, vesting and retention periods attached to the awards forfeited. The values included in the table for 2022 relate to his 2018 replacement award granted by the Royal Bank of Scotland Group plc, now renamed as NatWest Group plc ('NatWest') for performance year 2018 and was subject to a pre-vest performance test assessed and disclosed by NatWest in its Annual Report and Accounts 2021 (page 158). As no adjustment was proposed for Ewen Stevenson by NatWest, a total of 241,988 shares granted in respect of his 2018 replacement award ceased to be subject to performance conditions. These awards were granted at a share price of £6.643 and the HSBC share price was £4.8772 when the first tranche of these awards vested and all tranches were no longer subject to performance conditions, with no value attributable to share price appreciation. The values included in the table for 2021 are explained in the Annual Report and Accounts 2021.

5 An LTI award over 476,757 shares was made in February 2020 (in respect of 2019) at a share price of £5.6220 for which the performance period ended on 31 December 2022. The value has been computed based on a share price of £4.816, the average share price during the three-month period to 31 December 2022. There is no value attributable to share price appreciation. See the following section for details of the assessment outcomes, which resulted in 19% vesting due to performance.

Benefits

The values of the significant benefits in the single figure table are set out in the following table¹. The insurance benefit for Noel Quinn has increased year on year because of the increase in premium at annual renewal.


(£000)	2022	2021
Insurance benefit (non-taxable)	82	67
Car and driver (UK and Hong Kong)	69	87

1 The insurance and car benefits for Ewen Stevenson are not included in the above table as they were not deemed significant.

Long-term incentive ('LTI') awards

(Audited)

LTI awards over 2020 to 2022 performance period

The 2019 LTI award was granted to Ewen Stevenson in February 2020. Noel Quinn did not receive a 2019 LTI award. Based on the performance outcome, 90,584 shares will vest for Ewen Stevenson. The awards will vest in five equal annual instalments commencing in February 2023.

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 2020 LTI awards. The Committee agreed that if the LTI grant share price experienced a greater than 30% decline since the previous grant, that an adjustment percentage equal to half the share price percentage decline would be applied to the awards to mitigate the potential for windfall gains. Although this was not in place for the 2019 LTI award, no pre-grant adjustment would have been applied if it had been. The value of awards at vesting is less than at grant and the Committee determined that there are no windfall gains to consider for this award.

Assessment of the 2019 LTI award (performance period 1 January 2020 to 31 December 2022)

Average RoTE with CET1 underpin² (33.3%)	10.0%	11.0%	12.0%	9.9%	0.0%	0.00%
Relative TSR³ (33.3%)	At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	Below median	0.0%	0.00%
Customers (33.3%)	Performance was assessed by the Committee based on: • customer satisfaction scores at the start and end of the three-year performance period for our global businesses in home and scale markets, which resulted in a formulaic 64% outcome. This comprised: - UK and Hong Kong (assessed at 58%) - in WPB and CMB, we were ranked in first and second place in Hong Kong, with improved NPS scores. In GBM, our global NPS improved and our global rank remained in fifth; - Digital markets (assessed at 77%) - in WPB and CMB digital markets, we were ranked in top three positions in Hong Kong, and in GBM globally, our digital trade finance platforms were ranked in first place; and - Key growth markets (assessed at 56%) - in WPB, our NPS increased in mainland China, Singapore and Mexico, and in India saw a small decline, and in CMB, our NPS increased in Mexico, with slight decreases in the other markets, but our rank positions in all four markets were in the top three against competitors. • progress against customer objectives linked to our strategy over 2020 to 2022. It was determined that it broadly represented target performance and therefore 50% of this element was achieved. The main items driving this assessment are our growth in international and Premier customers and in specific growth markets, where our overall performance has been broadly in line with plan and expectations. These two percentages (64% and 50%) averaged to 57%.				57.0%	19.00%
Total						19.00%

1 Awards vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 Assessed based on RoTE in the 2022 financial year, which was not met. The CET1 underpin was met.

3 The peer group was: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

LTI awards over 2023 to 2025 performance period

After taking into account performance for 2022, the Committee decided to grant Noel Quinn an LTI award of £4,275,000.

The 2022 LTI awards will have a three-year performance period starting 1 January 2023. During this period, performance will be assessed based on four equally weighted measures: two financial measures to incentivise value creation for our shareholders; a measure linked to our climate ambitions; and relative total shareholder return ('TSR'). This is consistent with the measures used for our last LTI awards.

The Committee regularly reviews the TSR peer group to ensure it remains an appropriate performance comparison, taking into account strategic shifts in our geographical and business mix, notably future growth investment in Asia and wealth business. Following feedback from some of our shareholders, the Committee reviewed the TSR performance peer group, with the objective of including more Asian peers to better reflect the balance of markets and businesses of the Group. The new peer group will be used for the relative TSR measure for LTI awards for the 2023 to 2025 performance period and now includes Bank of China (Hong Kong), China Merchants Bank and OCBC Bank. No change will be made to the performance peer group for subsisting LTI awards.

The LTI continues to be subject to a risk and compliance modifier, which gives the Committee the discretion to adjust down the overall outcome to ensure that the Group operates soundly when achieving its financial targets. For this purpose, the Committee will receive information including any risk metrics outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure.

The RoTE and capital reallocation to Asia measures are also subject to a CET1 underpin. If the CET1 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 these measures will be reduced to nil.

As the awards are not entitled to dividend equivalents in accordance with regulatory requirements, the number of shares to be awarded will be adjusted to reflect the expected dividend yield of the shares over the vesting period.

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.

Performance conditions for LTI awards in respect of 2022 (performance period 1 January 2023 to 31 December 2025)

RoTE with CET1 underpin²		13.0%	14.3%	15.5%	25.0
Capital reallocation to Asia with CET1 underpin³		49.0%	50.5%	52.0%	25.0
Transition to net zero⁴	Carbon reduction (own emissions)	64.0%	68.0%	72.0%	25.0
Transition to net zero⁴	Sustainable finance and investment	$588.0bn	$700.0bn	$756.0bn	25.0
Relative TSR⁵		At the median of the peer group	Straight-line vesting between minimum and maximum	At the upper quartile of the peer group	25.0
Subject to risk and compliance modifier

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period. This metric will be subject to the CET1 underpin.

3 To be assessed based on share of Group tangible equity (on a reported basis and excluding associates) allocated to Asia by 31 December 2025. This metric will be subject to the CET1 underpin.

4 Carbon 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.

5 The peer group for the 2022 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings, JP Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.

Annual incentive measures for 2023

The 2023 annual incentive scorecard measures for our executive Directors have been set to deliver growth and business transformation. They were selected by the Committee after taking into account the Group's strategic pivot to Asia and feedback received from our major shareholders during engagement in the year. The targets have been set to reflect the Group's 2023 plan, while considering macroeconomic uncertainty, including the interest-rate environment and rising inflation.

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 2023 annual incentive award for executive Directors are disclosed below. In previous years, the weightings were different for the Group Chief Executive and Group Chief Financial Officer. For 2023, these have been aligned, reflecting feedback from shareholders and to simplify our approach. 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 for a given year in the Directors' remuneration report for that year.


Financial (subject to CET1 underpin)	60%
Reported profit before tax	15%
Reported operating expenses	15%
Reported Group RoTE	15%
Reported Asia RoTE	5%
Fee income growth	5%
Net new invested assets growth	5%
Stakeholders	30%
Customer satisfaction (improvement in NPS scores/rank)	15%
Employee experience (gender and ethnicity representation and Inclusion index score)	15%
Personal objectives Group Chief Executive: technology transformation, innovation, and simplification of processes and organisation Group Chief Financial Officer: regulatory priorities (regulatory reporting enhancement programme, resolution recovery planning, and ESG and climate), Finance change transformation and digitisation, energised Finance workforce, and liquidity usage and capital management	10%
Subject to risk and compliance modifier

Scheme interests awarded during 2022

(Audited)

The table below sets out the scheme interests granted to executive Directors during 2022 in respect of performance year 2021, as disclosed in the 2021 Directors' remuneration report. No non-executive Directors received scheme interests during the financial year.

Scheme awards in 2022
(Audited)
	Type of interest awarded	Basis on which award made	Date of award	Face value awarded¹ £000	Percentage receivable for minimum performance	Number of shares awarded	End of performance period
Noel Quinn	LTI deferred shares²	% of salary²	28 February 2022	5,290	25	983,339	31 December 2024
Ewen Stevenson	LTI deferred shares²	% of salary²	28 February 2022	3,086	25	573,674	31 December 2024

1 The face value of the award has been computed using HSBC's closing share price of £5.380 taken on 25 February 2022. 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. On vesting, awards will be subject to a one-year retention period. Awards are subject to malus during the vesting period and clawback for a maximum period of 10 years from the date of the award.

2 In line with regulatory requirements, scheme interests awarded during 2022 were not eligible for dividend equivalents. In accordance with the remuneration policy approved by shareholders at the 2019 AGM, the LTI award was determined at 320% of salary for Noel Quinn and 320% of salary for Ewen Stevenson. The number of shares to be granted was determined by taking HSBC's closing share price of £5.380 taken on 25 February 2022, and applying a discount based on HSBC's expected dividend yield of 5% per annum for the vesting period (£4.201).

The above table does not include details of shares issued as part of the fixed pay allowance and shares issued as part of the 2021 annual incentive award that vested on grant and were not subject to any further service or performance conditions. Details of the performance measures and targets for the 2021 LTI award are below:

Performance conditions for LTI awards in respect of 2021 (performance period 1 January 2022 to 31 December 2024) (Audited)

RoTE (with CET¹ underpin)²		8.0%	9.5%	11.0%	25.0
Capital reallocation to Asia (with CET1 underpin)³		46.0%	48.0%	50.0%	25.0
Environment and sustainability⁴	Carbon reduction	52.0%	56.0%	60.0%	25.0
Environment and sustainability⁴	Sustainable finance and investment	$285.0bn	$340.0bn	$370.0bn	25.0
Relative TSR⁵		At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	25.0

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period. The measure will also be subject to a CET1 underpin. If the CET1 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.

3 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2024. This metric will be subject to the CET1 underpin outlined above.

4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2024 using 2019 as the baseline. The sustainable finance and investment metric will assess cumulative financing provided over the period commencing on 1 January 2020 and ending on 31 December 2024.

5 The peer group for the 2021 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

Executive Directors' interests in shares

(Audited)

The shareholdings of executive Directors in 2022, including the shareholdings of their connected persons, at 31 December 2022 (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 2022 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) will count towards their shareholding requirement under the shareholder-approved policy.

The Committee reviews compliance with the shareholding requirement and has full discretion in determining if any unvested shares should be taken into consideration for assessing compliance with this 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. When an executive Director ceases employment as a good leaver under our policy, any LTI awards granted will continue to be released over a period of up to eight years, subject to the outcome of performance conditions.

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 2022² (% of salary)	At 31 Dec 2022
				Scheme interests
			Share interests (number of shares)	Share options³	Shares awarded subject to deferral¹
			Share interests (number of shares)	Share options³	without performance conditions⁴	with performance conditions⁵
Executive Directors
Noel Quinn⁶	400%	513%	1,422,650	-	415,771	2,101,893
Ewen Stevenson⁶	300%	658%	1,064,626	-	383,587	1,687,628

1 The 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.

2 The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2022 (£4.816).

3 At 31 December 2022, Noel Quinn and Ewen Stevenson did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).

4 The amount for Ewen Stevenson reflects the award granted in May 2019, replacing the 2015 to 2018 LTIs forfeited by the Royal Bank of Scotland Group plc, now renamed as NatWest Group plc ('NatWest'), and is subject to any performance adjustments assessed and disclosed in the relevant NatWest Annual Report and Accounts.

5 LTI awards granted in February 2021 and 2022 are subject to the performance conditions as set out in the preceding sections above.

6 Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment (Noel Quinn and Ewen Stevenson were appointed on 5 August 2019 and 1 January 2019, 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

Ewen Stevenson

1 December 2018

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)

No 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.

Payments for loss of office

(Audited)

Departure terms for Ewen Stevenson

Ewen Stevenson is leaving the Group on 30 April 2023. He will receive payments totalling £703,519 from the Group in lieu of his base salary and pension allowance from 1 January until 25 October 2023. He will also receive his fixed pay allowance in respect of the

same period, which totals £885,836, and will be awarded in immediately vested shares. The fixed pay allowance will be subject to a retention period and released on a pro-rata basis over five years.

Ewen Stevenson will not be eligible for an LTI award in respect of the 2022 performance year, or any annual incentive award in respect of the 2023 performance year.

In accordance with the contractual terms agreed and our approved Directors' remuneration policy, Ewen Stevenson was granted good leaver status in respect of his outstanding unvested share awards. Good leaver status is conditional upon him not taking up a role with a defined list of competitor financial services firms for a year from his departure date. As a good leaver, his deferred share awards will continue to vest and be released on their scheduled vesting dates, subject to the relevant terms (including post-vesting retention periods, malus and, where applicable, clawback). Any vesting of his LTI awards will be pro-rated for the period up to the departure date and will be subject to the relevant terms (including post-vesting retention periods, malus and clawback) and the achievement of the required performance conditions. For this purpose, his 2020 and 2021 LTI awards have been pro-rated for time with the maximum number of shares, being 495,597 and 254,966 respectively, still subject to performance.

The Group will make a contribution towards Ewen Stevenson's legal fees incurred in connection with his departure arrangements. In line with the Directors' remuneration policy, Ewen Stevenson will be eligible to receive certain post-departure benefits for a period of up to seven years after the departure date.

Ewen Stevenson will receive no other compensation or payment for the termination of his service agreement or his ceasing to be a Director of the Group.

No other payments for loss of office were made to, or in respect of, former or current Directors in the year.

External appointments

During 2022, executive Directors did not receive any fees from external appointments.

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 2022.

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

	2013	2014	2015	2016	2017	2018		2019		2020	2021	2022
Group Chief Executive	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	John Flint	John Flint	Noel Quinn	Noel Quinn	Noel Quinn	Noel Quinn
Total single figure £000	8,033	7,619	7,340	5,675	6,086	2,387	4,582	2,922	1,977	4,154	4,895	5,562
Annual incentive¹ (% of maximum)	49%	54%	45%	64%	80%	76%	76%	61%	66%	32%	57%	75%
Long-term incentive^1,2,3 (% of maximum)	49%	44%	41%	-%	-%	100%	-%	-%	-%	-%	-%	-%

1 The 2012 annual incentive figure for Stuart Gulliver includes 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 included in the 2018 single figure of remuneration and included as long-term incentive for 2018.

2 Long-term incentive awards are included in the single figure 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 2013 to 2015 are therefore related to awards granted in 2014 to 2016.

3 The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made for 2016. 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 did not receive the 2019 LTI award that had a performance period ended on 31 December 2022.

Voting results from Annual General Meeting

2022 Annual General Meeting voting results
	For	Against	Withheld
Remuneration report (votes cast)	95.83%	4.17%	--
Remuneration report (votes cast)	7,675,588,519	334,152,471	6,830,718
Remuneration policy (votes cast)	95.73%	4.27%	--
Remuneration policy (votes cast)	7,666,488,029	342,320,697	7,773,468

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