HSBC Holdings plc - Pillar 3 at 31 Dec 2019 Part 2

RNS Number : 2817D

HSBC Holdings PLC

18 February 2020

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Pillar 3 Disclosures at 31 December 2019 continued…

The Incremental Risk Charge

The incremental risk charge ('IRC') measures the default and migration risk of issuers of traded instruments.

IRC risk factors include credit migration, default, product basis, concentration, hedge mismatch, recovery rate and liquidity. The PDs are floored to reflect the lack of historical data on defaults and a period of stress is used to calibrate the spread changes for the relevant ratings. The IRC model is validated quarterly by stressing key model parameters and reviewing the response of the model.

The IRC is a stand-alone charge generating no diversification benefit with other charges. IRC relies on a range of liquidity horizons from three months, corresponding to the regulatory floor, to one year. A wide range of criteria can indicate the liquidity of a position. The liquidity horizon for the IRC measure depends on a set of factors such as issuer features, including rating, sector, geography and size of positions, including product, maturity and concentration.

The IRC transition matrices are calibrated using transition and default data published by three rating agencies (S&P, Moody's and Fitch) as the starting point, in combination with internal rules for flooring. The average of the three matrices is computed for each sector. The PDs are then floored: sovereign PDs are consistent with IRB, while a 3 basis point floor is applied to corporates' and banks' PDs.

The IRC correlation matrix is derived from historical CDS spreads data, covering the latest two-year VaR period. The returns estimation window is set equal to either three or 12 months, depending on the liquidity horizon of each obligor. First, each obligor is mapped to six sector/rating categories; then the correlation matrix is obtained by computing the arithmetic mean of correlations for each category.

IRC increased during the first half of the year, driven mainly by exposures to the U.S., Japan and Brazil sovereigns. After peaking in Q3, IRC decreased mainly as a result of the Rates business actively reducing our exposures arising from U.S. government debt asset swaps.

Structural foreign exchange exposures

Structural foreign exchange exposures represent net investments in subsidiaries, branches and associates whose functional currency is not the US dollar. An entity's functional currency is normally that of the primary economic environment in which it operates.

Exchange differences on structural exposures are recognised in 'Other comprehensive income'. We use the US dollar as our presentation currency in our consolidated financial statements because the US dollar and currencies linked to it form the major currency bloc in which we transact and fund our business.

Our consolidated balance sheet is, therefore, affected by exchange differences between the US dollar and all the non-US dollar functional currencies of underlying subsidiaries.

Our structural foreign exchange exposures are managed with the primary objective of ensuring, where practical, that our consolidated capital ratios and the capital ratios of individual banking subsidiaries are largely protected from the effect of changes in exchange rates. We hedge structural foreign exchange exposures only in limited circumstances.

Details of our structural foreign exchange exposures are provided in the Market risk section, on page 136 of the Annual Report and Accounts 2019.

Interest rate risk in the banking book

Interest rate risk in the banking book ('IRRBB') is the potential adverse impact of changes in interest rates on earnings and capital. The component of IRRBB that can be economically neutralised in the market is transferred to BSM to manage, in accordance with internal transfer pricing rules. In its management of IRRBB, the Group aims to balance mitigating the effect of future interest rate movements, which could reduce net interest income against the cost of hedging. The monitoring of the projected net interest income and economic value of equity sensitivity under varying interest rate scenarios is a key part of this.

More details on our IRRBB and the net interest income sensitivity may be found on page 136 and page 140 of the Annual Report and Accounts 2019.

Prudent valuation adjustment

HSBC has documented policies and maintains systems and controls for the calculation of the prudent valuation adjustment ('PVA'). Prudent value represents a conservative estimate with a 90% degree of certainty of a price that would be received to sell an asset or paid to transfer a liability in orderly transactions occurring between market participants at the balance sheet date. HSBC's methodology addresses fair value uncertainties arising from a number of sources: market price uncertainty, bid-offer uncertainty, model risk, concentration, administrative costs, unearned credit spreads and investing and funding costs.

Table 64: Prudential valuation adjustments (PV1)
	Equity	Interest rates	FX	Credit	Commodities	Total	Of which: in the trading book	Of which: in the banking book
	$m	$m	$m	$m	$m	$m	$m	$m
Closeout uncertainty	260	361	47	137	5	810	606	204
- of which:
Mid-market value	198	135	19	57	4	413	312	101
Closeout cost	20	91	9	8	1	129	115	14
Concentration	42	135	19	72	-	268	179	89
Early termination	-	-	-	4	-	4	4	-
Model risk	25	85	6	9	-	125	122	3
Operational risk	22	28	3	9	-	62	50	12
Investing and funding costs	-	56	-	2	-	58	58	-
Unearned credit spreads	-	90	4	8	-	102	102	-
Future administrative costs	-	1	-	7	-	8	8	-
Other	-	-	-	-	-	-	-	-
Total adjustment at 31 Dec 2019	307	621	60	176	5	1,169	950	219

Closeout uncertainty, of which:	196	360	29	149	2	736	470	266
- of which:
Mid-market value	127	98	4	54	-	283	127	156
Closeout cost	21	94	10	9	2	136	123	13
Concentration	48	168	15	86	-	317	220	97
Early termination	-	-	-	5	-	5	5	-
Model risk	21	116	4	5	-	146	146	-
Operational risk	15	29	2	11	-	57	39	18
Investing and funding costs	-	95	1	2	-	98	98	-
Unearned credit spreads	1	90	7	19	3	120	120	-
Future administrative costs	-	5	-	4	-	9	9	-
Other	-	-	-	-	-	-	-	-
Total adjustment at 31 Dec 2018	233	695	43	195	5	1,171	887	284

The net PVA charge was broadly unchanged due to some offsetting movements, notably:

• a $130m increase in mid-market value notably driven by deferral of day one profits which are no longer eligible to offset any additional valuation adjustment following an EBA statement;

• offset by a $110m reduction in other additional valuation adjustments, driven by a reduction in underlying exposures and reduced spreads.

The types of financial instruments for which the highest PVA is observed include (i) multi callable interest rate derivatives, (ii) asset backed securities and valuation adjustments related to non-collateralised derivatives.

Non-financial risk

Non-financial risk is the risk to achieving our strategy or objectives as a result of inadequate or failed internal processes, people and systems, or from external events. Sound non-financial risk management is central to achieving good outcomes for our customers. Non-financial risk is relevant to every aspect of our business and is managed through the operational risk management framework ('ORMF'). It covers a wide spectrum of issues, such as resilience risk, financial crime and fraud, regulatory compliance, reporting and tax risk, legal risk, model risk, people risk and failure in other principle risk processing. Losses arising from breaches of regulation and law, unauthorised activities, error, omission, inefficiency, fraud, systems failure or external events all fall within the definition of non-financial risk.

Operational risk capital requirements

Operational risk is part of non-financial risk. Table

reports our operational risk capital requirements by region and global business.

Table 65: Operational risk RWAs
	31 Dec 2019		31 Dec 2018
	RWAs	Capital required	RWAs	Capital required
	$bn	$bn	$bn	$bn
By global business	92.8	7.4	91.1	7.3
Retail Banking and Wealth Management	30.2	2.4	27.3	2.2
Commercial Banking	25.9	2.1	24.3	1.9
Global Banking and Markets	30.8	2.5	31.5	2.5
Global Private Banking	2.8	0.2	2.8	0.2
Corporate Centre	3.1	0.2	5.2	0.5
By geographical region	92.8	7.4	91.1	7.3
Europe	24.5	2.0	27.3	2.2
Asia	45.2	3.6	39.5	3.2
Middle East and North Africa	6.2	0.5	6.8	0.5
North America	11.9	0.9	11.7	0.9
Latin America	5.0	0.4	5.8	0.5

Organisation and responsibilities

Responsibility for managing non-financial risk lies with our people. During 2019, we continued to strengthen our approach to managing non-financial risk as set out in the ORMF. The framework sets out our approach to governance and risk appetite. It provides a single view of non-financial risks that matter the most and associated controls. The enhancement and embedding of the risk appetite framework for non-financial risk, and the improvement of the consistency of the adoption of the end-to-end risk and control assessment processes were a particular focus in 2019. While there remains more to do, we made progress in strengthening the control environment and the management of non-financial risk.

Activity to strengthen the three lines of defence model continued to be a key focus in 2019. The first line of defence owns the risk and is accountable for identifying, assessing, managing key existing and emerging risks. The second line of defence sets the policy and control standards to manage risks, and provides advice and guidance to support these policies. It also challenges the first line to ensure it is managing risk effectively. The third line of defence is Internal Audit, which provides independent assurance to the Board and management that our risk management approach and processes are designed and operating effectively.

The Non-Financial Risk Management Board ('NFRMB') is a formal governance committee established to provide strategic direction and oversight of the management of non-financial risk and is a sub-committee of the Group Risk Management Meeting ('GRMM').

Operational risk is organised as a specific risk discipline within Global Risk and is headed by the Group Head of Operational Risk. The Group Head of Operational Risk is responsible for establishing and maintaining the ORMF, as well as monitoring the level of operational losses and the effectiveness of the internal control environment supported by their second line of defence functions. The Group Head of Operational Risk is accountable to the Group Chief Risk Officer in respect of this element of the overall enterprise-wide risk management framework.

Measurement and monitoring

We have codified our ORMF in a high-level standard, supplemented by detailed policies. These policies explain our approach to identifying, assessing, monitoring and controlling non-financial risk, and give guidance on mitigating actions to be taken when weaknesses are identified.

Monitoring non-financial risk exposure against risk appetite on a regular basis, and setting out our risk acceptance process, drives risk awareness in a more forward-looking manner. This assists management in determining whether further action is required.

Risk scenario analysis across material legal entities provides a top down, forward-looking assessment of risks to help determine whether they are being effectively managed within our risk appetite or whether further management action is required. In each of our subsidiaries, business managers are responsible for maintaining an appropriate level of internal control, commensurate with the scale and nature of operations. They are responsible for identifying and assessing risks, designing controls and monitoring the effectiveness of these controls. The ORMF helps managers to fulfil these responsibilities by defining a standard risk assessment methodology and providing a tool for the systematic reporting of operational loss data.

Risk and control assessment approach

Non-financial risk and control assessments are performed by individual business units and functions. The risk and control assessment process is designed to provide business areas and functions with a forward-looking view of non-financial risks, an assessment of the effectiveness of controls, and a tracking mechanism for action plans so that they can proactively manage non-financial risks within acceptable levels. Appropriate means of mitigation and controls are considered. These include:

• making specific changes to strengthen the internal control environment; and

• investigating whether cost-effective insurance cover is available to mitigate the risk.

Recording

We use a Group-wide risk management system to record the results of our non-financial risk management process. Non-financial risk and control assessments, as described above, are input and maintained by business units. Business management monitors and follows up the progress of documented action plans. Operational risk losses are entered into the Group-wide risk management system and reported to governance on a monthly basis. Loss capture thresholds are in line with industry standards.

Liquidity

Strategies and processes

HSBC has an internal liquidity and funding risk management framework ('LFRF'), which aims to allow it to withstand very severe liquidity stresses. It is designed to be adaptable to changing business models, markets and regulations. The management of liquidity and funding is primarily undertaken locally (by country) in our operating entities in compliance with the Group's LFRF, and with practices and limits set by the GMB through the RMM and approved by the Board. Our general policy is that each defined operating entity should be self-sufficient in funding its own activities.

The key aspects of the internal LFRF which is used to ensure that HSBC maintains an appropriate overall liquidity risk profile are:

• each entity must manage liquidity and funding risk on a stand-alone basis without reliance on other members of the group or central banks, unless pre-approved;

• minimum liquidity coverage ratio ('LCR') requirement; and

• minimum net stable funding ratio ('NSFR') requirement or other appropriate metric.

The internal LFRF and the risk tolerance limits were approved by the Group Risk Committee and the Board on the basis of recommendations made by the RMM.

Structure and organisation

Asset, Liability and Capital Management ('ALCM') teams are responsible for the application of the LFRF at a local operating entity level. The elements of the LFRF are underpinned by a robust governance framework, the two major elements of which are:

• Group, regional and entity level asset and liability management committees ('ALCOs'); and

• an internal liquidity adequacy assessment process ('ILAAP') used to validate risk tolerance and set risk appetite.

All operating entities and Group are required to prepare an internal liquidity adequacy assessment ('ILAA') document at an appropriate frequency. The final objective of the ILAA, approved by the relevant Board of Directors, is to verify that the entity and subsidiaries maintain liquidity resources which are adequate in both amount and quality at all times, ensuring that there is no significant risk that its liabilities cannot be met as they fall due, maintaining a prudent funding profile.

Management of liquidity and funding risk

Liquidity coverage ratio

The LCR aims to ensure that a bank has sufficient unencumbered high-quality liquid assets ('HQLA') to meet its liquidity needs in a 30 calendar day liquidity stress scenario. For the calculation of the LCR, HSBC follows the EU Regulation LCR Delegated Act 2015/61.

Net stable funding ratio

HSBC uses the NSFR or other appropriate metric as a basis for ensuring operating entities raise sufficient stable funding to support their business activities. The NSFR or other appropriate metric requires institutions to maintain a minimum amount of stable funding based on assumptions of asset liquidity.

Currency mismatch in the LCR

The Group's internal liquidity and funding risk management framework requires all operating entities to monitor the LCR for material currencies. Limits are set to ensure that outflows can be met, given assumptions on stressed capacity in the FX swap markets.

Governance

ALCM teams apply the LFRF at both an individual entity and Group level. Regional and local ALCM teams are responsible for the implementation of Group-wide and local regulatory policy at a legal entity level. Balance Sheet Management ('BSM') has responsibility for cash and liquidity management.

Liquidity Risk Management carry out independent review, challenge and assurance of the appropriateness of the risk management activities undertaken by ALCM and BSM. Their work includes setting control standards, advice on policy implementation, and review and challenge of reporting.

Internal Audit provide independent assurance that risk is managed effectively.

More details on the concentration of funding and liquidity sources may be found on page 133 of the Annual Report and Accounts 2019.

Table 66: Level and components of HSBC Group consolidated liquidity coverage ratio (LIQ1)
	Quarter ended 31 Dec 2019			Quarter ended 30 Sep 2019			Quarter ended 30 Jun 2019			Quarter ended 31 Mar 2019
	Total unweighted value	Total weighted value		Total unweighted value	Total weighted value		Total unweighted value	Total weighted value		Total unweighted value	Total weighted value
	$m	$m		$m	$m		$m	$m		$m	$m
Number of data points used in the calculation of averages	12			12			12			12
High quality liquid assets
Total high quality liquid assets ('HQLA')		542,436			543,249			548,045			540,986
Cash outflows
Retail deposits and small business funding	747,510	77,146		741,029	76,814		740,337	76,875		739,011	76,577
- of which:
stable deposits	304,474	15,224		293,281	14,651		286,926	14,293		286,380	14,225
less stable deposits	441,819	61,548		446,634	61,820		452,473	62,297		451,828	62,116
Unsecured wholesale funding	643,185	303,439		635,166	298,301		622,518	291,807		612,755	286,357
- operational deposits (all counterparties) and deposits in networks of cooperative banks	200,638	48,996		200,875	48,992		198,169	48,206		195,587	47,487
- non-operational deposits (all counterparties)	427,855	239,751		420,574	235,592		411,775	231,027		406,102	227,804
- unsecured debt	14,692	14,692		13,717	13,717		12,574	12,574		11,066	11,066
Secured wholesale funding		11,532			12,737			13,249			13,181
Additional requirements	310,100	89,589		306,075	88,533		305,290	88,350		308,002	90,119
- outflows related to derivative exposures and other collateral requirements	39,394	39,011		38,254	37,849		38,540	37,906		40,395	39,588
- outflows related to loss of funding on debt products	-	-		-	-		-	-		-	-
- credit and liquidity facilities	270,706	50,578		267,821	50,684		266,750	50,444		267,607	50,531
Other contractual funding obligations	88,055	37,881		92,249	38,326		96,962	37,942		97,645	36,037
Other contingent funding obligations	464,319	12,375		425,446	12,222		390,535	12,471		359,989	12,510
Total cash outflows		531,962			526,933			520,694			514,781
Cash inflows
Secured lending transactions (including reverse repos)	307,567	32,831		310,390	34,147		303,143	36,126		295,235	38,746
Inflows from fully performing exposures	102,549	70,653		105,650	73,971		110,404	79,002		112,583	81,523
Other cash inflows	114,166	48,542		111,556	48,084		101,067	46,246		93,069	45,893
(Difference between total weighted inflows and total weighted outflows arising from transactions in third countries where there are transfer restrictions or which are denominated in non-convertible currencies)		-			-			-			-
(Excess inflows from a related specialised credit institution)		-			-			-			-
Total cash inflows	524,282	152,026		527,596	156,202		514,614	161,374		500,887	166,162
Fully exempt inflows	-	-		-	-		-	-		-	-
Inflows Subject to 90% Cap	-	-		-	-		-	-		-	-
Inflows Subject to 75% Cap	493,752	152,026		497,429	156,202		484,373	161,374		467,328	166,162
Liquidity coverage ratio (Adjusted value)
Liquidity Buffer		542,436			543,249			548,045			540,986
Total net cash outflows		379,936			370,731			359,320			348,619
Liquidity coverage ratio (%)		142.8	%		146.5	%		152.5	%		155.2	%

Analysis of on-balance sheet encumbered and unencumbered assets and off-balance sheet collateral

On-balance sheet encumbered and unencumbered assets

The table on the following page summarises the total on-balance sheet assets capable of supporting future funding and collateral needs, and shows the extent to which they are currently pledged for this purpose. This disclosure aims to facilitate an understanding of available and unrestricted assets that could be used to support potential future funding and collateral needs.

Off-balance sheet collateral

The fair value of assets accepted as collateral that we are permitted to sell or repledge in the absence of default was $468bn at 31 December 2019 (2018: $483bn). The fair value of any such collateral actually sold or repledged was $295bn (2018: $329bn). We are obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard reverse repo, stock borrowing and derivative transactions.

The fair value of collateral received and re-pledged in relation to reverse repos, stock borrowing and derivatives is reported on a gross basis. The related balance sheet receivables and payables are reported on a net basis where required under IFRS offset criteria. As a consequence of reverse repo, stock borrowing and derivative transactions where the collateral received could be sold or re-pledged but had not been, we held $173bn (2018: $154bn) of unencumbered collateral available to support potential future funding and collateral needs at 31 December 2019.

Under the terms of our current collateral obligations under derivative contracts (which are ISDA compliant CSA contracts and contracts entered into for pension obligations), and based on an estimate of the positions at 31 December 2019, we calculate that we could be required to post additional collateral of up to $0.2bn (2018: $0.2bn) in the event of a one-notch downgrade in third-party agencies' credit rating of HSBC's debt. This would increase to $0.4bn (2018: $0.4bn) in the event of a two-notch downgrade.

For further details on liquidity and funding risk management, see page 131 onwards of the Annual Report and Accounts 2019.

Table 67: Analysis of on-balance sheet encumbered and unencumbered assets
	Assets encumbered as a result of transactions with counterparties other than central banks			Assets positioned at central banks (i.e. pre-positioned plus encumbered)	Unencumbered assets not positioned at central banks				Total
	As a result of covered bonds	As a result of securitisations	Other		Assets readily available for encumbrance	Other assets capable of being encumbered	Reverse repos/stock borrowing receivables and derivative assets	Assets that cannot be encumbered	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m
Cash and balances at central banks	-	-	-	244	151,247	39	-	2,569	154,099
Items in the course of collection from other banks	-	-	-	-	-	-	-	4,956	4,956
Hong Kong Government certificates of indebtedness	-	-	-	-	-	-	-	38,380	38,380
Trading assets	-	-	58,310	3,440	159,552	10,019	21,349	1,601	254,271
- treasury and other eligible bills	-	-	1,650	2,354	17,215	531	-	39	21,789
- debt securities	-	-	32,034	1,086	90,783	2,088	-	52	126,043
- equity securities	-	-	24,626	-	51,534	2,648	-	19	78,827
- loans and advances to banks	-	-	-	-	20	1,797	5,538	1,047	8,402
- loans and advances to customers	-	-	-	-	-	2,955	15,811	444	19,210
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	-	-	1,145	-	2,507	4,896	642	34,437	43,627
- treasury and other eligible bills	-	-	629	-	-	-	-	32	661
- debt securities	-	-	-	-	266	179	-	6,107	6,552
- equity securities	-	-	1	-	2,182	1,086	-	27,670	30,939
- loans and advances to banks and customers	-	-	-	-	59	3,227	642	628	4,556
- other assets	-	-	515	-	-	404	-	-	919
Derivatives	-	-	-	-	-	-	242,995	-	242,995
Loans and advances to banks	-	-	85	2,920	1,337	44,318	-	20,543	69,203
Loans and advances to customers	7,471	7,812	3,328	53,343	15,815	909,677	53	39,244	1,036,743
Reverse repurchase agreements - non-trading	-	-	-	-	-	-	240,862	-	240,862
Financial investments	-	405	25,517	19,503	321,651	4,957	-	71,279	443,312
- treasury and other eligible bills	-	405	564	9,000	93,486	1,228	-	836	105,519
- debt securities	-	-	24,953	10,503	227,665	3,013	-	69,661	335,795
- equity securities	-	-	-	-	500	716	-	697	1,913
- other instruments	-	-	-	-	-	-	-	85	85
Prepayments, accrued income and other assets	-	17	49,580	398	4,444	27,736	-	54,505	136,680
Current tax assets	-	-	-	-	-	-	-	755	755
Interest in associates and joint ventures	-	-	-	-	14	24,029	-	431	24,474
Goodwill and intangible assets	-	-	-	-	-	-	-	20,163	20,163
Deferred tax	-	-	-	-	-	-	-	4,632	4,632
At 31 Dec 2019	7,471	8,234	137,965	79,848	656,567	1,025,671	505,901	293,495	2,715,152

Table 67: Analysis of on-balance sheet encumbered and unencumbered assets (continued)
	Assets encumbered as a result of transactions with counterparties other than central banks			Assets positioned at central banks (i.e. pre- positioned plus encumbered)	Unencumbered assets not positioned at central banks				Total
	As a result of covered bonds	As a result of securitisations	Other		Assets readily available for encumbrance	Other assets capable of being encumbered	Reverse repos/stock borrowing receivables and derivative assets	Assets that cannot be encumbered	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m
Cash and balances at central banks	-	-	-	493	155,813	24	-	6,513	162,843
Items in the course of collection from other banks	-	-	-	-	-	-	-	5,787	5,787
Hong Kong Government certificates of indebtedness	-	-	-	-	-	-	-	35,859	35,859
Trading assets	-	-	68,877	3,221	137,589	8,493	18,279	1,671	238,130
- treasury and other eligible bills	-	-	2,367	2,357	17,707	209	-	34	22,674
- debt securities	-	-	44,000	864	83,640	1,803	-	232	130,539
- equity securities	-	-	22,510	-	36,242	2,070	-	74	60,896
- loans and advances to banks	-	-	-	-	-	2,768	6,753	904	10,425
- loans and advances to customers	-	-	-	-	-	1,643	11,526	427	13,596
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	-	-	1,177	-	2,135	7,601	605	29,593	41,111
- treasury and other eligible bills	-	-	627	-	-	-	-	43	670
- debt securities	-	-	-	-	297	4	-	6,246	6,547
- equity securities	-	-	-	-	1,676	1,035	-	22,638	25,349
- loans and advances to banks and customers	-	-	-	-	162	6,331	605	619	7,717
- other assets	-	-	550	-	-	231	-	47	828
Derivatives	-	-	-	-	-	-	207,825	-	207,825
Loans and advances to banks	-	-	170	2,367	1,947	45,992	-	21,691	72,167
Loans and advances to customers	6,621	7,653	4,036	58,737	15,867	847,301	28	41,453	981,696
Reverse repurchase agreements - non-trading	-	-	-	-	-	-	242,804	-	242,804
Financial investments	-	670	28,723	21,310	285,374	5,157	-	66,199	407,433
- treasury and other eligible bills	-	276	1,079	5,377	88,556	1,235	-	798	97,321
- debt securities	-	394	27,644	15,933	196,436	3,466	-	64,485	308,358
- equity securities	-	-	-	-	382	456	-	819	1,657
- other investments	-	-	-	-	-	-	-	97	97
Prepayments, accrued income and other assets	-	3	35,407	88	3,609	33,060	-	38,404	110,571
Current tax assets	-	-	-	-	-	-	-	684	684
Interest in associates and joint ventures	-	-	-	-	15	21,994	-	398	22,407
Goodwill and intangible assets	-	-	-	-	-	-	-	24,357	24,357
Deferred tax	-	-	-	-	-	-	-	4,450	4,450
At 31 Dec 2018	6,621	8,326	138,390	86,216	602,349	969,622	469,541	277,059	2,558,124

Other risks

Non-trading book exposures in equities

At 31 December

2019

, we had equity investments in the non-trading book of $

5.9

bn (

2018

: $5.0bn). These consist of investments held for the purposes shown in Table

We make investments in private equity primarily through managed funds that are subject to limits on the amount of investment. We risk-assess these commitments to ensure that industry and geographical concentrations remain within acceptable levels for the portfolio as a whole, and perform regular reviews to substantiate the valuation of the investments within the portfolio.

Exchange traded investments amounted to $0.5bn (2018: $0.7bn), with the remainder being unlisted. These investments are held at fair value in line with market prices.

On a regulatory consolidation basis, the net realised gain from disposal of equity securities amounted to $0.1bn (2018: $0.1bn). Unrealised gains on FVOCI equities of $0.6bn at 31 December 2019 were fully recognised in CET1.

Details of our accounting policy for equity investments measured at FVOCI and the valuation of financial instruments may be found on page 244 of the Annual Report and Accounts 2019. A detailed description of the valuation techniques applied to private equity may be found on page 269 of the Annual Report and Accounts 2019.

Table 68: Non-trading book equity investments
	Fair value through other comprehensive income (FVOCI)	Mandatorily measured at fair value through profit and loss	Total
	$bn	$bn	$bn
Private equity holdings	-	2.4	2.4
Investment to facilitate ongoing business¹	2.0	1.3	3.3
Other strategic investments	-	0.2	0.2
At 31 Dec 2019	2.0	3.9	5.9

Private equity holdings	-	1.9	1.9
Investment to facilitate ongoing business	1.7	1.1	2.8
Other strategic investments	-	0.3	0.3
At 31 Dec 2018	1.7	3.3	5.0

1 Includes holdings in government-sponsored enterprises and local stock exchanges.

Risk management of insurance operations

We operate an integrated bancassurance model that provides insurance products principally for customers with whom we have a banking relationship.

The insurance contracts we sell relate to the underlying needs of our banking customers, which we can identify from our point-of-sale contacts and customer knowledge. The majority of sales are of savings and investment products and term and credit life contracts.

By focusing largely on personal and small- and medium-sized enterprises ('SMEs') lines of business, we are able to optimise volumes and diversify individual insurance risks.

We choose to manufacture these insurance products in HSBC subsidiaries based on an assessment of operational scale and risk appetite. Manufacturing insurance allows us to retain the risks and rewards associated with writing insurance contracts by keeping part of the underwriting profit and investment income within the Group.

We have life insurance manufacturing subsidiaries in Argentina, mainland China, France, Hong Kong, Malaysia, Malta, Mexico, Singapore and the UK. We also have a life insurance manufacturing associate in India.

Where we do not have the risk appetite or operational scale to be an effective insurance manufacturer, we engage with a handful of leading external insurance companies in order to provide insurance products to our customers through our banking network and direct channels. These arrangements are generally structured with our exclusive strategic partners and earn the Group a combination of commissions, fees and a share of profits. We distribute insurance products in all of our geographical regions.

Insurance products are sold through all global businesses, but predominantly by RBWM and CMB through our branches and direct channels worldwide.

The risk profile of our insurance manufacturing businesses is measured using an economic capital approach. Assets and liabilities are measured on a market value basis, and a capital requirement is defined to ensure that there is a less than one-in-200 chance of insolvency over a one-year time horizon, given the risks to which the businesses are exposed. The methodology for the economic capital calculation is largely aligned to the pan-European Solvency II insurance capital regulations.

Subsidiaries engaged in insurance activities are excluded from the regulatory consolidation by excluding assets, liabilities and post-acquisition reserves, leaving the investment of these insurance subsidiaries to be recorded at cost and deducted from CET1 subject to thresholds (amounts below the thresholds are risk-weighted).

Further details of the management of financial risks and insurance risk arising from the insurance operations are provided on page 146 of the Annual Report and Accounts 2019.

Climate change risk

Climate change can create physical risks such as severe weather events of increasing severity and/or frequency. Transition risk, in the context of climate change, is the possibility that a customer's ability to meet its financial obligations will deteriorate due to the global movement from a high-carbon economy to a low-carbon economy.

We are a signatory to the disclosure recommendations by the Financial Stability Board's Task Force on Climate-related Financial Disclosures.

Refer to page 22 of the Annual Report and Accounts 2019 for our disclosure under the framework.

Appendix I

Additional tables

Credit risk

Table 69 sets out IRB exposures by obligor grade for central governments and central banks, institutions and corporates, all of which are assessed using our 23-grade CRR master scale. We benchmark the master scale against the ratings of external rating agencies. Each CRR band is associated with an external rating grade by reference to long-run default rates for that grade, represented by the average of issuer-weighted historical default rates. The correspondence between the agency long-run default rates and the PD ranges of our master scale is obtained by matching a smoothed curve based on those default rates with our master scale reference PDs. This association between internal and external ratings is indicative and may vary over time. In these tables, the ratings of S&P are cited for illustration purposes, although we also benchmark against other agencies' ratings in an equivalent manner.

Table 69: Wholesale IRB exposure - by obligor grade
			Central governments and central banks			Institutions			Corporates²
Default risk	CRR	PD range	Average net carrying values¹	Undrawn commit- ments	Mapped external rating	Average net carrying values¹	Undrawn commit- ments	Mapped external rating	Average net carrying values¹	Undrawn commit- ments	Mapped external rating
		%	$bn	$bn		$bn	$bn		$bn	$bn
Minimal	0.1	0.000 to 0.010	214.4	0.9	AAA to AA	2.5	-	AAA	0.4	-	-
	1.1	0.011 to 0.028	70.1	1.2	AA- to A+	34.5	2.2	AA+ to AA	32.1	20.2	AAA to AA
	1.2	0.029 to 0.053	25.0	0.3	A to A-	13.6	1.5	AA-	67.4	44.6	AA-
Low	2.1	0.054 to 0.095	9.7	0.3	BBB+	11.0	2.7	A+ to A	91.5	60.8	A+ to A
Low	2.2	0.096 to 0.169	9.6	-	BBB	11.9	3.6	A-	109.2	62.7	A-
Satisfactory	3.1	0.170 to 0.285	2.4	0.3	BBB-	4.0	1.2	BBB+	123.9	71.4	BBB+
	3.2	0.286 to 0.483	2.1	-	BBB-	2.4	0.3	BBB	120.8	57.4	BBB
	3.3	0.484 to 0.740	3.0	0.3	BB+/BB	1.3	0.1	BBB-	108.3	46.9	BBB-
Fair	4.1	0.741 to 1.022	1.4	-	BB-	0.9	0.3	BB+	77.0	35.3	BB+
	4.2	1.023 to 1.407	0.5	0.1	B+	0.5	0.1	BB	60.6	24.7	BB
	4.3	1.408 to 1.927	3.1	-	B+	0.2	0.1	BB-	47.5	21.0	BB-
Moderate	5.1	1.928 to 2.620	1.5	-	B+	0.1	-	BB-	84.7	31.4	BB-
	5.2	2.621 to 3.579	-	-	B	-	-	B+	25.9	12.6	B+
	5.3	3.580 to 4.914	0.2	-	B	-	-	B	19.8	9.7	B
Significant	6.1	4.915 to 6.718	-	0.1	B-	-	-	B-	10.7	4.5	B-
Significant	6.2	6.719 to 8.860	0.4	0.1	B-	-	-	B-	6.1	1.8	B-
High	7.1	8.861 to 11.402	-	-	B-	-	-	CCC+	4.1	1.7	CCC+
High	7.2	11.403 to 15.000	-	-	CCC+	0.1	0.1	CCC+	1.9	0.5	CCC+
Special Management	8.1	15.001 to 22.000	0.1	-	CCC+	-	-	CCC	2.6	1.4	CCC
	8.2	22.001 to 50.000	0.1	-	CCC	-	-	CCC- to CC	0.7	0.5	CCC- to CC
	8.3	50.001 to 99.999	0.3	-	CCC- to C	-	-	C	0.2	0.1	C
Default	9/10	100.000	-	-	Default	-	-	Default	4.0	0.9	Default
At 31 Dec 2019			343.9	3.6		83.0	12.2		999.4	510.1
Minimal	0.1	0.000 to 0.010	182.6	1.0	AAA	2.4	-	AAA	-	-
	1.1	0.011 to 0.028	77.4	0.9	AA+ to AA	32.1	2.1	AA+ to AA	28.7	12.6	AAA to AA
	1.2	0.029 to 0.053	22.5	0.4	AA- to A+	17.6	1.4	AA-	64.6	39.1	AA-
Low	2.1	0.054 to 0.095	8.1	0.3	A	13.1	2.8	A+ to A	89.9	50.3	A+ to A
Low	2.2	0.096 to 0.169	10.6	-	A-	11.9	3.3	A-	106.9	73.1	A-
Satisfactory	3.1	0.170 to 0.285	2.6	-	BBB+	3.1	0.7	BBB+	125.2	68.9	BBB+
	3.2	0.286 to 0.483	1.9	-	BBB	3.7	0.3	BBB	113.8	59.8	BBB
	3.3	0.484 to 0.740	2.8	0.2	BBB-	2.4	0.2	BBB-	104.4	47.5	BBB-
Fair	4.1	0.741 to 1.022	1.8	0.1	BB+	0.9	0.2	BB+	75.9	33.7	BB+
	4.2	1.023 to 1.407	0.3	0.1	BB	0.4	0.2	BB	54.2	28.8	BB
	4.3	1.408 to 1.927	1.5	0.1	BB-	0.3	0.1	BB-	49.4	19.8	BB-
Moderate	5.1	1.928 to 2.620	2.6	-	BB-	0.1	-	BB-	82.2	30.8	BB-
	5.2	2.621 to 3.579	-	-	B+	0.2	-	B+	24.0	10.1	B+
	5.3	3.580 to 4.914	0.2	-	B	-	-	B	19.6	8.5	B
Significant	6.1	4.915 to 6.718	0.1	-	B	-	-	B-	11.7	4.8	B-
Significant	6.2	6.719 to 8.860	0.3	0.1	B-	-	-	B-	6.0	1.9	B-
High	7.1	8.861 to 11.402	0.1	-	CCC+	-	-	CCC+	3.1	1.0	CCC+
High	7.2	11.403 to 15.000	-	-	CCC+	0.1	0.1	CCC+	2.0	0.6	CCC+
Special Management	8.1	15.001 to 22.000	-	-	CCC+	-	-	CCC	2.5	1.5	CCC
	8.2	22.001 to 50.000	-	-	CCC+	-	-	CCC- to CC	1.0	0.4	CCC- to CC
	8.3	50.001 to 99.999	-	-	CCC to C	-	-	C	0.4	0.2	C
Default	9/10	100.000	-	-	Default	-	-	Default	4.3	1.2	Default
At 31 Dec 2018			315.4	3.2		88.3	11.4		969.8	494.6

1 Average net carrying value are calculated by aggregating the net carrying values of the last five quarters and dividing by five.

2 Corporates excludes specialised lending exposures subject to supervisory slotting approach.

PD, LGD, RWA and exposure by country/territory

The following tables 70. a-c analyse the exposure-weighted average PD, exposure-weighted average LGD, RWAs and exposure

by location of the lending subsidiary or branch. The tables exclude specialised lending exposures subject to the supervisory slotting approach, securitisation exposures and non-credit obligations.

Table 70.a: PD, LGD, RWA and exposure by country/territory - wholesale IRB advanced approach
	Wholesale IRB advanced approach
	All asset classes				Central governments and central banks
	At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn
Europe	1.88	35.3	236.7	96.1	0.04	44.9	47.3	4.1
UK	1.87	35.8	186.9	76.5	0.03	44.7	39.6	2.9
France	2.31	30.2	39.3	17.5	0.03	45.0	0.7	0.1
Asia	0.65	42.9	573.8	176.4	0.03	43.7	208.6	15.9
Hong Kong	0.64	39.0	317.0	87.6	0.01	42.7	102.5	5.5
Australia	0.53	42.9	27.6	8.2	0.01	45.0	9.5	0.5
Mainland China	0.61	48.6	74.8	28.2	0.02	45.0	27.5	2.0
Singapore	0.41	41.7	45.5	10.5	0.01	44.1	18.6	1.0
Middle East and North Africa	0.43	43.9	24.0	7.6	0.40	45.0	18.2	6.0
North America	0.95	34.0	182.8	66.3	0.01	29.8	59.9	4.9
US	0.88	32.9	121.3	43.7	0.01	29.8	41.7	3.1
Canada	1.15	33.6	57.3	22.1	0.02	29.6	15.1	1.6
Latin America	11.10	44.8	10.2	5.8	11.84	45.0	9.5	5.4

	Wholesale IRB advanced approach
	Institutions				Corporates
	At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn
Europe	0.16	32.5	17.2	3.4	2.56	33.0	172.2	88.6
UK	0.16	27.7	12.8	2.3	2.57	33.9	134.5	71.3
France	0.16	45.1	1.8	0.5	2.46	29.2	36.8	16.9
Asia	0.07	44.7	40.6	5.8	1.13	42.2	324.6	154.7
Hong Kong	0.05	38.5	27.2	3.3	1.06	37.0	187.3	78.8
Australia	0.06	42.5	2.2	0.4	0.91	41.7	15.9	7.3
Mainland China	0.10	46.1	4.3	0.8	1.03	51.1	43.0	25.4
Singapore	0.06	39.9	3.9	0.4	0.79	40.0	23.0	9.1
Middle East and North Africa	0.15	45.0	2.1	0.5	0.74	32.7	3.7	1.1
North America	0.06	41.4	5.8	0.8	1.47	36.4	117.1	60.6
US	0.13	44.4	1.5	0.4	1.37	34.3	78.1	40.2
Canada	0.03	21.4	3.4	0.2	1.69	36.2	38.8	20.3
Latin America	0.42	45.1	0.5	0.3	1.36	31.6	0.2	0.1

Table 70.b: PD, LGD, RWA and exposure by country/territory - wholesale IRB foundation approach
	Wholesale IRB foundation approach
	All asset classes				Central governments and central banks
	At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn
Europe	2.04	43.7	38.1	22.7	0.02	45.0	-	-
UK	2.39	40.7	16.1	9.7	-	-	-	-
France	1.21	40.0	1.7	1.1	-	-	-	-
Asia	-	-	-	-	-	-	-	-
Hong Kong	-	-	-	-	-	-	-	-
Australia	-	-	-	-	-	-	-	-
Mainland China	-	-	-	-	-	-	-	-
Singapore	-	-	-	-	-	-	-	-
Middle East and North Africa	3.70	43.2	16.9	9.6	0.03	45.0	0.1	-
North America	-	-	-	-	-	-	-	-
US	-	-	-	-	-	-	-	-
Canada	-	-	-	-	-	-	-	-
Latin America	-	-	-	-	-	-	-	-

	Wholesale IRB foundation approach
	Institutions				Corporates
	At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn
Europe	0.14	45.0	0.1	-	2.05	43.7	38.0	22.7
UK	0.13	45.0	-	-	2.39	40.7	16.1	9.7
France	-	-	-	-	1.21	40.0	1.7	1.1
Asia	-	-	-	-	-	-	-	-
Hong Kong	-	-	-	-	-	-	-	-
Australia	-	-	-	-	-	-	-	-
Mainland China	-	-	-	-	-	-	-	-
Singapore	-	-	-	-	-	-	-	-
Middle East and North Africa	0.07	45.0	0.6	0.2	3.86	43.1	16.2	9.4
North America	-	-	-	-	-	-	-	-
US	-	-	-	-	-	-	-	-
Canada	-	-	-	-	-	-	-	-
Latin America	-	-	-	-	-	-	-	-

Table 70.c: PD, LGD, RWA and exposure by country/territory - retail IRB approach
	Retail IRB approach
	All asset classes				Retail secured by mortgages on immovable property non-SME				Retail secured by mortgages on immovable property SME
	At 31 Dec 2019				At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn	%	%	$bn	$bn
Europe	1.56	28.1	234.7	30.4	1.05	15.3	152.9	7.9	6.38	34.5	2.6	1.5
UK	1.35	31.2	200.3	26.9	0.95	15.4	149.6	7.3	4.25	36.8	2.0	1.1
France	3.42	13.1	26.5	3.3	6.01	13.9	3.3	0.6	13.91	26.4	0.6	0.4
Asia	0.88	28.9	192.3	36.1	0.83	10.7	123.0	24.1	0.77	11.4	0.5	-
Hong Kong	0.76	33.7	150.4	31.7	0.59	10.0	85.8	19.9	0.77	11.4	0.5	-
Australia	0.89	10.0	18.8	1.1	0.89	10.0	18.8	1.1	-	-	-	-
Mainland China	-	-	-	-	-	-	-	-	-	-	-	-
Singapore	0.80	14.1	11.8	1.3	0.94	19.6	7.2	1.0	-	-	-	-
Middle East and North Africa	-	-	-	-	-	-	-	-	-	-	-	-
North America	2.75	39.7	46.6	11.3	2.74	32.6	39.8	8.4	0.88	18.4	0.3	-
US	4.85	60.8	22.9	8.7	5.36	51.0	17.7	6.3	-	-	-	-
Canada	0.72	19.3	23.8	2.6	0.64	17.8	22.1	2.1	0.88	18.4	0.3	-
Latin America	-	-	-	-	-	-	-	-	-	-	-	-

	Retail IRB approach
	Retail QRRE				Other SME				Other non-SME
	At 31 Dec 2019				At 31 Dec 2019				At 31 Dec 2019
	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs	Exposure- weighted average PD	Exposure- weighted average LGD	Exposure value	RWAs
	%	%	$bn	$bn	%	%	$bn	$bn	%	%	$bn	$bn
Europe	1.69	79.3	34.9	7.6	9.93	66.8	5.8	4.5	1.86	26.7	38.6	8.9
UK	1.69	79.3	34.9	7.6	8.05	81.4	4.1	3.9	2.99	79.5	9.7	7.0
France	32.83	77.5	-	-	14.53	31.3	1.7	0.6	1.83	11.2	20.9	1.7
Asia	1.02	96.7	40.7	9.1	0.28	26.9	0.1	-	0.86	10.6	27.9	2.9
Hong Kong	1.02	96.7	40.7	9.1	0.28	26.9	0.1	-	0.91	11.6	23.3	2.7
Australia	-	-	-	-	-	-	-	-	-	-	-	-
Mainland China	-	-	-	-	-	-	-	-	-	-	-	-
Singapore	-	-	-	-	-	-	-	-	0.59	5.6	4.6	0.3
Middle East and North Africa	-	-	-	-	-	-	-	-	-	-	-	-
North America	2.64	91.7	4.7	2.1	3.31	51.2	0.3	0.2	3.39	67.0	1.6	0.6
US	2.65	93.6	4.4	1.9	-	-	-	-	5.45	96.7	0.8	0.5
Canada	2.38	63.8	0.3	0.1	3.31	51.2	0.3	0.2	1.15	34.6	0.8	0.2
Latin America	-	-	-	-	-	-	-	-	-	-	-	-

Table 71: Retail IRB exposure - by internal PD band
		At 31 Dec 2019		At 31 Dec 2018
	PD range	Average net carrying values¹	Undrawn commitments	Average net carrying values¹	Undrawn commitments
	%	$bn	$bn	$bn	$bn
Retail SME exposure secured by mortgages on immovable property		3.6	0.3	3.2	0.3
Band 1	0.000 to 0.483	1.1	0.1	1.0	0.1
Band 2	0.484 to 1.022	0.7	0.1	0.6	0.1
Band 3	1.023 to 4.914	1.3	0.1	1.2	0.1
Band 4	4.915 to 8.860	0.3	-	0.2	-
Band 5	8.861 to 15.000	0.1	-	0.1	-
Band 6	15.001 to 50.000	-	-	-	-
Band 7	50.001 to 100.000	0.1	-	0.1	-
Retail non-SME exposure secured by mortgages on immovable property		298.9	17.4	280.9	17.3
Band 1	0.000 to 0.483	252.0	15.8	234.9	15.5
Band 2	0.484 to 1.022	22.2	0.8	21.4	1.0
Band 3	1.023 to 4.914	18.7	0.7	17.7	0.7
Band 4	4.915 to 8.860	1.9	-	2.4	-
Band 5	8.861 to 15.000	0.6	0.1	0.5	-
Band 6	15.001 to 50.000	1.3	-	1.6	0.1
Band 7	50.001 to 100.000	2.2	-	2.4	-
Qualifying revolving retail exposure		135.1	117.8	129.1	111.6
Band 1	0.000 to 0.483	107.1	101.9	102.7	95.0
Band 2	0.484 to 1.022	12.0	8.1	11.5	8.1
Band 3	1.023 to 4.914	13.0	6.7	12.3	7.5
Band 4	4.915 to 8.860	1.5	0.6	1.4	0.6
Band 5	8.861 to 15.000	0.6	0.2	0.5	0.2
Band 6	15.001 to 50.000	0.6	0.2	0.5	0.2
Band 7	50.001 to 100.000	0.3	0.1	0.2	-
Other retail SME exposure		7.8	4.3	8.7	3.8
Band 1	0.000 to 0.483	1.3	1.1	1.2	0.9
Band 2	0.484 to 1.022	1.2	0.9	1.4	0.9
Band 3	1.023 to 4.914	3.8	1.7	4.3	1.6
Band 4	4.915 to 8.860	0.8	0.3	1.0	0.2
Band 5	8.861 to 15.000	0.3	0.1	0.3	0.1
Band 6	15.001 to 50.000	0.3	0.1	0.3	0.1
Band 7	50.001 to 100.000	0.1	0.1	0.2	-
Other retail non-SME exposure		62.6	27.4	54.8	15.9
Band 1	0.000 to 0.483	39.4	22.7	34.1	12.4
Band 2	0.484 to 1.022	10.7	2.2	9.1	1.6
Band 3	1.023 to 4.914	10.4	2.4	9.6	1.7
Band 4	4.915 to 8.860	1.2	0.1	1.1	0.1
Band 5	8.861 to 15.000	0.4	-	0.4	-
Band 6	15.001 to 50.000	0.2	-	0.2	-
Band 7	50.001 to 100.000	0.3	-	0.3	0.1
Total retail exposure		508.0	167.3	476.7	149.0
Band 1	0.000 to 0.483	400.9	141.7	373.9	124.0
Band 2	0.484 to 1.022	46.8	12.1	44.0	11.7
Band 3	1.023 to 4.914	47.2	11.6	45.1	11.6
Band 4	4.915 to 8.860	5.7	1.0	6.1	0.9
Band 5	8.861 to 15.000	2.0	0.4	1.8	0.3
Band 6	15.001 to 50.000	2.4	0.3	2.6	0.4
Band 7	50.001 to 100.000	3.0	0.2	3.2	0.1

1 Average net carrying values are calculated by aggregating the net carrying values of the last five quarters and dividing by five.

Table 72: IRB expected loss and CRAs - by exposure class
			CRA
		Expected loss	Balances	Charge for the year
		$bn	$bn	$bn
1	Total IRB approach
2	Central governments and central banks	0.6	0.1	-
3	Institutions	-	-	-
4	Corporates	5.5	4.3	1.0
5	Retail	2.6	2.0	1.1
	- secured by mortgages on immovable property SME	0.1	0.1	-
	- secured by mortgages on immovable property non-SME	0.8	0.2	-
	- qualifying revolving retail	0.9	1.0	0.6
	- other SME	0.4	0.3	0.2
	- other non-SME	0.4	0.4	0.3
6	Total at 31 Dec 2019	8.7	6.4	2.1

1	Total IRB approach
2	Central governments and central banks	0.1	0.1	-
3	Institutions	-	-	-
4	Corporates	5.0	4.1	0.5
5	Retail	2.4	1.8	0.9
	- secured by mortgages on immovable property SME	0.1	0.1	0.1
	- secured by mortgages on immovable property non-SME	0.8	0.3	-
	- qualifying revolving retail	0.7	0.7	0.4
	- other SME	0.4	0.3	0.2
	- other non-SME	0.4	0.4	0.2
6	Total at 31 Dec 2018	7.5	6.0	1.4

1	Total IRB approach
2	Central governments and central banks	0.1	-	-
3	Institutions	-	-	-
4	Corporates	5.3	4.2	0.7
5	Retail	2.5	1.0	0.3
	- secured by mortgages on immovable property non-SME	0.8	0.3	-
	- qualifying revolving retail	0.8	0.2	0.2
	- other SME	0.5	0.3	-
	- other non-SME	0.4	0.2	0.1
6	Total at 31 Dec 2017	7.9	5.2	1.0

Table 73: Credit risk RWAs - by geographical region
	RWAs
	Europe	Asia	MENA	North America	Latin America	Total
	$bn	$bn	$bn	$bn	$bn	$bn
IRB advanced approach	138.1	218.3	7.6	82.8	5.8	452.6
- central governments and central banks	4.1	15.9	6.0	4.9	5.4	36.3
- institutions	3.4	5.8	0.5	0.8	0.3	10.8
- corporates	100.2	160.5	1.1	65.8	0.1	327.7
- total retail	30.4	36.1	-	11.3	-	77.8
IRB securitisation positions	3.5	0.2	-	-	-	3.7
IRB non-credit obligation assets	4.6	4.9	0.9	2.0	0.9	13.3
IRB foundation approach	22.7	-	9.6	-	-	32.3
- institutions	-	-	0.2	-	-	0.2
- corporates	22.7	-	9.4	-	-	32.1
Standardised approach	39.4	68.5	29.9	13.7	23.2	174.7
- central governments and central banks	3.5	1.9	0.5	4.3	1.0	11.2
- regional governments or local authorities	-	-	0.9	-	0.7	1.6
- public sector entities	-	-	-	-	-	-
- institutions	0.1	0.1	0.6	-	0.1	0.9
- corporates	15.1	17.0	20.1	5.0	15.3	72.5
- retail	1.1	5.4	3.7	0.9	3.3	14.4
- secured by mortgages on immovable property	3.3	5.5	1.4	0.6	1.2	12.0
- exposures in default	0.8	0.5	1.9	0.3	0.6	4.1
- items associated with particularly high risk	7.2	-	0.1	0.5	0.1	7.9
- securitisation positions	2.3	1.3	-	0.8	0.2	4.6
- claims in the form of CIU	0.4	-	-	-	-	0.4
- equity	2.9	32.0	0.2	1.0	0.2	36.3
- other items	2.7	4.8	0.5	0.3	0.5	8.8
Total at 31 Dec 2019	208.3	291.9	48.0	98.5	29.9	676.6

IRB advanced approach	150.3	216.2	7.3	86.5	7.9	468.2
- central governments and central banks	4.2	15.1	5.0	5.4	7.2	36.9
- institutions	4.5	7.6	0.5	1.1	0.5	14.2
- corporates	113.2	162.0	1.8	67.9	0.2	345.1
- total retail	28.4	31.5	-	12.1	-	72.0
IRB securitisation positions	5.6	0.2	-	0.5	-	6.3
IRB non-credit obligation assets	3.5	4.7	0.6	1.3	0.7	10.8
IRB foundation approach	21.0	-	9.5	-	-	30.5
- institutions	-	-	0.2	-	-	0.2
- corporates	21.0	-	9.3	-	-	30.3
Standardised approach	39.0	70.8	29.6	14.8	21.1	175.3
- central governments and central banks	3.6	1.7	0.6	5.4	1.2	12.5
- regional governments or local authorities	-	-	0.8	-	0.5	1.3
- public sector entities	-	-	-	-	-	-
- institutions	0.2	0.2	0.8	-	-	1.2
- corporates	18.4	20.3	20.4	5.9	14.2	79.2
- retail	0.9	6.3	3.7	0.9	3.0	14.8
- secured by mortgages on immovable property	2.4	6.3	1.2	0.5	0.9	11.3
- exposures in default	1.0	0.5	1.4	0.3	0.6	3.8
- items associated with particularly high risk	6.3	-	0.1	0.4	0.1	6.9
- securitisation positions	0.6	1.4	-	-	0.1	2.1
- claims in the form of CIU	0.6	-	-	-	-	0.6
- equity	2.8	30.6	0.2	1.1	0.3	35.0
- other items	2.2	3.5	0.4	0.3	0.2	6.6
Total at 31 Dec 2018	219.4	291.9	47.0	103.1	29.7	691.1

Table 74: Standardised exposure - by credit quality step
	At 31 Dec 2019			At 31 Dec 2018
	Original exposure¹	Exposure value	RWAs^	Original exposure¹	Exposure value	RWAs^
	$bn	$bn	$bn	$bn	$bn	$bn
Central governments and central banks
Credit quality step 1	171.3	180.5		158.0	166.3
Credit quality step 2	0.3	0.2		0.3	0.2
Credit quality step 3	0.4	0.4		0.4	0.5
Credit quality step 4	-	-		-	-
Credit quality step 5	-	-		-	-
Credit quality step unrated	4.6	4.4		5.0	5.0
	176.6	185.5	11.2	163.7	172.0	12.5
Institutions
Credit quality step 1	0.3	0.4		0.4	0.4
Credit quality step 2	0.9	0.2		2.5	1.5
Credit quality step 3	0.7	0.6		-	-
Credit quality step 4	-	-		0.1	0.1
Credit quality step 5	0.1	0.1		-	-
Credit quality step unrated	0.4	0.3		0.2	0.2
	2.4	1.6	0.9	3.2	2.2	1.2
Corporates
Credit quality step 1	1.6	4.0		1.9	3.6
Credit quality step 2	3.7	2.7		5.2	3.4
Credit quality step 3	2.4	1.7		5.4	3.6
Credit quality step 4	2.6	1.8		2.2	1.6
Credit quality step 5	0.6	0.4		1.2	0.7
Credit quality step 6	0.6	0.3		0.2	0.1
Credit quality step unrated	148.9	65.9		163.9	71.1
	160.4	76.8	72.5	180.0	84.1	79.2

1 Figures presented on an 'obligor basis'.

^ Figures have been prepared on an IFRS 9 transitional basis.

Table 75: Specialised lending on slotting approach (CR10)
		On-balance sheet amount	Off-balance sheet amount	Risk weight	Exposure amount	RWAs	Expected loss
Regulatory categories	Remaining maturity	On-balance sheet amount	Off-balance sheet amount	Risk weight	Exposure amount	RWAs	Expected loss
Regulatory categories	Remaining maturity	$bn	$bn	%	$bn	$bn	$bn
Category 1 - Strong	Less than 2.5 years	15.6	2.6	50	16.7	8.4	-
Category 1 - Strong	Equal to or more than 2.5 years	11.5	2.3	70	12.5	8.7	0.1
Category 2 - Good	Less than 2.5 years	3.6	0.3	70	3.7	2.6	-
Category 2 - Good	Equal to or more than 2.5 years	2.0	0.8	90	2.3	2.1	-
Category 3 - Satisfactory	Less than 2.5 years	0.5	-	115	0.5	0.5	-
Category 3 - Satisfactory	Equal to or more than 2.5 years	0.1	-	115	0.1	0.1	-
Category 4 - Weak	Less than 2.5 years	0.1	-	250	0.1	0.2	-
Category 4 - Weak	Equal to or more than 2.5 years	-	-	250	-	-	-
Category 5 - Default	Less than 2.5 years	0.5	-	-	0.8	-	0.4
Category 5 - Default	Equal to or more than 2.5 years	-	-	-	0.1	-	-
Total at 31 Dec 2019	Less than 2.5 years	20.3	2.9		21.8	11.7	0.4
Total at 31 Dec 2019	Equal to or more than 2.5 years	13.6	3.1		15.0	10.9	0.1

Category 1 - Strong	Less than 2.5 years	14.8	2.7	50	15.9	8.0	-
Category 1 - Strong	Equal to or more than 2.5 years	11.7	2.6	70	12.7	8.8	0.1
Category 2 - Good	Less than 2.5 years	2.7	0.4	70	2.9	2.0	-
Category 2 - Good	Equal to or more than 2.5 years	2.0	0.5	90	2.2	2.0	-
Category 3 - Satisfactory	Less than 2.5 years	0.4	-	115	0.4	0.5	-
Category 3 - Satisfactory	Equal to or more than 2.5 years	0.5	0.1	115	0.5	0.6	-
Category 4 - Weak	Less than 2.5 years	0.1	-	250	0.1	0.1	-
Category 4 - Weak	Equal to or more than 2.5 years	-	-	250	-	0.1	-
Category 5 - Default	Less than 2.5 years	0.3	-	-	0.5	-	0.2
Category 5 - Default	Equal to or more than 2.5 years	0.1	-	-	0.1	-	0.1
Total at 31 Dec 2018	Less than 2.5 years	18.3	3.1		19.8	10.6	0.2
Total at 31 Dec 2018	Equal to or more than 2.5 years	14.3	3.2		15.5	11.5	0.2

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions^{^}
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
AIRB - Central government and central banks
0.00 to <0.15	328.5	2.6	42.9	329.6	0.02	269	41.6	2.10	26.1	8	-
0.15 to <0.25	2.0	0.3	2.6	2.0	0.22	11	45.0	1.40	0.8	38	-
0.25 to <0.50	2.3	-	20.0	2.3	0.37	12	45.0	1.20	1.1	50	-
0.50 to <0.75	2.4	0.3	60.6	2.6	0.63	15	45.0	1.10	1.6	64	-
0.75 to <2.50	5.6	0.2	31.1	5.4	1.39	21	44.5	1.20	4.8	89	-
2.50 to <10.00	0.5	0.2	0.2	0.1	7.58	8	7.8	3.30	-	31	-
10.00 to <100.00	1.5	-	-	1.5	75.00	5	45.0	1.00	1.9	130	0.6
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	342.8	3.6	40.1	343.5	0.37	341	41.7	2.10	36.3	11	0.6	0.1

AIRB - Institutions
0.00 to <0.15	56.7	9.9	32.4	59.6	0.05	2,520	37.1	1.40	7.9	13	-
0.15 to <0.25	2.9	1.2	27.4	3.3	0.22	290	33.7	1.00	1.0	30	-
0.25 to <0.50	1.3	0.3	56.5	1.5	0.37	145	41.3	1.10	0.7	48	-
0.50 to <0.75	0.8	0.1	3.8	0.8	0.63	102	45.0	1.40	0.6	82	-
0.75 to <2.50	0.8	0.6	28.6	0.9	1.14	177	28.3	2.10	0.5	59	-
2.50 to <10.00	-	-	36.7	0.1	3.60	25	45.3	0.90	0.1	125	-
10.00 to <100.00	-	0.1	17.9	-	15.75	19	45.8	1.90	-	216	-
100.00 (Default)	-	-	-	-	100.00	1	45.8	1.00	-	10	-
Sub-total	62.5	12.2	32.0	66.2	0.09	3,279	37.0	1.40	10.8	16	-	-

AIRB - Corporate - Specialised Lending (excluding Slotting)¹
0.00 to <0.15	2.1	1.2	39.5	2.5	0.10	40	20.5	3.30	0.4	17	-
0.15 to <0.25	1.8	0.8	32.0	2.0	0.22	44	29.3	3.80	0.8	40	-
0.25 to <0.50	1.1	0.6	40.1	1.2	0.37	31	27.0	3.50	0.5	43	-
0.50 to <0.75	1.1	0.2	52.6	1.0	0.63	24	26.1	3.70	0.6	53	-
0.75 to <2.50	1.2	0.7	51.5	1.4	1.40	35	28.3	3.10	1.0	74	-
2.50 to <10.00	0.6	-	69.2	0.5	4.51	13	25.3	3.30	0.4	85	-
10.00 to <100.00	0.1	-	57.5	0.1	18.28	4	12.3	2.50	0.1	64	-
100.00 (Default)	0.2	0.1	66.2	0.2	100.00	12	19.5	4.50	0.3	129	-
Sub-total	8.2	3.6	41.8	8.9	3.45	203	25.4	3.50	4.1	46	-	0.1

AIRB - Corporate - Other
0.00 to <0.15	107.4	171.5	36.0	212.1	0.08	10,842	40.7	2.10	45.5	21	0.1
0.15 to <0.25	50.0	64.0	36.4	83.8	0.22	9,967	38.8	2.00	32.2	38	0.1
0.25 to <0.50	55.4	51.0	32.9	75.3	0.37	11,148	36.6	2.10	35.3	47	0.1
0.50 to <0.75	54.1	40.5	31.6	63.2	0.63	10,296	35.0	2.00	35.7	57	0.1
0.75 to <2.50	142.5	101.3	30.0	132.2	1.36	41,384	37.0	1.90	103.4	78	0.7
2.50 to <10.00	34.7	25.8	33.0	32.7	4.31	11,505	38.7	1.90	38.8	119	0.6
10.00 to <100.00	5.0	3.7	39.1	4.9	17.34	1,812	33.1	1.90	7.6	156	0.3
100.00 (Default)	4.2	0.6	35.8	4.4	100.00	2,246	46.1	1.80	2.5	57	2.4
Sub-total	453.3	458.4	34.1	608.6	1.56	99,200	38.4	2.00	301.0	49	4.4	3.4

Wholesale AIRB - Total at 31 Dec 2019²	929.2	477.8	34.2	1,089.6	1.09	103,023	39.3	2.00	365.5	34	5.0	3.6

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions^
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
AIRB - Secured by mortgages on immovable property SME
0.00 to <0.15	0.4	-	46.0	0.3	0.06	1,196	11.8	-	-	4	-
0.15 to <0.25	0.1	-	36.2	0.1	0.21	2,192	32.7	-	-	13	-
0.25 to <0.50	0.6	-	41.6	0.6	0.35	6,785	27.0	-	0.1	15	-
0.50 to <0.75	0.3	0.1	38.7	0.4	0.62	5,423	33.1	-	0.1	27	-
0.75 to <2.50	1.0	0.2	37.8	1.0	1.44	13,167	33.6	-	0.5	48	-
2.50 to <10.00	0.7	0.1	38.4	0.8	4.54	7,098	30.8	-	0.6	81	-
10.00 to <100.00	0.1	-	37.9	0.1	17.47	1,117	31.1	-	0.1	135	-
100.00 (Default)	0.1	-	66.0	0.1	100.00	1,042	33.8	-	0.1	85	0.1
Sub-total	3.3	0.4	38.9	3.4	5.03	38,020	29.5	-	1.5	45	0.1	0.1

AIRB - Secured by mortgages on immovable property non-SME
0.00 to <0.15	191.2	11.1	88.0	204.8	0.07	1,110,935	15.7	-	14.8	7	-
0.15 to <0.25	33.4	1.7	88.4	35.1	0.21	136,145	16.2	-	4.6	13	-
0.25 to <0.50	27.3	3.0	40.4	28.7	0.35	126,980	17.2	-	5.2	18	-
0.50 to <0.75	14.1	0.4	91.6	14.6	0.59	56,837	14.9	-	2.8	19	-
0.75 to <2.50	21.1	1.0	76.6	22.0	1.36	99,412	13.1	-	5.9	27	0.1
2.50 to <10.00	6.1	0.1	97.0	6.3	4.42	27,562	11.3	-	2.4	38	-
10.00 to <100.00	1.8	0.1	99.3	1.9	23.22	16,032	20.1	-	2.4	129	0.1
100.00 (Default)	2.3	-	77.9	2.3	100.00	17,845	23.8	-	2.3	98	0.6
Sub-total	297.3	17.4	79.3	315.7	1.18	1,591,748	15.7	-	40.4	13	0.8	0.2

AIRB - Qualifying revolving retail exposures
0.00 to <0.15	5.8	72.5	49.4	41.4	0.06	13,492,492	89.4	-	1.8	4	-
0.15 to <0.25	1.3	15.7	49.0	8.9	0.20	2,827,957	92.5	-	1.0	11	-
0.25 to <0.50	2.5	14.2	41.9	8.4	0.36	2,155,649	90.3	-	1.5	18	-
0.50 to <0.75	2.9	5.3	48.2	5.4	0.61	1,012,194	87.4	-	1.4	26	-
0.75 to <2.50	6.1	7.8	47.9	9.8	1.43	1,894,368	86.0	-	4.7	48	0.1
2.50 to <10.00	3.7	1.8	63.8	4.8	4.91	887,239	84.2	-	5.3	111	0.2
10.00 to <100.00	1.0	0.4	65.2	1.2	30.09	315,052	84.3	-	2.6	209	0.4
100.00 (Default)	0.3	-	25.3	0.3	100.00	151,301	77.9	-	0.5	195	0.2
Sub-total	23.6	117.7	48.5	80.2	1.40	22,736,252	88.8	-	18.8	23	0.9	1.0

AIRB - Other SME
0.00 to <0.15	0.1	0.4	31.5	0.2	0.09	99,557	73.9	-	-	14	-
0.15 to <0.25	-	0.3	37.6	0.1	0.23	76,713	85.0	-	-	31	-
0.25 to <0.50	0.2	0.5	48.4	0.4	0.38	135,359	76.5	-	0.2	40	-
0.50 to <0.75	0.2	0.5	58.2	0.5	0.64	126,958	67.2	-	0.2	46	-
0.75 to <2.50	1.1	1.2	54.9	1.7	1.60	327,051	68.3	-	1.2	69	-
2.50 to <10.00	1.7	1.1	49.6	2.5	4.85	183,343	59.7	-	1.9	80	0.1
10.00 to <100.00	0.4	0.1	61.3	0.5	20.11	75,895	76.8	-	0.7	141	0.1
100.00 (Default)	0.3	0.1	77.9	0.3	100.00	19,210	44.3	-	0.5	138	0.2
Sub-total	4.0	4.2	50.3	6.2	9.41	1,044,086	65.3	-	4.7	76	0.4	0.3

AIRB - Other non-SME
0.00 to <0.15	15.1	14.7	15.8	17.7	0.07	675,819	12.5	-	0.7	4	-
0.15 to <0.25	8.1	3.7	39.7	9.9	0.20	529,201	24.7	-	1.2	12	-
0.25 to <0.50	12.2	4.4	24.8	13.5	0.37	459,987	19.0	-	1.6	13	-
0.50 to <0.75	7.9	1.8	22.8	8.4	0.62	246,120	22.6	-	1.7	20	-
0.75 to <2.50	13.2	1.7	9.7	13.5	1.31	490,546	24.9	-	4.1	30	-
2.50 to <10.00	3.5	1.1	23.7	3.9	4.27	238,724	34.0	-	2.0	52	0.1
10.00 to <100.00	0.8	-	16.4	0.9	23.85	96,236	42.5	-	0.7	86	0.1
100.00 (Default)	0.3	-	59.5	0.3	100.00	36,471	48.4	-	0.4	114	0.2
Sub-total	61.1	27.4	20.9	68.1	1.48	2,773,104	21.0	-	12.4	18	0.4	0.4

Retail AIRB - Total at 31 Dec 2019	389.3	167.1	47.3	473.6	1.40	28,183,210	29.6	-	77.8	16	2.6	2.0

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions^{^}
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
FIRB - Central government and central banks
0.00 to <0.15	-	-	75.0	0.1	0.03	1	45.0	3.60	-	20	-
0.15 to <0.25	-	-	-	-	-	-	-	-	-	-	-
0.25 to <0.50	-	-	-	-	-	-	-	-	-	-	-
0.50 to <0.75	-	-	-	-	-	-	-	-	-	-	-
0.75 to <2.50	-	-	-	-	-	-	-	-	-	-	-
2.50 to <10.00	-	-	-	-	-	-	-	-	-	-	-
10.00 to <100.00	-	-	-	-	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	-	-	75.0	0.1	0.03	1	45.0	3.60	-	20	-	-

FIRB - Institutions
0.00 to <0.15	0.7	-	29.3	0.6	0.08	2	45.0	2.70	0.2	25	-
0.15 to <0.25	-	-	40.9	-	0.22	1	45.0	2.40	-	48	-
0.25 to <0.50	-	-	16.9	-	0.37	1	45.0	0.10	-	36	-
0.50 to <0.75	-	-	-	-	-	-	-	-	-	-	-
0.75 to <2.50	-	-	-	-	-	-	-	-	-	-	-
2.50 to <10.00	-	-	-	-	-	-	-	-	-	-	-
10.00 to <100.00	-	-	-	-	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	0.7	-	31.3	0.6	0.08	4	45.0	2.70	0.2	26	-	-

FIRB - Corporate - Other
0.00 to <0.15	10.2	15.5	38.5	17.0	0.08	1,357	44.1	2.10	4.1	24	-
0.15 to <0.25	4.8	6.5	39.9	7.0	0.22	1,431	43.8	2.40	3.3	47	-
0.25 to <0.50	4.6	5.8	28.4	6.1	0.37	1,905	42.8	1.90	3.5	56	-
0.50 to <0.75	4.5	6.8	33.7	6.7	0.63	1,676	39.0	1.60	4.2	63	-
0.75 to <2.50	10.7	10.0	21.4	12.1	1.32	5,329	43.1	1.60	10.8	89	0.1
2.50 to <10.00	3.7	2.9	20.6	3.7	4.60	1,239	42.4	1.60	4.9	133	0.1
10.00 to <100.00	0.6	0.5	21.4	0.7	13.62	186	43.7	1.40	1.3	197	-
100.00 (Default)	0.8	0.2	20.7	0.9	100.00	435	43.7	2.10	-	-	0.4
Sub-total	39.9	48.2	32.1	54.2	2.59	13,558	42.9	1.90	32.1	59	0.6	0.5

FIRB - Total at 31 Dec 2019	40.6	48.2	32.1	54.9	2.55	13,563	43.0	1.90	32.3	59	0.6	0.5

^ Figures have been prepared on an IFRS 9 transitional basis.

1 Slotting exposures are disclosed in Table 75: Specialised lending on slotting approach (CR10).

2 The Wholesale AIRB Total includes non-credit obligation assets amounting to $62.4 bn of original exposure and EAD, and $13.3bn of RWAs.

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
AIRB - Central government and central banks
0.00 to <0.15	313.5	2.7	52.6	315.6	0.02	258	42.4	2.10	26.0	8	-
0.15 to <0.25	2.5	-	18.2	2.5	0.22	10	45.0	1.80	1.1	42	-
0.25 to <0.50	2.1	-	98.9	2.3	0.37	14	45.1	1.30	1.1	50	-
0.50 to <0.75	3.3	0.2	78.3	3.4	0.63	16	45.0	1.10	2.2	64	-
0.75 to <2.50	6.8	0.2	70.8	6.6	1.72	22	45.0	1.20	6.4	97	0.1
2.50 to <10.00	0.4	0.1	41.0	-	7.49	9	45.1	4.60	0.1	210	-
10.00 to <100.00	-	-	-	-	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	328.6	3.2	55.0	330.4	0.06	329	42.5	2.10	36.9	11	0.1	0.1

AIRB - Institutions
0.00 to <0.15	60.7	9.7	39.3	65.0	0.05	2,574	39.5	1.40	9.3	14	-
0.15 to <0.25	3.1	0.7	22.0	3.3	0.22	323	44.7	0.90	1.2	37	-
0.25 to <0.50	2.6	0.3	59.1	2.2	0.37	182	41.5	1.20	1.1	52	-
0.50 to <0.75	1.4	0.2	45.8	1.4	0.63	140	41.5	1.30	1.1	74	-
0.75 to <2.50	1.2	0.5	50.6	1.5	1.10	242	45.1	1.20	1.4	96	-
2.50 to <10.00	0.1	-	24.7	-	6.19	22	46.4	0.80	-	169	-
10.00 to <100.00	-	0.1	25.6	-	13.00	17	55.0	1.00	0.1	253	-
100.00 (Default)	-	-	-	-	100.00	1	64.8	1.00	-	807	-
Sub-total	69.1	11.5	39.2	73.4	0.11	3,501	39.9	1.40	14.2	19	-	-

AIRB - Corporate - Specialised Lending (excluding Slotting)¹
0.00 to <0.15	1.8	1.3	38.0	2.1	0.10	409	30.4	3.40	0.6	27	-
0.15 to <0.25	1.9	0.4	33.4	2.0	0.22	418	28.6	3.40	0.7	37	-
0.25 to <0.50	0.6	0.3	35.8	0.7	0.37	188	28.9	4.40	0.4	55	-
0.50 to <0.75	1.3	0.2	34.4	1.0	0.63	261	24.5	3.50	0.5	51	-
0.75 to <2.50	1.2	0.5	49.7	1.5	1.38	397	32.1	3.80	1.3	91	-
2.50 to <10.00	0.6	0.1	51.1	0.5	5.34	136	27.4	3.20	0.5	101	-
10.00 to <100.00	0.3	0.1	48.1	0.3	24.05	73	23.2	3.40	0.4	130	-
100.00 (Default)	0.1	0.1	87.5	0.2	100.00	105	37.9	4.80	0.5	258	0.1
Sub-total	7.8	3.0	41.3	8.3	3.68	1,987	29.1	3.60	4.9	59	0.1	0.1

AIRB - Corporate - Other
0.00 to <0.15	109.3	160.4	38.0	212.4	0.08	10,036	41.1	2.20	48.2	23	0.1
0.15 to <0.25	49.8	62.5	37.6	81.1	0.22	10,191	39.1	2.00	31.2	38	0.1
0.25 to <0.50	51.1	54.7	33.9	73.3	0.37	10,304	37.3	2.10	35.4	48	0.1
0.50 to <0.75	56.9	42.1	33.8	69.9	0.63	10,348	34.3	1.90	39.5	57	0.2
0.75 to <2.50	146.2	102.1	32.2	137.6	1.37	42,602	37.6	2.00	111.3	81	0.7
2.50 to <10.00	30.5	23.2	35.7	29.8	4.10	11,510	38.0	2.00	34.3	115	0.5
10.00 to <100.00	5.1	3.3	43.0	4.5	19.20	1,967	38.6	2.00	8.3	185	0.3
100.00 (Default)	4.2	0.9	46.6	4.5	100.00	2,473	46.0	1.90	9.9	221	1.9
Sub-total	453.1	449.2	35.9	613.1	1.55	99,431	38.7	2.10	318.1	52	3.9	3.1

Wholesale AIRB - Total at 31 Dec 2018²	915.5	466.9	36.1	1,082.1	0.98	105,248	39.9	2.00	384.9	37	4.1	3.3

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
AIRB - Secured by mortgages on immovable property SME
0.00 to <0.15	0.3	-	31.4	0.3	0.08	1,321	16.2	-	-	4	-
0.15 to <0.25	0.2	-	39.8	0.2	0.21	2,557	29.5	-	-	12	-
0.25 to <0.50	0.4	0.1	35.2	0.4	0.36	6,478	28.8	-	0.1	16	-
0.50 to <0.75	0.3	0.1	44.5	0.3	0.61	5,000	32.2	-	0.1	27	-
0.75 to <2.50	0.9	0.2	33.8	1.0	1.47	13,728	35.2	-	0.5	51	-
2.50 to <10.00	0.8	0.1	40.2	0.9	4.57	7,963	31.2	-	0.7	82	-
10.00 to <100.00	0.1	-	39.8	0.1	17.19	1,312	31.6	-	0.1	138	-
100.00 (Default)	0.1	-	55.7	0.1	100.00	1,266	33.9	-	0.3	227	0.1
Sub-total	3.1	0.5	37.5	3.3	5.78	39,625	30.8	-	1.8	54	0.1	0.1

AIRB - Secured by mortgages on immovable property non-SME
0.00 to <0.15	172.1	11.4	89.8	185.9	0.06	1,066,724	15.4	-	12.4	7	-
0.15 to <0.25	27.7	1.3	81.6	28.9	0.20	122,304	15.7	-	3.6	13	-
0.25 to <0.50	24.5	2.9	43.8	25.8	0.35	117,856	17.4	-	4.6	18	-
0.50 to <0.75	10.5	0.3	92.3	10.9	0.58	51,235	11.2	-	1.8	16	-
0.75 to <2.50	23.8	1.2	79.7	24.9	1.26	105,656	18.1	-	7.5	30	0.1
2.50 to <10.00	5.8	0.2	96.7	6.0	4.51	27,556	11.7	-	2.3	39	-
10.00 to <100.00	2.1	0.1	97.4	2.2	25.15	18,895	21.1	-	3.0	138	0.1
100.00 (Default)	2.3	-	76.1	2.3	100.00	18,777	24.6	-	2.0	89	0.6
Sub-total	268.8	17.4	81.0	286.9	1.31	1,529,003	15.7	-	37.2	13	0.8	0.3

AIRB - Qualifying revolving retail exposures
0.00 to <0.15	5.4	70.8	49.3	40.1	0.07	13,591,739	91.3	-	1.8	4	-
0.15 to <0.25	1.4	12.5	47.9	7.3	0.21	2,415,087	93.5	-	0.8	11	-
0.25 to <0.50	2.2	12.1	43.1	7.4	0.36	1,989,811	92.3	-	1.3	18	-
0.50 to <0.75	2.2	5.0	48.8	4.6	0.61	987,590	92.1	-	1.2	26	-
0.75 to <2.50	5.9	9.0	46.5	10.1	1.42	2,052,818	90.0	-	4.8	48	0.1
2.50 to <10.00	3.2	1.8	62.0	4.3	4.74	890,646	89.0	-	4.8	112	0.2
10.00 to <100.00	0.9	0.3	66.5	1.1	28.46	294,570	89.4	-	2.4	216	0.3
100.00 (Default)	0.1	-	22.8	0.1	100.00	72,485	79.6	-	0.2	160	0.1
Sub-total	21.3	111.5	48.5	75.0	1.17	22,294,746	91.3	-	17.3	23	0.7	0.7

AIRB - Other SME
0.00 to <0.15	0.1	0.3	35.0	0.2	0.09	98,383	75.0	-	-	14	-
0.15 to <0.25	-	0.2	38.3	0.1	0.22	72,510	80.8	-	-	29	-
0.25 to <0.50	0.1	0.4	48.7	0.3	0.38	124,508	74.4	-	0.1	39	-
0.50 to <0.75	0.2	0.5	63.4	0.5	0.63	155,864	68.4	-	0.2	46	-
0.75 to <2.50	1.1	1.2	58.7	1.8	1.60	358,362	66.9	-	1.3	67	-
2.50 to <10.00	1.8	1.0	69.1	2.6	4.87	181,027	59.5	-	2.1	80	0.1
10.00 to <100.00	0.4	0.2	48.6	0.5	19.39	79,791	73.9	-	0.6	133	0.1
100.00 (Default)	0.3	-	96.8	0.3	100.00	15,015	38.7	-	0.5	160	0.2
Sub-total	4.0	3.8	57.8	6.3	9.05	1,085,460	64.1	-	4.8	76	0.4	0.3

AIRB - Other non-SME
0.00 to <0.15	8.1	6.3	30.7	10.6	0.08	574,137	18.7	-	0.6	5	-
0.15 to <0.25	6.5	3.5	36.4	8.1	0.21	491,674	27.8	-	1.1	13	-
0.25 to <0.50	6.6	2.6	28.4	7.5	0.37	386,099	30.4	-	1.5	20	-
0.50 to <0.75	4.9	1.4	24.9	5.3	0.60	196,811	28.2	-	1.2	24	-
0.75 to <2.50	7.9	0.9	17.1	8.2	1.35	421,600	35.4	-	3.5	43	-
2.50 to <10.00	3.8	1.1	23.0	4.1	4.39	246,174	32.8	-	2.1	51	0.1
10.00 to <100.00	0.6	0.1	15.7	0.7	25.06	92,869	45.5	-	0.6	92	0.1
100.00 (Default)	0.3	0.1	7.7	0.3	100.00	40,274	43.9	-	0.3	103	0.2
Sub-total	38.7	16.0	29.6	44.8	1.91	2,449,638	28.3	-	10.9	24	0.4	0.4

Retail AIRB - Total at 31 Dec 2018	335.9	149.2	50.5	416.3	1.50	27,398,472	31.5	-	72.0	17	2.4	1.8

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)
	Original on-balance sheet gross exposure	Off-balance sheet exposures pre-CCF	Average CCF	EAD post-CRM and post-CCF	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density	Expected loss	Value adjustments and provisions
PD scale	$bn	$bn	%	$bn	%		%	years	$bn	%	$bn	$bn
FIRB - Central government and central banks
0.00 to <0.15	-	-	-	0.1	0.03	1	45.0	4.60	-	25	-
0.15 to <0.25	-	-	-	-	-	-	-	-	-	-	-
0.25 to <0.50	-	-	-	-	-	-	-	-	-	-	-
0.50 to <0.75	-	-	-	-	-	-	-	-	-	-	-
0.75 to <2.50	-	-	-	-	-	-	-	-	-	-	-
2.50 to <10.00	-	-	-	-	-	-	-	-	-	-	-
10.00 to <100.00	-	-	-	-	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	-	-	-	0.1	0.03	1	45.0	4.60	-	25	-	-

FIRB - Institutions
0.00 to <0.15	0.5	-	23.5	0.6	0.10	2	45.0	2.70	0.2	33	-
0.15 to <0.25	-	-	63.3	0.1	0.22	1	45.0	3.60	-	60	-
0.25 to <0.50	-	-	1.1	-	0.37	1	45.0	0.10	-	36	-
0.50 to <0.75	-	-	-	-	-	-	-	-	-	-	-
0.75 to <2.50	-	-	-	-	-	-	-	-	-	-	-
2.50 to <10.00	-	-	-	-	-	-	-	-	-	-	-
10.00 to <100.00	-	-	-	-	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-	-	-	-	-
Sub-total	0.5	-	40.6	0.7	0.12	4	45.0	2.80	0.2	35	-	-

FIRB - Corporate - Other
0.00 to <0.15	9.9	13.5	46.4	16.3	0.08	1,186	44.5	2.20	4.0	24	-
0.15 to <0.25	3.5	5.9	33.5	5.4	0.22	1,269	44.4	2.30	2.5	47	-
0.25 to <0.50	4.0	4.8	33.1	5.4	0.37	1,594	44.1	1.70	3.0	55	-
0.50 to <0.75	4.8	5.6	29.9	6.0	0.63	1,573	45.5	1.80	4.4	74	-
0.75 to <2.50	9.5	10.1	22.5	11.5	1.37	4,387	43.9	1.70	10.8	93	0.1
2.50 to <10.00	3.0	2.1	22.8	3.2	4.59	1,050	43.4	1.80	4.4	140	0.1
10.00 to <100.00	0.5	0.2	37.3	0.6	17.09	166	44.3	1.70	1.2	207	-
100.00 (Default)	0.8	0.2	23.3	0.9	100.00	348	44.4	1.90	-	-	0.4
Sub-total	36.0	42.4	33.9	49.3	2.72	11,573	44.4	1.90	30.3	61	0.6	0.5

FIRB - Total at 31 Dec 2018	36.5	42.4	33.9	50.1	2.67	11,578	44.4	1.90	30.5	61	0.6	0.5

1 Slotting exposures are disclosed in Table 75: Specialised lending on slotting approach (CR10).

2 The Wholesale AIRB Total includes non-credit obligation assets amounting to $56.9bn of original exposure and EAD, and $10.8bn of RWAs.

Counterparty credit risk

Table 77: Counterparty credit risk - RWAs by exposure class, product and geographical region
		RWAs						Capital required
		Europe	Asia	MENA	North America	Latin America	Total	Capital required
	Footnotes	$bn	$bn	$bn	$bn	$bn	$bn	$bn
By exposure class
IRB advanced approach		20.3	7.3	0.5	6.0	0.3	34.4	2.7
- central governments and central banks		0.4	0.1	0.2	0.1	0.1	0.9	0.1
- institutions		7.9	2.2	0.1	1.0	0.2	11.4	0.9
- corporates		12.0	5.0	0.2	4.9	-	22.1	1.7
IRB foundation approach		2.0	-	0.2	-	-	2.2	0.2
- corporates		2.0	-	0.2	-	-	2.2	0.2
Standardised approach		0.3	0.6	0.4	-	1.1	2.4	0.2
- central governments and central banks		-	-	-	-	-	-	-
- institutions		-	-	-	-	0.1	0.1	-
- corporates		0.3	0.6	0.4	-	1.0	2.3	0.2
CVA advanced	1	1.6	0.7	-	0.8	-	3.1	0.2
CVA standardised	1	0.2	-	0.2	0.2	0.3	0.9	0.1
CCP standardised		0.7	0.1	-	0.3	-	1.1	0.1
At 31 Dec 2019		25.1	8.7	1.3	7.3	1.7	44.1	3.5
By product
Derivatives (OTC and exchange traded derivatives)		17.1	5.9	0.8	4.6	1.2	29.6	2.4
SFTs		5.0	1.0	0.3	1.5	0.2	8.0	0.6
Other	2	0.8	1.0	-	0.1	-	1.9	0.2
CVA advanced	1	1.6	0.7	-	0.8	-	3.1	0.2
CVA standardised	1	0.2	-	0.2	0.2	0.3	0.9	0.1
CCP default funds	3	0.4	0.1	-	0.1	-	0.6	-
At 31 Dec 2019		25.1	8.7	1.3	7.3	1.7	44.1	3.5

By exposure class
IRB advanced approach		21.7	7.2	0.4	6.7	0.4	36.4	3.0
- central governments and central banks		0.5	0.1	0.3	0.8	0.2	1.9	0.2
- institutions		8.3	2.8	-	0.9	0.2	12.2	1.0
- corporates		12.9	4.3	0.1	5.0	-	22.3	1.8
IRB foundation approach		1.7	-	0.2	-	-	1.9	0.1
- corporates		1.7	-	0.2	-	-	1.9	0.1
Standardised approach		0.4	0.5	0.3	-	0.8	2.0	0.1
- central governments and central banks		-	-	-	-	-	-	-
- institutions		-	-	-	-	0.1	0.1	-
- corporates		0.4	0.5	0.3	-	0.7	1.9	0.1
CVA advanced	1	2.8	1.1	-	1.0	-	4.9	0.4
CVA standardised	1	0.1	0.3	0.1	0.3	0.2	1.0	0.1
CCP standardised		0.6	0.2	-	0.3	-	1.1	0.1
At 31 Dec 2018		27.3	9.3	1.0	8.3	1.4	47.3	3.8
By product
Derivatives (OTC and exchange traded derivatives)		16.5	5.9	0.6	4.5	1.0	28.5	2.3
SFTs		6.8	0.6	0.3	2.4	0.2	10.3	0.8
Other	2	0.9	1.3	-	-	-	2.2	0.2
CVA advanced	1	2.8	1.1	-	1.0	-	4.9	0.4
CVA standardised	1	0.1	0.3	0.1	0.3	0.2	1.0	0.1
CCP default funds	3	0.2	0.1	-	0.1	-	0.4	-
At 31 Dec 2018		27.3	9.3	1.0	8.3	1.4	47.3	3.8

1 The RWA impact due to the CVA capital charge is calculated based on the exposures under the IRB and standardised approaches. No additional exposures are taken into account.

2 Includes free deliveries not deducted from regulatory capital.

3 Default fund contributions are cash balances posted to CCPs by all members. These cash balances are not included in the total reported exposure.

Table 78: IRB - CCR exposures by portfolio and PD scale (CCR4)
	EAD post-CRM	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density
PD scale	$bn	%		%	years	$bn	%
AIRB - Central Government and Central Banks
0.00 to <0.15	10.5	0.02	97	44.6	0.93	0.6	6
0.15 to <0.25	0.2	0.22	12	45.0	1.22	0.1	35
0.25 to <0.50	-	0.37	7	45.0	2.01	-	59
0.50 to <0.75	-	0.63	1	45.0	2.35	-	80
0.75 to <2.50	0.3	1.64	6	45.0	1.77	0.3	104
2.50 to <10.00	-	6.65	2	33.8	7.00	-	195
10.00 to <100.00	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-
Sub-total	11.0	0.07	125	44.7	0.96	1.0	9

AIRB - Institutions
0.00 to <0.15	41.0	0.07	4,551	44.4	1.20	8.5	21
0.15 to <0.25	3.0	0.22	409	44.9	1.60	1.4	48
0.25 to <0.50	0.7	0.37	85	46.2	1.50	0.4	65
0.50 to <0.75	0.3	0.63	62	42.8	1.10	0.3	79
0.75 to <2.50	0.4	1.21	130	45.1	2.10	0.4	107
2.50 to <10.00	0.1	4.91	29	47.6	1.10	0.1	151
10.00 to <100.00	-	12.23	8	46.1	2.90	-	229
100.00 (Default)	-	100.00	1	45.0	1.00	-	365
Sub-total	45.5	0.12	5,275	44.6	1.20	11.1	24

AIRB - Corporates
0.00 to <0.15	30.5	0.07	5,498	44.1	1.80	6.8	22
0.15 to <0.25	9.7	0.22	1,962	45.7	1.59	4.1	42
0.25 to <0.50	3.9	0.37	1,039	46.0	1.46	2.2	57
0.50 to <0.75	3.1	0.63	941	43.0	1.88	2.5	80
0.75 to <2.50	5.2	1.34	3,493	46.3	1.41	5.3	102
2.50 to <10.00	0.8	3.95	549	48.7	1.73	1.2	152
10.00 to <100.00	-	18.17	63	48.0	1.62	-	230
100.00 (Default)	-	100.00	13	39.6	1.96	-	-
Sub-total	53.2	0.37	13,558	44.7	1.70	22.1	42

AIRB - Retail Other
0.00 to <0.15	-	0.04	212	0.9	-	-	-
0.15 to <0.25	-	0.23	10	1.8	-	-	1
0.25 to <0.50	-	0.38	52	2.2	-	-	2
0.50 to <0.75	-	0.62	22	1.8	-	-	2
0.75 to <2.50	-	1.24	22	1.5	-	-	3
2.50 to <10.00	-	2.82	2	3.0	-	-	4
10.00 to <100.00	-	96.57	1	83.6	-	-	29
100.00 (Default)	-	-	-	-	-	-	-
Sub-total	-	0.64	321	1.6	-	-	1

AIRB - Total at 31 Dec 2019	109.7	0.19	19,279	49.0	1.30	34.2	31

FIRB - Corporates
0.00 to <0.15	3.7	0.07	1,188	45.0	1.98	0.8	22
0.15 to <0.25	0.6	0.22	156	45.0	1.59	0.2	41
0.25 to <0.50	0.5	0.37	166	45.0	1.29	0.3	55
0.50 to <0.75	0.2	0.63	119	45.0	1.21	0.1	72
0.75 to <2.50	0.6	1.41	516	45.0	1.80	0.6	101
2.50 to <10.00	0.1	4.86	129	45.0	2.59	0.2	162
10.00 to <100.00	-	10.08	14	45.0	1.03	-	200
100.00 (Default)	-	100.00	5	45.0	1.08	-	-
FIRB - Total at 31 Dec 2019	5.7	0.44	2,293	45.0	1.85	2.2	39

Total (all portfolios) at 31 Dec 2019	115.4	0.25	21,572	44.7	1.58	36.4	32

Table 78: IRB - CCR exposures by portfolio and PD scale (CCR4) (continued)
	EAD post-CRM	Average PD	Number of obligors	Average LGD	Average maturity	RWAs	RWA density
PD scale	$bn	%		%	years	$bn	%
AIRB - Central Government and Central Banks
0.00 to <0.15	10.1	0.02	90	44.9	0.95	0.5	5
0.15 to <0.25	0.1	0.22	12	45.0	3.07	0.1	54
0.25 to <0.50	0.1	0.37	6	44.8	3.36	0.1	74
0.50 to <0.75	0.1	0.63	1	45.0	1.00	-	60
0.75 to <2.50	1.2	2.25	7	45.0	1.29	1.2	100
2.50 to <10.00	-	7.85	1	45.0	5.00	-	218
10.00 to <100.00	-	-	-	-	-	-	-
100.00 (Default)	-	-	-	-	-	-	-
Sub-total	11.6	0.22	117	45.0	1.02	1.9	17

AIRB - Institutions
0.00 to <0.15	40.5	0.06	4,629	44.3	1.17	7.9	19
0.15 to <0.25	3.5	0.22	477	43.9	1.40	1.6	46
0.25 to <0.50	1.7	0.37	75	45.0	1.19	0.9	50
0.50 to <0.75	0.7	0.63	64	44.9	1.06	0.4	67
0.75 to <2.50	0.4	1.37	106	46.2	2.08	0.5	117
2.50 to <10.00	0.1	4.94	20	44.9	1.60	0.1	149
10.00 to <100.00	0.4	12.98	12	55.0	1.20	0.8	241
100.00 (Default)	-	100.00	1	45.0	1.00	-	-
Sub-total	47.3	0.21	5,384	44.7	1.18	12.2	26

AIRB - Corporates
0.00 to <0.15	30.2	0.07	4,934	43.5	1.71	6.4	21
0.15 to <0.25	6.7	0.22	1,796	46.9	1.75	3.2	48
0.25 to <0.50	3.8	0.37	1,029	44.6	1.69	2.1	56
0.50 to <0.75	3.8	0.63	1,018	43.8	1.23	2.8	73
0.75 to <2.50	6.3	1.34	7,375	46.1	1.38	6.6	104
2.50 to <10.00	0.7	3.92	569	46.9	1.62	1.1	150
10.00 to <100.00	0.1	21.77	61	43.6	1.34	0.1	237
100.00 (Default)	-	100.00	17	41.1	2.60	-	-
Sub-total	51.6	0.42	16,799	44.4	1.64	22.3	43

AIRB - Total at 31 Dec 2018	110.5	0.28	22,300	49.2	1.38	36.4	33

FIRB - Corporates
0.00 to <0.15	2.5	0.07	522	37.9	1.73	0.6	24
0.15 to <0.25	0.4	0.22	146	45.0	1.78	0.2	42
0.25 to <0.50	0.2	0.37	130	45.0	1.66	0.1	59
0.50 to <0.75	0.2	0.63	84	45.0	0.82	0.1	74
0.75 to <2.50	0.7	1.59	533	45.0	1.56	0.8	105
2.50 to <10.00	0.1	5.00	82	45.0	2.20	0.1	155
10.00 to <100.00	-	11.95	11	45.0	1.03	-	192
100.00 (Default)	-	100.00	7	45.0	1.02	-	-
FIRB - Total at 31 Dec 2018	4.1	0.54	1,515	45.0	1.82	1.9	45

Total (all portfolios) at 31 Dec 2018	114.6	0.32	23,815	44.6	1.40	38.3	33

Appendix II

Countercyclical capital buffer

The table below discloses the geographical distribution of credit exposures relevant to the calculation of the countercyclical buffer under Article 440 of the Regulation (EU) 575/2013. Countries or territories that have a CCyB requirement or have an own funds requirement of greater than 0.7% or that are material in nature are disclosed below.

Table 79: Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer
	General credit exposures		Trading book exposures		Securitisation exposures		Own funds requirements				Share of total own funds require-ments	CCyB rate
	SA	IRB	Sum of long/short positions for SA	Internal models	SA	IRB	of which: General credit exposures	of which: Trading book exposures	of which: Securitis-ation exposures	Total	Share of total own funds require-ments	CCyB rate
Country	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	%	%
Argentina	2,076	891	-	1	-	-	234	1	-	235	0.5
Australia	1,279	34,400	-	133	593	2,007	834	12	20	866	1.7
Bulgaria	1	16	-	2	-	-	1	-	-	1	-	0.50	%
Canada	780	63,475	-	65	185	-	1,930	4	2	1,936	3.7
China	23,925	62,450	-	2,083	385	34	5,570	55	7	5,632	10.8
Czech Republic	376	177	-	-	-	-	34	1	-	35	0.1	1.50	%
Denmark	2	2,440	-	62	-	-	46	6	-	52	0.1	1.00	%
Egypt	2,369	1,155	-	-	-	-	201	-	-	201	0.4
France	6,446	56,575	-	324	480	1,083	1,857	19	17	1,893	3.6	0.25	%
Germany	1,072	18,958	-	601	250	287	892	12	8	912	1.8
Hong Kong	22,237	358,306	-	375	-	-	9,983	24	-	10,007	19.2	2.00	%
India	3,656	14,961	-	1,295	1,251	-	939	45	80	1,064	2.0
Iceland	-	3	-	4	-	-	-	3	-	3	-	1.75	%
Indonesia	1,136	6,637	-	116	-	-	507	14	-	521	1.0
Ireland	711	7,843	8	190	466	108	309	9	13	331	0.6	1.00	%
Lithuania	2	2	-	-	-	-	-	-	-	-	-	1.00	%
Luxembourg	1,389	6,110	-	121	200	-	373	6	6	385	0.7
Malaysia	3,449	13,244	1	6	-	-	714	8	-	722	1.4
Malta	3,591	433	-	-	-	-	166	-	-	166	0.3
Mexico	21,964	3,041	45	132	777	-	1,536	9	17	1,562	3.0
Netherlands	2,223	9,579	-	444	948	617	578	11	25	614	1.2
Norway	4	1,895	-	1	-	-	79	27	-	106	0.2	2.50	%
Saudi Arabia	18,001	3,934	-	45	-	-	1,329	12	-	1,341	2.6
Singapore	2,502	31,078	-	168	-	-	935	14	-	949	1.8
Slovakia	70	36	-	1	-	-	7	-	-	7	-	1.50	%
Sweden	5	1,614	-	114	-	-	62	4	-	66	0.1	2.50	%
Taiwan, Province Of China	1,498	12,834	-	168	-	-	367	3	-	370	0.7
Turkey	4,303	1,004	-	24	-	-	329	2	-	331	0.6
United Arab Emirates	4,858	17,883	-	60	-	-	879	14	-	893	1.7
United Kingdom	11,151	361,417	-	2,916	5,087	13,934	9,805	96	321	10,222	19.6	1.00	%
United States	9,663	129,560	-	349	4,601	1,649	5,488	76	110	5,674	10.9
Other countries	23,779	87,237	18	1,922	1,109	491	4,766	202	40	5,008	9.7
Total	174,518	1,309,188	72	11,722	16,332	20,210	50,750	689	666	52,105	100.00

Table 80: Countercyclical capital buffer
	2019
Total Risk Exposure Amount ($m)	843,395
Institution specific countercyclical capital buffer rate	0.61	%
Institution specific countercyclical capital buffer requirement ($m)	5,145

Appendix III

Asset encumbrance

Table 81: A - Assets¹
		Carrying amount of encumbered assets		Fair value of encumbered assets		Carrying amount of unencumbered assets		Fair value of unencumbered assets
		Total	of which: notionally eligible EHQLA and HQLA	Total	of which: notionally eligible EHQLA and HQLA	Total	of which: EHQLA and HQLA	Total	of which: EHQLA and HQLA
		$m	$m	$m	$m	$m	$m	$m	$m
010	Assets of the reporting institution	184,780	89,788			2,431,667	508,154
030	Equity instruments	21,394	6,225	-	-	53,307	9,555	-	-
040	Debt securities	92,917	83,563	92,781	83,441	434,933	335,877	429,779	331,896
	- of which:
050	- covered bonds	407	404	407	404	8,651	8,617	8,651	8,617
060	- asset-backed securities	340	-	340	-	4,917	-	4,941
070	- issued by general governments	72,234	71,317	72,234	71,317	257,347	231,365	257,090	231,134
080	- issued by financial corporations	7,948	1,178	7,948	1,178	94,890	15,080	94,845	15,080
090	- issued by non-financial corporations	1,880	214	1,880	214	14,481	4,761	14,168	4,658
120	Other assets	70,469	-			1,943,427	162,722

Table 81: B - Collateral received¹
		Fair value of encumbered collateral received or own debt securities issued		Unencumbered
				Fair value of collateral received or own debt securities issued available for encumbrance
		Total	of which: notionally eligible EHQLA and HQLA	Total	Of which: EHQLA and HQLA
		$m	$m	$m	$m
130	Collateral received by the reporting institution	269,782	216,763	244,994	147,920
140	Loans on demand	-	-	24	-
150	Equity instruments	23,675	8,811	16,624	6,284
160	Debt securities	245,440	207,952	206,899	141,636
	- of which:
170	- covered bonds	6	-	25	-
180	- asset-backed securities	17,973	389	1,765
190	- issued by general governments	207,476	196,387	162,884	129,241
200	- issued by financial corporations	12,196	6,012	23,290	5,800
210	- issued by non-financial corporations	7,295	5,164	16,948	6,595
220	Loans and advances other than loans on demand	-	-	14,222	-
230	Other collateral received	667	-	7,225	-
240	Own debt securities issued other than own covered bonds or ABSs	-	-	-	-
241	Own covered bonds and ABSs issued and not yet pledged			8,913	-
250	Total assets, collateral received and own debt securities issued	454,562	306,551

Table 81: C - Encumbered assets/collateral received and associated liabilities¹
		Matching liabilities, contingent liabilities or securities lent	Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered
		$m	$m
010	Carrying amount of selected financial liabilities	256,771	375,413

1 The values in these tables are the average of quarterly data points in the year.

Importance of encumbrance

We are a deposit-led bank and hence the majority of our funding is from customer current accounts and customer savings deposits payable on demand or at short notice. Given this structural unsecured funding position, we have little requirement to fund ourselves in secured markets, and therefore our overall low level of encumbrance reflects this position. However, we do provide collateralised financing services to clients as part of our GB&M business model, providing cash financing or specific securities, and these result in off-balance sheet encumbrance. The other sources that contribute to encumbrance are securities pledged in derivative transactions, mostly for hedging purposes, issuance of asset-backed securities, and covered bond programmes. HSBC Holdings ALCO reviews the asset encumbrance of the institution as a whole quarterly and any events changing the asset encumbrance level are examined.

For details on balance sheet encumbered and unencumbered assets, please refer to table 67.

Appendix IV

Summary of disclosures withheld


448(a)	Key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits) on their exposure to interest rate risk on positions not included in the trading book.	Assumptions regarding fixed term loan repayments and term behaviouralisation of non-maturity deposits and capital drive HSBC's structural interest rates positioning and market hedging requirements. These assumptions are proprietary and their disclosure could give key business strategy information to our competitors.

Other Information

Abbreviations

The following abbreviated terms are used throughout this document.

Currencies
$	United States dollar

A
ABCP	Asset-backed commercial paper
ABS¹	Asset-backed security
AIRB¹	Advanced internal ratings based approach
ALCM	Asset, Liability and Capital Management
ALCO	Asset and Liability Management Committee
AT1 capital	Additional tier 1 capital
AVA	Additional value adjustment

B
BCBS	Basel Committee on Banking Supervision
BoE	Bank of England
BSM	Balance Sheet Management

C
CCF	Credit conversion factor
CCP¹	Central counterparty
CCR¹	Counterparty credit risk
CCyB¹	Countercyclical capital buffer
CDS¹	Credit default swap
CET1¹	Common equity tier 1
CIU	Collective investment undertakings
CRA	Credit risk adjustment
CRD IV¹	Capital Requirements Regulation and Directive
CRE¹	Commercial real estate
CRM¹	Credit risk mitigation/mitigant
CRR¹	Customer risk rating
CRR II	Revised Capital Requirements Regulation, as implemented
CRO	Chief Risk Officer
CSA¹	Credit Support Annex
CVA¹	Credit valuation adjustment

D
D-SIB	Domestic systemically important bank
E
EAD¹	Exposure at default
EBA	European Banking Authority
EC	European Commission
ECA	Export Credit Agency
ECAI	External Credit Assessment Institution
ECL¹	Expected credit losses
EEA	European Economic Area
EL¹	Expected loss
EHQLA	Extremely high-quality liquid assets
EU	European Union

F
FIRB¹	Foundation internal ratings based approach
Fitch	Fitch Ratings
FPC¹	Financial Policy Committee (UK)
FRTB	Fundamental Review of the Trading book
FSB	Financial Stability Board
FSVC	Financial System Vulnerabilities Committee
FVOCI¹	Fair value through other comprehensive income

G
GAC	Group Audit Committee
GB&M	Global Banking and Markets, a global business
GMB	Group Management Board
GPB	Global Private Banking, a global business
GRC	Group Risk Committee
Group	HSBC Holdings together with its subsidiary undertakings
G-SIB¹	Global systemically important bank
G-SII	Global systemically important institution

H
HKMA	Hong Kong Monetary Authority
Hong Kong	The Hong Kong Special Administrative Region of the People's Republic of China
HQLA	High-quality liquid assets
HSBC	HSBC Holdings together with its subsidiary undertakings

I
IAA	Internal Assessment Approach
ICAAP¹	Internal Capital Adequacy Assessment Process
ICG	Individual capital guidance
ICR	Individual capital requirement
IFRSs	International Financial Reporting Standards
ILAA	Individual Liquidity Adequacy Assessment
IMA¹	Internal Models Approach
IMM¹	Internal Model Method
IRB¹	Internal ratings based approach
IRRBB	Interest rate risk in the banking book
IRC	Incremental risk charge

L
LCR¹	Liquidity Coverage Ratio
LFRF	Liquidity and Funding Risk Framework
LGD¹	Loss given default
Libor	London interbank offered rate

M
MDB	Multilateral Development Bank
MENA	Middle East and North Africa
MOC	Model Oversight Committee
Moody's	Moody's Investor Service
MPE	Multiple point of entry
MREL	Minimum requirements for own funds and eligible liabilities
MRM	Model Risk Management

N
NCOA	Non-credit obligation asset
NPL	Non-performing loans
NSFR¹	Net Stable Funding Ratio

O
ORMF	Operational risk management framework
OTC¹	Over-the-counter

P
PD¹	Probability of default
PFE	Potential future exposure
PIT	Point-in-time
POCI	Purchased or originated credit impaired loans
PPE	Property, plant and equipment
PRA¹	Prudential Regulation Authority (UK)
PVA	Prudent valuation adjustment

Q
QCCP	Qualifying Central Counterparty

R
RAF	Resolvability Assessment Framework
RAS	Risk appetite statement
RBM¹	Ratings Based Method
RBWM	Retail Bank and Wealth Management, a global business
Retail IRB¹	Retail internal ratings based approach
RMM	Risk Management Meeting of the GMB
RNIV	Risks not in VaR
RWA¹	Risk-weighted asset

S
SA/STD¹	Standardised approach
SA-CCR	Standardised approach for counterparty credit risk
S&P	Standard and Poor's rating agency
SFM	Supervisory Formula Method
SFT	Securities Financing Transactions
SIC	Securities Investment Conduit
SME	Small- and medium-sized enterprise
SPE¹	Special Purpose Entity
SRB¹	Systemic Risk Buffer
SREP	Supervisory Review and Evaluation Process
SSFA/SFA	Simplified supervisory formula approach
SVaR	Stressed Value at risk

T
TLAC¹	Total loss absorbing capital
TTC	Through-the-cycle
T1 capital¹	Tier 1 capital
T2 capital¹	Tier 2 capital

U
UK	United Kingdom
US	United States

V
VaR¹	Value at risk

1 Full definition included in the Glossary published on HSBC website www.hsbc.com

Cautionary statement regarding forward-

looking statements

The

Pillar 3 Disclosures at 31 December

2019

contain certain forward-looking statements with respect to HSBC's financial condition, results of operations, capital position and business.

Statements that are not historical facts, including statements about HSBC's beliefs and expectations, are forward-looking statements. Words such as 'expects', 'targets', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.

Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC's Directors, officers or employees to third parties, including financial analysts.

Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These include, but are not limited to:

• Changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks' policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; and consumer perception as to the continuing availability of credit and price competition in the market segments we serve; and deviations from the market and economic assumptions that form the basis for our ECL measurements;

• Changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and

• Factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in 'top and emerging risks' on pages 73 to 81 of the Annual Report and Accounts 2019.

Contacts

Enquiries relating to HSBC's strategy or operations may be directed to:

Richard O'Connor Global Head of Investor Relations HSBC Holdings plc 8 Canada Square London E14 5HQ United Kingdom	Mark Phin Head of Asia Pacific Investor Relations The Hongkong and Shanghai Banking Corporation Limited 1 Queen's Road Central Hong Kong

Telephone: +44 (0) 20 7991 6590	Telephone: +852 2822 4908

Email: investorrelations@hsbc.com	Email: investorrelations@hsbc.com.hk

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR GZGMZGRLGGZG

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HSBC Holdings (HSBA)

Tuesday, 26th November 2024

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