Final Results - Part 2

RNS Number : 5596B

Standard Chartered PLC

05 March 2014

Operational risk

Operational risk is the potential for loss arising from the failure of people, process or technology or the impact of external events. Operational risk exposures are managed through a consistent set of management processes that drive risk identification, assessment, control and monitoring. We seek to control operational risks to ensure that operational losses do not cause material damage to the Group's franchise.

Operational risks can arise from all business lines and from all activities carried out by the Group. We seek to systematically identify and manage operational risk by segmenting all the Group's activities into manageable units. Each of these has an owner who is responsible for identifying and managing all the risks that arise from those activities as an integral part of their First Line responsibilities. Products and services offered to clients and customers in all our markets are also assessed and authorised in accordance with product governance procedures.

Although operational risk exposures can take many varied forms, we seek to manage them in accordance with standards that drive systematic risk identification, assessment, control and monitoring. These standards are challenged and reviewed regularly to ensure their ongoing effectiveness. To support the systematic identification of material operational risk exposures associated with a given process, we classify them into the following types:


Operational Risk Subtypes
Processing failure	Potential for loss due to failure of an established process or to a process design weakness
External Rules & Regulations	Potential for actual or opportunity loss due to failure to comply with laws or regulations, or as a result of changes in laws or regulations or in their interpretation or application
Liability	Potential for loss or sanction due to a legal claim against any part of the Group or individuals within the Group
Legal enforceability	Potential for loss due to failure to protect legally the Group's interests or from difficulty in enforcing the Group's rights
Damage to assets	Potential for loss or damage to physical assets and other property from natural disaster and other events
Safety and security	Potential for loss or damage to health or safety of staff, customers or third parties arising from internal failures or the effects of external events
Internal crime or dishonesty	Potential for loss due to action by staff that is intended to defraud, misappropriate property or to circumvent the law or company policy
External crime	Potential for loss due to criminal acts by external parties such as fraud, theft and other criminal activity including internet crime
Model	Potential for loss due to a significant discrepancy between the output of risk measurement models and actual experience

Identified operational risk exposures are rated 'Low', 'Medium', 'High' or 'Very High' in accordance with defined risk assessment criteria. Risks which are outside of set materiality thresholds receive a differential level of management attention and are reported to senior management and risk committees up to Board level. Significant external events or internal failures which have occurred are analysed to identify the root cause of any failure for remediation and future mitigation. Actual operational losses are systematically recorded.

In the Second Line of Defence, Group Operational Risk is responsible for setting and maintaining the standards for operational risk management and control. In addition, specialist operational risk control owners have responsibility for the control of operational risk arising from the management of the following activities Group-wide: people, technology, vendor, property, security, accounting and financial control, tax, legal processes, corporate authorities and structure and regulatory compliance, as described further in the table below.

Operational risk control area
People Management	Recruiting, developing, compensating and managing employees
Technology Management	Developing, maintaining and using information technology, and information security
Vendor Management	Procurement, licensing, outsourcing and supplier management
Property Management	Managing property assets, projects and facilities.
Security Management	Protecting the security of staff and customers
Regulatory Compliance	Maintaining relationships with regulators, evidencing compliance with banking and securities regulations and managing regulatory change
Legal processes	Effective documentation of material transactions and other material contractual agreements, controlling the rights pertaining to material assets of the Group, and managing material claims and legal disputes
Accounting & Financial Control	Financial and management accounting, associated reporting and financial control
Tax management	Maintaining relationships with tax authorities and managing the Group's tax affairs to ensure compliance with our obligations
Corporate authorities & structure	Maintaining effective corporate legal entity structure and corporate decision making authorities

Each risk control owner, supported by a specialist control function, is responsible for identifying risks that are material to the Group and for maintaining an effective control environment, across the whole organisation. This includes defining appropriate policies for approval by authorised risk committees, that impose specific controls and constraints on the Group's activities.

The Group Operational Risk Committee, chaired by the GCRO, oversees the management of operational risks across the Group, supported by business, functional, and country-level committees. All operational risk committees operate on the basis of a defined structure of delegated authorities and terms of reference, derived from the GRC.

At the Group level, the Group Financial Crime Risk Committee provides direct oversight of operational risk relating to compliance with financial crime laws and regulations. The Committee takes its authority directly from the GRC, providing additional oversight of these risks. Close alignment is maintained with the Group Operational Risk Committee through overlap in membership and reporting.

Reputational risk

Reputational risk is the potential for damage to the Group's franchise, resulting in loss of earnings or adverse impact on market capitalisation as a result of stakeholders taking a negative view of the Group or its actions.

Reputational risk could arise from the failure of the Group to effectively mitigate the risks in its businesses including one or more of country, credit, liquidity, market, regulatory, legal or other operational risk. Damage to the Group's reputation could cause existing clients to reduce or cease to do business with the Group and prospective clients to be reluctant to do business with the Group. All employees are responsible for day to day identification and management of reputational risk. These responsibilities form part of the Group Code of Conduct and are further embedded through values-based performance assessments.

Reputational risk may also arise from a failure to comply with environmental and social standards. Our primary environmental and social impacts arise through our relationship with our clients and customers and the financing decisions we take. We have published a series of position statements which we apply in the provision of financial services to clients who operate in sectors with specific risks, and for key issues. We have mechanisms in our origination and credit processes to identify and assess environmental and social risks, and dedicated Sustainable Finance teams who review proposed transactions with identified risks.

The GRC provides Group-wide oversight on reputational risk, sets policy and monitors material risks. The Group Head of Corporate Affairs is the overall risk control owner for reputational risk. The BVC and BRC provide additional oversight of reputational risk on behalf of the Board

At the business level, Responsibility and Reputational Risk Committees have responsibility for managing reputational risk.

At country level, the Country Head of Corporate Affairs is the risk control owner of reputational risk. It is his or her responsibility to protect our reputation in that market with the support of the country management team. The Head of Corporate Affairs and Country Chief Executive Officer must actively:

· Promote awareness and application of our policies and procedures regarding reputational risk

· Encourage business and functions to take account of our reputation in all decision-making, including dealings with customers and suppliers

· Implement effective in-country reporting systems to ensure they are aware of all potential issues in tandem with respective business committees

· Promote effective, proactive stakeholder management through ongoing engagement.

Pension risk

Pension risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group's pension schemes. The risk assessment is focused on our obligations towards our major pension schemes, ensuring that our funding obligation to these schemes is comfortably within our financial capacity. Pension risk is monitored quarterly.

The Group Pension Risk Committee is the body responsible for governance of pension risk and it receives its authority from GRC.

Standard Chartered PLC - Capital

Capital management

Our approach to capital management is to maintain a strong capital base to support the development of our business, to meet regulatory capital requirements at all times and to maintain strong credit ratings.

Strategic, business and capital plans are drawn up annually covering a five-year horizon and are approved by the Board. The capital plan ensures that adequate levels of capital and an optimum mix of the different components of capital are maintained to support our strategy. Group Treasury is responsible for the ongoing assessment of the demand for capital and the updating of the Group's capital plan. The capital plan takes the following into account:

· Current regulatory capital requirements and our assessment of future standards

· Demand for capital due to business growth forecasts, loan impairment outlook and market shocks or stresses

· Forecast demand for capital to support credit ratings

· Available supply of capital and capital raising options

The Group formulates a capital plan with the help of internal models and other quantitative techniques. The Group uses a capital model to assess the capital demand for material risks, and supports this with our internal capital adequacy assessment. Other internal models help to estimate potential future losses arising from credit, market and other risks, and using regulatory formulae, the amount of capital required to support them. In addition, the models enable the Group to gain an enhanced understanding of its risk profile, for example, by identifying potential concentrations and assessing the impact of portfolio management actions. Stress testing and scenario analysis are an integral part of capital planning, and are used to ensure that the Group's internal capital adequacy assessment considers the impact of extreme but plausible scenarios on its risk profile and capital position. They provide an insight into the potential impact of significant adverse events and how these could be mitigated through appropriate management actions. The capital modelling process is a key part of our management discipline.

A strong governance and process framework is embedded in our capital planning and assessment methodology. The key capital management committees are the Group Asset and Liability Committee (GALCO) and the Capital Management Committee (CMC). The members of the GALCO include all the Group Executive Directors, the Group Chief Risk Officer and senior attendees from Group Treasury, Finance, Risk and the business. The GALCO regularly reviews the capital plan and approves capital management policies and guidelines. The CMC oversees the tactical management of the Group's capital position and provides a bridge to GALCO's strategic management of the Group's capital position. The GALCO delegates certain authorities to CMC in relation to capital management.

The Group's capital position, including its relationship to the Group's risk appetite statement, is regularly considered by the Board Risk Committee (BRC). Further details of the BRC's activities in relation to capital are available in the Corporate Governance section on page 143. At a country level, capital is monitored by the Country Asset and Liability Committee (ALCO). Appropriate policies are in place governing the transfer of capital within the Group.

Current compliance with Capital Adequacy Regulations

In light of the uncertain economic environment and continuing uncertainty as to the end state for banks' regulatory capital structures, the Group continues to believe it is appropriate to remain both strongly capitalised and well above regulatory requirements.

On 1 April 2013, the UK FSA ceased to exist and from that date, Standard Chartered Bank was authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA.

The capital that we are required to hold by the PRA is determined by our balance sheet, off-balance sheet, counterparty and other risk exposures. Further detail on counterparty and risk exposures is included in the Risk review on pages 33 to 34.

Capital in branches and subsidiaries is maintained on the basis of host regulators' requirements and the Group's assessment of capital requirements under normal and stress conditions. Suitable processes and controls are in place to monitor and manage capital adequacy and ensure compliance with local regulatory ratios in all our legal entities. These processes are designed to ensure that we have sufficient capital available to meet local regulatory capital requirements at all times.

The table on page 89 summarises the consolidated capital position of the Group.

Basel II

The Group complies with the Basel II framework, which has been implemented in the UK through the PRA's General Prudential Sourcebook and its Prudential Sourcebook for Banks, Building Societies and Investment Firms.

Since 1 January 2008, we have been using the advanced Internal Ratings Based (IRB) approach for the calculation of credit risk capital requirements with the approval of our relevant regulators. This approach builds on our risk management practices and is the result of a significant investment in data warehousing and risk models. We use Value at Risk (VaR) models for the calculation of market risk capital requirements for part of our trading book exposures where permission to use such models has been granted by our relevant regulators. Where our market risk exposures are not approved for inclusion in VaR models, the capital requirements are determined using standard rules provided by the relevant regulator. We apply the Standardised Approach for determining the capital requirements for operational risk.

The Group uses IRB models to calculate certain regulatory capital requirements. The Group's models are subject to initial approval, and ongoing supervision by its regulators. The Group believes that the overall performance of its models has been, and continues to be, very conservative. Recently, the PRA has revised its philosophy and approach towards the use and calibration of IRB models. Consequently, the Group is currently in discussions with the PRA regarding changes to some of its IRB models. Whilst the outcome of these discussions and the timetable for implementing any such changes is not fully finalised, the Group currently expects the PRA to require changes in 2014. These include changes to the calculation of Exposure At Default (EAD) and the introduction of Loss Given Default (LGD) floors based on the Foundation Approach for certain exposures where the country-specific default experience is not deemed sufficient for modelling purposes, resulting in an increase in the risk-weighted requirements calculated by such models. The Group expects these PRA requirements will, in part, be offset by model efficiencies, regulatory approvals of new IRB models and other management mitigating actions. The

Standard Chartered PLC - Capital

continued

Group's Pillar 3 Disclosures illustrate both the conservative nature of the Group's models and their robust performance over recent years. The Group currently estimates that the net impact of such model changes in 2014 will be a reduction in the Group's Common Equity Tier 1 (CET1) ratio on a pro forma basis of between 30 and 50bps.

CRD IV

The Financial Policy Committee (FPC) announced in March 2013 that the PRA should take action to ensure that the level of CET1 capital held by UK banks was above 7 per cent following any required adjustments to reflect a "proper valuation of their assets", "a realistic assessment of future conduct costs" and "a prudent calculation of risk weights." The PRA published the results of this exercise on 20 June 2013, confirming that the Group exceeded the 7 per cent CET1 target set by the FPC for the purposes of the exercise and, therefore, did not have a capital shortfall and had no action to take on its capital position.

The final text of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD) which together comprise CRD IV were published in the EU Official Journal on 27 June 2013. In Policy Statement PS7/13, the PRA finalised its approach to implementation of the CRD IV rules in December 2013 to come into effect on 1 January 2014. The PRA's approach accelerates a number of aspects of CRD IV where there is national discretion to do so, particularly in relation to the definition of CET1.

Notwithstanding the development of the CRD IV rules during 2013, the final CRD IV outcome remains uncertain. A number of areas of CRD IV are subject to further consultation or await promulgation of the relevant European Banking Authority (EBA) Technical Standards and UK implementing rules. Further, the CRD leaves considerable scope for national discretion to be applied.

G-SIB

On 11 November 2013, the FSB published an updated list of global systemically important banks (G-SIBs), using December 2012 data and an updated assessment methodology published by the BCBS in July 2013. The Group retained its classification as a G-SIB with a 1 per cent additional CET1 requirement. We understand that the PRA have applied a "supervisory judgement" overlay resulting in the Group's classification as a G-SIB. G-SIBs will be required to hold an additional CET1 buffer. If the Group remains a G-SIB in November 2014, its related CET1 requirement will be phased in from 1 January 2016 to 1 January 2019. The EBA is currently consulting on technical standards relating to the identification of, and disclosure requirements for, G-SIBs.

Capital buffers

CRD IV contains provisions for a number of additional capital buffers and the following comments are based on the Group's current understanding of the rules.

A capital conservation buffer (CCB) of 2.5 per cent CET1 will be phased in from 1 January 2016 to 1 January 2019. The CCB is intended to provide an additional level of capital available to absorb unexpected losses during a period of stress.

A potential countercyclical buffer (CCyB) requirement of up to 2.5 per cent will be phased in from 1 January 2016 to 1 January 2019. The CCyB is intended to be used by authorities to restrain the pace of credit growth and leverage by increasing the levels of CET1 a bank is required to hold during periods of strong economic activity.

A systemic risk buffer (SRB) may be imposed by national authorities to mitigate perceived systemic risk posed by one or more financial institutions in the relevant jurisdictions. If required, the SRB will be set in CET1 at a minimum level of 1 per cent of the exposures giving rise to the SRB. The rules relating to the SRB and its calibration are not yet finalised.

Final capital requirements will not be uniform across the sector. Each institution is expected to have a specific minimum requirement based on its particular business and risk profile as implemented through a variety of tools including: Pillar 2A requirements, PRA buffers, buffers for global or domestic systemically important banks, countercyclical buffers, systemic risk buffers and, potentially, other macro prudential tools. Consequently, it is not possible to determine precisely what the Group's final capital requirements may be or the ultimate impact of the various regulatory initiatives on the Group's capital position.

Pillar 2

In December 2013, the PRA published amendments to the current Pillar 2 regime. In addition to Pillar 1 capital requirements, the Group, like other UK banks, currently holds capital in respect of its Pillar 2 risks. Pillar 2 comprises:

· An Individual Capital Guidance (ICG or Pillar 2A buffer) for risks not covered or adequately addressed by Pillar 1 capital requirements (including for example: pension risk, interest rate risk, concentration risk and operational risk).

· A Capital Planning Buffer (CPB or Pillar 2B buffer) to ensure the Group remains well capitalised in a stressed environment.

Going forward, the Group will expect to hold capital under Pillar 2 in addition to Pillar 1 requirements as follows:

· From 1 January 2015, the Group must hold at least 56 per cent of its Pillar 2A buffer in CET1.

· From 1 January 2016, the PRA Buffer Assessment will take into account the CCB, and any G-SIB and SRB. A further CET1 component could be added to the extent that the PRA do not consider that these buffers are sufficient to cover the Group's risks. The PRA have announced they intend to consult in 2014 on the transition to the new regime.

Based on the Group's 2013 ICG and its current understanding of the rules, the Group's total Pillar 2A guidance on a pro forma basis is 0.7 per cent of required total capital. Assuming that the Group meets its Pillar 2A guidance to the extent possible with Tier 1 and Tier 2 capital, the Group's Pillar 2A CET1 requirement is approximately 40bps. The Group's Pillar 2A guidance is usually considered with the PRA annually and so would be expected to vary over time.

Primary loss absorbing capacity (PLAC)

Based on its current understanding of the draft rules, the Group estimates that as at 31 December 2013 its PLAC level is around 23 per cent of risk-weighted assets (RWA). This figure includes senior liabilities with at least one year to maturity and that part of subordinated debt that is amortised for regulatory capital purposes over the last five years of the relevant instrument's duration (with at least one year remaining to maturity) and therefore outside the scope of regulatory capital recognition.

Capital base
		2013	2012
		$million	$million
Shareholders' equity
Parent company shareholders' equity per balance sheet		46,246	45,362
Preference share classified as equity included in Tier 1 capital		(1,494)	(1,495)
		44,752	43,867
Non-controlling interests
Non-controlling interests per balance sheet		595	693
Non-controlling Tier 1 capital included in other Tier 1 capital		(320)	(320)
		275	373
Regulatory adjustments
Unrealised (gains)/losses on available-for-sale debt securities		75	(97)
Unrealised gains on available-for-sale equity securities included in Tier 2		(744)	(490)
Cash flow hedge reserve		(15)	(81)
Other adjustments¹		351	(35)
		(333)	(703)
Deductions
Goodwill and other intangible assets		(6,070)	(7,312)
50 per cent of excess of expected losses ²		(869)	(966)
50 per cent of tax on excess of expected losses²		259	240
50 per cent of securitisation positions		(92)	(118)
Other regulatory adjustments		1	(42)
		(6,771)	(8,198)
Core Tier 1 capital		37,923	35,339
Other Tier 1 capital
Preference shares included within shareholder's equity		1,494	1,495
Preference shares included within 'Subordinated debt and other borrowings'		299	1,205
Innovative Tier 1 securities (excluding non-controlling Tier 1 capital)		2,577	2,553
Non-controlling Tier 1 capital		320	320
		4,690	5,573
Deductions
50 per cent of tax on excess of expected losses²		259	240
50 per cent of material holdings		(537)	(552)
		(278)	(312)
Total Tier 1 capital		42,335	40,600
Tier 2 capital:
Qualifying subordinated liabilities:³
Subordinated liabilities and other borrowed funds as per balance sheet⁴		20,397	18,799
Preference shares eligible for Tier 1 capital		(299)	(1,205)
Innovative Tier 1 securities eligible for Tier 1 capital		(2,577)	(2,553)
Adjustments relating to fair value hedging and non-eligible securities		(1,314)	(2,052)
		16,207	12,989
Regulatory adjustments
Reserves arising on revaluation of available-for-sale equities		744	490
Portfolio impairment provision		237	248
		981	738
Deductions
50 per cent of excess of expected losses²		(869)	(966)
50 per cent of material holdings		(537)	(552)
50 per cent of securitisation positions		(92)	(118)
		(1,498)	(1,636)
Total Tier 2 capital		15,690	12,091
Deductions from Tier 1 and Tier 2 capital		(6)	(3)
Total capital base		58,019	52,688
¹	Other adjustments include the effect of regulatory consolidation and own credit adjustment
²	Excess of expected losses in respect of advanced IRB portfolios are shown gross of tax benefits
³	Consists of perpetual subordinated debt $1,336 million (2012: $1,314 million) and other eligible subordinated debt $14,871 million (2012: $11,675 million). Lower Tier 2 instruments that will mature within 5 years include amortisation
⁴	The amount for 2012 does not agree to Note 25 as the prior period was re-stated due to the use of equity accounting for associates and joint ventures.

Movement in total capital
	2013	2012
	$million	$million
Opening Core Tier 1 capital:	35,339	31,833
Ordinary shares issued in the year and share premium	22	59
Profit attributable to parent company shareholders' for the year	4,090	4,887
Dividends, net of scrip	(2,068)	(1,407)
Decrease/Increase in goodwill and other intangible assets	1,242	(251)
Foreign currency translation differences	(1,223)	513
Increase in unrealised gains on available for sale assets	(82)	(379)
Net effect of regulatory consolidation and change in non-controlling interests	322	-
Movement in eligible other comprehensive income	224	306
(Increase)/decrease in excess expected loss, net of tax	116	(210)
(Increase)/decrease in securitisation positions	26	(12)
Own credit adjustment, net of tax	(85)	-
Closing Core Tier 1 capital	37,923	35,339

Opening Other Tier 1 capital	5,261	5,179
Increase in tax benefit of excess expected losses	19	54
(Increase)/decrease in material holdings deducted from capital	15	(31)
Redeemed capital	(925)	-
Other	42	59
Closing Other Tier 1 capital	4,412	5,261

Opening Tier 2 capital	12,091	10,499
Issuance of subordinated loan capital, net of redemptions and foreign currency translation differences	3,218	1,641
Increase in revaluation reserve	254	249
Increase/(decrease) in portfolio impairment provision	(11)	9
(Increase)/decrease in excess expected losses	97	(264)
(Increase)/decrease in material holdings deducted from capital	15	(31)
(Increase)/decrease in securitisation positions	26	(12)
Closing Tier 2 capital	15,690	12,091
Deductions from total capital	(6)	(3)
Closing total capital	58,019	52,688

Risk weighted assets and capital ratios
	2013	2012
	$million	$million
Credit risk	265,834	246,650
Operational risk	33,289	30,761
Market risk	23,128	24,450
Total risk weighted assets	322,251	301,861
Capital ratios
Core Tier 1 capital	11.8%	11.7%
Tier 1 capital	13.1%	13.4%
Total capital ratio	18.0%	17.4%

Risk-weighted assets by business and geography		2013	2012
		$million	$million
Consumer Banking		81,148	80,889
Credit risk		70,736	71,481
Operational risk		10,412	9,408
Wholesale Banking		241,103	220,972
Credit risk		195,098	175,169
Operational risk		22,877	21,353
Market risk		23,128	24,450

Total risk-weighted assets		322,251	301,861
Hong Kong		39,610	36,534
Singapore		44,120	45,064
Korea		24,883	26,667
Other Asia Pacific		59,898	52,313
India		22,556	23,145
Middle East & Other S Asia		32,815	33,119
Africa		19,357	19,856
Americas, UK & Europe		89,818	73,527
		333,057	310,225
Less : Netting balances¹		(10,806)	(8,364)
Total risk-weighted assets		322,251	301,861
¹	Risk-weighted assets by geography are reported gross of any netting benefits
Risk-weighted contingent liabilities and commitments²
		2013	2012
		$million	$million
Contingent liabilities		15,519	14,725
Commitments		11,814	12,640
²	These amounts are included in total risk-weighted assets.

Movement in risk-weighted assets
	Wholesale Banking	Consumer Banking	Total
	Credit Risk	Credit Risk	Credit Risk	Market Risk
	$million	$million	$million	$million
Opening risk-weighted assets at 1 January 2013	175,169	71,481	246,650	24,450
Asset growth	15,950	1,738	17,688	(1,322)
Credit migration	9,214	(260)	8,954	-
RWA efficiencies	(2,084)	(1,832)	(3,916)	-
Model, methodology and policy changes	1,012	1,183	2,195	-
Acquisitions and disposals	-	301	301	-
Foreign currency translation differences	(4,163)	(1,875)	(6,038)	-
Closing risk weighted assets at 31 December 2013	195,098	70,736	265,834	23,128

	Wholesale Banking	Consumer Banking	Total
	Credit Risk	Credit Risk	Credit Risk	Market Risk
	$million	$million	$million	$million
Opening risk-weighted assets at 1 January 2012	157,538	62,856	220,394	21,354
Asset growth	10,236	3,763	13,999	2,000
Credit migration	4,940	1,164	6,104	-
RWA efficiencies	(2,800)	(1,000)	(3,800)	-
Model, methodology and policy changes	5,324	2,713	8,037	(700)
Foreign currency translation differences	(69)	1,985	1,916	-
Stressed VaR	-	-	-	1,796
Closing risk-weighted assets at 31 December 2012	175,169	71,481	246,650	24,450

RWA grew by $20.4 billion, or 7 per cent, compared to 31 December 2012, with an increase in Wholesale Banking (WB) of $20.1 billion and $0.3 billion in Consumer Banking (CB). WB RWA growth was mainly in Americas, UK & Europe, Singapore and Other Asia Pacific region. CB growth in Hong Kong, Africa, and Middle East and Other South Asia was partly offset by an RWA decline in Singapore. Growth in Other Asia Pacific region was due to the Group now fully consolidating its Permata joint venture for regulatory purposes and this change in methodology increased RWA by $6.9 billion, of which $4.6 billion was in WB (credit risk $4.4 billion, operational risk $0.2 billion) and $2.3 billion in CB (credit risk $2 billion, operational risk $0.3 billion).

WB credit risk RWA increased by $19.9 billion. Excluding the impact of fully consolidating Permata as highlighted above, the increase was $15.5 billion. This was driven by asset growth of $16 billion across Transaction Banking, Financial Markets and Corporate Finance. Additionally, due to downgrades especially in the Americas, UK & Europe region, the impact of negative credit migration was $9.2 billion. These increases were partially offset by RWA efficiencies ($2.1 billion), methodology changes ($3.4 billion) and the foreign currency translation impact ($4.2 billion) due to the appreciation of the US dollar relative to local currencies in some of our footprint markets.

CB credit risk RWA fell by $0.7 billion. Excluding the impact of fully consolidating Permata, the underlying drop in RWA was $2.7 billion. Asset growth across SME, Wealth Management, Credit Cards and Personal Loans of $1.7 billion was more than offset through RWA efficiencies, in particular through better collateral management. The drop was, therefore, primarily driven by the foreign currency translation impact due to the appreciation of the US dollar relative to local currencies in some of our footprint markets.

As at 31 December 2013 market risk RWA was $23.1 billion compared to $24.5 billion at 31 December 2012. The decrease in market risk RWA is primarily due to a reduction in CAD2 internal model positions, covering foreign exchange and structured products. Positions outside the CAD2 permission continue to be assessed according to standard PRA rules. Of the total market risk RWA, 29 per cent is subject to CAD2 internal models and 71 per cent is under standard rules.

Operational risk RWA increased by $2.5 billion, or 8 per cent. This is primarily determined by the change in income over a rolling three-year time horizon. The growth reflects the strong performance of the Group over that period and the methodology change for the Group's Permata joint venture in the Other Asia Pacific region.

CRD IV estimate

The CRD IV position presented here, derived in accordance with the Group's current understanding of the final CRD IV rules, does not constitute either a capital or RWA forecast and may be subject to change.

The Group's current view of its CRD IV CET1 ratio on a pro forma transitional basis (as at 1 January 2014) is 10.9 per cent. The CRD IV impact is due to both increased regulatory deductions from CET1 capital (particularly the full and unsheltered deduction for excess expected losses relative to provisions and the deduction of certain deferred tax assets) and additional RWA (particularly in relation to credit valuation adjustments (CVA)).

The Group's current view of its CRD IV CET1 ratio on a pro forma end point basis is 11.2 per cent which reflects (a) the impact of estimated mitigation of the CVA RWA increase through use of internal models (subject to regulatory approval) and increased central clearing of certain derivatives and (b) the inclusion of unrealised gains on available for sale equity securities in the end point calculation which are expected to be recognised from 2015 onwards.

The CRR and the proposed EBA final technical standards on own funds refer to the deduction of foreseeable dividends when calculating CET1 in certain circumstances. The impact of the deduction of the final proposed dividend for 2013 of $1,385 million from the Group's CET1 calculation would be around 40bps which reduces to around 30bps assuming a 25 per cent scrip dividend take up.

In November 2013, the PRA set out its target for large UK institutions of 7 per cent CET1 and a 3 per cent leverage ratio from 1 January 2014, the latter excluding non CRR compliant hybrid capital and both measures taking into account adjustments to RWA and capital deemed necessary by the PRA (in line with those communicated by the PRA as part of the 20 June 2013 capital exercise). The Group exceeds both of these requirements.

Reconciliation of Core Tier 1 and Common Equity Tier 1
	2013
	$million
Core Tier 1 capital	37,923
Full deduction of excess expected losses	(1,128)
Recognition of AFS gains and losses	669
Deduction of deferred tax assets	(273)
Prudent Valuation Adjustment (PVA)	(180)
Embedded goodwill net of tax	(102)
Ineligible non-controlling interests	(299)
Securitisation positions, free deliveries and other	(102)
Common Equity Tier 1 capital (end point)	36,508

Reconciliation of Basel II risk-weighted assets to CRD IV
	2013
	$million
Basel II risk-weighted assets	322,251
Credit Valuation Adjustment	7,900
Asset Value Correlation	5,200
Introduction of threshold deduction approach	2,482
Application of CRR standardised rules	(6,377)
Estimated mitigation	(6,100)
Other	(160)
CRD IV risk-weighted assets (end point)	325,196

Future Capital Requirements

As the relevant legislation and rules are not yet fully implemented it is not possible to predict the Group's final capital requirements. The actual outcome also depends in part on the future shape of the Group, future management actions and the future view taken by its regulators as to the Group's business and risk profile. Based on the Group's current understanding of the rules, a minimum CET1 capital requirement can be identified as follows:

· a minimum CET1 requirement of 4.5 per cent by 1 January 2015

· a CCB of 2.5 per cent by 1 January 2019

· a G-SIB buffer of 1 per cent by 1 January 2019

Following PS 7/13, the PRA requires at least 56 per cent of the Group's Pillar 2A guidance to be held in CET1. Based on its current ICG, the Group currently estimates a Pillar 2A CET1 addition of around 0.4 per cent which is subject to annual review by the PRA. This results in a minimum CET1 requirement of around 8.4 per cent. The Group's current CET1 position significantly and materially exceeds this requirement. The Group would also expect to continue to operate at all times with a prudent management buffer above minimum capital requirements. The UK authorities have yet to finalise the rules relating to, and calibration of, the CCyB, SRB, PRA Buffer and additional sectoral capital requirements.
The Group starts in a notably strong position: diverse, well capitalised, highly liquid and with a conservative approach to balance sheet management. The Group currently operates at capital levels materially above the current minimum requirements and, additionally, has a number of levers at its disposal to manage future regulatory requirements (e.g. IRB model adjustments, CRD IV buffers, Pillar 2 guidance, PRA buffers or sectoral capital requirements) as they finalise or emerge over the next few years. In this context, the Group introduced at its Investor Day in November 2013, a new financial metric of managing RWA growth to a level below that of earnings growth, which provides additional conservatism. This is intended to ensure that the Group achieves, and maintains, an accretive capital trajectory over the medium-term, which places it strongly to accommodate both future growth and potentially higher, if they emerge, regulatory capital requirements.

Consolidated income statement For the year ended 31 December 2013	Notes	2013	2012¹
	Notes	$million	$million
Interest income		17,593	17,827
Interest expense		(6,437)	(7,046)
Net interest income		11,156	10,781
Fees and commission income		4,581	4,575
Fees and commission expense		(480)	(496)
Net trading income	3	2,514	2,739
Other operating income	4	1,006	1,184
Non-interest income		7,621	8,002
Operating income		18,777	18,783
Staff costs	5	(6,570)	(6,492)
Premises costs	5	(877)	(863)
General administrative expenses	5	(2,032)	(2,707)
Depreciation and amortisation	6	(714)	(660)
Operating expenses		(10,193)	(10,722)
Operating profit before impairment losses and taxation		8,584	8,061
Impairment losses on loans and advances and other credit risk provisions	7	(1,617)	(1,196)
Other impairment
Goodwill	8	(1,000)	-
Other	8	(129)	(196)
Profit from associates and joint ventures		226	182
Profit before taxation		6,064	6,851
Taxation	9	(1,864)	(1,866)
Profit for the year		4,200	4,985


Profit attributable to:
Non-controlling interests	28	110	98
Parent company shareholders		4,090	4,887
Profit for the year		4,200	4,985


		Cents	Cents
Earnings per share:
Basic earnings per ordinary share	11	164.4	199.7
Diluted earnings per ordinary share	11	163.0	197.7

Dividends per ordinary share :
Interim dividends paid	10	28.80	27.23
Final proposed dividend²	10	57.20	56.77


		$million	$million
Total dividend:
Interim dividend paid		696	650
Final proposed dividend²		1,385	1,366

¹Amounts have been restated as explained in note 31
²The final proposed dividend in respect of 2013 will be accounted for in 2014 as explained in note 10

Consolidated statement of comprehensive income For the year ended 31 December 2013

				2013	2012¹
			Notes	$million	$million
Profit for the year				4,200	4,985
Other comprehensive income:
	Items that will not be reclassified to Income statement:
	Actuarial gain/(losses) on retirement benefit obligations		26	79	(76)

	Items that may be reclassified subsequently to Income statement:
	Exchange differences on translation of foreign operations:
		Net (losses)/gains taken to equity		(1,206)	568
		Net losses on net investment hedges		(35)	(73)
	Share of other comprehensive income from associates and joint ventures			(15)	4
	Available-for-sale investments:
		Net valuation gains taken to equity		171	1,054
		Reclassified to income statement		(248)	(336)
	Cash flow hedges:
		Net (losses)/gains taken to equity		(83)	133
		Reclassified to income statement		6	(20)
	Taxation relating to components of other comprehensive income			34	(132)
	Other comprehensive income for the year, net of taxation			(1,297)	1,122
Total comprehensive income for the year				2,903	6,107

Total comprehensive income attributable to:
Non-controlling interests			28	79	84
Parent company shareholders				2,824	6,023
				2,903	6,107
¹ Amounts have been restated as explained in note 31

Consolidated balance sheet As at 31 December 2013	Notes	2013	2012¹
Consolidated balance sheet As at 31 December 2013	Notes	$million	$million
Assets
Cash and balances at central banks	12, 30	54,534	60,537
Financial assets held at fair value through profit or loss	12, 13	29,335	27,076
Derivative financial instruments	12, 14	61,802	49,495
Loans and advances to banks	12, 15	83,702	67,797
Loans and advances to customers	12, 16	290,708	279,638
Investment securities	12, 17	102,716	99,225
Other assets	12, 18	33,570	28,548
Current tax assets		234	215
Prepayments and accrued income		2,510	2,552
Interests in associates and joint ventures		1,767	1,684
Goodwill and intangible assets	20	6,070	7,145
Property, plant and equipment		6,903	6,620
Deferred tax assets		529	676
Total assets		674,380	631,208

Liabilities
Deposits by banks	12, 21	43,517	36,427
Customer accounts	12, 22	381,066	372,874
Financial liabilities held at fair value through profit or loss	12, 13	23,030	23,064
Derivative financial instruments	12, 14	61,236	47,192
Debt securities in issue	12, 23	64,589	55,979
Other liabilities	12, 24	27,338	24,285
Current tax liabilities		1,050	1,066
Accruals and deferred income		4,668	4,811
Subordinated liabilities and other borrowed funds	12, 25	20,397	18,588
Deferred tax liabilities		176	161
Provisions for liabilities and charges		107	215
Retirement benefit obligations	26	365	491
Total liabilities		627,539	585,153

Equity
Share capital	27	1,214	1,207
Reserves		45,032	44,155
Total parent company shareholders' equity		46,246	45,362
Non-controlling interests	28	595	693
Total equity		46,841	46,055
Total equity and liabilities		674,380	631,208

¹Amounts have been restated as explained in note 31

Consolidated statement of changes in equity For the year ended 31 December 2013
		Share capital	Share premium account	Capital and capital redemption reserve¹	Merger reserve	Available-for-sale reserve	Cash flow hedge reserve	Translation reserve	Retained earnings	Parent company shareholders equity	Non-controlling interests	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
At 1 January 2012		1,192	5,432	18	12,421	(109)	(13)	(1,394)	23,167	40,714	661	41,375
Profit for the year		-	-	-	-	-	-	-	4,887	4,887	98	4,985
Other comprehensive income		-	-	-	-	587	94	509	(54)²	1,136	(14)	1,122
Distributions		-	-	-	-	-	-	-	-	-	(60)	(60)
Shares issued, net of expenses		2	57	-	-	-	-	-	-	59	-	59
Net own shares adjustment		-	-	-	-	-	-	-	(386)	(386)	-	(386)
Share option expense, net of taxation		-	-	-	-	-	-	-	359	359	-	359
Capitalised on scrip dividend		13	(13)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(1,407)	(1,407)	-	(1,407)
Other increases		-	-	-	-	-	-	-	-	-	8	8
At 31 December 2012		1,207	5,476	18	12,421	478	81	(885)	26,566	45,362	693	46,055
Profit for the year		-	-	-	-	-	-	-	4,090	4,090	110	4,200
Other comprehensive income		-	-	-	-	(32)	(66)	(1,221)	53³	(1,266)	(31)	(1,297)
Distributions		-	-	-	-	-	-	-	-	-	(77)	(77)
Shares issued, net of expenses		5	19	-	-	-	-	-	-	24	-	24
Net own shares adjustment		-	-	-	-	-	-	-	(124)	(124)	-	(124)
Share option expense, net of taxation		-	-	-	-	-	-	-	240	240	-	240
Capitalised on scrip dividend		2	(2)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(2,068)	(2,068)	-	(2,068)
Other decreases⁴		-	-	-	-	-	-	-	(12)	(12)	(100)	(112)
At 31 December 2013		1,214	5,493	18	12,421	446	15	(2,106)	28,745	46,246	595	46,841
¹	Includes capital reserve of $5 million and capital redemption reserve of $13 million
²	Comprises actuarial losses, net of taxation and non-controlling interests, of $58 million and share of comprehensive income from associates and joint ventures of $4 million
³	Comprises actuarial gains, net of taxation and non-controlling interests, of $58 million and share of comprehensive income from associates and joint ventures of $(5) million
⁴	Other decreases in Non-controlling interests mainly relate to the impact of losing controlling interest in a subsidiary after divesting from the company

Consolidated Cash flow statement For the year ended 31 December 2013			2013	2012¹
		Notes	$million	$million
Cash flows from operating activities
Profit before taxation			6,064	6,851
Adjustments for:
	Non-cash items included within income statement	29	4,121	2,421
	Change in operating assets	29	(44,144)	(8,409)
	Change in operating liabilities	29	45,148	18,970
	Contributions to defined benefit schemes		(168)	(203)
	UK and overseas taxes paid		(1,716)	(1,767)
Net cash from operating activities			9,305	17,863
Net cash flows from investing activities
	Purchase of property, plant and equipment		(205)	(162)
	Disposal of property, plant and equipment		156	195
	Acquisition of investment in subsidiaries, associates,
	and joint ventures, net of cash acquired		(46)	(63)
	Purchase of investment securities	17	(142,888)	(156,883)
	Disposal and maturity of investment securities		137,163	145,327
	Dividends received from investment in subsidiaries, associates and joint ventures		5	14
Net cash used in investing activities			(5,815)	(11,572)
Net cash flows from financing activities
	Issue of ordinary and preference share capital, net of expenses		24	59
	Purchase of own shares		(154)	(425)
	Exercise of share options through ESOP		30	39
	Interest paid on subordinated liabilities		(813)	(989)
	Gross proceeds from issue of subordinated liabilities		5,448	3,390
	Repayment of subordinated liabilities		(2,616)	(1,701)
	Interest paid on senior debts		(563)	(867)
	Gross proceeds from issue of senior debts		6,816	11,453
	Repayment of senior debts		(3,730)	(5,938)
	Dividends paid to non-controlling interests and preference shareholders, net of scrip		(178)	(161)
	Dividends paid to ordinary shareholders, net of scrip		(1,967)	(1,306)
Net cash from financing activities			2,297	3,554
Net increase in cash and cash equivalents			5,787	9,845
	Cash and cash equivalents at beginning of year		79,518	69,566
	Effect of exchange rate movements on cash and cash equivalents		(1,149)	107
Cash and cash equivalents at end of year		30	84,156	79,518
¹ Amounts have been restated as explained in note 31

Notes to the financial statements

1. Basis of preparation

The Group financial statements consolidate those of Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group's interest in associates and jointly controlled entities.

These Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the EU.

Except as noted below, the accounting policies applied by the Group as at, and for, 31 December 2013 are the same as those applied by the Group in its consolidated financial statements as at, and for, the year ended 31 December 2012. The following accounting standards and amendments have been endorsed by the EU.

Accounting standards adopted for reporting periods beginning 1 January 2013

On 1 January 2013, the Group adopted IFRS 13 Fair Value Measurement, which consolidates the guidance on how to measure fair value, which was spread across various IFRS, into one comprehensive standard. It introduces the use of an exit price, as well as extensive disclosure requirements, particularly the inclusion of non-financial instruments into the fair value hierarchy. IFRS 13 is required to be applied prospectively. The most significant impact of applying IFRS 13 is the mandatory requirement for the fair value of derivative liabilities and other liabilities held at fair value through profit or loss to take into account an adjustment for an entity's own credit risk and enhanced disclosure of valuation techniques and details on significant unobservable inputs for level 3 financial instruments. The adjustment for own credit risk is recognised as part of Net trading income (see note 3), and the approach for determining these fair values, along with the enhanced disclosures, are set out in note 12.

On 1 January 2013, the group adopted IAS 19 Employee Benefits (Revised), which introduces significant changes in the measurement, presentation and disclosure of defined benefit plans. The most significant impact on the Group as a result of these revisions comes in the form of the rate used to discount the plan assets. Where this rate has historically (until 31 December 2012) been based on the expected return on each class of pension assets, from 1 January 2013, IAS 19 requires assets to be measured based on an AA rated corporate bond yield, which aligns to the rate at which the liability is discounted. IAS 19 also makes changes to termination benefits as well as enhancing disclosure requirements and is required to be applied retrospectively. The effect of these changes on total operating expenses and pre-tax profit is not material.

On 1 January 2013 the Group early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures. Though the EU has endorsed these standards for application from 1 January 2014, which is one year later than the mandatory adoption date required by the IASB of 1 January 2013, the EU has permitted early adoption from 1 January 2013.

IFRS 10 and 11, IAS 27 and 28 require retrospective application while IFRS 12 is applied prospectively. IFRS 10 replaces the current guidance on consolidation in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Special Purpose Entities. It introduces a single model of assessing control whereby an investor controls an investee when it has the power, exposure to variable returns and the ability to use its power to influence the returns of the investee. IFRS 10 also includes specific guidance on de facto control, protective rights and the determination of whether a decision maker is acting as principal or agent, all of which influence the assessment of control. The application of IFRS 10 has not had a material impact on the Group.

IFRS 11 replaces IAS 31 Interests in Joint Ventures. It requires all joint ventures to be equity accounted thereby removing the option in IAS 31 for proportionate consolidation. It also removes the IAS 31 concept of jointly controlled assets. As a result, the Group's joint venture investment in PT Bank Permata Tbk (Permata) which was proportionately consolidated until 31 December 2012, is from 1 January 2013 being accounted for using the equity method as mandated under IFRS 11. The impact of this change is provided in note 31.

IFRS 12 prescribes additional disclosures around significant judgements and assumptions made in determining whether an entity controls another entity and has joint control or significant influence over another entity. The standard also requires disclosures on the nature and risks associated with interests in unconsolidated structured entities. The Group will present these disclosures, where appropriate, in the 2013 Annual Report and Accounts.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at, and for, the year ended 31 December 2013.

A summary of the Group's significant accounting policies will be included in the 2013 Annual Report and Accounts.

Notes to the financial statements continued

2. Segmental Information

The Group is organised on a worldwide basis for management and reporting purposes into two main business segments: Consumer Banking and Wholesale Banking. The products offered by these segments are summarised under 'Income by product' below. The businesses' focus is on broadening and deepening the relationship with clients and customers, rather than maximising a particular product line. Hence the Group evaluates segmental performance based on overall profit or loss before taxation (excluding corporate items not allocated) and not individual product profitability. Product revenue information is used as a way of assessing client and customer needs and trends in the market place. The strategies adopted by Consumer Banking and Wholesale Banking need to be adapted to local market and regulatory requirements, which is the responsibility of country management teams. While not the primary driver of the business, country performance is an important part of the Group's matrix structure and is also used to evaluate performance and reward staff. Corporate items not allocated are not aggregated into the businesses because of the one-off nature of these items.

The Group's entity-wide disclosure which includes profit before tax, net interest margin and structure of the Group's deposits comprises geographic areas, classified by the location of the customer, except for Financial Market products which are classified by the location of the dealer.

Transactions between the business segments and geographic areas are carried out on an arms length basis. Apart from the entities that have been acquired in the last two years, Group central expenses have been distributed between the business segments and geographic areas in proportion to their direct costs, and the benefit of the Group's capital has been distributed between segments in proportion to their average risk weighted assets. In the year in which an acquisition is made, the Group does not charge or allocate the benefit of the Group's capital. The distribution of central expenses is phased in over two years, based on the estimate of central management costs associated with the acquisition.

As disclosed in note 34, the Group will adopt a new segmental disclosure in 2014 following a reorganisation of its business.

By class of business
		2013					2012 ⁴
		Consumer Banking	Wholesale Banking¹	Total reportable segments	Corporate items not allocated²	Total	Consumer Banking	Wholesale Banking	Total reportable segments	Corporate items not allocated³	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		9	(9)	-	-	-	(16)	16	-	-	-
Net interest income		4,940	6,216	11,156	-	11,156	4,780	6,001	10,781	-	10,781
Non interest income		2,230	5,391	7,621	-	7,621	2,257	5,655	7,912	90	8,002
Operating income		7,179	11,598	18,777	-	18,777	7,021	11,672	18,693	90	18,783
Operating expenses		(4,632)	(5,326)	(9,958)	(235)	(10,193)	(4,596)	(5,952)	(10,548)	(174)	(10,722)
Operating profit before impairment losses and taxation		2,547	6,272	8,819	(235)	8,584	2,425	5,720	8,145	(84)	8,061
Impairment losses on loans and advances and other credit risk provisions		(1,034)	(583)	(1,617)	-	(1,617)	(674)	(522)	(1,196)	-	(1,196)
Other impairment
Goodwill impairment		-	-	-	(1,000)	(1,000)	-	-	-	-	-
Other impairment		(7)	(122)	(129)	-	(129)	(45)	(151)	(196)	-	(196)
Profit from associates and joint ventures		44	182	226	-	226	43	139	182	-	182
Profit before taxation		1,550	5,749^-	7,299	(1,235)^-	6,064	1,749	5,186	6,935	(84)	6,851
Total assets employed		138,764	528,783	667,547	6,833	674,380	138,699	484,473	623,172	8,036	631,208
Total liabilities employed		191,275	435,038	626,313	1,226	627,539	186,327	397,599	583,926	1,227	585,153
Other segment items:
Capital expenditure⁵		235	1,216	1,451	-	1,451	204	2,042	2,246	-	2,246
Depreciation		133	300	433	-	433	147	259	406	-	406
Investment in associates and joint ventures		537	1,230	1,767	-	1,767	559	1,125	1,684	-	1,684
Amortisation of intangible assets		87	194	281	-	281	81	173	254	-	254
¹	Wholesale Banking non-interest income includes Own credit adjustment (OCA) of $106 million
²	Relates to UK bank levy and goodwill impairment charge on Korea business
³	Relates to profits realised from repurchase of subordinated liabilities and UK bank levy
⁴	Amounts have been restated as explained in note 31
⁵	Includes capital expenditure in Wholesale Banking of $874 million in respect of operating lease assets (2012: $1,788 million)

2. Segmental Information continued

The following table details entity-wide operating income by product:
	2013	2012
	$million	$million
Consumer Banking
Cards, Personal Loans and Unsecured Lending	2,802	2,668
Wealth Management	1,296	1,268
Deposits	1,414	1,526
Mortgage and Auto Finance	1,425	1,298
Other	242	261
	7,179	7,021
Wholesale Banking
Lending and Portfolio Management	818	837
Transaction Banking
Trade	1,845	1,915
Cash Management and Custody	1,629	1,721
Global Markets
Financial Markets¹	3,756	3,657
Asset and Liability Management (ALM)	754	837
Corporate Finance	2,519	2,222
Principal Finance	277	483
	7,306	7,199
	11,598	11,672
¹ Includes $106 million (2012: $nil) benefits relating to Own credit adjustment (OCA)

Entity-wide information
By geography
The Group manages its reportable business segments on a global basis. The operations are based in eight main geographic areas. The UK is the home country of the Company.
		2013
		Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas, UK & Europe¹	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		119	(78)	(69)	123	84	69	129	(377)	-
Net interest income		1,681	1,148	1,267	2,253	1,030	1,185	992	1,600	11,156
Fees and commissions income, net		910	581	237	632	269	476	417	579	4,101
Net trading income		722	311	73	373	165	397	184	289	2,514
Underlying		722	282	72	357	165	397	184	229	2,408
Own credit adjustment		-	29	1	16	-	-	-	60	106
Other operating income		293	170	56	92	148	82	29	136	1,006
Operating income		3,725	2,132	1,564	3,473	1,696	2,209	1,751	2,227	18,777
Operating expenses		(1,666)	(1,129)	(1,120)	(2,118)	(699)	(1,084)	(862)	(1,515)	(10,193)
Operating profit before impairment losses and taxation		2,059	1,003	444	1,355	997	1,125	889	712	8,584
Impairment losses on loans and advances and other credit risk provisions		(135)	(88)	(427)	(415)	(195)	(67)	(270)	(20)	(1,617)
Other impairment		(4)	10	(1,029)	(3)	(105)	-	-	2	(1,129)
Profit from associates and joint ventures		-	-	-	224	-	-	-	2	226
Profit/(loss) before taxation		1,920	925	(1,012)	1,161	697	1,058	619	696	6,064
Capital expenditure²		905	320	27	27	26	53	45	48	1,451
¹	Americas UK & Europe includes operating income of $1,110 million in respect of the UK, the Company's country of domicile
²	Includes capital expenditure of $874 million in Hong Kong in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles (note 20) including any post-acquisition additions made by the acquired entities

2. Segmental Information continued

	2012
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income	111	(107)	(85)	93	129	84	60	(285)	-
Net interest income	1,564	1,251	1,421	2,168	920	1,143	917	1,397	10,781
Fees and commissions income, net	830	551	210	677	304	471	416	620	4,079
Net trading income	653	377	147	575	157	448	157	225	2,739
Other operating income	190	131	159	159	75	88	43	339	1,184
Operating income	3,348	2,203	1,852	3,672	1,585	2,234	1,593	2,296	18,783
Operating expenses	(1,572)	(1,169)	(1,081)	(2,258)	(753)	(1,100)	(784)	(2,005)	(10,722)
Operating profit before impairment losses and taxation	1,776	1,034	771	1,414	832	1,134	809	291	8,061
Impairment losses on loans and advances and other credit risk provisions	(109)	(66)	(249)	(221)	(165)	(316)	(38)	(32)	(1,196)
Other impairment	(7)	(2)	(8)	(157)	9	(32)	-	1	(196)
Profit from associates and joint ventures	-	-	-	181	-	-	-	1	182
Profit before taxation	1,660	966	514	1,217	676	786	771	261	6,851
Capital expenditure ²	1,825	232	22	18	22	55	31	41	2,246

¹ Americas UK & Europe includes operating income of $1,187 million in respect of the UK, the Company's country of domicile

² Includes capital expenditure in Hong Kong of $1,788 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles (note 20) including any post-acquisition additions made by the acquired entities

2. Segmental Information continued

Net interest margin and yield
								2013		2012
								$million		$million
Net interest margin (%)								2.1		2.2
Net interest yield (%)								2.1		2.1
Average interest earning assets								521,287		483,491
Average interest bearing liabilities								488,593		456,998

Net interest margin by geography
	2013
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Intra-group/ tax assets		Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million		$million
Total assets employed	149,327	115,561	55,921	118,337	34,962	47,166	24,892	193,499	(65,285)		674,380
Of which : Loans to customers²	61,173	57,540	29,760	54,843	23,019	26,124	13,122	30,434	-		296,015
Average interest-earning assets	114,713	86,070	49,219	101,459	30,111	39,193	20,061	131,686	(51,225)		521,287
Net interest income	1,835	1,072	1,199	2,351	1,116	1,256	1,123	1,204	-		11,156
Net interest margin (%)	1.6	1.2	2.4	2.3	3.7	3.2	5.6	0.9	-		2.1

¹ Americas UK & Europe includes total assets employed of $122,182 million in respect of the UK, the Company's country of domicile

² The analysis of loans and advances to customers is based on the location of the customer rather than booking location of the loan

	2012
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Intra-group/ tax assets	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
Total assets employed	130,601	107,973	62,903	112,476	36,935	46,219	20,890	179,516	(66,305)	631,208
Of which : Loans to customers²	53,330	51,318	36,165	54,730	23,994	25,200	11,304	28,575	-	284,616
Average interest-earning assets	107,434	76,689	54,064	98,695	29,796	36,806	18,177	114,768	(52,938)	483,491
Net interest income	1,716	1,144	1,335	2,232	1,050	1,230	976	1,098	-	10,781
Net interest margin (%)	1.6	1.5	2.5	2.3	3.5	3.3	5.4	1.0	-	2.2

¹ Americas UK & Europe includes total assets employed of $108,775 million in respect of the UK, the Company's country of domicile

² The analysis of loans and advances to customers is based on the location of the customer rather than booking location of the loan

2. Segmental Information continued

The following tables set out the structure of the Group's deposits by principal geographic areas:
	2013
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Non-interest bearing current and demand accounts	9,166	8,654	50	3,376	2,169	10,309	5,465	6,293	45,482
Interest bearing current accounts and savings deposits	59,348	30,851	19,157	28,230	1,826	4,573	2,429	34,745	181,159
Time deposits	39,476	38,020	12,096	38,175	7,633	12,683	3,985	48,074	200,142
Other deposits	214	1,482	541	1,563	1,557	299	207	2,851	8,714
Total	108,204	79,007	31,844	71,344	13,185	27,864	12,086	91,963	435,497
Deposits by banks	2,091	4,792	1,479	6,926	459	1,574	566	26,639	44,526
Customer accounts	106,113	74,215	30,365	64,418	12,726	26,290	11,520	65,324	390,971
Of which:
Protected under government insurance schemes	17,875	6,319	25,080	28,655	11,465	2,283	697	-	92,223
Other accounts	88,238	67,896	5,285	35,763	1,261	24,007	10,823	65,324	298,748
	108,204	79,007	31,844	71,344	13,185	27,864	12,086	91,963	435,497
Debt securities in issue:
Senior debt	144	-	4,094	2,043	-	53	6	18,839	25,179
Other debt securities	2,167	2,621	3,215	3,875	46	-	214	34,095	46,233
Subordinated liabilities and other borrowed funds	1,359	-	635	337	-	24	51	17,991	20,397
Total	111,874	81,628	39,788	77,599	13,231	27,941	12,357	162,888	527,306
The above table includes financial instruments held at fair value (see note 12).
	2012
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Non-interest bearing current and demand accounts	8,178	9,260	49	3,529	2,691	9,223	4,380	4,920	42,230
Interest bearing current accounts and savings deposits	56,261	28,978	21,368	30,481	2,224	4,159	2,392	27,240	173,103
Time deposits	35,224	37,968	16,989	38,596	7,380	12,367	3,318	49,281	201,123
Other deposits	199	242	595	915	1,636	455	163	1,851	6,056
Total	99,862	76,448	39,001	73,521	13,931	26,204	10,253	83,292	422,512
Deposits by banks	1,585	2,005	1,769	5,628	441	1,934	540	23,493	37,395
Customer accounts	98,277	74,443	37,232	67,893	13,490	24,270	9,713	59,799	385,117
Of which:
Protected under government insurance schemes	16,194	6,279	24,692	30,586	11,248	1,383	1,543	-	91,925
Other accounts	82,083	68,164	12,540	37,307	2,242	22,887	8,170	59,799	293,192
	99,862	76,448	39,001	73,521	13,931	26,204	10,253	83,292	422,512
Debt securities in issue:
Senior debt	1,291	-	4,038	1,485	-	69	6	14,767	21,656
Other debt securities	5	1,903	1,999	3,617	47	-	294	31,719	39,584
Subordinated liabilities and other borrowed funds	1,454	-	871	349	-	29	62	15,823	18,588
Total	102,612	78,351	45,909	78,972	13,978	26,302	10,615	145,601	502,340
The above table includes financial instruments held at fair value (see note 12).

2. Segmental Information continued

		2013
		China		Malaysia		Indonesia		Taiwan	Thailand	Others	Other Asia Pacific
		$million		$million		$million		$million	$million	$million	$million
Operating income¹		933		700		429		539	394	478	3,473
Operating expenses		(753)		(344)		(242)		(353)	(187)	(239)	(2,118)
Impairment losses on loans and advances and other credit risk provisions		(58)		(104)		(103)		(49)	(82)	(19)	(415)
Other impairment		4		-		-		1	-	(8)	(3)
Profit from associates and joint ventures		146		-		72		-	-	6	224
Profit before taxation		272		252		156		138	125	218	1,161
Total assets employed		35,117		19,479		7,868		25,498	9,538	20,837	118,337
Loans to customers²		15,489		12,178		4,564		13,184	4,126	5,302	54,843
Deposits by banks		1,888		815		152		673	966	2,432	6,926
Customer accounts		20,071		11,923		2,446		19,089	3,691	7,198	64,418
Debt securities in issue		818		274		-		1,906	66	2,854	5,918

¹ Operating income includes OCA of ($1) million in China, $4 million in Malaysia, $12 million in Thailand and $1 million in Others
² The analysis is based on the location of the customers rather than booking location of the loan
	2012
	China		Malaysia		Indonesia		Taiwan		Thailand	Others	Other Asia Pacific
	$million		$million		$million		$million		$million	$million	$million
Operating income	999		743		525		567		391	447	3,672
Operating expenses	(758)		(338)		(223)		(366)		(192)	(381)	(2,258)
Impairment losses on loans and advances and other credit risk provisions	(38)		(68)		(55)		(4)		(37)	(19)	(221)
Other impairment	(44)		-		-		(1)		-	(112)	(157)
Profit from associates and joint ventures	96		-		66		-		-	19	181
Profit/(loss) before taxation	255		337		313		196		162	(46)	1,217
Total assets employed	29,710		18,665		8,761		25,831		9,417	20,092	112,476
Loans to customers¹	14,353		12,110		5,163		13,609		4,691	4,804	54,730
Deposits by banks	1,690		948		192		251		849	1,698	5,628
Customer accounts	20,536		11,753		2,691		20,014		4,390	8,509	67,893
Debt securities in issue	-		944		-		1,971		177	2,010	5,102
¹The analysis is based on the location of the customers rather than booking location of the loan

2. Segmental Information continued

	2013
	UAE	Pakistan	Bangladesh	Others	Middle East & Other S Asia
	$million	$million	$million	$million	$million
Operating income	1,222	237	275	475	2,209
Operating expenses	(573)	(157)	(91)	(263)	(1,084)
Impairment losses on loans and advances and other credit risk provisions	(52)	(26)	(20)	31	(67)
Other impairment	-	-	-	-	-
Profit before taxation	597	54	164	243	1,058
Total assets employed	27,892	4,032	3,823	11,419	47,166
Loans to customers¹	15,734	1,623	2,113	6,654	26,124
Deposits by banks	1,180	162	81	151	1,574
Customer accounts	16,765	2,859	2,196	4,470	26,290
Debt securities in issue	-	53	-	-	53
¹ The analysis is based on the location of the customers rather than booking location of the loan
	2012
	UAE	Pakistan	Bangladesh	Others	Middle East & Other S Asia
	$million	$million	$million	$million	$million
Operating income	1,230	291	225	488	2,234
Operating expenses	(569)	(174)	(87)	(270)	(1,100)
Impairment losses on loans and advances and other credit risk provisions	(230)	(46)	(7)	(33)	(316)
Other impairment	-	(4)	-	(28)	(32)
Profit before taxation	431	67	131	157	786
Total assets employed	26,306	4,284	3,105	12,524	46,219
Loans to customers¹	14,366	1,758	1,802	7,274	25,200
Deposits by banks	1,527	247	10	150	1,934
Customer accounts	15,453	2,797	1,935	4,085	24,270
Debt securities in issue	-	69	-	-	69
¹ The analysis is based on the location of the customers rather than booking location of the loan

3. Net trading income
	2013	2012²
	$million	$million
Gains less losses on instruments held for trading:
Foreign currency ¹	1,118	1,498
Trading securities	(203)	648
Interest rate derivatives	889	428
Credit and other derivatives	633	28
	2,437	2,602
Gains less losses from fair value hedging:
Gains less losses from fair value hedged items	1,307	10
Gains less losses from fair value hedging instruments	(1,322)	(13)
	(15)	(3)
Gains less losses on instruments designated at fair value:
Financial assets designated at fair value through profit or loss	97	229
Financial liabilities designated at fair value through profit or loss	172	(256)
Own credit adjustment (OCA)	106	-
Derivatives managed with financial instruments designated at fair value through profit or loss	(283)	167
	92	140
	2,514	2,739

¹ Includes foreign currency gains and losses arising on the translation of foreign currency monetary assets and liabilities

² Amounts reclassified to present on a consistent basis

Gains less losses on instruments held for trading is presented by product type. Gains or losses on certain trading securities are offset by gains or losses within interest rate derivatives and credit and other derivatives.

4. Other operating income
	2013	2012
	$million	$million
Other operating income includes:
Gains less losses on disposal of financial instruments:
Available-for-sale	248	336
Loans and receivables	5	37
Dividend income	104	92
Gains arising on repurchase of subordinated liabilities	-	90
Rental income from operating lease assets	485	347
Gains on disposal of property, plant and equipment	102	100
Gain arising on sale of business	-	15
Fair value loss on businesses classified as held for sale	(49)	-

5. Operating expenses
	2013	2012
	$million	$million
Staff costs:
Wages and salaries	4,982	4,877
Social security costs	160	148
Other pension costs (note 26)	336	299
Share based payment costs	264	374
Other staff costs	828	794
	6,570	6,492

Variable compensation is included within wages and salaries. Other staff costs include training and travel costs.

5. Operating expenses continued

The following tables summarise the number of employees within the Group :
	2013
	Consumer Banking	Wholesale Banking	Support Services	Total
At 31 December	51,248	20,384	15,008	86,640
Average for the year	53,628	20,101	14,528	88,257

	2012
	Consumer Banking	Wholesale Banking	Support Services	Total
At 31 December	55,237	19,752	14,069	89,058
Average for the year	54,650	19,565	13,354	87,569

Premises and equipment expenses:
			2013	2012
			$million	$million
Rental of premises			440	432
Other premises and equipment costs			415	406
Rental of computers and equipment			22	25
			877	863

General administrative expenses:
			2013	2012
			$million	$million
UK bank levy ¹			235	174
Settlement with the US authorities ²			-	667
Other general administrative expenses			1,797	1,866
			2,032	2,707

¹The UK bank levy is applied on the chargeable equities and liabilities on the Group's consolidated balance sheet. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting.

The rate of the levy for 2013 is 0.13 per cent for chargeable short term liabilities, with a lower rate of 0.065 per cent generally applied to chargeable equity and long term liabilities (i.e. liabilities with a remaining maturity greater than one year). The rate for 2014 has been increased to 0.156 per cent for qualifying liabilities, with a long term rate of 0.078 per cent. The charge for 2013 has been reduced by a refund of $31 million relating to prior years, $11 million of which related to 2012.

²During 2012, the Group reached settlements with the US authorities regarding US sanctions compliance in the period 2001 to 2007, involving a Consent Order by the New York Department of Financial Services (NYDFS), a Cease and Desist Order by the Federal Reserve Bank of New York (FRBNY), Deferred Prosecution Agreements with each of the Department of Justice and with the District Attorney of New York and a Settlement Agreement with the Office of Foreign Assets Control.

6. Depreciation and amortisation
	2013	2012
	$million	$million
Premises	108	126
Equipment:
Operating lease assets	206	148
Others	119	132
Intangibles:
Software	226	189
Acquired on business combinations	55	65
	714	660

7. Impairment losses on loans and advances and other credit risk provisions

The following table reconciles the charge for impairment provisions on loans and advances to the total impairment charge and other credit risk provisions :
	2013	2012
	$million	$million
Net charge against profit on loans and advances:
Individual impairment charge	1,597	1,230
Portfolio impairment charge/(release)	15	(35)
	1,612	1,195
Provisions related to credit commitments	-	5
Impairment charge/(release) relating to debt securities classified as loans and receivables	5	(4)
Total impairment losses and other credit risk provisions	1,617	1,196

An analysis of impairment provisions on loans and advances by geography and business is set out within the Risk review on pages 44 to 63.

8. Other impairment
	2013	2012
	$million	$million
Impairment losses on available-for-sale financial assets:
- Asset backed securities	(2)	(3)
- Other debt securities	56	(16)
- Equity shares	90	134
	144	115
Impairment of investment in associates	-	70
Impairment of goodwill	1,000	-
Others	14	36
	1,158	221
Recovery of impairment on disposal of equity instruments¹	(29)	(25)
	1,129	196

¹ Relates to private equity instruments sold during the year which had impairment provisions raised against them in prior years

9. Taxation
Determining the Group's taxation charge for the year involves a degree of estimation and judgement.
Analysis of taxation charge in the year:
	2013	2012
	$million	$million
The charge for taxation based upon the profits for the year comprises:
Current tax:
United Kingdom corporation tax at 23.25 per cent (2012: 24.5 per cent):
Current tax on income for the year	139	110
Adjustments in respect of prior periods (including double taxation relief)	(3)	10
Double taxation relief	(9)	(9)
Foreign tax:
Current tax on income for the year	1,594	1,687
Adjustments in respect of prior periods	(37)	(4)
	1,684	1,794
Deferred tax:
Origination/reversal of temporary differences	165	64
Adjustments in respect of prior periods	15	8
	180	72
Tax on profits on ordinary activities	1,864	1,866
Effective tax rate	30.7%	27.2%

The UK corporation tax rate was reduced from 24 per cent to 23 per cent with an effective date of 1 April 2013, giving a blended rate of 23.25 per cent for the year.

Foreign taxation includes taxation on Hong Kong profits of $242 million (2012: $189 million) provided at a rate of 16.5 per cent (2012: 16.5 per cent) on the profits assessable in Hong Kong. Deferred taxation includes origination/reversal of temporary differences in Hong Kong profits of $1 million (2012: $3 million) provided at a rate of 16.5 per cent (2012: 16.5 per cent) on the profits assessable in Hong Kong.

10. Dividends
Ordinary equity shares			2013		2012
			Cents per share	$million	Cents per share		$million
2012/2011 final dividend declared and paid during the year¹			56.77	1,366	51.25		1,216
2013/2012 interim dividend declared and paid during the year¹			28.80	696	27.23		650
				2,062			1,866
¹ The amounts are gross of scrip adjustments

The amounts in the table above reflect the actual dividend per share declared and paid to shareholders in 2013 and 2012. Dividends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders. Accordingly, the final ordinary equity share dividends set out above relate to the respective prior years. The 2012 final dividend of 56.77 cents per ordinary share ($1,366 million) was paid to eligible shareholders on 14 May 2013 and the 2013 interim dividend of 28.80 cents per ordinary share ($696 million) was paid to eligible shareholders on 17 October 2013. 2013 recommended final ordinary equity share dividend The 2013 final ordinary equity share dividend recommended by the Board is 57.20 cents per share ($1,385 million), which makes the total dividend for 2013 86.00 cents per share (2012: 84.00 cents per share). The final dividend will be paid in either pounds sterling, Hong Kong dollars or US dollars on 14 May 2014 to shareholders on the UK register of members at the close of business in the UK (10:00 pm London time) on 14 March 2014, and to shareholders on the Hong Kong branch register of members at the opening of business in Hong Kong (9:00 am Hong Kong time) on 14 March 2014. The 2013 final ordinary equity share dividend will be paid in Indian rupees on 15 May 2014 to Indian Depository Receipt holders on the Indian register at the close of business in India on 14 March 2014. It is intended that shareholders on the UK register and Hong Kong branch register will be able to elect to receive shares credited as fully paid instead of all or part of the final cash dividend. Details of the dividend arrangements will be sent to shareholders on or around 28 March 2014. Indian Depository Receipt holders will receive their dividend in Indian rupees only.


						2013		2012
Preference shares						$million		$million
Non-cumulative irredeemable preference shares:		7 ³/₈ per cent preference shares of £1 each¹				11		11
		8 ¹/₄ per cent preference shares of £1 each¹				13		13
Non-cumulative redeemable preference shares:		8.125 per cent preference shares of $5 each^1,3				75		75
		7.014 per cent preference shares of $5 each²				53		53
		6.409 per cent preference shares of $5 each²				48		48
¹	Dividends on these preference shares are treated as interest expense and accrued accordingly
²	Dividends on these preference shares classified as equity are recorded in the period in which they are declared
³	On 27 November 2013 these preference shares were redeemed (see note 27)

11. Earnings per ordinary share

		2013			2012
		Profit¹	Weighted average number of shares	Per share amount	Profit¹	Weighted average number of shares	Per share amount
		$million	('000)	cents	$million	('000)	cents
Basic earnings per ordinary share		3,989	2,426,238	164.4	4,786	2,396,737	199.7
Effect of dilutive potential ordinary shares:
Options²		-	20,671	-	-	24,534	-
Diluted earnings per ordinary share		3,989	2,446,909	163.0	4,786	2,421,271	197.7

There were no ordinary shares issued after the balance sheet date that would have significantly affected the number of ordinary shares used in the above calculation had they been issued prior to the end of the balance sheet date.

The Group measures earnings per share on a normalised basis. This differs from earnings defined in IAS 33 Earnings per share. The table below provides a reconciliation.

						2013	2012³
						$million	$million
Operating income as reported						18,777	18,783
Items normalised:
Fair value gains on own credit adjustment						(106)	-
Gain on disposal of property						(77)	(91)
Gains on repurchase of subordinated liabilities						-	(90)
Gain arising on sale of business						-	(15)
Fair value loss on business classified as held for sale						49	-
						(134)	(196)
Normalised operating income						18,643	18,587

Operating expenses as reported						(10,193)	(10,722)
Items normalised:
Amortisation of intangible assets arising on business combinations						55	65
Settlements with US authorities						-	667
						55	732
Normalised operating expenses						(10,138)	(9,990)

Other impairment as reported						(1,129)	(196)
Items normalised:
Impairment of associates						-	70
Impairment of property						9	4
Impairment of goodwill						1,000	-
						1,009	74
Normalised other impairment						(120)	(122)

Taxation as reported						(1,864)	(1,866)
Tax on normalised items⁴						31	2
Normalised taxation						(1,833)	(1,864)

Profit as reported¹						3,989	4,786
Items normalised as above:
Operating income						(134)	(196)
Operating expenses						55	732
Other impairment						1,009	74
Taxation						31	2
						961	612
Normalised profit						4,950	5,398

Normalised basic earnings per ordinary share (cents)						204.0	225.2
Normalised diluted earnings per ordinary share (cents)						202.3	222.9
¹	The profit amounts represent the profit attributable to ordinary shareholders, which is profit for the year after non-controlling interest and the declaration of dividends payable to the holders of the non-cumulative redeemable preference shares classified as equity (note 10)
²	The impact of anti-dilutive options has been excluded from this amount as required by IAS 33
³	Amounts have been restated as explained in note 31
⁴	No tax is included in respect of the impairment of goodwill as no tax relief is available

12. Financial instruments

Classification

Financial assets are classified between four measurement categories: held at fair value through profit or loss (comprising trading and designated), available-for-sale, loans and receivables and held-to-maturity; and two measurement categories for financial liabilities: held at fair value through profit or loss (comprising trading and designated) and amortised cost. Instruments are classified in the balance sheet in accordance with their legal form, except for instruments that are held for trading purposes and those that the Group has designated to hold at fair value through the profit and loss account. The latter are combined on the face of the balance sheet and disclosed as financial assets or liabilities held at fair value through profit or loss.

The Group's classification of its principal financial assets and liabilities is summarised in the table below.

		Assets at fair value				Assets at amortised cost
Assets		Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Available- for-sale	Loans and receivables	Non-financial assets	Total
Assets	Notes	$million	$million	$million	$million	$million	$million	$million
Cash and balances at central banks		-	-	-	-	54,534	-	54,534
Financial assets held at fair value through profit or loss
Loans and advances to banks¹		2,221	-	246	-	-	-	2,467
Loans and advances to customers¹		4,411	-	896	-	-	-	5,307
Treasury bills and other eligible bills	13	5,161	-	-	-	-	-	5,161
Debt securities	13	12,407	-	292	-	-	-	12,699
Equity shares	13	2,932	-	769	-	-	-	3,701
		27,132	-	2,203	-	-	-	29,335
Derivative financial instruments	14	59,765	2,037	-	-	-	-	61,802
Loans and advances to banks¹	15	-	-	-	-	83,702	-	83,702
Loans and advances to customers¹	16	-	-	-	-	290,708	-	290,708
Investment securities
Treasury bills and other eligible bills	17	-	-	-	26,243	-	-	26,243
Debt securities	17	-	-	-	70,546	2,828	-	73,374
Equity shares	17	-	-	-	3,099	-	-	3,099
		-	-	-	99,888	2,828	-	102,716
Other assets	18	-	-	-	-	26,351	7,219	33,570
Total at 31 December 2013		86,897	2,037	2,203	99,888	458,123	7,219	656,367

Cash and balances at central banks		-	-	-	-	60,537	-	60,537
Financial assets held at fair value through profit or loss
Loans and advances to banks¹		677	-	97	-	-	-	774
Loans and advances to customers¹		4,793	-	185	-	-	-	4,978
Treasury bills and other eligible bills	13	2,955	-	-	-	-	-	2,955
Debt securities	13	14,882	-	333	-	-	-	15,215
Equity shares	13	2,140	-	1,014	-	-	-	3,154
		25,447	-	1,629	-	-	-	27,076
Derivative financial instruments	14	47,133	2,362	-	-	-	-	49,495
Loans and advances to banks¹	15	-	-	-	-	67,797	-	67,797
Loans and advances to customers¹	16	-	-	-	-	279,638	-	279,638
Investment securities
Treasury bills and other eligible bills	17	-	-	-	26,740	-	-	26,740
Debt securities	17	-	-	-	65,356	3,851	-	69,207
Equity shares	17	-	-	-	3,278	-	-	3,278
		-	-	-	95,374	3,851	-	99,225
Other assets	18	-	-	-	-	21,406	7,142	28,548
Total at 31 December 2012		72,580	2,362	1,629	95,374	433,229	7,142	612,316

¹ Further analysed in Risk review on pages 25 to 86

12. Financial instruments continued

Classification continued

		Liabilities at fair value
Liabilities		Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Amortised cost	Non-financial liabilities	Total
Liabilities	Notes	$million	$million	$million	$million	$million	$million
Financial liabilities held at fair value through profit or loss
Deposits by banks		-	-	1,009	-	-	1,009
Customer accounts		-	-	9,905	-	-	9,905
Debt securities in issue		-	-	6,823	-	-	6,823
Short positions		5,293	-	-	-	-	5,293
		5,293	-	17,737	-	-	23,030
Derivative financial instruments	14	60,322	914	-	-	-	61,236
Deposits by banks	21	-	-	-	43,517	-	43,517
Customer accounts	22	-	-	-	381,066	-	381,066
Debt securities in issue	23	-	-	-	64,589	-	64,589
Other liabilities	24	-	-	-	21,894	5,444	27,338
Subordinated liabilities and other borrowed funds	25	-	-	-	20,397	-	20,397
Total at 31 December 2013		65,615	914	17,737	531,463	5,444	621,173

Financial liabilities held at fair value through profit or loss¹
Deposits by banks		-	-	968	-	-	968
Customer accounts		-	-	12,243	-	-	12,243
Debt securities in issue		-	-	5,261	-	-	5,261
Short positions		4,592	-	-	-	-	4,592
		4,592	-	18,472	-	-	23,064
Derivative financial instruments	14	46,459	733	-	-	-	47,192
Deposits by banks	21	-	-	-	36,427	-	36,427
Customer accounts	22	-	-	-	372,874	-	372,874
Debt securities in issue	23	-	-	-	55,979	-	55,979
Other liabilities	24	-	-	-	19,547	4,738	24,285
Subordinated liabilities and other borrowed funds	25	-	-	-	18,588	-	18,588
Total at 31 December 2012		51,051	733	18,472	503,415	4,738	578,409

¹Amounts have been restated as explained in note 31

Valuation of financial instruments

Valuation hierarchy

The valuation hierarchy, and the types of instruments classified into each level within that hierarchy, is set out below:

	Level 1	Level 2	Level 3
Fair value determined using:	Unadjusted quoted prices in an active market for identical assets and liabilities	Directly or indirectly observable inputs other than unadjusted quoted prices included within Level 1 that are observable	One or more inputs that are not based on observable market data (unobservable inputs)
Types of financial assets:	Actively traded government and other securities Listed equities Listed derivative instruments Investments in publicly traded mutual funds with listed market prices	Corporate and other government bonds and loans Over-the-counter (OTC) derivatives Asset backed securities Private equity investments	Asset backed securities Private equity investments Highly structured OTC derivatives with unobservable parameters Illiquid or highly structured corporate bonds with unobservable inputs
Types of financial liabilities:	Listed derivative instruments	OTC derivatives Structured deposits Credit structured debt securities in issue	Highly structured OTC derivatives with unobservable parameters Illiquid highly structured debt securities in issue with unobservable inputs

12. Financial instruments continued

Valuation of financial instruments continued

The table below shows the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 31 December 2013.
Assets	Level 1	Level 2	Level 3	Total
Assets	$million	$million	$million	$million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	244	2,223	-	2,467
Loans and advances to customers	-	4,587	720	5,307
Treasury bills and other eligible bills	4,904	257	-	5,161
Debt securities	6,596	5,944	159	12,699
Of which:
Government bonds	6,396	1,220	-	7,616
Issued by corporates other than financial institutions	79	3,211	159	3,449
Issued by financial institutions	121	1,513	-	1,634

Equity shares	2,797	-	904	3,701

Derivative financial instruments	323	60,881	598	61,802
Of which:
Foreign exchange	56	41,942	366	42,364
Interest rate	-	16,013	53	16,066
Commodity	267	2,104	-	2,371
Credit	-	573	13	586
Equity and stock index	-	249	166	415

Investment securities
Treasury bills and other eligible bills	22,701	3,523	19	26,243
Debt securities	24,445	45,493	608	70,546
Of which:
Government bonds	14,513	5,451	64	20,028
Issued by corporates other than financial institutions	6,480	7,314	493	14,287
Issued by financial institutions	3,452	32,728	51	36,231

Equity shares	1,635	8	1,456	3,099

At 31 December 2013	63,645	122,916	4,464	191,025

Liabilities
Financial instruments held at fair value through profit or loss
Deposit by banks	-	1,009	-	1,009
Customer accounts	-	9,897	8	9,905
Debt securities in issue	7	6,777	39	6,823
Short positions	4,917	376	-	5,293

Derivative financial instruments	420	60,375	441	61,236
Of which:
Foreign exchange	84	41,738	315	42,137
Interest rate	-	15,863	24	15,887
Commodity	336	1,500	-	1,836
Credit	-	874	-	874
Equity and stock index	-	400	102	502

At 31 December 2013	5,344	78,434	488	84,266

There are no significant transfers of financial assets and liabilities measured at fair value between level 1 and level 2 in 2013

12. Financial instruments continued

The table below shows the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 31 December 2012.

Valuation of financial instruments continued

Assets	Level 1	Level 2	Level 3	Total
Assets	$million	$million	$million	$million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	97	677	-	774
Loans and advances to customers	-	4,068	910	4,978
Treasury bills and other eligible bills	2,812	143	-	2,955
Debt securities	8,523	6,516	176	15,215
Of which:
Government bonds	8,286	1,482	4	9,772
Issued by corporates other than financial institutions	132	2,683	172	2,987
Issued by financial institutions	105	2,351	-	2,456

Equity shares	2,029	-	1,125	3,154

Derivative financial instruments	260	48,749	486	49,495
Of which:
Foreign exchange	41	25,125	401	25,567
Interest rate	-	20,364	9	20,373
Commodity	219	2,151	-	2,370
Credit	-	824	6	830
Equity and stock index	-	285	70	355

Investment securities
Treasury bills and other eligible bills	22,781	3,901	58	26,740
Debt securities	20,771	44,189	396	65,356
Of which:
Government bonds	11,809	3,419	87	15,315
Issued by corporates other than financial institutions	4,516	7,853	266	12,635
Issued by financial institutions	4,446	32,917	43	37,406

Equity shares	1,307	13	1,958	3,278

At 31 December 2012	58,580	108,256	5,109	171,945

Liabilities
Financial instruments held at fair value through profit or loss
Deposit by banks	-	968	-	968
Customer accounts	68	12,175	-	12,243
Debt securities in issue	-	5,147	114	5,261
Short positions	4,320	272	-	4,592

Derivative financial instruments	383	46,246	563	47,192
Of which:
Foreign exchange	72	24,584	411	25,067
Interest rate	-	19,106	33	19,139
Commodity	311	1,173	-	1,484
Credit	-	1,120	10	1,130
Equity and stock index	-	263	109	372

At 31 December 2012	4,771	64,808	677	70,256

There are no significant transfers of financial assets and liabilities measured at fair value between level 1 and level 2 in 2012.

12. Financial instruments continued

Level 3 movement tables - Financial assets
	Held at fair value through profit or loss			Derivative financial instruments	Investment securities
Assets	Loans and advances to customers	Debt securities	Equity shares	Derivative financial instruments	Treasury bills	Debt securities	Equity shares	Total
Assets	$million	$million	$million	$million	$million	$million	$million	$million
At 1 January 2013	910	176	1,125	486	58	396	1,958	5,109
Total (losses)/gains recognised in income statement	(89)	63	17	37	-	(18)	51	61
Total losses recognised in other comprehensive income	-	-	-	-	-	(23)	(46)	(69)
Purchases	-	18	264	86	-	6	119	493
Sales	-	(30)	(502)	(11)	(36)	(59)	(446)	(1,084)
Settlements	(103)	(38)	-	(50)	(3)	(100)	-	(294)
Transfers out	-	(44)	-	(1)	-	(56)	(180)	(281)
Transfers in	2	14	-	51	-	462	-	529
At 31 December 2013	720	159	904	598	19	608	1,456	4,464
Total (losses)/ gains recognised in the income statement relating to assets held at 31 December 2013	(86)	3	16	24	-	-	3	(40)

Transfers in during the year primarily relate to investments in structured notes, bonds and corporate debt securities where the valuation parameters became unobservable during the year.

Transfers out during the year primarily relate to certain equity shares and corporate debt securities where the valuation parameters became observable during the year and were transferred to level 1 and level 2 financial assets.

12. Financial instruments continued

Level 3 movement tables - Financial assets continued

		Held at fair value through profit or loss						Derivative financial instruments		Investment securities
Assets		Loans and advances to customers		Debt securities		Equity shares				Treasury bills		Debt securities		Equity shares		Total
		$million		$million		$million		$million		$million		$million		$million		$million
At 1 January 2012		-		293		566		276		49		745		1418		3,347
Total gains/(losses) recognised in income statement		-		9		313		(48)		-		48		(13)		309
Total losses recognised in other comprehensive income		-		-		-		-		-		(56)		133		77
Purchases		-		22		310		336		42		134		525		1,369
Sales		-		(5)		(64)		(13)		-		(199)		(71)		(352)
Settlements		(27)		(97)		-		(60)		-		(17)		(23)		(224)
Transfers out		-		(96)		-		(7)		(33)		(261)		(16)		(413)
Transfers in		937		50		-		2		-		2		5		996
At 31 December 2012		910		176		1125		486		58		396		1958		5,109
Total (losses)/gains recognised in the income statement relating to assets held at 31 December 2012		-		(10)		195		(30)		-		-		(14)		141

Transfers in during the year primarily relate to loans held within the Group's global syndicates underwriting book where the valuation parameters became unobservable during the year.

Transfers out during the year primarily relate to certain corporate debt securities where the valuation parameters became observable during the year and were transferred to Level 2 financial assets.
Financial liabilities
			2013										2012
Liabilities	Customer Accounts		Debt securities in issue		Derivative financial instruments		Total		Customer Accounts		Debt securities in issue		Derivative financial instruments		Total
	$million		$million		$million		$million		$million		$million		$million		$million
At 1January	-		114		563		677		-		172		184		356
Total losses/(gains) recognised in income statement	-		3		54		57		-		(43)		80		37
Issues	9		506		1		516		-		50		324		374
Settlements	(3)		(490)		(144)		(637)		-		(28)		(25)		(53)
Transfers out	-		(99)		(33)		(132)		-		(37)		-		(37)
Transfers in	2		5		-		7		-		-		-		-
At 31 December	8		39		441		488		-		114		563		677
Total losses recognised in the income statement relating to liabilities held at 31 December	-		4		37		41		-		3		44		47

Transfers in during the year primarily relate to certain financial instruments which parameters became unobservable during the year.

Transfers out during the year primarily relate to certain financial instruments where the valuation parameters became observable during the year and were transferred to level 2 financial liabilities.

12. Financial instruments continued

Valuation of financial instruments measured at amortised cost on a recurring basis

The valuation techniques used to establish the Group's fair values are consistent with those used to calculate the fair values of financial instruments carried at fair value. The fair values calculated are for disclosure purposes only and do not have any impact on the Group's reported financial performance or position. The fair values calculated by the Group may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument. As certain categories of financial instruments are not traded there is a significant level of management judgement involved in calculating the fair values.

The following sets out the Group's basis of establishing fair values of amortised cost financial instruments and their classification between level 1, 2 and 3.

Cash and balances at central banks

The fair value of cash and balances at central banks is their carrying amounts.

Loans and advances to banks and customers

For loans and advances to banks, the fair value of floating rate placements and overnight deposits is their carrying amounts. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using the prevailing money market rates for debts with a similar credit risk and remaining maturity.

The Group's loans and advances to customers portfolio is well diversified by geography and industry. Approximately one-fourth of the portfolio reprices within one month, and approximately half reprices within 12 months. Loans and advances are presented net of provisions for impairment. The fair value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value, subject to any significant movement in credit spreads. The estimated fair value of loans and advances with a residual maturity of more than one year represents the discounted amount of future cash flows expected to be received, including assumptions relating to prepayment rates and, where appropriate, credit spreads. Expected cash flows are discounted at current market rates to determine fair value. The Group has a wide range of individual instruments within its loans and advances portfolio and as a result providing quantification of the key assumptions used to value such instruments is impractical, with no one assumption being material.

Investment securities

For investment securities that do not have directly observable market values, the Group utilises a number of valuation techniques to determine fair value. Where available, securities are valued using inputs proxied from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or inputs proxied from a different underlying (for example, a similar bond but using spreads for a particular sector and rating). Certain instruments cannot be proxied as set out above, and in such cases the positions are valued using non-market observable inputs. This includes those instruments held at amortised cost and predominantly relate to asset backed securities. The fair value for such instruments is usually proxied from internal assessments of the underlying cash flows. The Group has a wide range of individual investments within the unlisted debt securities portfolio. Given the number of instruments involved, providing quantification of the key assumptions used to value such instruments is impractical, with no one assumption being material.

Deposits and borrowings

The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings without quoted market prices is based on discounting cash flows using the prevailing market rates for debts with a similar credit risk and remaining maturity. Following the adoption of IFRS 13 the Group also adjusts the fair value of deposits and borrowings for own credit adjustment using the principles described above.

Debt securities in issue, subordinated liabilities and other borrowed funds

The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current market related yield curve appropriate for the remaining term to maturity.

Financial Hierarchy for Instruments at amortised cost

The valuation hierarchy, and the main types of instruments classified into each level within that hierarchy, is set out below:

	Level 1	Level 2	Level 3
Fair value determined using:	Unadjusted quoted prices in an active market for identical assets and liabilities	Directly or indirectly observable inputs other than unadjusted quoted prices included within level 1 that are observable	Significant inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Types of financial assets:	Actively traded corporate or other debt	Cash and balances at central banks Loans to banks and other financial institutions	Loans and advances to customers Illiquid or highly structured corporate bonds Illiquid loans and advances
Types of financial liabilities:	Quoted debt securities in issue Quoted subordinated liabilities	Unquoted debt securities in issue Unquoted subordinated liabilities Time deposits by customers Deposits by banks	Illiquid or highly structured debt securities in issue

12. Financial instruments continued

Instruments carried at amortised cost

The following table summarises the carrying amounts and incorporates the Group's estimate of fair values of those financial assets and liabilities not presented on the Group's balance sheet at fair value. The fair values in the table below may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available.

			Fair value
		Carrying value	Level 1	Level 2	Level 3	Total
		$million	$million	$million	$million	$million
Assets
Cash and balances at central banks¹		54,534	-	54,534	-	54,534
Loans and advances to banks		83,702	-	83,408	177	83,585
Loans and advances to customers		290,708	-	3,518	286,958	290,476
Investment securities		2,828	-	2,812	73	2,885
Other assets¹		26,351	-	26,182	168	26,350
At 31 December 2013		458,123	-	170,454	287,376	457,830
Liabilities
Deposits by banks		43,517	12	43,506	-	43,518
Customer accounts		381,066	682	380,610	-	381,292
Debt securities in issue		64,589	19,015	45,673	-	64,688
Subordinated liabilities and other borrowed funds		20,397	17,987	2,512	-	20,499
Other liabilities¹		21,894	201	21,691	9	21,901
At 31 December 2013		531,463	37,897	493,992	9	531,898
¹	The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently.


					Carrying value	Fair value
					$million	$million
Assets
Cash and balances at central banks¹					60,537	60,537
Loans and advances to banks					67,797	67,761
Loans and advances to customers					279,638	278,672
Investment securities					3,851	3,803
Other assets¹					21,406	21,406
At 31 December 2012					433,229	432,179
Liabilities
Deposits by banks					36,427	35,961
Customer accounts					372,874	371,702
Debt securities in issue					55,979	56,469
Subordinated liabilities and other borrowed funds					18,588	19,773
Other liabilities¹					19,547	19,547
At 31 December 2012					503,415	503,452
¹	The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently.

12. Financial instruments continued

Reclassification of financial assets

In 2008 the Group reclassified certain non-derivative financial assets classified as held for trading into the available-for-sale ('AFS') category as these were no longer considered to be held for the purpose of selling or repurchasing in the near term. At the time of transfer, the Group identified the rare circumstances permitting such a transfer as the impact of the credit crisis in financial markets, particularly from the beginning of 2008, which significantly impacted the liquidity in certain markets. The Group also reclassified certain eligible financial assets from trading and available-for-sale categories to loans and receivables where the Group had the intent and ability to hold the reclassified assets for the foreseeable future or until maturity. There have been no reclassifications since 2008.

The following tables provide details of the remaining balances of assets reclassified during 2008:

			If assets had not been reclassified, fair value gains from 1 January 2013 to 31 December 2013 that would have been recognised within
For assets reclassified:	Carrying amount at 31 December 2013	Fair value at 31 December 2013	Income	AFS reserve	Income recognised in income statement in 2013	Effective interest rate at date of reclassification	Estimated amounts of expected cash flows
For assets reclassified:	$million	$million	$million	$million	$million	%	$million
From trading to AFS	46	46	5¹	-	6	8.8%	123
From trading to loans and receivables	183	179	20	-	12	6.2%	214
From AFS to loans and receivables	486	520	-	12	21	5.5%	626
	715	745	25	12	39
Of which asset backed securities:
reclassified to AFS	46	46	7¹	-	6
reclassified to loans and receivables	614	647	-	33	33

¹ Post reclassification, the gain is recognised within the available-for-sale reserve.

			If assets had not been reclassified, fair value gains from 1 January 2012 to 31 December 2012 that would have been recognised within
For assets reclassified:	Carrying amount at 31 December 2012	Fair value at 31 December 2012	Income	AFS reserve	Income recognised in income statement in 2012	Effective interest rate at date of reclassification	Estimated amounts of expected cash flows
For assets reclassified:	$million	$million	$million	$million	$million	%	$million
From trading to AFS	85	85	5¹	-	10	4.1	195
From trading to loans and receivables	550	532	34	-	28	5.0	609
From AFS to loans and receivables	673	661	-	45	26	5.3	826
	1,308	1,278	39	45	64
Of which asset backed securities:
reclassified to AFS	81	81	5¹	-	8
reclassified to loans and receivables	924	896	68	45	43

¹ Post reclassification, the gain is recognised within the available-for-sale reserve.

12. Financial instruments continued

Transfers of financial assets
Transfers where financial assets are not derecognised
Repurchase transactions
The Group enters into collateralised repurchase agreements (repos) and securities borrowing and lending transactions. These transactions typically entitle the Group and its counterparties to have recourse to assets similar to those provided as collateral in the event of a default. Securities sold subject to repos continue to be recognised on the balance sheet as the Group retains substantially the associated risk and rewards of these securities. The counterparty liability is included in deposits by banks or customer accounts, as appropriate. Assets sold under repurchase agreements are considered encumbered as the group cannot pledge these to obtain funding
The table below sets out the financial assets provided by the Group as collateral for repurchase transactions:
	Fair value through profit and loss	Available for sale	Loans and receivables	Total
Collateral pledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills and other eligible bills	391	256	-	647
Debt securities	1,706	1,163	-	2,869
Loan and advances to banks and customers	-	-	2,714	2,714
Off balance sheet
Repledged collateral received	257	-	1,547	1,804
At 31 December 2013	2,354	1,419	4,261	8,034

Balance sheet liabilities - Repurchase agreements
Deposits by banks				4,330
Customer accounts				1,732
At 31 December 2013				6,062

	Fair value through profit and loss	Available for sale	Loans and receivables	Total
Collateral pledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills and other eligible bills	62	424	-	486
Debt securities	522	590	-	1,112
Loan and advances to banks and customers	-	-	1,780	1,780
Off balance sheet
Repledged collateral received	97	-	1,281	1,378
At 31 December 2012	681	1,014	3,061	4,756

Balance sheet liabilities - Repurchase agreements
Deposits by banks				1,338
Customer accounts				1,917
At 31 December 2012				3,255

12. Financial instruments continued

Repurchase and reverse repurchase agreements
The Group also undertakes reverse repurchase (reverse repo) lending agreements with counterparties typically financial institutions in exchange for collateral. Reverse repo agreements entitle the Group to have recourse to assets similar to those received as collateral in the event of a default. In addition the Group also obtains collateral on terms that permit the Group to repledge or resell the collateral to others. The Group does not recognise the securities bought under reverse repos as collateral on its balance sheet as the Group is not substantially entitled to the risks and rewards associated with those assets and instead recognises the lending as loans and advances to banks or customers, as appropriate. The Group's reverse repos at 31 December 2013 and 31 December 2012 are set out in the table below:
Balance sheet assets - Reverse repurchase agreements
			2013		2012
			$million		$million
Loans and advances to banks			12,887		7,759
Loans and advances to customers			4,538		2,900
			17,425		10,659
Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:
			2013		2012
			$million		$million
Securities and collateral received (at fair value)			17,835		10,949
Securities and collateral which can be repledged or sold (at fair value)			15,906		10,517
Thereof repledged/transferred to others for financing activities, to satisfy commitments under short sale transactions or liabilities under sale and repurchase agreements (at fair value)			1,804		1,378

Securitisation transactions
The Group has also entered into a number of securitisation transactions where the underlying loans and advances have been transferred to Structured Entities (SEs) that are fully consolidated by the Group. As a result, the Group continues to recognise the assets on its balance sheet, together with the associated liability instruments issued by the SEs. The holders of the liability instruments have recourse only to the assets transferred to the SEs.
The following table sets out the carrying value and fair value of the assets transferred and the carrying value and fair value of the associated liabilities at 31 December 2013 and 2012 respectively.
	2013			2012
	Carrying value	Fair value		Carrying value		Fair value
	$million	$million		$million		$million
Loan and advances to customers	779	778		1,321		1,319
Securitisation liability - reported as debt securities in issue	502	502		1,093		1,093
Net	277	276		228		226

The Group did not undertake any transactions that required the recognition of an asset representing continuing involvement in financial assets.

12. Financial instruments continued Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements
Impact of offset in the balance sheet In accordance with IAS 32 Financial Instruments: Presentation the Group is permitted to offset assets and liabilities and present these net on the Group's balance sheet, only if there is a legally enforceable right to set off and the Group intends to settle on a net basis or realise the asset and liability simultaneously. Amounts not offset in the balance sheet In practice the Group is able to offset other assets and liabilities which do not meet the IAS 32 netting criteria set out above. Such arrangements include master netting arrangements for derivatives and global master repurchase agreements for repurchase and reverse repurchase transactions. These agreements generally allow that all outstanding transactions with a particular counterparty can be offset but only in the event of default or other pre determined events. In addition the Group also receives and pledges readily realisable collateral for derivative transactions cover the net exposure in the event of a default. Under repurchase and reverse repurchase agreements the Group pledges (legally sell) and obtains (legally purchase) respectively, highly liquid assets which can be sold in the event of a default. The table below sets out the following: · Impact of offset on the balance sheet - This comprises derivative transactions settled through an enforceable netting agreement where we have the intent and ability to settle net that are offset on the balance sheet. · Related amounts not offset the balance sheet: This comprise (a) Financial instruments not offset in the balance sheet, but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivative financial instruments and excludes the effect of over collateralisation; and (b) Financial collateral - This comprises cash collateral pledged and received for derivative financial instruments and collateral bought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect of over collateralisation.
				Related amount not offset in the balance sheet
	Gross amounts of recognised financial instruments	Impact of offset in the balance sheet	Net amounts of financial instruments presented in the balance sheet	Financial instruments	Financial collateral	Net amount
	$million	$million	$million	$million	$million	$million
Assets
Derivative financial instruments	67,369	(5,567)	61,802	(46,242)	(5,147)	10,413
Reverse repurchase agreements	17,425	-	17,425	-	(17,425)	-
At 31 December 2013	84,794	(5,567)	79,227	(46,242)	(22,572)	10,413
Liabilities
Derivative financial instruments	66,803	(5,567)	61,236	(46,242)	(9,240)	5,754
Sale and repurchase liabilities	6,062	-	6,062	-	(6,062)	-
At 31 December 2013	72,865	(5,567)	67,298	(46,242)	(15,302)	5,754

				Related amount not offset in the balance sheet
	Gross amounts of recognised financial instruments	Impact of offset in the balance sheet	Net amounts of financial instruments presented in the balance sheet	Financial instruments	Financial collateral	Net amount
	$million	$million	$million	$million	$million	$million
Assets
Derivative financial instruments	55,795	(6,300)	49,495	(35,073)	(3,245)	11,177
Reverse repurchase agreements	10,659	-	10,659	-	(10,517)	142
At 31 December 2012	66,454	(6,300)	60,154	(35,073)	(13,762)	11,319
Liabilities
Derivative financial instruments	53,492	(6,300)	47,192	(35,073)	(5,068)	7,051
Sale and repurchase liabilities	3,255	-	3,255	-	(3,255)	-
At 31 December 2012	56,747	(6,300)	50,447	(35,073)	(8,323)	7,051

13. Financial instruments held at fair value through profit or loss

Financial assets held at fair value through profit or loss

Financial assets held at fair value through profit or loss comprise assets held for trading and those financial assets designated as being held at fair value through profit or loss. For certain loans and advances and debt securities with fixed rates of interest, interest rate swaps have been acquired with the intention of significantly reducing interest rate risk. Derivatives are recorded at fair value whereas loans and advances are usually recorded at amortised cost. To significantly reduce the accounting mismatch between fair value and amortised cost, these loans and advances and debt securities have been designated at fair value through profit or loss. The Group ensures the criteria under IAS 39 are met by matching the principal terms of interest rate swaps to the corresponding loans and debt securities.

Debt securities, equity shares and treasury bills held at fair value through profit or loss
		2013
		Debt Securities	Equity Shares	Treasury bills	Total
		$million	$million	$million	$million
Issued by public bodies:
	Government securities	7,763
	Other public sector securities	76
		7,839
Issued by banks:
	Certificates of deposit	292
	Other debt securities	457
		749
Issued by corporate entities and other issuers:
	Other debt securities	4,111
Total debt securities		12,699
Of which:
	Listed on a recognised UK exchange	144	21	-	165
	Listed elsewhere	8,017	2,741	1,646	12,404
	Unlisted	4,538	939	3,515	8,992
		12,699	3,701	5,161	21,561
Market value of listed securities		8,161	2,762	1,646	12,569

		2012
		Debt Securities	Equity Shares	Treasury bills	Total
		$million	$million	$million	$million
Issued by public bodies:
	Government securities	10,174
	Other public sector securities	131
		10,305
Issued by banks:
	Certificates of deposit	255
	Other debt securities	1,723
		1,978
Issued by corporate entities and other issuers:
	Other debt securities	2,932
Total debt securities		15,215
Of which:
	Listed on a recognised UK exchange	467	23	-	490
	Listed elsewhere	9,086	2,081	949	12,116
	Unlisted	5,662	1,050	2,006	8,718
		15,215	3,154	2,955	21,324
Market value of listed securities		9,553	2,104	949	12,606

13. Financial instruments held at fair value through profit or loss continued

Financial liabilities held at fair value through profit or loss

The Group designates certain financial liabilities at fair value through profit or loss where either the liabilities:

· have fixed rates of interest and interest rate swaps or other interest rate derivatives have been entered into with the intention of significantly reducing interest rate risk; or

· are exposed to foreign currency risk and derivatives have been acquired with the intention of significantly reducing exposure to market changes; or

· have been acquired to fund trading asset portfolios or assets, or where the assets and liabilities are managed, and performance evaluated, on a fair value basis for a documented risk management or investment strategy.

Derivatives are recorded at fair value whereas non-trading financial liabilities (unless designated at fair value) are recorded at amortised cost. Designation of certain liabilities at fair value through profit or loss significantly reduces the accounting mismatch between fair value and amortised cost expense recognition (a criterion of IAS 39). The Group ensures the criteria under IAS 39 are met by matching the principal terms of derivatives to the corresponding liabilities, either individually or on a portfolio basis.

14. Derivative financial instruments

The tables below analyse the notional principal amounts and the positive and negative fair values of the Group's derivative financial instruments. Notional principal amounts are the amount of principal underlying the contract at the reporting date.

	2013			2012
Total derivatives	Notional principal amounts	Assets	Liabilities	Notional principal amounts	Assets	Liabilities
Total derivatives	$million	$million	$million	$million	$million	$million

Foreign exchange derivative contracts:
Forward foreign exchange contracts	1,303,103	17,213	17,490	1,220,806	11,635	12,697
Currency swaps and options	1,086,784	25,151	24,647	853,460	13,932	12,370
Exchange traded futures and options	340	-	-	8,772	-	-
	2,390,227	42,364	42,137	2,083,038	25,567	25,067
Interest rate derivative contracts:
Swaps	1,974,451	15,295	15,241	1,463,777	19,107	18,343
Forward rate agreements and options	236,646	771	646	145,020	1,266	796
Exchange traded futures and options	694,212	-	-	306,054	-	-
	2,905,309	16,066	15,887	1,914,851	20,373	19,139
Credit derivative contracts	40,981	586	874	61,186	830	1,130
Equity and stock index options	15,684	415	502	12,223	355	372
Commodity derivative contracts	162,858	2,371	1,836	138,642	2,370	1,484
Total derivatives	5,515,059	61,802	61,236	4,209,940	49,495	47,192

The Group limits exposure to credit losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are only presented net in these accounts where they are subject to legal right of offset and intended to be settled net in the ordinary course of business. Details of the amounts available for offset under master netting agreement can be found in the Risk review on page 33.

The Derivatives and Hedging sections of the Risk review on pages 73-74 explain the Group's risk management of derivative contracts and application of hedging.

14. Derivative financial instruments continued

Derivatives held for hedging
Hedge accounting is applied to derivatives and hedged items when the criteria under IAS 39 have been met. The tables below list the types of derivatives that the Group holds for hedge accounting.


	2013				2012¹
	Notional principal amounts	Assets	Liabilities	Notional principal amounts	Assets	Liabilities
	$million	$million	$million	$million	$million	$million

Derivatives designated as fair value hedges:
Interest rate swaps	41,598	756	589	35,896	1,111	524
Forward foreign exchange contracts	199	7	-	427	-	9
Currency swaps	22,026	1,190	169	18,396	1,143	117
	63,823	1,953	758	54,719	2,254	650
Derivatives designated as cash flow hedges:
Interest rate swaps	20,564	22	19	17,033	33	17
Forward foreign exchange contracts	2,150	42	38	2,066	52	1
Currency swaps	7,169	20	15	8,955	23	13
	29,883	84	72	28,054	108	31
Derivatives designated as net investment hedges:
Forward foreign exchange contracts	981	-	84	671	-	52
Total derivatives held for hedging	94,687	2,037	914	83,444	2,362	733
¹The split within fair value hedges and cash flow hedges has been reclassified for prior year

15. Loans and advances to banks
	2013	2012
	$million	$million
Loans and advances to banks	86,271	68,676
Individual impairment provision	(100)	(103)
Portfolio impairment provision	(2)	(2)
	86,169	68,571
Of which: loans and advances held at fair value through profit or loss (note 12)	(2,467)	(774)
	83,702	67,797
Analysis of loans and advances to banks by geography are set out in the Risk review section on page 36.

16. Loans and advances to customers
	2013	2012
	$million	$million
Loans and advances to customers	299,460	287,668
Individual impairment provision	(2,749)	(2,330)
Portfolio impairment provision	(696)	(722)
	296,015	284,616
Of which: loans and advances held at fair value through profit or loss (note 12)	(5,307)	(4,978)
	290,708	279,638

The Group has outstanding residential mortgage loans to Korea residents of $12.6 billion (2012:$16.7 billion) and Hong Kong residents of $23.3 billion (2012: $21.4 billion).

Analysis of loans and advances to customers by geography and business and related impairment provisions are set out within the Risk review on pages 36 to 64.

17. Investment securities
		2013
		Debt securities
		Available- for-sale	Loans and receivables	Equity shares	Treasury bills	Total
		$million	$million	$million	$million	$million
Issued by public bodies:
	Government securities	26,111	-
	Other public sector securities	928	-
		27,039	-
Issued by banks:
	Certificates of deposit	6,476	-
	Other debt securities	24,897	49
		31,373	49
Issued by corporate entities and other issuers:
	Other debt securities	12,134	2,779
Total debt securities		70,546	2,828
Of which:
	Listed on a recognised UK exchange	5,563	113¹	65	-	5,741
	Listed elsewhere	26,091	619¹	1,545	10,480	38,735
	Unlisted	38,892	2,096	1,489	15,763	58,240
		70,546	2,828	3,099	26,243	102,716
Market value of listed securities		31,654	732	1,610	10,480	44,476
¹	These debt securities listed or registered on a recognised UK exchange or elsewhere, are thinly traded or the market for these securities is illiquid

		2012
		Debt securities
		Available- for-sale	Loans and receivables	Equity shares	Treasury bills	Total
		$million	$million	$million	$million	$million
Issued by public bodies:
	Government securities	23,059	390
	Other public sector securities	1,229	-
		24,288	390
Issued by banks:
	Certificates of deposit	5,974	-
	Other debt securities	24,195	114
		30,169	114
Issued by corporate entities and other issuers :
	Other debt securities	10,899	3,347
Total debt securities		65,356	3,851
Of which:
	Listed on a recognised UK exchange	6,858	173¹	70	-	7,101
	Listed elsewhere	22,816	878¹	1,104	13,039	37,837
	Unlisted	35,682	2,800	2,104	13,701	54,287
		65,356	3,851	3,278	26,740	99,225
Market value of listed securities		29,674	1,006	1,174	13,039	44,893
¹	These debt securities listed or registered on a recognised UK exchange or elsewhere, are thinly traded or the market for these securities is illiquid

There are no debt securities classified as held-to-maturity. Equity shares largely comprise investments in corporates.

17. Investment securitiescontinued

The change in the carrying amount of investment securities comprised:
	2013				2012
	Debt securities	Equity shares	Treasury bills	Total	Debt securities	Equity shares	Treasury bills	Total
	$million	$million	$million	$million	$million	$million	$million	$million
At 1 January	69,207	3,278	26,740	99,225	60,975	2,543	21,428	84,946
Exchange translation differences	(1,834)	(9)	(566)	(2,409)	678	14	627	1,319
Additions	93,136	215	49,537	142,888	111,322	783	44,778	156,883
Maturities and disposals	(86,954)	(533)	(49,676)	(137,163)	(104,558)	(217)	(40,552)	(145,327)
Impairment, net of recoveries on disposal	(59)	(61)	-	(120)	24	(109)	-	(85)
Changes in fair value (including the effect of fair value hedging)	(91)	209	(29)	89	727	264	56	1,047
Amortisation of discounts and premiums	(31)	-	237	206	39	-	403	442
At 31 December	73,374	3,099	26,243	102,716	69,207	3,278	26,740	99,225
The analysis of unamortised premiums and unamortised discounts on debt securities and income on equity shares held for investment purposes is provided below:
							2013	2012
							$million	$million
Debt securities:
Unamortised premiums							605	607
Unamortised discounts							425	443
Income from listed equity shares							67	54
Income from unlisted equity shares							37	38

18. Other assets
	2013	2012
	$million	$million
Financial assets held at amortised cost (note 12)
Hong Kong SAR government certificates of indebtedness (note 24)¹	4,460	4,191
Cash collateral	9,240	5,068
Acceptances and endorsements	5,501	4,957
Unsettled trades and other financial assets	7,150	7,190
	26,351	21,406
Non-financial assets and assets held for sale
Commodities	3,965	5,574
Assets held for sale²	1,623	43
Other	1,631	1,525
	33,570	28,548

¹The Hong Kong SAR government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued
²In 2013, assets held for sale include $1,563 million in respect of the Group's realignment of the Consumer Banking business in Korea. The disposal group consists of Standard Chartered Capital (Korea) Company Limited and Standard Chartered Savings Bank Korea Company Limited. The assets recorded here are classified as level 3.

19. Business Combinations

2013 acquisitions

On 2 December 2013 the Group completed the acquisition of the South African custody and trustee business of Absa Bank for a consideration of $36 million recognising goodwill of $16 million. The net assets acquired primarily comprised customer relationships that have been recognised as intangibles assets of the Group.

Goodwill arising on the acquisition is attributable to the synergies expected to arise from their integration with the Group. The primary reason for this acquisition is to enhance capability.

2012 acquisitions

On 4 November 2012, the Group completed the acquisition of 100 per cent of the issued and paid up share capital of Credit Agricole Yatirim Bankasi Turk A.S. (CAYBT), a wholly-owned subsidiary of Credit Agricole Corporate and Investment Bank, for a consideration of $63 million, recognising goodwill of $26 million. The net assets acquired primarily comprised balances held with central banks. The goodwill acquired largely represents intangibles that are not separately recognised, and primarily relates to the associated banking license. The primary reason for these acquisitions is to enhance capability and broaden product offering to customers.


20. Goodwill and intangible assets
	2013				2012
	Goodwill	Acquired intangibles	Software	Total	Goodwill	Acquired intangibles	Software	Total
	$million	$million	$million	$million	$million	$million	$million	$million
Cost
At 1 January	6,378	658	923	7,959	6,186	643	806	7,635
Exchange translation differences	(187)	(15)	(15)	(217)	158	14	41	213
Acquisitions	16	35	-	51	34	3	-	37
Additions	-	-	372	372	-	-	294	294
Amounts written off	(1,000)	-	(175)	(1,175)	-	(2)	(218)	(220)
Other movements	-	-	(2)	(2)	-	-	-	-
At 31 December	5,207	678	1,103	6,988	6,378	658	923	7,959
Provision for amortisation
At 1 January	-	481	333	814	-	404	340	744
Exchange translation differences	-	(6)	2	(4)	-	14	15	29
Amortisation for the period	-	55	226	281	-	65	189	254
Amounts written off	-	-	(173)	(173)	-	(2)	(211)	(213)
At 31 December	-	530	388	918	-	481	333	814
Net book value	5,207	148	715	6,070	6,378	177	590	7,145


20. Goodwill and intangible assets continued Testing of goodwill for impairment
An annual assessment is made as to whether the current carrying value of goodwill is impaired. For the purposes of impairment testing goodwill is allocated at the date of acquisition to a cash-generating unit (CGU), and the table below sets out the goodwill allocated to each CGU. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. The recoverable amounts for all the CGUs were measured based on value-in-use. The key assumptions used in determining the recoverable amounts are set out below and are solely estimates for the purposes of assessing impairment of acquired goodwill.
	2013			2012
	Goodwill	Pre-tax discount rate	Long-term forecast GDP growth rates	Goodwill	Pre-tax discount rate	Long-term forecast GDP growth rates
Cash Generating Unit	$million	per cent	per cent	$million	per cent	per cent
Korean business	794	16.5	3.9	1,850	16.4	3.9
Pakistan business	249	25.9	4.4	270	27.6	3.5
Taiwan business	1,313	18.6	4.4	1,348	16.3	4.8
Credit card and personal loan - Asia, India & MESA	896	15.8	1.4	896	15.8	1.8
India business	324	17.7	6.5	364	16.8	6.8
MESA business	368	19.1	4.1	368	20.4	4.0
Thailand business	315	16.4	4.7	331	16.1	5.0
Financial Institutions and Private Banking business	396	14.5	1.4	396	15.2	1.8
Corporate advisory business	75	15.8	1.4	77	15.9	1.8
Consumer banking business in Singapore	221	11.2	3.8	228	12.6	3.8
Other	256	12.4-15.8	1.4 - 7.4	250	15.6 - 17.0	1.8 - 7.5
	5,207			6,378

Methodology for determining value-in-use

The calculation of value-in-use for each CGU is based on cash flow projections over a 20 year period, including a terminal value which is determined based on long-term earnings multiple consistent with available market data. These cash flows are discounted using a pre-tax discount rate which reflects current market rates appropriate to the CGU as set out in the table below.

The cash flow projections are based on budgets and forecasts approved by management covering one year, except for Taiwan, Korea, Thailand and Pakistan CGUs, where management forecasts cover a total of five years to 2018. Management forecasts project growth rates greater than long-term GDP rates but which are in line with past performance as adjusted to reflect the current economic climate. For the period after management approved forecasts, the cash flows are extrapolated forward using steady long-term forecast GDP growth rates appropriate to the CGU.

Outcome of impairment assessment

The Group performed an impairment assessment on the level of goodwill assigned to the Korea CGU as at 30 June 2013 prior to its annual assessment date as a result of its consideration of reduced expectation for future cash flows and fluctuations in the discount rate. Based on this analysis, the carrying amount was assessed as exceeding the recoverable value by $1 billion which was recognised as an impairment charge.

At 31 December 2013, the results of our annual assessment review indicated that there is no other goodwill impairment to be recognised for 2013. Other than for the Korea CGU, the Group also believes that a reasonable possible change in any of the key assumptions on which the recoverable amounts have been based would not cause the carrying amounts to exceed their recoverable amount.

It continues to be possible that certain scenarios (to which Korea is more sensitive than other CGUs) could be constructed where a combination of a material change in the discount rate coupled with a reduction in current business plan forecasts or the GDP growth rate, would potentially result in the carrying amount of the goodwill exceeding the recoverable amount in the future.

21. Deposits by banks
	2013	2012
	$million	$million
Deposits by banks	43,517	36,427
Deposits by banks included within:
Financial liabilities held at fair value through profit or loss (note 12)	1,009	968
Total deposits by bank	44,526	37,395

22. Customer accounts
	2013	2012
	$million	$million
Customer accounts	381,066	372,874
Customer accounts included within:
Financial liabilities held at fair value through profit or loss (note 12)	9,905	12,243
Total customer accounts	390,971	385,117

Included in customer accounts were deposits of $4,956 million (2012: $2,862 million) held as collateral for irrevocable commitments under import letters of credit.

23. Debt securities in issue
		2013			2012
		Certificates of deposit of $100,000 or more	Other debt securities in issue	Total	Certificates of deposit of $100,000 or more	Other debt securities in issue	Total
		$million	$million	$million	$million	$million	$million
Debt securities in issue		21,082	43,507	64,589	16,982	38,997	55,979
Debt securities in issue included within:
	Financial liabilities held at fair value through profit or loss (note 12)	141	6,682	6,823	165	5,096	5,261
Total debt securities in issue		21,223	50,189	71,412	17,147	44,093	61,240

24. Other liabilities
	2013	2012
	$million	$million
Financial liabilities held at amortised cost (note 12)
Notes in circulation¹	4,460	4,191
Acceptances and endorsements	5,501	4,900
Cash collateral	5,147	3,245
Unsettled trades and other financial liabilities	6,786	7,211
	21,894	19,547
Non-financial liabilities
Cash-settled share based payments	73	84
Liabilities held for sale²	344	-
Other liabilities	5,027	4,654
Total other liabilities	27,338	24,285

¹Hong Kong currency notes in circulation of $4,460 million (2012: $4,191 million) that are secured by the government of Hong Kong SAR certificates of indebtedness of the same amount included in other assets (note 18)
²Liabilities held for sale of $344 million is in respect of the Group's realignment of the Consumer Banking business in Korea. The disposal group consists of Standard Chartered Capital (Korea) Company Limited and Standard Chartered Savings Bank Korea Company Limited. In addition, the businesses also have total net liabilities due to Group undertakings of $1.1 billion which will be transferred to the acquirer on completion of the sale. Liabilities recorded here are classified as level 2.

25. Subordinated liabilities and other borrowed funds
							2013		2012
							$million		$million
Subordinated liabilities and other borrowed funds							20,397		18,588


	2013				2012
	USD	GBP	Euro	Others	USD	GBP		Euro		Others
	$million	$million	$million	$million	$million	$million		$million		$million
Fixed rate subordinated debt	9,663	3,922	4,426	2,060	7,512	4,638		2,706		2,400
Floating rate subordinated debt	238	50	-	38	338	50		890		54
Total	9,901	3,972	4,426	2,098	7,850	4,688		3,596		2,454

All subordinated liabilities are unsecured, unguaranteed and subordinated to the claims of other creditors including without limitation, customer deposits and deposits by banks. The Group has the right to settle these debt instruments in certain circumstances as set out in the contractual agreements.

Issuances

On 11 January 2013, the Company issued $2 billion 3.95 per cent fixed interest rate notes due January 2023.

On 11 January 2013, the Company issued $500 million 5.3 per cent fixed interest rate notes due January 2043. On 17 January 2013, the Company issued a further $250 million 5.3 per cent fixed interest rate notes due January 2043 which were consolidated and form a single series with the existing $500 million 5.3 per cent fixed interest rate notes due January 2043 issued on 11 January 2013.

On 26 September 2013, the Company issued $1 billion 5.2 per cent fixed interest rate notes due January 2024.

On 21 October 2013, the Company issued €1.25 billion 4 per cent fixed interest rate notes due October 2025.

Redemptions

On 15 January 2013, Standard Chartered Bank (Botswana) Limited exercised its right to redeem its BWP75 million floating rate subordinated notes in full on the first optional call date.

On 25 January 2013, Standard Chartered Bank exercised the right to redeem its £300 million 6.0 per cent fixed rate subordinated notes in full on the first optional call date.

On 29 January 2013, Standard Chartered (Pakistan) Limited redeemed its PKR1 billion floating rate note on maturity.

On 28 March 2013, Standard Chartered Bank exercised its right to redeem its $100 million floating rate subordinated notes in full on the first optional call date.

On 28 March 2013, Standard Chartered Bank exercised the right to redeem its €675 million floating rate subordinated notes in full on the first optional call date.

On 25 April 2013, Standard Chartered Bank Korea Limited exercised its right to redeem its KRW260 billion 6.08 per cent subordinated debt in full on the first optional call date.

On 27 November 2013, the Company exercised its right to redeem its $925 million 8.125 per cent non-cumulative redeemable Dollar Preference Shares on the first optional call date.

The following subordinated notes issued by PT Bank Permata Tbk (Permata) are no longer disclosed as part of the Group consolidated accounts due to IFRS 11 'Joint Arrangements' which requires all joint ventures to be equity accounted:

· $22 million 9.75 per cent fixed to floating interest rate note 2021 (callable and floating rate from 2016)

· IDR 700 billion 8.9 per cent subordinated notes 2019

· IDR 1,750 billion 11 per cent subordinated notes 2018

· IDR 1,800 billion 9.4 per cent subordinated notes 2019

26. Retirement benefit obligations
Retirement benefit obligations comprise:
	2013	2012
	$million	$million
Total market value of assets	2,585	2,366
Present value of the schemes' liabilities	(2,926)	(2,836)
Defined benefit schemes obligation	(341)	(470)
Defined contribution schemes obligation	(24)	(21)
Net book amount	(365)	(491)

Retirement benefit charge comprises:
	2013	2012
	$million	$million
Defined benefit schemes	119	96
Defined contribution schemes	217	203
Charge against profit	336	299

The pension cost for defined benefit schemes was:
	2013	2012
	$million	$million
Current service cost	100	100
Past service cost and curtailments	4	3
Gain on settlements	-	(6)
Interest income on pension scheme assets	(93)	(112)
Interest on pension scheme liabilities	108	111
Total charge to profit before deduction of tax	119	96
Gain on assets above expected return	(69)	(75)
(Gain)/loss on liabilities	(10)	151
Total (gains)/loss recognised directly in statement of comprehensive income before tax	(79)	76
Deferred taxation	21	(14)
Total (gains)/loss after tax	(58)	62

27. Share capital, reserves and own shares

	Number of ordinary shares	Ordinary share capital	Preference share capital	Total
	(millions)	$million	$million	$million
At 1 January 2012	2,384	1,192	-	1,192
Capitalised on scrip dividend	25	13	-	13
Shares issued	4	2	-	2
At 31 December 2012	2,413	1,207	-	1,207
Capitalised on scrip dividend	4	2	-	2
Shares issued	10	5	-	5
At 31 December 2013	2,427	1,214	-	1,214

2013

On 13 May 2013, the Company issued 1,727,682 new ordinary shares instead of the 2012 final dividend and on 17 October 2013 the Company issued 2,081,685 new ordinary shares instead of the 2013 interim dividend.

During the year 10,542,375 new ordinary shares were issued under employee share plans at prices between nil and 1,463 pence.

2012

On 14 May 2012, the Company issued 6,961,782 new ordinary shares instead of the 2011 final dividend and on 11 October 2012 the Company issued 18,454,741 new ordinary shares instead of the 2012 interim dividend.

During the year 3,559,652 new ordinary shares were issued under employee share plans at prices between nil and 1,463 pence.

27. Share capital, reserves and own shares continued

Own shares

Bedell Cristin Trustees Limited is trustee of both the 1995 Employees' Share Ownership Plan Trust (the 1995 trust), which is an employee benefit trust used in conjunction with some of the Group's employee share schemes, and of the Standard Chartered 2004 Employee Benefit Trust (the 2004 trust) which is an employee benefit trust used in conjunction with the Group's deferred bonus plan and the delivery of shares to satisfy any discretionary variable compensation arrangements such as the annual performance plan. The trustee has agreed to satisfy a number of awards made under these arrangements through the relevant employee benefit trust. As part of these arrangements Group companies fund the trust, from time to time, to enable the trustee to acquire shares to satisfy these awards. All shares have been acquired through the London Stock Exchange.

Except as disclosed, neither the Company nor any of its subsidiaries has bought, sold or redeemed any securities of the company listed on The Stock Exchange of Hong Kong Limited during the year. Details of the shares purchased and held by the trusts are set out below.

	1995 Trust		2004 Trust		Total
Number of shares	2013	2012	2013	2012	2013	2012
Shares purchased	4,855,145	15,984,057	790,829	977,761¹	5,645,974	16,961,818
Market price of shares purchased ($ million)	133	386	21	25	154	411
Shares held at the end of the year	5,575,821	6,809,269²	141,160	211,415	5,716,981	7,020,684
Maximum number of shares held during year					7,278,439	18,321,546
¹The acquisition of shares in the year to 31 December 2012 was overstated by 4,472 shares in the 2012 accounts and has therefore been restated
²The closing balance at 31 December 2012 was understated by 894 shares in the 2012 accounts and has therefore been restated

28. Non-controlling interests
	$300m 7.267% Hybrid Tier 1 Securities	Other non-controlling interests	Total
	$million	$million	$million
At 1 January 2012	320	341	661
Expenses in equity attributable to non-controlling interests	-	(14)	(14)
Other profits attributable to non-controlling interests	22	76	98
Comprehensive income for the year	22	62	84
Distributions	(22)	(38)	(60)
Other increases	-	8	8
At 31 December 2012	320	373	693
Expenses in equity attributable to non-controlling interests	-	(31)	(31)
Other profits attributable to non-controlling interests	22	88	110
Comprehensive income for the year	22	57	79
Distributions	(22)	(55)	(77)
Other decreases	-	(100)	(100)
At 31 December 2013	320	275	595

The $300 million 7.267% Hybrid Tier 1 securities were issued by Standard Chartered Bank Korea Limited, a wholly owned subsidiary of the Group, and are classified in equity. The Group has no interest in these securities.

29. Cash flow statement
Adjustment for non-cash items and other adjustments included within income statement

	2013	2012
	$million	$million
Amortisation of discounts and premiums of investment securities	(206)	(442)
Interest expense on subordinated liabilities	655	569
Interest expense on senior debt securities in issue	492	418
Other non-cash items (including own credit adjustment)	173	120
Pension costs for defined benefit schemes	119	96
Share based payment costs	264	374
UK bank levy	55	10
Impairment losses on loans and advances and other credit risk provisions	1,617	1,196
Other impairment	1,129	196
Loss on business classified as held for sale	49	-
Profit from associates and joint ventures	(226)	(116)
Total	4,121	2,421
Change in operating assets

	2013	2012
	$million	$million
(Increase)/decrease in derivative financial instruments	(13,065)	18,684
Decrease/(increase) in debt securities, treasury bills and equity shares held at fair value through profit or loss	5,220	(3,077)
Net increase in loans and advances to banks and customers	(29,918)	(20,925)
(Increase) / decrease in pre-payments and accrued income	(8)	(39)
(Increase)/decrease in other assets	(6,373)	(3,052)
Total	(44,144)	(8,409)
Change in operating liabilities

	2013	2012
	$million	$million
Increase/(decrease) in derivative financial instruments	14,804	(18,968)
Net increase in deposits from banks, customer accounts, debt securities in issue, Hong Kong notes in circulation and short positions	28,996	37,826
(Decrease) / increase in accruals and deferred income	(39)	113
Increase/(decrease) in other liabilities	1,387	(1)
Total	45,148	18,970

30. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash, on demand and overnight balances with central banks (unless restricted) and balances with less than three months maturity from the date of acquisition, including: treasury bills and other eligible bills, loans and advances to banks, and short-term government securities. The following balances with less than three months maturity from the date of acquisition have been identified by the Group as being cash and cash equivalents. Restricted balances comprise minimum balances required to be held at central banks.
	Group
	2013	2012
	$million	$million
Cash and balances at central banks	54,534	60,537
Less restricted balances	(9,946)	(9,336)
Treasury bills and other eligible bills	6,561	3,101
Loans and advances to banks	29,509	23,909
Trading securities	3,498	1,307
Total	84,156	79,518

31. Restatement of prior year

The Group has introduced the following changes in its financial statements and has re-presented prior year balances on a similar basis to enhance the comparability of information presented.

Restatements impacting 31 December 2012

· Application of IFRS 11 Joint Arrangements as discussed in Note 1

The Group's investment in Permata has been presented using the equity method of accounting, applied on a retrospective basis. There is no impact on the profit for the period or Shareholders' equity, however, profit before taxation is lower as a result of profits from joint ventures been reported on a net of tax basis (see pages 137 to 141).

· Allocation of associates and joint ventures to Consumer Banking and Wholesale Banking

The Group's profits and interests in associates are allocated to Consumer Banking and Wholesale Banking. The associates balances were previously reported as corporate items not allocated. Joint venture balances were previously allocated to Consumer Banking and Wholesale Banking on a line by line basis and has been presented within the line following adoption of IFRS 11 (see page 141).

Goodwill and intangible assets previously allocated to Consumer Banking and Wholesale Banking is now reported in Corporate items not allocated.

· Reclassification of liabilities due to operational improvements

The Group has reclassified certain liabilities measured at fair value, these liabilities were previously reported as trading but now classified as fair value through profit and loss (see page 141).

The impact of the above restatements on the primary statements is set out on pages 137 to 141.

Income statement
		As reported	Permata	Restated
	Notes	31.12.12	restatement	31.12.12
	Notes	$million	$million	$million
Interest income		18,258	(431)	17,827
Interest expense		(7,248)	202	(7,046)
Net interest income		11,010	(229)	10,781
Fees and commission income		4,618	(43)	4,575
Fees and commission expense		(497)	1	(496)
Net trading income	3	2,748	(9)	2,739
Other operating income	4	1,192	(8)	1,184
Non-interest income		8,061	(59)	8,002
Operating income		19,071	(288)	18,783
Staff costs	5	(6,584)	92	(6,492)
Premises costs	5	(886)	23	(863)
General administrative expenses	5	(2,758)	51	(2,707)
Depreciation and amortisation	6	(668)	8	(660)
Operating expenses		(10,896)	174	(10,722)
Operating profit before impairment losses and taxation		8,175	(114)	8,061
Impairment losses on loans and advances and other credit risk provisions	7	(1,221)	25	(1,196)
Other impairment	8	(194)	(2)	(196)
Profit from associates and joint ventures		116	66	182
Profit before taxation		6,876	(25)	6,851
Taxation	9	(1,891)	25	(1,866)
Profit for the year		4,985	-	4,985

31. Restatement of prior year continued

Statement of other comprehensive income
					As reported	Permata	Restated
					2012	restatement	2012
				Notes	$million	$million	$million
Profit for the year					4,985	-	4,985
Other comprehensive income:
	Items that will not be reclassified to Income statement:
		Actuarial losses on retirement benefit obligations		26	(76)	-	(76)

	Items that may be reclassified subsequently to Income statement:
		Exchange differences on translation of foreign operations:
			Net gains taken to equity		575	(7)	568
			Net losses on net investment hedges		(73)	-	(73)
		Share of other comprehensive income from associates and joint ventures			(2)	6	4
		Available-for-sale-investments:
			Net valuation gains taken to equity		1,056	(2)	1,054
			Reclassified to income statement		(339)	3	(336)
	Cash flow hedges:
			Net gains taken to equity		133	-	133
			Reclassified to income statement		(20)	-	(20)
		Taxation relating to components of other comprehensive income		9	(132)	-	(132)
	Other comprehensive income for the period, net of taxation				1,122	-	1,122
Total comprehensive income for the year					6,107	-	6,107

31. Restatement of prior year continued

Balance sheet
		As reported	Permata	Restated
	Notes	2012	restatement	2012
	Notes	$million	$million	$million
Assets
Cash and balances at central banks	12, 30	61,043	(506)	60,537
Financial assets held at fair value through profit or loss	12, 13	27,084	(8)	27,076
Derivative financial instruments	12, 14	49,496	(1)	49,495
Loans and advances to banks	12, 15	68,381	(584)	67,797
Loans and advances to customers	12, 16	283,885	(4,247)	279,638
Investment securities	12, 17	99,413	(188)	99,225
Other assets	12, 18	28,818	(270)	28,548
Current tax assets		215	-	215
Prepayments and accrued income		2,581	(29)	2,552
Interests in associates and joint ventures		953	731	1,684
Goodwill and intangible assets	20	7,312	(167)	7,145
Property, plant and equipment		6,646	(26)	6,620
Deferred tax assets		691	(15)	676
Total assets		636,518	(5,310)	631,208

Liabilities
Deposits by banks	12, 21	36,477	(50)	36,427
Customer accounts	12, 22	377,639	(4,765)	372,874
Financial liabilities held at fair value through profit or loss	12, 13	23,064	-	23,064
Derivative financial instruments	12, 14	47,192	-	47,192
Debt securities in issue	12, 23	55,979	-	55,979
Other liabilities	12, 24	24,504	(219)	24,285
Current tax liabilities		1,069	(3)	1,066
Accruals and deferred income		4,860	(49)	4,811
Subordinated liabilities and other borrowed funds	12, 25	18,799	(211)	18,588
Deferred tax liabilities		161	-	161
Provisions for liabilities and charges		215	-	215
Retirement benefit obligations	26	504	(13)	491
Total liabilities		590,463	(5,310)	585,153

Equity
Share capital	27	1,207	-	1,207
Reserves		44,155	-	44,155
Total parent company shareholders' equity		45,362	-	45,362
Non-controlling interests	28	693	-	693
Total equity		46,055	-	46,055
Total equity and liabilities		636,518	(5,310)	631,208

31. Restatement of prior year continued

Cash flow statement
			As reported	Permata	Restated
		Notes	2012	restatement	2012
		Notes	$million	$million	$million
Cash flows from operating activities
Profit before taxation			6,876	(25)	6,851
Adjustments for:
	Non-cash items and other adjustments included within income statement	29	2,465	(44)	2,421
	Change in operating assets	29	(15,882)	7,473	(8,409)
	Change in operating liabilities	29	26,416	(7,446)	18,970
	Contributions to defined benefit schemes		(204)	1	(203)
	UK and overseas taxes paid		(1,791)	24	(1,767)
Net cash from operating activities			17,880	(17)	17,863
Net cash flows from investing activities
	Purchase of property, plant and equipment		(168)	6	(162)
	Disposal of property, plant and equipment		195	-	195
	Acquisition of investment in subsidiaries, associates and joint ventures, net of cash acquired		(63)	-	(63)
	Purchase of investment securities		(157,325)	442	(156,883)
	Disposal and maturity of investment securities		145,905	(578)	145,327
	Dividends received from investment in subsidiaries, associates and joint ventures		14	-	14
Net cash used in investing activities			(11,442)	(130)	(11,572)
Net cash flows from financing activities
	Issue of ordinary and preference share capital, net of expenses		59	-	59
	Purchase of own shares		(425)	-	(425)
	Exercise of share options through ESOP		39	-	39
	Interest paid on subordinated liabilities		(871)	(118)	(989)
	Gross proceeds from issue of subordinated liabilities		3,390	-	3,390
	Repayment of subordinated liabilities		(1,701)	-	(1,701)
	Interest paid on senior debts		(867)	-	(867)
	Gross proceeds from issue of senior debts		11,453	-	11,453
	Repayment of senior debts		(5,938)	-	(5,938)
	Dividends paid to non-controlling interests and preference shareholders, net of scrip		(161)	-	(161)
	Dividends paid to ordinary shareholders, net of scrip		(1,306)	-	(1,306)
Net cash from financing activities			3,672	(118)	3,554
Net increase/ (decrease) in cash and cash equivalents			10,110	(265)	9,845
	Cash and cash equivalents at beginning of the year		70,450	(884)	69,566
	Effect of exchange rate movements on cash and cash equivalents		40	67	107
Cash and cash equivalents at end of the year		30	80,600	(1,082)	79,518

31. Restatement of prior year continued

Restatement by class of business

The Group's profits and interests in associates are allocated to Consumer Banking and Wholesale Banking. The associates balances were previously reported as corporate items not allocated. Joint venture balances were previously allocated to Consumer Banking and Wholesale Banking on a line by line basis and has been presented within the line following adoption of IFRS 11.
	As reported				Restatement				Restated
	2012				2012				2012
	Consumer Banking	Wholesale Banking	Corporate items not allocated	Total	Consumer Banking	Wholesale Banking	Corporate items not allocated	Total	Consumer Banking	Wholesale Banking	Corporate items not allocated	Total reportable segments
	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	7,202	11,779	90	19,071	(181)	(107)	-	(288)	7,021	11,672	90	18,783
Operating expenses	(4,723)	(5,999)	(174)	(10,896)	127	47	-	174	(4,596)	(5,952)	(174)	(10,722)
Operating profit before impairment losses and taxation	2,479	5,780	(84)	8,175	(54)	(60)	-	(114)	2,425	5,720	(84)	8,061
Impairment losses on loans and advances and other credit risk provisions	(697)	(524)	-	(1,221)	23	2	-	25	(674)	(522)	-	(1,196)
Other impairment	(4)	(120)	(70)	(194)	(41)	(31)	70	(2)	(45)	(151)	-	(196)
Profit from associates and joint ventures	-	-	116	116	43	139	(116)	66	43	139	-	182
Profit before taxation	1,778	5,136	(38)	6,876	(29)	50	(46)	(25)	1,749	5,186	(84)	6,851
Total assets employed	143,250	491,409	1,859	636,518	(4,551)	(6,936)	6,177	(5,310)	138,699	484,473	8,036	631,208
Total liabilities employed	189,779	399,454	1,230	590,463	(3,452)	(1,855)	(3)	(5,310)	186,327	397,599	1,227	585,153

Reclassification of financial liabilities
	As reported 2012			Restatement 2012			Restated 2012
	Trading	Designated at fair value through profit or loss	Total	Trading	Designated at fair value through profit or loss	Total	Trading	Designated at fair value through profit or loss	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Deposits by banks	933	35	968	(933)	933	-	-	968	968
Customer accounts	4,858	7,385	12,243	(4,858)	4,858	-	-	12,243	12,243
Debt securities in issue	3,902	1,359	5,261	(3,902)	3,902	-	-	5,261	5,261
Total	9,693	8,779	18,472	(9,693)	9,693	-	-	18,472	18,472

32. Contingent liabilities and commitments
The table below shows the contract or underlying principal amounts and risk weighted amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk.
	2013	2012
	$million	$million
Contingent liabilities
Guarantees and irrevocable letters of credit	36,936	34,258
Other contingent liabilities	10,002	10,035
	46,938	44,293
Commitments
Documentary credits and short term trade-related transactions	7,409	7,610
Forward asset purchases and forward deposits placed	459	711
Undrawn formal standby facilities, credit lines and other commitments to lend:
One year and over	43,294	39,294
Less than one year	17,983	17,353
Unconditionally cancellable	123,481	110,138
	192,626	175,106

The Group's share of contingent liabilities and commitments relating to joint ventures is $388 million (2012: $348 million)

33. Legal and regulatory matters

The Group receives legal claims against it in a number of jurisdictions arising in the normal course of business. The Group considers none of these matters as material either individually or in aggregate. Where appropriate the Group recognises a provision for liabilities when it is probable that an outflow of economic resources embodying economic benefits will be required and for which a reliable estimate can be made of the obligation.

The Group seeks to comply with all applicable laws and regulations, but may be subject to regulatory actions and investigations across our markets, the outcome of which are generally difficult to predict and can be material to the Group.

Further details in the 'Regulatory compliance, reviews, request for information and investigations' and 'Risk of fraud and other criminal acts' sections' are set out on pages 27 and 28 of the Risk Review.

34. Post balance sheet events

On 1 January 2014 the Group adopted a new regional geographic structure in order to better align with how the Group is managed. The new regions are Greater China (including Hong Kong), North East Asia (including Korea), ASEAN (Including Singapore), South Asia (Including India), Middle East, North Africa and Pakistan, Africa, Americas, and Europe.

On 9January 2014 the Group announced that with effect from 1 April 2014 the two businesses of the Group, Wholesale Banking and Consumer Banking would be integrated to form one business. The new business will be organised into 3 segment groups (Corporate and Institutional; Commercial and Private banking; and Retail and Small business) serviced by 5 global product groups. The impact of this change will be reflected in the Group's 2014 Half Year report.

35. Related party transactions
Directors and officers
Details of directors' remuneration and interests in shares are disclosed in the Directors' remuneration report.

IAS 24 'Related party disclosures' requires the following additional information for key management compensation. Key management comprises non-executive directors, executive directors of Standard Chartered PLC and the Court Directors of Standard Chartered Bank.
			2013	2012
			$million	$million
Salaries, allowances and benefits in kind			25	21
Pension contributions			5	5¹
Bonuses paid or receivable			7	10
Share based payments			28	35
			65	71

¹The 2012 pension balance has been restated (previously stated as $6 million). In addition, for 2013, the methodology for calculating pension value has been changed to be consistent with the new UK remuneration reporting requirements. The change in methodology does not affect the restated 2012 balance as the difference in value is not material. Transactions with directors, officers and others
At 31 December 2013, the total amounts to be disclosed under the Companies Act 2006 (the Act) and the Listing Rules of the Hong Kong Stock Exchange Limited (HK Listing Rules) about loans to directors and officers were as follows:
	2013		2012
	Number	$000	Number	$000
Directors	5	6,446	4	4,898
Officers¹	-	-	1	18
¹For this disclosure in respect of 2012 the term 'Officers' means the members of the Executive Management Group other than those who were directors of Standard Chartered PLC and the Group Company Secretary.

Directors, connected persons or officers

There were no material transactions, arrangements or agreements outstanding for any director, connected person or officer of the Company which have to be disclosed under the Act, the rules of the UK Listing Authority or the HK Listing Rules.

Associates

The Group has loans and advances to Merchant Solutions and China Bohai Bank totalling $nil million and $20 million respectively at 31 December 2013 (2012: $29 million and $32 million respectively) and amounts payable to Merchant Solutions and China Bohai Bank of $27 million and $20 million respectively at 31 December 2013 (2012: $21 million and $16 million respectively).

Joint ventures

The Group has loans and advances to PT Bank Permata Tbk totalling $31 million at 31 December 2013 (2012: $18 million), and deposits of $31 million (2012: $23 million). The Group has investments in subordinated debt issued by PT Bank Permata Tbk of $114 million (2012: $128 million).

36. Corporate governance

The directors confirm that, throughout the year, the Company has complied with the code provisions set out in the corporate governance code continued in Appendix 14 of the Listing Rules of the Hong Kong Stock Exchange ("HK Listing Rules"). The Company confirms that it has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than required by Appendix 10 of the HK Listing Rules and that the directors of the Company have complied with this code of conduct throughout the year.

The directors also confirm that the announcement of these results have been reviewed by the Company's Audit Committee.

37. Other information

The financial information included within this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the directors on 5 March 2014. These accounts will be published on 28 March 2014 after which they will be delivered to the Registrar of Companies in England and Wales. The report of the auditors on these accounts was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not include a statement under section 498 of the Companies Act 2006.

38. UK and Hong Kong accounting requirements

As required by the HK Listing Rules, an explanation of the differences in accounting practices between EU endorsed IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards. EU endorsed IFRS may differ from IFRSs published by the International Accounting Standards Board if a standard has not been endorsed by the EU.

Standard Chartered PLC - Statement of directors' responsibilities

The directors confirm that to the best of their knowledge:

(a) the consolidated financial information contained herein has been prepared in accordance with IFRSs as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

(b) this announcement includes:

(i) an indication of important events that have occurred during the year ended 31 December 2013 and their impact on the consolidated financial statements, and a description of the principal risks and uncertainties; and

(ii) details of material related party transactions in the year ended 31 December 2013 and any material changes in the related party transactions described in the last annual report of the Group.

By order of the Board

R H Meddings

Group Finance Director

5 March 2014

Standard Chartered PLC - Additional information

A. Remuneration

The Group employed 86,640 staff at 31 December 2013 (2012: 89,058).

Performance and reward philosophy and principles

Our approach to performance, reward and benefits supports and drives our business strategy and reinforces our values in the context of a clearly articulated risk appetite.

Our approach:

· supports a strong performance-oriented culture, ensuring that individual reward and incentives relate directly to: (i) the performance and behaviour of the individual (ii) the performance of the business; and (iii) the interests of shareholders.

· ensures a competitive reward package that reflects our international nature and enable us to attract, retain and motivate our employees.

· reflects the fact that many of our employees bring international experience and expertise, and we recruit from a global marketplace.

· encourages an appropriate mix of fixed and variable compensation based on (i) the individual's responsibility and (ii) the individual's risk profile and that of the business.

Total remuneration is typically delivered via a combination of base salary and benefits plus variable compensation. Consistent with our pay for performance culture, our discretionary variable compensation incentives play an integral role in enabling us to recognise and reward superior performance and behaviour that support our values.

Standard Chartered PLC - Additional information continued
B. Summarised consolidated income statement
First and second half 2013	1st half 2013	2nd half 2013	2013
First and second half 2013	$million	$million	$million
Interest income	8,914	8,679	17,593
Interest expense	(3,316)	(3,121)	(6,437)
Net interest income	5,598	5,558	11,156
Fees and commission income	2,338	2,243	4,581
Fees and commission expense	(243)	(237)	(480)
Net trading income¹	1,685	829	2,514
Other operating income²	610	396	1,006
Total non-interest income	4,390	3,231	7,621
Operating income	9,988	8,789	18,777
Staff costs	(3,397)	(3,173)	(6,570)
Premises costs	(426)	(451)	(877)
General administrative expenses	(860)	(1,172)	(2,032)
Depreciation and amortisation	(351)	(363)	(714)
Operating expenses	(5,034)	(5,159)	(10,193)
Operating profit before impairment losses and taxation	4,954	3,630	8,584
Impairment losses on loans and advances and other credit risk provisions	(730)	(887)	(1,617)
Other impairment:
Goodwill Impairment	(1,000)	-	(1,000)
Other	(11)	(118)	(129)
Profit from associates and joint ventures	112	114	226
Profit before taxation	3,325	2,739	6,064
Taxation	(1,089)	(775)	(1,864)
Profit for the year	2,236	1,964	4,200


Profit attributable to:
Non-controlling interests	55	55	110
Parent company shareholders	2,181	1,909	4,090
Profit for the year	2,236	1,964	4,200

Earnings per share:
Basic earnings per ordinary share (cents)	88.1	76.4	164.4
Diluted earnings per ordinary share (cents)	87.3	75.6	163.0
¹Includes Own credit adjustment (OCA) gain of $237 million in the first half of 2013 and a charge of $131 million in the second half of 2013, taking the full year gain to $106 million (2012: $ nil million)

²The second half of 2013 includes a net charge of $235 million relating to the UK bank levy

Glossary
Advances-to-deposits ratio	The ratio of total loans and advances to customers relative to total customer deposits. A low advances-to-deposits ratio demonstrates that customer deposits exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers.
Asset Backed Securities (ABS)	Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and in the case of Collateralised Debt Obligations (CDOs), the reference pool may be ABS.
Advanced Internal Rating Based (AIRB) approach	The AIRB approach under the Basel II framework is used to calculate credit risk capital based on the Group's own estimates of certain parameters.
ASEAN	Association of South East Asian Nations (ASEAN) which includes the Group's operation in Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.
Attributable profit to ordinary shareholders	Profit for the year after non-controlling interests and the declaration of dividends on preference shares classified as equity.
Basel II	The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the 'International Convergence of Capital Measurement and Capital Standards'.
Basel III	In December 2010, the BCBS issued the Basel III rules text, which presents the details of strengthened global regulatory standards on bank capital adequacy and liquidity. The new requirements are being phased in from 1 January 2013 with full implementation by 31 December 2019.
Basis point (bps)	One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent. Used in quoting movements in interest rates or yields on securities.
CAD2	An amendment to Capital Adequacy Directive that gives national regulators the discretion to permit firms to use their own value at risk model for calculating capital requirements subject to certain criteria.
Collateralised Debt Obligations (CDOs)	Securities issued by a third party which reference ABS and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets.
Collateralised Loan Obligation (CLO)	A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches).
Collectively assessed loan impairment provisions	Also known as portfolio impairment provisions. Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant and to cover losses which have been incurred but have not yet been identified at the balance sheet date. Typically assets within the Consumer Banking business are assessed on a portfolio basis.
Commercial Mortgage Backed Securities (CMBS)	Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Commercial Paper (CP)	An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date.
Commercial real estate	Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets.
Constant currency	Constant currency change is derived by applying a simple translation of the previous period functional currency number in each entity using the current average and period end US dollar exchange rates to the income statement and balance sheet respectively.
Contractual maturity	Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal will be repaid and interest is due to be paid.
Core Tier 1 Capital	Core Tier 1 capital comprises called-up ordinary share capital and eligible reserves plus non-controlling interests, less goodwill and other intangible assets and deductions relating to excess expected losses over eligible provisions and securitisation positions as specified by the UK's Prudential Regulation Authority (PRA).
Core Tier 1 Capital ratio	Core Tier 1 capital as a percentage of risk weighted assets.
Cost to income ratio	Represents the proportion of total operating expenses to total operating income.
Cover ratio	Represents the extent to which non-performing loans are covered by impairment allowances.
Covered bonds	Debt securities backed by a portfolio of mortgages that are segregated from the issuer's other assets solely for the benefit of the holders of the covered bonds.
Credit Conversion Factor (CCF)	CCF is an internally modelled parameter based on historical experience to determine the amount that is expected to be further drawn down from the undrawn portion in a committed facility.

Glossary continued

Credit Default Swaps (CDSs)	A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
Credit institutions	An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.
Credit risk spread	The credit spread is the yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to take on a lower credit quality.
Credit valuation adjustments (CVA)	An adjustment to fair value primarily in respect of derivative contracts that reflects the possibility that the counterparty may default such that the Group would not receive the full market value of the transactions.
Customer deposits	Money deposited by all individuals and companies which are not credit institutions including securities sold under Repo. Such funds are recorded as liabilities in the Group's balance sheet under Customer accounts.
Debt restructuring	This is when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction.
Debt securities	Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks.
Debt securities in issue	Debt securities in issue are transferrable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits.
Delinquency	A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as 'Arrears'.
Deposits by banks	Deposits by banks comprise amounts owed to other domestic or foreign credit institutions by the Group including securities sold under Repo.
Dividend per share	Represents the entitlement of each shareholder in the share of the profits of the company. Calculated in the lowest unit of currency in which the shares are quoted.
Effective tax rate (ETR)	The tax on profits on ordinary activities as a percentage of profit on ordinary activities before taxation.
Expected loss (EL)	The Group measure of anticipated loss for exposures captured under an internal ratings based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), with a one-year time horizon.
Exposures	Credit exposures represent the amount lent to a customer, together with an undrawn commitments.
Exposure at default (EAD)	The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty's default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.
Eurozone	Represents the 17 European Union countries that have adopted the euro as their common currency. The 17 countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.
Forbearance	Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor's financial liabilities.
Foundation Internal Ratings Based Approach	A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD.
Funded/unfunded exposures	Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where there is a commitment to provide future funding is made but funds have been released / not released.
Guaranteed mortgages	Mortgages for which there is a guarantor to provide the lender a certain level of financial security in the event of default of the borrower.
High Quality Liquid Assets (HQLA)	Assets that are unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, for example, cash and claims on central governments and central banks. The Basel 3 Rules require this ratio to be at least 100% and it's expected to apply from 2015.
Impaired loans	Loans where individual identified impairment provisions have been raised and also include loans which are collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing.
Impairment allowances	Impairment allowances are a provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss. An impairment allowance may either be identified or unidentified and individual (specific) or collective (portfolio).

Individually assessed loan impairment provisions	Also known as specific impairment provisions. Impairment is measured individually for assets that are individually significant to the Group. Typically assets within the Wholesale Banking business of the Group are assessed individually.
Innovative Tier 1 Capital	Innovative Tier 1 capital consists of instruments which incorporate certain features, the effect of which is to weaken (but only marginally) the key characteristics of Tier 1 capital (that is, fully subordinated, perpetual and non-cumulative). Innovative Tier 1 capital is subject to a limit of 15 per cent of total Tier 1 capital.
Internal Ratings Based (IRB) approach	The IRB approach is used to calculate risk weighted assets in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of certain parameters.
Investment grade	A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.
Jaws	The rate of income growth less the rate of expense growth, expressed as positive jaws when income growth exceeds expense growth (and vice versa for negative jaws).
Leveraged finance	Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt : EBITDA (earnings before interest tax, depreciation and amortisation)) typically arising from private equity sponsor led acquisitions of the businesses concerned.
Liquidity and credit enhancements	Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over-collateralisation. Liquidity enhancement makes funds available if required, for other reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper.
Liquid asset buffer	These assets include high quality government or central bank securities, certain deposits with central banks and securities issued by designated multilateral development banks to meet the PRA's requirement for liquidity.
Liquid asset ratio	Ratio of total liquid assets to total assets. Liquid assets comprise cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities.
Liquid cover ratio (LCR)	A short-term liquidity measure that considers a 30 day period of liquidity stress
Loans and advances	This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument. An example of a loan product is a home loan.
Loans to banks	Amounts loaned to credit institutions including securities bought under Reverse repo.
Loans to individuals	Money loaned to individuals rather than institutions. The loans may be for car or home purchases, medical care, home repair, holidays, and other consumer uses.
Loan-to-value ratio	The loan-to-value ratio is a mathematical calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.
Loans past due	Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made.
Loss given default (LGD)	LGD is the percentage of an exposure that a lender expects to lose in the event of obligor default.
Master netting agreement	An agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract.
Mezzanine capital	Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender.
Mortgage Backed Securities (MBS)	Securities that represent interests in a group of mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Mortgage related assets	Assets which are referenced to underlying mortgages.
Medium term notes (MTNs)	Corporate notes continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.
Net asset value per share	Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.
Net interest income	The difference between interest received on assets and interest paid on liabilities.
Net interest margin	The margin is expressed as net interest income divided by average interest earning assets.
Net interest yield	Interest income divided by average interest earning assets less interest expense divided by average interest bearing liabilities.
Net Stable Funding Ratio (NSFR)	The ratio of available stable funding to required stable funding over a one year time horizon, assuming a stressed scenario. It is a longer term liquidity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one year time horizon
Non-performing loans	A non performing loan is any loan that is more than 90 days past due or is otherwise individually impaired, other than a loan which is: - renegotiated before 90 days past due, and on which no default in interest payments or loss of principal is expected; or - renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected.
Normalised earnings	Profit attributable to ordinary shareholders adjusted for profits or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent; and other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period.
Over the counter (OTC) derivatives	A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models.
Pre-provision profit	Operating profit before impairment losses and taxation.
Private equity investments	Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
Probability of default (PD)	PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation.
Profit attributable to ordinary shareholders	Profit for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.
Renegotiated loans	Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. Such assets will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset and are defined as forborne loans. In other cases, renegotiation may lead to a new agreement, which would be treated as a new loan.
Repo/Reverse repo	A repurchase agreement or repo is a short term funding agreements which allow a borrower to sell a financial asset, such as ABS or Government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or reverse repo.
Residential mortgage	A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a Home loan.
Residential Mortgage Backed Securities (RMBS)	Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Return on equity	Represents the ratio of the current year's profit available for distribution to ordinary shareholders to the weighted average ordinary shareholders equity for the reporting period.
Risks-not-in-VaR (RNIV)	A framework for identifying and quantifying marginal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a fat-tail risk or the necessary historical market data not being available.
Risk weighted assets	A measure of a bank's assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the PRA.
Seasoning	The emergence of credit loss patterns in portfolio over time.
Secured (fully and partially)	A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured.
Securitisation	Securitisation is a process by which debt instruments are aggregated into a pool, which is used to back new securities. A company sells assets to a special purpose entity (SPE) who then issues securities backed by the assets based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors.
Senior debt	Senior debt, frequently issued in the form of senior notes, is debt that takes priority over other unsecured or otherwise more "junior" debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure after subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.
Sovereign exposures	Exposures to central governments and central government departments, central banks and entities owned or guaranteed by the aforementioned. Sovereign exposures as defined by the European Banking Authority includes only exposures to central governments.
Standardised approach	In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines.
Stressed value at risk	A regulatory market risk measure based on potential market movements for a continuous one-year period of stress for a trading portfolio.
Structured finance /notes	A structured note is an investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.
Subordinated liabilities	Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
Sub-prime	Sub-prime is defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default.
Tangible net asset value per share	Ratio of parent shareholders' equity less preference shares classified as equity and goodwill and intangible assets to the number of ordinary shares outstanding at the end of the reporting period.
Tier 1 capital	Tier 1 capital comprises Core Tier 1 capital plus innovative Tier 1 securities and preference shares and tax on excess expected losses less material holdings in credit or financial institutions.
Tier 1 capital ratio	Tier 1 capital as a percentage of risk weighted assets.
Tier 2 capital	Tier 2 capital comprises qualifying subordinated liabilities, allowable portfolio impairment provision and unrealised gains in the eligible revaluation reserves arising from the fair valuation of equity instruments held as available-for-sale.
UK bank levy	A levy that applies to certain UK banks and the UK operations of foreign banks from 1 January 2011. The levy is payable each year based on a percentage of the chargeable liabilities of the Group as at 31 December.
Value at Risk (VaR)	Value at Risk is an estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level of 97.5 per cent.
Working profit	Operating profit before impairment losses and taxation.
Write downs	After an advance has been identified as impaired and is subject to an impairment allowance, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write downs will occur when and to the extent that, the whole or part of a debt is considered irrecoverable.

Financial Calendar

Results and dividend announced	5 Mar 2014
Ex-dividend date	12 Mar 2014
Record date for dividend	14 Mar 2014
Last date to elect for share dividend or to change standing instructions	24 Apr 2014
Annual General Meeting	8 May 2014
Dividend payment date	14 May 2014

Copies of this statement are available from:

Investor Relations, Standard Chartered PLC, 1 Basinghall Avenue, London, EC2V 5DD or on our website at http://investors.standardchartered.com

For further information please contact:

Steve Atkinson, Group Head of Corporate Affairs

+44 20 7885 7245

James Hopkinson, Head of Investor Relations

+44 20 7885 7151

Edwin Hui, Head of Investor Relations, Asia

+852 2820 3050

Uttam Hazarika, Manager, Investor Relations, India

+91 22 61158643

Tim Baxter ,Group Head of Corporate Communications

+44 20 7885 5573

The following information for the Full Year Results will be available on our website:

Video interviews with Peter Sands, Group Chief Executive and Richard Meddings, Group Finance Director

Analyst presentation in pdf format

Webcast of the live analyst presentation

Podcast of analyst presentation

Images of our Board of directors and senior management are available for the media at http://www.sc.com/en/about-us/our-people/index.html

Information regarding the Group's commitment to Sustainability is available at http://www.sc.com/sustainability

Forward looking statements

It is possible that this document could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions.

The Group undertakes no obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

The CRD IV position presented in this document does not constitute either a capital or RWA forecast and may be subject to change. Whiles the CRD IV rules text is finalised it remains subject to final EBA technical standards and certain aspects remain subject to ongoing national discretion or future regulatory decisions.

Disclaimer

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933 (the "U.S. Securities Act") and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. No public offering of the Placing Shares will be made in the United States.

Index	Page		Page
Assets at fair value through profit or loss	125	Liquidity risk	75
Asset backed securities	66	Loan maturity analysis	37
Balance sheet	96	Loans and advances	127
Business combinations	130	Market risk	71
Capital base and ratios	89-90	Net interest margins and spread	103
Cash flow statement	98	Non-controlling interest	135
Consumer Banking:		Non-performing loans	41,53,64
· Financial review	15	Normalised earnings	112
· Loan impairment coverage ratio	53	Operational risk	84
Contingent liabilities and commitments	142	Other impairment	109
Country risk	70	Other operating income	107
Customer deposits	132	Regulatory and legal matters	142
Depreciation and amortisation	109	Regulatory risk	27
Derivates	126	Remuneration	146
Dividends	111	Renegotiated and forborne loans	46-47
Earnings per share	112	Reputational risk	86
Financial calendar	153	Retirement benefit obligations	134
Financial instruments classification	113	Risk management framework	28
Financial review of Group		Risk weighted assets	91
· Operating income and profit	13	Segmental information by business	100
· Group consolidated balance sheet	23	Segmental information by geography	101
Hedging	74	Structure of deposits	104
Highlights	1	Selected European Country exposures	67
Impairment losses on loans and advances:		Share capital	134
Total individual impairment	44	Shares held by share scheme trust	135
· Consumer Banking	52	Statement of comprehensive income	95
· Wholesale Banking	62	Subordinated liabilities	133
· Income statement	94	Summarised income statement by halves	147
Industry concentration in loans and advances	48,54	Summary results	3
Investment securities	128	Taxation	110
Liabilities at fair value through profit or loss	126	Net trading income	107
		Wholesale Banking:
		· Financial review	19
		· Loan impairment coverage ratio	64

This information is provided by RNS

The company news service from the London Stock Exchange

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