Annual Financial Report - 4 of 9
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
The following disclosure provides a reconciliation by stage of the Group's gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. Movements are calculated on a quarterly basis and therefore fully capture stage movements between quarters. If movements were calculated on a year-to-date basis they would only reflect the opening and closing position of the financial instrument.
The transfers of financial instruments represents the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating ('CRR')/probability of default ('PD') movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the 'changes in risk parameters - credit quality' line item.
Changes in 'New financial assets originated or purchased', 'assets derecognised (including final repayments)' and 'changes to risk parameters - further lending/repayment' represent the impact from volume movements within the Group's lending portfolio.
|
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including |
||||||||||||||||||||
|
(Audited) |
||||||||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
|
|||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
|||||||||||||||
|
|
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
At 1 Jan 2019 |
1,502,976 |
|
(1,449 |
) |
95,104 |
|
(2,278 |
) |
14,232 |
|
(5,135 |
) |
334 |
|
(194 |
) |
1,612,646 |
|
(9,056 |
) |
|
Transfers of financial instruments: |
(36,244 |
) |
(543 |
) |
31,063 |
|
1,134 |
|
5,181 |
|
(591 |
) |
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 1 to stage 2 |
(108,434 |
) |
487 |
|
108,434 |
|
(487 |
) |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 2 to stage 1 |
73,086 |
|
(1,044 |
) |
(73,086 |
) |
1,044 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- transfers to stage 3 |
(1,284 |
) |
59 |
|
(5,022 |
) |
665 |
|
6,306 |
|
(724 |
) |
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 3 |
388 |
|
(45 |
) |
737 |
|
(88 |
) |
(1,125 |
) |
133 |
|
- |
|
- |
|
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
669 |
|
- |
|
(676 |
) |
- |
|
(114 |
) |
- |
|
- |
|
- |
|
(121 |
) |
|
New financial assets originated or purchased |
504,064 |
|
(534 |
) |
- |
|
- |
|
- |
|
- |
|
135 |
|
(21 |
) |
504,199 |
|
(555 |
) |
|
Assets derecognised (including final repayments) |
(352,961 |
) |
112 |
|
(19,909 |
) |
553 |
|
(2,712 |
) |
656 |
|
(26 |
) |
8 |
|
(375,608 |
) |
1,329 |
|
|
Changes to risk parameters - further lending/repayment |
(72,239 |
) |
291 |
|
(2,560 |
) |
67 |
|
402 |
|
(6 |
) |
28 |
|
12 |
|
(74,369 |
) |
364 |
|
|
Changes to risk parameters - credit quality |
- |
|
2 |
|
- |
|
(1,208 |
) |
- |
|
(2,704 |
) |
- |
|
(51 |
) |
- |
|
(3,961 |
) |
|
Changes to models used for ECL calculation |
- |
|
(6 |
) |
- |
|
4 |
|
- |
|
14 |
|
- |
|
- |
|
- |
|
12 |
|
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(2,657 |
) |
2,657 |
|
(140 |
) |
140 |
|
(2,797 |
) |
2,797 |
|
|
Credit-related modifications that resulted in derecognition |
- |
|
- |
|
- |
|
- |
|
(268 |
) |
125 |
|
- |
|
- |
|
(268 |
) |
125 |
|
|
Foreign exchange |
16,838 |
|
(9 |
) |
1,201 |
|
(40 |
) |
160 |
|
(31 |
) |
1 |
|
1 |
|
18,200 |
|
(79 |
) |
|
Others |
(821 |
) |
3 |
|
652 |
|
3 |
|
(3 |
) |
8 |
|
13 |
|
6 |
|
(159 |
) |
20 |
|
|
At 31 Dec 2019 |
1,561,613 |
|
(1,464 |
) |
105,551 |
|
(2,441 |
) |
14,335 |
|
(5,121 |
) |
345 |
|
(99 |
) |
1,681,844 |
|
(9,125 |
) |
|
ECL income statement change for the period |
|
534 |
|
|
(1,260 |
) |
|
(2,154 |
) |
|
(52 |
) |
|
(2,932 |
) |
|||||
|
Recoveries |
|
|
|
|
|
|
|
|
|
361 |
|
|||||||||
|
Others |
|
|
|
|
|
|
|
|
|
(20 |
) |
|||||||||
|
Total ECL income statement change for the period |
|
|
|
|
|
|
|
|
|
(2,591 |
) |
|||||||||
|
|
At 31 Dec 2019 |
12 months ended
|
||||
|
|
Gross carrying/nominal amount |
Allowance for ECL |
ECL charge |
|||
|
|
$m |
$m |
$m |
|||
|
As above |
1,681,844 |
|
(9,125 |
) |
(2,591 |
) |
|
Other financial assets measured at amortised cost |
615,179 |
|
(118 |
) |
(26 |
) |
|
Non-trading reverse purchase agreement commitments |
53,093 |
|
- |
|
- |
|
|
Performance and other guarantees not considered for IFRS 9 |
- |
|
- |
|
(34 |
) |
|
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement |
2,350,116 |
|
(9,243 |
) |
(2,651 |
) |
|
Debt instruments measured at FVOCI |
355,664 |
|
(166 |
) |
(105 |
) |
|
Total allowance for ECL/total income statement ECL change for the period |
n/a |
(9,409 |
) |
(2,756 |
) |
|
As shown in the previous table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees increased $69m during the period from $9,056m at 31 December 2018 to $9,125m at 31 December 2019.
This increase was primarily driven by:
• $3,961m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;
• $121m relating to the net remeasurement impact of stage transfers; and
• foreign exchange and other movements of $59m.
These decreases were partly offset by:
• $2,797m of assets written off;
• $1,138m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayment;
• $125m credit-related modifications that resulted in derecognitions; and
• $12m changes to models used for ECL calculation.
The ECL charge for the period of $2,932m presented in the previous table consisted of $3,961m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $121m relating to the net remeasurement impact of stage transfers. This was partly offset by $1,138m relating to underlying net book volume movements and $12m in changes to models used for ECL calculation.
Summary views of the movement in wholesale and personal lending are presented on pages 107 and 120.
|
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1,2 |
||||||||||||||||||||
|
(Audited) |
||||||||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
Total |
|||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
||||||||||||||||
|
|
Gross exposure |
Allowance/ provision for ECL |
Gross exposure |
Allowance/ provision for ECL |
Gross exposure |
Allowance/ provision for ECL |
Gross exposure |
Allowance/ provision for ECL |
Gross exposure |
Allowance/ provision for ECL |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
At 1 Jan 2018 |
1,446,857 |
|
(1,469 |
) |
102,032 |
|
(2,406 |
) |
15,083 |
|
(5,722 |
) |
1,042 |
|
(242 |
) |
1,565,014 |
|
(9,839 |
) |
|
Transfers of financial instruments: |
(8,747 |
) |
(685 |
) |
3,582 |
|
1,185 |
|
5,165 |
|
(500 |
) |
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 1 to stage 2 |
(84,181 |
) |
319 |
|
84,181 |
|
(319 |
) |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 2 to stage 1 |
77,325 |
|
(999 |
) |
(77,325 |
) |
999 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- transfers to stage 3 |
(2,250 |
) |
35 |
|
(4,439 |
) |
607 |
|
6,689 |
|
(642 |
) |
- |
|
- |
|
- |
|
- |
|
|
- transfers from stage 3 |
359 |
|
(40 |
) |
1,165 |
|
(102 |
) |
(1,524 |
) |
142 |
|
- |
|
- |
|
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
620 |
|
- |
|
(605 |
) |
- |
|
(103 |
) |
- |
|
- |
|
- |
|
(88 |
) |
|
Net new lending and further lending/payments |
126,868 |
|
(512 |
) |
(16,162 |
) |
564 |
|
(2,902 |
) |
733 |
|
(587 |
) |
42 |
|
107,217 |
|
827 |
|
|
Changes to risk parameters - credit quality |
- |
|
423 |
|
- |
|
(1,087 |
) |
- |
|
(2,238 |
) |
- |
|
(51 |
) |
- |
|
(2,953 |
) |
|
Changes to models used for ECL calculation |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(2,568 |
) |
2,552 |
|
(1 |
) |
1 |
|
(2,569 |
) |
2,553 |
|
|
Foreign exchange |
(52,911 |
) |
76 |
|
(2,935 |
) |
99 |
|
(636 |
) |
232 |
|
(26 |
) |
6 |
|
(56,508 |
) |
413 |
|
|
Other |
(9,091 |
) |
98 |
|
8,587 |
|
(28 |
) |
90 |
|
(89 |
) |
(94 |
) |
50 |
|
(508 |
) |
31 |
|
|
At 31 Dec 2018 |
1,502,976 |
|
(1,449 |
) |
95,104 |
|
(2,278 |
) |
14,232 |
|
(5,135 |
) |
334 |
|
(194 |
) |
1,612,646 |
|
(9,056 |
) |
|
ECL income statement change for the period |
|
531 |
|
|
(1,128 |
) |
|
(1,608 |
) |
|
(9 |
) |
|
(2,214 |
) |
|||||
|
Recoveries |
|
|
|
|
|
|
|
|
|
408 |
|
|||||||||
|
Others |
|
|
|
|
|
|
|
|
|
(62 |
) |
|||||||||
|
Total ECL income statement change for the period |
|
|
|
|
|
|
|
|
|
(1,868 |
) |
|||||||||
|
|
At 31 Dec 2018 |
12 months ended 31 Dec 2018 |
||||
|
|
Gross carrying/nominal amount |
Allowance for ECL |
ECL charge |
|||
|
|
$m |
$m |
$m |
|||
|
As above |
1,612,646 |
|
(9,056 |
) |
(1,868 |
) |
|
Other financial assets measured at amortised cost |
582,917 |
|
(55 |
) |
21 |
|
|
Non-trading reverse purchase agreement commitments |
65,381 |
|
- |
|
- |
|
|
Performance and other guarantees not considered for IFRS 9 |
- |
|
- |
|
(25 |
) |
|
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement |
2,260,944 |
|
(9,111 |
) |
(1,872 |
) |
|
Debt instruments measured at FVOCI |
343,110 |
|
(84 |
) |
105 |
|
|
Total allowance for ECL/total income statement ECL change for the period |
n/a |
(9,195 |
) |
(1,767 |
) |
|
1 The 31 December 2018 comparative 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers' disclosure presents 'New financial assets originated or purchased', 'Assets derecognised (including final repayments)' and 'Changes to risk parameters - further lending/repayments' under 'Net new lending and further lending/repayments'. To provide greater granularity, these amounts have been separately presented in the 31 December 2019 disclosure.
2 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount for 31 December 2018 only. For further details, see page 86.
Credit quality
Credit quality of financial instruments
(Audited)
We assess the credit quality of all financial instruments that are subject to credit risk. The credit quality of financial instruments is a point-in-time assessment of PD, whereas stages 1 and 2 are determined based on relative deterioration of credit quality since initial recognition. Accordingly, for non-credit-impaired financial instruments, there is no direct relationship between the credit quality assessment and stages 1 and 2, although typically the lower credit quality bands exhibit a higher proportion in stage 2.
The five credit quality classifications each encompass a range of granular internal credit rating grades assigned to wholesale and personal lending businesses and the external ratings attributed by external agencies to debt securities, as shown in the table on page 85.
|
Distribution of financial instruments by credit quality at 31 December 2019 |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
Gross carrying/notional amount |
Allowance for ECL/other credit provisions |
Net |
|||||||||||||
|
|
Strong |
Good |
Satisfactory |
Sub-standard |
Credit impaired |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
In-scope for IFRS 9 |
|
|
|
|
|
|
|
|
||||||||
|
Loans and advances to customers held at amortised cost |
524,889 |
|
258,402 |
|
228,485 |
|
20,007 |
|
13,692 |
|
1,045,475 |
|
(8,732 |
) |
1,036,743 |
|
|
- personal |
354,461 |
|
45,037 |
|
27,636 |
|
2,286 |
|
4,851 |
|
434,271 |
|
(3,134 |
) |
431,137 |
|
|
- corporate and commercial |
138,126 |
|
190,470 |
|
186,383 |
|
16,891 |
|
8,629 |
|
540,499 |
|
(5,438 |
) |
535,061 |
|
|
- non-bank financial institutions |
32,302 |
|
22,895 |
|
14,466 |
|
830 |
|
212 |
|
70,705 |
|
(160 |
) |
70,545 |
|
|
Loans and advances to banks held at amortised cost |
60,636 |
|
5,329 |
|
1,859 |
|
1,395 |
|
- |
|
69,219 |
|
(16 |
) |
69,203 |
|
|
Cash and balances at central banks |
151,788 |
|
1,398 |
|
915 |
|
- |
|
- |
|
154,101 |
|
(2 |
) |
154,099 |
|
|
Items in the course of collection from other banks |
4,935 |
|
18 |
|
3 |
|
- |
|
- |
|
4,956 |
|
- |
|
4,956 |
|
|
Hong Kong Government certificates of indebtedness |
38,380 |
|
- |
|
- |
|
- |
|
- |
|
38,380 |
|
- |
|
38,380 |
|
|
Reverse repurchase agreements - non-trading |
193,157 |
|
37,947 |
|
9,621 |
|
137 |
|
- |
|
240,862 |
|
- |
|
240,862 |
|
|
Financial investments |
78,318 |
|
6,503 |
|
906 |
|
61 |
|
- |
|
85,788 |
|
(53 |
) |
85,735 |
|
|
Prepayments, accrued income and other assets |
70,675 |
|
8,638 |
|
11,321 |
|
306 |
|
152 |
|
91,092 |
|
(63 |
) |
91,029 |
|
|
- endorsements and acceptances |
1,133 |
|
4,651 |
|
4,196 |
|
230 |
|
4 |
|
10,214 |
|
(16 |
) |
10,198 |
|
|
- accrued income and other |
69,542 |
|
3,987 |
|
7,125 |
|
76 |
|
148 |
|
80,878 |
|
(47 |
) |
80,831 |
|
|
Debt instruments measured at
|
333,158 |
|
10,966 |
|
7,222 |
|
544 |
|
1 |
|
351,891 |
|
(166 |
) |
351,725 |
|
|
Out-of-scope for IFRS 9 |
|
|
|
|
|
|
|
|
||||||||
|
Trading assets |
135,059 |
|
15,240 |
|
22,964 |
|
2,181 |
|
- |
|
175,444 |
|
- |
|
175,444 |
|
|
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss |
4,655 |
|
1,391 |
|
5,584 |
|
139 |
|
- |
|
11,769 |
|
- |
|
11,769 |
|
|
Derivatives |
187,636 |
|
42,642 |
|
11,894 |
|
821 |
|
2 |
|
242,995 |
|
- |
|
242,995 |
|
|
Total gross carrying amount on balance sheet |
1,783,286 |
|
388,474 |
|
300,774 |
|
25,591 |
|
13,847 |
|
2,511,972 |
|
(9,032 |
) |
2,502,940 |
|
|
Percentage of total credit quality |
70.9% |
15.5% |
12.0% |
1.0% |
0.6% |
100% |
|
|
||||||||
|
Loan and other credit-related commitments |
369,424 |
|
146,988 |
|
77,499 |
|
5,338 |
|
780 |
|
600,029 |
|
(329 |
) |
599,700 |
|
|
Financial guarantees |
7,441 |
|
6,033 |
|
5,539 |
|
1,011 |
|
190 |
|
20,214 |
|
(48 |
) |
20,166 |
|
|
In-scope: Irrevocable loan commitments and financial guarantees |
376,865 |
|
153,021 |
|
83,038 |
|
6,349 |
|
970 |
|
620,243 |
|
(377 |
) |
619,866 |
|
|
Loan and other credit-related commitments2 |
66,148 |
|
69,890 |
|
58,754 |
|
2,605 |
|
182 |
|
197,579 |
|
- |
|
197,579 |
|
|
Performance and other guarantees |
30,099 |
|
23,335 |
|
20,062 |
|
2,057 |
|
380 |
|
75,933 |
|
(132 |
) |
75,801 |
|
|
Out-of-scope: Revocable loan commitments and non-financial guarantees |
96,247 |
|
93,225 |
|
78,816 |
|
4,662 |
|
562 |
|
273,512 |
|
(132 |
) |
273,380 |
|
|
Distribution of financial instruments by credit quality at 31 December 2018 (continued) |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
Gross carrying/notional amount |
Allowance for ECL/other credit provisions |
Net |
|||||||||||||
|
|
Strong |
Good |
Satisfactory |
Sub- standard |
Credit impaired |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
In-scope for IFRS 9 |
|
|
|
|
|
|
|
|
||||||||
|
Loans and advances to customers held at amortised cost |
485,451 |
|
244,199 |
|
230,357 |
|
16,993 |
|
13,321 |
|
990,321 |
|
(8,625 |
) |
981,696 |
|
|
- personal |
316,616 |
|
43,764 |
|
27,194 |
|
2,182 |
|
4,581 |
|
394,337 |
|
(2,947 |
) |
391,390 |
|
|
- corporate and commercial |
140,387 |
|
181,984 |
|
189,357 |
|
14,339 |
|
8,510 |
|
534,577 |
|
(5,552 |
) |
529,025 |
|
|
- non-bank financial institutions |
28,448 |
|
18,451 |
|
13,806 |
|
472 |
|
230 |
|
61,407 |
|
(126 |
) |
61,281 |
|
|
Loans and advances to banks held at amortised cost |
60,249 |
|
7,371 |
|
4,549 |
|
11 |
|
- |
|
72,180 |
|
(13 |
) |
72,167 |
|
|
Cash and balances at central banks |
160,995 |
|
1,508 |
|
324 |
|
18 |
|
- |
|
162,845 |
|
(2 |
) |
162,843 |
|
|
Items in the course of collection from other banks |
5,765 |
|
21 |
|
1 |
|
- |
|
- |
|
5,787 |
|
- |
|
5,787 |
|
|
Hong Kong Government certificates of indebtedness |
35,859 |
|
- |
|
- |
|
- |
|
- |
|
35,859 |
|
- |
|
35,859 |
|
|
Reverse repurchase agreements - non-trading |
200,774 |
|
29,423 |
|
12,607 |
|
- |
|
- |
|
242,804 |
|
- |
|
242,804 |
|
|
Financial investments |
56,031 |
|
5,703 |
|
949 |
|
1 |
|
- |
|
62,684 |
|
(18 |
) |
62,666 |
|
|
Prepayments, accrued income and other assets |
55,424 |
|
8,069 |
|
9,138 |
|
181 |
|
126 |
|
72,938 |
|
(35 |
) |
72,903 |
|
|
- endorsements and acceptances |
1,514 |
|
4,358 |
|
3,604 |
|
155 |
|
3 |
|
9,634 |
|
(11 |
) |
9,623 |
|
|
- accrued income and other |
53,910 |
|
3,711 |
|
5,534 |
|
26 |
|
123 |
|
63,304 |
|
(24 |
) |
63,280 |
|
|
Debt instruments measured at fair value through other comprehensive income1
|
319,632 |
|
12,454 |
|
7,210 |
|
2,558 |
|
12 |
|
341,866 |
|
(84 |
) |
341,782 |
|
|
Out-of-scope for IFRS 9 |
|
|
|
|
|
|
|
|
||||||||
|
Trading assets |
139,484 |
|
18,888 |
|
16,991 |
|
1,871 |
|
- |
|
177,234 |
|
- |
|
177,234 |
|
|
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss |
6,079 |
|
2,163 |
|
6,683 |
|
9 |
|
- |
|
14,934 |
|
- |
|
14,934 |
|
|
Derivatives |
169,121 |
|
31,225 |
|
6,813 |
|
625 |
|
41 |
|
207,825 |
|
- |
|
207,825 |
|
|
Total gross carrying amount on balance sheet |
1,694,864 |
|
361,024 |
|
295,622 |
|
22,267 |
|
13,500 |
|
2,387,277 |
|
(8,777 |
) |
2,378,500 |
|
|
Percentage of total credit quality |
71% |
15.1% |
12.4% |
0.9% |
0.6% |
100% |
|
|
||||||||
|
Loan and other credit-related commitments |
373,302 |
|
137,076 |
|
75,478 |
|
5,233 |
|
919 |
|
592,008 |
|
(325 |
) |
591,683 |
|
|
Financial guarantees |
9,716 |
|
7,400 |
|
5,505 |
|
597 |
|
300 |
|
23,518 |
|
(93 |
) |
23,425 |
|
|
In-scope: Irrevocable loan commitments and financial guarantees |
383,018 |
|
144,476 |
|
80,983 |
|
5,830 |
|
1,219 |
|
615,526 |
|
(418 |
) |
615,108 |
|
|
Loan and other credit-related commitments2 |
188,258 |
|
- |
|
- |
|
- |
|
- |
|
188,258 |
|
- |
|
188,258 |
|
|
Performance and other guarantees |
26,679 |
|
25,743 |
|
16,790 |
|
1,869 |
|
403 |
|
71,484 |
|
(99 |
) |
71,385 |
|
|
Out-of-scope: Revocable loan commitments and non-financial guarantees |
214,937 |
|
25,743 |
|
16,790 |
|
1,869 |
|
403 |
|
259,742 |
|
(99 |
) |
259,643 |
|
1 For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
2 In 2018, revocable loan and other commitments, which are out of scope of IFRS 9, are presented within the 'Strong' classification.
|
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation |
|||||||||||||||||
|
(Audited) |
|||||||||||||||||
|
|
|
Gross carrying/notional amount |
Allowance for ECL |
Net |
|||||||||||||
|
|
|
Strong |
Good |
Satisfactory |
Sub- |
Credit impaired |
Total |
||||||||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Loans and advances to customers at amortised cost |
|
524,889 |
|
258,402 |
|
228,485 |
|
20,007 |
|
13,692 |
|
1,045,475 |
|
(8,732 |
) |
1,036,743 |
|
|
- stage 1 |
|
523,092 |
|
242,631 |
|
181,056 |
|
4,804 |
|
- |
|
951,583 |
|
(1,297 |
) |
950,286 |
|
|
- stage 2 |
|
1,797 |
|
15,771 |
|
47,429 |
|
15,185 |
|
- |
|
80,182 |
|
(2,284 |
) |
77,898 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
13,378 |
|
13,378 |
|
(5,052 |
) |
8,326 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
18 |
|
314 |
|
332 |
|
(99 |
) |
233 |
|
|
Loans and advances to banks at amortised cost |
|
60,636 |
|
5,329 |
|
1,859 |
|
1,395 |
|
- |
|
69,219 |
|
(16 |
) |
69,203 |
|
|
- stage 1 |
|
60,548 |
|
5,312 |
|
1,797 |
|
112 |
|
- |
|
67,769 |
|
(14 |
) |
67,755 |
|
|
- stage 2 |
|
88 |
|
17 |
|
62 |
|
1,283 |
|
- |
|
1,450 |
|
(2 |
) |
1,448 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Other financial assets measured at amortised cost |
|
537,253 |
|
54,505 |
|
22,766 |
|
503 |
|
152 |
|
615,179 |
|
(118 |
) |
615,061 |
|
|
- stage 1 |
|
536,942 |
|
54,058 |
|
21,921 |
|
279 |
|
- |
|
613,200 |
|
(38 |
) |
613,162 |
|
|
- stage 2 |
|
311 |
|
447 |
|
845 |
|
224 |
|
- |
|
1,827 |
|
(38 |
) |
1,789 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
151 |
|
151 |
|
(42 |
) |
109 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
1 |
|
|
Loan and other credit-related commitments |
|
369,424 |
|
146,988 |
|
77,499 |
|
5,338 |
|
780 |
|
600,029 |
|
(329 |
) |
599,700 |
|
|
- stage 1 |
|
368,711 |
|
141,322 |
|
66,283 |
|
1,315 |
|
- |
|
577,631 |
|
(137 |
) |
577,494 |
|
|
- stage 2 |
|
713 |
|
5,666 |
|
11,216 |
|
4,023 |
|
- |
|
21,618 |
|
(133 |
) |
21,485 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
771 |
|
771 |
|
(59 |
) |
712 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
9 |
|
9 |
|
- |
|
9 |
|
|
Financial guarantees |
|
7,441 |
|
6,033 |
|
5,539 |
|
1,011 |
|
190 |
|
20,214 |
|
(48 |
) |
20,166 |
|
|
- stage 1 |
|
7,400 |
|
5,746 |
|
4,200 |
|
338 |
|
- |
|
17,684 |
|
(16 |
) |
17,668 |
|
|
- stage 2 |
|
41 |
|
287 |
|
1,339 |
|
673 |
|
- |
|
2,340 |
|
(22 |
) |
2,318 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
186 |
|
186 |
|
(10 |
) |
176 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
4 |
|
4 |
|
- |
|
4 |
|
|
At 31 Dec 2019 |
|
1,499,643 |
|
471,257 |
|
336,148 |
|
28,254 |
|
14,814 |
|
2,350,116 |
|
(9,243 |
) |
2,340,873 |
|
|
Debt instruments at FVOCI |
1 |
|
|
|
|
|
|
|
|
||||||||
|
- stage 1 |
|
333,072 |
|
10,941 |
|
6,902 |
|
- |
|
- |
|
350,915 |
|
(39 |
) |
350,876 |
|
|
- stage 2 |
|
86 |
|
25 |
|
320 |
|
544 |
|
- |
|
975 |
|
(127 |
) |
848 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
1 |
|
|
At 31 Dec 2019 |
|
333,158 |
|
10,966 |
|
7,222 |
|
544 |
|
1 |
|
351,891 |
|
(166 |
) |
351,725 |
|
1 For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
|
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation2 (continued) |
|||||||||||||||||
|
(Audited) |
|||||||||||||||||
|
|
|
Gross carrying/notional amount |
|
|
|||||||||||||
|
|
|
Strong |
Good |
Satisfactory |
Sub-standard |
Credit impaired |
Total |
Allowance for ECL |
Net |
||||||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Loans and advances to customers at amortised cost |
|
485,451 |
|
244,199 |
|
230,357 |
|
16,993 |
|
13,321 |
|
990,321 |
|
(8,625 |
) |
981,696 |
|
|
- stage 1 |
|
483,170 |
|
232,004 |
|
187,773 |
|
5,446 |
|
- |
|
908,393 |
|
(1,276 |
) |
907,117 |
|
|
- stage 2 |
|
2,281 |
|
12,195 |
|
42,584 |
|
11,521 |
|
- |
|
68,581 |
|
(2,108 |
) |
66,473 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
13,023 |
|
13,023 |
|
(5,047 |
) |
7,976 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
26 |
|
298 |
|
324 |
|
(194 |
) |
130 |
|
|
Loans and advances to banks at amortised cost |
|
60,249 |
|
7,371 |
|
4,549 |
|
11 |
|
- |
|
72,180 |
|
(13 |
) |
72,167 |
|
|
- stage 1 |
|
60,199 |
|
7,250 |
|
4,413 |
|
11 |
|
- |
|
71,873 |
|
(11 |
) |
71,862 |
|
|
- stage 2 |
|
50 |
|
121 |
|
136 |
|
- |
|
- |
|
307 |
|
(2 |
) |
305 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Other financial assets measured at amortised cost |
|
514,848 |
|
44,724 |
|
23,019 |
|
200 |
|
126 |
|
582,917 |
|
(55 |
) |
582,862 |
|
|
- stage 1 |
|
514,525 |
|
44,339 |
|
22,184 |
|
70 |
|
- |
|
581,118 |
|
(27 |
) |
581,091 |
|
|
- stage 2 |
|
323 |
|
385 |
|
835 |
|
130 |
|
- |
|
1,673 |
|
(6 |
) |
1,667 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
126 |
|
126 |
|
(22 |
) |
104 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Loan and other credit-related commitments |
|
373,302 |
|
137,076 |
|
75,478 |
|
5,233 |
|
919 |
|
592,008 |
|
(325 |
) |
591,683 |
|
|
- stage 1 |
|
372,529 |
|
131,278 |
|
62,452 |
|
973 |
|
- |
|
567,232 |
|
(143 |
) |
567,089 |
|
|
- stage 2 |
|
773 |
|
5,798 |
|
13,026 |
|
4,260 |
|
- |
|
23,857 |
|
(139 |
) |
23,718 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
912 |
|
912 |
|
(43 |
) |
869 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
7 |
|
7 |
|
- |
|
7 |
|
|
Financial guarantees |
|
9,716 |
|
7,400 |
|
5,505 |
|
597 |
|
300 |
|
23,518 |
|
(93 |
) |
23,425 |
|
|
- stage 1 |
|
9,582 |
|
6,863 |
|
4,231 |
|
158 |
|
- |
|
20,834 |
|
(19 |
) |
20,815 |
|
|
- stage 2 |
|
134 |
|
537 |
|
1,274 |
|
439 |
|
- |
|
2,384 |
|
(29 |
) |
2,355 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
297 |
|
297 |
|
(45 |
) |
252 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
3 |
|
3 |
|
- |
|
3 |
|
|
At 31 Dec 2018 |
|
1,443,566 |
|
440,770 |
|
338,908 |
|
23,034 |
|
14,666 |
|
2,260,944 |
|
(9,111 |
) |
2,251,833 |
|
|
Debt instruments at FVOCI |
1 |
- |
|
|
|
|
|
|
|
|
|||||||
|
- stage 1 |
|
319,623 |
|
12,358 |
|
6,856 |
|
2,218 |
|
- |
|
341,055 |
|
(33 |
) |
341,022 |
|
|
- stage 2 |
|
9 |
|
96 |
|
354 |
|
340 |
|
- |
|
799 |
|
(50 |
) |
749 |
|
|
- stage 3 |
|
- |
|
- |
|
- |
|
- |
|
8 |
|
8 |
|
(1 |
) |
7 |
|
|
- POCI |
|
- |
|
- |
|
- |
|
- |
|
4 |
|
4 |
|
- |
|
4 |
|
|
At 31 Dec 2018 |
|
319,632 |
|
12,454 |
|
7,210 |
|
2,558 |
|
12 |
|
341,866 |
|
(84 |
) |
341,782 |
|
1 For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
2 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
Credit-impaired loans
(Audited)
We determine that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether:
• contractual payments of either principal or interest are past due for more than 90 days;
• there are other indications that the borrower is unlikely to pay, such as when a concession has been granted to the borrower for economic or legal reasons relating to the borrower's financial condition; and
• the loan is otherwise considered to be in default. If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due, even where regulatory rules permit default to be defined based on 180 days past due. Therefore, the definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or otherwise credit impaired.
Renegotiated loans and forbearance
The following table shows the gross carrying amounts of the Group's holdings of renegotiated loans and advances to customers by industry sector and by stages.
A summary of our current policies and practices for renegotiated loans and forbearance is set out in 'Credit risk management' on page 84.
|
Renegotiated loans and advances to customers at amortised cost by stage allocation |
||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
|||||
|
|
$m |
$m |
$m |
$m |
$m |
|||||
|
Gross carrying amount |
|
|
|
|
|
|||||
|
Personal |
- |
|
- |
|
2,207 |
|
- |
|
2,207 |
|
|
- first lien residential mortgages |
- |
|
- |
|
1,558 |
|
- |
|
1,558 |
|
|
- other personal lending |
- |
|
- |
|
649 |
|
- |
|
649 |
|
|
Wholesale |
1,168 |
|
1,179 |
|
3,353 |
|
310 |
|
6,010 |
|
|
- corporate and commercial |
1,168 |
|
1,179 |
|
3,290 |
|
310 |
|
5,947 |
|
|
- non-bank financial institutions |
- |
|
- |
|
63 |
|
- |
|
63 |
|
|
At 31 Dec 2019 |
1,168 |
|
1,179 |
|
5,560 |
|
310 |
|
8,217 |
|
|
Allowance for ECL |
|
|
|
|
|
|||||
|
Personal |
- |
|
- |
|
(397 |
) |
- |
|
(397 |
) |
|
- first lien residential mortgages |
- |
|
- |
|
(181 |
) |
- |
|
(181 |
) |
|
- other personal lending |
- |
|
- |
|
(216 |
) |
- |
|
(216 |
) |
|
Wholesale |
(13 |
) |
(55 |
) |
(1,349 |
) |
(86 |
) |
(1,503 |
) |
|
- corporate and commercial |
(13 |
) |
(55 |
) |
(1,316 |
) |
(86 |
) |
(1,470 |
) |
|
- non-bank financial institutions |
- |
|
- |
|
(33 |
) |
- |
|
(33 |
) |
|
At 31 Dec 2019 |
(13 |
) |
(55 |
) |
(1,746 |
) |
(86 |
) |
(1,900 |
) |
|
Gross carrying amount |
|
|
|
|
|
|||||
|
Personal |
- |
|
- |
|
2,248 |
|
- |
|
2,248 |
|
|
- first lien residential mortgages |
- |
|
- |
|
1,641 |
|
- |
|
1,641 |
|
|
- other personal lending |
- |
|
- |
|
607 |
|
- |
|
607 |
|
|
Wholesale |
1,532 |
|
1,193 |
|
3,845 |
|
270 |
|
6,840 |
|
|
- corporate and commercial |
1,517 |
|
1,193 |
|
3,789 |
|
270 |
|
6,769 |
|
|
- non-bank financial institutions |
15 |
|
- |
|
56 |
|
- |
|
71 |
|
|
At 31 Dec 2018 |
1,532 |
|
1,193 |
|
6,093 |
|
270 |
|
9,088 |
|
|
Allowance for ECL |
|
|
|
|
|
|||||
|
Personal |
- |
|
- |
|
(381 |
) |
- |
|
(381 |
) |
|
- first lien residential mortgages |
- |
|
- |
|
(186 |
) |
- |
|
(186 |
) |
|
- other personal lending |
- |
|
- |
|
(195 |
) |
- |
|
(195 |
) |
|
Wholesale |
(29 |
) |
(49 |
) |
(1,461 |
) |
(146 |
) |
(1,685 |
) |
|
- corporate and commercial |
(29 |
) |
(49 |
) |
(1,438 |
) |
(146 |
) |
(1,662 |
) |
|
- non-bank financial institutions |
- |
|
- |
|
(23 |
) |
- |
|
(23 |
) |
|
At 31 Dec 2018 |
(29 |
) |
(49 |
) |
(1,842 |
) |
(146 |
) |
(2,066 |
) |
|
Renegotiated loans and advances to customers by geographical region |
||||||||||||||||
|
|
|
|
|
|
|
|
Of which: |
|||||||||
|
|
Europe |
Asia |
MENA |
North America |
Latin |
Total |
UK |
Hong Kong |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
At 31 Dec 2019 |
4,182 |
|
838 |
|
1,805 |
|
1,185 |
|
207 |
|
8,217 |
|
3,438 |
|
277 |
|
|
At 31 Dec 2018 |
4,533 |
|
864 |
|
1,973 |
|
1,352 |
|
366 |
|
9,088 |
|
3,609 |
|
305 |
|
Wholesale lending
This section provides further details on the regions, countries, territories and products comprising wholesale loans and advances to customers and banks. Product granularity is also provided by stage with geographical data presented for loans and advances to customers, banks, other credit commitments, financial guarantees and similar contracts. Additionally, this section provides a reconciliation of the opening 1 January 2019 to 31 December 2019 closing gross carrying/nominal amounts and the associated allowance for ECL.
At 31 December 2019, wholesale lending for loans and advances to banks and customers of $680bn increased by $12.3bn since
31 December 2018. This included favourable foreign exchange movements of $6.1bn.
Excluding foreign exchange movements, the total wholesale lending growth was driven by an $8.7bn increase in balances from non-bank financial institutions and $0.3bn in corporate and commercial balances. These were partly offset by a decrease in loans and advances to banks of $2.8bn. The primary drivers of the increase in balances from non-bank financial institutions were $3.4bn in Europe, notably $2.8bn in France, and $4.9bn in Asia. The allowance for ECL attributable to loans and advances to banks and customers of $5.6bn at 31 December 2019 decreased from $5.7bn at 31 December 2018.
|
Total wholesale lending for loans and advances to banks and customers by stage distribution |
||||||||||||||||||||
|
|
Gross carrying amount |
Allowance for ECL |
||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Corporate and commercial |
472,253 |
|
59,599 |
|
8,315 |
|
332 |
|
540,499 |
|
(672 |
) |
(920 |
) |
(3,747 |
) |
(99 |
) |
(5,438 |
) |
|
- agriculture, forestry and fishing |
5,416 |
|
1,000 |
|
278 |
|
2 |
|
6,696 |
|
(13 |
) |
(29 |
) |
(139 |
) |
(1 |
) |
(182 |
) |
|
- mining and quarrying |
9,923 |
|
4,189 |
|
311 |
|
12 |
|
14,435 |
|
(22 |
) |
(70 |
) |
(122 |
) |
(12 |
) |
(226 |
) |
|
- manufacturing |
88,138 |
|
14,525 |
|
1,581 |
|
136 |
|
104,380 |
|
(143 |
) |
(211 |
) |
(806 |
) |
(50 |
) |
(1,210 |
) |
|
- electricity, gas, steam and air-conditioning supply |
13,479 |
|
1,386 |
|
175 |
|
- |
|
15,040 |
|
(14 |
) |
(41 |
) |
(25 |
) |
- |
|
(80 |
) |
|
- water supply, sewerage, waste management and remediation |
2,963 |
|
508 |
|
30 |
|
- |
|
3,501 |
|
(6 |
) |
(4 |
) |
(18 |
) |
- |
|
(28 |
) |
|
- construction |
10,520 |
|
3,883 |
|
852 |
|
32 |
|
15,287 |
|
(16 |
) |
(49 |
) |
(467 |
) |
(32 |
) |
(564 |
) |
|
- wholesale and retail trade, repair of motor vehicles and motorcycles |
83,151 |
|
9,897 |
|
1,625 |
|
8 |
|
94,681 |
|
(111 |
) |
(137 |
) |
(934 |
) |
(2 |
) |
(1,184 |
) |
|
- transportation and storage |
22,604 |
|
2,359 |
|
588 |
|
29 |
|
25,580 |
|
(42 |
) |
(37 |
) |
(158 |
) |
- |
|
(237 |
) |
|
- accommodation and food |
20,109 |
|
4,284 |
|
262 |
|
1 |
|
24,656 |
|
(37 |
) |
(46 |
) |
(62 |
) |
(1 |
) |
(146 |
) |
|
- publishing, audiovisual and broadcasting |
18,103 |
|
1,706 |
|
141 |
|
21 |
|
19,971 |
|
(30 |
) |
(23 |
) |
(33 |
) |
(1 |
) |
(87 |
) |
|
- real estate |
122,972 |
|
6,450 |
|
1,329 |
|
1 |
|
130,752 |
|
(108 |
) |
(97 |
) |
(475 |
) |
- |
|
(680 |
) |
|
- professional, scientific and technical activities |
21,085 |
|
2,687 |
|
350 |
|
- |
|
24,122 |
|
(31 |
) |
(33 |
) |
(145 |
) |
- |
|
(209 |
) |
|
- administrative and support services |
21,370 |
|
3,817 |
|
438 |
|
89 |
|
25,714 |
|
(33 |
) |
(58 |
) |
(179 |
) |
- |
|
(270 |
) |
|
- public administration and defence, compulsory social security |
1,889 |
|
488 |
|
- |
|
- |
|
2,377 |
|
(1 |
) |
(7 |
) |
- |
|
- |
|
(8 |
) |
|
- education |
1,700 |
|
184 |
|
16 |
|
- |
|
1,900 |
|
(7 |
) |
(5 |
) |
(6 |
) |
- |
|
(18 |
) |
|
- health and care |
3,543 |
|
811 |
|
111 |
|
- |
|
4,465 |
|
(9 |
) |
(20 |
) |
(28 |
) |
- |
|
(57 |
) |
|
- arts, entertainment and recreation |
2,537 |
|
257 |
|
30 |
|
- |
|
2,824 |
|
(6 |
) |
(8 |
) |
(11 |
) |
- |
|
(25 |
) |
|
- other services |
13,143 |
|
941 |
|
191 |
|
1 |
|
14,276 |
|
(35 |
) |
(31 |
) |
(133 |
) |
- |
|
(199 |
) |
|
- activities of households |
725 |
|
66 |
|
- |
|
- |
|
791 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- extra-territorial organisations and bodies activities |
2 |
|
- |
|
- |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- government |
8,159 |
|
147 |
|
7 |
|
- |
|
8,313 |
|
(6 |
) |
(2 |
) |
(6 |
) |
- |
|
(14 |
) |
|
- asset-backed securities |
722 |
|
14 |
|
- |
|
- |
|
736 |
|
(2 |
) |
(12 |
) |
- |
|
- |
|
(14 |
) |
|
Non-bank financial institutions |
65,661 |
|
4,832 |
|
212 |
|
- |
|
70,705 |
|
(42 |
) |
(28 |
) |
(90 |
) |
- |
|
(160 |
) |
|
Loans and advances to banks |
67,769 |
|
1,450 |
|
- |
|
- |
|
69,219 |
|
(14 |
) |
(2 |
) |
- |
|
- |
|
(16 |
) |
|
At 31 Dec 2019 |
605,683 |
|
65,881 |
|
8,527 |
|
332 |
|
680,423 |
|
(728 |
) |
(950 |
) |
(3,837 |
) |
(99 |
) |
(5,614 |
) |
|
By geography |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Europe |
190,528 |
|
20,276 |
|
4,671 |
|
129 |
|
215,604 |
|
(318 |
) |
(458 |
) |
(1,578 |
) |
(45 |
) |
(2,399 |
) |
|
- of which: UK |
131,007 |
|
16,253 |
|
3,343 |
|
79 |
|
150,682 |
|
(252 |
) |
(385 |
) |
(989 |
) |
(32 |
) |
(1,658 |
) |
|
Asia |
308,305 |
|
32,287 |
|
1,419 |
|
148 |
|
342,159 |
|
(228 |
) |
(253 |
) |
(986 |
) |
(38 |
) |
(1,505 |
) |
|
- of which: Hong Kong |
182,501 |
|
23,735 |
|
673 |
|
48 |
|
206,957 |
|
(118 |
) |
(172 |
) |
(475 |
) |
(28 |
) |
(793 |
) |
|
MENA |
25,470 |
|
3,314 |
|
1,686 |
|
18 |
|
30,488 |
|
(55 |
) |
(85 |
) |
(946 |
) |
(12 |
) |
(1,098 |
) |
|
North America |
64,501 |
|
7,495 |
|
458 |
|
- |
|
72,454 |
|
(45 |
) |
(96 |
) |
(141 |
) |
- |
|
(282 |
) |
|
Latin America |
16,879 |
|
2,509 |
|
293 |
|
37 |
|
19,718 |
|
(82 |
) |
(58 |
) |
(186 |
) |
(4 |
) |
(330 |
) |
|
At 31 Dec 2019 |
605,683 |
|
65,881 |
|
8,527 |
|
332 |
|
680,423 |
|
(728 |
) |
(950 |
) |
(3,837 |
) |
(99 |
) |
(5,614 |
) |
|
Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1 |
||||||||||||||||||||
|
|
Nominal amount |
Allowance for ECL |
||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Corporate and commercial |
271,678 |
|
20,880 |
|
757 |
|
13 |
|
293,328 |
|
(132 |
) |
(151 |
) |
(68 |
) |
- |
|
(351 |
) |
|
Financial |
101,345 |
|
1,447 |
|
5 |
|
- |
|
102,797 |
|
(7 |
) |
(2 |
) |
(1 |
) |
- |
|
(10 |
) |
|
At 31 Dec 2019 |
373,023 |
|
22,327 |
|
762 |
|
13 |
|
396,125 |
|
(139 |
) |
(153 |
) |
(69 |
) |
- |
|
(361 |
) |
|
By geography |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Europe |
190,604 |
|
7,852 |
|
645 |
|
13 |
|
199,114 |
|
(60 |
) |
(43 |
) |
(56 |
) |
- |
|
(159 |
) |
|
- of which: UK |
76,013 |
|
4,193 |
|
494 |
|
9 |
|
80,709 |
|
(48 |
) |
(32 |
) |
(31 |
) |
- |
|
(111 |
) |
|
Asia |
60,759 |
|
3,762 |
|
8 |
|
- |
|
64,529 |
|
(43 |
) |
(33 |
) |
(4 |
) |
- |
|
(80 |
) |
|
- of which: Hong Kong |
27,047 |
|
2,114 |
|
5 |
|
- |
|
29,166 |
|
(14 |
) |
(23 |
) |
(2 |
) |
- |
|
(39 |
) |
|
MENA |
5,690 |
|
621 |
|
31 |
|
- |
|
6,342 |
|
(12 |
) |
(13 |
) |
(4 |
) |
- |
|
(29 |
) |
|
North America |
112,812 |
|
9,933 |
|
77 |
|
- |
|
122,822 |
|
(22 |
) |
(62 |
) |
(5 |
) |
- |
|
(89 |
) |
|
Latin America |
3,158 |
|
159 |
|
1 |
|
- |
|
3,318 |
|
(2 |
) |
(2 |
) |
- |
|
- |
|
(4 |
) |
|
At 31 Dec 2019 |
373,023 |
|
22,327 |
|
762 |
|
13 |
|
396,125 |
|
(139 |
) |
(153 |
) |
(69 |
) |
- |
|
(361 |
) |
1 Included in loans and other credit-related commitments and financial guarantees is $53bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.
|
Total wholesale lending for loans and advances to banks and customers by stage distribution1 |
||||||||||||||||||||
|
|
Gross carrying amount |
|
Allowance for ECL |
|
||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Corporate and commercial |
474,700 |
|
51,341 |
|
8,212 |
|
324 |
|
534,577 |
|
(698 |
) |
(812 |
) |
(3,848 |
) |
(194 |
) |
(5,552 |
) |
|
- agriculture, forestry and fishing
|
4,791 |
|
1,672 |
|
236 |
|
2 |
|
6,701 |
|
(15 |
) |
(34 |
) |
(117 |
) |
(1 |
) |
(167 |
) |
|
- mining and quarrying
|
11,892 |
|
1,919 |
|
359 |
|
2 |
|
14,172 |
|
(29 |
) |
(51 |
) |
(94 |
) |
(2 |
) |
(176 |
) |
|
- manufacturing |
92,193 |
|
11,817 |
|
1,569 |
|
125 |
|
105,704 |
|
(132 |
) |
(156 |
) |
(791 |
) |
(83 |
) |
(1,162 |
) |
|
- electricity, gas, steam and air-conditioning supply
|
14,431 |
|
1,513 |
|
40 |
|
60 |
|
16,044 |
|
(18 |
) |
(60 |
) |
(15 |
) |
(54 |
) |
(147 |
) |
|
- water supply, sewerage, waste management and remediation
|
3,212 |
|
287 |
|
24 |
|
- |
|
3,523 |
|
(5 |
) |
(2 |
) |
(17 |
) |
- |
|
(24 |
) |
|
- construction |
12,577 |
|
1,458 |
|
1,168 |
|
51 |
|
15,254 |
|
(27 |
) |
(41 |
) |
(524 |
) |
(44 |
) |
(636 |
) |
|
- wholesale and retail trade, repair of motor vehicles and motorcycles
|
83,192 |
|
12,784 |
|
1,652 |
|
37 |
|
97,665 |
|
(115 |
) |
(128 |
) |
(968 |
) |
(7 |
) |
(1,218 |
) |
|
- transportation and storage
|
23,195 |
|
1,957 |
|
351 |
|
38 |
|
25,541 |
|
(37 |
) |
(46 |
) |
(82 |
) |
(1 |
) |
(166 |
) |
|
- accommodation and food
|
18,370 |
|
2,904 |
|
270 |
|
3 |
|
21,547 |
|
(43 |
) |
(41 |
) |
(83 |
) |
(1 |
) |
(168 |
) |
|
- publishing, audiovisual and broadcasting
|
19,529 |
|
1,453 |
|
189 |
|
1 |
|
21,172 |
|
(42 |
) |
(16 |
) |
(84 |
) |
- |
|
(142 |
) |
|
- real estate |
115,615 |
|
6,502 |
|
1,115 |
|
1 |
|
123,233 |
|
(97 |
) |
(80 |
) |
(594 |
) |
- |
|
(771 |
) |
|
- professional, scientific and technical activities
|
19,567 |
|
2,656 |
|
350 |
|
- |
|
22,573 |
|
(29 |
) |
(29 |
) |
(113 |
) |
- |
|
(171 |
) |
|
- administrative and support services
|
22,553 |
|
2,110 |
|
437 |
|
3 |
|
25,103 |
|
(41 |
) |
(48 |
) |
(166 |
) |
(1 |
) |
(256 |
) |
|
- public administration and defence, compulsory social security
|
1,425 |
|
30 |
|
8 |
|
- |
|
1,463 |
|
(1 |
) |
(3 |
) |
(5 |
) |
- |
|
(9 |
) |
|
- education |
1,585 |
|
230 |
|
14 |
|
- |
|
1,829 |
|
(11 |
) |
(7 |
) |
(6 |
) |
- |
|
(24 |
) |
|
- health and care |
3,558 |
|
609 |
|
141 |
|
- |
|
4,308 |
|
(10 |
) |
(16 |
) |
(33 |
) |
- |
|
(59 |
) |
|
- arts, entertainment and recreation
|
4,244 |
|
758 |
|
39 |
|
- |
|
5,041 |
|
(9 |
) |
(9 |
) |
(15 |
) |
- |
|
(33 |
) |
|
- other services |
13,234 |
|
436 |
|
242 |
|
1 |
|
13,913 |
|
(31 |
) |
(31 |
) |
(140 |
) |
- |
|
(202 |
) |
|
- activities of households
|
770 |
|
59 |
|
1 |
|
- |
|
830 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- extra-territorial organisations and bodies activities
|
49 |
|
3 |
|
7 |
|
- |
|
59 |
|
- |
|
- |
|
(1 |
) |
- |
|
(1 |
) |
|
- government |
7,905 |
|
168 |
|
- |
|
- |
|
8,073 |
|
(6 |
) |
(1 |
) |
- |
|
- |
|
(7 |
) |
|
- asset-backed securities |
813 |
|
16 |
|
- |
|
- |
|
829 |
|
- |
|
(13 |
) |
- |
|
- |
|
(13 |
) |
|
Non-bank financial institutions |
59,012 |
|
2,165 |
|
230 |
|
- |
|
61,407 |
|
(44 |
) |
(31 |
) |
(51 |
) |
- |
|
(126 |
) |
|
Loans and advances to banks |
71,873 |
|
307 |
|
- |
|
- |
|
72,180 |
|
(11 |
) |
(2 |
) |
- |
|
- |
|
(13 |
) |
|
At 31 Dec 2018
|
605,585 |
|
53,813 |
|
8,442 |
|
324 |
|
668,164 |
|
(753 |
) |
(845 |
) |
(3,899 |
) |
(194 |
) |
(5,691 |
) |
|
By geography |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Europe |
183,592 |
|
25,868 |
|
4,233 |
|
150 |
|
213,843 |
|
(366 |
) |
(529 |
) |
(1,598 |
) |
(102 |
) |
(2,595 |
) |
|
- of which: UK |
126,209 |
|
22,165 |
|
2,928 |
|
8 |
|
151,310 |
|
(313 |
) |
(471 |
) |
(998 |
) |
- |
|
(1,782 |
) |
|
Asia |
314,591 |
|
17,729 |
|
1,736 |
|
92 |
|
334,148 |
|
(179 |
) |
(121 |
) |
(1,040 |
) |
(36 |
) |
(1,376 |
) |
|
- of which: Hong Kong |
194,186 |
|
8,425 |
|
729 |
|
69 |
|
203,409 |
|
(99 |
) |
(54 |
) |
(413 |
) |
(35 |
) |
(601 |
) |
|
MENA |
25,684 |
|
2,974 |
|
1,769 |
|
53 |
|
30,480 |
|
(73 |
) |
(77 |
) |
(974 |
) |
(46 |
) |
(1,170 |
) |
|
North America |
62,631 |
|
6,928 |
|
314 |
|
- |
|
69,873 |
|
(37 |
) |
(107 |
) |
(101 |
) |
- |
|
(245 |
) |
|
Latin America |
19,087 |
|
314 |
|
390 |
|
29 |
|
19,820 |
|
(98 |
) |
(11 |
) |
(186 |
) |
(10 |
) |
(305 |
) |
|
At 31 Dec 2018
|
605,585 |
|
53,813 |
|
8,442 |
|
324 |
|
668,164 |
|
(753 |
) |
(845 |
) |
(3,899 |
) |
(194 |
) |
(5,691 |
) |
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
|
Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1,2 |
||||||||||||||||||||
|
|
Nominal amount |
Allowance for ECL |
||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Corporate and commercial |
264,550 |
|
23,026 |
|
791 |
|
10 |
|
288,377 |
|
(142 |
) |
(161 |
) |
(87 |
) |
- |
|
(390 |
) |
|
Financial |
117,413 |
|
1,452 |
|
6 |
|
- |
|
118,871 |
|
(7 |
) |
(6 |
) |
(1 |
) |
- |
|
(14 |
) |
|
At 31 Dec 2018
|
381,963 |
|
24,478 |
|
797 |
|
10 |
|
407,248 |
|
(149 |
) |
(167 |
) |
(88 |
) |
- |
|
(404 |
) |
|
By geography |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Europe |
201,024 |
|
11,794 |
|
614 |
|
10 |
|
213,442 |
|
(82 |
) |
(66 |
) |
(53 |
) |
- |
|
(201 |
) |
|
- of which: UK |
80,504 |
|
8,446 |
|
442 |
|
- |
|
89,392 |
|
(69 |
) |
(57 |
) |
(39 |
) |
- |
|
(165 |
) |
|
Asia |
61,206 |
|
3,076 |
|
102 |
|
- |
|
64,384 |
|
(39 |
) |
(16 |
) |
(28 |
) |
- |
|
(83 |
) |
|
- of which: Hong Kong |
27,022 |
|
1,115 |
|
89 |
|
- |
|
28,226 |
|
(12 |
) |
(2 |
) |
(27 |
) |
- |
|
(41 |
) |
|
MENA |
5,304 |
|
732 |
|
18 |
|
- |
|
6,054 |
|
(8 |
) |
(10 |
) |
(2 |
) |
- |
|
(20 |
) |
|
North America |
111,494 |
|
8,850 |
|
62 |
|
- |
|
120,406 |
|
(17 |
) |
(75 |
) |
(4 |
) |
- |
|
(96 |
) |
|
Latin America |
2,935 |
|
26 |
|
1 |
|
- |
|
2,962 |
|
(3 |
) |
- |
|
(1 |
) |
- |
|
(4 |
) |
|
At 31 Dec 2018
|
381,963 |
|
24,478 |
|
797 |
|
10 |
|
407,248 |
|
(149 |
) |
(167 |
) |
(88 |
) |
- |
|
(404 |
) |
1 Included in loans and other credit-related commitments and financial guarantees is $65bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.
2 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
|
Wholesale lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
|
||||||||||||||||||||
|
(Audited) |
||||||||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
|
|||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
|||||||||||||||
|
|
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
At 1 Jan 2019 |
922,192 |
|
(902 |
) |
78,266 |
|
(1,012 |
) |
9,239 |
|
(3,987 |
) |
334 |
|
(194 |
) |
1,010,031 |
|
(6,095 |
) |
|
Transfers of financial instruments |
(31,493 |
) |
(169 |
) |
28,418 |
|
276 |
|
3,075 |
|
(107 |
) |
- |
|
- |
|
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
223 |
|
- |
|
(268 |
) |
- |
|
(38 |
) |
- |
|
- |
|
- |
|
(83 |
) |
|
Net new and further lending/ repayments |
27,918 |
|
(134 |
) |
(20,121 |
) |
167 |
|
(1,552 |
) |
369 |
|
137 |
|
(1 |
) |
6,382 |
|
401 |
|
|
Change in risk parameters - credit quality |
- |
|
102 |
|
- |
|
(193 |
) |
- |
|
(1,514 |
) |
- |
|
(51 |
) |
- |
|
(1,656 |
) |
|
Changes to models used for ECL calculation |
- |
|
- |
|
- |
|
(56 |
) |
- |
|
- |
|
- |
|
- |
|
- |
|
(56 |
) |
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(1,312 |
) |
1,312 |
|
(140 |
) |
140 |
|
(1,452 |
) |
1,452 |
|
|
Credit-related modifications that resulted in derecognition |
- |
|
- |
|
- |
|
- |
|
(268 |
) |
125 |
|
- |
|
- |
|
(268 |
) |
125 |
|
|
Foreign exchange and other |
7,035 |
|
13 |
|
1,606 |
|
(17 |
) |
107 |
|
(66 |
) |
14 |
|
7 |
|
8,762 |
|
(63 |
) |
|
At 31 Dec 2019 |
925,652 |
|
(867 |
) |
88,169 |
|
(1,103 |
) |
9,289 |
|
(3,906 |
) |
345 |
|
(99 |
) |
1,023,455 |
|
(5,975 |
) |
|
ECL income statement change for the period |
|
191 |
|
|
(350 |
) |
|
(1,183 |
) |
|
(52 |
) |
|
(1,394 |
) |
|||||
|
Recoveries |
|
|
|
|
|
|
|
|
|
47 |
|
|||||||||
|
Others |
|
|
|
|
|
|
|
|
|
(24 |
) |
|||||||||
|
Total ECL income statement change for the period |
|
|
|
|
|
|
|
|
|
(1,371 |
) |
|||||||||
As shown in the above table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees decreased $120m during the period from $6,095m at 31 December 2018 to $5,975m at 31 December 2019.
This decrease was primarily driven by:
• $1,452m of assets written off;
• $401m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayments; and
• $125m of credit-related modifications that resulted in derecognition.
These decreases were partly offset by increases of:
• $1,656m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;
• $83m relating to the net remeasurement impact of stage transfers;
• $56m changes to models used for ECL calculation; and
• foreign exchange and other movements of $63m.
The ECL charge for the period of $1,394m presented in the above table consisted of $1,656m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $83m relating to the net remeasurement impact of stage transfers. This was partly offset by $401m relating to underlying net book volume movements and $56m in changes to models used for ECL calculation.
|
Wholesale lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1
|
||||||||||||||||||||
|
(Audited) |
||||||||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
|
|||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
|||||||||||||||
|
|
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
At 1 Jan 2018 |
897,529 |
|
(873 |
) |
84,354 |
|
(1,249 |
) |
10,209 |
|
(4,410 |
) |
1,042 |
|
(242 |
) |
993,134 |
|
(6,774 |
) |
|
Transfers of financial instruments |
(4,477 |
) |
(274 |
) |
1,535 |
|
386 |
|
2,942 |
|
(112 |
) |
- |
|
- |
|
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
262 |
|
- |
|
(231 |
) |
- |
|
(92 |
) |
- |
|
- |
|
- |
|
(61 |
) |
|
Net new and further lending/repayments |
74,107 |
|
(271 |
) |
(13,709 |
) |
342 |
|
(2,414 |
) |
406 |
|
(587 |
) |
42 |
|
57,397 |
|
519 |
|
|
Changes to risk parameters - credit quality |
- |
|
157 |
|
- |
|
(301 |
) |
- |
|
(1,041 |
) |
- |
|
(51 |
) |
- |
|
(1,236 |
) |
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(1,182 |
) |
1,172 |
|
(1 |
) |
1 |
|
(1,183 |
) |
1,173 |
|
|
Foreign exchange and other |
(44,967 |
) |
97 |
|
6,086 |
|
41 |
|
(316 |
) |
90 |
|
(120 |
) |
56 |
|
(39,317 |
) |
284 |
|
|
At 31 Dec 2018 |
922,192 |
|
(902 |
) |
78,266 |
|
(1,012 |
) |
9,239 |
|
(3,987 |
) |
334 |
|
(194 |
) |
1,010,031 |
|
(6,095 |
) |
|
ECL income statement change for the period |
|
148 |
|
|
(190 |
) |
|
(727 |
) |
|
(9 |
) |
|
(778 |
) |
|||||
|
Recoveries |
|
|
|
|
|
|
|
|
|
118 |
|
|||||||||
|
Others |
|
|
|
|
|
|
|
|
|
(69 |
) |
|||||||||
|
Total ECL income statement change for the period |
|
|
|
|
|
|
|
|
|
(729 |
) |
|||||||||
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount for 31 December 2018 only. For further details, see page 86.
|
Wholesale lending - distribution of financial instruments to which the impairment requirements of IFRS 9 are applied by credit quality |
||||||||||
|
|
Gross carrying/nominal amount |
Allowance for ECL |
Net |
|||||||
|
|
Strong |
Good |
Satisfactory |
Sub-standard |
Credit impaired |
Total |
||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||
|
By geography |
|
|
|
|
|
|
|
|
||
|
Europe |
57,340 |
69,427 |
74,143 |
9,895 |
4,799 |
215,604 |
(2,399 |
) |
213,205 |
|
|
of which: UK |
35,838 |
53,046 |
51,355 |
7,023 |
3,420 |
150,682 |
(1,658 |
) |
149,024 |
|
|
Asia |
145,450 |
106,313 |
86,685 |
2,158 |
1,553 |
342,159 |
(1,505 |
) |
340,654 |
|
|
of which: Hong Kong |
82,053 |
67,541 |
55,379 |
1,263 |
721 |
206,957 |
(793 |
) |
206,164 |
|
|
MENA |
12,036 |
6,003 |
9,307 |
1,439 |
1,703 |
30,488 |
(1,098 |
) |
29,390 |
|
|
North America |
12,319 |
31,496 |
24,860 |
3,320 |
459 |
72,454 |
(282 |
) |
72,172 |
|
|
Latin America |
3,919 |
5,455 |
7,713 |
2,304 |
327 |
19,718 |
(330 |
) |
19,388 |
|
|
At 31 Dec 2019 |
231,064 |
218,694 |
202,708 |
19,116 |
8,841 |
680,423 |
(5,614 |
) |
674,809 |
|
|
Percentage of total credit quality |
34.0% |
32.1% |
29.8% |
2.8% |
1.3% |
100.0% |
|
|
||
|
By geography |
|
|
|
|
|
|
|
|
||
|
Europe |
60,145 |
62,098 |
79,466 |
7,752 |
4,382 |
213,843 |
(2,595 |
) |
211,248 |
|
|
of which: UK |
39,840 |
46,396 |
56,974 |
5,164 |
2,936 |
151,310 |
(1,782 |
) |
149,528 |
|
|
Asia |
143,864 |
100,437 |
86,065 |
1,977 |
1,805 |
334,148 |
(1,376 |
) |
332,772 |
|
|
of which: Hong Kong |
82,854 |
63,564 |
55,357 |
837 |
797 |
203,409 |
(601 |
) |
202,808 |
|
|
MENA |
10,393 |
7,905 |
9,173 |
1,186 |
1,823 |
30,480 |
(1,170 |
) |
29,310 |
|
|
North America |
10,952 |
31,278 |
24,708 |
2,621 |
314 |
69,873 |
(245 |
) |
69,628 |
|
|
Latin America |
3,730 |
6,088 |
8,300 |
1,286 |
416 |
19,820 |
(305 |
) |
19,515 |
|
|
At 31 Dec 2018 |
229,084 |
207,806 |
207,712 |
14,822 |
8,740 |
668,164 |
(5,691 |
) |
662,473 |
|
|
Percentage of total credit quality |
34.3% |
31.1% |
31.1% |
2.2% |
1.3% |
100.0% |
|
|
||
Our risk rating system facilitates the internal ratings-based approach under the Basel framework adopted by the Group to support calculation of our minimum credit regulatory capital requirement. The credit quality classifications can be found on page 85.
|
Wholesale lending - credit risk profile by obligor grade for loans and advances at amortised cost |
|||||||||||||||||||||||||
|
|
|
Gross carrying amount |
Allowance for ECL |
|
|
||||||||||||||||||||
|
|
Basel one-year PD range |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
ECL coverage |
Mapped external rating |
||||||||||||
|
|
% |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
% |
|
||||||||||||
|
Corporate and commercial |
|
472,253 |
|
59,599 |
|
8,315 |
|
332 |
|
540,499 |
|
(672 |
) |
(920 |
) |
(3,747 |
) |
(99 |
) |
(5,438 |
) |
1.0 |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
44,234 |
|
18 |
|
- |
|
- |
|
44,252 |
|
(7 |
) |
- |
|
- |
|
- |
|
(7 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
92,861 |
|
1,013 |
|
- |
|
- |
|
93,874 |
|
(20 |
) |
(10 |
) |
- |
|
- |
|
(30 |
) |
- |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
178,662 |
|
11,808 |
|
- |
|
- |
|
190,470 |
|
(164 |
) |
(91 |
) |
- |
|
- |
|
(255 |
) |
0.1 |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
105,708 |
|
17,829 |
|
- |
|
- |
|
123,537 |
|
(244 |
) |
(151 |
) |
- |
|
- |
|
(395 |
) |
0.3 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
46,423 |
|
16,423 |
|
- |
|
- |
|
62,846 |
|
(190 |
) |
(218 |
) |
- |
|
- |
|
(408 |
) |
0.6 |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
3,323 |
|
7,592 |
|
- |
|
15 |
|
10,930 |
|
(33 |
) |
(141 |
) |
- |
|
- |
|
(174 |
) |
1.6 |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
795 |
|
3,067 |
|
- |
|
3 |
|
3,865 |
|
(11 |
) |
(172 |
) |
- |
|
- |
|
(183 |
) |
4.7 |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
247 |
|
1,849 |
|
- |
|
- |
|
2,096 |
|
(3 |
) |
(137 |
) |
- |
|
- |
|
(140 |
) |
6.7 |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
8,315 |
|
314 |
|
8,629 |
|
- |
|
- |
|
(3,747 |
) |
(99 |
) |
(3,846 |
) |
44.6 |
|
D |
|
Non-bank financial institutions |
|
65,661 |
|
4,832 |
|
212 |
|
- |
|
70,705 |
|
(42 |
) |
(28 |
) |
(90 |
) |
- |
|
(160 |
) |
0.2 |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
16,616 |
|
- |
|
- |
|
- |
|
16,616 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
15,630 |
|
56 |
|
- |
|
- |
|
15,686 |
|
(4 |
) |
- |
|
- |
|
- |
|
(4 |
) |
- |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
21,562 |
|
1,333 |
|
- |
|
- |
|
22,895 |
|
(12 |
) |
(4 |
) |
- |
|
- |
|
(16 |
) |
0.1 |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
7,535 |
|
1,169 |
|
- |
|
- |
|
8,704 |
|
(12 |
) |
(7 |
) |
- |
|
- |
|
(19 |
) |
0.2 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
4,024 |
|
1,738 |
|
- |
|
- |
|
5,762 |
|
(12 |
) |
(11 |
) |
- |
|
- |
|
(23 |
) |
0.4 |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
280 |
|
517 |
|
- |
|
- |
|
797 |
|
(1 |
) |
(4 |
) |
- |
|
- |
|
(5 |
) |
0.6 |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
12 |
|
7 |
|
- |
|
- |
|
19 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
2 |
|
12 |
|
- |
|
- |
|
14 |
|
- |
|
(2 |
) |
- |
|
- |
|
(2 |
) |
14.3 |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
212 |
|
- |
|
212 |
|
- |
|
- |
|
(90 |
) |
- |
|
(90 |
) |
42.5 |
|
D |
|
Banks |
|
67,769 |
|
1,450 |
|
- |
|
- |
|
69,219 |
|
(14 |
) |
(2 |
) |
- |
|
- |
|
(16 |
) |
- |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
49,858 |
|
21 |
|
- |
|
- |
|
49,879 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
10,689 |
|
68 |
|
- |
|
- |
|
10,757 |
|
(7 |
) |
- |
|
- |
|
- |
|
(7 |
) |
0.1 |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
5,312 |
|
17 |
|
- |
|
- |
|
5,329 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
- |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
1,725 |
|
31 |
|
- |
|
- |
|
1,756 |
|
(1 |
) |
(1 |
) |
- |
|
- |
|
(2 |
) |
0.1 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
71 |
|
32 |
|
- |
|
- |
|
103 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
113 |
|
2 |
|
- |
|
- |
|
115 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
1.7 |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
1 |
|
1 |
|
- |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
- |
|
1,278 |
|
- |
|
- |
|
1,278 |
|
- |
|
(1 |
) |
- |
|
- |
|
(1 |
) |
0.1 |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
D |
|
At 31 Dec 2019 |
|
605,683 |
|
65,881 |
|
8,527 |
|
332 |
|
680,423 |
|
(728 |
) |
(950 |
) |
(3,837 |
) |
(99 |
) |
(5,614 |
) |
0.8 |
|
|
|
|
Wholesale lending - credit risk profile by obligor grade for loans and advances at amortised cost1 (continued) |
|||||||||||||||||||||||||
|
|
Basel one-year PD range |
Gross carrying amount |
Allowance for ECL |
ECL coverage |
Mapped external rating |
||||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
|||||||||||||||
|
|
% |
$m |
$m |
$m |
$m |
$m
|
$m |
$m |
$m |
$m |
$m |
% |
|
||||||||||||
|
Corporate and commercial |
|
474,700 |
|
51,341 |
|
8,212 |
|
324 |
|
534,577 |
|
(698 |
) |
(812 |
) |
(3,848 |
) |
(194 |
) |
(5,552 |
) |
1.0 |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
45,401 |
|
67 |
|
- |
|
- |
|
45,468 |
|
(4 |
) |
(2 |
) |
- |
|
- |
|
(6 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
93,266 |
|
1,653 |
|
- |
|
- |
|
94,919 |
|
(17 |
) |
(4 |
) |
- |
|
- |
|
(21 |
) |
- |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
172,496 |
|
9,487 |
|
- |
|
- |
|
181,983 |
|
(162 |
) |
(85 |
) |
- |
|
- |
|
(247 |
) |
0.1 |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
111,949 |
|
14,352 |
|
- |
|
- |
|
126,301 |
|
(231 |
) |
(114 |
) |
- |
|
- |
|
(345 |
) |
0.3 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
46,396 |
|
16,661 |
|
- |
|
- |
|
63,057 |
|
(209 |
) |
(252 |
) |
- |
|
- |
|
(461 |
) |
0.7 |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
3,662 |
|
4,544 |
|
- |
|
22 |
|
8,228 |
|
(41 |
) |
(103 |
) |
- |
|
- |
|
(144 |
) |
1.8 |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
1,228 |
|
2,882 |
|
- |
|
4 |
|
4,114 |
|
(22 |
) |
(147 |
) |
- |
|
- |
|
(169 |
) |
4.1 |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
302 |
|
1,695 |
|
- |
|
- |
|
1,997 |
|
(12 |
) |
(105 |
) |
- |
|
- |
|
(117 |
) |
5.9 |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
8,212 |
|
298 |
|
8,510 |
|
- |
|
- |
|
(3,848 |
) |
(194 |
) |
(4,042 |
) |
47.5 |
|
D |
|
Non-bank financial institutions |
|
59,012 |
|
2,165 |
|
230 |
|
- |
|
61,407 |
|
(44 |
) |
(31 |
) |
(51 |
) |
- |
|
(126 |
) |
0.2 |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
13,256 |
|
- |
|
- |
|
- |
|
13,256 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
15,172 |
|
20 |
|
- |
|
- |
|
15,192 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
- |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
17,950 |
|
501 |
|
- |
|
- |
|
18,451 |
|
(13 |
) |
(1 |
) |
- |
|
- |
|
(14 |
) |
0.1 |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
7,521 |
|
798 |
|
- |
|
- |
|
8,319 |
|
(10 |
) |
(2 |
) |
- |
|
- |
|
(12 |
) |
0.1 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
4,882 |
|
606 |
|
- |
|
- |
|
5,488 |
|
(14 |
) |
(5 |
) |
- |
|
- |
|
(19 |
) |
0.3 |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
61 |
|
133 |
|
- |
|
- |
|
194 |
|
- |
|
(2 |
) |
- |
|
- |
|
(2 |
) |
1.0 |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
169 |
|
23 |
|
- |
|
- |
|
192 |
|
(4 |
) |
(1 |
) |
- |
|
- |
|
(5 |
) |
2.6 |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
1 |
|
84 |
|
- |
|
- |
|
85 |
|
- |
|
(20 |
) |
- |
|
- |
|
(20 |
) |
23.5 |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
230 |
|
- |
|
230 |
|
- |
|
- |
|
(51 |
) |
- |
|
(51 |
) |
22.2 |
|
D |
|
Banks |
|
71,873 |
|
307 |
|
- |
|
- |
|
72,180 |
|
(11 |
) |
(2 |
) |
- |
|
- |
|
(13 |
) |
- |
|
|
|
|
- CRR 1 |
0.000 to 0.053 |
47,680 |
|
32 |
|
- |
|
- |
|
47,712 |
|
(3 |
) |
- |
|
- |
|
- |
|
(3 |
) |
- |
|
AA- and above |
|
|
- CRR 2 |
0.054 to 0.169 |
12,519 |
|
18 |
|
- |
|
- |
|
12,537 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
- |
|
A+ to A- |
|
|
- CRR 3 |
0.170 to 0.740 |
7,250 |
|
121 |
|
- |
|
- |
|
7,371 |
|
(3 |
) |
(1 |
) |
- |
|
- |
|
(4 |
) |
0.1 |
|
BBB+ to BBB- |
|
|
- CRR 4 |
0.741 to 1.927 |
4,032 |
|
118 |
|
- |
|
- |
|
4,150 |
|
(3 |
) |
(1 |
) |
- |
|
- |
|
(4 |
) |
0.1 |
|
BB+ to BB- |
|
|
- CRR 5 |
1.928 to 4.914 |
381 |
|
18 |
|
- |
|
- |
|
399 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
BB- to B |
|
|
- CRR 6 |
4.915 to 8.860 |
8 |
|
- |
|
- |
|
- |
|
8 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
B- |
|
|
- CRR 7 |
8.861 to 15.000 |
1 |
|
- |
|
- |
|
- |
|
1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
CCC+ |
|
|
- CRR 8 |
15.001 to 99.999 |
2 |
|
- |
|
- |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
CCC to C |
|
|
- CRR 9/10 |
100.000 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
D |
|
At 31 Dec 2018 |
|
605,585 |
|
53,813 |
|
8,442 |
|
324 |
|
668,164 |
|
(753 |
) |
(845 |
) |
(3,899 |
) |
(194 |
) |
(5,691 |
) |
0.9 |
|
|
|
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
Commercial real estate
Commercial real estate lending includes the financing of corporate, institutional and high net worth customers who are investing primarily in income-producing assets and, to a lesser extent, in their construction and development. The portfolio is globally diversified with larger concentrations in Hong Kong, the UK and the US.
Our global exposure is centred largely on cities with economic, political or cultural significance. In more developed markets, our exposure mainly comprises the financing of investment assets, the
redevelopment of existing stock and the augmentation of both commercial and residential markets to support economic and population growth. In less-developed commercial real estate markets, our exposures comprise lending for development assets on relatively short tenors with a particular focus on supporting larger, better capitalised developers involved in residential construction or assets supporting economic expansion.
Commercial real estate lending grew $7.2bn, including foreign exchange movements, mainly in Hong Kong and, to a lesser extent, within Canada.
|
Commercial real estate lending |
||||||||||||||||
|
|
|
|
|
|
|
|
Of which: |
|||||||||
|
|
Europe |
Asia |
MENA |
North America |
Latin America |
Total |
UK |
Hong Kong |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Gross loans and advances |
|
|
|
|
|
|
|
|
||||||||
|
Stage 1 |
25,017 |
|
76,832 |
|
1,507 |
|
10,938 |
|
1,653 |
|
115,947 |
|
17,953 |
|
60,632 |
|
|
Stage 2 |
3,988 |
|
2,673 |
|
18 |
|
508 |
|
41 |
|
7,228 |
|
2,953 |
|
1,696 |
|
|
Stage 3 |
1,115 |
|
21 |
|
208 |
|
33 |
|
27 |
|
1,404 |
|
948 |
|
17 |
|
|
POCI |
1 |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
- |
|
- |
|
|
At 31 Dec 2019 |
30,121 |
|
79,526 |
|
1,733 |
|
11,479 |
|
1,721 |
|
124,580 |
|
21,854 |
|
62,345 |
|
|
- of which: renegotiated loans |
788 |
|
- |
|
195 |
|
- |
|
- |
|
983 |
|
782 |
|
- |
|
|
Allowance for ECL |
(372 |
) |
(78 |
) |
(170 |
) |
(17 |
) |
(7 |
) |
(644 |
) |
(305 |
) |
(40 |
) |
|
Commercial real estate lending1 (continued) |
||||||||||||||||
|
|
|
|
|
|
|
|
Of which: |
|||||||||
|
|
Europe |
Asia |
MENA |
North America |
Latin America |
Total |
UK |
Hong Kong |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Gross loans and advances |
|
|
|
|
|
|
|
|
||||||||
|
Stage 1 |
26,265 |
|
70,769 |
|
1,607 |
|
9,129 |
|
1,796 |
|
109,566 |
|
19,624 |
|
55,872 |
|
|
Stage 2 |
2,406 |
|
3,176 |
|
120 |
|
677 |
|
13 |
|
6,392 |
|
1,809 |
|
2,032 |
|
|
Stage 3 |
1,022 |
|
16 |
|
209 |
|
43 |
|
118 |
|
1,408 |
|
673 |
|
12 |
|
|
POCI |
- |
|
- |
|
- |
|
- |
|
14 |
|
14 |
|
- |
|
- |
|
|
At 31 Dec 2018 |
29,693 |
|
73,961 |
|
1,936 |
|
9,849 |
|
1,941 |
|
117,380 |
|
22,106 |
|
57,916 |
|
|
- of which: renegotiated loans |
944 |
|
1 |
|
186 |
|
1 |
|
- |
|
1,132 |
|
816 |
|
- |
|
|
Allowance for ECL |
(364 |
) |
(59 |
) |
(171 |
) |
(9 |
) |
(52 |
) |
(655 |
) |
(282 |
) |
(33 |
) |
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a significant proportion of the principal at maturity. Typically, a customer will arrange repayment through the acquisition of a new
loan to settle the existing debt. Refinance risk is the risk that a customer, being unable to repay the debt on maturity, fails to refinance it at commercial rates. We monitor our commercial real estate portfolio closely, assessing indicators for signs of potential issues with refinancing.
|
Commercial real estate gross loans and advances maturity analysis |
||||||||||||||||
|
|
|
|
|
|
|
|
Of which: |
|||||||||
|
|
Europe |
Asia |
MENA |
North America |
Latin America |
Total |
UK |
Hong Kong |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
On demand, overdrafts or revolving |
|
|
|
|
|
|
|
|
||||||||
|
< 1 year |
13,808 |
|
21,625 |
|
816 |
|
5,905 |
|
135 |
|
42,289 |
|
11,775 |
|
16,937 |
|
|
1-2 years |
6,197 |
|
17,638 |
|
142 |
|
1,548 |
|
107 |
|
25,632 |
|
5,274 |
|
13,776 |
|
|
2-5 years |
7,797 |
|
35,557 |
|
509 |
|
3,511 |
|
1,332 |
|
48,706 |
|
4,347 |
|
27,860 |
|
|
> 5 years |
2,319 |
|
4,706 |
|
266 |
|
515 |
|
147 |
|
7,953 |
|
458 |
|
3,772 |
|
|
At 31 Dec 2019 |
30,121 |
|
79,526 |
|
1,733 |
|
11,479 |
|
1,721 |
|
124,580 |
|
21,854 |
|
62,345 |
|
|
On demand, overdrafts or revolving |
|
|
|
|
|
|
|
|
||||||||
|
< 1 year |
13,790 |
|
22,100 |
|
896 |
|
4,942 |
|
427 |
|
42,155 |
|
11,305 |
|
18,094 |
|
|
1-2 years |
5,850 |
|
13,174 |
|
305 |
|
1,949 |
|
117 |
|
21,395 |
|
5,153 |
|
9,120 |
|
|
2-5 years |
7,257 |
|
32,894 |
|
417 |
|
2,152 |
|
1,053 |
|
43,773 |
|
5,232 |
|
26,061 |
|
|
> 5 years |
2,796 |
|
5,793 |
|
318 |
|
806 |
|
344 |
|
10,057 |
|
416 |
|
4,641 |
|
|
At 31 Dec 2018 |
29,693 |
|
73,961 |
|
1,936 |
|
9,849 |
|
1,941 |
|
117,380 |
|
22,106 |
|
57,916 |
|
Collateral and other credit enhancements
(Audited)
Although collateral can be an important mitigant of credit risk, it is the Group's practice to lend on the basis of the customer's ability to meet their obligations out of cash flow resources rather than placing primary reliance on collateral and other credit risk enhancements. Depending on the customer's standing and the type of product, facilities may be provided without any collateral or other credit enhancements. For other lending, a charge over collateral is obtained and considered in determining the credit decision and pricing. In the event of default, the Group may utilise the collateral as a source of repayment.
Depending on its form, collateral can have a significant financial effect in mitigating our exposure to credit risk. Where there is sufficient collateral, an expected credit loss is not recognised. This is the case for reverse repurchase agreements and for certain loans and advances to customers where the loan to value ('LTV') is very low.
Mitigants may include a charge on borrowers' specific assets, such as real estate or financial instruments. Other credit risk mitigants include short positions in securities and financial assets held as part of linked insurance/investment contracts where the risk is predominantly borne by the policyholder. Additionally, risk may be managed by employing other types of collateral and credit risk enhancements, such as second charges, other liens and unsupported guarantees. Guarantees are normally taken from corporates and export credit agencies. Corporates would normally provide guarantees as part of a parent/subsidiary relationship and span a number of credit grades. The export credit agencies will normally be investment grade.
Certain credit mitigants are used strategically in portfolio management activities. While single name concentrations arise in portfolios managed by Global Banking and Corporate Banking, it is only in Global Banking that their size requires the use of portfolio level credit mitigants. Across Global Banking, risk limits and utilisations, maturity profiles and risk quality are monitored and managed proactively. This process is key to the setting of risk appetite for these larger, more complex, geographically distributed customer groups. While the principal form of risk management continues to be at the point of exposure origination, through the lending decision-making process, Global Banking also utilises loan sales and credit default swap ('CDS') hedges to manage concentrations and reduce risk. These transactions are the responsibility of a dedicated Global Banking portfolio management team. Hedging activity is carried out within agreed credit parameters, and is subject to market risk limits and a robust governance structure. Where applicable, CDSs are entered into directly with a central clearing house counterparty. Otherwise our exposure to CDS protection providers is diversified among mainly banking counterparties with strong credit ratings.
CDS mitigants are held at portfolio level and are not included in the expected loss calculations. CDS mitigants are not reported in the following tables.
Collateral on loans and advances
Collateral held is analysed separately for commercial real estate and for other corporate, commercial and financial (non-bank) lending. The following tables include off-balance sheet loan commitments, primarily undrawn credit lines.
The collateral measured in the following tables consists of fixed first charges on real estate, and charges over cash and marketable financial instruments. The values in the tables represent the expected market value on an open market basis. No adjustment has been made to the collateral for any expected costs of recovery. Marketable securities are measured at their fair value.
Other types of collateral such as unsupported guarantees and floating charges over the assets of a customer's business are not measured in the following tables. While such mitigants have value, often providing rights in insolvency, their assignable value is not sufficiently certain and they are therefore assigned no value for disclosure purposes.
The LTV ratios presented are calculated by directly associating loans and advances with the collateral that individually and uniquely supports each facility. When collateral assets are shared by multiple loans and advances, whether specifically or, more generally, by way of an all monies charge, the collateral value is pro-rated across the loans and advances protected by the collateral.
For credit-impaired loans, the collateral values cannot be directly compared with impairment allowances recognised. The LTV figures use open market values with no adjustments. Impairment allowances are calculated on a different basis, by considering other cash flows and adjusting collateral values for costs of realising collateral as explained further on page 244.
Commercial real estate loans and advances
The value of commercial real estate collateral is determined by using a combination of external and internal valuations and physical inspections. For CRR 1-7, local valuation policies determine the frequency of review on the basis of local market conditions because of the complexity of valuing collateral for commercial real estate. For CRR 8-10, almost all collateral would have been revalued within the last three years.
In Hong Kong, market practice is typically for lending to major property companies to be either secured by guarantees or unsecured. In Europe, facilities of a working capital nature are generally not secured by a first fixed charge, and are therefore disclosed as not collateralised.
|
Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key countries/territories (by stage) |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
61,820 |
|
0.1 |
|
7,266 |
|
0.1 |
|
32,478 |
|
- |
|
541 |
|
- |
|
|
Fully collateralised |
89,319 |
|
0.1 |
|
18,535 |
|
- |
|
41,798 |
|
- |
|
4,722 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
46,318 |
|
0.1 |
|
7,018 |
|
0.1 |
|
28,776 |
|
- |
|
1,703 |
|
0.1 |
|
|
- 51% to 75% |
32,583 |
|
0.1 |
|
9,349 |
|
- |
|
10,815 |
|
0.1 |
|
2,854 |
|
- |
|
|
- 76% to 90% |
5,018 |
|
0.1 |
|
1,649 |
|
0.1 |
|
1,436 |
|
0.1 |
|
96 |
|
- |
|
|
- 91% to 100% |
5,400 |
|
0.2 |
|
519 |
|
- |
|
771 |
|
- |
|
69 |
|
- |
|
|
Partially collateralised (A): |
6,563 |
|
0.2 |
|
682 |
|
- |
|
1,627 |
|
0.1 |
|
- |
|
- |
|
|
- collateral value on A |
3,602 |
|
|
535 |
|
|
1,142 |
|
|
- |
|
|
||||
|
Total |
157,702 |
|
0.1 |
|
26,483 |
|
0.1 |
|
75,903 |
|
- |
|
5,263 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
3,040 |
|
1.2 |
|
1,857 |
|
1.2 |
|
440 |
|
0.2 |
|
- |
|
- |
|
|
Fully collateralised |
5,184 |
|
1.1 |
|
1,419 |
|
1.2 |
|
1,501 |
|
0.6 |
|
354 |
|
1.4 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
2,167 |
|
1.1 |
|
615 |
|
1.8 |
|
955 |
|
0.3 |
|
62 |
|
- |
|
|
- 51% to 75% |
1,986 |
|
0.9 |
|
712 |
|
0.6 |
|
497 |
|
1.0 |
|
292 |
|
1.4 |
|
|
- 76% to 90% |
333 |
|
2.1 |
|
16 |
|
6.3 |
|
29 |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
698 |
|
1.1 |
|
76 |
|
1.3 |
|
20 |
|
- |
|
- |
|
- |
|
|
Partially collateralised (B): |
500 |
|
0.6 |
|
296 |
|
0.3 |
|
42 |
|
- |
|
- |
|
- |
|
|
- collateral value on B |
203 |
|
|
56 |
|
|
25 |
|
|
- |
|
|
||||
|
Total |
8,724 |
|
1.1 |
|
3,572 |
|
1.1 |
|
1,983 |
|
0.5 |
|
354 |
|
- |
|
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
315 |
|
57.8 |
|
66 |
|
92.4 |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
557 |
|
14.9 |
|
404 |
|
12.9 |
|
17 |
|
11.8 |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
87 |
|
16.1 |
|
42 |
|
7.1 |
|
6 |
|
16.7 |
|
- |
|
- |
|
|
- 51% to 75% |
90 |
|
7.8 |
|
69 |
|
4.3 |
|
10 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
89 |
|
15.7 |
|
72 |
|
4.2 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
291 |
|
16.5 |
|
221 |
|
19.5 |
|
1 |
|
- |
|
- |
|
- |
|
|
Partially collateralised (C): |
773 |
|
41.5 |
|
507 |
|
27.8 |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on C |
380 |
|
|
166 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
1,645 |
|
35.6 |
|
977 |
|
26.0 |
|
17 |
|
11.8 |
|
- |
|
- |
|
|
POCI |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (D): |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on D |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
||||
|
Total |
1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
At 31 Dec 2019 |
168,072 |
|
0.5 |
|
31,032 |
|
1.0 |
|
77,903 |
|
0.1 |
|
5,617 |
|
0.1 |
|
|
Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key countries/territories (by stage)1 (continued) |
||||||||||||||||
|
|
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
61,486 |
|
0.1 |
|
9,920 |
|
0.2 |
|
31,224 |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
86,960 |
|
0.1 |
|
17,196 |
|
0.1 |
|
39,174 |
|
- |
|
4,862 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
46,650 |
|
0.1 |
|
7,673 |
|
0.1 |
|
25,870 |
|
- |
|
3,463 |
|
- |
|
|
- 51% to 75% |
29,384 |
|
0.1 |
|
7,937 |
|
0.1 |
|
10,452 |
|
0.1 |
|
787 |
|
- |
|
|
- 76% to 90% |
5,167 |
|
0.1 |
|
1,038 |
|
- |
|
1,168 |
|
0.1 |
|
519 |
|
- |
|
|
- 91% to 100% |
5,759 |
|
0.2 |
|
548 |
|
0.2 |
|
1,684 |
|
0.1 |
|
93 |
|
- |
|
|
Partially collateralised (A): |
6,101 |
|
0.1 |
|
487 |
|
0.2 |
|
2,130 |
|
- |
|
- |
|
- |
|
|
- collateral value on A |
3,735 |
|
|
285 |
|
|
1,401 |
|
|
- |
|
|
||||
|
Total |
154,547 |
|
0.1 |
|
27,603 |
|
0.1 |
|
72,528 |
|
- |
|
4,862 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
2,886 |
|
0.9 |
|
1,083 |
|
1.0 |
|
1,140 |
|
0.2 |
|
- |
|
- |
|
|
Fully collateralised |
5,309 |
|
1.1 |
|
1,352 |
|
2.6 |
|
1,576 |
|
0.4 |
|
439 |
|
0.5 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
2,372 |
|
0.9 |
|
727 |
|
1.9 |
|
795 |
|
0.4 |
|
303 |
|
0.7 |
|
|
- 51% to 75% |
1,667 |
|
0.7 |
|
567 |
|
0.7 |
|
505 |
|
0.4 |
|
7 |
|
- |
|
|
- 76% to 90% |
363 |
|
5.0 |
|
34 |
|
44.1 |
|
29 |
|
- |
|
129 |
|
- |
|
|
- 91% to 100% |
907 |
|
1.0 |
|
24 |
|
8.3 |
|
247 |
|
- |
|
- |
|
- |
|
|
Partially collateralised (B): |
289 |
|
1.4 |
|
52 |
|
5.8 |
|
15 |
|
- |
|
- |
|
- |
|
|
- collateral value on B |
156 |
|
|
20 |
|
|
5 |
|
|
- |
|
|
||||
|
Total |
8,484 |
|
1.1 |
|
2,487 |
|
2.0 |
|
2,731 |
|
0.3 |
|
439 |
|
0.5 |
|
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
338 |
|
57.1 |
|
61 |
|
85.2 |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
606 |
|
12.7 |
|
433 |
|
9.2 |
|
12 |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
412 |
|
10.0 |
|
304 |
|
9.2 |
|
2 |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
88 |
|
27.3 |
|
58 |
|
6.9 |
|
10 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
38 |
|
2.6 |
|
35 |
|
5.7 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
68 |
|
16.2 |
|
36 |
|
16.7 |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (C): |
474 |
|
56.5 |
|
261 |
|
42.9 |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on C |
321 |
|
|
137 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
1,418 |
|
37.9 |
|
755 |
|
27.0 |
|
12 |
|
- |
|
- |
|
- |
|
|
POCI |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
15 |
|
53.3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
13 |
|
61.5 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (D): |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on D |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
||||
|
Total |
15 |
|
53.3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
At 31 Dec 2018 |
164,464 |
|
0.5 |
|
30,845 |
|
0.9 |
|
75,271 |
|
- |
|
5,301 |
|
0.1 |
|
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
|
Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key countries/territories |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Rated CRR/PD1 to 7 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
64,850 |
|
0.1 |
|
9,119 |
|
0.3 |
|
32,918 |
|
- |
|
541 |
|
- |
|
|
Fully collateralised |
94,299 |
|
0.1 |
|
19,833 |
|
0.1 |
|
43,299 |
|
0.1 |
|
5,021 |
|
0.1 |
|
|
Partially collateralised (A): |
7,052 |
|
0.2 |
|
971 |
|
0.1 |
|
1,669 |
|
0.1 |
|
- |
|
- |
|
|
- collateral value on A |
3,796 |
|
|
586 |
|
|
1,167 |
|
|
- |
|
|
||||
|
Total |
166,201 |
|
0.1 |
|
29,923 |
|
0.1 |
|
77,886 |
|
- |
|
5,562 |
|
0.1 |
|
|
Rated CRR/PD8 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
10 |
|
50.0 |
|
4 |
|
100.0 |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
204 |
|
4.9 |
|
121 |
|
5.0 |
|
- |
|
- |
|
55 |
|
3.6 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
47 |
|
8.5 |
|
27 |
|
14.8 |
|
- |
|
- |
|
13 |
|
- |
|
|
- 51% to 75% |
120 |
|
3.3 |
|
68 |
|
1.5 |
|
- |
|
- |
|
42 |
|
4.8 |
|
|
- 76% to 90% |
25 |
|
4.0 |
|
15 |
|
6.7 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
12 |
|
8.3 |
|
11 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (B): |
11 |
|
- |
|
7 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on B |
9 |
|
|
5 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
225 |
|
6.7 |
|
132 |
|
7.6 |
|
- |
|
- |
|
55 |
|
3.6 |
|
|
Rated CRR/PD9 to 10 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
315 |
|
57.8 |
|
66 |
|
92.4 |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
557 |
|
14.9 |
|
404 |
|
12.9 |
|
17 |
|
11.8 |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
87 |
|
16.1 |
|
42 |
|
7.1 |
|
6 |
|
16.7 |
|
- |
|
- |
|
|
- 51% to 75% |
90 |
|
7.8 |
|
69 |
|
4.3 |
|
10 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
89 |
|
15.7 |
|
72 |
|
4.2 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
291 |
|
16.5 |
|
221 |
|
19.5 |
|
1 |
|
100.0 |
|
- |
|
- |
|
|
Partially collateralised (C): |
774 |
|
41.6 |
|
507 |
|
27.8 |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on C |
380 |
|
|
166 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
1,646 |
|
35.7 |
|
977 |
|
26.0 |
|
17 |
|
11.8 |
|
- |
|
- |
|
|
At 31 Dec 2019 |
168,072 |
|
0.5 |
|
31,032 |
|
1.0 |
|
77,903 |
|
0.1 |
|
5,617 |
|
0.1 |
|
|
Rated CRR/PD1 to 7 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
64,324 |
|
0.1 |
|
11,001 |
|
0.2 |
|
32,364 |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
91,791 |
|
0.1 |
|
18,112 |
|
0.2 |
|
40,747 |
|
0.1 |
|
5,282 |
|
0.1 |
|
|
Partially collateralised (A): |
6,377 |
|
0.2 |
|
532 |
|
0.6 |
|
2,145 |
|
- |
|
- |
|
- |
|
|
- collateral value on A |
3,879 |
|
|
299 |
|
|
1,406 |
|
|
- |
|
|
||||
|
Total |
162,492 |
|
0.1 |
|
29,645 |
|
0.3 |
|
75,256 |
|
- |
|
5,282 |
|
0.1 |
|
|
Rated CRR/PD8 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
49 |
|
2.0 |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
477 |
|
1.5 |
|
435 |
|
1.1 |
|
3 |
|
33.3 |
|
19 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
178 |
|
1.7 |
|
149 |
|
1.3 |
|
3 |
|
33.3 |
|
19 |
|
- |
|
|
- 51% to 75% |
269 |
|
0.4 |
|
265 |
|
0.4 |
|
- |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
13 |
|
7.7 |
|
7 |
|
14.3 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
17 |
|
11.8 |
|
14 |
|
14.3 |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (B): |
13 |
|
7.7 |
|
8 |
|
12.5 |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on B |
12 |
|
|
6 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
539 |
|
1.7 |
|
445 |
|
1.3 |
|
3 |
|
33.3 |
|
19 |
|
- |
|
|
Rated CRR/PD9 to 10 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
338 |
|
57.1 |
|
61 |
|
85.2 |
|
- |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
621 |
|
13.5 |
|
433 |
|
9.2 |
|
12 |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
425 |
|
11.5 |
|
304 |
|
9.2 |
|
2 |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
90 |
|
26.7 |
|
58 |
|
6.9 |
|
10 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
38 |
|
2.6 |
|
35 |
|
5.7 |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
68 |
|
16.2 |
|
36 |
|
16.7 |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (C): |
474 |
|
56.5 |
|
261 |
|
42.9 |
|
- |
|
- |
|
- |
|
- |
|
|
- collateral value on C |
321 |
|
|
137 |
|
|
- |
|
|
- |
|
|
||||
|
Total |
1,433 |
|
38.0 |
|
755 |
|
27.0 |
|
12 |
|
- |
|
- |
|
- |
|
|
At 31 Dec 2018 |
164,464 |
|
0.5 |
|
30,845 |
|
0.9 |
|
75,271 |
|
- |
|
5,301 |
|
0.1 |
|
Other corporate, commercial and financial (non-bank) loans and advances
Other corporate, commercial and financial (non-bank) loans are analysed separately in the following table, which focuses on the countries/territories containing the majority of our loans and advances balances. For financing activities in other corporate and commercial lending, collateral value is not strongly correlated to principal repayment performance.
Collateral values are generally refreshed when an obligor's general credit performance deteriorates and we have to assess the likely performance of secondary sources of repayment should it prove necessary to rely on them.
Accordingly, the following table reports values only for customers with CRR 8-10, recognising that these loans and advances generally have valuations that are comparatively recent.
|
Wholesale lending - other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories (by stage) |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
680,079 |
|
0.1 |
|
132,197 |
|
0.2 |
|
116,536 |
|
- |
|
112,911 |
|
- |
|
|
Fully collateralised |
128,290 |
|
0.1 |
|
40,172 |
|
0.1 |
|
32,818 |
|
0.1 |
|
14,830 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
48,012 |
|
0.1 |
|
13,831 |
|
0.1 |
|
11,009 |
|
0.1 |
|
5,326 |
|
- |
|
|
- 51% to 75% |
37,891 |
|
0.1 |
|
11,903 |
|
0.2 |
|
12,783 |
|
0.1 |
|
3,717 |
|
0.1 |
|
|
- 76% to 90% |
13,072 |
|
0.1 |
|
3,399 |
|
0.2 |
|
4,697 |
|
0.1 |
|
130 |
|
- |
|
|
- 91% to 100% |
29,315 |
|
- |
|
11,039 |
|
- |
|
4,329 |
|
0.1 |
|
5,657 |
|
- |
|
|
Partially collateralised (A): |
52,890 |
|
0.1 |
|
8,122 |
|
0.1 |
|
20,162 |
|
0.1 |
|
1,629 |
|
- |
|
|
- collateral value on A |
25,824 |
|
|
3,809 |
|
|
9,616 |
|
|
1,337 |
|
|
||||
|
Total |
861,259 |
|
0.1 |
|
180,491 |
|
0.2 |
|
169,516 |
|
- |
|
129,370 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
61,540 |
|
1.2 |
|
13,318 |
|
2.2 |
|
13,308 |
|
0.7 |
|
10,129 |
|
0.9 |
|
|
Fully collateralised |
21,126 |
|
0.8 |
|
3,139 |
|
1.8 |
|
12,934 |
|
0.6 |
|
868 |
|
0.8 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
7,081 |
|
0.9 |
|
1,208 |
|
2.0 |
|
3,845 |
|
0.6 |
|
303 |
|
0.3 |
|
|
- 51% to 75% |
8,482 |
|
0.9 |
|
1,111 |
|
1.8 |
|
5,580 |
|
0.7 |
|
465 |
|
1.1 |
|
|
- 76% to 90% |
2,684 |
|
0.9 |
|
282 |
|
2.1 |
|
1,646 |
|
0.5 |
|
47 |
|
2.1 |
|
|
- 91% to 100% |
2,879 |
|
0.6 |
|
538 |
|
1.3 |
|
1,863 |
|
0.2 |
|
53 |
|
- |
|
|
Partially collateralised (B): |
8,463 |
|
0.8 |
|
1,516 |
|
1.4 |
|
3,768 |
|
0.4 |
|
124 |
|
1.6 |
|
|
- collateral value on B |
3,669 |
|
|
370 |
|
|
1,801 |
|
|
53 |
|
|
||||
|
Total |
91,129 |
|
1.1 |
|
17,973 |
|
2.1 |
|
30,010 |
|
0.6 |
|
11,121 |
|
0.9 |
|
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
4,768 |
|
49.2 |
|
1,899 |
|
33.0 |
|
504 |
|
83.5 |
|
2 |
|
50.0 |
|
|
Fully collateralised |
1,479 |
|
22.4 |
|
494 |
|
12.6 |
|
86 |
|
12.8 |
|
214 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
335 |
|
35.2 |
|
103 |
|
17.5 |
|
9 |
|
33.3 |
|
2 |
|
- |
|
|
- 51% to 75% |
352 |
|
24.4 |
|
198 |
|
8.6 |
|
21 |
|
4.8 |
|
- |
|
- |
|
|
- 76% to 90% |
373 |
|
23.6 |
|
101 |
|
20.8 |
|
40 |
|
7.5 |
|
- |
|
- |
|
|
- 91% to 100% |
419 |
|
9.1 |
|
92 |
|
7.6 |
|
16 |
|
25.0 |
|
212 |
|
- |
|
|
Partially collateralised (C): |
1,367 |
|
44.8 |
|
369 |
|
20.1 |
|
87 |
|
48.3 |
|
92 |
|
44.6 |
|
|
- collateral value on C |
693 |
|
|
192 |
|
|
34 |
|
|
65 |
|
|
||||
|
Total |
7,614 |
|
43.2 |
|
2,762 |
|
27.6 |
|
677 |
|
70.0 |
|
308 |
|
13.6 |
|
|
POCI |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
223 |
|
32.7 |
|
32 |
|
96.9 |
|
7 |
|
- |
|
- |
|
- |
|
|
Fully collateralised |
28 |
|
3.6 |
|
- |
|
- |
|
10 |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
2 |
|
50.0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
26 |
|
- |
|
- |
|
- |
|
10 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Partially collateralised (D): |
97 |
|
33.0 |
|
57 |
|
1.8 |
|
31 |
|
90.3 |
|
- |
|
- |
|
|
- collateral value on D |
57 |
|
|
19 |
|
|
30 |
|
|
- |
|
|
||||
|
Total |
348 |
|
30.5 |
|
89 |
|
36.0 |
|
48 |
|
58.3 |
|
- |
|
- |
|
|
At 31 Dec 2019 |
960,350 |
|
0.5 |
|
201,315 |
|
0.7 |
|
200,251 |
|
0.4 |
|
140,799 |
|
0.1 |
|
|
Wholesale lending - other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories (by stage)1,2 (continued) |
||||||||||||||||
|
(Audited)
|
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
673,589 |
|
0.1 |
|
137,269 |
|
0.2 |
|
122,259 |
|
- |
|
116,001 |
|
- |
|
|
Fully collateralised |
127,443 |
|
0.1 |
|
30,492 |
|
0.1 |
|
36,730 |
|
0.1 |
|
11,229 |
|
0.1 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
39,509 |
|
0.1 |
|
8,519 |
|
0.2 |
|
12,032 |
|
0.1 |
|
4,686 |
|
- |
|
|
- 51% to 75% |
49,518 |
|
0.1 |
|
9,275 |
|
0.2 |
|
14,264 |
|
0.1 |
|
2,424 |
|
- |
|
|
- 76% to 90% |
12,627 |
|
0.1 |
|
3,201 |
|
0.2 |
|
4,567 |
|
0.1 |
|
318 |
|
- |
|
|
- 91% to 100% |
25,789 |
|
0.1 |
|
9,497 |
|
- |
|
5,867 |
|
0.1 |
|
3,801 |
|
- |
|
|
Partially collateralised (A): |
54,412 |
|
0.1 |
|
6,668 |
|
0.2 |
|
21,942 |
|
- |
|
1,875 |
|
- |
|
|
- collateral value on A |
23,857 |
|
|
3,250 |
|
|
10,263 |
|
|
912 |
|
|
||||
|
Total |
855,444 |
|
0.1 |
|
174,429 |
|
0.2 |
|
180,931 |
|
- |
|
129,105 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
61,464 |
|
1.1 |
|
21,035 |
|
1.7 |
|
6,212 |
|
0.4 |
|
10,085 |
|
1.2 |
|
|
Fully collateralised |
13,633 |
|
1.2 |
|
5,645 |
|
1.5 |
|
3,378 |
|
0.5 |
|
1,131 |
|
9.3 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
5,109 |
|
1.1 |
|
2,047 |
|
1.7 |
|
1,421 |
|
0.4 |
|
342 |
|
0.6 |
|
|
- 51% to 75% |
4,950 |
|
1.3 |
|
2,154 |
|
1.8 |
|
1,290 |
|
0.6 |
|
467 |
|
0.6 |
|
|
- 76% to 90% |
1,399 |
|
1.8 |
|
496 |
|
1.2 |
|
391 |
|
0.5 |
|
85 |
|
1.2 |
|
|
- 91% to 100% |
2,175 |
|
0.8 |
|
948 |
|
0.4 |
|
276 |
|
0.4 |
|
237 |
|
1.7 |
|
|
Partially collateralised (B): |
6,623 |
|
0.7 |
|
1,793 |
|
1.2 |
|
2,287 |
|
0.3 |
|
63 |
|
1.6 |
|
|
- collateral value on B |
2,324 |
|
|
339 |
|
|
971 |
|
|
16 |
|
|
||||
|
Total |
81,720 |
|
1.1 |
|
28,473 |
|
1.6 |
|
11,877 |
|
0.4 |
|
11,279 |
|
1.1 |
|
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
5,240 |
|
50.2 |
|
1,882 |
|
38.8 |
|
478 |
|
81.2 |
|
1 |
|
100.0 |
|
|
Fully collateralised |
1,460 |
|
22.9 |
|
517 |
|
6.2 |
|
146 |
|
- |
|
130 |
|
13.8 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
361 |
|
36.0 |
|
133 |
|
10.5 |
|
11 |
|
- |
|
4 |
|
- |
|
|
- 51% to 75% |
328 |
|
9.8 |
|
179 |
|
1.7 |
|
62 |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
427 |
|
24.6 |
|
131 |
|
13.7 |
|
32 |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
344 |
|
19.8 |
|
74 |
|
8.1 |
|
41 |
|
- |
|
126 |
|
- |
|
|
Partially collateralised (C): |
1,147 |
|
43.1 |
|
228 |
|
21.1 |
|
158 |
|
15.2 |
|
71 |
|
31.0 |
|
|
- collateral value on C |
580 |
|
|
132 |
|
|
38 |
|
|
55 |
|
|
||||
|
Total |
7,847 |
|
44.1 |
|
2,627 |
|
31.2 |
|
782 |
|
52.7 |
|
202 |
|
10.9 |
|
|
POCI |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
232 |
|
66.8 |
|
- |
|
- |
|
25 |
|
20.0 |
|
- |
|
- |
|
|
Fully collateralised |
37 |
|
2.7 |
|
- |
|
- |
|
9 |
|
- |
|
- |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 51% to 75% |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 76% to 90% |
22 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
14 |
|
- |
|
- |
|
- |
|
9 |
|
- |
|
- |
|
- |
|
|
Partially collateralised (D): |
49 |
|
63.3 |
|
8 |
|
- |
|
35 |
|
85.7 |
|
- |
|
- |
|
|
- collateral value on D |
38 |
|
|
3 |
|
|
34 |
|
|
- |
|
|
||||
|
Total |
318 |
|
59.2 |
|
8 |
|
- |
|
69 |
|
50.7 |
|
- |
|
- |
|
|
At 31 Dec 2018 |
945,329 |
|
0.6 |
|
205,537 |
|
0.8 |
|
193,659 |
|
0.3 |
|
140,586 |
|
0.1 |
|
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
2 The 2018 comparative amounts have been re-presented to reclassify amounts from fully collateralised to not collateralised and to include not collateralised amounts previously excluded. The impact of these re-presentations is to increase stage 1 not collateralised amounts by $130bn and decrease fully collateralised amounts by $105bn; increase stage 2 not collateralised amounts by $14bn and decrease fully collateralised amounts by $12bn; and to increase stage 3 not collateralised amounts by $0.3bn and decrease fully collateralised amounts by $0.1bn.
|
Wholesale lending - other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Rated CRR/PD8 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
2,499 |
|
5.8 |
|
285 |
|
13.0 |
|
10 |
|
70.0 |
|
1,645 |
|
3.3 |
|
|
Fully collateralised |
694 |
|
3.3 |
|
382 |
|
2.6 |
|
- |
|
- |
|
166 |
|
1.2 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
246 |
|
2.8 |
|
120 |
|
1.7 |
|
- |
|
- |
|
85 |
|
1.2 |
|
|
- 51% to 75% |
189 |
|
4.2 |
|
93 |
|
3.2 |
|
- |
|
- |
|
18 |
|
- |
|
|
- 76% to 90% |
97 |
|
2.1 |
|
42 |
|
2.4 |
|
- |
|
- |
|
45 |
|
2.2 |
|
|
- 91% to 100% |
162 |
|
3.7 |
|
127 |
|
3.9 |
|
- |
|
- |
|
18 |
|
- |
|
|
Partially collateralised (A): |
279 |
|
4.7 |
|
53 |
|
5.7 |
|
73 |
|
2.7 |
|
66 |
|
3.0 |
|
|
- collateral value on A |
152 |
|
|
34 |
|
|
6 |
|
|
39 |
|
|
||||
|
Total |
3,472 |
|
5.2 |
|
720 |
|
6.9 |
|
83 |
|
12.0 |
|
1,877 |
|
3.0 |
|
|
Rated CRR/PD9 to 10 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
4,991 |
|
48.5 |
|
1,930 |
|
34.1 |
|
510 |
|
82.5 |
|
2 |
|
50.0 |
|
|
Fully collateralised |
1,507 |
|
22.0 |
|
494 |
|
12.6 |
|
96 |
|
11.5 |
|
214 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
338 |
|
35.2 |
|
103 |
|
17.5 |
|
10 |
|
- |
|
2 |
|
- |
|
|
- 51% to 75% |
377 |
|
22.8 |
|
198 |
|
8.6 |
|
30 |
|
3.3 |
|
- |
|
- |
|
|
- 76% to 90% |
373 |
|
23.6 |
|
101 |
|
20.8 |
|
40 |
|
7.5 |
|
- |
|
- |
|
|
- 91% to 100% |
419 |
|
9.1 |
|
92 |
|
7.6 |
|
16 |
|
- |
|
212 |
|
- |
|
|
Partially collateralised (B): |
1,464 |
|
44.0 |
|
427 |
|
17.6 |
|
119 |
|
58.8 |
|
92 |
|
44.6 |
|
|
- collateral value on B |
750 |
|
|
211 |
|
|
64 |
|
|
65 |
|
|
||||
|
Total |
7,962 |
|
42.7 |
|
2,851 |
|
27.9 |
|
725 |
|
69.2 |
|
308 |
|
13.6 |
|
|
At 31 Dec 2019 |
11,434 |
|
31.3 |
|
3,571 |
|
23.7 |
|
808 |
|
63.4 |
|
2,185 |
|
4.5 |
|
|
Rated CRR/PD8 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
1,243 |
|
5.4 |
|
565 |
|
6.2 |
|
94 |
|
7.4 |
|
191 |
|
5.2 |
|
|
Fully collateralised |
1,895 |
|
3.6 |
|
74 |
|
4.1 |
|
11 |
|
9.1 |
|
1,621 |
|
3.1 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
693 |
|
4.2 |
|
21 |
|
4.8 |
|
- |
|
- |
|
594 |
|
4.2 |
|
|
- 51% to 75% |
292 |
|
2.7 |
|
49 |
|
2.0 |
|
11 |
|
9.1 |
|
169 |
|
2.4 |
|
|
- 76% to 90% |
45 |
|
15.6 |
|
2 |
|
- |
|
- |
|
- |
|
20 |
|
- |
|
|
- 91% to 100% |
865 |
|
2.8 |
|
2 |
|
- |
|
- |
|
- |
|
838 |
|
- |
|
|
Partially collateralised (A): |
212 |
|
2.8 |
|
23 |
|
4.3 |
|
153 |
|
1.3 |
|
- |
|
- |
|
|
- collateral value on A |
84 |
|
|
14 |
|
|
49 |
|
|
- |
|
|
||||
|
Total |
3,350 |
|
4.2 |
|
662 |
|
6 |
|
258 |
|
3.9 |
|
1,812 |
|
3.4 |
|
|
Rated CRR/PD9 to 10 |
|
|
|
|
|
|
|
|
||||||||
|
Not collateralised |
5,199 |
|
53.2 |
|
1,775 |
|
42.1 |
|
503 |
|
78.1 |
|
6 |
|
16.7 |
|
|
Fully collateralised |
1,719 |
|
24.8 |
|
513 |
|
6.2 |
|
155 |
|
- |
|
188 |
|
9.6 |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
608 |
|
36.0 |
|
181 |
|
7.7 |
|
11 |
|
- |
|
77 |
|
22.1 |
|
|
- 51% to 75% |
503 |
|
8.7 |
|
172 |
|
1.7 |
|
62 |
|
- |
|
103 |
|
1.0 |
|
|
- 76% to 90% |
405 |
|
24.2 |
|
86 |
|
10.5 |
|
32 |
|
- |
|
- |
|
- |
|
|
- 91% to 100% |
203 |
|
31.5 |
|
74 |
|
8.1 |
|
50 |
|
- |
|
8 |
|
- |
|
|
Partially collateralised (B): |
974 |
|
46.1 |
|
187 |
|
21.9 |
|
193 |
|
28.0 |
|
5 |
|
60.0 |
|
|
- collateral value on B |
466 |
|
|
116 |
|
|
73 |
|
|
2 |
|
|
||||
|
Total |
7,892 |
|
46.1 |
|
2,475 |
|
33.2 |
|
851 |
|
52.6 |
|
199 |
|
11.1 |
|
|
At 31 Dec 2018 |
11,242 |
|
33.7 |
|
3,137 |
|
27.4 |
|
1,109 |
|
41.3 |
|
2,011 |
|
4.2 |
|
Other credit risk exposures
In addition to collateralised lending, other credit enhancements are employed and methods used to mitigate credit risk arising from financial assets. These are summarised below:
• Some securities issued by governments, banks and other financial institutions benefit from additional credit enhancements provided by government guarantees that cover the assets.
• Debt securities issued by banks and financial institutions include asset-backed securities ('ABSs') and similar instruments, which are supported by underlying pools of financial assets. Credit risk associated with ABSs is reduced through the purchase of credit default swap ('CDS') protection.
• Trading loans and advances mainly pledged against cash collateral are posted to satisfy margin requirements. There is limited credit risk on cash collateral posted since in the event of default of the counterparty this would be set off against the related liability. Reverse repos and stock borrowing are by their nature collateralised.
Collateral accepted as security that the Group is permitted to sell or repledge under these arrangements is described on page 282 of the financial statements.
• The Group's maximum exposure to credit risk includes financial guarantees and similar contracts granted, as well as loan and other credit-related commitments. Depending on the terms of the arrangement, we may use additional credit mitigation if a guarantee is called upon or a loan commitment is drawn and subsequently defaults.
For further information on these arrangements, see Note 32 on the financial statements.
Derivatives
We participate in transactions exposing us to counterparty credit risk. Counterparty credit risk is the risk of financial loss if the counterparty to a transaction defaults before satisfactorily settling it. It arises principally from over-the-counter ('OTC') derivatives and securities financing transactions and is calculated in both the trading and non-trading books. Transactions vary in value by reference to a market factor such as an interest rate, exchange rate or asset price.
The counterparty risk from derivative transactions is taken into account when reporting the fair value of derivative positions. The adjustment to the fair value is known as the credit valuation adjustment ('CVA').
For an analysis of CVAs, see Note 12 on the financial statements.
The following table reflects by risk type the fair values and gross notional contract amounts of derivatives cleared through an exchange, central counterparty or non-central counterparty.
|
Notional contract amounts and fair values of derivatives |
||||||||||||
|
|
2019 |
2018 |
||||||||||
|
|
Notional |
Fair value |
Notional |
Fair value |
||||||||
|
|
amount |
Assets |
Liabilities |
amount |
Assets |
Liabilities |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Total OTC derivatives |
26,244,531 |
|
282,778 |
|
279,101 |
|
31,982,343 |
|
255,190 |
|
251,001 |
|
|
- total OTC derivatives cleared by central counterparties |
12,563,343 |
|
45,140 |
|
46,351 |
|
17,939,035 |
|
52,424 |
|
52,845 |
|
|
- total OTC derivatives not cleared by central counterparties |
13,681,188 |
|
237,638 |
|
232,750 |
|
14,043,308 |
|
202,766 |
|
198,156 |
|
|
Total exchange traded derivatives |
1,583,590 |
|
1,956 |
|
2,135 |
|
2,030,580 |
|
2,346 |
|
4,545 |
|
|
Gross |
27,828,121 |
|
284,734 |
|
281,236 |
|
34,012,923 |
|
257,536 |
|
255,546 |
|
|
Offset |
|
(41,739 |
) |
(41,739 |
) |
|
(49,711 |
) |
(49,711 |
) |
||
|
At 31 Dec |
|
242,995 |
|
239,497 |
|
|
207,825 |
|
205,835 |
|
||
The purposes for which HSBC uses derivatives are described in Note 15 on the financial statements.
The International Swaps and Derivatives Association ('ISDA') master agreement is our preferred agreement for documenting derivatives activity. It is common, and our preferred practice, for the parties involved in a derivative transaction to execute a credit support annex ('CSA') in conjunction with the ISDA master agreement. Under a CSA, collateral is passed between the parties to mitigate the counterparty risk inherent in outstanding positions. The majority of our CSAs are with financial institutional clients.
We manage the counterparty exposure on our OTC derivative contracts by using collateral agreements with counterparties and netting agreements. Currently, we do not actively manage our general OTC derivative counterparty exposure in the credit markets, although we may manage individual exposures in certain circumstances.
We place strict policy restrictions on collateral types and as a consequence the types of collateral received and pledged are, by value, highly liquid and of a strong quality, being predominantly cash.
Where a collateral type is required to be approved outside the collateral policy, approval is required from a committee of senior representatives from Markets, Legal and Risk.
See page 304 and Note 30 on the financial statements for details regarding legally enforceable right of offset in the event of counterparty default and collateral received in respect of derivatives.
Personal lending
This section presents further disclosures related to personal lending. It provides details of the regions, countries and products that are driving the change observed in personal loans and advances to customers, with the impact of foreign exchange separately identified. Additionally, Hong Kong and UK mortgage book LTV data is provided.
This section also provides a reconciliation of the opening 1 January 2019 to 31 December 2019 closing gross carrying/nominal amounts and associated allowance for ECL.
Further product granularity is also provided by stage, with geographical data presented for loans and advances to customers, loan and other credit-related commitments and financial guarantees.
At 31 December 2019, total personal lending for loans and advances to customers of $434bn increased by $40bn compared with 31 December 2018. This increase included favourable exchange movements of $6bn. Excluding foreign exchange movements, there was growth of $34bn, primarily driven by $18bn in Asia and $14bn in Europe. The allowance for ECL attributable to personal lending, excluding off-balance sheet loan commitments and guarantees, and foreign exchange movements, increased $0.2bn.
Excluding foreign exchange movements, total personal lending was primarily driven by mortgage growth, which grew by $23bn. Mortgages grew in Asia by $12bn, notably $7bn in Hong Kong and $3bn in Australia. In Europe, mortgages grew by $10bn, notably $9bn in the UK, driven by stronger acquisition performance, including the expanded use of broker relationships.
The quality of both our Hong Kong and UK mortgage books remained high, with negligible defaults and impairment allowances. The average LTV ratio on new mortgage lending in Hong Kong was 49%, compared with an estimated 41% for the overall mortgage portfolio. The average LTV ratio on new lending in the UK was 67%, compared with an estimated 51% for the overall mortgage portfolio.
Excluding foreign exchange movements, other personal lending balances at 31 December 2019 increased by $11bn compared with 31 December 2018. The increase was attributable to loans and overdrafts, which grew by $4bn in Hong Kong and $4bn in Europe, notably $2bn in France and $1bn in the UK. Credit cards increased by $1bn in the US, China and to a lesser extent from Mexico.
|
Total personal lending for loans and advances to customers at amortised cost by stage distribution |
||||||||||||||||
|
|
Gross carrying amount |
|
Allowance for ECL |
|||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
By portfolio |
|
|
|
|
|
|
|
|
||||||||
|
First lien residential mortgages |
312,031 |
|
7,077 |
|
3,070 |
|
322,178 |
|
(39 |
) |
(68 |
) |
(422 |
) |
(529 |
) |
|
- of which: interest only (including offset) |
31,201 |
|
1,602 |
|
376 |
|
33,179 |
|
(6 |
) |
(15 |
) |
(91 |
) |
(112 |
) |
|
- affordability (including US adjustable rate mortgages) |
14,222 |
|
796 |
|
514 |
|
15,532 |
|
(3 |
) |
(3 |
) |
(3 |
) |
(9 |
) |
|
Other personal lending |
101,638 |
|
8,674 |
|
1,781 |
|
112,093 |
|
(544 |
) |
(1,268 |
) |
(793 |
) |
(2,605 |
) |
|
- other |
77,031 |
|
4,575 |
|
1,193 |
|
82,799 |
|
(229 |
) |
(451 |
) |
(491 |
) |
(1,171 |
) |
|
- credit cards |
22,285 |
|
3,959 |
|
524 |
|
26,768 |
|
(310 |
) |
(801 |
) |
(284 |
) |
(1,395 |
) |
|
- second lien residential mortgages |
750 |
|
84 |
|
55 |
|
889 |
|
(1 |
) |
(6 |
) |
(10 |
) |
(17 |
) |
|
- motor vehicle finance |
1,572 |
|
56 |
|
9 |
|
1,637 |
|
(4 |
) |
(10 |
) |
(8 |
) |
(22 |
) |
|
At 31 Dec 2019 |
413,669 |
|
15,751 |
|
4,851 |
|
434,271 |
|
(583 |
) |
(1,336 |
) |
(1,215 |
) |
(3,134 |
) |
|
By geography |
|
|
|
|
|
|
|
|
||||||||
|
Europe |
186,561 |
|
6,854 |
|
2,335 |
|
195,750 |
|
(112 |
) |
(538 |
) |
(578 |
) |
(1,228 |
) |
|
- of which: UK |
153,313 |
|
5,455 |
|
1,612 |
|
160,380 |
|
(104 |
) |
(513 |
) |
(370 |
) |
(987 |
) |
|
Asia |
173,523 |
|
5,855 |
|
717 |
|
180,095 |
|
(223 |
) |
(339 |
) |
(170 |
) |
(732 |
) |
|
- of which: Hong Kong |
117,013 |
|
2,751 |
|
189 |
|
119,953 |
|
(90 |
) |
(220 |
) |
(44 |
) |
(354 |
) |
|
MENA |
5,671 |
|
247 |
|
299 |
|
6,217 |
|
(50 |
) |
(58 |
) |
(189 |
) |
(297 |
) |
|
North America |
41,148 |
|
1,930 |
|
1,238 |
|
44,316 |
|
(56 |
) |
(119 |
) |
(141 |
) |
(316 |
) |
|
Latin America |
6,766 |
|
865 |
|
262 |
|
7,893 |
|
(142 |
) |
(282 |
) |
(137 |
) |
(561 |
) |
|
At 31 Dec 2019 |
413,669 |
|
15,751 |
|
4,851 |
|
434,271 |
|
(583 |
) |
(1,336 |
) |
(1,215 |
) |
(3,134 |
) |
|
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution |
||||||||||||||||
|
|
Nominal amount |
Allowance for ECL |
||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Europe |
51,575 |
|
604 |
|
110 |
|
52,289 |
|
(10 |
) |
(2 |
) |
- |
|
(12 |
) |
|
- of which: UK |
49,322 |
|
493 |
|
105 |
|
49,920 |
|
(8 |
) |
(1 |
) |
- |
|
(9 |
) |
|
Asia |
149,336 |
|
682 |
|
9 |
|
150,027 |
|
- |
|
- |
|
- |
|
- |
|
|
- of which: Hong Kong |
115,025 |
|
27 |
|
3 |
|
115,055 |
|
- |
|
- |
|
- |
|
- |
|
|
MENA |
3,150 |
|
46 |
|
53 |
|
3,249 |
|
- |
|
- |
|
- |
|
- |
|
|
North America |
13,919 |
|
256 |
|
20 |
|
14,195 |
|
(1 |
) |
- |
|
- |
|
(1 |
) |
|
Latin America |
4,312 |
|
43 |
|
3 |
|
4,358 |
|
(3 |
) |
- |
|
- |
|
(3 |
) |
|
At 31 Dec 2019 |
222,292 |
|
1,631 |
|
195 |
|
224,118 |
|
(14 |
) |
(2 |
) |
- |
|
(16 |
) |
|
Total personal lending for loans and advances to customers at amortised cost by stage distribution (continued) |
||||||||||||||||
|
|
Gross carrying amount |
|
Allowance for ECL |
|
||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
By portfolio |
|
|
|
|
|
|
|
|
||||||||
|
First lien residential mortgages |
284,103 |
|
6,286 |
|
2,944 |
|
293,333 |
|
(41 |
) |
(62 |
) |
(432 |
) |
(535 |
) |
|
- of which: interest only (including offset) |
31,874 |
|
1,324 |
|
338 |
|
33,536 |
|
(3 |
) |
(13 |
) |
(92 |
) |
(108 |
) |
|
- affordability (including US adjustable rate mortgages) |
16,110 |
|
1,065 |
|
507 |
|
17,682 |
|
(3 |
) |
(4 |
) |
(5 |
) |
(12 |
) |
|
Other personal lending |
90,578 |
|
8,789 |
|
1,637 |
|
101,004 |
|
(493 |
) |
(1,203 |
) |
(716 |
) |
(2,412 |
) |
|
- other |
67,196 |
|
4,400 |
|
1,121 |
|
72,717 |
|
(214 |
) |
(435 |
) |
(465 |
) |
(1,114 |
) |
|
- credit cards |
20,932 |
|
4,259 |
|
453 |
|
25,644 |
|
(272 |
) |
(756 |
) |
(233 |
) |
(1,261 |
) |
|
- second lien residential mortgages |
1,022 |
|
100 |
|
57 |
|
1,179 |
|
(2 |
) |
(9 |
) |
(13 |
) |
(24 |
) |
|
- motor vehicle finance |
1,428 |
|
30 |
|
6 |
|
1,464 |
|
(5 |
) |
(3 |
) |
(5 |
) |
(13 |
) |
|
At 31 Dec 2018 |
374,681 |
|
15,075 |
|
4,581 |
|
394,337 |
|
(534 |
) |
(1,265 |
) |
(1,148 |
) |
(2,947 |
) |
|
By geography |
|
|
|
|
|
|
|
|
||||||||
|
Europe |
169,782 |
|
5,731 |
|
2,051 |
|
177,564 |
|
(105 |
) |
(453 |
) |
(450 |
) |
(1,008 |
) |
|
- of which: UK |
139,237 |
|
4,308 |
|
1,315 |
|
144,860 |
|
(93 |
) |
(421 |
) |
(219 |
) |
(733 |
) |
|
Asia |
155,661 |
|
5,413 |
|
693 |
|
161,767 |
|
(207 |
) |
(353 |
) |
(180 |
) |
(740 |
) |
|
- of which: Hong Kong |
104,909 |
|
2,715 |
|
169 |
|
107,793 |
|
(71 |
) |
(220 |
) |
(39 |
) |
(330 |
) |
|
MENA |
5,565 |
|
350 |
|
411 |
|
6,326 |
|
(61 |
) |
(70 |
) |
(263 |
) |
(394 |
) |
|
North America |
38,283 |
|
2,552 |
|
1,186 |
|
42,021 |
|
(29 |
) |
(90 |
) |
(142 |
) |
(261 |
) |
|
Latin America |
5,390 |
|
1,029 |
|
240 |
|
6,659 |
|
(132 |
) |
(299 |
) |
(113 |
) |
(544 |
) |
|
At 31 Dec 2018
|
374,681 |
|
15,075 |
|
4,581 |
|
394,337 |
|
(534 |
) |
(1,265 |
) |
(1,148 |
) |
(2,947 |
) |
|
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution (continued) |
||||||||||||||||
|
|
Nominal amount |
Allowance for ECL |
||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Europe |
52,719 |
|
291 |
|
290 |
|
53,300 |
|
(7 |
) |
- |
|
- |
|
(7 |
) |
|
- of which: UK |
50,195 |
|
224 |
|
285 |
|
50,704 |
|
(5 |
) |
- |
|
- |
|
(5 |
) |
|
Asia |
131,333 |
|
1,034 |
|
1 |
|
132,368 |
|
- |
|
- |
|
- |
|
- |
|
|
- of which: Hong Kong |
102,156 |
|
366 |
|
- |
|
102,522 |
|
- |
|
- |
|
- |
|
- |
|
|
MENA |
3,264 |
|
67 |
|
23 |
|
3,354 |
|
- |
|
- |
|
- |
|
- |
|
|
North America |
14,469 |
|
312 |
|
94 |
|
14,875 |
|
(1 |
) |
(1 |
) |
- |
|
(2 |
) |
|
Latin America |
4,318 |
|
59 |
|
4 |
|
4,381 |
|
(5 |
) |
- |
|
- |
|
(5 |
) |
|
At 31 Dec 2018
|
206,103 |
|
1,763 |
|
412 |
|
208,278 |
|
(13 |
) |
(1 |
) |
- |
|
(14 |
) |
Exposure to UK interest-only mortgage loans
The following information is presented for HSBC branded UK interest-only mortgage loans with balances of $14.6bn. This excludes offset mortgages in the first direct brand, Private Bank mortgages, endowment mortgages and other products.
At the end of 2019, the average LTV ratio in the portfolio was 42%
and 99% of mortgages had an LTV ratio of 75% or less.
Of the interest-only mortgages that expired in 2017, 86% were repaid within 12 months of expiry with a total of 95% being repaid within 24 months of expiry. For interest-only mortgages expiring during 2018, 91% were fully repaid within 12 months of expiry.
The profile of maturing UK interest-only loans is as follows:
|
UK interest-only mortgage loans |
||
|
|
$m |
|
|
Expired interest-only mortgage loans |
158 |
|
|
Interest-only mortgage loans by maturity |
|
|
|
- 2020 |
306 |
|
|
- 2021 |
435 |
|
|
- 2022 |
430 |
|
|
- 2023 |
556 |
|
|
- 2024-2028 |
3,101 |
|
|
- Post 2028 |
9,587 |
|
|
At 31 Dec 2019 |
14,573 |
|
|
Personal lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
|
||||||||||||||||
|
(Audited)
|
|
|
||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
|
|||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||||||
|
|
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
At 1 Jan 2019 |
580,784 |
|
(547 |
) |
16,838 |
|
(1,266 |
) |
4,993 |
|
(1,148 |
) |
602,615 |
|
(2,961 |
) |
|
Transfers of financial instruments |
(4,751 |
) |
(374 |
) |
2,645 |
|
858 |
|
2,106 |
|
(484 |
) |
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
446 |
|
- |
|
(408 |
) |
- |
|
(76 |
) |
- |
|
(38 |
) |
|
Net new and further lending/repayments |
50,946 |
|
3 |
|
(2,348 |
) |
453 |
|
(758 |
) |
281 |
|
47,840 |
|
737 |
|
|
Change in risk parameters - credit quality |
- |
|
(100 |
) |
- |
|
(1,015 |
) |
- |
|
(1,190 |
) |
- |
|
(2,305 |
) |
|
Changes to models used for ECL calculation |
- |
|
(6 |
) |
- |
|
60 |
|
- |
|
14 |
|
- |
|
68 |
|
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(1,345 |
) |
1,345 |
|
(1,345 |
) |
1,345 |
|
|
Foreign exchange and other |
8,982 |
|
(19 |
) |
247 |
|
(20 |
) |
50 |
|
43 |
|
9,279 |
|
4 |
|
|
At 31 Dec 2019 |
635,961 |
|
(597 |
) |
17,382 |
|
(1,338 |
) |
5,046 |
|
(1,215 |
) |
658,389 |
|
(3,150 |
) |
|
ECL income statement change for the period |
|
343 |
|
|
(910 |
) |
|
(971 |
) |
|
(1,538 |
) |
||||
|
Recoveries |
|
|
|
|
|
|
|
314 |
|
|||||||
|
Other |
|
|
|
|
|
|
|
4 |
|
|||||||
|
Total ECL income statement change for the period |
|
|
|
|
|
|
|
(1,220 |
) |
|||||||
As shown in the above table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees increased $189m during the period from $2,961m at 31 December 2018 to $3,150m at 31 December 2019.
This increase was primarily driven by:
• $737m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayments;
• $68m due to changes to models used for ECL calculation;
• $1,345m of assets written off; and
• foreign exchange and other movements of $4m.
These were offset by:
• $2,305m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages; and
• $38m relating to the net remeasurement impact of stage transfers.
The ECL charge for the period of $1,538m presented in the above table consisted of $2,305m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $38m relating to the net remeasurement impact of stage transfers. This was partly offset by $737m relating to underlying net book volume movements and $68m in changes to models used for ECL calculation.
|
Personal lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
|
||||||||||||||||
|
(Audited)
|
||||||||||||||||
|
|
Non-credit impaired |
Credit impaired |
|
|||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
||||||||||||
|
|
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
Gross carrying/ nominal amount |
Allowance for ECL |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
At 1 Jan 2018 |
549,328 |
|
(596 |
) |
17,678 |
|
(1,157 |
) |
4,874 |
|
(1,312 |
) |
571,880 |
|
(3,065 |
) |
|
Transfers of financial instruments |
(4,270 |
) |
(411 |
) |
2,047 |
|
799 |
|
2,223 |
|
(388 |
) |
- |
|
- |
|
|
Net remeasurement of ECL arising from transfer of stage |
- |
|
358 |
|
- |
|
(374 |
) |
- |
|
(11 |
) |
- |
|
(27 |
) |
|
Net new and further lending/repayments |
52,761 |
|
(241 |
) |
(2,453 |
) |
222 |
|
(488 |
) |
327 |
|
49,820 |
|
308 |
|
|
Changes to risk parameters - credit quality |
- |
|
266 |
|
- |
|
(786 |
) |
- |
|
(1,197 |
) |
- |
|
(1,717 |
) |
|
Assets written off |
- |
|
- |
|
- |
|
- |
|
(1,386 |
) |
1,380 |
|
(1,386 |
) |
1,380 |
|
|
Foreign exchange and other |
(17,035 |
) |
77 |
|
(434 |
) |
30 |
|
(230 |
) |
53 |
|
(17,699 |
) |
160 |
|
|
At 31 Dec 2018 |
580,784 |
|
(547 |
) |
16,838 |
|
(1,266 |
) |
4,993 |
|
(1,148 |
) |
602,615 |
|
(2,961 |
) |
|
ECL income statement change for the period |
|
383 |
|
|
(938 |
) |
|
(881 |
) |
|
(1,436 |
) |
||||
|
Recoveries |
|
|
|
|
|
|
|
290 |
|
|||||||
|
Others |
|
|
|
|
|
|
|
(18 |
) |
|||||||
|
Total ECL income statement change for the period
|
|
|
|
|
|
|
|
(1,164 |
) |
|||||||
|
Personal lending - credit risk profile by internal PD band for loans and advances to customers at amortised cost |
|||||||||||||||||||
|
|
|
Gross carrying amount |
|
Allowance for ECL |
|
||||||||||||||
|
|
PD range1 |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
ECL coverage |
|||||||||
|
|
% |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
% |
|||||||||
|
First lien residential mortgages |
|
312,031 |
|
7,077 |
|
3,070 |
|
322,178 |
|
(39 |
) |
(68 |
) |
(422 |
) |
(529 |
) |
0.2 |
|
|
- Band 1 |
0.000 to 0.250 |
268,490 |
|
284 |
|
- |
|
268,774 |
|
(16 |
) |
- |
|
- |
|
(16 |
) |
- |
|
|
- Band 2 |
0.251 to 0.500 |
22,293 |
|
301 |
|
- |
|
22,594 |
|
(4 |
) |
- |
|
- |
|
(4 |
) |
- |
|
|
- Band 3 |
0.501 to 1.500 |
17,247 |
|
2,313 |
|
- |
|
19,560 |
|
(13 |
) |
(3 |
) |
- |
|
(16 |
) |
0.1 |
|
|
- Band 4 |
1.501 to 5.000 |
3,796 |
|
1,970 |
|
- |
|
5,766 |
|
(5 |
) |
(7 |
) |
- |
|
(12 |
) |
0.2 |
|
|
- Band 5 |
5.001 to 20.000 |
198 |
|
1,383 |
|
- |
|
1,581 |
|
(1 |
) |
(23 |
) |
- |
|
(24 |
) |
1.5 |
|
|
- Band 6 |
20.001 to 99.999 |
7 |
|
826 |
|
- |
|
833 |
|
- |
|
(35 |
) |
- |
|
(35 |
) |
4.2 |
|
|
- Band 7 |
100.000 |
- |
|
- |
|
3,070 |
|
3,070 |
|
- |
|
- |
|
(422 |
) |
(422 |
) |
13.7 |
|
|
Other personal lending |
|
101,638 |
|
8,674 |
|
1,781 |
|
112,093 |
|
(544 |
) |
(1,268 |
) |
(793 |
) |
(2,605 |
) |
2.3 |
|
|
- Band 1 |
0.000 to 0.250 |
46,533 |
|
60 |
|
- |
|
46,593 |
|
(120 |
) |
- |
|
- |
|
(120 |
) |
0.3 |
|
|
- Band 2 |
0.251 to 0.500 |
16,435 |
|
65 |
|
- |
|
16,500 |
|
(38 |
) |
(26 |
) |
- |
|
(64 |
) |
0.4 |
|
|
- Band 3 |
0.501 to 1.500 |
25,160 |
|
317 |
|
- |
|
25,477 |
|
(110 |
) |
(13 |
) |
- |
|
(123 |
) |
0.5 |
|
|
- Band 4 |
1.501 to 5.000 |
10,951 |
|
3,483 |
|
- |
|
14,434 |
|
(144 |
) |
(329 |
) |
- |
|
(473 |
) |
3.3 |
|
|
- Band 5 |
5.001 to 20.000 |
2,421 |
|
3,434 |
|
- |
|
5,855 |
|
(132 |
) |
(440 |
) |
- |
|
(572 |
) |
9.8 |
|
|
- Band 6 |
20.001 to 99.999 |
138 |
|
1,315 |
|
- |
|
1,453 |
|
- |
|
(460 |
) |
- |
|
(460 |
) |
31.7 |
|
|
- Band 7 |
100.000 |
- |
|
- |
|
1,781 |
|
1,781 |
|
- |
|
- |
|
(793 |
) |
(793 |
) |
44.5 |
|
|
At 31 Dec 2019 |
|
413,669 |
|
15,751 |
|
4,851 |
|
434,271 |
|
(583 |
) |
(1,336 |
) |
(1,215 |
) |
(3,134 |
) |
0.7 |
|
|
First lien residential mortgages |
|
284,103 |
|
6,286 |
|
2,944 |
|
293,333 |
|
(41 |
) |
(62 |
) |
(432 |
) |
(535 |
) |
0.2 |
|
|
- Band 1 |
0.000 to 0.250 |
247,046 |
|
308 |
|
- |
|
247,354 |
|
(15 |
) |
- |
|
- |
|
(15 |
) |
- |
|
|
- Band 2 |
0.251 to 0.500 |
15,458 |
|
78 |
|
- |
|
15,536 |
|
(4 |
) |
- |
|
- |
|
(4 |
) |
- |
|
|
- Band 3 |
0.501 to 1.500 |
17,987 |
|
1,881 |
|
- |
|
19,868 |
|
(14 |
) |
(2 |
) |
- |
|
(16 |
) |
0.1 |
|
|
- Band 4 |
1.501 to 5.000 |
3,295 |
|
1,575 |
|
- |
|
4,870 |
|
(7 |
) |
(6 |
) |
- |
|
(13 |
) |
0.3 |
|
|
- Band 5 |
5.001 to 20.000 |
301 |
|
1,445 |
|
- |
|
1,746 |
|
(1 |
) |
(19 |
) |
- |
|
(20 |
) |
1.1 |
|
|
- Band 6 |
20.001 to 99.999 |
16 |
|
999 |
|
- |
|
1,015 |
|
- |
|
(35 |
) |
- |
|
(35 |
) |
3.4 |
|
|
- Band 7 |
100.000 |
- |
|
- |
|
2,944 |
|
2,944 |
|
- |
|
- |
|
(432 |
) |
(432 |
) |
14.7 |
|
|
Other personal lending |
|
90,578 |
|
8,789 |
|
1,637 |
|
101,004 |
|
(493 |
) |
(1,203 |
) |
(716 |
) |
(2,412 |
) |
2.4 |
|
|
- Band 1 |
0.000 to 0.250 |
41,048 |
|
38 |
|
- |
|
41,086 |
|
(95 |
) |
- |
|
- |
|
(95 |
) |
0.2 |
|
|
- Band 2 |
0.251 to 0.500 |
12,524 |
|
116 |
|
- |
|
12,640 |
|
(34 |
) |
- |
|
- |
|
(34 |
) |
0.3 |
|
|
- Band 3 |
0.501 to 1.500 |
23,573 |
|
323 |
|
- |
|
23,896 |
|
(122 |
) |
(26 |
) |
- |
|
(148 |
) |
0.6 |
|
|
- Band 4 |
1.501 to 5.000 |
11,270 |
|
3,089 |
|
- |
|
14,359 |
|
(131 |
) |
(285 |
) |
- |
|
(416 |
) |
2.9 |
|
|
- Band 5 |
5.001 to 20.000 |
2,158 |
|
4,061 |
|
- |
|
6,219 |
|
(111 |
) |
(465 |
) |
- |
|
(576 |
) |
9.3 |
|
|
- Band 6 |
20.001 to 99.999 |
5 |
|
1,162 |
|
- |
|
1,167 |
|
- |
|
(427 |
) |
- |
|
(427 |
) |
36.6 |
|
|
- Band 7 |
100.000 |
- |
|
- |
|
1,637 |
|
1,637 |
|
- |
|
- |
|
(716 |
) |
(716 |
) |
43.7 |
|
|
At 31 Dec 2018 |
|
374,681 |
|
15,075 |
|
4,581 |
|
394,337 |
|
(534 |
) |
(1,265 |
) |
(1,148 |
) |
(2,947 |
) |
0.7 |
|
1 12-month point in time adjusted for multiple economic scenarios.
Collateral on loans and advances
(Audited)
The following table provides a quantification of the value of fixed charges we hold over specific assets where we have a history of enforcing, and are able to enforce, collateral in satisfying a debt in the event of the borrower failing to meet its contractual obligations, and where the collateral is cash or can be realised by
sale in an established market. The collateral valuation excludes any adjustments for obtaining and selling the collateral and, in particular, loans shown as not collateralised or partially collateralised may also benefit from other forms of credit mitigants.
|
Personal lending - residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
326,510 |
|
- |
|
143,772 |
|
- |
|
86,049 |
|
- |
|
16,079 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
168,923 |
|
- |
|
70,315 |
|
- |
|
57,043 |
|
- |
|
8,170 |
|
- |
|
|
- 51% to 60% |
55,287 |
|
- |
|
21,898 |
|
- |
|
13,169 |
|
- |
|
3,330 |
|
- |
|
|
- 61% to 70% |
44,208 |
|
- |
|
19,903 |
|
- |
|
6,478 |
|
- |
|
2,702 |
|
- |
|
|
- 71% to 80% |
33,049 |
|
- |
|
17,649 |
|
- |
|
3,195 |
|
- |
|
1,610 |
|
- |
|
|
- 81% to 90% |
18,157 |
|
- |
|
11,127 |
|
- |
|
3,685 |
|
- |
|
198 |
|
- |
|
|
- 91% to 100% |
6,886 |
|
- |
|
2,880 |
|
- |
|
2,479 |
|
- |
|
69 |
|
- |
|
|
Partially collateralised (A): |
1,384 |
|
0.1 |
326 |
|
- |
|
284 |
|
- |
|
5 |
|
- |
|
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
843 |
|
0.1 |
89 |
|
- |
|
281 |
|
- |
|
3 |
|
- |
|
|
|
- 111% to 120% |
195 |
|
0.2 |
48 |
|
- |
|
1 |
|
- |
|
1 |
|
- |
|
|
|
- greater than 120% |
346 |
|
0.1 |
189 |
|
- |
|
2 |
|
- |
|
1 |
|
- |
|
|
|
- collateral value on A |
1,232 |
|
|
232 |
|
|
279 |
|
|
5 |
|
|
||||
|
Total |
327,894 |
|
- |
|
144,098 |
|
- |
|
86,333 |
|
- |
|
16,084 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
7,087 |
|
0.9 |
1,941 |
|
1.0 |
1,116 |
|
- |
|
1,074 |
|
0.3 |
|||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
3,781 |
|
0.5 |
1,146 |
|
0.7 |
892 |
|
- |
|
680 |
|
0.2 |
|||
|
- 51% to 60% |
923 |
|
1.1 |
233 |
|
1.5 |
95 |
|
- |
|
184 |
|
0.3 |
|||
|
- 61% to 70% |
909 |
|
1.2 |
262 |
|
1.2 |
59 |
|
- |
|
130 |
|
0.6 |
|||
|
- 71% to 80% |
894 |
|
1.1 |
231 |
|
1.0 |
32 |
|
- |
|
53 |
|
1.3 |
|||
|
- 81% to 90% |
425 |
|
1.6 |
36 |
|
2.9 |
25 |
|
- |
|
17 |
|
2.7 |
|||
|
- 91% to 100% |
155 |
|
4.4 |
33 |
|
1.8 |
13 |
|
- |
|
10 |
|
1.1 |
|||
|
Partially collateralised (B): |
76 |
|
7.2 |
23 |
|
1.8 |
1 |
|
- |
|
4 |
|
- |
|
||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
45 |
|
5.4 |
20 |
|
1.5 |
1 |
|
- |
|
2 |
|
- |
|
||
|
- 111% to 120% |
10 |
|
11.1 |
1 |
|
4.8 |
- |
|
- |
|
1 |
|
- |
|
||
|
- greater than 120% |
21 |
|
9.0 |
2 |
|
3.0 |
- |
|
- |
|
1 |
|
- |
|
||
|
- collateral value on B |
69 |
|
|
20 |
|
|
1 |
|
|
3 |
|
|
||||
|
Total |
7,163 |
|
1.0 |
1,964 |
|
1.0 |
1,117 |
|
- |
|
1,078 |
|
0.3 |
|||
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
2,725 |
|
9.0 |
1,177 |
|
9.9 |
44 |
0.5 |
|
695 |
|
0.7 |
||||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
1,337 |
|
7.1 |
711 |
|
7.8 |
39 |
|
0.5 |
|
279 |
|
0.7 |
|||
|
- 51% to 60% |
410 |
|
7.0 |
159 |
|
10.0 |
3 |
|
0.2 |
|
126 |
|
0.8 |
|||
|
- 61% to 70% |
358 |
|
7.9 |
136 |
|
10.6 |
- |
|
- |
|
125 |
|
0.8 |
|||
|
- 71% to 80% |
309 |
|
13.4 |
100 |
|
18.9 |
1 |
|
- |
|
93 |
|
1.1 |
|||
|
- 81% to 90% |
178 |
|
13.8 |
47 |
|
12.3 |
1 |
|
- |
|
51 |
|
- |
|
||
|
- 91% to 100% |
133 |
|
21.8 |
24 |
|
26.3 |
- |
|
- |
|
21 |
|
- |
|
||
|
Partially collateralised (C): |
371 |
|
47.6 |
25 |
|
27.3 |
- |
|
- |
|
13 |
|
0.2 |
|||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
97 |
|
36.4 |
11 |
|
19.1 |
- |
|
- |
|
7 |
|
0.3 |
|||
|
- 111% to 120% |
62 |
|
37.8 |
6 |
|
22.7 |
- |
|
- |
|
2 |
|
0.3 |
|||
|
- greater than 120% |
212 |
|
55.6 |
8 |
|
42.0 |
- |
|
- |
|
4 |
|
- |
|
||
|
- collateral value on C |
305 |
|
|
24 |
|
|
- |
|
|
13 |
|
|
||||
|
Total |
3,096 |
|
13.7 |
1,202 |
|
10.3 |
44 |
0.5 |
|
708 |
|
0.7 |
||||
|
At 31 Dec 2019 |
338,153 |
|
0.2 |
147,264 |
|
0.1 |
87,494 |
|
- |
|
17,870 |
|
0.1 |
|||
|
Personal lending - residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage (continued) |
||||||||||||||||
|
(Audited) |
||||||||||||||||
|
|
|
|
Of which: |
|||||||||||||
|
|
Total |
UK |
Hong Kong |
US |
||||||||||||
|
|
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
Gross carrying/nominal amount |
ECL coverage |
||||||||
|
|
$m |
% |
$m |
% |
$m |
% |
$m |
% |
||||||||
|
Stage 1 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
299,072 |
|
- |
|
130,646 |
|
- |
|
79,180 |
|
- |
|
15,321 |
|
- |
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
160,563 |
|
- |
|
66,834 |
|
- |
|
54,262 |
|
- |
|
8,060 |
|
- |
|
|
- 51% to 60% |
51,415 |
|
- |
|
20,937 |
|
- |
|
11,591 |
|
- |
|
3,382 |
|
- |
|
|
- 61% to 70% |
40,273 |
|
- |
|
17,480 |
|
- |
|
5,979 |
|
- |
|
2,473 |
|
- |
|
|
- 71% to 80% |
28,383 |
|
- |
|
15,086 |
|
- |
|
2,986 |
|
- |
|
1,113 |
|
- |
|
|
- 81% to 90% |
14,191 |
|
- |
|
8,824 |
|
- |
|
2,637 |
|
- |
|
158 |
|
- |
|
|
- 91% to 100% |
4,247 |
|
0.1 |
1,485 |
|
- |
|
1,725 |
|
- |
|
135 |
|
- |
|
|
|
Partially collateralised (A): |
1,420 |
|
0.1 |
581 |
|
- |
|
300 |
|
- |
|
10 |
|
- |
|
|
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
808 |
|
0.1 |
334 |
|
- |
|
256 |
|
- |
|
5 |
|
- |
|
|
|
- 111% to 120% |
184 |
|
0.2 |
46 |
|
- |
|
41 |
|
- |
|
2 |
|
- |
|
|
|
- greater than 120% |
428 |
|
0.2 |
201 |
|
- |
|
3 |
|
- |
|
3 |
|
- |
|
|
|
- collateral value on A |
1,266 |
|
|
493 |
|
|
284 |
|
|
8 |
|
|
||||
|
Total |
300,492 |
|
- |
|
131,227 |
|
- |
|
79,480 |
|
- |
|
15,331 |
|
- |
|
|
Stage 2 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
6,170 |
|
1.0 |
1,234 |
|
1.3 |
867 |
|
- |
|
1,435 |
|
0.3 |
|||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
3,334 |
|
0.7 |
917 |
|
0.9 |
699 |
|
- |
|
814 |
|
0.1 |
|||
|
- 51% to 60% |
932 |
|
1.1 |
113 |
|
3.0 |
74 |
|
- |
|
268 |
|
0.4 |
|||
|
- 61% to 70% |
853 |
|
1.0 |
105 |
|
2.2 |
43 |
|
- |
|
231 |
|
0.3 |
|||
|
- 71% to 80% |
586 |
|
1.3 |
39 |
|
3.4 |
28 |
|
- |
|
79 |
|
0.9 |
|||
|
- 81% to 90% |
331 |
|
1.7 |
27 |
|
3.1 |
20 |
|
- |
|
32 |
|
1.6 |
|||
|
- 91% to 100% |
134 |
|
2.4 |
33 |
|
1.5 |
3 |
|
- |
|
11 |
|
0.8 |
|||
|
Partially collateralised (B): |
123 |
|
2.9 |
46 |
|
0.2 |
1 |
|
- |
|
5 |
|
0.3 |
|||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
76 |
|
1.5 |
44 |
|
0.1 |
1 |
|
- |
|
3 |
|
0.5 |
|||
|
- 111% to 120% |
17 |
|
4.5 |
1 |
|
4.3 |
- |
|
- |
|
1 |
|
- |
|
||
|
- greater than 120% |
30 |
|
5.3 |
1 |
|
0.6 |
- |
|
- |
|
1 |
|
- |
|
||
|
- collateral value on B |
118 |
|
|
44 |
|
|
1 |
|
|
4 |
|
|
||||
|
Total |
6,293 |
|
1.0 |
1,280 |
|
1.3 |
868 |
|
- |
|
1,440 |
|
0.3 |
|||
|
Stage 3 |
|
|
|
|
|
|
|
|
||||||||
|
Fully collateralised |
2,557 |
|
12.3 |
1,023 |
|
10.9 |
25 |
|
0.9 |
671 |
|
1.0 |
||||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- less than 50% |
1,255 |
|
13.6 |
638 |
|
7.8 |
24 |
|
0.9 |
219 |
|
0.9 |
||||
|
- 51% to 60% |
359 |
|
8.3 |
151 |
|
11.3 |
1 |
|
- |
|
107 |
|
0.9 |
|||
|
- 61% to 70% |
336 |
|
12.0 |
119 |
|
18.4 |
- |
|
- |
|
105 |
|
1.0 |
|||
|
- 71% to 80% |
280 |
|
9.9 |
70 |
|
14.8 |
- |
|
- |
|
114 |
|
0.9 |
|||
|
- 81% to 90% |
190 |
|
9.4 |
33 |
|
19.4 |
- |
|
- |
|
81 |
|
1.2 |
|||
|
- 91% to 100% |
137 |
|
19.8 |
12 |
|
45.9 |
- |
|
- |
|
45 |
|
2.2 |
|||
|
Partially collateralised (C): |
391 |
|
33.6 |
23 |
|
15.8 |
- |
|
- |
|
24 |
|
0.4 |
|||
|
LTV ratio: |
|
|
|
|
|
|
|
|
||||||||
|
- 101% to 110% |
73 |
|
17.4 |
10 |
|
14.3 |
- |
|
- |
|
14 |
|
0.6 |
|||
|
- 111% to 120% |
68 |
|
24.2 |
5 |
|
26.4 |
- |
|
- |
|
6 |
|
0.3 |
|||
|
- greater than 120% |
250 |
|
40.8 |
8 |
|
11.1 |
- |
|
- |
|
4 |
|
0.2 |
|||
|
- collateral value on C |
372 |
|
|
20 |
|
|
- |
|
|
22 |
|
|
||||
|
Total |
2,948 |
|
15.1 |
1,046 |
|
11.0 |
25 |
|
0.9 |
695 |
|
1.0 |
||||
|
At 31 Dec 2018 |
309,733 |
|
0.2 |
133,553 |
|
0.1 |
80,373 |
|
- |
|
17,466 |
|
0.1 |
|||
Supplementary information
|
Wholesale lending - loans and advances to customers at amortised cost by country/territory |
||||||||||||||||
|
|
Gross carrying amount |
Allowance for ECL |
||||||||||||||
|
|
Corporate and commercial |
Of which: real estate1 |
Non-bank financial institutions |
Total |
Corporate and commercial |
Of which: real estate1 |
Non-bank financial institutions |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Europe |
175,215 |
|
26,587 |
|
26,497 |
|
201,712 |
|
(2,304 |
) |
(354 |
) |
(81 |
) |
(2,385 |
) |
|
- UK |
126,760 |
|
18,941 |
|
18,545 |
|
145,305 |
|
(1,629 |
) |
(303 |
) |
(26 |
) |
(1,655 |
) |
|
- France |
27,885 |
|
5,643 |
|
4,899 |
|
32,784 |
|
(423 |
) |
(28 |
) |
(52 |
) |
(475 |
) |
|
- Germany |
9,771 |
|
390 |
|
1,743 |
|
11,514 |
|
(60 |
) |
- |
|
- |
|
(60 |
) |
|
- Switzerland |
1,535 |
|
554 |
|
406 |
|
1,941 |
|
(1 |
) |
- |
|
- |
|
(1 |
) |
|
- other |
9,264 |
|
1,059 |
|
904 |
|
10,168 |
|
(191 |
) |
(23 |
) |
(3 |
) |
(194 |
) |
|
Asia |
267,709 |
|
85,556 |
|
32,157 |
|
299,866 |
|
(1,449 |
) |
(94 |
) |
(52 |
) |
(1,501 |
) |
|
- Hong Kong |
168,380 |
|
67,856 |
|
19,776 |
|
188,156 |
|
(750 |
) |
(51 |
) |
(40 |
) |
(790 |
) |
|
- Australia |
11,428 |
|
1,993 |
|
1,743 |
|
13,171 |
|
(70 |
) |
(3 |
) |
- |
|
(70 |
) |
|
- India |
6,657 |
|
1,565 |
|
2,622 |
|
9,279 |
|
(49 |
) |
(3 |
) |
(1 |
) |
(50 |
) |
|
- Indonesia |
4,346 |
|
63 |
|
353 |
|
4,699 |
|
(222 |
) |
(1 |
) |
(2 |
) |
(224 |
) |
|
- mainland China |
26,594 |
|
5,304 |
|
5,911 |
|
32,505 |
|
(198 |
) |
(29 |
) |
(8 |
) |
(206 |
) |
|
- Malaysia |
6,914 |
|
1,597 |
|
230 |
|
7,144 |
|
(40 |
) |
(2 |
) |
- |
|
(40 |
) |
|
- Singapore |
19,986 |
|
5,235 |
|
618 |
|
20,604 |
|
(60 |
) |
(2 |
) |
- |
|
(60 |
) |
|
- Taiwan |
6,384 |
|
28 |
|
82 |
|
6,466 |
|
(2 |
) |
- |
|
- |
|
(2 |
) |
|
- other |
17,020 |
|
1,915 |
|
822 |
|
17,842 |
|
(58 |
) |
(3 |
) |
(1 |
) |
(59 |
) |
|
Middle East and North Africa (excluding Saudi Arabia) |
23,447 |
|
1,816 |
|
288 |
|
23,735 |
|
(1,087 |
) |
(181 |
) |
(13 |
) |
(1,100 |
) |
|
- Egypt |
1,889 |
|
35 |
|
16 |
|
1,905 |
|
(132 |
) |
- |
|
(3 |
) |
(135 |
) |
|
- UAE |
13,697 |
|
1,695 |
|
122 |
|
13,819 |
|
(683 |
) |
(179 |
) |
(7 |
) |
(690 |
) |
|
- other |
7,861 |
|
86 |
|
150 |
|
8,011 |
|
(272 |
) |
(2 |
) |
(3 |
) |
(275 |
) |
|
North America |
59,680 |
|
15,128 |
|
10,078 |
|
69,758 |
|
(274 |
) |
(43 |
) |
(11 |
) |
(285 |
) |
|
- US |
34,477 |
|
8,282 |
|
8,975 |
|
43,452 |
|
(116 |
) |
(14 |
) |
(2 |
) |
(118 |
) |
|
- Canada |
24,427 |
|
6,556 |
|
979 |
|
25,406 |
|
(136 |
) |
(10 |
) |
(4 |
) |
(140 |
) |
|
- other |
776 |
|
290 |
|
124 |
|
900 |
|
(22 |
) |
(19 |
) |
(5 |
) |
(27 |
) |
|
Latin America |
14,448 |
|
1,665 |
|
1,685 |
|
16,133 |
|
(324 |
) |
(8 |
) |
(3 |
) |
(327 |
) |
|
- Mexico |
12,352 |
|
1,664 |
|
1,625 |
|
13,977 |
|
(221 |
) |
(8 |
) |
(3 |
) |
(224 |
) |
|
- other |
2,096 |
|
1 |
|
60 |
|
2,156 |
|
(103 |
) |
- |
|
- |
|
(103 |
) |
|
At 31 Dec 2019 |
540,499 |
|
130,752 |
|
70,705 |
|
611,204 |
|
(5,438 |
) |
(680 |
) |
(160 |
) |
(5,598 |
) |
|
Europe |
176,577 |
|
25,715 |
|
22,529 |
|
199,106 |
|
(2,507 |
) |
(481 |
) |
(82 |
) |
(2,589 |
) |
|
- UK |
127,093 |
|
18,384 |
|
17,703 |
|
144,796 |
|
(1,701 |
) |
(410 |
) |
(78 |
) |
(1,779 |
) |
|
- France |
28,204 |
|
5,890 |
|
2,488 |
|
30,692 |
|
(405 |
) |
(36 |
) |
(1 |
) |
(406 |
) |
|
- Germany |
10,454 |
|
246 |
|
1,371 |
|
11,825 |
|
(35 |
) |
- |
|
- |
|
(35 |
) |
|
- Switzerland |
1,674 |
|
509 |
|
348 |
|
2,022 |
|
(1 |
) |
- |
|
- |
|
(1 |
) |
|
- other |
9,152 |
|
686 |
|
619 |
|
9,771 |
|
(365 |
) |
(35 |
) |
(3 |
) |
(368 |
) |
|
Asia |
263,608 |
|
79,941 |
|
27,284 |
|
290,892 |
|
(1,343 |
) |
(67 |
) |
(31 |
) |
(1,374 |
) |
|
- Hong Kong |
168,621 |
|
63,287 |
|
15,062 |
|
183,683 |
|
(579 |
) |
(40 |
) |
(20 |
) |
(599 |
) |
|
- Australia |
11,335 |
|
2,323 |
|
2,115 |
|
13,450 |
|
(68 |
) |
(3 |
) |
- |
|
(68 |
) |
|
- India |
6,396 |
|
1,408 |
|
2,846 |
|
9,242 |
|
(77 |
) |
(4 |
) |
(1 |
) |
(78 |
) |
|
- Indonesia |
4,286 |
|
35 |
|
354 |
|
4,640 |
|
(269 |
) |
- |
|
(2 |
) |
(271 |
) |
|
- mainland China |
24,225 |
|
4,423 |
|
5,146 |
|
29,371 |
|
(172 |
) |
(15 |
) |
(6 |
) |
(178 |
) |
|
- Malaysia |
7,924 |
|
1,649 |
|
274 |
|
8,198 |
|
(77 |
) |
(2 |
) |
- |
|
(77 |
) |
|
- Singapore |
17,564 |
|
4,463 |
|
431 |
|
17,995 |
|
(31 |
) |
(2 |
) |
- |
|
(31 |
) |
|
- Taiwan |
6,008 |
|
23 |
|
156 |
|
6,164 |
|
(2 |
) |
- |
|
- |
|
(2 |
) |
|
- other |
17,249 |
|
2,330 |
|
900 |
|
18,149 |
|
(68 |
) |
(1 |
) |
(2 |
) |
(70 |
) |
|
Middle East and North Africa (excluding Saudi Arabia) |
23,738 |
|
2,025 |
|
322 |
|
24,060 |
|
(1,167 |
) |
(178 |
) |
(1 |
) |
(1,168 |
) |
|
- Egypt |
1,746 |
|
41 |
|
- |
|
1,746 |
|
(125 |
) |
- |
|
- |
|
(125 |
) |
|
- UAE |
14,445 |
|
1,849 |
|
206 |
|
14,651 |
|
(721 |
) |
(176 |
) |
(1 |
) |
(722 |
) |
|
- other |
7,547 |
|
135 |
|
116 |
|
7,663 |
|
(321 |
) |
(2 |
) |
- |
|
(321 |
) |
|
North America |
56,983 |
|
14,169 |
|
9,647 |
|
66,630 |
|
(236 |
) |
(37 |
) |
(8 |
) |
(244 |
) |
|
- US |
35,714 |
|
8,422 |
|
8,777 |
|
44,491 |
|
(103 |
) |
(8 |
) |
(2 |
) |
(105 |
) |
|
- Canada |
20,493 |
|
5,354 |
|
770 |
|
21,263 |
|
(105 |
) |
(5 |
) |
(2 |
) |
(107 |
) |
|
- other |
776 |
|
393 |
|
100 |
|
876 |
|
(28 |
) |
(24 |
) |
(4 |
) |
(32 |
) |
|
Latin America |
13,671 |
|
1,383 |
|
1,625 |
|
15,296 |
|
(299 |
) |
(8 |
) |
(4 |
) |
(303 |
) |
|
- Mexico |
11,302 |
|
1,354 |
|
1,567 |
|
12,869 |
|
(225 |
) |
(8 |
) |
(4 |
) |
(229 |
) |
|
- other |
2,369 |
|
29 |
|
58 |
|
2,427 |
|
(74 |
) |
- |
|
- |
|
(74 |
) |
|
At 31 Dec 2018 |
534,577 |
|
123,233 |
|
61,407 |
|
595,984 |
|
(5,552 |
) |
(771 |
) |
(126 |
) |
(5,678 |
) |
1 Real estate lending within this disclosure corresponds solely to the industry of the borrower. Commercial real estate on page 111 includes borrowers in multiple industries investing in income-producing assets and to a lesser extent, their construction and development.
|
Personal lending - loans and advances to customers at amortised cost by country/territory |
||||||||||||||||
|
|
Gross carrying amount |
Allowance for ECL |
||||||||||||||
|
|
First lien residential mortgages |
Other personal |
Of which: credit cards |
Total |
First lien residential mortgages |
Other personal |
Of which: credit cards |
Total |
||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||
|
Europe |
145,382 |
|
50,368 |
|
10,246 |
|
195,750 |
|
(266 |
) |
(962 |
) |
(438 |
) |
(1,228 |
) |
|
- UK |
137,985 |
|
22,395 |
|
9,816 |
|
160,380 |
|
(159 |
) |
(828 |
) |
(434 |
) |
(987 |
) |
|
- France |
3,520 |
|
21,120 |
|
376 |
|
24,640 |
|
(39 |
) |
(101 |
) |
(3 |
) |
(140 |
) |
|
- Germany |
- |
|
325 |
|
- |
|
325 |
|
- |
|
- |
|
- |
|
- |
|
|
- Switzerland |
1,183 |
|
6,165 |
|
- |
|
7,348 |
|
(6 |
) |
(17 |
) |
- |
|
(23 |
) |
|
- other |
2,694 |
|
363 |
|
54 |
|
3,057 |
|
(62 |
) |
(16 |
) |
(1 |
) |
(78 |
) |
|
Asia |
131,864 |
|
48,231 |
|
12,144 |
|
180,095 |
|
(42 |
) |
(690 |
) |
(463 |
) |
(732 |
) |
|
- Hong Kong |
86,892 |
|
33,061 |
|
8,043 |
|
119,953 |
|
(1 |
) |
(353 |
) |
(242 |
) |
(354 |
) |
|
- Australia |
16,997 |
|
693 |
|
603 |
|
17,690 |
|
(5 |
) |
(34 |
) |
(33 |
) |
(39 |
) |
|
- India |
1,047 |
|
528 |
|
219 |
|
1,575 |
|
(5 |
) |
(21 |
) |
(15 |
) |
(26 |
) |
|
- Indonesia |
67 |
|
329 |
|
204 |
|
396 |
|
- |
|
(24 |
) |
(18 |
) |
(24 |
) |
|
- mainland China |
8,966 |
|
1,190 |
|
656 |
|
10,156 |
|
(2 |
) |
(74 |
) |
(68 |
) |
(76 |
) |
|
- Malaysia |
2,840 |
|
3,200 |
|
980 |
|
6,040 |
|
(22 |
) |
(73 |
) |
(33 |
) |
(95 |
) |
|
- Singapore |
6,687 |
|
7,033 |
|
452 |
|
13,720 |
|
(1 |
) |
(60 |
) |
(19 |
) |
(61 |
) |
|
- Taiwan |
5,286 |
|
1,004 |
|
297 |
|
6,290 |
|
0 |
|
(14 |
) |
(4 |
) |
(14 |
) |
|
- other |
3,082 |
|
1,193 |
|
690 |
|
4,275 |
|
(6 |
) |
(37 |
) |
(31 |
) |
(43 |
) |
|
Middle East and North Africa (excluding Saudi Arabia) |
2,303 |
|
3,914 |
|
1,042 |
|
6,217 |
|
(62 |
) |
(235 |
) |
(111 |
) |
(297 |
) |
|
- Egypt |
- |
|
346 |
|
88 |
|
346 |
|
- |
|
(3 |
) |
(1 |
) |
(3 |
) |
|
- UAE |
1,920 |
|
1,462 |
|
517 |
|
3,382 |
|
(59 |
) |
(121 |
) |
(54 |
) |
(180 |
) |
|
- other |
383 |
|
2,106 |
|
437 |
|
2,489 |
|
(3 |
) |
(111 |
) |
(56 |
) |
(114 |
) |
|
North America |
39,065 |
|
5,251 |
|
1,742 |
|
44,316 |
|
(122 |
) |
(194 |
) |
(142 |
) |
(316 |
) |
|
- US |
17,870 |
|
2,551 |
|
1,424 |
|
20,421 |
|
(8 |
) |
(160 |
) |
(134 |
) |
(168 |
) |
|
- Canada |
19,997 |
|
2,495 |
|
271 |
|
22,492 |
|
(21 |
) |
(25 |
) |
(7 |
) |
(46 |
) |
|
- other |
1,198 |
|
205 |
|
47 |
|
1,403 |
|
(93 |
) |
(9 |
) |
(1 |
) |
(102 |
) |
|
Latin America |
3,564 |
|
4,329 |
|
1,594 |
|
7,893 |
|
(37 |
) |
(524 |
) |
(241 |
) |
(561 |
) |
|
- Mexico |
3,419 |
|
3,780 |
|
1,308 |
|
7,199 |
|
(31 |
) |
(488 |
) |
(224 |
) |
(519 |
) |
|
- other |
145 |
|
549 |
|
286 |
|
694 |
|
(6 |
) |
(36 |
) |
(17 |
) |
(42 |
) |
|
At 31 Dec 2019 |
322,178 |
|
112,093 |
|
26,768 |
|
434,271 |
|
(529 |
) |
(2,605 |
) |
(1,395 |
) |
(3,134 |
) |
|
Europe |
131,557 |
|
46,007 |
|
9,790 |
|
177,564 |
|
(258 |
) |
(750 |
) |
(313 |
) |
(1,008 |
) |
|
- UK |
124,357 |
|
20,503 |
|
9,356 |
|
144,860 |
|
(141 |
) |
(592 |
) |
(309 |
) |
(733 |
) |
|
- France |
3,454 |
|
19,616 |
|
376 |
|
23,070 |
|
(43 |
) |
(114 |
) |
(4 |
) |
(157 |
) |
|
- Germany |
- |
|
288 |
|
- |
|
288 |
|
- |
|
- |
|
- |
|
- |
|
|
- Switzerland |
1,120 |
|
5,213 |
|
- |
|
6,333 |
|
(2 |
) |
(19 |
) |
- |
|
(21 |
) |
|
- other |
2,626 |
|
387 |
|
58 |
|
3,013 |
|
(72 |
) |
(25 |
) |
- |
|
(97 |
) |
|
Asia |
119,718 |
|
42,049 |
|
11,900 |
|
161,767 |
|
(44 |
) |
(696 |
) |
(465 |
) |
(740 |
) |
|
- Hong Kong |
79,059 |
|
28,734 |
|
8,124 |
|
107,793 |
|
(1 |
) |
(329 |
) |
(228 |
) |
(330 |
) |
|
- Australia |
13,858 |
|
764 |
|
626 |
|
14,622 |
|
(5 |
) |
(55 |
) |
(54 |
) |
(60 |
) |
|
- India |
1,030 |
|
608 |
|
228 |
|
1,638 |
|
(5 |
) |
(20 |
) |
(14 |
) |
(25 |
) |
|
- Indonesia |
59 |
|
279 |
|
206 |
|
338 |
|
- |
|
(34 |
) |
(27 |
) |
(34 |
) |
|
- mainland China |
8,706 |
|
1,139 |
|
502 |
|
9,845 |
|
(2 |
) |
(57 |
) |
(50 |
) |
(59 |
) |
|
- Malaysia |
2,890 |
|
3,209 |
|
888 |
|
6,099 |
|
(24 |
) |
(71 |
) |
(33 |
) |
(95 |
) |
|
- Singapore |
5,991 |
|
5,353 |
|
434 |
|
11,344 |
|
- |
|
(70 |
) |
(21 |
) |
(70 |
) |
|
- Taiwan |
5,123 |
|
860 |
|
289 |
|
5,983 |
|
(1 |
) |
(20 |
) |
(5 |
) |
(21 |
) |
|
- other |
3,002 |
|
1,103 |
|
603 |
|
4,105 |
|
(6 |
) |
(40 |
) |
(33 |
) |
(46 |
) |
|
Middle East and North Africa (excluding Saudi Arabia) |
2,393 |
|
3,933 |
|
1,181 |
|
6,326 |
|
(88 |
) |
(306 |
) |
(148 |
) |
(394 |
) |
|
- Egypt |
- |
|
309 |
|
71 |
|
309 |
|
- |
|
(5 |
) |
(1 |
) |
(5 |
) |
|
- UAE |
1,974 |
|
1,477 |
|
538 |
|
3,451 |
|
(82 |
) |
(126 |
) |
(54 |
) |
(208 |
) |
|
- other |
419 |
|
2,147 |
|
572 |
|
2,566 |
|
(6 |
) |
(175 |
) |
(93 |
) |
(181 |
) |
|
North America |
36,964 |
|
5,057 |
|
1,341 |
|
42,021 |
|
(122 |
) |
(139 |
) |
(81 |
) |
(261 |
) |
|
- US |
17,464 |
|
2,280 |
|
1,028 |
|
19,744 |
|
(13 |
) |
(106 |
) |
(75 |
) |
(119 |
) |
|
- Canada |
18,267 |
|
2,562 |
|
265 |
|
20,829 |
|
(16 |
) |
(23 |
) |
(5 |
) |
(39 |
) |
|
- other |
1,233 |
|
215 |
|
48 |
|
1,448 |
|
(93 |
) |
(10 |
) |
(1 |
) |
(103 |
) |
|
Latin America |
2,701 |
|
3,958 |
|
1,432 |
|
6,659 |
|
(23 |
) |
(521 |
) |
(254 |
) |
(544 |
) |
|
- Mexico |
2,550 |
|
3,192 |
|
1,121 |
|
5,742 |
|
(22 |
) |
(465 |
) |
(227 |
) |
(487 |
) |
|
- other |
151 |
|
766 |
|
311 |
|
917 |
|
(1 |
) |
(56 |
) |
(27 |
) |
(57 |
) |
|
At 31 Dec 2018 |
293,333 |
|
101,004 |
|
25,644 |
|
394,337 |
|
(535 |
) |
(2,412 |
) |
(1,261 |
) |
(2,947 |
) |
|
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied - by global business |
||||||||||||||||||||
|
|
Gross carrying/nominal amount |
Allowance for ECL |
||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Loans and advances to customers at amortised cost |
951,583 |
|
80,182 |
|
13,378 |
|
332 |
|
1,045,475 |
|
(1,297 |
) |
(2,284 |
) |
(5,052 |
) |
(99 |
) |
(8,732 |
) |
|
- RBWM |
378,792 |
|
15,251 |
|
4,472 |
|
- |
|
398,515 |
|
(593 |
) |
(1,320 |
) |
(1,210 |
) |
- |
|
(3,123 |
) |
|
- CMB |
297,319 |
|
46,423 |
|
6,649 |
|
212 |
|
350,603 |
|
(520 |
) |
(765 |
) |
(3,190 |
) |
(68 |
) |
(4,543 |
) |
|
- GB&M |
228,546 |
|
16,934 |
|
1,598 |
|
120 |
|
247,198 |
|
(173 |
) |
(176 |
) |
(550 |
) |
(31 |
) |
(930 |
) |
|
- GPB |
45,512 |
|
1,543 |
|
659 |
|
- |
|
47,714 |
|
(9 |
) |
(10 |
) |
(102 |
) |
- |
|
(121 |
) |
|
- Corporate Centre |
1,414 |
|
31 |
|
- |
|
- |
|
1,445 |
|
(2 |
) |
(13 |
) |
- |
|
- |
|
(15 |
) |
|
Loans and advances to banks at amortised cost |
67,769 |
|
1,450 |
|
- |
|
- |
|
69,219 |
|
(14 |
) |
(2 |
) |
- |
|
- |
|
(16 |
) |
|
- RBWM |
4,733 |
|
388 |
|
- |
|
- |
|
5,121 |
|
- |
|
(1 |
) |
- |
|
- |
|
(1 |
) |
|
- CMB |
1,245 |
|
216 |
|
- |
|
- |
|
1,461 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
|
- GB&M |
23,420 |
|
801 |
|
- |
|
- |
|
24,221 |
|
(9 |
) |
(1 |
) |
- |
|
- |
|
(10 |
) |
|
- GPB |
28 |
|
- |
|
- |
|
- |
|
28 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- Corporate Centre |
38,343 |
|
45 |
|
- |
|
- |
|
38,388 |
|
(3 |
) |
- |
|
- |
|
- |
|
(3 |
) |
|
Other financial assets measured at amortised cost |
613,200 |
|
1,827 |
|
151 |
|
1 |
|
615,179 |
|
(38 |
) |
(38 |
) |
(42 |
) |
- |
|
(118 |
) |
|
- RBWM |
55,915 |
|
535 |
|
32 |
|
- |
|
56,482 |
|
(21 |
) |
(30 |
) |
(3 |
) |
- |
|
(54 |
) |
|
- CMB |
13,698 |
|
900 |
|
47 |
|
1 |
|
14,646 |
|
(8 |
) |
(7 |
) |
(26 |
) |
- |
|
(41 |
) |
|
- GB&M |
280,621 |
|
372 |
|
34 |
|
- |
|
281,027 |
|
(5 |
) |
(1 |
) |
(11 |
) |
- |
|
(17 |
) |
|
- GPB |
1,406 |
|
9 |
|
4 |
|
- |
|
1,419 |
|
- |
|
- |
|
(2 |
) |
- |
|
(2 |
) |
|
- Corporate Centre |
261,560 |
|
11 |
|
34 |
|
- |
|
261,605 |
|
(4 |
) |
- |
|
- |
|
- |
|
(4 |
) |
|
Total gross carrying amount on-balance sheet at 31 Dec 2019 |
1,632,552 |
|
83,459 |
|
13,529 |
|
333 |
|
1,729,873 |
|
(1,349 |
) |
(2,324 |
) |
(5,094 |
) |
(99 |
) |
(8,866 |
) |
|
Loans and other credit-related commitments |
577,631 |
|
21,618 |
|
771 |
|
9 |
|
600,029 |
|
(137 |
) |
(133 |
) |
(59 |
) |
- |
|
(329 |
) |
|
- RBWM |
171,118 |
|
1,850 |
|
180 |
|
- |
|
173,148 |
|
(14 |
) |
(1 |
) |
- |
|
- |
|
(15 |
) |
|
- CMB |
117,703 |
|
11,403 |
|
558 |
|
9 |
|
129,673 |
|
(69 |
) |
(65 |
) |
(56 |
) |
- |
|
(190 |
) |
|
- GB&M |
246,805 |
|
8,270 |
|
28 |
|
- |
|
255,103 |
|
(53 |
) |
(67 |
) |
(3 |
) |
- |
|
(123 |
) |
|
- GPB |
41,975 |
|
95 |
|
5 |
|
- |
|
42,075 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
|
- Corporate Centre |
30 |
|
- |
|
- |
|
- |
|
30 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Financial guarantees
|
17,684 |
|
2,340 |
|
186 |
|
4 |
|
20,214 |
|
(16 |
) |
(22 |
) |
(10 |
) |
- |
|
(48 |
) |
|
- RBWM |
61 |
|
2 |
|
1 |
|
- |
|
64 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- CMB |
7,446 |
|
1,442 |
|
105 |
|
4 |
|
8,997 |
|
(9 |
) |
(12 |
) |
(6 |
) |
- |
|
(27 |
) |
|
- GB&M |
9,263 |
|
894 |
|
80 |
|
- |
|
10,237 |
|
(7 |
) |
(10 |
) |
(4 |
) |
- |
|
(21 |
) |
|
- GPB |
911 |
|
2 |
|
- |
|
- |
|
913 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- Corporate Centre |
3 |
|
- |
|
- |
|
- |
|
3 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Total nominal amount off-balance sheet at 31 Dec 2019 |
595,315 |
|
23,958 |
|
957 |
|
13 |
|
620,243 |
|
(153 |
) |
(155 |
) |
(69 |
) |
- |
|
(377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
RBWM |
13,754 |
|
278 |
|
- |
|
- |
|
14,032 |
|
(5 |
) |
(58 |
) |
- |
|
- |
|
(63 |
) |
|
CMB |
250 |
|
25 |
|
- |
|
1 |
|
276 |
|
- |
|
(12 |
) |
- |
|
- |
|
(12 |
) |
|
GB&M |
1,055 |
|
18 |
|
- |
|
- |
|
1,073 |
|
- |
|
(8 |
) |
- |
|
- |
|
(8 |
) |
|
GPB |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Corporate Centre |
339,590 |
|
693 |
|
- |
|
- |
|
340,283 |
|
(34 |
) |
(49 |
) |
- |
|
- |
|
(83 |
) |
|
Debt instruments measured at FVOCI at 31 Dec 2019 |
354,649 |
|
1,014 |
|
- |
|
1 |
|
355,664 |
|
(39 |
) |
(127 |
) |
- |
|
- |
|
(166 |
) |
|
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied - by global business1 (continued) |
||||||||||||||||||||
|
|
Gross carrying/nominal amount |
Allowance for ECL |
||||||||||||||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
Stage 1 |
Stage 2 |
Stage 3 |
POCI |
Total |
||||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
||||||||||
|
Loans and advances to customers at amortised cost |
908,393 |
|
68,581 |
|
13,023 |
|
324 |
|
990,321 |
|
(1,276 |
) |
(2,108 |
) |
(5,047 |
) |
(194 |
) |
(8,625 |
) |
|
- RBWM |
340,606 |
|
19,228 |
|
4,960 |
|
- |
|
364,794 |
|
(544 |
) |
(1,250 |
) |
(1,129 |
) |
- |
|
(2,923 |
) |
|
- CMB |
299,523 |
|
32,109 |
|
5,732 |
|
298 |
|
337,662 |
|
(538 |
) |
(659 |
) |
(3,110 |
) |
(194 |
) |
(4,501 |
) |
|
- GB&M |
228,035 |
|
16,327 |
|
1,683 |
|
25 |
|
246,070 |
|
(188 |
) |
(182 |
) |
(718 |
) |
- |
|
(1,088 |
) |
|
- GPB |
37,970 |
|
724 |
|
618 |
|
1 |
|
39,313 |
|
(5 |
) |
(3 |
) |
(89 |
) |
- |
|
(97 |
) |
|
- Corporate Centre |
2,259 |
|
193 |
|
30 |
|
- |
|
2,482 |
|
(1 |
) |
(14 |
) |
(1 |
) |
- |
|
(16 |
) |
|
Loans and advances to banks at amortised cost |
71,873 |
|
307 |
|
- |
|
- |
|
72,180 |
|
(11 |
) |
(2 |
) |
- |
|
- |
|
(13 |
) |
|
- RBWM |
5,801 |
|
5 |
|
- |
|
- |
|
5,806 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
|
- CMB |
1,912 |
|
15 |
|
- |
|
- |
|
1,927 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
|
- GB&M |
25,409 |
|
212 |
|
- |
|
- |
|
25,621 |
|
(7 |
) |
(2 |
) |
- |
|
- |
|
(9 |
) |
|
- GPB |
46 |
|
- |
|
- |
|
- |
|
46 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- Corporate Centre |
38,705 |
|
75 |
|
- |
|
- |
|
38,780 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
|
Other financial assets measured at amortised cost |
581,118 |
|
1,673 |
|
126 |
|
- |
|
582,917 |
|
(27 |
) |
(6 |
) |
(22 |
) |
- |
|
(55 |
) |
|
- RBWM |
49,142 |
|
184 |
|
32 |
|
- |
|
49,358 |
|
(14 |
) |
(2 |
) |
(1 |
) |
- |
|
(17 |
) |
|
- CMB |
15,082 |
|
774 |
|
60 |
|
- |
|
15,916 |
|
(7 |
) |
(3 |
) |
(21 |
) |
- |
|
(31 |
) |
|
- GB&M |
272,028 |
|
703 |
|
20 |
|
- |
|
272,751 |
|
(1 |
) |
(1 |
) |
- |
|
- |
|
(2 |
) |
|
- GPB |
924 |
|
1 |
|
2 |
|
- |
|
927 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- Corporate Centre |
243,942 |
|
11 |
|
12 |
|
- |
|
243,965 |
|
(5 |
) |
- |
|
- |
|
- |
|
(5 |
) |
|
Total gross carrying amount on-balance sheet at 31 Dec 2018 |
1,561,384 |
|
70,561 |
|
13,149 |
|
324 |
|
1,645,418 |
|
(1,314 |
) |
(2,116 |
) |
(5,069 |
) |
(194 |
) |
(8,693 |
) |
|
Loans and other credit-related commitments |
567,232 |
|
23,857 |
|
912 |
|
7 |
|
592,008 |
|
(143 |
) |
(139 |
) |
(43 |
) |
- |
|
(325 |
) |
|
- RBWM |
164,589 |
|
1,792 |
|
399 |
|
- |
|
166,780 |
|
(6 |
) |
(1 |
) |
(1 |
) |
- |
|
(8 |
) |
|
- CMB |
112,969 |
|
10,129 |
|
308 |
|
5 |
|
123,411 |
|
(72 |
) |
(52 |
) |
(40 |
) |
- |
|
(164 |
) |
|
- GB&M |
251,676 |
|
10,892 |
|
194 |
|
2 |
|
262,764 |
|
(58 |
) |
(86 |
) |
(2 |
) |
- |
|
(146 |
) |
|
- GPB |
33,885 |
|
1,044 |
|
11 |
|
- |
|
34,940 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- Corporate Centre |
4,113 |
|
- |
|
- |
|
- |
|
4,113 |
|
(7 |
) |
- |
|
- |
|
- |
|
(7 |
) |
|
Financial guarantees |
20,834 |
|
2,384 |
|
297 |
|
3 |
|
23,518 |
|
(19 |
) |
(29 |
) |
(45 |
) |
- |
|
(93 |
) |
|
- RBWM |
54 |
|
3 |
|
3 |
|
- |
|
60 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- CMB |
7,605 |
|
1,227 |
|
230 |
|
3 |
|
9,065 |
|
(10 |
) |
(11 |
) |
(39 |
) |
- |
|
(60 |
) |
|
- GB&M |
12,067 |
|
1,141 |
|
63 |
|
- |
|
13,271 |
|
(8 |
) |
(18 |
) |
(5 |
) |
- |
|
(31 |
) |
|
- GPB |
1,053 |
|
13 |
|
- |
|
- |
|
1,066 |
|
(1 |
) |
- |
|
- |
|
- |
|
(1 |
) |
|
- Corporate Centre |
55 |
|
- |
|
1 |
|
- |
|
56 |
|
- |
|
- |
|
(1 |
) |
- |
|
(1 |
) |
|
Total nominal amount off-balance sheet at 31 Dec 2018 |
588,066 |
|
26,241 |
|
1,209 |
|
10 |
|
615,526 |
|
(162 |
) |
(168 |
) |
(88 |
) |
- |
|
(418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
RBWM |
13,160 |
|
153 |
|
- |
|
- |
|
13,313 |
|
(5 |
) |
- |
|
- |
|
- |
|
(5 |
) |
|
CMB |
226 |
|
- |
|
- |
|
1 |
|
227 |
|
(2 |
) |
- |
|
- |
|
- |
|
(2 |
) |
|
GB&M |
1,994 |
|
- |
|
- |
|
- |
|
1,994 |
|
(5 |
) |
- |
|
- |
|
- |
|
(5 |
) |
|
GPB |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Corporate Centre |
326,795 |
|
770 |
|
7 |
|
4 |
|
327,576 |
|
(21 |
) |
(50 |
) |
(1 |
) |
- |
|
(72 |
) |
|
Debt instruments measured at FVOCI at 31 Dec 2018 |
342,175 |
|
923 |
|
7 |
|
5 |
|
343,110 |
|
(33 |
) |
(50 |
) |
(1 |
) |
- |
|
(84 |
) |
1 During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.
|
Loans and advances to customers and banks metrics |
||||||||||||||
|
|
Gross carrying amount |
Of which: stage 3 and POCI |
Allowance for ECL |
Of which: stage 3 and POCI |
Change in ECL |
Write-offs |
Recoveries |
|||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|||||||
|
First lien residential mortgages |
322,178 |
|
3,070 |
|
(529 |
) |
(422 |
) |
(107 |
) |
(139 |
) |
54 |
|
|
Other personal lending |
112,093 |
|
1,781 |
|
(2,605 |
) |
(793 |
) |
(1,114 |
) |
(1,206 |
) |
260 |
|
|
Personal lending |
434,271 |
|
4,851 |
|
(3,134 |
) |
(1,215 |
) |
(1,221 |
) |
(1,345 |
) |
314 |
|
|
- agriculture, forestry and fishing |
6,696 |
|
280 |
|
(182 |
) |
(140 |
) |
(15 |
) |
(6 |
) |
- |
|
|
- mining and quarrying |
14,435 |
|
323 |
|
(226 |
) |
(134 |
) |
(31 |
) |
(4 |
) |
- |
|
|
- manufacturing |
104,380 |
|
1,717 |
|
(1,210 |
) |
(856 |
) |
(392 |
) |
(332 |
) |
8 |
|
|
- electricity, gas, steam and air-conditioning supply |
15,040 |
|
175 |
|
(80 |
) |
(25 |
) |
14 |
|
(54 |
) |
2 |
|
|
- water supply, sewerage, waste management and remediation |
3,501 |
|
30 |
|
(28 |
) |
(18 |
) |
(4 |
) |
- |
|
- |
|
|
- construction |
15,287 |
|
884 |
|
(564 |
) |
(499 |
) |
(171 |
) |
(191 |
) |
12 |
|
|
- wholesale and retail trade, repair of motor vehicles and motorcycles |
94,681 |
|
1,633 |
|
(1,184 |
) |
(936 |
) |
(330 |
) |
(389 |
) |
13 |
|
|
- transportation and storage |
25,580 |
|
617 |
|
(237 |
) |
(158 |
) |
(93 |
) |
(37 |
) |
- |
|
|
- accommodation and food |
24,656 |
|
263 |
|
(146 |
) |
(63 |
) |
(49 |
) |
(81 |
) |
- |
|
|
- publishing, audiovisual and broadcasting |
19,971 |
|
162 |
|
(87 |
) |
(34 |
) |
(17 |
) |
(31 |
) |
- |
|
|
- real estate |
130,752 |
|
1,330 |
|
(680 |
) |
(475 |
) |
(34 |
) |
(168 |
) |
6 |
|
|
- professional, scientific and technical activities |
24,122 |
|
350 |
|
(209 |
) |
(145 |
) |
(47 |
) |
(10 |
) |
1 |
|
|
- administrative and support services |
25,714 |
|
527 |
|
(270 |
) |
(179 |
) |
(80 |
) |
(22 |
) |
- |
|
|
- public administration and defence, compulsory social security |
2,377 |
|
- |
|
(8 |
) |
- |
|
- |
|
- |
|
- |
|
|
- education |
1,900 |
|
16 |
|
(18 |
) |
(6 |
) |
6 |
|
(3 |
) |
- |
|
|
- health and care |
4,465 |
|
111 |
|
(57 |
) |
(28 |
) |
(6 |
) |
(13 |
) |
1 |
|
|
- arts, entertainment and recreation |
2,824 |
|
30 |
|
(25 |
) |
(11 |
) |
3 |
|
(4 |
) |
- |
|
|
- other services |
14,276 |
|
192 |
|
(199 |
) |
(133 |
) |
(79 |
) |
(102 |
) |
2 |
|
|
- activities of households |
791 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- extra-territorial organisations and bodies activities |
2 |
|
- |
|
- |
|
- |
|
2 |
|
- |
|
1 |
|
|
- government |
8,313 |
|
7 |
|
(14 |
) |
(6 |
) |
(8 |
) |
- |
|
- |
|
|
- asset-backed securities |
736 |
|
- |
|
(14 |
) |
- |
|
- |
|
- |
|
- |
|
|
Corporate and commercial |
540,499 |
|
8,647 |
|
(5,438 |
) |
(3,846 |
) |
(1,331 |
) |
(1,447 |
) |
46 |
|
|
Non-bank financial institutions |
70,705 |
|
212 |
|
(160 |
) |
(90 |
) |
(71 |
) |
(5 |
) |
1 |
|
|
Wholesale lending |
611,204 |
|
8,859 |
|
(5,598 |
) |
(3,936 |
) |
(1,402 |
) |
(1,452 |
) |
47 |
|
|
Loans and advances to customers |
1,045,475 |
|
13,710 |
|
(8,732 |
) |
(5,151 |
) |
(2,623 |
) |
(2,797 |
) |
361 |
|
|
Loans and advances to banks |
69,219 |
|
- |
|
(16 |
) |
- |
|
(6 |
) |
- |
|
- |
|
|
At 31 Dec 2019 |
1,114,694 |
|
13,710 |
|
(8,748 |
) |
(5,151 |
) |
(2,629 |
) |
(2,797 |
) |
361 |
|
HSBC Holdings
(Audited)
Risk in HSBC Holdings is overseen by the HSBC Holdings Asset and Liability Management Committee ('Holdings ALCO'). The major risks faced by HSBC Holdings are credit risk, liquidity risk and market risk (in the form of interest rate risk and foreign exchange risk).
Credit risk in HSBC Holdings primarily arises from transactions with Group subsidiaries and its investments in those subsidiaries.
In HSBC Holdings, the maximum exposure to credit risk arises from two components:
• financial instruments on the balance sheet (see page 237); and
• financial guarantees and similar contracts, where the maximum exposure is the maximum that we would have to pay if the guarantees were called upon (see Note 32).
In the case of our derivative balances, we have amounts with a legally enforceable right of offset in the case of counterparty default that are not included in the carrying value. These offsets also include collateral received in cash and other financial assets. The total offset relating to our derivative balances was $0.1bn at 31 December 2019 (2018: $1.5bn).
The credit quality of loans and advances and financial investments, both of which consist of intra-Group lending and US Treasury bills and bonds, is assessed as 'strong', with 100% of the exposure being neither past due nor impaired (2018: 100%). For further details of credit quality classification, see page 85.
|
Capital and liquidity risk |
|
|
|
Page |
|
Capital risk management |
130 |
|
Liquidity and funding risk management |
131 |
|
Liquidity and funding risk in 2019 |
131 |
|
Sources of funding |
133 |
|
Pension risk |
134 |
Overview
Capital and liquidity risk is the risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including pension risk.
Capital and liquidity risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment.
Governance and structure
Capital and liquidity are the responsibility of the Group Management Board and directly addressed by the GRC. Capital and liquidity risks are managed through the Holdings ALCO and local Asset and Liability Management Committees ('ALCOs') and overseen by the RMM. The Global Head of Wholesale and Market Risk is the accountable risk steward.
Capital risk management
Overview
Capital risk is the risk that we fail to meet our regulatory capital requirements either at Group, subsidiary or branch level.
Key developments in 2019
In 2019, we carried out a restructuring of our capital risk management function, with the creation of a dedicated second line of defence that will provide independent oversight of capital management activities. The approach to capital risk management is evolving. This will operate across the Group focusing on both adequacy of capital and sufficiency of returns. Other developments in 2019 included:
• The Risk function was actively involved in the calibration of the capital risk appetite metrics, the review and challenge of the capital adequacy expressed through stress testing, and the internal capital adequacy assessment process ('ICAAP').
• The common equity tier 1 ('CET1') ratio was 14.7% at 31 December 2019 and the leverage ratio was 5.3%. Allocation of the Group's capital to business lines and legal entities is informed by return metrics and the performance of key capital ratios under plan and stress scenarios.
• We passed the PRA annual stress test exercise with sufficient capital to operate through a severe macroeconomic scenario.
For quantitative disclosures on capital ratios, own funds and RWAs, refer to pages 152 to 155 in the Capital section.
ICAAP and risk appetite
The objectives of our capital management policy are to maintain a strong capital base to support the risks inherent in our business and invest in accordance with our strategy, meeting both consolidated and local regulatory capital requirements at all times. Our capital management policy is underpinned by a capital management framework and our ICAAP. The framework incorporates key capital risk appetites for CET1, total capital, minimum required eligible liabilities ('MREL'), and double leverage. The ICAAP is an assessment of the Group's capital position, outlining both regulatory and internal capital resources and requirements resulting from HSBC's business model, strategy, risk profile and management, performance and planning, risks to capital, and the implications of stress testing. Our assessment of capital adequacy is driven by an assessment of risks. These risks include credit, market, operational, pensions, insurance, structural foreign exchange, residual risk and interest rate risk in the banking book. An ICAAP supports the determination of the consolidated and subsidiary capital risk appetite and target ratios as well as enables the assessment and determination of capital requirements by regulators.
HSBC Holdings is the provider of equity capital to its subsidiaries and also provides them with non-equity capital where necessary. These investments are substantially funded by HSBC Holdings' own capital issuance and profit retention.
HSBC Holdings seeks to maintain a prudent balance between the composition of its capital and its investment in subsidiaries, including management of double leverage. Double leverage reflects the extent to which equity investments in operating entities are funded by holding company debt. Where Group capital requirements are less than the aggregate of operating entity capital requirements, double leverage can be used to improve Group capital efficiency provided it is managed appropriately and prudently in accordance with risk appetite. Double leverage is a constraint on managing our capital position, given the complexity of the Group's subsidiary structure and the multiple regulatory regimes under which we operate. As a matter of long-standing policy, the holding company retains a substantial portfolio of high-quality liquid assets ('HQLA'), which at 31 December 2019 was in excess of $14bn to mitigate holding company cash flow risk arising from double leverage and to underpin the strength of support the holding company can offer its subsidiaries in times of stress. Further mitigation is provided by additional tier 1 ('AT1') securities issued in excess of the regulatory requirements of our subsidiaries.
Planning and performance
Capital and risk-weighted asset ('RWA') plans form part of the annual operating plan that is approved by the Board. Capital and RWA forecasts are submitted to the Group Management Board on a monthly basis, and capital and RWAs are monitored and managed against the plan. The responsibility for global capital allocation principles rests with the Group Chief Financial Officer supported by the Group Capital Management Meeting. This is a specialist forum addressing capital management, reporting into Holdings ALCO.
Through our internal governance processes, we seek to strengthen discipline over our investment and capital allocation decisions, and to ensure that returns on investment meet the Group's management objectives. Our strategy is to allocate capital to businesses and entities to support growth objectives where returns above internal hurdle levels have been identified and in order to meet their regulatory and economic capital needs. We evaluate and manage business returns by using a return on average tangible equity measure.
Risks to capital
Outside the stress testing framework, other risks may be identified that have the potential to affect our RWAs and/or capital position. Downside and Upside scenarios are assessed against our capital management objectives and mitigating actions are assigned as necessary. We closely monitor and consider future regulatory change. We continue to evaluate the impact upon our capital requirements of regulatory developments, including the amendments to the Capital Requirements Regulation, the Basel III reforms package and the UK's withdrawal from the EU.
We currently estimate our pre-mitigation RWAs could potentially rise in the range of 5% to 10% as at 1 January 2022 as a result of the regulatory changes. The primary drivers include changes in the market risk, operational risk and credit valuation adjustment methodologies, as well as the potential lack of equivalence for certain investments in funds. We plan to take action to substantially mitigate a significant proportion of the increase.
The Basel package introduces an output floor that will be introduced in 2022 with a five-year transitional provision. This floor ensures that at the end of the transitional period banks' total RWAs are no lower than 72.5% of those generated by the standardised approaches. We estimate that there will be an additional RWA impact as a result of the output floor from 2026.
There remains a significant degree of uncertainty in the impact due to the number of national discretions within Basel's reforms, the need for further supporting technical standards to be developed and the lack of clarity regarding their implementation following the UK's withdrawal from the EU. Furthermore, the impact does not take into consideration the possibility of offsets against Pillar 2, which may arise as the shortcomings within Pillar 1 are addressed.
Further details can be found in the 'Regulatory developments' section of the Group's Pillar 3 Disclosures at 31 December 2019.
Stress testing and recovery planning
The Group uses stress testing to evaluate the robustness of plans and risk portfolios as well as to meet the requirements for stress testing set by supervisors. Stress testing also informs the ICAAP and supports recovery planning in many jurisdictions. It is a critical methodology used to evaluate how much capital the Group requires in setting risk appetite for capital risk and to re-evaluate business plans where analysis shows returns and/or capital do not meet target.
Supervisory stress testing requirements are increasing in frequency and in the granularity with which the results are required. These exercises include the programmes of the Bank of England, the US Federal Reserve Board, the European Banking Authority, the European Central Bank and the Hong Kong Monetary Authority, and stress tests undertaken in other jurisdictions. The results of regulatory stress testing and our internal stress tests are used when assessing our internal capital requirements through the ICAAP. The outcome of stress testing exercises carried out by the PRA and other regulators feeds into the setting of regulatory minimum ratios and buffers.
The Group and subsidiaries have established recovery plans addressing the actions that management would consider taking in a stress scenario if the capital position deteriorates through the target ratio and threatens to breach risk appetite and regulatory minimum levels. The recovery plans set out a range of appropriate actions that could feasibly be executed in a stressed environment to recover the capital position. These include cost management, reducing dividends and raising additional capital.
Liquidity and funding risk management
Overview
Liquidity risk is the risk that we do not have sufficient financial resources to meet our obligations as they fall due. Liquidity risk arises from mismatches in the timing of cash flows.
Funding risk is the risk that we cannot raise funding or can only do so at excessive cost.
Key developments in 2019
We have amended the Group risk appetite statement to remove the depositor concentration and wholesale funding concentration metrics. Both these risks will be monitored and controlled at the operating entity level.
For the major operating entities, we have transferred second line of defence activities to a newly created team in the Risk function. This team provides independent review and challenge of first line business activities and approves the liquidity and funding risk management framework ('LFRF').
ILAAP and risk appetite
We maintain a comprehensive LFRF, which aims to enable us to withstand very severe liquidity stresses. The LFRF comprises policies, metrics and controls designed to ensure that Group and entity management have oversight of our liquidity and funding risks in order to manage them appropriately.
We manage liquidity and funding risk at an operating entity level to ensure that obligations can be met in the jurisdiction where they fall due, generally without reliance on other parts of the Group. Operating entities are required to meet internal minimum requirements and any applicable regulatory requirements at all times. These requirements are assessed through the internal liquidity adequacy assessment process ('ILAAP'), which is used to ensure that operating entities have robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of liquidity risk over an appropriate set of time horizons, including intra-day, so as to ensure they maintain adequate levels of liquidity buffers. It informs the validation of risk tolerance and the setting of risk appetite. It also assesses the capability to manage liquidity and funding effectively in each major entity. These metrics are set and managed locally but are subject to robust global review and challenge to ensure consistency of approach and application of the LFRF across the Group.
Performance and measurement
Funding and liquidity plans form part of the annual operating plan that is approved by the Board. The critical Board-level appetite measures are the liquidity coverage ratio ('LCR') and net stable funding ratio ('NSFR'). An appropriate funding and liquidity profile is managed through a wider set of measures:
• a minimum LCR requirement;
• a minimum NSFR requirement or other appropriate metric;
• a legal entity depositor concentration limit;
• three-month and 12-month cumulative rolling term contractual maturity limits covering deposits from banks, deposits from non-bank financial institutions and securities issued;
• a minimum LCR requirement by currency;
• intra-day liquidity;
• the application of liquidity funds transfer pricing; and
• forward-looking funding assessments.
The LCR and NSFR metrics are to be supplemented by an internal liquidity metric in 2020.
Risks to liquidity and funding
Risks to liquidity and funding are assessed through forecasting, stress testing and scenario analysis, combined with ongoing assessments of risks in the business and external environment.
Stress testing, recovery and contingency planning
The Group uses stress testing to evaluate the robustness of plans and risk portfolios, inform the ILAAP and support recovery planning, as well as meeting the requirements for stress testing set by supervisors. It is a critical methodology used to evaluate how much funding and liquidity the Group requires in setting risk appetite.
All entities maintain contingency plans that can be enacted in the event of internal or external triggers, which threaten the liquidity or funding position. They also have established recovery plans addressing the actions that management would consider taking in a stress scenario if the position deteriorates and threatens to breach risk appetite and regulatory minimum levels. The recovery plans set out a range of appropriate actions, which could feasibly be executed in a stressed environment to recover the position.
Details of HSBC's liquidity and funding risk management framework ('LFRF') can be found in the Group's Pillar 3 Disclosures at 31 December 2019.
Liquidity and funding risk in 2019
Liquidity metrics
At 31 December 2019, all of the Group's material operating entities were above regulatory minimum levels.
Each entity maintains sufficient unencumbered liquid assets to comply with local and regulatory requirements. The liquidity value of these liquidity assets for each entity is shown in the following table along with the individual LCR levels on a European Commission ('EC') basis. This basis may differ from local LCR measures due to differences in the way non-EU regulators have implemented the Basel III standards.
Each entity maintains sufficient stable funding relative to the required stable funding assessed using the NSFR or other appropriate metric.
The Group liquidity and funding position at the end of 2019 is analysed in the following sections.
|
Operating entities' liquidity |
|||||||||
|
|
|
At 31 December 2019 |
|||||||
|
|
|
LCR |
HQLA |
Net outflows |
NSFR |
||||
|
|
Footnotes |
% |
$bn
|
$bn |
% |
||||
|
HSBC UK Bank plc (ring-fenced bank) |
1 |
165 |
|
75 |
|
45 |
|
150 |
|
|
HSBC Bank plc (non-ring-fenced bank) |
2 |
142 |
|
103 |
|
72 |
|
106 |
|
|
The Hongkong and Shanghai Banking Corporation - Hong Kong branch |
3 |
163 |
|
109 |
|
67 |
|
128 |
|
|
The Hongkong and Shanghai Banking Corporation - Singapore branch |
3 |
147 |
|
14 |
|
10 |
|
120 |
|
|
Hang Seng Bank |
|
185 |
|
42 |
|
23 |
|
148 |
|
|
HSBC Bank China |
|
180 |
|
21 |
|
11 |
|
151 |
|
|
HSBC Bank USA |
|
125 |
|
73 |
|
59 |
|
122 |
|
|
HSBC France |
4 |
152 |
|
44 |
|
29 |
|
117 |
|
|
HSBC Middle East - UAE branch |
|
202 |
|
11 |
|
5 |
|
159 |
|
|
HSBC Canada |
4 |
124 |
|
18 |
|
14 |
|
124 |
|
|
HSBC Mexico |
|
208 |
|
9 |
|
4 |
|
136 |
|
|
|
|
At 31 December 2018 |
|||||||
|
HSBC UK Bank plc (ring-fenced bank) |
1 |
143 |
|
59 |
|
41 |
|
144 |
|
|
HSBC Bank plc (non-ring-fenced bank) |
2 |
147 |
|
117 |
|
80 |
|
113 |
|
|
The Hongkong and Shanghai Banking Corporation - Hong Kong branch |
3 |
161 |
|
125 |
|
78 |
|
132 |
|
|
The Hongkong and Shanghai Banking Corporation - Singapore branch |
3 |
149 |
|
12 |
|
8 |
|
123 |
|
|
Hang Seng Bank |
|
202 |
|
38 |
|
19 |
|
152 |
|
|
HSBC Bank China |
|
153 |
|
24 |
|
15 |
|
153 |
|
|
HSBC Bank USA |
|
121 |
|
70 |
|
58 |
|
131 |
|
|
HSBC France |
4 |
128 |
|
20 |
|
16 |
|
113 |
|
|
HSBC Middle East - UAE branch |
|
182 |
|
7 |
|
4 |
|
132 |
|
|
HSBC Canada |
4 |
115 |
|
16 |
|
14 |
|
126 |
|
|
HSBC Mexico |
|
153 |
|
6 |
|
4 |
|
123 |
|
1 HSBC UK Bank plc refers to the HSBC UK liquidity group, which comprises four legal entities: HSBC UK Bank plc (including the Dublin branch), Marks and Spencer Financial Services plc, HSBC Private Bank (UK) Ltd and HSBC Trust Company (UK) Limited, managed as a single operating entity, in line with the application of UK liquidity regulation as agreed with the PRA.
2 HSBC Bank plc includes oversea branches and SPEs consolidated by HSBC for financial statements purposes.
3 The Hongkong and Shanghai Banking Corporation - Hong Kong branch and The Hongkong and Shanghai Banking Corporation - Singapore branch represent the material activities of The Hongkong and Shanghai Banking Corporation. Each branch is monitored and controlled for liquidity and funding risk purposes as a stand-alone operating entity.
4 HSBC France and HSBC Canada represent the consolidated banking operations of the Group in France and Canada, respectively. HSBC France and HSBC Canada are each managed as single distinct operating entities for liquidity purposes.
At 31 December 2019, all of the Group's principal operating entities were well above regulatory minimum levels.
The most significant movements in 2019 are explained below:
• HSBC UK Bank plc improved its liquidity ratio to 165%, mainly driven by increased customer surplus, wholesale funding and MREL issuance.
• The Hongkong and Shanghai Banking Corporation - Hong Kong branch remained highly liquid. The reduction in Hang Seng Bank reflected changes in the maturity of both customer lending and deposits.
• HSBC Bank China improved its LCR to 180%, mainly reflecting increased customer deposits and wholesale funding issuance.
• HSBC France increased significantly the liquidity position, reflecting management actions to address restructuring related to the UK's departure from the EU.
Liquid assets
At 31 December 2019, the Group had a total of $601bn of highly liquid unencumbered LCR eligible liquid assets (31 December 2018: $567bn) held in a range of asset classes and currencies. Of these, 90% were eligible as level 1 (31 December 2018: 89%).
The following tables reflect the composition of the liquidity pool by asset type and currency at 31 December 2019:
|
Liquidity pool by asset type |
||||||||
|
|
Liquidity pool |
Cash |
Level 11 |
Level 21 |
||||
|
|
$bn |
$bn |
$bn |
$bn |
||||
|
Cash and balance at central bank |
158 |
|
158 |
|
- |
|
- |
|
|
Central and local government bonds |
375 |
|
- |
|
334 |
|
41 |
|
|
Regional government PSE |
17 |
|
- |
|
15 |
|
2 |
|
|
International organisation and MDBs |
15 |
|
- |
|
15 |
|
- |
|
|
Covered bonds |
12 |
|
- |
|
3 |
|
9 |
|
|
Other |
24 |
|
- |
|
16 |
|
8 |
|
|
Total at 31 Dec 2019 |
601 |
|
158 |
|
383 |
|
60 |
|
|
Total at 31 Dec 2018 |
567 |
165 |
338 |
64 |
||||
1 As defined in EU regulation, level 1 assets means 'assets of extremely high liquidity and credit quality', and level 2 assets means 'assets of high liquidity and credit quality'.
|
Liquidity pool by currency |
||||||||||||
|
|
$ |
£ |
€ |
HK$ |
Other |
Total |
||||||
|
|
$bn |
$bn |
$bn |
$bn |
$bn |
$bn |
||||||
|
Liquidity pool at 31 Dec 2019 |
179 |
|
117 |
|
93 |
|
47 |
|
165 |
|
601 |
|
|
Liquidity pool at 31 Dec 2018 |
164 |
105 |
81 |
57 |
160 |
567 |
||||||
Consolidated liquidity metrics
The Group consolidated LCR reflects the LCR of the Group, according to the guidelines under the EC Delegated Act. The Group LCR was 150% at 31 December 2019. The Group LCR was well above the regulatory minimum.
The methodology used to calculate the Group consolidated LCR is currently under review given that the Group's liquidity profile is set and managed based on factors relevant to the operating entities on a stand-alone basis.
|
|
At |
|||||
|
|
31 Dec 2019 |
30 Jun 2019 |
31 Dec 2018 |
|||
|
|
$bn |
$bn |
$bn |
|||
|
High-quality liquid assets (liquidity value) |
601 |
533 |
567 |
|||
|
Net outflows |
400 |
391 |
369 |
|||
|
Liquidity coverage ratio |
150 |
% |
136 |
% |
154 |
% |
Sources of funding
Our primary sources of funding are customer current accounts and customer savings deposits payable on demand or at short notice. We issue wholesale securities (secured and unsecured) to supplement our customer deposits and change the currency mix, maturity profile or location of our liabilities and to meet the Group's minimum requirement for own funds and eligible liabilities.
The following 'Funding sources' and 'Funding uses' tables provide a consolidated view of how our balance sheet is funded, and should be read in light of the LFRF, which generally requires operating entities to manage liquidity and funding risk on a stand-alone basis.
The tables analyse our consolidated balance sheet according to the assets that primarily arise from operating activities and the sources of funding primarily supporting these activities. Assets and liabilities that do not arise from operating activities are presented at other balance sheet lines.
In 2019, the level of customer accounts continued to exceed the level of loans and advances to customers.
Loans and advances to banks continued to exceed deposits by banks, meaning the Group remained a net unsecured lender to the banking sector.
|
Funding sources |
||||
|
(Audited) |
||||
|
|
2019 |
2018 |
||
|
|
$m |
$m |
||
|
Customer accounts |
1,439,115 |
|
1,362,643 |
|
|
Deposits by banks |
59,022 |
|
56,331 |
|
|
Repurchase agreements - non-trading |
140,344 |
|
165,884 |
|
|
Debt securities in issue |
104,555 |
|
85,342 |
|
|
Cash collateral, margin and settlement accounts |
71,002 |
|
54,066 |
|
|
Liabilities of disposal groups held for sale |
- |
|
313 |
|
|
Subordinated liabilities |
24,600 |
|
22,437 |
|
|
Financial liabilities designated at fair value |
164,466 |
|
148,505 |
|
|
Liabilities under insurance contracts |
97,439 |
|
87,330 |
|
|
Trading liabilities |
83,170 |
|
84,431 |
|
|
- repos |
558 |
|
1,495 |
|
|
- stock lending |
9,702 |
|
10,998 |
|
|
- other trading liabilities |
72,910 |
|
71,938 |
|
|
Total equity |
192,668 |
|
194,249 |
|
|
Other balance sheet liabilities |
338,771 |
|
296,593 |
|
|
At 31 Dec |
2,715,152 |
|
2,558,124 |
|
|
Funding uses |
|||||
|
(Audited) |
|||||
|
|
|
2019 |
2018 |
||
|
|
Footnotes |
$m |
$m |
||
|
Loans and advances to customers |
|
1,036,743 |
|
981,696 |
|
|
Loans and advances to banks |
|
69,203 |
|
72,167 |
|
|
Reverse repurchase agreements - non-trading |
|
240,862 |
|
242,804 |
|
|
Prepayments, accrued income and other assets |
1 |
63,891 |
|
47,159 |
|
|
- cash collateral, margin and settlement accounts |
|
63,891 |
|
47,159 |
|
|
Assets held for sale |
|
123 |
|
735 |
|
|
Trading assets |
|
254,271 |
|
238,130 |
|
|
- reverse repos |
|
13,659 |
|
9,893 |
|
|
- stock borrowing |
|
7,691 |
|
8,387 |
|
|
- other trading assets |
|
232,921 |
|
219,850 |
|
|
Financial investments |
|
443,312 |
|
407,433 |
|
|
Cash and balances with central banks |
|
154,099 |
|
162,843 |
|
|
Other balance sheet assets |
|
452,648 |
|
405,157 |
|
|
At 31 Dec |
|
2,715,152 |
|
2,558,124 |
|
1 Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. 'Prepayments, accrued income and other assets' as presented within the consolidated balance sheet on page 231 includes both financial and non-financial assets.
Wholesale term debt maturity profile
The maturity profile of our wholesale term debt obligations is set out in the following table.
The balances in the table are not directly comparable with those in the consolidated balance sheet because the table presents gross cash flows relating to principal payments and not the balance sheet carrying value, which include debt securities and subordinated liabilities measured at fair value.
|
Wholesale funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities |
||||||||||||||||||
|
|
Due not more than 1 month |
Due over 3 months |
Due over 6 months |
Due over 9 months |
Due over 9 months but not more than 1 year |
Due over 1 year but not more than 2 years |
Due over 2 years but not more than 5 years |
Due over 5 years |
Total |
|||||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|||||||||
|
Debt securities issued |
17,728 |
|
19,758 |
|
15,654 |
|
16,284 |
|
16,132 |
|
35,836 |
|
57,387 |
|
53,768 |
|
232,547 |
|
|
- unsecured CDs and CP |
4,913 |
|
12,280 |
|
11,020 |
|
8,745 |
|
11,509 |
|
1,156 |
|
2,095 |
|
1,578 |
|
53,296 |
|
|
- unsecured senior MTNs |
8,198 |
|
2,462 |
|
695 |
|
4,595 |
|
1,753 |
|
25,121 |
|
42,316 |
|
38,812 |
|
123,952 |
|
|
- unsecured senior structured notes |
1,698 |
|
1,386 |
|
1,711 |
|
1,003 |
|
923 |
|
3,579 |
|
6,102 |
|
9,596 |
|
25,998 |
|
|
- secured covered bonds |
- |
|
- |
|
- |
|
- |
|
1,139 |
|
749 |
|
3,661 |
|
1,159 |
|
6,708 |
|
|
- secured asset-backed commercial paper |
1,933 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,933 |
|
|
- secured ABS |
- |
|
- |
|
248 |
|
161 |
|
- |
|
205 |
|
911 |
|
741 |
|
2,266 |
|
|
- others |
986 |
|
3,630 |
|
1,980 |
|
1,780 |
|
808 |
|
5,026 |
|
2,302 |
|
1,882 |
|
18,394 |
|
|
Subordinated liabilities |
1,523 |
|
- |
|
22 |
|
2,000 |
|
- |
|
754 |
|
2,424 |
|
26,809 |
|
33,532 |
|
|
- subordinated debt securities |
1,500 |
|
- |
|
22 |
|
2,000 |
|
- |
|
754 |
|
2,424 |
|
24,587 |
|
31,287 |
|
|
- preferred securities |
23 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2,222 |
|
2,245 |
|
|
At 31 Dec 2019 |
19,251 |
|
19,758 |
|
15,676 |
|
18,284 |
|
16,132 |
|
36,590 |
|
59,811 |
|
80,577 |
|
266,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Debt securities issued |
8,091 |
|
13,362 |
|
15,808 |
|
10,241 |
|
5,447 |
|
21,811 |
|
70,462 |
|
63,914 |
|
209,136 |
|
|
- unsecured CDs and CP |
4,378 |
|
7,640 |
|
10,696 |
|
6,546 |
|
818 |
|
529 |
|
764 |
|
1,031 |
|
32,402 |
|
|
- unsecured senior MTNs |
467 |
|
1,233 |
|
3,107 |
|
2,263 |
|
2,172 |
|
11,252 |
|
55,307 |
|
54,256 |
|
130,057 |
|
|
- unsecured senior structured notes |
817 |
|
821 |
|
1,452 |
|
1,029 |
|
2,394 |
|
3,005 |
|
7,021 |
|
4,473 |
|
21,012 |
|
|
- secured covered bonds |
- |
|
- |
|
205 |
|
- |
|
- |
|
1,190 |
|
3,469 |
|
1,137 |
|
6,001 |
|
|
- secured asset-backed commercial paper |
2,094 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2,094 |
|
|
- secured ABS |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
327 |
|
327 |
|
|
- others |
335 |
|
3,668 |
|
348 |
|
403 |
|
63 |
|
5,835 |
|
3,901 |
|
2,690 |
|
17,243 |
|
|
Subordinated liabilities |
- |
|
95 |
|
2,007 |
|
- |
|
- |
|
2,021 |
|
1,383 |
|
31,131 |
|
36,637 |
|
|
- subordinated debt securities |
- |
|
95 |
|
2,007 |
|
- |
|
- |
|
2,021 |
|
1,383 |
|
28,934 |
|
34,440 |
|
|
- preferred securities |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2,197 |
|
2,197 |
|
|
At 31 Dec 2018 |
8,091 |
|
13,457 |
|
17,815 |
|
10,241 |
|
5,447 |
|
23,832 |
|
71,845 |
|
95,045 |
|
245,773 |
|
Pension risk
Overview
Pension risk is the risk of increased costs to HSBC from offering post-employment benefit plans to its employees.
Pension risk arises from investments delivering an inadequate return, adverse changes in interest rates or inflation, or members living longer than expected. Pension risk also includes operational and reputational risk of sponsoring pension plans.
Key developments in 2019
There were no material changes to our global policies and practices for the management of pension risk in 2019.
Governance and structure
A global pension risk framework and accompanying global policies on the management of risks related to defined benefit and defined contribution plans are in place. Pension risk is managed by a network of local and regional pension risk forums. The Global Pensions Oversight Forum is responsible for the governance and oversight of all pension plans sponsored by HSBC around the world.
Key risk management processes
Our global pensions strategy is to move from defined benefit to defined contribution plans, where local law allows and it is considered competitive to do so.
In defined contribution pension plans, the contributions that HSBC is required to make are known, while the ultimate pension benefit will vary, typically with investment returns achieved by investment choices made by the employee. While the market risk to HSBC of defined contribution plans is low, the Group is still exposed to operational and reputational risk.
In defined benefit pension plans, the level of pension benefit is known. Therefore, the level of contributions required by HSBC will vary due to a number of risks, including:
• investments delivering a return below that required to provide the projected plan benefits;
• the prevailing economic environment leading to corporate failures, thus triggering write-downs in asset values (both equity and debt);
• a change in either interest rates or inflation expectations, causing an increase in the value of plan liabilities; and
• plan members living longer than expected (known as longevity risk).
Pension risk is assessed using an economic capital model that takes into account potential variations in these factors. The impact of these variations on both pension assets and pension liabilities is assessed using a one-in-200-year stress test. Scenario analysis and other stress tests are also used to support pension risk management. To fund the benefits associated with defined benefit plans, sponsoring Group companies, and in some instances employees, make regular contributions in accordance with advice from actuaries and in consultation with the plan's trustees where relevant. These contributions are normally set to ensure that there are sufficient funds to meet the cost of the accruing benefits for the future service of active members. However, higher contributions are required when plan assets are considered insufficient to cover the existing pension liabilities. Contribution rates are typically revised annually or once every three years, depending on the plan.
The defined benefit plans invest contributions in a range of investments designed to limit the risk of assets failing to meet a plan's liabilities. Any changes in expected returns from the investments may also change future contribution requirements. In pursuit of these long-term objectives, an overall target allocation of the defined benefit plan assets between asset classes is established. In addition, each permitted asset class has its own benchmarks, such as stock-market or property valuation indices or liability characteristics. The benchmarks are reviewed at least once every three to five years and more frequently if required by local legislation or circumstances. The process generally involves an extensive asset and liability review.
In addition, during 2019, some of the Group's pension plans performed longevity swap transactions. These arrangements provide long-term protection to the relevant plans against costs resulting from pensioners or their dependants living longer than initially expected. The most sizeable plan to do this was the HSBC Bank (UK) Pension Scheme, which performed longevity swap transactions with The Prudential Insurance Company of America, a subsidiary of Prudential Financial, Inc., and with Swiss Re. Together these cover approximately three-quarters of the plan's pensioner liabilities (50% with The Prudential Insurance Company of America and 25% with Swiss Re).
|
Market risk |
|
|
|
Page |
|
Market risk management |
151 |
|
Market risk in 2019 |
137 |
|
Trading portfolios |
137 |
|
Non-trading portfolios |
138 |
|
Market risk balance sheet linkages |
139 |
|
Structural foreign exchange exposures |
139 |
|
Net interest income sensitivity |
140 |
|
Sensitivity of capital and reserves |
141 |
|
Third-party assets in Balance Sheet Management |
141 |
|
Defined benefit pension schemes |
141 |
|
Additional market risk measures applicable only to the parent company |
142 |
Overview
Market risk is the risk that movements in market factors, such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices, will reduce our income or the value of our portfolios. Exposure to market risk is separated into two portfolios: trading portfolios and non-trading portfolios.
Market risk management
Key developments in 2019
There were no material changes to our policies and practices for the management of market risk in 2019.
Governance and structure
The following diagram summarises the main business areas where trading and non-trading market risks reside, and the market risk measures used to monitor and limit exposures.
|
Trading risk |
||
|
• Foreign exchange and commodities • Interest rates • Credit spreads • Equities |
• Structural foreign exchange • Interest rates1 • Credit spreads |
|
|
Global business |
GB&M and BSM2 |
GB&M, BSM2, GPB, CMB and RBWM |
|
Risk measure |
Value at risk | Sensitivity | Stress testing |
Value at risk | Sensitivity | Stress testing |
1 The interest rate risk on the fixed-rate securities issued by HSBC Holdings is not included in the Group value at risk. The management of this risk is described on page 142.
2 Balance Sheet Management ('BSM'), for external reporting purposes, forms part of the Corporate Centre while daily operations and risk are managed within GB&M.
Where appropriate, we apply similar risk management policies and measurement techniques to both trading and non-trading portfolios. Our objective is to manage and control market risk exposures to optimise return on risk while maintaining a market profile consistent with our established risk appetite.
Market risk is managed and controlled through limits approved by the Group Chief Risk Officer for HSBC Holdings. These limits are allocated across business lines and to the Group's legal entities. The majority of HSBC's total value at risk ('VaR') and almost all trading VaR reside in GB&M. Each major operating entity has an independent market risk management and control sub-function, which is responsible for measuring, monitoring and reporting market risk exposures against limits on a daily basis. Each operating entity is required to assess the market risks arising in its business and to transfer them either to its local GB&M unit for management, or to separate books managed under the supervision of the local ALCO. The Traded Risk function enforces the controls around trading in permissible instruments approved for each site as well as new product approval procedures. Traded Risk also restricts trading in the more complex derivative products to offices with appropriate levels of product expertise and robust control systems.
Key risk management processes
Monitoring and limiting market risk exposures
Our objective is to manage and control market risk exposures while maintaining a market profile consistent with our risk appetite.
We use a range of tools to monitor and limit market risk exposures including sensitivity analysis, VaR and stress testing.
Sensitivity analysis
Sensitivity analysis measures the impact of individual market factor movements on specific instruments or portfolios, including interest rates, foreign exchange rates and equity prices. We use sensitivity measures to monitor the market risk positions within each risk type. Granular sensitivity limits are set for trading desks with consideration of market liquidity, customer demand and capital constraints, among other factors.
Value at risk
(Audited)
VaR is a technique for estimating potential losses on risk positions as a result of movements in market rates and prices over a specified time horizon and to a given level of confidence. The use of VaR is integrated into market risk management and calculated for all trading positions regardless of how we capitalise them. In addition, we calculate VaR for non-trading portfolios to have a complete picture of risk. Where we do not calculate VaR explicitly, we use alternative tools as summarised in the 'Stress testing' section below.
Our models are predominantly based on historical simulation that incorporates the following features:
• historical market rates and prices, which are calculated with reference to foreign exchange rates, commodity prices, interest rates, equity prices and the associated volatilities;
• potential market movements that are calculated with reference to data from the past two years; and
• calculations to a 99% confidence level and using a one-day holding period.
The models also incorporate the effect of option features on the underlying exposures. The nature of the VaR models means that an increase in observed market volatility will lead to an increase in VaR without any changes in the underlying positions.
VaR model limitations
Although a valuable guide to risk, VaR is used with awareness of its limitations. For example:
• The use of historical data as a proxy for estimating future market moves may not encompass all potential market events, particularly those that are extreme in nature.
• The use of a one-day holding period for risk management purposes of trading and non-trading books assumes that this short period is sufficient to hedge or liquidate all positions.
• The use of a 99% confidence level by definition does not take into account losses that might occur beyond this level of confidence.
• VaR is calculated on the basis of exposures outstanding at the close of business and therefore does not reflect intra-day exposures.
Risk not in VaR framework
The risks not in VaR ('RNIV') framework captures and capitalises material market risks that are not adequately covered in the VaR model.
Risk factors are reviewed on a regular basis and are either incorporated directly in the VaR models, where possible, or quantified through either the VaR-based RNIV approach or a stress test approach within the RNIV framework. While VaR-based RNIVs are calculated by using historical scenarios, stress-type RNIVs are estimated on the basis of stress scenarios whose severity is calibrated to be in line with the capital adequacy requirements. The outcome of the VaR-based RNIV approach is included in the overall VaR calculation but excluded from the VaR measure used for regulatory back-testing. In addition, the stressed VaR measure also includes risk factors considered in the VaR-based RNIV approach.
Stress-type RNIVs include a gap risk exposure measure to capture risk on non-recourse margin loans, and a de-peg risk measure to capture risk to pegged and heavily managed currencies.
Stress testing
Stress testing is an important procedure that is integrated into our market risk management framework to evaluate the potential impact on portfolio values of more extreme, although plausible, events or movements in a set of financial variables. In such scenarios, losses can be much greater than those predicted by VaR modelling.
Stress testing is implemented at legal entity, regional and overall Group levels. A set of scenarios is used consistently across all regions within the Group. The risk appetite around potential stress losses for the Group is set and monitored against a referral limit.
Market risk reverse stress tests are designed to identify vulnerabilities in our portfolios by looking for scenarios that lead to loss levels considered severe for the relevant portfolio. These scenarios may be quite local or idiosyncratic in nature, and complement the systematic top-down stress testing.
Stress testing and reverse stress testing provide senior management with insights regarding the 'tail risk' beyond VaR, for which our appetite is limited.
Trading portfolios
Trading portfolios comprise positions held for client servicing and market-making, with the intention of short-term resale and/or to hedge risks resulting from such positions.
Back-testing
We routinely validate the accuracy of our VaR models by back-testing the VaR metric against both actual and hypothetical profit and loss. Hypothetical profit and loss excludes non-modelled items such as fees, commissions and revenue of intra-day transactions.
The number of back-testing exceptions is used to gauge how well the models are performing. We consider enhanced internal monitoring of a VaR model if more than five profit exceptions or more than five loss exceptions occur in a 250-day period.
We back-test our VaR at set levels of our Group entity hierarchy.
Structural foreign exchange exposures
Structural foreign exchange exposures represent net investments in subsidiaries, branches and associates, the functional currencies of which are currencies other than the US dollar. An entity's functional currency is normally that of the primary economic environment in which the entity operates.
Exchange differences on structural exposures are recognised in 'Other comprehensive income'. We use the US dollar as our presentation currency in our consolidated financial statements because the US dollar and currencies linked to it form the major currency bloc in which we transact and fund our business. Therefore, our consolidated balance sheet is affected by exchange differences between the US dollar and all the non-US dollar functional currencies of underlying subsidiaries.
Our structural foreign exchange exposures are managed with the primary objective of ensuring, where practical, that our consolidated capital ratios and the capital ratios of individual banking subsidiaries are largely protected from the effect of changes in exchange rates. We hedge structural foreign exchange exposures only in limited circumstances.
For further details of our structural foreign exchange exposures, see page 139.
Interest rate risk in the banking book
Overview
Interest rate risk in the banking book is the risk of an adverse impact to earnings or capital due to changes in market interest rates. It is generated by our non-traded assets and liabilities, specifically loans, deposits and financial instruments that are not held for trading intent or that are held in order to hedge positions held with trading intent. This risk is monitored and controlled by the Asset, Liability and Capital Management ('ALCM') function. Interest rate risk in the banking book is transferred to and managed by Balance Sheet Management ('BSM'), and also monitored by the Wholesale Market Risk, Product Control and ALCM functions with reference to established risk appetites.
Governance and structure
The ALCM function monitors and controls non-traded interest rate risk. This includes reviewing and challenging the business prior to the release of new products and in respect of proposed behavioural assumptions used for hedging activities. The ALCM function is also responsible for maintaining and updating the transfer pricing framework, informing the ALCO of the Group's overall banking book interest rate risk exposure and managing the balance sheet in conjunction with BSM.
BSM manages the banking book interest rate positions transferred to it within the market risk limits approved by RMM. Effective governance of BSM is supported by the dual reporting lines it has to the Chief Executive Officer of GB&M and to the Group Treasurer, with Risk acting as a second line of defence. The global businesses can only transfer non-trading assets and liabilities to BSM provided BSM can economically hedge the risk it receives. Hedging is generally executed through interest rate derivatives or fixed-rate government bonds. Any interest rate risk that BSM cannot economically hedge is not transferred and will remain within the global business where the risks originate.
Measurement of interest rate risk in the banking book
The ALCM function uses a number of measures to monitor and control interest rate risk in the banking book, including:
• non-traded VaR;
• net interest income sensitivity; and
• economic value of equity ('EVE').
Non-traded VaR
Non-traded VaR uses the same models as those used in the trading book and excludes both HSBC Holdings and the elements of risk that are not transferred to BSM.
NII sensitivity
A principal part of our management of non-traded interest rate risk is to monitor the sensitivity of expected net interest income ('NII') under varying interest rate scenarios (i.e. simulation modelling), where all other economic variables are held constant. This monitoring is undertaken at an entity level by local ALCOs, where entities forecast both one-year and five-year NII sensitivities across a range of interest rate scenarios.
Projected NII sensitivity figures represent the effect of pro forma movements in projected yield curves based on a static balance sheet size and structure. The exception to this is where the size of the balances or repricing is deemed interest rate sensitive, for example, non-interest-bearing current account migration and fixed-rate loan early prepayment. These sensitivity calculations do not incorporate actions that would be taken by BSM or in the business units to mitigate the effect of interest rate movements.
The NII sensitivity calculations assume that interest rates of all maturities move by the same amount in the 'up-shock' scenario. Rates are not assumed to become negative in the 'down-shock' scenario unless the central bank rate is already negative. In these cases, rates are not assumed to go further negative, which may, in certain currencies, effectively result in non-parallel shock. In addition, the NII sensitivity calculations take account of the effect of anticipated differences in changes between interbank and internally determined interest rates, where the entity has discretion in terms of the timing and extent of rate changes.
Tables showing our calculations of NII sensitivity can be found on page 140.
Economic value of equity
Economic value of equity ('EVE') represents the present value of the future banking book cash flows that could be distributed to equity providers under a managed run-off scenario. This equates to the current book value of equity plus the present value of future NII in this scenario. EVE can be used to assess the economic capital required to support interest rate risk in the banking book. An EVE sensitivity is the extent to which the EVE value will change due to pre-specified movements in interest rates, where all other economic variables are held constant. Operating entities are required to monitor EVE sensitivity as a percentage of capital resources.
HSBC Holdings
As a financial services holding company, HSBC Holdings has limited market risk activities. Its activities predominantly involve maintaining sufficient capital resources to support the Group's diverse activities; allocating these capital resources across the Group's businesses; earning dividend and interest income on its investments in the businesses; payment of operating expenses; providing dividend payments to its equity shareholders and interest payments to providers of debt capital; and maintaining a supply of short-term liquid assets for deployment under extraordinary circumstances.
The main market risks to which HSBC Holdings is exposed are banking book interest rate risk and foreign currency risk. Exposure to these risks arises from short-term cash balances, funding positions held, loans to subsidiaries, investments in long-term financial assets and financial liabilities including debt capital issued. The objective of HSBC Holdings' market risk management strategy is to reduce exposure to these risks and minimise volatility in capital resources, cash flows and distributable reserves. Market risk for HSBC Holdings is monitored by Holdings ALCO in accordance with its risk appetite statement.
HSBC Holdings uses interest rate swaps and cross-currency interest rate swaps to manage the interest rate risk and foreign currency risk arising from its long-term debt issues.
Market risk in 2019
The performance of financial markets through the year reflected fluctuations in global trade tensions and changes in the policy stance of key central banks. With persistently low inflation and weak growth outlook, monetary policy turned accommodative in several major economies and emerging markets. The FRB cut its policy rate three times, reversing the tightening cycle started in 2018. At the same time, the ECB restarted its programme of government bond purchases in September. Yield curves inverted in a number of countries during the summer, while the stock of fixed income securities with negative yields reached record highs.
During the last quarter of the year, easing of US-China trade tensions and looser financial conditions contributed to a more positive market sentiment. Global stock markets reached historical record highs and volatility remained subdued. However, tensions around the UK's departure from the EU led to spikes in short-term sterling volatility. Search for yield contributed to further tightening of credit spreads on investment grade and high-yield debt, although spreads on corporate debt with the lowest ratings tended to widen.
The overall risk profile remained relatively stable in 2019, with the fixed income business continuing to be the key driver of trading VaR. The interest rates asset class was the major contributor to trading VaR, while the exposure to credit spread risks provided partial offsetting gains. The equity and foreign exchange components provided more limited contributions to the overall market risk in the trading book.
Trading portfolios
Value at risk of the trading portfolios
Trading VaR predominantly resides within Global Markets.
VaR for trading book activity at the end of 2019 was lower than at the end of 2018. The decrease was attributable primarily to lower contributions from:
• credit spread risks due to a reduction of exposures during the year and lower baseline credit spread levels;
• reduced equity correlation and interest rate volatility risks captured in the RNIV framework; and
• some offsetting gains provided by the flow rates activity.
The lower contribution of the above drivers of trading VaR was partly offset by reduced diversification benefits across asset classes.
The daily levels of total trading VaR during 2019 are set out in the graph below.
|
Daily VaR (trading portfolios), 99% 1 day ($m) |
The Group trading VaR for the year is shown in the table below.
|
Trading VaR, 99% 1 day1 |
||||||||||||
|
(Audited) |
|
|
|
|
|
|
||||||
|
|
Foreign exchange and commodity |
Interest rate |
Equity |
Credit spread |
Portfolio diversification2 |
Total3 |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Balance at 31 Dec 2019 |
7.7 |
|
28.2 |
|
15.7 |
|
15.2 |
|
(26.4 |
) |
40.3 |
|
|
Average |
6.9 |
|
29.9 |
|
16.2 |
|
23.7 |
|
(29.0 |
) |
47.8 |
|
|
Maximum |
13.5 |
|
36.5 |
|
24.9 |
|
33.2 |
|
|
59.3 |
|
|
|
Minimum |
4.1 |
|
22.9 |
|
12.4 |
|
11.7 |
|
|
33.3 |
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance at 31 Dec 2018 |
12.6 |
|
33.9 |
|
22.6 |
|
25.9 |
|
(37.9 |
) |
57.1 |
|
|
Average |
9.5 |
|
36.4 |
|
22.5 |
|
20.7 |
|
(34.3 |
) |
54.8 |
|
|
Maximum |
21.8 |
|
49.9 |
|
33.8 |
|
35.2 |
|
|
71.2 |
|
|
|
Minimum |
5.5 |
|
27.0 |
|
13.5 |
|
12.2 |
|
|
43.9 |
|
|
1 Trading portfolios comprise positions arising from the market-making and warehousing of customer-derived positions.
2 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic market risk that occurs when combining a number of different risk types - such as interest rate, equity and foreign exchange - together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of portfolio diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for these measures.
3 The total VaR is non-additive across risk types due to diversification effects.
Back-testing
In 2019, the Group experienced six profit back-testing exceptions and one loss back-testing exception against actual profit and loss. Some of these exceptions were driven by profits spread across a large number of desks or arose from new trades, which are outside trading VaR scope. The above exceptions comprised:
• a profit exception in early January, driven by gains across most asset classes, as interest rates rose and equity markets rebounded;
• a profit exception in late January, due mainly to gains from new transactions in the Rates business and lower equity volatilities;
• a profit exception in March, driven by increased volatility in some emerging markets currencies and interest rates;
• a loss exception in March, attributable to month-end valuation adjustments driven by portfolio and spread changes;
• two profit exceptions in early May, arising from new transactions and a number of relatively small gains spread across all asset classes; and
• a profit exception in December, due to gains from multiple desks and spread across all asset classes.
The Group also experienced one profit back-testing exception and one loss back-testing exception against hypothetical profit and loss:
• a loss exception in November driven primarily by the impact of the widening of the credit spread on a high-yield bond holding; and
• a profit exception in December, due to gains from multiple desks and spread across all asset classes.
Non-trading portfolios
Non-trading portfolios comprise positions that primarily arise from the interest rate management of our retail and commercial banking assets and liabilities, financial investments measured at fair value through other comprehensive income, debt instruments measured at amortised cost, and exposures arising from our insurance operations.
Value at risk of the non-trading portfolios
VaR for non-trading books at the end of 2019 was materially larger than in 2018. The increase was driven by an uplift in contributions from both interest rate and credit spread risks during the last quarter of the year. The larger contribution from interest rate risks was primarily due to increased inventories of highly-rated government securities and the effect of rising long-term interest rates on the duration of the agency mortgage-backed securities ('MBS') portfolio. Increase in credit spread risk contribution was also driven by the MBS portfolio, due mainly to US mortgage spreads widening in the second half of the year owing to geopolitical events, such as the US-China trade- and tariff-related tensions, and related concerns around weaker economic growth.
Non-trading VaR includes the interest rate risk in the banking book transferred to and managed by BSM and the non-trading financial instruments held by BSM. The management of interest rate risk in the banking book is described further in the 'Net interest income sensitivity' section.
The daily levels of total non-trading VaR over the last year are set out in the graph below.
|
Daily VaR (non-trading portfolios), 99% 1 day ($m) |
The Group non-trading VaR for the year is shown in the table below.
|
Non-trading VaR, 99% 1 day |
||||||||
|
(Audited) |
||||||||
|
|
Interest rate |
Credit spread |
Portfolio |
Total2 |
||||
|
|
$m |
$m |
$m |
$m |
||||
|
Balance at 31 Dec 2019 |
96.2 |
|
62.5 |
|
(28.2 |
) |
130.5 |
|
|
Average |
65.9 |
|
44.2 |
|
(25.6 |
) |
84.5 |
|
|
Maximum |
100.1 |
|
81.2 |
|
|
132.8 |
|
|
|
Minimum |
49.2 |
|
26.6 |
|
|
60.9 |
|
|
|
|
|
|
|
|
||||
|
Balance at 31 Dec 2018 |
61.4 |
|
37.2 |
|
(30.6 |
) |
68 |
|
|
Average |
96.8 |
|
48.3 |
|
(29.1 |
) |
116 |
|
|
Maximum |
129.3 |
|
96 |
|
|
154.1 |
|
|
|
Minimum |
59.9 |
|
27.6 |
|
|
68 |
|
|
1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic market risk that occurs when combining a number of different risk types - such as interest rate, equity and foreign exchange - together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of portfolio diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for these measures.
2 The total VaR is non-additive across risk types due to diversification effects.
Non-trading VaR excludes equity risk on securities held at fair value, structural foreign exchange risk and interest rate risk on fixed-rate securities issued by HSBC Holdings. The following sections describe the scope of HSBC's management of market risks in non-trading books.
Market risk balance sheet linkages
The following balance sheet lines in the Group's consolidated position are subject to market risk:
Trading assets and liabilities
The Group's trading assets and liabilities are in almost all cases originated by GB&M. These assets and liabilities are treated as traded risk for the purposes of market risk management, other than a limited number of exceptions, primarily in Global Banking where the short-term acquisition and disposal of the assets are linked to other non-trading-related activities such as loan origination.
Derivative assets and liabilities
We undertake derivative activity for three primary purposes: to create risk management solutions for clients, to manage the portfolio risks arising from client business, and to manage and hedge our own risks. Most of our derivative exposures arise from
sales and trading activities within GB&M. The assets and liabilities included in trading VaR give rise to a large proportion of the income included in net income from financial instruments held for trading or managed on a fair value basis. Adjustments to trading income such as valuation adjustments are not measured by the trading VaR model.
For information on the accounting policies applied to financial instruments at fair value, see Note 1 on the financial statements
Structural foreign exchange exposures
For our policies and procedures for managing structural foreign exchange exposures, see page 136 of the 'Risk management' section.
Structural foreign exchange exposures represent net investments in subsidiaries, branches and associates, the functional currencies of which are currencies other than the US dollar. Exchange differences on structural exposures are recognised in 'Other comprehensive income'.
|
Net structural foreign exchange exposures |
|||||
|
|
|
2019 |
2018 |
||
|
|
Footnotes |
$m |
$m |
||
|
Currency of structural exposure |
|
|
|
||
|
Hong Kong dollars |
|
46,527 |
|
41,477 |
|
|
Pound sterling |
1 |
33,383 |
|
36,642 |
|
|
Chinese renminbi |
|
28,847 |
|
27,554 |
|
|
Euros |
|
14,881 |
|
20,964 |
|
|
Mexican pesos |
|
4,600 |
|
4,363 |
|
|
Canadian dollars |
|
4,416 |
|
3,815 |
|
|
Indian rupees |
|
4,375 |
|
3,837 |
|
|
Saudi riyals |
|
4,280 |
|
3,913 |
|
|
UAE dirhams |
|
4,105 |
|
2,185 |
|
|
Malaysian ringgit |
|
2,695 |
|
2,572 |
|
|
Singapore dollars |
|
2,256 |
|
2,246 |
|
|
Taiwanese dollars |
|
1,957 |
|
1,904 |
|
|
Australian dollars |
|
1,898 |
|
1,823 |
|
|
Indonesian rupiah |
|
1,665 |
|
1,792 |
|
|
Korean won |
|
1,245 |
|
1,285 |
|
|
Swiss francs |
|
1,188 |
|
987 |
|
|
Thai baht |
|
910 |
|
856 |
|
|
Egyptian pound |
|
875 |
|
697 |
|
|
Brazilian real |
|
271 |
|
707 |
|
|
Others, each less than $700m |
|
6,758 |
|
6,140 |
|
|
At 31 Dec |
|
167,132 |
|
165,759 |
|
1 At 31 December 2019, we had forward foreign exchange contracts of $10.5bn (2018: $5bn) in order to manage our sterling structural foreign exchange exposure.
Shareholders' equity would decrease by $2,298m (2018: $2,743m) if euro and sterling foreign currency exchange rates weakened by 5% relative to the US dollar.
Net interest income sensitivity
The following tables set out the assessed impact to a hypothetical base case projection of our NII (excluding insurance) under the following scenarios:
• an immediate shock of 25 basis points ('bps') to the current market-implied path of interest rates across all currencies on
1 January 2020 (effects over one year and five years); and
• an immediate shock of 100bps to the current market-implied path of interest rates across all currencies on 1 January 2020 (effects over one year and five years).
The sensitivities shown represent our assessment of the change to a hypothetical base case NII, assuming a static balance sheet and no management actions from BSM. They incorporate the effect of interest rate behaviouralisation, managed rate product pricing assumptions and customer behaviour, including prepayment of mortgages or customer migration from non-interest-bearing to interest-bearing deposit accounts under the specific interest rate scenarios. Market uncertainty and our competitors' behaviours also need to be factored in when analysing these results. The scenarios represent interest rate shocks to the current market implied path of rates.
The NII sensitivities shown are indicative and based on simplified scenarios. Immediate interest rate rises of 25bps and 100bps would increase projected NII for the 12 months to 31 December 2020 by $853m and $2,798m, respectively. Conversely, falls of 25bps and 100bps would decrease projected NII for the 12 months to 31 December 2020 by $849m and $3,311m, respectively.
The sensitivity of NII for 12 months increased by $20m in the plus 100bps parallel shock and decreased by $143m in the minus 100bps parallel shock, comparing December 2020 with December 2019. These changes were driven by movements in the sterling amounts primarily due to changes in balance sheet composition given by liquidity management.
The change in NII sensitivity for five years is also driven by the factors above.
The structural sensitivity arising from the four global businesses, excluding Global Markets, is positive in a rising rate environment and negative in a falling rate environment. Both BSM and Global Markets have NII sensitivity profiles that offset this to some degree. The tables do not include BSM management actions or changes in Global Markets' net trading income that may further limit the offset.
The limitations of this analysis are discussed within the 'Market risk management' section on page 135.
|
NII sensitivity to an instantaneous change in yield curves (12 months) |
||||||||||||
|
|
Currency |
|
||||||||||
|
|
$ |
HK$ |
£ |
€ |
Other |
Total |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Change in Jan 2020 to Dec 2020 (based on balance sheet at 31 December 2019) |
|
|
|
|
|
|
||||||
|
+25bps parallel |
59 |
|
198 |
|
278 |
|
116 |
|
202 |
|
853 |
|
|
-25bps parallel |
(91 |
) |
(255 |
) |
(332 |
) |
11 |
|
(182 |
) |
(849 |
) |
|
+100bps parallel |
(16 |
) |
504 |
|
1,123 |
|
441 |
|
746 |
|
2,798 |
|
|
-100bps parallel |
(490 |
) |
(1,023 |
) |
(1,049 |
) |
(23 |
) |
(726 |
) |
(3,311 |
) |
|
Change in Jan 2019 to Dec 2019 (based on balance sheet at 31 December 2018) |
|
|
|
|
|
|
||||||
|
+25bps parallel |
70 |
|
232 |
|
198 |
|
115 |
|
213 |
|
828 |
|
|
-25bps parallel |
(160 |
) |
(301 |
) |
(244 |
) |
8 |
|
(187 |
) |
(884 |
) |
|
+100bps parallel |
147 |
|
773 |
|
777 |
|
408 |
|
673 |
|
2,778 |
|
|
-100bps parallel |
(523 |
) |
(1,046 |
) |
(1,122 |
) |
9 |
|
(772 |
) |
(3,454 |
) |
The net interest income sensitivities arising from the scenarios presented in the tables above are not directly comparable. This is due to timing differences relating to interest rate changes and the repricing of assets and liabilities.
|
NII sensitivity to an instantaneous change in yield curves (5 years) |
||||||||||||
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Total |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Change in Jan 2020 to Dec 2020 (based on balance sheet at 31 December 2019) |
|
|
|
|
|
|
||||||
|
+25bps parallel |
853 |
|
1,158 |
|
1,348 |
|
1,449 |
|
1,523 |
|
6,331 |
|
|
-25bps parallel |
(849 |
) |
(1,205 |
) |
(1,402 |
) |
(1,562 |
) |
(1,649 |
) |
(6,667 |
) |
|
+100bps parallel |
2,798 |
|
4,255 |
|
4,915 |
|
5,155 |
|
5,454 |
|
22,577 |
|
|
-100bps parallel |
(3,311 |
) |
(4,621 |
) |
(5,289 |
) |
(5,766 |
) |
(6,164 |
) |
(25,151 |
) |
|
Change in Jan 2019 to Dec 2019 (based on balance sheet at 31 December 2018) |
|
|
|
|
|
|
||||||
|
+25bps parallel |
828 |
|
1,155 |
|
1,416 |
|
1,529 |
|
1,428 |
|
6,356 |
|
|
-25bps parallel |
(884 |
) |
(1,127 |
) |
(1,206 |
) |
(1,296 |
) |
(1,597 |
) |
(6,110 |
) |
|
+100bps parallel |
2,778 |
|
3,863 |
|
4,542 |
|
4,968 |
|
5,096 |
|
21,247 |
|
|
-100bps parallel |
(3,454 |
) |
(4,632 |
) |
(5,276 |
) |
(5,691 |
) |
(6,187 |
) |
(25,240 |
) |
Sensitivity of capital and reserves
Financial assets at fair value through other comprehensive income reserves are included as part of CET1 capital. We measure the potential downside risk to the CET1 ratio due to interest rate and credit spread risk in this portfolio using the portfolio's stressed VaR, with a 99% confidence level and an assumed holding period of one quarter. At December 2019, the stressed VaR of the portfolio was $3.2bn (2018: $2.9bn).
We monitor the sensitivity of reported cash flow hedging reserves to interest rate movements on a yearly basis by assessing
the expected reduction in valuation of cash flow hedges due to parallel movements of plus or minus 100bps in all yield curves. These particular exposures form only a part of our overall interest rate exposure.
The following table describes the sensitivity of our cash flow hedge reported reserves to the stipulated movements in yield curves at year end. The sensitivities are indicative and based on simplified scenarios.
|
Sensitivity of cash flow hedging reported reserves to interest rate movements |
|
|
|
|
|
|
$m |
|
At 31 Dec 2019 |
|
|
+100 basis point parallel move in all yield curves |
(702) |
|
As a percentage of total shareholders' equity |
(0.38)% |
|
-100 basis point parallel move in all yield curves |
732 |
|
As a percentage of total shareholders' equity |
0.4% |
|
|
|
|
At 31 Dec 2018 |
|
|
+100 basis point parallel move in all yield curves |
(492) |
|
As a percentage of total shareholders' equity |
(0.26)% |
|
-100 basis point parallel move in all yield curves |
550 |
|
As a percentage of total shareholders' equity |
0.3% |
Third-party assets in Balance Sheet Management
For our BSM governance framework, see page 136.
Third-party assets in BSM increased by 1.6% during 2019. 'Reverse repurchase agreements' increased by $7bn, reflecting in
part the management of cash and commercial surplus in North America and Asia respectively. 'Financial Investments' increased by $18bn, driven by an increase in investments predominantly across Europe and Middle East. 'Cash and balances at central banks' comparatively decreased by $16bn.
|
Third-party assets in Balance Sheet Management |
||||
|
|
2019 |
2018 |
||
|
|
$m |
$m |
||
|
Cash and balances at central banks |
129,114 |
|
144,802 |
|
|
Trading assets |
268 |
|
601 |
|
|
Loans and advances: |
|
|
||
|
- to banks |
24,466 |
|
25,257 |
|
|
- to customers |
310 |
|
964 |
|
|
Reverse repurchase agreements |
29,868 |
|
22,899 |
|
|
Financial investments |
351,842 |
|
333,622 |
|
|
Other |
7,655 |
|
6,880 |
|
|
At 31 Dec |
543,523 |
|
535,025 |
|
Defined benefit pension schemes
Market risk arises within our defined benefit pension schemes to the extent that the obligations of the schemes are not fully matched by assets with determinable cash flows.
For details of our defined benefit schemes, including asset allocation, see Note 5 on the financial statements, and for pension risk management, see page 134.
Additional market risk measures applicable only to the parent company
HSBC Holdings monitors and manages foreign exchange risk and interest rate risk. In order to manage interest rate risk, HSBC Holdings uses the projected sensitivity of its NII to future changes in yield curves and the interest rate gap repricing tables.
Foreign exchange risk
HSBC Holdings' foreign exchange exposures derive almost entirely from the execution of structural foreign exchange hedges on behalf of the Group as its business-as-usual foreign exchange exposures are managed within tight risk limits. At 31 December 2019, HSBC Holdings had forward foreign exchange contracts of $10.5bn (2018: $5bn) to manage the Group's sterling structural foreign exchange exposure.
Sensitivity of net interest income
HSBC Holdings monitors NII sensitivity over a five-year time horizon, reflecting the longer-term perspective on interest rate risk management appropriate to a financial services holding company. These sensitivities assume that any issuance where HSBC Holdings has an option to reimburse at a future call date is called at this date. The table below sets out the effect on HSBC Holdings' future NII over a five-year time horizon of incremental 25bps parallel falls or rises in all yield curves at the beginning of each quarter during the 12 months from 1 January 2020.
The NII sensitivities shown are indicative and based on simplified scenarios. Immediate interest rate rises of 25bps and 100bps would decrease projected NII for the 12 months to 31 December 2020 by $21m and $96m, respectively. Conversely, falls of 25bps and 100bps would increase projected NII for the 12 months to 31 December 2020 by $23m and $99m, respectively.
|
NII sensitivity to an instantaneous change in yield curves (12 months) |
||||||||||||
|
|
$ |
HK$ |
£ |
€ |
Other |
Total |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Change in Jan 2020 to Dec 2020 (based on balance sheet at 31 December 2019) |
|
|
|
|
|
|
||||||
|
+25bps |
(30 |
) |
- |
|
7 |
|
2 |
|
- |
|
(21 |
) |
|
-25bps |
30 |
|
- |
|
(7 |
) |
- |
|
- |
|
23 |
|
|
+100bps |
(120 |
) |
- |
|
30 |
|
(6 |
) |
- |
|
(96 |
) |
|
-100bps |
120 |
|
- |
|
(21 |
) |
- |
|
- |
|
99 |
|
|
Change in Jan 2019 to Dec 2019 (based on balance sheet at 31 December 2018) |
|
|
|
|
|
|
||||||
|
+25bps |
(10 |
) |
- |
|
8 |
|
(5 |
) |
- |
|
(7 |
) |
|
-25bps |
10 |
|
- |
|
(8 |
) |
8 |
|
- |
|
10 |
|
|
+100bps |
(38 |
) |
- |
|
31 |
|
(22 |
) |
- |
|
(29 |
) |
|
-100bps |
38 |
|
- |
|
(28 |
) |
33 |
|
- |
|
43 |
|
|
NII sensitivity to an instantaneous change in yield curves (5 years) |
||||||||||||
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Total |
||||||
|
|
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Change in Jan 2020 to Dec 2020 (based on balance sheet at 31 December 2019) |
|
|
|
|
|
|
||||||
|
+25bps |
(21 |
) |
(14 |
) |
(13 |
) |
(14 |
) |
(17 |
) |
(79 |
) |
|
-25bps |
23 |
|
12 |
|
8 |
|
9 |
|
13 |
|
65 |
|
|
+100bps |
(96 |
) |
(64 |
) |
(53 |
) |
(54 |
) |
(72 |
) |
(339 |
) |
|
-100bps |
99 |
|
61 |
|
41 |
|
38 |
|
43 |
|
282 |
|
|
Change in Jan 2019 to Dec 2019 (based on balance sheet at 31 December 2018) |
|
|
|
|
- |
|
|
|||||
|
+25bps |
(7 |
) |
(9 |
) |
(9 |
) |
(4 |
) |
(8 |
) |
(37 |
) |
|
-25bps |
10 |
|
12 |
|
11 |
|
11 |
|
11 |
|
55 |
|
|
+100bps |
(29 |
) |
(36 |
) |
(36 |
) |
(16 |
) |
(32 |
) |
(149 |
) |
|
-100bps |
43 |
|
47 |
|
47 |
|
29 |
|
42 |
|
208 |
|
The interest rate sensitivities in the preceding table are indicative and based on simplified scenarios. The figures represent hypothetical movements in NII based on our projected yield curve scenarios, HSBC Holdings' current interest rate risk profile and assumed changes to that profile during the next five years.
The sensitivities represent our assessment of the change to a hypothetical base case based on a static balance sheet assumption, and do not take into account the effect of actions that could be taken to mitigate this interest rate risk.
Interest rate repricing gap table
The interest rate risk on the fixed-rate securities issued by HSBC Holdings is not included within the Group VaR, but is managed on a repricing gap basis. The following interest rate repricing gap table analyses the full-term structure of interest rate mismatches within HSBC Holdings' balance sheet where debt issuances are reflected based on either the next reprice date if floating rate or the maturity/call date (whichever is first) if fixed rate.
|
Repricing gap analysis of HSBC Holdings |
|||||||||||||
|
|
|
Total |
Up to 1 year |
From over 1 to 5 years |
From over 5 to 10 years |
More than 10 years |
Non-interest bearing |
||||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
$m |
$m |
||||||
|
Cash at bank and in hand: |
|
|
|
|
|
|
|
||||||
|
- balances with HSBC undertakings |
|
2,382 |
|
2,382 |
|
- |
|
- |
|
- |
|
- |
|
|
Derivatives |
|
2,002 |
|
- |
|
- |
|
- |
|
- |
|
2,002 |
|
|
Loans and advances to HSBC undertakings |
|
72,182 |
|
19,976 |
|
21,084 |
|
24,739 |
|
2,000 |
|
4,383 |
|
|
Financial investments in HSBC undertakings |
|
16,106 |
|
13,054 |
|
3,006 |
|
- |
|
- |
|
46 |
|
|
Investments in subsidiaries |
|
163,948 |
|
5,035 |
|
5,118 |
|
3,924 |
|
- |
|
149,871 |
|
|
Other assets |
|
1,095 |
|
102 |
|
- |
|
- |
|
- |
|
993 |
|
|
Total assets |
|
257,715 |
|
40,549 |
|
29,208 |
|
28,663 |
|
2,000 |
|
157,295 |
|
|
Amounts owed to HSBC undertakings |
|
(464 |
) |
(464 |
) |
- |
|
- |
|
- |
|
- |
|
|
Financial liabilities designated at fair values |
|
(30,303 |
) |
- |
|
(14,628 |
) |
(14,698 |
) |
(750 |
) |
(227 |
) |
|
Derivatives |
|
(2,021 |
) |
- |
|
- |
|
- |
|
- |
|
(2,021 |
) |
|
Debt securities in issue |
|
(56,844 |
) |
(15,446 |
) |
(22,336 |
) |
(15,154 |
) |
(2,000 |
) |
(1,908 |
) |
|
Other liabilities |
|
(2,203 |
) |
- |
|
- |
|
- |
|
- |
|
(2,203 |
) |
|
Subordinated liabilities |
|
(18,361 |
) |
- |
|
(2,000 |
) |
(2,543 |
) |
(11,284 |
) |
(2,534 |
) |
|
Total equity |
|
(147,519 |
) |
(2,950 |
) |
(10,707 |
) |
(9,975 |
) |
- |
|
(123,887 |
) |
|
Total liabilities and equity |
|
(257,715 |
) |
(18,860 |
) |
(49,671 |
) |
(42,370 |
) |
(14,034 |
) |
(132,780 |
) |
|
Off-balance sheet items attracting interest rate sensitivity |
|
|
(30,363 |
) |
16,789 |
|
6,796 |
|
6,469 |
|
309 |
|
|
|
Net interest rate risk gap at 31 Dec 2019 |
|
|
(8,674 |
) |
(3,674 |
) |
(6,911 |
) |
(5,565 |
) |
24,824 |
|
|
|
Cumulative interest rate gap |
|
|
(8,674 |
) |
(12,348 |
) |
(19,259 |
) |
(24,824 |
) |
- |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Cash at bank and in hand: |
|
|
|
|
|
|
|
||||||
|
- balances with HSBC undertakings |
|
3,509 |
|
3,509 |
|
- |
|
- |
|
- |
|
- |
|
|
Derivatives |
|
707 |
|
- |
|
- |
|
- |
|
- |
|
707 |
|
|
Loans and advances to HSBC undertakings |
|
79,657 |
|
39,316 |
|
16,717 |
|
18,382 |
|
2,000 |
|
3,242 |
|
|
Financial investments in HSBC undertakings |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Investments in subsidiaries |
|
160,231 |
|
4,703 |
|
2,136 |
|
379 |
|
|
153,013 |
|
|
|
Other assets |
|
1,077 |
|
- |
|
- |
|
- |
|
- |
|
1,077 |
|
|
Total assets |
|
245,181 |
|
47,528 |
|
18,853 |
|
18,761 |
|
2,000 |
|
158,039 |
|
|
Amounts owed to HSBC undertakings |
|
(949 |
) |
- |
|
- |
|
- |
|
- |
|
(949 |
) |
|
Financial liabilities designated at fair values |
|
(25,049 |
) |
(1,920 |
) |
(11,871 |
) |
(9,299 |
) |
(750 |
) |
(1,208 |
) |
|
Derivatives |
|
(2,159 |
) |
- |
|
- |
|
- |
|
- |
|
(2,159 |
) |
|
Debt securities in issue |
|
(50,800 |
) |
(14,879 |
) |
(16,753 |
) |
(18,156 |
) |
(2,900 |
) |
1,888 |
|
|
Other liabilities |
|
(1,156 |
) |
- |
|
- |
|
- |
|
- |
|
(1,156 |
) |
|
Subordinated liabilities |
|
(17,715 |
) |
(1,646 |
) |
- |
|
(4,476 |
) |
(10,317 |
) |
(1,277 |
) |
|
Total equity |
|
(147,353 |
) |
(1,450 |
) |
(9,861 |
) |
(10,777 |
) |
(1,372 |
) |
(123,893 |
) |
|
Total liabilities and equity |
|
(245,181 |
) |
(19,895 |
) |
(38,485 |
) |
(42,708 |
) |
(15,339 |
) |
(128,754 |
) |
|
Off-balance sheet items attracting interest rate sensitivity |
|
|
(30,713 |
) |
10,544 |
|
12,718 |
|
6,410 |
|
1,041 |
|
|
|
Net interest rate risk gap at 31 Dec 2018 |
1 |
|
(3,080 |
) |
(9,088 |
) |
(11,229 |
) |
(6,929 |
) |
30,326 |
|
|
|
Cumulative interest rate gap |
|
|
(3,080 |
) |
(12,168 |
) |
(23,397 |
) |
(30,326 |
) |
|
||
1 Investments in subsidiaries and equity have been allocated based on call dates for any callable bonds. The prior year figures have been amended to reflect this.
|
Resilience risk |
Overview
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates and counterparties as a result of sustained and significant operational disruption.
Resilience risk arises from failures or inadequacies in processes, people, systems or external events.
Resilience risk management
Key developments in 2019
In May 2019, in line with the increasing threat landscape that we face, we formed a new Resilience Risk sub-function. The function seeks to take a holistic view of the increasing geopolitical, environmental and technological risks to ensure the continued provision of critical services to our customers. These threats include those to our physical buildings, data centres and branches, cyber-attacks impacting our critical systems and data as well as threats posed by our reliance on third parties.
We have carried out a number of initiatives to develop and embed the new sub-function:
• We recruited and consolidated the following previously independent risk functions: Information and Cyber Security; Protective Security; Business Continuity and Incident Management; Building Availability and Workspace Safety; Third Party; Systems and Data Integrity; and Transaction Processing.
• We aligned with the operational risk management framework and the agreed non-financial risk responsibilities.
• We developed a new risk taxonomy with control library changes, simplifying and removing duplication that existed in the previously independent risk functions, which helped to strengthen our overall management of operational risks.
• We focused on the establishment of preventative measures, which include deepening an understanding of resilience risk, and creating clearly defined resilience risk oversight services and end-to-end strategic change programme support.
• We focused on detailed responsive methods, which include robust business continuity plans, back-up plans, alternative delivery channels and tested recovery options.
• We invested in IT resilience by designing and implementing IT systems that continue to be available to use in the face of adverse conditions.
• We have sought to ensure we understand the root cause of IT failures and learn lessons both from our own experiences and those of others.
We prioritise our efforts on areas of material risk and strategic growth by being present in higher risk profile countries. However, we are also supporting chief risk officers and our colleagues in the Operational Risk function in countries where we have no physical presence, with assessing and understanding their risk profile.
Governance and structure
Resilience Risk provides oversight, advice, guidance and challenge to our global businesses and global functions to strengthen our ability to prevent, adapt, and learn from resilience-related threats when - and not if - something goes wrong.
The Resilience Risk target operating model was published in November 2019. It is helping us to provide a globally consistent view across resilience risks, strengthening our risk management oversight while operating effectively as part of a simplified non-financial risk structure. We view resilience risk through six risk lenses: strategic change and emerging threats; third-party risk; information and data resilience; payments and processing resilience; systems and cyber resilience; and protective security risk.
The Resilience Risk structure simplifies interactions with our key stakeholders by providing a single channel of contact for all areas across Resilience Risk. The Resilience Risk manager interfacing with the stakeholders will be supported by experts in the wider Resilience Risk organisation to deliver clear, consistent and credible responses to the business.
A strategic change and emerging threat team within Resilience Risk provides increased oversight and robust challenge around high-priority programmes and change programmes. They consider how emerging threats, requirements and opportunities arise from the use of new technologies, and how they could impact our risk profile.
The Resilience Risk Management Meeting oversees resilience risk and has accountability to the RMM. The Resilience Risk management meeting is supported by its sub-committees that provide oversight over each of the respective Resilience Risk sub-teams.
The Resilience Risk Global Governance Meeting aims to ensure that resilience risk is managed within its defined risk appetite. It is jointly chaired by the Global Head of Operational Resilience and the Group Chief Information Officer. The Resilience Risk Global Governance Meeting has accountability into the Non-Financial Risk Management Board and escalates issues to the Group Risk Committee.
Key risk management processes
Operational resilience is our ability to adapt operations to continue functioning when an operational disturbance occurs. We measure resilience in terms of the maximum disruption period or the impact tolerance that we are willing to accept for a business service. Resilience risk cannot be managed down to zero, so we concentrate on material risk and critical business services and strategic change programmes that have the highest potential to threaten our ability to provide continued service to our customers.
The Resilience Risk team oversees the identification, management and control of resilience risks. To support our oversight, a variety of changes have been made to the risk taxonomy and control library to simplify and strengthen the risk management of Resilience Risk. The risk taxonomy and control library was developed by looking at a number of frameworks and control libraries, including National Institute for Standards and Technology, Control Objectives for Information and related Technology and Standard of Good Practice.
Continuity of business operations
Every department within the organisation undertakes business continuity management. This incorporates the development of a plan that includes a business impact analysis, which assesses risk when business disruption occurs.
We maintain a number of dedicated work area recovery sites globally. Regular testing of these facilities is carried out with representation from each business and support function to help ensure business continuity plans remain accurate, relevant and fit for purpose. Where possible, we ensured that our critical business systems are not co-located with business systems users, thereby reducing concentration risk.
|
Regulatory compliance risk |
Overview
Regulatory compliance risk is the risk that we fail to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice, which as a consequence incur fines and penalties and suffer damage to our business.
Regulatory compliance risk arises from the risks associated with breaching our duty to our customers and other counterparties, inappropriate market conduct and breaching other regulatory requirements.
Regulatory compliance risk management
Key developments in 2019
There were no material changes to the policies and practices for the management of regulatory compliance risk in 2019, except for the initiatives that we undertook to raise our standards in relation to the conduct of our business, as described below under 'Conduct of business'.
Governance and structure
The Regulatory Compliance sub-function provides independent, objective oversight and challenge, and promotes a compliance-orientated culture that supports the business in delivering fair outcomes for customers, maintaining the integrity of financial markets and achieving our strategic objectives. Regulatory Compliance is part of the Compliance function, which is headed by the Group Chief Compliance Officer. Regulatory Compliance is structured as a global sub-function with regional and country Regulatory Compliance teams, which support and advise each global business and global function.
Key risk management processes
We regularly review our policies and procedures. Global policies and procedures require the prompt identification and escalation of any actual or potential regulatory breach to Regulatory Compliance. Reportable events are escalated to the RMM and the GRC, as appropriate. Matters relating to the Group's regulatory conduct of business are reported to the GRC.
Conduct of business
In 2019, we continued to promote and encourage good conduct through our people's behaviour and decision making in order to deliver fair outcomes for our customers, and to maintain financial market integrity. During 2019:
• We developed and implemented a set of principles to govern the ethical management and use of data and artificial intelligence ('AI'), which includes support of digital products and services. This was complemented with training of our people to use data appropriately.
• We continued to focus on the needs of vulnerable customers in our product and process design. In specific markets, we provided awareness and training initiatives, and we also deployed staff with specialist knowledge of conditions such as dementia. Financial inclusion initiatives progressed in specific markets, combating financial abuse and developing financial education schemes for older customers.
• We further defined roles and responsibilities for our people as part of the enterprise risk management framework across the Group to consider the customer in decision making and action.
• We delivered our fifth annual global mandatory training course on conduct, and reinforced the importance of conduct by highlighting examples of good conduct.
• We continued the expansion of recognition programmes across business areas for our people when they deliver exceptional service, when working directly with customers or in supporting roles.
The Board continues to maintain oversight of conduct matters through the GRC.
Further details can be found under the 'Our conduct' section of www.hsbc.com/our-approach/risk-and-responsibility .
|
Financial crime and fraud risk |
Overview
Financial crime and fraud risk is the risk that we knowingly or unknowingly help parties to commit or to further potentially illegal activity, including both internal and external fraud. Financial crime and fraud risk arises from day-to-day banking operations.
Financial crime and fraud risk management
Key developments in 2019
In 2019, we continued to increase our efforts to strengthen our ability to combat financial crime. We integrated into our day-to-day operations the majority of the financial crime risk core capabilities delivered through the Global Standards programme, which we set up in 2013 to enhance our risk management policies, processes and systems. We have begun several initiatives to define the next phase of financial crime risk management, including:
• We continued to strengthen our anti-fraud capabilities, focusing upon threats posed by new and existing technologies, and delivered a comprehensive fraud training programme to our people.
• We continued to invest in the use of AI and advanced analytics techniques to develop a financial crime risk management framework for the future.
• We launched advanced anti-money laundering ('AML') and sanctions automation systems to detect and disrupt financial crime in international trade. These systems are designed to strengthen our ability to fight financial crime through the detection of suspicious activity and possible criminal networks.
Governance and structure
Since establishing a global framework of financial crime risk management committees in the first quarter of 2018, we have continued to strengthen and review the effectiveness of our governance framework to manage financial crime risk. Formal governance committees are held across all countries, territories, regions and lines of business, and are chaired by the respective CEOs. They help to enable compliance with the letter and the spirit of all applicable financial crime compliance laws and regulations, as well as our own standards, values and policies relating to financial crime risks.
In 2019, at a Group level, the Financial System Vulnerabilities Committee ('FSVC') reported to the Board on matters relating to financial crime. The committee, which was attended by the Group Chief Compliance Officer, received regular reports on actions being taken to address issues and vulnerabilities, and updates on the ongoing work to strengthen financial crime controls in relation to money laundering and sanctions. In order to simplify our governance framework and processes, and as a reflection of the growing maturity of our financial crime and fraud risk management, responsibility for the oversight of financial crime risk transferred from the FSVC to the GRC, with the final meeting of the FSVC taking place on 15 January 2020. For more details on the work of the FSVC, see page 182.
Key risk management processes
We continued to deliver a programme to further enhance the policies and controls around identifying and managing the risks of bribery and corruption across our business. Our transformation programme continued to focus on our anti-fraud and anti-tax evasion capabilities. Further enhancements have been made to our governance and policy frameworks, and to the management information reporting process, which demonstrates the effectiveness of our financial crime controls. We are investing in the next generation of capabilities to fight financial crime by applying advanced analytics and AI. We remain committed to enhancing our risk assessment capabilities and to delivering more proactive risk management.
Working in partnership with the public sector and other financial institutions is vital to managing financial crime risk. We are a strong proponent of public-private partnerships and participate in information-sharing initiatives around the world to gain a better understanding of these risks so that they can be mitigated more effectively.
Skilled Person/Independent Consultant
Following expiration in December 2017 of the anti-money laundering deferred prosecution agreement entered into with the US Department of Justice ('DoJ'), the then-Monitor has continued to work in his capacity as a Skilled Person under Section 166 of the Financial Services and Markets Act under the Direction issued by the UK Financial Conduct Authority ('FCA') in 2013. He has also continued to work in his capacity as an Independent Consultant under a cease-and-desist order issued by the US Federal Reserve Board ('FRB').
The Skilled Person has assessed HSBC's progress towards being able to effectively manage its financial crime risk on a business-as-usual basis. The Skilled Person issued several reports in 2019. The Skilled Person has noted that HSBC continues to make material progress towards its financial crime risk target end state in terms of key systems, processes and people. Nonetheless, the Skilled Person has identified some areas that require further work before HSBC reaches a business-as-usual state. Reflective of HSBC's significant progress in strengthening its financial crime risk management capabilities, HSBC's engagement with the current Skilled Person will be terminated and a new Skilled Person with a narrower mandate will be appointed to assess the remaining areas that require further work in order for HSBC to transition fully to business-as-usual financial crime risk management. The FCA also intends to take steps to maintain global oversight of HSBC's management of financial crime risk.
The Independent Consultant completed his sixth annual assessment, which was primarily focused on HSBC's sanctions programme. The Independent Consultant concluded that HSBC continues to make significant strides toward establishing an effective sanctions compliance programme, commending HSBC's material progress since the fifth annual assessment in 2018. However, he has determined that certain areas within HSBC's sanctions compliance programme require further work. A seventh annual assessment will take place in the first quarter of 2020. The Independent Consultant will continue to carry out an annual Office of Foreign Assets Control compliance review, at the FRB's discretion.
Throughout 2019, the FSVC received regular reports on HSBC's relationship with the Skilled Person and Independent Consultant. The FSVC received regular updates on the Skilled Person's and Independent Consultant's reviews and received the Skilled Person's country and quarterly reports and the Independent Consultant's sixth annual assessment report. Given our general progress in strengthening our financial crime systems and controls, and in order to simplify our governance framework and processes, responsibilities of the FSVC transferred recently to the Group Risk Committee, and the final meeting of the FSVC was held on 15 January 2020.
|
Model risk |
Overview
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used. Model risk arises in both financial and non-financial contexts whenever business decision making includes reliance on models.
Key developments in 2019
In 2019, we carried out a number of initiatives to further develop and embed the Model Risk Management sub-function, including:
• We appointed regional heads of Model Risk Management in all of our key geographies, and a Global Head of Model Risk Governance.
• We refined the model risk policy to enable a more risk-based approach to model risk management.
• We conducted a full review of model governance arrangements overseeing model risk across the Group, resulting in a range of enhancements to the underlying structure to improve effectiveness and increase business engagement.
• We designed a new target operating model for Model Risk Management, referring to internal and industry best practice.
• We enhanced the calculation methodology within our Group risk appetite for model risk.
Governance and structure
We placed greater focus on our model risk activities during 2019, and to reflect this, we created the role of Chief Model Risk Officer, reporting to the Group Chief Risk Officer. This has been filled on an interim basis while we seek a permanent role holder. Model Risk Management is structured as a sub-function within Global Risk Strategy. Regional Model Risk Management teams support and advise all areas of the Group.
Key risk management processes
We use a variety of modelling approaches, including regression, simulation, sampling, machine learning and judgemental scorecards for a range of business applications, in activities such as customer selection, product pricing, financial crime transaction monitoring, creditworthiness evaluation and financial reporting. Global responsibility for managing model risk is delegated from the RMM to the Global Model Risk Committee, which is chaired by the Group Chief Risk Officer. This committee regularly reviews our model risk management policies and procedures, and requires the first line of defence to demonstrate comprehensive and effective controls based on a library of model risk controls provided by Model Risk Management.
Model Risk Management also reports on model risk to senior management on a regular basis through the use of the risk map, risk appetite metrics and top and emerging risks.
We regularly review the effectiveness of these processes, including the model oversight committee structure, to help ensure appropriate understanding and ownership of model risk is embedded in the businesses and functions.
|
Insurance manufacturing operations risk |
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|
|
Page |
|
Overview |
146 |
|
Insurance manufacturing operations risk management |
146 |
|
Insurance manufacturing operations risk in 2019 |
147 |
|
HSBC's bancassurance model |
147 |
|
Measurement |
147 |
|
Key risk types |
149 |
|
- Market risk |
149 |
|
- Credit risk |
150 |
|
- Capital and liquidity risk |
150 |
|
- Insurance risk |
151 |
Overview
Insurance risk is the risk that, over time, the cost of insurance policies written, including claims and benefits, may exceed the total amount of premiums and investment income received. The cost of claims and benefits can be influenced by many factors, including mortality and morbidity experience, as well as lapse and surrender rates.
Insurance manufacturing operations risk management
Key developments in 2019
There were no material changes to our policies and practices for the management of risks arising in our insurance manufacturing operations in 2019.
Governance and structure
(Audited)
Insurance risks are managed to a defined risk appetite, which is aligned to the Group's risk appetite and risk management framework, including its three lines of defence model. For details of the Group's governance framework, see page 74. The Global Insurance Risk Management Meeting oversees the control framework globally and is accountable to the RBWM Risk Management Meeting on risk matters relating to the insurance business.
The monitoring of the risks within our insurance operations is carried out by insurance risk teams. Specific risk functions, including Wholesale Credit and Market Risk, Operational Risk, Resilience Risk, and Compliance, support Insurance Risk teams in their respective areas of expertise.
Stress and scenario testing
(Audited)
Stress testing forms a key part of the risk management framework for the insurance business. We participate in local and Group-wide regulatory stress tests, including the Bank of England stress test of the banking system, the Hong Kong Monetary Authority stress test, the European Insurance and Occupational Pensions Authority stress test, and individual country insurance regulatory stress tests.
These have highlighted that a key risk scenario for the insurance business is a prolonged low interest rate environment. In order to mitigate the impact of this scenario, the insurance operations have taken a number of actions, including repricing some products to reflect lower interest rates, launching less capital intensive products, investing in more capital efficient assets and developing investment strategies to optimise the expected returns against the cost of economic capital.
Key risk management processes
Market risk
(Audited)
All our insurance manufacturing subsidiaries have market risk mandates that specify the investment instruments in which they are permitted to invest and the maximum quantum of market risk that they may retain. They manage market risk by using, among others, some or all of the techniques listed below, depending on the nature of the contracts written:
• We are able to adjust bonus rates to manage the liabilities to policyholders for products with discretionary participating features ('DPF'). The effect is that a significant portion of the market risk is borne by the policyholder.
• We use asset and liability matching where asset portfolios are structured to support projected liability cash flows. The Group manages its assets using an approach that considers asset quality, diversification, cash flow matching, liquidity, volatility and target investment return. It is not always possible to match asset and liability durations due to uncertainty over the receipt of all future premiums, the timing of claims and because the forecast payment dates of liabilities may exceed the duration of the longest dated investments available. We use models to assess the effect of a range of future scenarios on the values of financial assets and associated liabilities, and ALCOs employ the outcomes in determining how best to structure asset holdings to support liabilities.
• We use derivatives to protect against adverse market movements to better match liability cash flows.
• For new products with investment guarantees, we consider the cost when determining the level of premiums or the price structure.
• We periodically review products identified as higher risk, such as those that contain investment guarantees and embedded optionality features linked to savings and investment products, for active management.
• We design new products to mitigate market risk, such as changing the investment return sharing portion between policyholders and the shareholder.
• We exit, to the extent possible, investment portfolios whose risk is considered unacceptable.
• We reprice premiums charged on new contracts to policyholders.
Credit risk
(Audited)
Our insurance manufacturing subsidiaries are responsible for the credit risk, quality and performance of their investment portfolios. Our assessment of the creditworthiness of issuers and counterparties is based primarily upon internationally recognised credit ratings and other publicly available information.
Investment credit exposures are monitored against limits by our insurance manufacturing subsidiaries and are aggregated and reported to the Group Insurance Credit Risk and Group Credit Risk functions. Stress testing is performed on investment credit exposures using credit spread sensitivities and default probabilities.
We use a number of tools to manage and monitor credit risk. These include a credit report containing a watch-list of investments with current credit concerns, primarily investments that may be at risk of future impairment or where high concentrations to counterparties are present in the investment portfolio. Sensitivities to credit spread risk are assessed and monitored regularly.
Liquidity risk
(Audited)
Risk is managed by cash flow matching and maintaining sufficient cash resources, investing in high credit-quality investments with deep and liquid markets, monitoring investment concentrations and restricting them where appropriate, and establishing committed contingency borrowing facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity risk reports and an annual review of the liquidity risks to which they are exposed.
Insurance risk
HSBC Insurance primarily uses the following techniques to manage and mitigate insurance risk:
• a formalised product approval process covering product design, pricing and overall proposition management (for example, management of lapses by introducing surrender charges);
• underwriting policy;
• claims management processes; and
• reinsurance which cedes risks above our acceptable thresholds to an external reinsurer thereby limiting our exposure.
Insurance manufacturing operations risk in 2019
The majority of the risk in our insurance business derives from manufacturing activities and can be categorised as financial risk or insurance risk. Financial risks include market risk, credit risk and liquidity risk. Insurance risk is the risk, other than financial risk, of loss transferred from the holder of the insurance contract to HSBC, the issuer.
HSBC's bancassurance model
We operate an integrated bancassurance model that provides insurance products principally for customers with whom we have a banking relationship.
The insurance contracts we sell relate to the underlying needs of our banking customers, which we can identify from our point-of-sale contacts and customer knowledge. For the products we manufacture, the majority of sales are of savings, universal life and credit and term life contracts.
We choose to manufacture these insurance products in HSBC subsidiaries based on an assessment of operational scale and risk appetite. Manufacturing insurance allows us to retain the risks and rewards associated with writing insurance contracts by keeping part of the underwriting profit and investment income within the Group.
We have life insurance manufacturing subsidiaries in eight countries and territories, which are Hong Kong, France, Singapore, the UK, mainland China, Malta, Mexico and Argentina. We also have a life insurance manufacturing associate in India.
Where we do not have the risk appetite or operational scale to be an effective insurance manufacturer, we engage with a small number of leading external insurance companies in order to provide insurance products to our customers through our banking network and direct channels. These arrangements are generally structured with our exclusive strategic partners and earn the Group a combination of commissions, fees and a share of profits. We distribute insurance products in all of our geographical regions.
Insurance products are sold worldwide through branches, direct channels and third-party distributors.
Measurement
(Audited)
The risk profile of our insurance manufacturing businesses is measured using an economic capital approach. Assets and liabilities are measured on a market value basis, and a capital requirement is defined to ensure that there is a less than one-in-200 chance of insolvency over a one-year time horizon, given the risks to which the businesses are exposed. The methodology for the economic capital calculation is largely aligned to the pan-European Solvency II insurance capital regulations. The economic capital coverage ratio (economic net asset value divided by the economic capital requirement) is a key risk appetite measure.
Each of the businesses operates to appetite limits of 135% or higher. In addition to economic capital, the regulatory solvency ratio is also a metric used to manage risk appetite on an entity basis.
The following tables show the composition of assets and liabilities by contract type and by geographical region.
|
Balance sheet of insurance manufacturing subsidiaries by type of contract |
|||||||||||
|
(Audited) |
|
|
|
|
|
|
|||||
|
|
|
With DPF |
Unit-linked |
Other contracts1 |
Shareholder |
Total |
|||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
$m |
|||||
|
Financial assets |
|
73,929 |
|
7,333 |
|
17,514 |
|
8,269 |
|
107,045 |
|
|
- trading assets |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- financial assets designated and otherwise mandatorily measured at fair value through profit or loss |
|
21,652 |
|
7,119 |
|
3,081 |
|
2,426 |
|
34,278 |
|
|
- derivatives |
|
202 |
|
(6 |
) |
9 |
|
3 |
|
208 |
|
|
- financial investments at amortised cost |
|
35,299 |
|
18 |
|
13,436 |
|
4,076 |
|
52,829 |
|
|
- financial investments at fair value through other comprehensive income |
|
12,447 |
|
- |
|
445 |
|
1,136 |
|
14,028 |
|
|
- other financial assets |
2 |
4,329 |
|
202 |
|
543 |
|
628 |
|
5,702 |
|
|
Reinsurance assets |
|
2,208 |
|
72 |
|
1,563 |
|
1 |
|
3,844 |
|
|
PVIF |
3 |
- |
|
- |
|
- |
|
8,945 |
|
8,945 |
|
|
Other assets and investment properties |
|
2,495 |
|
2 |
|
211 |
|
602 |
|
3,310 |
|
|
Total assets |
|
78,632 |
|
7,407 |
|
19,288 |
|
17,817 |
|
123,144 |
|
|
Liabilities under investment contracts designated at fair value |
|
- |
|
2,011 |
|
3,881 |
|
- |
|
5,892 |
|
|
Liabilities under insurance contracts |
|
77,147 |
|
6,151 |
|
14,141 |
|
- |
|
97,439 |
|
|
Deferred tax |
4 |
197 |
|
23 |
|
6 |
|
1,297 |
|
1,523 |
|
|
Other liabilities |
|
- |
|
- |
|
- |
|
4,410 |
|
4,410 |
|
|
Total liabilities |
|
77,344 |
|
8,185 |
|
18,028 |
|
5,707 |
|
109,264 |
|
|
Total equity |
|
- |
|
- |
|
- |
|
13,879 |
|
13,879 |
|
|
Total liabilities and equity at 31 Dec 2019 |
|
77,344 |
|
8,185 |
|
18,028 |
|
19,586 |
|
123,143 |
|
|
Balance sheet of insurance manufacturing subsidiaries by type of contract (continued) |
|||||||||||
|
(Audited) |
|
|
|
|
|
|
|||||
|
|
|
With DPF |
Unit-linked |
Other contracts1 |
Shareholder |
Total |
|||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
$m |
|||||
|
Financial assets |
|
66,735 |
|
7,337 |
|
15,552 |
|
7,120 |
|
96,744 |
|
|
- trading assets |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- financial assets designated and otherwise mandatorily measured at fair value through profit or loss
|
|
17,855 |
|
7,099 |
|
3,024 |
|
1,264 |
|
29,242 |
|
|
- derivatives |
|
200 |
|
- |
|
33 |
|
4 |
|
237 |
|
|
- financial investments at amortised cost
|
|
33,575 |
|
70 |
|
11,597 |
|
4,171 |
|
49,413 |
|
|
- financial investments at fair value through other comprehensive income
|
|
11,499 |
|
- |
|
450 |
|
1,385 |
|
13,334 |
|
|
- other financial assets |
2 |
3,606 |
|
168 |
|
448 |
|
296 |
|
4,518 |
|
|
Reinsurance assets |
|
1,255 |
|
69 |
|
1,368 |
|
- |
|
2,692 |
|
|
PVIF |
3 |
- |
|
- |
|
- |
|
7,149 |
|
7,149 |
|
|
Other assets and investment properties |
|
2,670 |
|
2 |
|
235 |
|
453 |
|
3,360 |
|
|
Total assets |
|
70,660 |
|
7,408 |
|
17,155 |
|
14,722 |
|
109,945 |
|
|
Liabilities under investment contracts designated at fair value |
|
- |
|
1,574 |
|
3,884 |
|
- |
|
5,458 |
|
|
Liabilities under insurance contracts |
|
69,269 |
|
5,789 |
|
12,272 |
|
- |
|
87,330 |
|
|
Deferred tax |
4 |
179 |
|
21 |
|
15 |
|
1,051 |
|
1,266 |
|
|
Other liabilities |
|
- |
|
- |
|
- |
|
3,659 |
|
3,659 |
|
|
Total liabilities |
|
69,448 |
|
7,384 |
|
16,171 |
|
4,710 |
|
97,713 |
|
|
Total equity |
|
- |
|
- |
|
- |
|
12,232 |
|
12,232 |
|
|
Total liabilities and equity at 31 Dec 2018 |
|
69,448 |
|
7,384 |
|
16,171 |
|
16,942 |
|
109,945 |
|
1 'Other Contracts' includes term insurance, credit life insurance, universal life insurance and investment contracts not included in the 'Unit-linked' or 'With DPF' columns.
2 Comprise mainly loans and advances to banks, cash and inter-company balances with other non-insurance legal entities.
3 Present value of in-force long-term insurance business.
4 'Deferred tax' includes the deferred tax liabilities arising on recognition of PVIF.
|
Balance sheet of insurance manufacturing subsidiaries by geographical region1 |
|||||||||
|
(Audited) |
|||||||||
|
|
|
Europe |
Asia |
Latin |
Total |
||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
||||
|
Financial assets |
|
31,613 |
|
74,237 |
|
1,195 |
|
107,045 |
|
|
- trading assets |
|
- |
|
- |
|
- |
|
- |
|
|
- financial assets designated and otherwise mandatorily measured at fair value through profit or loss |
|
15,490 |
|
18,562 |
|
226 |
|
34,278 |
|
|
- derivatives |
|
84 |
|
124 |
|
- |
|
208 |
|
|
- financial investments - at amortised cost |
|
100 |
|
52,186 |
|
543 |
|
52,829 |
|
|
- financial investments - at fair value through other comprehensive income |
|
13,071 |
|
582 |
|
375 |
|
14,028 |
|
|
- other financial assets |
2 |
2,868 |
|
2,783 |
|
51 |
|
5,702 |
|
|
Reinsurance assets |
|
237 |
|
3,604 |
|
3 |
|
3,844 |
|
|
PVIF |
3 |
945 |
|
7,841 |
|
159 |
|
8,945 |
|
|
Other assets and investment properties |
|
1,085 |
|
2,176 |
|
49 |
|
3,310 |
|
|
Total assets |
|
33,880 |
|
87,858 |
|
1,406 |
|
123,144 |
|
|
Liabilities under investment contracts designated at fair value |
|
1,139 |
|
4,753 |
|
- |
|
5,892 |
|
|
Liabilities under insurance contracts |
|
28,437 |
|
67,884 |
|
1,118 |
|
97,439 |
|
|
Deferred tax |
4 |
229 |
|
1,275 |
|
19 |
|
1,523 |
|
|
Other liabilities |
|
2,212 |
|
2,172 |
|
26 |
|
4,410 |
|
|
Total liabilities |
|
32,017 |
|
76,084 |
|
1,163 |
|
109,264 |
|
|
Total equity |
|
1,862 |
|
11,774 |
|
243 |
|
13,879 |
|
|
Total liabilities and equity at 31 Dec 2019 |
|
33,879 |
|
87,858 |
|
1,406 |
|
123,143 |
|
|
|
|
|
|
|
|
||||
|
Balance sheet of insurance manufacturing subsidiaries by geographical region1 (continued) |
|||||||||
|
|
|
Europe |
Asia |
Latin |
Total |
||||
|
|
Footnotes |
$m |
$m |
$m |
$m |
||||
|
Financial assets |
|
28,631 |
|
66,793 |
|
1,320 |
|
96,744 |
|
|
- trading assets |
|
- |
|
- |
|
- |
|
- |
|
|
- financial assets designated and otherwise mandatorily measured at fair value through profit or loss |
|
13,142 |
|
15,744 |
|
326 |
|
29,242 |
|
|
- derivatives |
|
121 |
|
116 |
|
- |
|
237 |
|
|
- financial investments - at amortised cost |
|
296 |
|
48,595 |
|
522 |
|
49,413 |
|
|
- financial investments - at fair value through other comprehensive income |
|
12,453 |
|
440 |
|
441 |
|
13,334 |
|
|
- other financial assets |
2 |
2,619 |
|
1,868 |
|
31 |
|
4,518 |
|
|
Reinsurance assets |
|
249 |
|
2,438 |
|
5 |
|
2,692 |
|
|
PVIF |
3 |
832 |
|
6,195 |
|
122 |
|
7,149 |
|
|
Other assets and investment properties |
|
1,053 |
|
2,280 |
|
27 |
|
3,360 |
|
|
Total assets |
|
30,765 |
|
77,706 |
|
1,474 |
|
109,945 |
|
|
Liabilities under investment contracts designated at fair value |
|
780 |
|
4,678 |
|
- |
|
5,458 |
|
|
Liabilities under insurance contracts |
|
26,375 |
|
59,829 |
|
1,126 |
|
87,330 |
|
|
Deferred tax |
4 |
209 |
|
1,050 |
|
7 |
|
1,266 |
|
|
Other liabilities |
|
1,690 |
|
1,911 |
|
58 |
|
3,659 |
|
|
Total liabilities |
|
29,054 |
|
67,468 |
|
1,191 |
|
97,713 |
|
|
Total equity |
|
1,711 |
|
10,238 |
|
283 |
|
12,232 |
|
|
Total liabilities and equity at 31 Dec 2018 |
|
30,765 |
|
77,706 |
|
1,474 |
|
109,945 |
|
1 HSBC has no insurance manufacturing subsidiaries in Middle East and North Africa or North America.
2 Comprise mainly loans and advances to banks, cash and inter-company balances with other non-insurance legal entities.
3 Present value of in-force long-term insurance business.
4 'Deferred tax' includes the deferred tax liabilities arising on recognition of PVIF.
Key risk types
The key risks for the insurance operations are market risks, in particular interest rate and equity, and credit risks, followed by insurance underwriting risk and operational risks. Liquidity risk, while significant for the bank, is minor for our insurance operations.
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting HSBC's capital or profit. Market factors include interest rates, equity and growth assets and foreign exchange rates.
Our exposure varies depending on the type of contract issued. Our most significant life insurance products are contracts with discretionary participating features ('DPF') issued in France and Hong Kong. These products typically include some form of capital guarantee or guaranteed return on the sums invested by the policyholders, to which discretionary bonuses are added if allowed by the overall performance of the funds. These funds are primarily invested in bonds, with a proportion allocated to other asset classes to provide customers with the potential for enhanced returns.
DPF products expose HSBC to the risk of variation in asset returns, which will impact our participation in the investment performance.
In addition, in some scenarios the asset returns can become insufficient to cover the policyholders' financial guarantees, in which case the shortfall has to be met by HSBC. Amounts are held against the cost of such guarantees, calculated by stochastic modelling.
Where local rules require, these reserves are held as part of liabilities under insurance contracts. Any remainder is accounted for as a deduction from the present value of in-force ('PVIF') long-term insurance business on the relevant product. The following table shows the total reserve held for the cost of guarantees, the range of investment returns on assets supporting these products and the implied investment return that would enable the business to meet the guarantees.
The cost of guarantees increased to $693m (2018: $669m) primarily due to the reduction in swap rates in France and Hong Kong, partly offset by the impact of modelling changes in Hong Kong.
For unit-linked contracts, market risk is substantially borne by the policyholder, but some market risk exposure typically remains, as fees earned are related to the market value of the linked assets.
|
Financial return guarantees |
|||||||||||
|
(Audited) |
|||||||||||
|
|
|
2019 |
2018 |
||||||||
|
|
|
Investment returns implied by guarantee |
Long-term investment returns on relevant portfolios |
Cost of guarantees |
Investment returns implied by guarantee |
Long-term investment returns on relevant portfolios |
Cost of guarantees |
||||
|
|
Footnotes |
% |
% |
$m |
% |
% |
$m |
||||
|
Capital |
|
0.0 |
|
1.3 - 3.9 |
110 |
|
0.0 |
|
2.2-3.0 |
100 |
|
|
Nominal annual return |
|
0.1 - 2.0 |
3.0-4.5 |
118 |
|
0.1-2.0 |
3.6-3.7 |
78 |
|
||
|
Nominal annual return |
1 |
2.0 - 4.0 |
2.4 - 4.5 |
355 |
|
2.1-4.0 |
2.7-4.6 |
420 |
|
||
|
Nominal annual return |
|
4.1 - 5.0 |
2.3 - 4.1 |
110 |
|
4.1-5.0 |
2.7-4.1 |
71 |
|
||
|
At 31 Dec |
|
|
|
693 |
|
|
|
669 |
|
||
1 A block of contracts in France with guaranteed nominal annual returns in the range 1.25%-3.72% is reported entirely in the 2.0%-4.0% category in line with the average guaranteed return of 2.6% offered to policyholders by these contracts.
Sensitivities
Changes in financial market factors, from the economic assumptions in place at the start of the year, had a positive impact on reported profit before tax of $450m (2018: $326m negative). The following table illustrates the effects of selected interest rate, equity price and foreign exchange rate scenarios on our profit for the year and the total equity of our insurance manufacturing subsidiaries.
Where appropriate, the effects of the sensitivity tests on profit after tax and equity incorporate the impact of the stress on the PVIF. Due in part to the impact of the cost of guarantees and hedging strategies, which may be in place, the relationship between the profit and total equity and the risk factors is non-linear. Therefore, the results disclosed should not be extrapolated to measure sensitivities to different levels of stress. For the same reason, the impact of the stress is not necessarily symmetrical on the upside and downside. The sensitivities are stated before allowance for management actions, which may mitigate the effect of changes in the market environment. The sensitivities presented allow for adverse changes in policyholder behaviour that may arise in response to changes in market rates. The differences between the impacts on profit after tax and equity are driven by the changes in value of the bonds measured at fair value through other comprehensive income, which are only accounted for in equity.
|
Sensitivity of HSBC's insurance manufacturing subsidiaries to market risk factors |
||||||||
|
(Audited) |
||||||||
|
|
2019 |
2018 |
||||||
|
|
Effect on profit after tax |
Effect on total equity |
Effect on profit after tax |
Effect on total equity |
||||
|
|
$m |
$m |
$m |
$m |
||||
|
+100 basis point parallel shift in yield curves |
43 |
|
(37 |
) |
9 |
|
(61 |
) |
|
-100 basis point parallel shift in yield curves |
(221 |
) |
(138 |
) |
(28 |
) |
46 |
|
|
10% increase in equity prices |
270 |
|
270 |
|
213 |
|
213 |
|
|
10% decrease in equity prices |
(276 |
) |
(276 |
) |
(202 |
) |
(202 |
) |
|
10% increase in US dollar exchange rate compared with all currencies |
41 |
|
41 |
|
36 |
|
36 |
|
|
10% decrease in US dollar exchange rate compared with all currencies |
(41 |
) |
(41 |
) |
(36 |
) |
(36 |
) |
Credit risk
(Audited)
Description and exposure
Credit risk is the risk of financial loss if a customer or counterparty fails to meet their obligation under a contract. It arises in two main areas for our insurance manufacturers:
• risk associated with credit spread volatility and default by debt security counterparties after investing premiums to generate a return for policyholders and shareholders; and
• risk of default by reinsurance counterparties and non-reimbursement for claims made after ceding insurance risk.
The amounts outstanding at the balance sheet date in respect of these items are shown in the table on page 148.
The credit quality of the reinsurers' share of liabilities under insurance contracts is assessed as 'satisfactory' or higher (as defined on page 85), with 100% of the exposure being neither past due nor impaired (2018: 100%).
Credit risk on assets supporting unit-linked liabilities is predominantly borne by the policyholder. Therefore, our exposure is primarily related to liabilities under non-linked insurance and investment contracts and shareholders' funds. The credit quality of insurance financial assets is included in the table on page 100. The risk associated with credit spread volatility is to a large extent mitigated by holding debt securities to maturity, and sharing a degree of credit spread experience with policyholders.
Capital and liquidity risk
(Audited)
Description and exposure
Liquidity risk is the risk that an insurance operation, though solvent, either does not have sufficient financial resources available to meet its obligations when they fall due, or can secure them only at excessive cost.
The following table shows the expected undiscounted cash flows for insurance liabilities at 31 December 2019. The liquidity risk exposure is wholly borne by the policyholder in the case of unit-linked business and is shared with the policyholder for non-linked insurance.
The profile of the expected maturity of insurance contracts at 31 December 2019 remained comparable with 2018.
The remaining contractual maturity of investment contract liabilities is included in Note 29 on page 298.
|
Expected maturity of insurance contract liabilities |
||||||||||
|
(Audited) |
||||||||||
|
|
Expected cash flows (undiscounted) |
|||||||||
|
|
Within 1 year |
1-5 years |
5-15 years |
Over 15 years |
Total |
|||||
|
|
$m |
$m |
$m |
$m |
$m |
|||||
|
Unit-linked |
1,296 |
|
3,153 |
|
2,654 |
|
1,955 |
|
9,058 |
|
|
With DPF and Other contracts |
7,907 |
|
26,906 |
|
50,576 |
|
71,731 |
|
157,120 |
|
|
At 31 Dec 2019 |
9,203 |
|
30,059 |
|
53,230 |
|
73,686 |
|
166,178 |
|
|
|
|
|
|
|
|
|||||
|
Unit-linked |
1,119 |
|
2,932 |
|
2,684 |
|
1,962 |
|
8,697 |
|
|
With DPF and Other contracts |
7,459 |
|
27,497 |
|
46,217 |
|
55,989 |
|
137,162 |
|
|
At 31 Dec 2018 |
8,578 |
|
30,429 |
|
48,901 |
|
57,951 |
|
145,859 |
|
Insurance risk
Description and exposure
Insurance risk is the risk of loss through adverse experience, in either timing or amount, of insurance underwriting parameters (non-economic assumptions). These parameters include mortality, morbidity, longevity, lapses and unit costs.
The principal risk we face is that, over time, the cost of the contract, including claims and benefits, may exceed the total amount of premiums and investment income received.
The tables on pages 148 and 149 analyse our life insurance risk exposures by type of contract and by geographical region.
The insurance risk profile and related exposures remain largely consistent with those observed at 31 December 2018.
Sensitivities
(Audited)
The following table shows the sensitivity of profit and total equity to reasonably possible changes in non-economic assumptions across all our insurance manufacturing subsidiaries.
Mortality and morbidity risk is typically associated with life insurance contracts. The effect on profit of an increase in mortality or morbidity depends on the type of business being written. Our largest exposures to mortality and morbidity risk exist in Hong Kong and Singapore.
Sensitivity to lapse rates depends on the type of contracts being written. For a portfolio of term assurance, an increase in lapse rates typically has a negative effect on profit due to the loss of future income on the lapsed policies. However, some contract lapses have a positive effect on profit due to the existence of policy surrender charges. We are most sensitive to a change in lapse rates on unit-linked and universal life contracts in Hong Kong and Singapore, and DPF contracts in France.
Expense rate risk is the exposure to a change in the cost of administering insurance contracts. To the extent that increased expenses cannot be passed on to policyholders, an increase in expense rates will have a negative effect on our profits.
|
Sensitivity analysis |
||||
|
(Audited) |
||||
|
|
2019 |
2018 |
||
|
|
$m |
$m |
||
|
Effect on profit after tax and total equity at 31 Dec |
|
|
||
|
10% increase in mortality and/or morbidity rates |
(88 |
) |
(77 |
) |
|
10% decrease in mortality and/or morbidity rates |
88 |
|
82 |
|
|
10% increase in lapse rates |
(99 |
) |
(95 |
) |
|
10% decrease in lapse rates |
114 |
|
107 |
|
|
10% increase in expense rates |
(106 |
) |
(92 |
) |
|
10% decrease in expense rates |
105 |
|
93 |
|
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