Annual Financial Report (part 2 of 2)

HSBC UK Bank PLC

21 February 2024

 

Financial statements

Contents
77	Consolidated income statement
78	Consolidated statement of comprehensive income
79	Consolidated balance sheet
80	Consolidated statement of changes in equity
81	Consolidated statement of cash flows
82	HSBC UK Bank plc balance sheet
83	HSBC UK Bank plc statement of changes in equity
84	HSBC UK Bank plc statement of cash flows

Notes on the financial statements

Contents
85	1	Basis of preparation and material accounting policies
93	2	Net fee income
93	3	Employee compensation and benefits
98	4	Auditors' remuneration
98	5	Tax
100	6	Dividends
100	7	Fair values of financial instruments carried at fair value
101	8	Fair values of financial instruments not carried at fair value
103	9	Derivatives
105	10	Financial investments
106	11	Assets pledged, collateral received and assets transferred
107	12	Interests in joint ventures
107	13	Investments in subsidiaries
108	14	Structured entities
108	15	Goodwill and intangible assets
109	16	Prepayments, accrued income and other assets

109	17	Debt securities in issue
109	18	Accruals, deferred income and other liabilities
110	19	Provisions
112	20	Subordinated liabilities
113	21	Maturity analysis of assets, liabilities and off-balance sheet commitments
117	22	Offsetting of financial assets and financial liabilities
118	23	Called up share capital and other equity instruments
119	24	Contingent liabilities, contractual commitments, guarantees and contingent assets
120	25	Finance lease receivables
120	26	Legal proceedings and regulatory matters
121	27	Related party transactions
123	28	Business acquisitions
124	29	Events after the balance sheet date
124	30	HSBC UK Bank plc's subsidiaries and joint ventures

Consolidated income statement

for the year ended 31 December
		2023	2022
	Notes	£m	£m
Net interest income		7,787	6,203
-  interest income1,2,3		12,915	7,592
-  interest expense		(5,128)	(1,389)
Net fee income	2	1,284	1,245
-  fee income		1,554	1,493
-  fee expense		(270)	(248)
Net income from financial instruments held for trading or managed on a fair value basis		414	384
Gain on acquisition of subsidiary4		1,307	-
Other operating income		15	120
Net operating income before change in expected credit losses and other credit impairment charges		10,807	7,952
Change in expected credit losses and other credit impairment charges		(421)	(482)
Net operating income		10,386	7,470
Employee compensation and benefits	3	(1,007)	(1,079)
General and administrative expenses		(2,265)	(2,271)
Depreciation and impairment of property, plant and equipment and right-of-use assets		(116)	(164)
Amortisation and impairment of intangible assets		(319)	(318)
Total operating expenses		(3,707)	(3,832)
Operating profit		6,679	3,638
Profit before tax		6,679	3,638
Tax expense	5	(1,425)	(762)
Profit for the year		5,254	2,876
Attributable to:
-  shareholders of the parent company		5,249	2,871
-  non-controlling interests		5	5
Profit for the year		5,254	2,876

1   Interest income recognised on financial assets measured at amortised cost is £12,478m (2022: £7,415m).

2   Interest income recognised on financial assets measured at FVOCI is £435m (2022: £166m).

3   Interest income calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost or fair value through other comprehensive income.

4   Provisional gain of £1,307m recognised in respect of the acquisition of SVB UK.

Consolidated statement of comprehensive income

for the year ended 31 December
	2023	2022
	£m	£m
Profit for the year	5,254	2,876
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income	66	(300)
-  fair value gains/(losses)	16	(385)
-  fair value (gains)/losses transferred to the income statement on disposal	66	(37)
-  expected credit recoveries  recognised in the income statement	-	(1)
-  income taxes	(16)	123
Cash flow hedges	1,031	(1,234)
-  fair value gains/(losses)	548	(1,884)
-  fair value losses reclassified to the income statement	884	180
-  income taxes	(401)	470
Exchange differences	8	(2)
-  other exchange differences	8	(2)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit asset/liability	(128)	(1,023)
-  before income taxes	(176)	(1,603)
-  income taxes1	48	580
Other comprehensive income/(expense) for the year, net of tax	977	(2,559)
Total comprehensive income for the year	6,231	317
Attributable to:
-  shareholders of the parent company	6,226	312
-  non-controlling interests	5	5
Total comprehensive income for the year	6,231	317

1     There is an income tax credit of £48m (2022: credit £580m). 2022 includes an income tax credit of £134m arising upon the remeasurement of deferred tax following the substantive enactment of legislation to reduce the UK banking surcharge rate from 8% to 3% with effect from 1 April 2023.

Consolidated balance sheet

at 31 December
		2023	2022
	Notes	£m	£m
Assets
Cash and balances at central banks		65,719	94,407
Items in the course of collection from other banks		284	353
Financial assets mandatorily measured at fair value through profit or loss	7	135	108
Derivatives	9	178	546
Loans and advances to banks		7,980	6,357
Loans and advances to customers		211,887	204,143
Reverse repurchase agreements - non-trading		7,686	7,406
Financial investments	10	26,315	16,092
Prepayments, accrued income and other assets	16	8,321	8,762
Interests in joint ventures	12	8	9
Goodwill and intangible assets	15	4,363	4,258
Total assets		332,876	342,441
Liabilities and equity
Liabilities
Deposits by banks		10,843	10,721
Customer accounts		268,345	281,095
Repurchase agreements - non-trading		4,652	9,333
Items in the course of transmission to other banks		411	308
Derivatives	9	108	304
Debt securities in issue	17	1,988	1,299
Accruals, deferred income and other liabilities	18	4,124	3,543
Current tax liabilities		276	173
Provisions	19	350	424
Deferred tax liabilities	5	1,111	666
Subordinated liabilities	20	14,598	12,349
Total liabilities		306,806	320,215
Equity
Called up share capital	23	-	-
Share premium account	23	9,015	9,015
Other equity instruments	23	2,196	2,196
Other reserves		7,226	6,121
Retained earnings		7,573	4,834
Total shareholders' equity		26,010	22,166
Non-controlling interests		60	60
Total equity		26,070	22,226
Total liabilities and equity		332,876	342,441

The accompanying notes on pages 85 to 125 and the audited sections in: the 'Financial summary' on pages 9 to 12 and the 'Report of the Directors' on pages 15 to 68 form an integral part of these financial statements.

These financial statements were approved by the Board of Directors on 20 February 2024 and signed on its behalf by:

John David Stuart

Director

Consolidated statement of changes in equity

for the year ended 31 December
				Other reserves
	Called up share capital and share premium	Other equity instru-ments	Retained earnings	Financial assets at FVOCI reserve	Cash flow hedging reserve	Group re-organisa-tion reserve2	Total share- holders' equity	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	9,015	2,196	4,834	(246)	(1,324)	7,691	22,166	60	22,226
Profit for the year	-	-	5,249	-	-	-	5,249	5	5,254
Other comprehensive income (net of tax)	-	-	(128)	74	1,031	-	977	-	977
-  debt instruments at fair value through other comprehensive income	-	-	-	66	-	-	66	-	66
-  cash flow hedges	-	-	-	-	1,031	-	1,031	-	1,031
-  remeasurement of defined benefit asset/liability	-	-	(128)	-	-	-	(128)	-	(128)
-  exchange differences	-	-	-	8	-	-	8	-	8
Total comprehensive income for the year	-	-	5,121	74	1,031	-	6,226	5	6,231
Dividends to shareholders	-	-	(2,411)	-	-	-	(2,411)	(5)	(2,416)
Other movements1	-	-	29	-	-	-	29	-	29
At 31 Dec 2023	9,015	2,196	7,573	(172)	(293)	7,691	26,010	60	26,070
At 1 Jan 2022	9,015	2,196	4,877	56	(90)	7,691	23,745	60	23,805
Profit for the year	-	-	2,871	-	-	-	2,871	5	2,876
Other comprehensive income (net of tax)	-	-	(1,023)	(302)	(1,234)	-	(2,559)	-	(2,559)
-  debt instruments at fair value through other comprehensive income	-	-	-	(300)	-	-	(300)	-	(300)
-  cash flow hedges	-	-	-	-	(1,234)	-	(1,234)	-	(1,234)
-  remeasurement of defined benefit asset/liability	-	-	(1,023)	-	-	-	(1,023)	-	(1,023)
-  exchange differences	-	-	-	(2)	-	-	(2)	-	(2)
Total comprehensive income for the year	-	-	1,848	(302)	(1,234)	-	312	5	317
Dividends to shareholders	-	-	(1,929)	-	-	-	(1,929)	(5)	(1,934)
Other movements1	-	-	38	-	-	-	38	-	38
At 31 Dec 2022	9,015	2,196	4,834	(246)	(1,324)	7,691	22,166	60	22,226

1     Relates to £5m pension assets transfer from HSBC Global Services (UK) Limited and HSBC Bank plc (2022: £9m) and share based payments cost of £24m in 2023 (2022: £29m).

2     The Group reorganisation reserve is an equity reserve which was used to recognise the contribution of equity reserves associated with the ring fenced businesses that were notionally transferred from HSBC Bank plc.

Consolidated statement of cash flows

for the year ended 31 December
	2023	2022
	£m	£m
Profit before tax	6,679	3,638
Adjustments for non-cash items:
Depreciation, amortisation and impairment	435	482
Net gain from investing activities	79	(37)
Provisional gain on acquisition of SVB UK	(1,307)	-
Change in expected credit losses gross of recoveries and other credit impairment charges	472	575
Provisions including pensions	(233)	(78)
Share-based payment expense	19	17
Other non-cash items included in profit before tax	(149)	(204)
Elimination of exchange differences1	332	1,032
Changes in operating assets and liabilities
Change in net trading securities and derivatives	1,615	(2,174)
Change in loans and advances to banks and customers	(2,773)	(9,182)
Change in reverse repurchase agreements - non-trading	(264)	894
Change in financial assets mandatorily measured at fair value	(27)	(29)
Change in other assets	114	(2,219)
Change in deposits by banks and customer accounts	(20,028)	(1,234)
Change in repurchase agreements - non-trading	(5,086)	(1,104)
Change in debt securities in issue	689	399
Change in other liabilities	605	1,052
Contributions paid to defined benefit plans	(17)	(21)
Tax paid	(1,182)	(1,499)
Net cash from operating activities	(20,027)	(9,692)
Purchase of financial investments	(17,640)	(10,386)
Proceeds from the sale and maturity of financial investments	10,222	8,571
Proceeds from sale of property, plant and equipment	67	39
Purchase of property, plant and equipment	(45)	(80)
Purchase of intangible assets	(325)	(382)
Net cash flow from acquisition of SVB UK	1,023	-
Net cash from investing activities	(6,698)	(2,238)
Subordinated loan capital issued2	2,250	-
Dividends paid to shareholders of the parent company and non-controlling interests	(2,416)	(1,934)
Net cash from financing activities	(166)	(1,934)
Net decrease in cash and cash equivalents	(26,891)	(13,864)
Cash and cash equivalents at 1 Jan	100,319	114,134
Exchange differences in respect of cash and cash equivalents	(47)	49
Cash and cash equivalents at 31 Dec3	73,381	100,319
Cash and cash equivalents comprise:
-  cash and balances at central banks	65,719	94,407
-  items in the course of collection from other banks	284	353
-  loans and advances to banks of one month or less	6,948	5,285
-  reverse repurchase agreements with banks of one month or less	328	312
-  treasury bills, other bills and certificates of deposit less than three months	503	268
-  cash collateral and net settlement accounts	10	2
-  less: items in the course of transmission to other banks	(411)	(308)
Cash and cash equivalents at 31 Dec3	73,381	100,319

Interest received was £12,389m (2022: £7,054m) and interest paid was £4,607m (2022: £1,172m).

1     Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

2     Subordinated liabilities changes during the year are attributable to cash flows from issuance of securities of £2,250m (2022: £nil) and repayments of £nil (2022: £nil ). Non-cash changes during the year included foreign exchange gain/losses of £277m (2022: £556m).

3     At 31 December 2023 6,770m (2022: £4,700m) was not available for use by the group, £6,600m (2022: £4,700) related to mandatory deposits at central banks.

HSBC UK Bank plc balance sheet

at 31 December
		2023	2022
	Notes	£m	£m
Assets
Cash and balances at central banks		65,719	94,407
Items in the course of collection from other banks		96	154
Financial assets mandatorily measured at fair value through profit or loss	7	135	108
Derivatives	9	175	546
Loans and advances to banks		13,642	9,304
Loans and advances to customers		201,014	199,666
Reverse repurchase agreements - non-trading		7,686	7,406
Financial investments	10	26,104	16,092
Investments in subsidiaries	13	918	1,010
Prepayments, accrued income and other assets	16	8,117	8,527
Interests in joint ventures	12	5	5
Goodwill and intangible assets	15	1,201	1,185
Total assets		324,812	338,410
Liabilities and equity
Liabilities
Deposits by banks		14,120	11,619
Customer accounts		262,342	279,575
Repurchase agreements - non-trading		4,652	9,333
Items in the course of transmission to other banks		408	304
Derivatives	9	108	304
Debt securities in issue	17	1,564	1,091
Accruals, deferred income and other liabilities	18	3,802	3,330
Current tax liabilities		175	135
Provisions	19	327	386
Deferred tax liabilities	5	1,151	690
Subordinated liabilities	20	14,598	12,349
Total liabilities		303,247	319,116
Equity
Called up share capital	23	-	-
Share premium account	23	9,015	9,015
Other equity instruments	23	2,196	2,196
Other reserves		4,777	3,678
Retained earnings		5,577	4,405
Total equity		21,565	19,294
Total liabilities and equity		324,812	338,410

Profit after tax for the year was £3,683m (2022: £2,882m).

The accompanying notes on pages 85 to 125, and the audited sections of the 'Report of the Directors' on pages 15 to 68 form an integral part of these financial statements.

These financial statements were approved by the Board of Directors on 20 February 2024 and signed on its behalf by:

John David Stuart

Director

HSBC UK Bank plc statement of changes in equity

for the year ended 31 December
				Other reserves
	Called up share capital and share premium	Other equity instruments	Retained earnings	Financial assets at FVOCI reserve	Cash flow hedging reserve	Group re-organisation2 reserve	Total share- holders' equity
	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	9,015	2,196	4,405	(246)	(1,324)	5,248	19,294
Profit for the year	-	-	3,683	-	-	-	3,683
Other comprehensive expense (net of tax)	-	-	(128)	68	1,031	-	971
-  debt instruments at fair value through other comprehensive income	-	-	-	60	-	-	60
-  cash flow hedges	-	-	-	-	1,031	-	1,031
-  remeasurement of defined benefit asset/liability	-	-	(128)	-	-	-	(128)
-  exchange differences	-	-	-	8	-	-	8
Total comprehensive income for the year	-	-	3,555	68	1,031	-	4,654
Dividends to shareholders	-	-	(2,411)	-	-	-	(2,411)
Other movements1	-	-	29	-	-	-	29
At 31 Dec 2023	9,015	2,196	5,578	(178)	(293)	5,248	21,566
At 1 Jan 2022	9,015	2,196	4,438	56	(90)	5,248	20,863
Profit for the year	-	-	2,882	-	-	-	2,882
Other comprehensive income (net of tax)	-	-	(1,023)	(302)	(1,234)	-	(2,559)
-  debt instruments at fair value through other comprehensive income	-	-	-	(300)	-	-	(300)
-  cash flow hedges	-	-	-	-	(1,234)	-	(1,234)
-  remeasurement of defined benefit asset/liability	-	-	(1,023)	-	-	-	(1,023)
-  exchange differences	-	-	-	(2)	-	-	(2)
Total comprehensive income for the year	-	-	1,859	(302)	(1,234)	-	323
Dividends to shareholders	-	-	(1,929)	-	-	-	(1,929)
Other movements1	-	-	37	-	-	-	37
At 31 Dec 2022	9,015	2,196	4,405	(246)	(1,324)	5,248	19,294

1     Relates to £5m pension assets transfer from HSBC Global Services (UK) Limited and HSBC Bank plc (2022: £9m) and share based payments cost of £24m in 2023 (2022: £28m).

2     The Group reorganisation reserve is an equity reserve which was used to recognise the contribution of equity reserves associated with the ring fenced businesses that were notionally transferred from HSBC Bank plc.

HSBC UK Bank plc statement of cash flows

for the year ended 31 December
	2023	2022
	£m	£m
Profit before tax	4,978	3,599
Adjustments for non-cash items:
Depreciation, amortisation and impairment	411	473
Net gain from investing activities	165	(37)
Change in expected credit losses gross of recoveries and other credit impairment charges	380	457
Provisions including pensions	(224)	(93)
Share-based payment expense	19	16
Other non-cash items included in profit before tax	(149)	(204)
Elimination of exchange differences1	332	1,032
Changes in operating assets and liabilities
Change in net trading securities and derivatives	1,606	(2,174)
Change in loans and advances to banks and customers	(1,900)	(9,130)
Change in reverse repurchase agreements - non-trading	(264)	894
Change in financial assets mandatorily measured at fair value	(27)	(29)
Change in other assets	(146)	(2,188)
Change in deposits by banks and customer accounts	(14,733)	(924)
Change in repurchase agreements - non-trading	(4,683)	(1,104)
Change in debt securities in issue	473	416
Change in other liabilities	656	1,013
Contributions paid to defined benefit plans	(17)	(21)
Tax paid	(1,145)	(1,460)
Net cash from operating activities	(14,268)	(9,464)
Purchase of financial investments	(20,071)	(10,386)
Proceeds from the sale and maturity of financial investments	10,294	8,571
Proceeds from sale of property, plant and equipment	8	2
Purchase of property, plant and equipment	(42)	(66)
Purchase of intangible assets	(319)	(375)
Net cash from investing activities	(10,130)	(2,254)
Subordinated loan capital issued2	2,250	-
Dividends paid to shareholders of the parent company	(2,411)	(1,929)
Net cash from financing activities	(161)	(1,929)
Net decrease in cash and cash equivalents	(24,559)	(13,647)
Cash and cash equivalents at 1 Jan	100,516	114,114
Exchange differences in respect of cash and cash equivalents	(47)	49
Cash and cash equivalents at 31 Dec3	75,910	100,516
Cash and cash equivalents comprise:
-  cash and balances at central banks	65,719	94,407
-  items in the course of collection from other banks	96	154
-  loans and advances to banks of one month or less	9,832	5,677
-  reverse repurchase agreements with banks of one month or less	328	312
-  treasury bills, other bills and certificates of deposit less than three months	333	268
-  cash collateral and net settlement accounts	10	2
-  less: items in the course of transmission to other banks	(408)	(304)
Cash and cash equivalents at 31 Dec3	75,910	100,516

Interest received was £11,673m (2022: £6,671m), interest paid was £4,554m (2022: £1,154m) and dividends received were £140m (2022: £161m).

1     Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on line-by-line basis, as details cannot be determined without unreasonable expense.

2     Subordinated liabilities changes during the year are attributable to cash flows from issuance of securities of £2,250m (2022: £nil). Non-cash changes during the year included foreign exchange gain/losses of £277m (2022: £556m).

3     At 31 December 2023, £6,600m (2022: £4,700m) was not available for use by the bank, £6,600m (2022: £4,700m) related to mandatory deposits at central banks.

Notes on the financial statements

1	Basis of preparation and material accounting policies

1.1    Basis of preparation

(a)         Compliance with International Financial Reporting Standards

The consolidated financial statements of HSBC UK and the separate financial statements of the bank comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006. These financial statements are also prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, ('IFRS Accounting Standards'), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS Accounting standards for the periods presented. There were no unendorsed standards effective for the year ended 31 December 2023 affecting these consolidated and separate financial statements.

Standards adopted during the year ended 31 December 2023

Amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules'

On 23 May 2023, the International Accounting Standards Board ('IASB') issued amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules', which became effective immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July 2023 and by the European Financial Reporting Advisory Group on 8 November 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the OECD's Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from             1 January 2024. The group has applied the IAS 12 exemption from recognising and disclosing information on associated deferred tax assets and liabilities.

There were no other new standards or amendments to standards that had an effect on these financial statements.

(b)         Future accounting developments

Minor amendments to IFRS Accounting standards

The IASB has published a number of minor amendments to IFRS Accounting standards that are effective from 1 January 2024. The group expects they will have an insignificant effect, when adopted, on the consolidated financial statements of the group and the separate financial statements of the bank.

(c)         Foreign currencies

The functional currency of the bank is sterling, which is also the presentational currency of the consolidated financial statements of
the group.

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the balance sheet date except non-monetary assets and liabilities measured at historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised.

(d)         Presentation of information

Certain disclosures required by IFRS Accounting Standards have been included in the audited sections of this Annual Report and Accounts 2023 as follows:

-     disclosures concerning the nature and extent of risks relating to financial instruments are included in the 'Report of the Directors | Risk' on pages 15 to 62; and

-     capital disclosures are included in the 'Report of the Directors | Risk' on pages 56 to 58. 

In publishing the parent company financial statements together with the group financial statements, the bank has taken advantage of the exemption in Section 408(3) of the Companies Act 2006 not to present its individual income statement and related notes.

(e)         Critical estimates and judgements

The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of items highlighted as the critical estimates and judgements in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on which management's estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes of these financial statements. Management's selection of the group's accounting policies that contain critical estimates and judgements reflects the materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.

Management has considered the impact of climate-related risks on HSBC UK's financial position and performance. While the effects of climate change are a source of uncertainty, as at 31 December 2023 management did not consider there to be a material impact on our critical judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular management has considered the known and observable potential impacts of climate-related risks of associated judgements and estimates in our value in use calculations.

(f)          Segmental analysis

HSBC UK's chief operating decision-maker is the group Chief Executive, supported by the group Executive Committee, and operating segments are reported in a manner consistent with the internal reporting provided to the group Chief Executive and the group Executive Committee.

Measurement of segmental assets, liabilities, income and expenses is in accordance with the group's accounting policies. Segmental income and expenses include transfers between segments and these transfers are conducted at arm's length. Shared costs are included in segments on the basis of the actual recharges made.

The types of products and services from which each reportable segment derives its revenue are discussed in the 'Strategic report | Our global businesses'.

(g)    Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the group and bank have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios that reflect the uncertainty in the macroeconomic environment following rising inflation and the Russia-Ukraine and Israel-Hamas wars. They also considered other top and emerging risks, including climate change, as well as from the related impacts on profitability, capital and liquidity.

1.2   Summary of material accounting policies

(a)         Consolidation and related policies

Investments in subsidiaries

Where an entity is governed by voting rights, the group consolidates when it holds, directly or indirectly, the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities and whether power is held as agent or principal.

The bank's investments in subsidiaries are stated at cost less impairment losses.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the  consideration, including contingent consideration, given at the date of exchange. Acquisition-related costs are recognised as an expense in the income statement in the period in which they are incurred. The acquired identifiable assets, liabilities and contingent liabilities are generally measured at their fair value at the date of acquisition.

Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of non-controlling interest and the fair value of HSBC UK's previously held equity interest, if any, over the net of the amounts of the identifiable assets acquired and the liabilities assumed. Any gain resulting from a bargain purchase is recognised in the income statement.

The amount of non-controlling interest is measured either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The election is made for each business combination.

Goodwill

Goodwill is allocated to CGUs for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill is monitored for internal management purposes. The group's CGUs are based on the business lines described in the Strategic Report. Impairment testing is performed once a year, or whenever there is an indication of impairment, by comparing the recoverable amount of a CGU with its carrying amount.

Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within such a CGU. The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained.

Critical estimates and judgements

The review of goodwill for impairment reflects management's best estimate of the future cash flows of the CGUs and the rates used to discount these cash flows, both of which are subject to uncertain factors as follows:
Judgements	Estimates
-   The accuracy of forecast cash flows is subject to a high degree of uncertainty in volatile market conditions. Where such circumstances are determined to exist, management re-tests goodwill for impairment more frequently than once a year when indicators of impairment exist. This ensures that the assumptions on which the cash flow forecasts are based continue to reflect current market conditions and management's best estimate of future business prospects.	-   The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for which detailed forecasts are available and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance and verifiable economic data, but they reflect management's view of future business prospects at the time of the assessment. -   The rates used to discount future expected cash flows can have a significant effect on their valuation, and are based on the costs of equity assigned to individual CGUs. The cost of equity percentage is generally derived from a capital asset pricing model and the market implied cost of equity, which incorporates inputs reflecting a number of financial and economic variables, including the risk-free interest rate and a premium for the risk of the business being evaluated. These variables are subject to fluctuations in external market rates and economic conditions beyond management's control. -   Key assumptions used in estimating goodwill impairment are described in Note 15.

The group does not consider there to be a significant risk of a material adjustment to the carrying amount of the goodwill balance in the next financial year but does consider this to be an area that is inherently judgemental.

Interests in associates and joint arrangements

Joint arrangements are investments in which the group, together with one or more parties, has joint control. Depending on the group's rights and obligations, the joint arrangement is classified as either a joint operation or a joint venture. The group classifies investments in entities over which it has significant influence, and that are neither subsidiaries nor joint arrangements, as associates.

The group recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures are recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates is included in the consolidated financial statements of the group, based on either financial statements made up to 31 December, or pro-rated amounts adjusted for any material transactions or events occurring between the date the financial statements are available and 31 December.

Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired. Goodwill on acquisition of interests in joint ventures and associates is not tested separately for impairment, but is assessed as part of the carrying amount of the investment.

(b)    Income and expense

Operating income

Interest income and expense

Interest income and expense for all financial instruments, excluding those classified as held for trading are recognised in 'interest income' and 'interest expense' in the income statement using the effective interest method.

Interest on credit-impaired financial assets is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount of the asset less allowance for ECL).

Non-interest income and expense

The group generates fee income from services provided over time, such as account service and card fees, or when it delivers a specific transaction at a point in time, such as broking services and import/export services. With the exception of certain performance fees, all other fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size of the customer portfolio and the group's performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee income is generally earned from short-term contracts with payment terms that do not include a significant financing component.

The group acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, the group acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.

The group recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer. Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement.

Where the group offers a package of services that contains multiple non-distinct performance obligations, such as those included in account service packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance obligations, such as those including both account and insurance services, the corresponding transaction price is allocated to each performance obligation based on the estimated stand-alone selling prices.

Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and usually the date when shareholders approve the dividend for unlisted equity securities.

The group buys and sells currencies to customers, as principal and presents the results of this activity, including the related gains and losses from changes in foreign exchange rates, as trading.

Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:

-     'Net income from financial instruments held for trading or managed on a fair value basis': This comprises net trading income, which includes all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial instruments managed on a fair value basis, together with the related interest income, expense and dividends, excluding the effect of changes in the credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.

-     'Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss': This includes interest on instruments that fail the SPPI test, see (d).

(c)         Valuation of financial instruments

All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a valuation technique that uses only data from observable markets, the group recognises the difference as a trading gain or loss at inception        (a 'day 1 gain or loss'). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the transaction either until the transaction matures or is closed out or the valuation inputs become observable.

The fair value of financial instruments is generally measured on an individual basis. Financial instruments are classified into one of three fair value hierarchy levels, described in Note 7, 'Fair values of financial instruments carried at fair value'.

(d)    Financial instruments measured at amortised cost

Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. The group accounts for regular way amortised cost financial instruments using trade date accounting. The carrying value of these financial assets at initial recognition includes any directly attributable transactions costs.

Non-trading reverse repurchase, repurchase and similar agreements

When debt securities are sold subject to a commitment to repurchase them at a predetermined price ('repos'), they remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell ('reverse repos') are not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as interest and recognised in net interest income over the life of the agreement.

Finance lease receivables

Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets are classified as finance leases. They are recorded at an amount equal to the net investment in the lease, less any impairment allowance. The net investment in finance leases represents the sum of the minimum payments receivable (gross investment in the lease) discounted at the rate of interest implicit in the lease. Initial direct costs incurred in arranging the lease, less any fee income related to the lease, are included in the initial measurement of the net investment.

(e)         Financial assets measured at fair value through other comprehensive income

Financial assets managed within a business model that is achieved by both collecting contractual cash flows and selling and which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at FVOCI. These comprise primarily debt securities. They are recognised on the trade date when the group enters into contractual arrangements to purchase and are generally derecognised when they are either sold or redeemed. They are subsequently remeasured at fair value with changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses in other comprehensive income are recognised in the income statement as 'Gains less losses from financial instruments'. Financial assets measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.

(f)    Derivatives

Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices. Derivatives are recognised initially and are subsequently measured at fair value through profit or loss. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. This includes embedded derivatives in financial liabilities, which are bifurcated from the host contract when they meet the definition of a derivative on a stand-alone basis.

Hedge accounting

When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge accounting relationships where the required criteria for documentation and hedge effectiveness are met. The group uses these derivatives or, where allowed, other non-derivative hedging instruments in fair value hedges or cash flow hedges as appropriate to the risk being hedged.

Fair value hedge

Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income statement immediately.

Cash flow hedge

The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the income statement within 'Net income from financial instruments held for trading or managed on a fair value basis'. The accumulated gains and losses recognised in other comprehensive income are reclassified to the income statement in the same periods in which the hedged item affects profit or loss. When a hedge relationship is discontinued, or partially discontinued, any cumulative gain or loss recognised in other comprehensive income remains in equity until the forecast transaction is recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is immediately reclassified to the income statement.

(g)         Impairment of amortised cost and FVOCI financial assets

ECL are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements, other financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee contracts. At initial recognition, an allowance (or provision in the case of some loan commitments and financial guarantees) is recognised for ECL resulting from possible default events within the next 12 months, or less, where the remaining life is less than 12 months ('12-month ECL'). In the event of a significant increase in credit risk, an allowance (or provision) is recognised for ECL resulting from all possible default events over the expected life of the financial instrument ('lifetime ECL'). Financial assets where 12-month ECL is recognised are considered to be 'stage 1'; financial assets which are considered to have experienced a significant increase in credit risk are in 'stage 2'; and financial assets for which there is objective evidence of impairment, and so are considered to be in default or otherwise credit impaired are in 'stage 3'. POCI are treated differently as set out below.

Credit impaired (stage 3)

The group determines 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 that a concession has been granted to the borrower for economic or legal reasons relating to the borrower's financial condition, or 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. 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.

Interest income is recognised by applying the effective interest rate to the amortised cost amount, i.e. gross carrying amount less allowance for ECL.

Write-off

Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.

Forbearance

Loans are identified as forborne and classified as either performing or non-performing when HSBC UK modifies the contractual terms due to financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet the cure criteria, as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of default have been present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon entering forbearance would not be reversed.

The group applies the EBA Guidelines on the application of definition of default for our retail portfolios, which affects credit risk policies and our reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof). Further details are provided under 'Forborne loans and advances' on page 25.

Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable cure criteria (for example, they continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is either stage 1 or stage 2 as determined by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms) and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms).

A forborne loan is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the terms of an existing agreement are modified such that the forborne loan is a substantially different financial instrument. Any new loans that arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be disclosed as forborne.

Loan modifications other than forborne loans

Loan modifications that are not identified as forborne are considered to be commercial restructuring. Where a commercial restructuring results in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC UK rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The rights to cash flows are generally considered to have expired if the commercial restructure is at market rates and no payment-related concession has been provided. Modifications of certain higher credit risk wholesale loans are assessed for derecognition having regard to changes in contractual terms that either individually or in combination are judged to result in a substantially different financial instrument. Changes to current market rates are not treated as modifications when they were contemplated at initial recognition, but rather a repricing. Mandatory and general offer loan modifications that are not borrower-specific, for example market-wide customer relief programmes generally do not result in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL impairment policy. Changes made to these financial instruments that are economically equivalent and required by interest rate benchmark reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective interest rate to be updated to reflect the change of the interest rate benchmark.

Significant increase in credit risk (stage 2)

An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering the change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at initial recognition, taking into account reasonable and supportable information, including information about past events, current conditions and future economic conditions. The assessment is unbiased, probability-weighted, and to the extent relevant, uses forward-looking information consistent with that used in the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the borrower. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a significant increase in credit risk and these criteria will differ for different types of lending, particularly between retail and wholesale. However, unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when 30 days past due. In addition, wholesale loans that are individually assessed, which are typically corporate and commercial customers, and included on a watch or worry list, are included in stage 2.

For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime PD which encompasses a wide range of information including the obligor's CRR, macro-economic condition forecasts and credit transition probabilities. For origination CRRs up to 3.3, significant increase in credit risk is measured by comparing the average PD for the remaining term estimated at origination with the equivalent estimation at the reporting date. The quantitative measure of significance varies depending on the credit quality at origination as follows:

Origination CRR	Significance trigger - PD that increases by
0.1-1.2	15 bps
2.1-3.3	30 bps

For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to relative changes in external market rates.

For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be approximated assuming through-the-cycle PDs and through-the-cycle migration probabilities, consistent with the instrument's underlying modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-based thresholds, as set out in the table below:

Origination CRR	Additional significance criteria - Number of CRR grade notches deterioration required to identify as significant credit deterioration (stage 2) (> or equal to)
0.1	5 notches
1.1-4.2	4 notches
4.3-5.1	3 notches
5.2-7.1	2 notches
7.2-8.2	1 notch
8.3	0 notch

Further information about the 23-grade scale used for CRR can be found on page 24 - Risk rating scales.

For Retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internally developed statistical models, which incorporate all available information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogenous portfolios, generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a

PD higher than would be expected from loans that are performing as originally expected and higher than that which would have been acceptable at origination. It therefore approximates a comparison of origination to reporting date PDs.

We continue to refine the retail transfer criteria approach for certain portfolios as additional data becomes available, in order to utilise a more relative approach, noting this approach is currently applied to the mortgage portfolio. These enhancements take advantage of the increase in origination related data in the assessment of significant increases in credit risk by comparing remaining lifetime PD to the comparable remaining term lifetime PD at origination based on portfolio-specific origination segments.

Unimpaired and without significant increase in credit risk (stage 1)

ECL resulting from default events that are possible within the next 12 months ('12-month ECL') are recognised for financial instruments that remain in stage 1.

Purchased or originated credit impaired

Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This population includes new financial instruments recognised in most cases following the derecognition of forborne loans. The amount of change in lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan is derecognised, even if the lifetime ECL are less than the amount of ECL included in the estimated cash flows on initial recognition.

Movement between stages

Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased since initial recognition based on the assessments described above. In the case of non-performing forborne loans, such financial instruments are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing criteria as described above.

Measurement of ECL

The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information which is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money and considers other factors such as climate-related risks.

In general, the group calculates ECL using three main components: a PD, a LGD and the EAD.

The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead. The 12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument respectively.

The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.

The group makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following table:

Model	Regulatory capital	IFRS 9
PD	Through the cycle (represents long-run average PD throughout a full economic cycle). The definition of default includes a backstop of 90+ days past due.	Point in time (based on current conditions, adjusted to take into account estimates of future conditions that will impact PD). Default backstop of 90+ days past due for all portfolios.
EAD	Cannot be lower than current balance.	Amortisation captured for term products.
LGD	Downturn LGD (consistent losses expected to be suffered during a severe but plausible economic downturn). Regulatory floors may apply to mitigate risk of underestimating downturn LGD due to lack of historical data. Discounted using cost of capital. All collection costs included.	Expected LGD (based on estimate of loss given default including the expected impact of future economic conditions such as changes in value of collateral). No floors. Discounted using the original effective interest rate of the loan. Only costs associated with obtaining/selling collateral included.
Other		Discounted back from point of default to balance sheet date.

While 12-month PDs are recalibrated from Basel II models where possible, the lifetime PDs are determined by projecting the 12-month PD using a term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the CRR bands over its life.

The ECL for wholesale stage 3 is determined primarily on an individual basis using a discounted cash flow ('DCF') methodology. The expected future cash flows are based on estimates of the reporting date, reflecting reasonable and supportable assumptions and projections of future recoveries and expected future receipts of interest.

Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral.

The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under up to four different scenarios are probability-weighted by reference to the status of the borrower, economic scenarios applied more generally by the group and judgement in relation to the likelihood of the workout strategy succeeding or receivership being required. For less significant cases where an individual assessment is undertaken, the effect of different economic scenarios and work-out strategies results in an ECL calculation based on a most likely outcome which is adjusted to capture losses resulting from less likely but possible outcomes. For certain less significant cases, the bank may use a LGD-based modelled approach to ECL assessment, which factors in a range of economic scenarios.

Period over which ECL is measured

Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it 12-month or lifetime ECL) is the maximum contractual period over which the group is exposed to credit risk. However, where the financial

instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn commitment does not serve to limit the group's exposure to credit risk to the contractual notice period, the contractual period does not determine the maximum period considered. Instead, ECL is measured over the period the group remains exposed to credit risk that is not mitigated by credit risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset component. As a result, the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision. For wholesale overdraft facilities, credit risk management actions are taken no less frequently than on an annual basis.

Forward-looking economic inputs

The group applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit loss in most economic environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios or adjustments, to reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in 'Measurement uncertainty and sensitivity analysis of ECL estimates' on page 32.

Critical estimates and judgements

The calculation of the group's ECL under IFRS 9 requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Judgements	Estimates
-   Defining what is considered to be a significant increase in credit risk. -   Determining the lifetime and point of initial recognition of overdrafts and credit cards. -   Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making reasonable and supportable judgements about how models react to current and future economic conditions. -   Selecting model inputs and economic forecasts, including determining whether sufficient and appropriately weighted economic forecasts are incorporated to calculate unbiased expected credit loss. -   Making management judgemental adjustments to account for late breaking events, model and data limitations and deficiencies, and expert credit judgements. -   Selecting applicable recovery strategies for certain wholesale credit-impaired loans.	-   The section 'Measurement uncertainty and sensitivity analysis of ECL estimates', marked as audited on pages 32 to 36, sets out the assumptions used in determining ECL, and provides an indication of the sensitivity of the result to the application of different weightings being applied to different economic assumptions.

(h)         Employee compensation and benefits

Share-based payments

The group enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the provision of their services.

The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in respect of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement. Expenses are recognised when the employee starts to render service to which the award relates.

Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.

Post-employment benefit plans

The group operates a pension plan which provides defined benefit and defined contribution pensions.

Payments to defined contribution schemes are charged as an expense as the employees render service.

Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.

Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets (see policy (c)), after applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and reductions in future contributions to the plan.

The costs of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.

Critical estimates and judgements

The most significant critical accounting estimates relate to the determination of key assumptions applied in calculating the defined benefit pension obligation.
Judgements	Estimates
	-   A range of assumptions could be applied, and different assumptions could significantly alter the defined benefit obligation and the amounts recognised in OCI or profit or loss. -   The calculation of the defined benefit pension obligation includes assumptions with regard to the discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. Management determines these assumptions in consultation with the plan's actuaries. -   Key assumptions used in calculating the defined benefit pension obligation and the sensitivity of the calculation to different assumptions are described in Note 3.

(i)          Tax

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement in which the related item appears.

Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years. The group provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods as the assets will be realised or the liabilities settled.

Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.

(j)          Provisions, contingent liabilities and guarantees

Provisions

Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive obligation that has arisen as a result of past events and for which a reliable estimate can be made.

Critical estimates and judgements

The recognition and measurement of provisions requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Judgements	Estimates
-   Determining whether a present obligation exists. Professional advice is taken on the assessment of litigation and similar obligations. -   Provisions for legal proceedings and regulatory matters typically require a higher degree of judgement than other types of provisions. When matters are at an early stage, accounting judgements can be difficult because of the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. As matters progress, management and legal advisers evaluate on an ongoing basis whether provisions should be recognised, revising previous estimates as appropriate. At more advanced stages, it is typically easier to make estimates around a better defined set of possible outcomes.	-   Provisions for legal proceedings and regulatory matters remain very sensitive to the assumptions used in the estimate. There could be a wider range of possible outcomes for any pending legal proceedings, investigations or inquiries. As a result it is often not practicable to quantify a range of possible outcomes for individual matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in aggregate for these types of provisions because of the diverse nature and circumstances of such matters and the wide range of uncertainties involved.

Contingent liabilities, contractual commitments and guarantees

Contingent liabilities

Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related to legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of settlement is remote.

Financial guarantee contracts

Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is generally the fee received or present value of the fee receivable.

(k)         Impairment of non-financial assets

Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In addition, impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are considered to be the principal operating legal entities divided by global business.

Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of the fair value less costs of disposal or the value in use. The carrying amount of a CGU comprises the carrying values of its assets and liabilities, including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and consistent basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping of CGUs. The recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent and qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs (see Note 15).

When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the extent that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of their respective individual recoverable amount or nil. Impairment is not allocated to the financial assets in a CGU.

Impairment loss recognised in prior periods for non-financial assets is reversed when there has been a change in the estimate used to determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would not exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior periods.

2	Net fee income

	Year ended
	31 Dec	31 Dec
	2023	2022
Net fee income by product	£m	£m
Account services	272	257
Funds under management	120	114
Cards	582	580
Credit facilities	147	130
Imports/exports	28	30
Insurance agency commission	11	25
Receivables finance	86	96
Other	308	261
Fee income	1,554	1,493
Less: fee expense	(270)	(248)
Net fee income	1,284	1,245
Net fee income by global business
Wealth and Personal Banking	588	590
Commercial Banking	922	879
Global Banking and Markets	(224)	(222)
Corporate Centre	(2)	(2)

Net fee income includes £1,204m of fees earned on financial assets that are not at fair value through profit or loss (other than amounts included in determining the effective interest rate) (2022: £1,129m), £199m of fees payable on financial liabilities that are not at fair value through profit of loss (other than amounts included in determining the effective interest rate) (2022: £174m), £124m of fees earned on trust and other fiduciary activities (2022: £118m).

3	Employee compensation and benefits

	2023	2022
	£m	£m
Wages and salaries	1,025	971
Social security costs	113	106
Post-employment benefits1	(131)	2
Year ended 31 Dec	1,007	1,079

1   Post-employment benefits increase/decrease is a factor of interest receivable on assets, service cost, interest cost on liabilities and administration expenses.

Average number of persons employed by the group during the year
	20231	20221
Wealth and Personal Banking	15,549	15,923
Commercial Banking	4,796	4,491
Global Banking and Markets	60	54
Corporate Centre	10	33
Year ended 31 Dec	20,415	20,501

1   Average number of headcount staff in corporate centre are allocated to the respective global businesses. The allocation is on the basis of amounts charged to the respective global business.

Share-based payments

The share-based payment income statement charge is recognised in wages and salaries as follows:

	2023	2022
	£m	£m
Restricted share awards	10	8
Savings-related and other share award option plans	9	9
Year ended 31 Dec	19	17

HSBC Group share awards
Award	Policy
Deferred share awards (including annual incentive awards, LTI awards delivered in shares) and GPSP	An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award to be granted. -   Deferred awards generally require employees to remain in employment over the vesting period and are generally not subject to performance conditions after the grant date. -   Deferred share awards generally vest over a period of three, five or seven years. -   Vested shares may be subject to a retention requirement post-vesting. -   Awards are subject to malus and clawback provisions.
International Employee Share Purchase Plan ('ShareMatch')	The plan was first introduced in Hong Kong in 2013 and now includes employees based in 31 jurisdictions. -   Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency. -   Matching awards are added at a ratio of one free share for every three purchased. -   Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum period of two years and nine months.

Movement on HSBC Group share awards
	2023	2022
	Number	Number
	(000s)	(000s)
Restricted share awards outstanding at 1 Jan	2,981	2,457
Additions during the year	1,826	1,976
Released in the year	(1,582)	(1,404)
Forfeited in the year	(142)	(48)
Restricted share awards outstanding at 31 Dec	3,083	2,981
Weighted average fair value of awards granted (£)	5.55	4.03

HSBC Group share option plans
Plans	Policy
Savings-related share option plans ('Sharesave')	-   Eligible employees can save up to £500 per month with the option to use the savings to acquire shares. -   These are generally exercisable within six months following either the third or fifth anniversary of the commencement of a three-year or five-year contract, respectively. -   The exercise price is set at a 20% (2022: 20%) discount to the market value immediately preceding the date of invitation.

Calculation of fair values

The fair values of share options are calculated using a Black-Scholes model. The fair value of a share award is based on the share price at the date of the grant.

Movement on HSBC Group share option plans
	Savings-related share option plans
	Number	WAEP1
	(000s)	£
Outstanding at 1 Jan 2023	60,350	2.85
Granted during the year	11,496	4.76
Exercised during the year	(26,249)	2.71
Expired during the year	(658)	4.76
Forfeited during the year	(2,261)	3.32
Outstanding at 31 Dec 2023	42,678	3.44
-  of which exercisable	3,527	2.68
Weighted average remaining contractual life (years)	2.44

Outstanding at 1 Jan 2022	64,073	2.85
Granted during the year	4,523	4.30
Exercised during the year	(1,517)	3.56
Expired during the year	(1,360)	4.95
Forfeited during the year	(5,369)	2.94
Outstanding at 31 Dec 2022	60,350	2.88
-  of which exercisable	1.761	4.35
Weighted average remaining contractual life (years)	2.23

1     Weighted average exercise price.

Post-employment benefit plans

We operate a pension plan for our employees called the HBUK section of the HSBC Bank (UK) Pension Scheme ('the plan'), which has both defined benefit and defined contribution sections, managed by the Trustee of the plan. The HSBC Bank (UK) Pension Scheme was fully sectionalised in 2018 to meet the requirements of the Banking Reform Act.

The Pension risk section on page 56 contains details about the policies and practices associated with the plan. Climate-related risks on page 19 provides details of how the trustee of our employee pension plan, the HSBC Bank (UK) Pension Scheme, manages climate risk.

The defined benefit section was closed to future benefit accrual in 2015, with defined benefits earned by employees at that date continuing to be linked to their salary while they remain employed by the HSBC Group. The plan is overseen by an independent corporate trustee, who has a fiduciary responsibility for the operation of the plan. Its assets are held separately from the assets of the group.

The investment strategy of the plan is to hold the majority of assets in bonds, with the remainder in a diverse range of investments. It also includes some interest rate swaps to reduce interest rate risk, inflation swaps to reduce inflation risk and longevity swaps to reduce the impact of longer life expectancy. For further details of the measures to manage the market volatility, see Treasury risk on page 52.

The plan is subject to the statutory funding objective requirements of the UK Pensions Act 2004, which requires that it be funded to at least the level of technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built up under the plan). Where a funding valuation is carried out and identifies a deficit, the employer and trustee are required to agree to a deficit recovery plan.

The latest funding valuation of the plan at 31 December 2019 was carried out by Colin G Singer of Willis Towers Watson Limited, who is a Fellow of the UK Institute and Faculty of Actuaries, using the projected unit credit method. At that date, the market value of the plan's assets was £31.1bn and this exceeded the value placed on its liabilities on an ongoing basis by £2.5bn, giving a funding level of 109%. These figures include defined contribution assets amounting to £2.4bn. The funding valuation is used to judge the amount of cash contributions the group needs to put into the pension scheme. It will always be different to the IAS 19 accounting surplus, which is an accounting rule concerning employee benefits and shown on the balance sheet of our financial statements. The main differences between the assumptions used for assessing the liabilities for this funding valuation and those used for IAS19 are that an element of prudence is contained in the funding assumptions for discount rate, inflation rate and life expectancy. The next funding valuation was scheduled to be performed in 2023, with an effective date 31 December 2022, is currently underway and will be concluded no later than the regulatory deadline of 31 March 2024. The plan is estimated to remain in a comfortable surplus relative to funding liabilities as at end 2023, based on assumptions consistent with those used to determine the funding liabilities for the 2019 valuation.

The actuary also assessed the value of the liabilities if the HBUK section of the plan were to have been stopped and an insurance company asked to secure all future pension payments. This is generally larger than the amount needed on the ongoing basis described above because an insurance company would use more prudent assumptions which allow for reserves and include a more prudent allowance for the future administrative expenses of the plan. Under this approach, the amount of assets needed was estimated to be £33bn at 31 December 2019.

The Trust Deed gives the ability for HSBC UK to take a refund of surplus assets after the plan has been run down such that no further beneficiaries remain. In assessing whether a surplus is recoverable HSBC UK has considered its right to obtain a future refund together with the rights of third parties such as trustees. On this basis, any net surplus in the HBUK section of the plan is recognised in HSBC UK's financial statements.   

Income statement charge/(credit)
	2023	2022
	£m	£m
Defined benefit pension plans	(241)	(95)
Defined contribution pension plans	110	97
Pension plans	(131)	2
Year ended 31 Dec	(131)	2

Defined benefit pension plans

Net asset/(liability) under defined benefit pension plans
	Fair value of plan assets	Present value of defined benefit obligations	Net defined benefit assets/(liabilities)
	£m	£m	£m
At 1 Jan 2023	20,853	(15,596)	5,257
Service cost	-	(8)	(8)
-  current service cost	-	(11)	(11)
-  past service cost	-	3	3
Net interest income/(cost) on the net defined benefit asset/(liability)	1,003	(744)	259
Remeasurement effects recognised in other comprehensive income	(181)	6	(175)
-  return on plan assets (excluding interest income)	(181)	-	(181)
-  actuarial gains/(losses) financial assumptions	-	(98)	(98)
-  actuarial gains/(losses) demographic assumptions	-	287	287
-  actuarial gains/(losses) experience adjustments	-	(183)	(183)
Transfers to/from the scheme	30	(25)	5
Benefits paid	(855)	855	-
Other movements1	1	(2)	(1)
At 31 Dec 2023	20,851	(15,514)	5,337

Net asset/(liability) under defined benefit pension plans (continued)
	Fair value of plan assets	Present value of defined benefit obligations	Net defined benefit assets/(liabilities)
	£m	£m	£m
At 1 Jan 2022	30,578	(23,833)	6,745
Service cost	-	(25)	(25)
-  current service cost	-	(10)	(10)
-  past service cost	-	(15)	(15)
Net interest income/(cost) on the net defined benefit asset/(liability)	571	(443)	128
Remeasurement effects recognised in other comprehensive income	(9,343)	7,740	(1,603)
-  return on plan assets (excluding interest income)	(9,343)	-	(9,343)
-  actuarial gains/(losses) financial assumptions	-	8,561	8,561
-  actuarial gains/(losses) demographic assumptions	-	(100)	(100)
-  actuarial gains/(losses) experience adjustments	-	(721)	(721)
Transfers to/from the scheme	36	(27)	9
Benefits paid	(992)	992	-
Other movements1	3	-	3
At 31 Dec 2022	20,853	(15,596)	5,257

1     Other movements of Fair value of plan assets includes contributions by HSBC UK of £17m (2022: £20m), less administrative costs £16m (2022: £17m). Other movements of Present value of defined benefit obligations includes the adjustment on administrative cost paid lower than expected incurred of £2m (2022: Nil).

Benefits expected to be paid from the plan to retirees over each of the next five years, and in aggregate for the five years thereafter, are as follows:

Benefits expected to be paid from plan
	2024	2025	2026	2027	2028	2029-2033
	£m	£m	£m	£m	£m	£m
The plan1	882	910	938	968	998	5,480

1     The duration of the defined benefit obligation is 12.9 years under the disclosure assumptions adopted (2022: 13.2 years).

Fair value of plan assets by asset classes
	At 31 Dec 2023			At 31 Dec 2022
	Value	Quoted market price in active market	No quoted market price in active market	Value	Quoted market price in active market	No quoted market price in active market
	£m	£m	£m	£m	£m	£m
The plan
Fair value of plan assets	20,851	11,768	9,083	20,853	11,550	9,303
-  equities1	65	-	65	93	-	93
-  bonds fixed income2	4,126	3,716	410	4,386	4,002	384
-  bonds index linked	8,077	8,077	-	7,869	7,869	-
-  derivatives	832	-	832	998	-	998
-  property	651	-	651	700	-	700
-  pooled investment     vehicles	7,125	-	7,125	7,128	-	7,128
-  other	(25)	(25)	-	(321)	(321)	-

1   Includes £65m (2022: £93m) in relation to private equities.

2   Bonds fixed income, includes £(838)m (2022: £(705)m) in relation to repurchase agreements.

Post-employment defined benefit plan actuarial financial assumptions

HSBC UK determines the discount rates to be applied to its obligations in consultation with the plan's local actuaries, on the basis of current average yields of high quality (AA-rated or equivalent) debt instruments with maturities consistent with those of the defined benefit obligations.

Key actuarial assumptions for the plan
	Discount rate	Inflation rate (RPI)	Inflation rate (CPI)	Rate of increase for pensions	Rate of pay increase
	%	%	%	%	%
UK
At 31 Dec 2023	4.65	3.23	2.67	3.14	3.42
At 31 Dec 2022	4.93	3.39	2.84	3.27	3.34

Mortality tables and average life expectancy at age 60 for the plan
	Mortality table	Life expectancy at age 60 for a male member currently:		Life expectancy at age 60 for a female member currently:
		Aged 60	Aged 40	Aged 60	Aged 40
UK
At 31 Dec 2023	SAPS S31	26.2	27.7	28.3	29.8
At 31 Dec 2022	SAPS S31	27.1	28.6	28.4	29.9

1   Self-administered pension scheme ('SAPS') S3 table, with different tables and multipliers adopted based on gender, pension amount and member status, reflecting the Scheme's actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation's CMI 2022 core projection model with an initial addition to improvement of 0.25% per annum, a long-term rate of improvement of 1.25% per annum and a 0% weighting to 2020 and 2021, 25% weighting to 2022, mortality experience reflecting updated long-term view on mortality improvements post-pandemic.

The effect of changes in key assumptions on the plan
	Impact on HSBC Bank (UK) Pension Scheme Obligation
	Financial impact of increase		Financial impact of decrease
	2023	2022	2023	2022
	£m	£m	£m	£m
Discount rate - increase/decrease of 0.25%	(470)	(483)	495	509
Inflation rate (RPI/CPI) - increase/decrease of 0.25%	392	387	(390)	(371)
Pension payments and deferred pensions - increase/decrease of 0.25%	488	457	(463)	(431)
Pay - increase/decrease of 0.25%	6	8	(5)	(8)
Change in mortality - increase/decrease of 1 year	481	390	(481)	(405)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this in unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Directors' emoluments

The aggregate emoluments of the Directors of the Company, computed in accordance with the Companies Act 2006 as amended by statutory instrument 2008 No. 410, were:

	2023	2022
	£000	£000
Fees paid to non-executive Directors	1,519	1,406
Salaries and other emoluments1	2,559	2,418
Annual incentives2	1,362	1,160
Long-term incentives3	1,013	781
Year ended 31 Dec	6,453	5,765

1     Salaries and other emoluments include Fixed Pay Allowances.

2     Discretionary annual incentives for the Executive Directors are based on a combination of individual and corporate performance and are determined by the Remuneration Committee of the Company's ultimate parent company, HSBC Holdings plc. Incentive awards made to Executive Directors are delivered in the form of cash and HSBC Holdings plc shares. The total amount shown is comprised of £681,040 (2022: £580,071) in cash and £681,040 (2022: £580,071) in Restricted Shares, which is the upfront portion of the annual incentive granted in respect of performance year 2023.

3     The amount shown is comprised of £416,869 (2022: £364,848) in deferred cash and £595,927 (2022: £416,541) in deferred Restricted Shares. These amounts relate to the portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in 2023. The total deferral period of deferred cash and share awards is no less than five years up to a maximum of seven years. Grants with a five-year deferral vest in five equal tranches on each anniversary of the grant date on a pro-rate basis. Grants with a seven-year deferral vest in five equal tranches on each anniversary from the third anniversary of the grant date on a pro-rata basis. The deferral periods and pro-rata calculations are in line with the requirements set out in the Remuneration rules applicable to Material Risk Takers. The share awards are subject to a retention period of six months to one year upon vesting. Details of the Plans are contained within the Directors' Remuneration Report of HSBC Holdings plc.

One Director exercised share options over HSBC Holdings plc ordinary shares during the year (2022: no Directors).

Awards were made to 2 Directors under HSBC Holdings plc long-term incentive plans in respect of qualifying services rendered in 2023      (2022: 2). During 2023, 2 Directors received shares in respect of awards in HSBC Holdings plc long-term incentive plans that vested during the year (2022: 2).

Retirement benefits accrued to 1 Director during the year in respect of their qualifying services (2022: 1 Director). No Directors received cash in lieu of pension contributions during the year in respect of their qualifying services (2022: no Directors). Cash received in lieu of pension is included in the salary and other emoluments disclosure in the table above.

Of these aggregate figures, the following amounts are attributable to the highest paid Director:

	2023	2022
	£000	£000
Salaries and other emoluments	1,787	1,771
Annual incentives1	1,042	890
Long-term incentives2	876	602
Year ended 31 Dec	3,705	3,263

1     Awards made to the highest paid Director are delivered in the form of cash and HSBC Holdings plc shares. The amount shown is comprised of £521,040 (2022: £445,071) in cash and £521,040 (2022: £445,071) in Restricted Shares.

2     The amount shown is comprised of £362,179 (2022: £294,214) in deferred cash and £514,297 (2022: £307,398) in deferred Restricted Shares.

These amounts represent a portion of the total award that will vest following satisfaction of the vesting condition attached to the 2023 awards. The total period of deferral for these cash and share awards is seven years with pro-rata vesting in five equal tranches between the third and seventh anniversary of the date granted. The vested share awards are then subject to a one-year retention period.

The highest paid Director received shares in respect of qualifying services under an HSBC Holdings plc long term incentive plan.

Pension contributions of £nil were made by the Company in respect of services by the highest paid Director during the year (2022: £nil).

4	Auditors' remuneration

	2023	2022
	£m	£m
Audit fees payable to PwC	6.9	5.4
Assurance fees payable to PwC	2.3	2.8
Year ended 31 Dec	9.2	8.2

Fees payable by the group to PwC
	2023	2022
	£m	£m
Audit fees for HSBC UK Bank plc's statutory audit1	4.7	4.3
Fees for other services provided to the group	4.5	3.9
-  audit of the group's subsidiaries	2.2	1.1
-  audit-related assurance services2	2.2	1.9
-  other assurance services3	0.1	0.9
Year ended 31 Dec	9.2	8.2

1     Fees payable to PwC for the statutory audit of the consolidated financial statements of the group and the separate financial statements of HSBC UK Bank plc. They exclude amounts payable for the statutory audit of the bank's subsidiaries which have been included in 'Fees for other services provided to the group'.

2     Including services for assurance and other services that relate to statutory and regulatory filings, including comfort letters and interim and quarterly reviews.

3     Including comfort and arrangement letters to underwriters or other financial intermediaries and assurance reviews of PRA regulatory reporting returns.

No fees were payable to PwC as principal auditor for the following types of services: internal audit services and services related to litigation, recruitment and remuneration.

In addition to the above, the estimated fees paid to PwC by third parties associated with HSBC UK amounted to £2.2m (2022: £0.7m). In these cases, HSBC UK was connected with the contracting party and may therefore have been involved in appointing PwC. These fees arose from services such as reviewing the financial position of corporate concerns that borrow from HSBC UK.

Fees payable for non-audit services for HSBC UK Bank plc are not disclosed separately because such fees are disclosed on a consolidated basis for the group.

5

Tax

Tax expense
	2023	2022
	£m	£m
Current tax	1,310	876
-  for this year	1,320	880
-  adjustments in respect of prior years	(10)	(4)
Deferred tax	115	(114)
-  origination and reversal of temporary differences	122	52
-  effect of changes in tax rates	(1)	(172)
-  adjustments in respect of prior years	(6)	6
Year ended 31 Dec1	1,425	762

1   In addition to amounts recorded in the income statement, a tax charge of £369m (2022: credit of £1,173m) was recorded directly to equity.

On 1 April 2023, the main rate of UK corporation tax increased from 19% to 25% and the UK banking surcharge rate decreased from 8% to 3%. The tax rate applying to HSBC UK Bank plc and its banking subsidiaries in 2023 was a blended rate of 27.75%, comprising 23.5% UK corporation tax main rate plus 4.25% UK banking surcharge rate. The tax rate applicable for non-banking entities in 2023 was 23.5% (2022: 19%).

On 20 June 2023, legislation was substantively enacted in the UK, the jurisdiction of the entity's ultimate parent entity, HSBC Holdings plc, to introduce the 'Pillar Two' global minimum tax model rules of the OECD's Inclusive Framework on Base Erosion and Profit Shifting (BEPS), as well as a qualified domestic minimum top-up tax, with effect from 1 January 2024. Under these rules, a top-up tax liability arises where the effective tax rate of the HSBC Holdings plc group's operations in a jurisdiction, calculated based on principles set out in the OECD's Pillar Two model rules, is below 15%. Based on the Group's forecasts, no top-up tax liability is expected to arise in respect of the UK and therefore these rules are not expected to affect HSBC UK Bank plc's tax expense in future periods.

Tax reconciliation

The tax charged to the income statement differs from the tax expense that would apply if all profits had been taxed at the UK corporation tax rate as follows:

	2023		2022
	£m	%	£m	%
Profit before tax	6,679		3,638
Tax expense
Taxation at UK corporation tax rate of 23.5% (2022: 19.00%)	1,570	23.5	691	19.0
Items increasing the tax charge in 2023:
-  UK banking surcharge at 4.25% (2022: 8.00%)	277	4.1	278	7.6
-  UK bank levy	14	0.2	9	0.2
-  other permanent disallowables	5	0.1	4	0.1
Items decreasing tax charge in 2023:
-  non-taxable gain on SVB UK acquisition	(361)	(5.4)	-	-
-  deductions for AT1 coupon payments	(61)	(0.9)	(39)	(1.1)
-  movement in uncertain tax positions	(15)	(0.2)	-	-
-  non-deductible UK customer redress	(2)	(0.1)	(11)	(0.3)
-  change in tax rates	(1)	-	(172)	(4.7)
-  adjustments in respect of prior period liabilities	(1)	-	2	0.1
Year ended 31 Dec	1,425	21.3	762	20.9

The effective tax rate for the year was 21.3% (2022: 20.9%). The effective tax rate is reduced by 5.4% due to non-taxable provisional gain arising on the acquisition of SVB UK in the period. The effective tax rate excluding this item is 26.7% and reflects the statutory blended tax rate of 27.75%, tax relief on AT1 coupon payments and a tax credit from the release of provisions for uncertain tax positions. The effective tax rate for 2022 was reduced by 4.7% by a credit arising from the remeasurement of the group's deferred tax balances following the substantive enactment of legislation to reduce the UK banking surcharge rate from 8% to 3%, with effect from 1 April 2023. The effective tax rate excluding this item in 2022 was 25.6%.

Movement of deferred tax assets and liabilities
	Loan impairment provisions	Cash flow hedges	FVOCI reserves	Defined benefit pension	Fixed and intangible assets	Other	Total
	£m	£m	£m	£m	£m	£m	£m
The group
At 1 Jan 2023	92	516	92	(1,472)	84	22	(666)
Income statement	(11)	-	(16)	(70)	(1)	(17)	(115)
Other comprehensive income	-	(401)	(24)	48	-	-	(377)
Acquisition of subsidiary	(7)	-	24	-	(25)	55	47
At 31 Dec 2023	74	115	76	(1,494)	58	60	(1,111)
Assets	74	115	76	-	58	60	383
Liabilities	-	-	-	(1,494)	-	-	(1,494)

At 1 Jan 2022	122	45	(26)	(2,226)	102	14	(1,969)
Income statement	(30)	-	-	174	(18)	(12)	114
Other comprehensive income	-	470	118	580	-	20	1,188
Other adjustments	-	1	-	-	-	-	1
At 31 Dec 2022	92	516	92	(1,472)	84	22	(666)
Assets	92	516	92	-	84	22	806
Liabilities	-	-	-	(1,472)	-	-	(1,472)

The bank
At 1 Jan 2023	85	516	89	(1,472)	68	24	(690)
Income statement	(17)	-	-	(70)	(1)	4	(84)
Other comprehensive income	-	(401)	(24)	48	-	-	(377)
At 31 Dec 2023	68	115	65	(1,494)	67	28	(1,151)
Assets	68	115	65	-	67	28	343
Liabilities	-	-	-	(1,494)	-	-	(1,494)

Movement of deferred tax assets and liabilities (continued)
	Loan impairment provisions	Cash flow hedges	FVOCI reserves	Defined benefit pension	Fixed and intangible assets	Other	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2022	115	45	(29)	(2,226)	80	14	(2,001)
Income statement	(30)	-	-	174	(12)	(9)	123
Other comprehensive income	-	470	118	580	-	20	1,188
Other adjustments	-	1	-	-	-	(1)	-
At 31 Dec 2022	85	516	89	(1,472)	68	24	(690)
Assets	85	516	89	-	68	24	782
Liabilities	-	-	-	(1,472)	-	-	(1,472)

Management has assessed the likely availability of future taxable profits against which to recover the deferred tax assets of the bank and the group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts of future business performance. Management is satisfied that there is sufficient evidence to support recognition of all deferred tax assets.

6

Dividends

On 9 February 2024, the Directors resolved to pay an interim dividend of £1,412m to the ordinary shareholders of the parent company in respect of the financial year ending 31 December 2023. No liability is recognised in the financial statements in respect of this dividend.

Dividends to the shareholder of the parent company
	2023		2022
	£ per share	£m	£ per share	£m
Dividends paid on ordinary shares
Interim dividend in respect of the previous year	10,779	539	9,820	491
Interim dividend in respect of the current year	33,159	1,658	25,919	1,296
Total	43,938	2,197	35,739	1,787

Total coupons on capital securities classified as equity
		2023	2022
	First call date	£m	£m
Undated Subordinated Additional Tier 1 instruments
-  £1,096m	Dec 2019	106	70
-  £1,100m	Dec 2024	108	72
Total		214	142

7	Fair values of financial instruments carried at fair value

Control framework

Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk taker.

Where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price determination or validation is used.

For fair values determined using valuation models, the control framework includes development or validation by independent support functions of the model logic, inputs, model outputs and adjustments. Valuation models are subject to a process of due diligence before becoming operational and are calibrated against external market data on an ongoing basis.

Changes in fair value are generally subject to a profit and loss analysis process and are disaggregated into high-level categories including portfolio changes, market movements and other fair value adjustments.

Fair value hierarchy

Fair values of financial assets and liabilities are determined according to the following hierarchy:

-   Level 1 - valuation technique using quoted market price: financial instruments with quoted prices for identical instruments in active markets that can be accessed at the measurement date.

-   Level 2 - valuation technique using observable inputs: financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.

-   Level 3 - valuation technique with significant unobservable inputs: financial instruments valued using valuation techniques where one or more significant inputs are unobservable.

-  

Financial instruments carried at fair value and bases of valuation
		2023								2022
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
The group		£m		£m		£m		£m		£m		£m		£m		£m
Recurring fair value measurements at 31 Dec
Assets
Financial assets mandatorily measured at fair value through profit or loss		89		-		46		135		72		-		36		108
Derivatives		2		173		3		178		14		532		-		546
Financial investments		14,284		212		-		14,496		10,757		175		-		10,932
Liabilities
Derivatives		-		108		-		108		-		304		-		304
The bank
Recurring fair value measurements at 31 Dec
Assets
Financial assets mandatorily measured at fair value through profit or loss	89		-		46		135		72		-		36		108
Derivatives	2		173		-		175		14		532		-		546
Financial investments	14,284		212		-		14,496		10,757		175		-		10,932
Liabilities
Derivatives	-		108		-		108		-		304		-		304

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency. There were no transfers between Level 1 and Level 2 during 2023 and 2022.

Fair value adjustments

Fair value adjustments are adopted when the group determines there are additional factors considered by market participants that are not incorporated within the valuation model. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement, such as when models are enhanced and therefore fair value adjustments may no longer be required.

Fair value valuation bases

Equities

The fair value of equity investment is estimated on the basis of an analysis of the investee's financial position and results, risk profile, prospects and other factors. If necessary, adjustments are made to the net asset value of funds to obtain the best estimate of fair value.

8	Fair values of financial instruments not carried at fair value
Fair values of financial instruments not carried at fair value and bases of valuation
			Fair value
		Carrying amount	Quoted market price Level 1	Observable inputs Level 2	Significant unobservable inputs Level 3	Total
		£m	£m	£m	£m	£m
The group
At 31 Dec 2023
Assets
Loans and advances to banks		7,980	-	7,979	-	7,979
Loans and advances to customers		211,887	-	-	209,462	209,462
Reverse repurchase agreements - non-trading		7,686	-	7,686	-	7,686
Financial investments - at amortised cost		11,819	9,931	1,639	-	11,570
Liabilities
Deposits by banks		10,843	-	10,843	-	10,843
Customer accounts		268,345	-	268,345	-	268,345
Repurchase agreements - non-trading		4,652	-	4,652	-	4,652
Debt securities in issue		1,988	-	1,568	416	1,984
Subordinated liabilities		14,598	-	14,678	-	14,678
At 31 Dec 2022
Assets
Loans and advances to banks		6,357	-	6,357	-	6,357
Loans and advances to customers		204,143	-	-	199,957	199,957
Reverse repurchase agreements - non-trading		7,406	-	7,406	-	7,406
Financial investments - at amortised cost		5,160	4,772	-	-	4,772
Liabilities
Deposits by banks		10,721	-	10,721	-	10,721
Customer accounts		281,095	-	281,095	-	281,095
Repurchase agreements - non-trading		9,333	-	9,333	-	9,333
Debt securities in issue		1,299	-	1,094	185	1,279
Subordinated liabilities		12,349	-	11,765	-	11,765

Fair values of financial instruments not carried at fair value and bases of valuation (continued)
		Fair value
	Carrying amount	Quoted market price Level 1	Observable inputs Level 2	Significant unobservable inputs Level 3	Total
	£m	£m	£m	£m	£m
The bank
At 31 Dec 2023
Assets
Loans and advances to banks	13,642	-	13,646	-	13,646
Loans and advances to customers	201,014	-	-	198,552	198,552
Reverse repurchase agreements - non-trading	7,686	-	7,686	-	7,686
Financial investments held at amortised cost	11,608	9,931	1,469	-	11,400
Liabilities
Deposits by banks	14,120	-	14,120	-	14,120
Customer accounts	262,342	-	262,342	-	262,342
Repurchase agreements - non-trading	4,652	-	4,652	-	4,652
Debt securities in issue	1,564	-	1,568	-	1,568
Subordinated liabilities	14,598	-	14,678	-	14,678
At 31 Dec 2022
Assets
Loans and advances to banks	9,304	-	9,296	-	9,296
Loans and advances to customers	199,666	-	-	195,606	195,606
Reverse repurchase agreements - non-trading	7,406	-	7,406	-	7,406
Financial investments held at amortised cost	5,160	4,772	-	-	4,772
Liabilities
Deposits by banks	11,619	-	11,619	-	11,619
Customer accounts	279,575	-	279,575	-	279,575
Repurchase agreements - non-trading	9,333	-	9,333	-	9,333
Debt securities in issue	1,091	-	1,094	-	1,094
Subordinated liabilities	12,349	-	11,765	-	11,765

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value. They include cash and balances at central banks and items in the course of collection from and transmission to other banks, all of which are measured at amortised cost.

Valuation

Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It does not reflect the economic benefits and costs that the group expects to flow from an instrument's cash flow over its expected future life. Our valuation methodologies and assumptions in determining fair values for which no observable market prices are available may differ from those of other companies.

Loans and advances to banks and customers

To determine the fair value of loans and advances to banks and customers, loans are segregated, as far as possible, into portfolios of similar characteristics. Fair values are based on observable market transactions, when available. When they are unavailable, fair values are estimated using valuation models incorporating a range of input assumptions. These assumptions may include: forward-looking discounted cash flow models, taking account of expected customer prepayment rates, using assumptions that HSBC UK believes are consistent with those that would be used by market participants in valuing such loans; and new business rates estimates for similar loans.

The fair value of loans reflects expected credit losses at the balance sheet date and the fair value effect of repricing between origination and the balance sheet date. For credit impaired loans, fair value is estimated by discounting the future cash flows over the time period they are expected to be recovered.

Deposits by banks and customer accounts

The fair values of deposits are approximated by their carrying value.

Debt securities in issue and subordinated liabilities

Fair values are determined using quoted market prices at the balance sheet date where available, or by reference to quoted market prices for similar instruments. When quoted market prices are unavailable, these instruments are valued using valuation techniques, the inputs for which are derived from observable market data and, where relevant, assumptions in respect of unobservable inputs.

Repurchase and reverse repurchase agreements - non-trading

Fair values approximate carrying amounts as balances are generally short dated.

Financial investments

The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are determined using valuation techniques that incorporate the prices and future earnings streams of equivalent quoted securities.

9	Derivatives

Notional contract amounts and fair values of derivatives by product contract type held
	Notional contract amount		Fair value - Assets			Fair value - Liabilities
	Trading	Hedging	Trading	Hedging	Total	Trading	Hedging	Total
The group and bank	£m	£m	£m	£m	£m	£m	£m	£m
Foreign exchange	8,064	75	61	2	63	76	1	77
Interest rate	61,286	74,368	2,042	1,744	3,786	2,019	1,686	3,705
Equities	9	-	3	-	3	-	-	-
Gross total fair values	69,359	74,443	2,106	1,746	3,852	2,095	1,687	3,782
Offset (Note 22)					(3,674)			(3,674)
At 31 Dec 2023	69,359	74,443	2,106	1,746	178	2,095	1,687	108

Foreign exchange	21,892	106	145	-	145	83	8	91
Interest rate	37,231	46,121	1,265	1,298	2,563	1,326	1,049	2,375
Equities	-	-	-	-	-	-	-	-
Gross total fair values	59,123	46,227	1,410	1,298	2,708	1,409	1,057	2,466
Offset (Note 22)					(2,162)			(2,162)
At 31 Dec 2022	59,123	46,227	1,410	1,298	546	1,409	1,057	304

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting indicate the nominal value of transactions outstanding at the balance sheet date; they do not represent amounts at risk. 

Use of derivatives

We undertake derivative activity for two primary purposes: to create risk management solutions for commercial clients and to manage and hedge our own balance sheet risks.

Hedge accounting derivatives

The group applies hedge accounting to manage the following risks: interest rate risk and foreign exchange risks. Further details on how these risks arise and how they are managed by the group can be found in the 'Risk review'.

Hedge risk components

The group designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or otherwise separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest rates generally are regarded as being both separately identifiable and reliably measurable, except for the IBOR Reform transition where the group designates Alternative Benchmark Rates as the hedged risk which may not have been separately identifiable upon initial designation, provided the group reasonably expects it will meet the requirement within 24 months from the first designation date. The designated risk component accounts for a significant portion of the overall changes in fair value or cash flows of the hedged items.

Fair value hedges

The group enters into fixed-for-floating-interest-rate swaps to manage the exposure to changes in fair value due to movements in market interest rates on certain fixed rate financial instruments which are not measured at fair value through profit or loss.

Hedging instrument by hedged risk
	Hedging Instrument
	Carrying amount
	Notional amount1	Assets	Liabilities	Balance sheet Presentation	Change in fair value2
Hedged risk	£m	£m	£m		£m
Interest rate3	22,928	1,135	1,086	Derivatives	(270)
At 31 Dec 2023	22,928	1,135	1,086		(270)

Interest rate3	18,520	1,297	837	Derivatives	723
At 31 Dec 2022	18,520	1,297	837		723

1     The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date; they do not represent amounts at risk.

2     Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.

3     The hedged risk 'interest rate' includes inflation risk.

Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount2			Change in fair value1	Recognised in profit and loss	Profit and loss presentation
	Assets	Liabilities	Assets	Liabilities	Balance sheet presentation
Hedged risk	£m	£m	£m	£m		£m	£m
Interest rate4	12,141		(17)		Financial investments measured at fair value through other comprehensive income	465	4	Net income from financial instruments held for trading or managed on a fair value basis
	2,172		(58)		Loans and advances  to customers	54
	403		25		Financial Investments measured at amortised cost	26
		6,691		(285)	Subordinated Liabilities3	(271)
At 31 Dec 2023	14,716	6,691	(50)	(285)		274	4

Interest rate4	9,937		(912)		Financial investments measured at fair value through other comprehensive income	(1,300)	2	Net income from financial instruments held for trading or managed on a fair value basis
	1,250		(112)		Loans and advances  to customers	(110)
		5,326		(573)	Subordinated Liabilities3	689
At 31 Dec 2022	11,187	5,326	(1,024)	(573)		(721)	2

1     Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.

2     The accumulated amount of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were assets/(liabilities) of £(4)m (2022: £(12)m) for FVOCI and liabilities of £(58)m for Loans and advances to customers (2022: £(111)m) and £(3)m for Financial Investments measured at amortised cost (2022: £Nil).

3     The notional amount of non-dynamic fair value hedges is equal to £6,921m (2022: £5,901m), of which the weighted-average maturity date is January 2028 and the weighted average swap rate is 1.89% (2022: 1.28%). These hedges are all internal to HSBC Group and hedges internal funding between HSBC Group and HSBC UK.

4     The hedged risk 'interest rate' includes inflation risk.

The hedged item is either the benchmark interest rate risk portion within the fixed rate of the hedged item or the full fixed rate and it is hedged for changes in fair value due to changes in the benchmark interest rate risk.

HSBC UK applies macro fair value hedging for interest rate risk exposures on portfolios of fixed rate mortgages. These are considered to be dynamic hedges and both the hedged items and the hedging instruments are adjusted on a monthly basis when the existing hedging relationship is terminated and a new one designated. The hedged items and hedging instruments are adjusted to reflect changes in the size and maturity profile of the hedged portfolio.

Sources of hedge ineffectiveness may arise from basis risk including but not limited to the discount rates used for calculating the fair value of derivatives, hedges using instruments with a non-zero fair value and notional and timing differences between the hedged items and hedging instruments.

The disclosures for the group are the same as the disclosures for the bank.

Cash flow hedges

The group's cash flow hedging instruments consist principally of interest rate swaps and cross-currency swaps that are used to manage the variability in future interest cash flows of non-trading financial assets and liabilities, arising due to changes in market interest rates and foreign-currency basis.

The group applies macro cash flow hedging for interest-rate risk exposures on portfolios of replenishing current and forecasted issuances of non-trading assets and liabilities that bear interest at variable rates, including rolling such instruments. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate cash flows representing both principal balances and interest cash flows across all portfolios are used to determine the effectiveness and ineffectiveness. Macro cash flow hedges are considered to be dynamic hedges.

The group also hedges the variability in future cash-flows on foreign-denominated financial assets and liabilities arising due to changes in foreign exchange market rates with cross-currency swaps, these are considered dynamic hedges. 

Hedging instrument by hedged risk
	Hedging Instrument					Hedged	Ineffectiveness
		Carrying amount			Change in fair value2	Change in fair value3	Recognised in profit and loss	Profit and loss presentation
	Notional amount1	Assets	Liabilities	Balance sheet presentation
Hedged risk	£m	£m	£m		£m	£m	£m
Foreign currency	75	2	1	Derivatives	12	12	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	51,440	609	600	Derivatives	537	536	1
At 31 Dec 2023	51,515	611	601		549	548	1

Foreign currency	106	-	8	Derivatives	(8)	(8)	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	27,601	1	212	Derivatives	(1,876)	(1,876)	-
At 31 Dec 2022	27,707	1	220		(1,884)	(1,884)	-

1     The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date; they do not represent amounts at risk.

2     Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.

3     Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.

Sources of hedge ineffectiveness may arise from basis risk, including but not limited to timing differences between the hedged items and hedging instruments and hedges using instruments with a non-zero fair value.

The disclosures for the group are the same as the disclosures for the bank.

Reconciliation of equity and analysis of other comprehensive income by risk type
	Interest rate	Foreign
	£m	£m
Cash flow hedging reserve at 1 Jan 2023	(1,325)	1
Fair value gains/(losses)	536	12
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
-  hedged items that have affected profit or loss	896	(12)
Income taxes	(401)	-
Cash flow hedging reserve at 31 Dec 2023	(294)	1

Cash flow hedging reserve at 1 Jan 2022	(89)	(1)
Fair value gains/(losses)	(1,876)	(8)
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
-  hedged items that have affected profit or loss	170	10
Income taxes	470	-
Cash flow hedging reserve at 31 Dec 2022	(1,325)	1

10	Financial investments

Carrying amount of financial investments
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Financial investments measured at fair value through other comprehensive income	14,496	10,932	14,496	10,932
-  treasury and other eligible bills	884	512	884	512
-  debt securities	13,611	10,419	13,611	10,419
-  equity securities	1	1	1	1
Debt instruments measured at amortised cost	11,819	5,160	11,608	5,160
-  treasury and other eligible bills	3,188	448	3,017	448
-  debt securities	8,631	4,712	8,591	4,712
At 31 Dec	26,315	16,092	26,104	16,092

11	Assets pledged, collateral received and assets transferred

Assets pledged

Financial assets pledged as collateral
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Treasury bills and other eligible securities	170	-	-	-
Debt securities	6,717	8,375	6,717	8,375
Loans and advances to banks	6,600	4,700	9,047	4,700
Loans and advances to customers	15,016	14,598	15,016	14,598
Other	116	294	116	294
Assets pledged at 31 Dec	28,619	27,967	30,896	27,967

The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, where assets are placed with a custodian or a settlement agent that has a floating charge over all the assets placed to secure any liabilities under settlement accounts.

These transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant, standard securities lending and borrowing, repurchase agreements and derivative margining. The group places both cash and non-cash collateral in relation to derivative transactions.

Financial assets pledged as collateral that the counterparty has the right to sell or repledge
	The group and bank
	2023	2022
	£m	£m
Financial investments	5,542	7,536
At 31 Dec	5,542	7,536

Collateral received

The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and derivative margining, that the group and the bank is permitted to sell or repledge in the absence of default was £10,689m (2022: £10,084m). The group and the bank is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard securities lending, reverse repurchase agreements and derivative margining. The fair value of financial assets accepted as collateral by the group and the bank that have been sold or repledged is £3,456m (2022: £5,967m).

Assets transferred

The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt securities held by counterparties as collateral under repurchase agreements and securities lent under securities lending agreements and mortgages to collateralise the covered bond programme. For secured borrowings, the transferred asset collateral continues to be recognised in full and a related liability, reflecting the group's obligation to repurchase the assets for a fixed price at a future date is also recognised on the balance sheet.

Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash collateral received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the duration of these transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty's recourse is not limited to the transferred assets.

Transferred financial assets not qualifying for full derecognition and associated financial liabilities
	2023		2022
	Carrying amount of:		Carrying amount of:
	Transferred assets	Associated liabilities	Transferred assets	Associated liabilities
The group	£m	£m	£m	£m
Repurchase agreements	4,350	2,644	5,064	4,367
Securities lending agreements	1,192	-	2,472	-
The bank
Repurchase agreements	4,350	2,644	5,064	4,367
Securities lending agreements	1,192	-	2,472	-
Other sales (recourse for full amount)	2,829	998	1,245	499

12	Interests in joint ventures

Vaultex UK Limited is a joint venture of the bank and the group. Vaultex UK Limited is incorporated in England and its principal activity is that of cash management services. At 31 December 2023, the group had a 50% interest in the £10m issued equity capital (2022: 50%).

For further detail see Note 30.

13	Investments in subsidiaries

Main subsidiaries of HSBC UK Bank plc
	Country of incorporation or registration	HSBC UK Bank plc's interest in equity capital	Share class
		%
HSBC Equipment Finance (UK) Limited	England and Wales	100.00	Ordinary £1
HSBC Invoice Finance (UK) Limited	England and Wales	100.00	Ordinary £1
Marks and Spencer Financial Services plc	England and Wales	100.00	Ordinary £1
HSBC Innovation Bank Limited	England and Wales	100.00	Ordinary £1

All the above prepare their financial statements up to 31 December.

On 13 March 2023, HSBC UK acquired Silicon Valley Bank UK Limited (now HSBC Innovation Bank Limited) for £1, acquiring 100% of the equity and thereby obtaining control (see Note 28 for more information on the acquisition).

Details of all group subsidiaries, as required under Section 409 of the Companies Act 2006, are set out in Note 30. The principal country of operation is the same as the country of incorporation.

Impairment testing of investments in subsidiaries

At each reporting period end, HSBC UK Bank plc reviews investments in subsidiaries for indicators of impairment. An impairment is recognised when the carrying amount exceeds the recoverable amount for that investment. The recoverable amount is the higher of the investment's fair value less costs of disposal and its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting management's cash flow projections for the investment. The cash flows represent the free cash flows based on the subsidiary's binding capital requirements.

We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:

-     The cash flow projections for each investment are based on the latest approved plans, which includes forecast capital available for distribution based on the capital requirements of the subsidiary taking into account minimum and core capital requirements. For the impairment test at 31 December 2023, cash flow projections until the end of 2028 were considered in line with our internal planning horizon. Our cash flow projections include known and observable climate-related opportunities and costs associated with our operating model.

-     A long-term growth rate is used to extrapolate the cash flows in perpetuity. The growth rate reflects inflation and is based on the UK long-term average.

-     The rate used to discount the cash flows is based on the cost of capital assigned to each investment, which is derived using a CAPM model. CAPM depends on a number of inputs reflecting financial and economic variables, including the riskfree rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market's assessment of the economic variables and management's judgement. The discount rates for each investment are refined to reflect the rates of inflation for the countries within which the investment operates. In addition, for the purposes of testing investments for impairment, management supplements this process by comparing the discount rates derived using the internally generated CAPM, with cost of capital rates produced by external sources for businesses operating in similar markets. The impacts from climate risk are included to the extent that they are observable in discount rates and asset prices.

Impairment test results

During 2023, an impairment of £92m (2022: £Nil) was recognised on the bank's investment in Marks and Spencer Financial Services plc as the VIU calculation performed identified that the recoverable amount was below the carrying amount:

Investment	Carrying amount £m	VIU £m	Impairment £m	Long term growth rate %	Discount rate %
Marks and Spencer Financial Services plc	746	654	92	2.05	10.43

There are no reasonably possible changes in the assumptions used to perform the VIU calculation in the next 12 months that would materially impact the impairment recognised.

During 2023, an impairment of £0.1m (2022: £4m) was recognised on the bank's investment in HSBC Trust Company (UK) Limited, due to a reduction in the net assets of the entity.

No further impairments were recognised as a result of the impairment testing in subsidiaries performed in 2023.

14	Structured entities

The group is involved with both consolidated and unconsolidated structured entities through the securitisation of financial assets and investment funds, established either by the group or a third party.

Consolidated structured entities

Total assets of the group's consolidated structured entities, split by entity type:

	Securitisations	Other	Total
	£m	£m	£m
At 31 Dec 2023	675	1,006	1,681
At 31 Dec 2022	315	502	817

Securitisations

The group uses a structured entity to securitise customer loans and advances to diversify its sources of funding for asset origination and capital efficiency purposes. The loans and advances are transferred by the group to the structured entity synthetically, and the structured entity issues debt securities to investors.

Unconsolidated structured entities

The term 'unconsolidated structured entities' refers to all structured entities not controlled by the group. The group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment opportunities.

The group's interest in unconsolidated structured entities consist of unit holdings in four funds managed by a third party within the wider HSBC Group. The group's unit holdings are held to facilitate customer transactions and are recognised as Other assets with a carrying value and maximum exposure to loss at 31 December 2023 of £0.2m (2022: £0.2m). The total assets of the funds at 31 December 2023 were £1.1bn (2022: £1.1bn). The group has no liabilities or commitments in respect of the funds.

15	Goodwill and intangible assets

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Goodwill	3,285	3,285	223	223
Other intangible assets1	1,078	973	978	962
At 31 Dec	4,363	4,258	1,201	1,185

1   Included within the group's other intangible assets is internally generated software with a net carrying value of £991m (2022: £973m). During the year, capitalisation of internally generated software is £321m (2022: £382m), impairment was £8m (2022: £45m) and amortisation is £295m (2022: £273m). The amortisation and impairment of intangible assets totalled for the group £319m (2022: £318m).

Impairment testing

The group's annual impairment test in respect of goodwill allocated to each CGU is performed at 1 October each year. A review for indicators of impairment is undertaken at 30 June and 31 December. At 31 December 2023, this review did not identify any indicators of impairment. As a result, no impairment test has been performed at 31 December 2023.

Basis of the recoverable amount

The recoverable amount of all CGUs to which goodwill has been allocated was equal to its VIU at each respective testing date. The VIU is calculated by discounting management's cash flow projections for the CGU. At 1 October 2023, all CGUs supporting goodwill had a VIU larger than their respective carrying amounts. The key assumptions used in the VIU calculation for each CGU are discussed below.

Key assumptions in VIU calculation
	Goodwill at 1 Oct 2023	Discount rate	Growth rate beyond initial cash flow projections	Goodwill at 1 Oct 2022	Discount rate	Growth rate beyond initial cash flow projections
Cash-generating unit	£m	%	%	£m	%	%
WPB	2,046	10.4	2.1	2,046	9.6	2.1
CMB	1,239	9.0	2.1	1,239	8.6	2.1
Total	3,285			3,285

The group's CGUs do not carry on their balance sheets any significant intangible assets with indefinite useful lives, other than goodwill.

Management's judgement in estimating the cash flows of a CGU

The cash flow projections for each CGU are based on the forecast profitability plans approved by the Board and minimal capital levels required to support the business operations of a CGU. The Board challenges and endorses planning assumptions in light of internal capital allocation decisions necessary to support HSBC UK's strategy, current market conditions and macroeconomic outlook. For the 1 October 2023 impairment test, cash flow projections until the end of 2028 were considered, in line with internal planning horizon. As required by IFRS Accounting Standards, estimates of future cash flows exclude estimated cash inflows or outflows that are expected to arise from restructuring initiatives before an entity has a constructive obligation to carry out the plan, and would therefore have recognised a provision for restructuring costs. Our cash flow projections include known climate-related opportunities and costs associated with our operating model.

Discount Rate

The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a CAPM and market implied cost of equity. The impacts of climate-risk are included to the extent that they are observable in discount rates and asset prices.

Long-term growth rate

The long-term growth rate is used to extrapolate the cash flows in perpetuity because of the long-term perspective within the group of business units making up the CGUs. The long-term growth rate reflects inflation for the UK.

Sensitivities of key assumptions in calculating VIU

At 1 October 2023, there were no CGUs deemed sensitive to reasonably possible adverse changes in key assumptions supporting the recoverable amounts. In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in respect of each input into the VIU calculation, such as the external range of discount rates observable, historical performance against forecast and risks attaching to the key assumptions underlying cash flow projections.

16	Prepayments, accrued income and other assets

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Prepayments and accrued income	1,378	986	1,360	1,011
Settlement accounts	85	9	86	9
Cash collateral and margin receivables	27	222	27	222
Endorsements and acceptances	32	49	32	49
Employee benefit assets (Note 3)	5,337	5,257	5,337	5,257
Right-of-use assets	169	171	145	158
Other accounts	922	1,610	776	1,439
Owned property, plant and equipment Owned property, plant and equipment	371	458	354	382
At 31 Dec	8,321	8,762	8,117	8,527

For the group, prepayments, accrued income and other assets include £1,803m (2022: £1,871m), and for the bank £1,811m (2022: £1,901m) of financial assets, majority of which are measured at amortised cost. Other accounts includes a receivable of £73m (2022: £71m) arising from our profit and loss sharing arrangement with Marks & Spencer plc, which is tested for impairment in line with our accounting policy on the impairment of non-financial assets.

17	Debt securities in issue

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Bonds and medium-term notes1	574	358	150	150
Covered bonds	998	499	998	499
Other debt securities in issue2	416	442	416	442
At 31 Dec	1,988	1,299	1,564	1,091

1   The group's Bonds and medium-term notes includes £426m (2022: £208m) issued by structured entities.

2   Other debt securities in issue consists of commercial paper and certificates of deposits.

18	Accruals, deferred income and other liabilities

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Accruals and deferred income	1,203	645	1,125	615
Settlement accounts	4	81	4	81
Cash collateral and margin payable	263	234	263	234
Endorsements and acceptances	38	51	38	51
Lease liabilities	188	198	163	184
Other liabilities	2,428	2,334	2,209	2,165
At 31 Dec	4,124	3,543	3,802	3,330

For the group, accruals, deferred income and other liabilities include £3,959m (2022: £3,362m), and for the bank £3,744m (2022: £3,269m) of financial liabilities, the majority of which are measured at amortised cost.

19	Provisions

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The group	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2023	63	32	142	82	319
Additions	28	4	24	18	74
Amounts utilised	(36)	(2)	(49)	(6)	(93)
Unused amounts reversed	(28)	-	(29)	(18)	(75)
Exchange and other movements	3	-	1	(2)	2
At 31 Dec 2023	30	34	89	74	227
Contractual commitments1
At 1 Jan 2023					105
Net change in expected credit loss provision and other movements					18
At 31 Dec 2023					123
Total provisions
At 31 Dec 2022					424
At 31 Dec 2023					350

Provisions (excluding contractual commitments)
At 1 Jan 2022	22	39	256	96	413
Additions	65	5	38	33	141
Amounts utilised	(20)	(10)	(75)	(6)	(111)
Unused amounts reversed	(27)	(2)	(83)	(25)	(137)
Exchange and other movements	23	-	6	(16)	13
At 31 Dec 2022	63	32	142	82	319
Contractual commitments1
At 1 Jan 2022					82
Net change in expected credit loss provision and other movements					23
At 31 Dec 2022					105
Total provisions
At 31 Dec 2021					495
At 31 Dec 2022					424

1     Contractual commitments include the provision for contingent liabilities measured under IFRS 9 Financial Instruments in respect of financial guarantees and the expected credit loss provision on off-balance sheet guarantees and commitments.

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The bank	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2023	63	32	107	82	284
Additions	27	4	32	18	81
Amounts utilised	(35)	(2)	(39)	(6)	(82)
Unused amounts reversed	(28)	-	(27)	(18)	(73)
Exchange and other movements	3	-	1	(2)	2
At 31 Dec 2023	30	34	74	74	212
Contractual commitments1
At 1 Jan 2023					102
Net change in expected credit loss provision and other movements					13
At 31 Dec 2023					115
Total provisions
At 31 Dec 2022					386
At 31 Dec 2023					327

Provisions (excluding contractual commitments)
At 1 Jan 2022	22	39	205	96	362
Additions	65	5	33	33	136
Amounts utilised	(20)	(10)	(62)	(6)	(98)
Unused amounts reversed	(27)	(2)	(76)	(25)	(130)
Exchange and other movements	23	-	7	(16)	14
At 31 Dec 2022	63	32	107	82	284
Contractual commitments1
At 1 Jan 2022					80
Net change in expected credit loss provision and other movements					22
At 31 Dec 2022					102
Total provisions
At 31 Dec 2021					442
At 31 Dec 2022					386

1     Contractual commitments include the provision for contingent liabilities measured under IFRS 9 Financial Instruments in respect of financial guarantees and the expected credit loss provision on off-balance sheet guarantees and commitments.

Customer remediation

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

Restructuring costs

The restructuring costs provision is for costs associated with the group's transformation programme.

Legal proceedings and regulatory matters

Further details of 'Legal proceedings and regulatory matters' are set out in Note 26. Legal proceedings include civil court, arbitration or tribunal proceedings brought against the group (whether by way of claim or counterclaim), or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the actions of, regulatory or law enforcement agencies in connection with alleged wrongdoing.

20	Subordinated liabilities

Subordinated liabilities
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
At amortised cost	14,598	12,349	14,598	12,349
-  subordinated liabilities1	14,598	12,349	14,598	12,349
At 31 Dec	14,598	12,349	14,598	12,349

1     Includes £11.3bn (2022: £9.3bn) of eligible debt issued to meet our Minimum requirement for own funds and Eligible Liabilities applicable from
1 January 2020.

Subordinated liabilities rank behind senior obligations and generally count towards the capital base of the group. Capital securities may be called and redeemed by the group subject to prior notification to and consent of the PRA.

The balance sheet amounts disclosed below are presented on an IFRS basis and do not reflect the amount that the instruments contribute to regulatory capital principally due to regulatory amortisation and regulatory eligibility limits. 

Subordinated liabilities of the group
				Carrying amount
				2023	2022
		First call date	Maturity date	£m	£m
Capital instruments
Tier 2 instruments
£550m	HSBC UK Bank plc Subordinated Floating Loan 20331	Jul 2028	Jul 2033	548	550
$840m	HSBC UK Bank plc Subordinated Floating Loan 20332	Jul 2028	Jul 2033	656	697
£100m	HSBC UK Bank plc 2.8594% Subordinated Loan 2029	Mar 2024	Mar 2029	100	100
£1,000m	HSBC UK Bank plc Subordinated Floating Loan 20303	Jul 2025	Jul 2030	1,000	1,000
£650m	HSBC UK Bank plc Subordinated Floating Loan 20334	Sep 2028	Sep 2033	650	650
£79m	HSBC UK Bank plc 2.1250% Subordinated Loan 2031	Mar 2026	Mar 2031	79	79
£250m	HSBC UK Bank plc 6.8960% Subordinated Loan 2033	Dec 2028	Dec 2033	255	-
Other instruments
Subordinated loan instruments not eligible for inclusion in regulatory capital
$2000m	HSBC UK Bank plc 0.9760% MREL eligible Subordinated Loan 2025	May 2024	May 2025	1,536	1,558
£350m	HSBC UK Bank plc 1.8777% MREL eligible Subordinated Loan 2025	Oct 2024	Oct 2025	350	350
£150m	HSBC UK Bank plc 2.1003% MREL eligible Subordinated Loan 2025	Oct 2024	Oct 2025	150	150
€500m	HSBC UK Bank plc MREL eligible Subordinated Floating Loan 20265	Sep 2025	Sep 2026	437	449
£1,000m	HSBC UK Bank plc 1.1250% MREL eligible Subordinated Loan 2026	Nov 2025	Nov 2026	1,000	1,000
£1,000m	HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan 2027	Jul 2026	Jul 2027	999	998
£1,000m	HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan 2028	Jul 2027	Jul 2028	922	880
£1,000m	HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan 2029	Aug 2028	Aug 2029	1,000	1,000
$3000m	HSBC UK Bank plc 3.9730% MREL eligible Subordinated Loan 2030	May 2029	May 2030	2,181	2,259
£750m	HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan 2030	May 2029	May 2030	666	629
£1,000m	HSBC UK Bank plc MREL eligible Subordinated Floating Loan 20296	Apr 2028	Apr 2029	998	-
£1,000m	HSBC UK Bank plc 6.8000% MREL eligible Subordinated Loan 2031	Sep 2030	Sep 2031	1,071	-
At 31 Dec				14,598	12,349

1     The floating rate of interest is Sonia plus 3.37%.

2     The floating rate of interest is SOFR plus 3.03%.

3     The floating rate of interest is Sonia plus 1.89%.

4     The floating rate of interest is Sonia plus 2.14%.

5     The floating rate of interest is three month Euribor plus 1.00%.

6   The floating rate of interest is Sonia plus 2.03%.

21	Maturity analysis of assets, liabilities and off-balance sheet commitments

The following table provides an analysis of consolidated total assets, liabilities and off-balance sheet commitments by residual contractual maturity at the balance sheet date. These balances are included in the maturity analysis as follows:

-     Trading derivatives are included in the 'Due not more than 1 month' time bucket, because trading balances are typically held for short periods of time.

-     Financial assets and liabilities with no contractual maturity (such as equity securities) are included in the 'Due over 5 years' time bucket. Undated or perpetual instruments are classified based on the contractual notice period which the counterparty of the instrument is entitled to give. Where there is no contractual notice period, undated or perpetual contracts are included in the 'Due over 5 years' time bucket.

-     Non-financial assets and liabilities with no contractual maturity are included in the 'Due over 5 years' time bucket.

-     Loan and other credit-related commitments are classified on the basis of the earliest date they can be drawn down.

-    

Maturity analysis of assets, liabilities and off-balance sheet commitments
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 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
The group
Financial assets
Cash and balances at central banks	65,719	-	-	-	-	-	-	-	65,719
Items in the course of collection from other banks	284	-	-	-	-	-	-	-	284
Financial assets mandatorily measured at fair value	89	-	-	-	-	-	-	46	135
Derivatives	73	1	-	-	1	4	25	74	178
Loans and advances to banks	6,947	111	922	-	-	-	-	-	7,980
Loans and advances to customers	16,357	9,502	6,562	5,339	5,877	19,294	40,853	108,103	211,887
-  personal	6,280	2,490	1,980	1,907	1,897	7,047	19,955	101,056	142,612
-  corporate and commercial	9,536	5,596	3,366	2,015	3,290	11,103	20,413	6,659	61,978
-  financial	541	1,416	1,216	1,417	690	1,144	485	388	7,297
Reverse repurchase agreements -  non-trading	2,257	3,334	1,195	-	900	-	-	-	7,686
Financial investments	1,273	2,275	1,270	386	412	1,942	5,963	12,794	26,315
Accrued income and other financial assets	1,435	256	90	9	10	1	4	-	1,805
Total financial assets at 31 Dec 2023	94,434	15,479	10,039	5,734	7,200	21,241	46,845	121,017	321,989
Non-financial assets	-	-	-	-	-	-	-	10,887	10,887
Total assets at 31 Dec 2023	94,434	15,479	10,039	5,734	7,200	21,241	46,845	131,904	332,876
Financial liabilities
Deposits by banks	519	24	-	-	-	500	9,800	-	10,843
Customer accounts1	253,400	4,615	2,876	2,378	3,363	1,652	61	-	268,345
-  personal	159,488	1,028	1,639	2,048	3,112	1,619	56	-	168,990
-  corporate and commercial	89,054	3,311	1,180	320	248	30	5	-	94,148
-  financial	4,858	276	57	10	3	3	-	-	5,207
Repurchase agreements -  non-trading	4,652	-	-	-	-	-	-	-	4,652
Items in the course of transmission to other banks	411	-	-	-	-	-	-	-	411
Derivatives	91	-	-	-	-	2	6	9	108
Debt securities in issue	47	368	-	150	-	-	1,204	219	1,988
Accruals and other financial liabilities	2,858	484	306	143	26	38	70	32	3,957
Subordinated liabilities	-	100	1,536	-	500	2,438	6,106	3,918	14,598
Total financial liabilities at 31 Dec 2023	261,978	5,591	4,718	2,671	3,889	4,630	17,247	4,178	304,902
Non-financial liabilities	-	-	-	-	-	-	-	1,904	1,904
Total liabilities at 31 Dec 2023	261,978	5,591	4,718	2,671	3,889	4,630	17,247	6,082	306,806
Off-balance sheet commitments given
Loan and other credit-related commitments	72,921	24	2	-	15	111	48	71	73,192
-  personal	41,180	-	-	-	-	-	-	-	41,180
-  corporate and commercial	28,399	24	2	-	15	111	48	71	28,670
-  financial	3,342	-	-	-	-	-	-	-	3,342

Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 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
The group
Financial assets
Cash and balances at central banks	94,407	-	-	-	-	-	-	-	94,407
Items in the course of collection from other banks	353	-	-	-	-	-	-	-	353
Financial assets mandatorily measured at fair value	72	-	-	-	-	-	-	36	108
Derivatives	84	1	1	1	-	2	117	340	546
Loans and advances to banks	5,283	-	1,074	-	-	-	-	-	6,357
Loans and advances to customers	16,645	10,575	8,753	6,128	5,462	18,412	34,746	103,422	204,143
-  personal	6,195	2,254	1,843	1,888	1,851	7,059	20,301	96,363	137,754
-  corporate and commercial	10,178	8,033	6,650	4,071	3,469	10,732	13,978	6,809	63,920
-  financial	272	288	260	169	142	621	467	250	2,469
Reverse repurchase agreements -  non-trading	573	3,012	1,749	1,322	750	-	-	-	7,406
Financial investments	300	1,200	70	137	131	529	3,874	9,851	16,092
Accrued income and other financial assets	1,614	179	52	19	3	-	-	-	1,867
Total financial assets at 31 Dec 2022	119,331	14,967	11,699	7,607	6,346	18,943	38,737	113,649	331,279
Non-financial assets	-	-	-	-	-	-	-	11,162	11,162
Total assets at 31 Dec 2022	119,331	14,967	11,699	7,607	6,346	18,943	38,737	124,811	342,441
Financial liabilities
Deposits by banks	393	30	-	-	-	-	10,298	-	10,721
Customer accounts1	275,777	2,558	997	381	1,016	360	6	-	281,095
-  personal	177,548	767	391	296	828	348	2	-	180,180
-  corporate and commercial	94,229	1,606	532	77	174	12	4	-	96,634
-  financial	4,000	185	74	8	14	-	-	-	4,281
Repurchase agreements -  non-trading	9,333	-	-	-	-	-	-	-	9,333
Items in the course of transmission to other banks	308	-	-	-	-	-	-	-	308
Derivatives	83	2	-	6	17	33	74	89	304
Debt securities in issue	44	398	-	150	-	-	707	-	1,299
Accruals and other financial liabilities	2,061	351	235	94	13	39	535	36	3,364
Subordinated liabilities	-	-	-	1,247	-	2,158	4,406	4,538	12,349
Total financial liabilities at 31 Dec 2022	287,999	3,339	1,232	1,878	1,046	2,590	16,026	4,663	318,773
Non-financial liabilities	-	-	-	-	-	-	-	1,442	1,442
Total liabilities at 31 Dec 2022	287,999	3,339	1,232	1,878	1,046	2,590	16,026	6,105	320,215
Off-balance sheet commitments given
Loan and other credit-related commitments	70,263	39	-	10	-	24	124	23	70,483
-  personal	42,059	-	-	-	-	-	-	-	42,059
-  corporate and commercial	27,094	39	-	10	-	24	124	23	27,314
-  financial	1,110	-	-	-	-	-	-	-	1,110

1     'Customer accounts' includes £133,791m (2022: £137,319m) insured by guarantee schemes.

Maturity analysis of assets, liabilities and off-balance sheet commitments
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 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
The bank
Financial assets
Cash and balances at central banks	65,719	-	-	-	-	-	-	-	65,719
Items in the course of collection from other banks	96	-	-	-	-	-	-	-	96
Financial assets mandatorily measured at fair value	89	-	-	-	-	-	-	46	135
Derivatives	73	1	-	-	1	4	25	71	175
Loans and advances to banks	9,831	456	1,395	155	152	505	1,148	-	13,642
Loans and advances to customers	19,065	4,715	4,364	3,961	5,147	18,387	37,953	107,422	201,014
-  personal	3,992	2,223	1,885	1,817	1,813	6,758	19,564	101,030	139,082
-  corporate and commercial	9,267	2,159	2,130	1,888	3,032	10,012	17,243	5,909	51,640
-  financial	5,806	333	349	256	302	1,617	1,146	483	10,292
Reverse repurchase agreements -  non-trading	2,257	3,334	1,195	-	900	-	-	-	7,686
Financial investments	1,273	2,105	1,270	386	412	1,942	5,962	12,754	26,104
Accrued income and other financial assets	1,535	175	85	8	9	-	-	-	1,812
Total financial assets at 31 Dec 2023	99,938	10,786	8,309	4,510	6,621	20,838	45,088	120,293	316,383
Non-financial assets	-	-	-	-	-	-	-	8,429	8,429
Total assets at 31 Dec 2023	99,938	10,786	8,309	4,510	6,621	20,838	45,088	128,722	324,812
Financial liabilities
Deposits by banks	2,144	67	92	77	112	765	10,413	450	14,120
Customer accounts1	249,185	3,280	2,658	2,348	3,286	1,580	5	-	262,342
-  personal	158,993	987	1,598	2,019	3,048	1,547	-	-	168,192
-  corporate and commercial	85,708	2,141	1,019	319	235	30	5	-	89,457
-  financial	4,484	152	41	10	3	3	-	-	4,693
Repurchase agreements -  non-trading	4,652	-	-	-	-	-	-	-	4,652
Items in the course of transmission to other banks	408	-	-	-	-	-	-	-	408
Derivatives	90	-	-	-	-	2	7	9	108
Debt securities in issue	48	368	-	150	-	-	998	-	1,564
Accruals and other financial liabilities	2,727	429	302	141	25	34	57	28	3,743
Subordinated liabilities	-	100	1,536	-	500	2,438	6,106	3,918	14,598
Total financial liabilities at 31 Dec 2023	259,254	4,244	4,588	2,716	3,923	4,819	17,586	4,405	301,535
Non-financial liabilities	-	-	-	-	-	-	-	1,712	1,712
Total liabilities at 31 Dec 2023	259,254	4,244	4,588	2,716	3,923	4,819	17,586	6,117	303,247
Off-balance sheet commitments given
Loan and other credit-related commitments	56,063	-	-	-	-	-	-	-	56,063
-  personal	30,562	-	-	-	-	-	-	-	30,562
-  corporate and commercial	24,617	-	-	-	-	-	-	-	24,617
-  financial	884	-	-	-	-	-	-	-	884

Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 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
The bank
Financial assets
Cash and balances at central banks	94,407	-	-	-	-	-	-	-	94,407
Items in the course of collection from other banks	154	-	-	-	-	-	-	-	154
Financial assets mandatorily measured at fair value	72	-	-	-	-	-	-	36	108
Derivatives	84	1	1	1	-	2	117	340	546
Loans and advances to banks	5,675	370	1,588	145	145	486	895	-	9,304
Loans and advances to customers	20,286	7,041	7,218	6,157	5,391	18,036	32,667	102,870	199,666
-  personal	4,147	1,988	1,740	1,790	1,759	6,741	19,869	96,334	134,368
-  corporate and commercial	9,978	4,589	5,099	3,981	3,297	10,078	11,510	6,173	54,705
-  financial	6,161	464	379	386	335	1,217	1,288	363	10,593
Reverse repurchase agreements -  non-trading	573	3,012	1,749	1,322	750	-	-	-	7,406
Financial investments	300	1,200	70	137	131	530	3,874	9,850	16,092
Accrued income and other financial assets	1,652	164	52	19	3	-	7	-	1,897
Total financial assets at 31 Dec 2022	123,203	11,788	10,678	7,781	6,420	19,054	37,560	113,096	329,580
Non-financial assets	-	-	-	-	-	-	-	8,830	8,830
Total assets at 31 Dec 2022	123,203	11,788	10,678	7,781	6,420	19,054	37,560	121,926	338,410
Financial liabilities
Deposits by banks	911	50	65	45	55	115	10,378	-	11,619
Customer accounts1	274,258	2,558	997	381	1,015	360	6	-	279,575
-  personal	176,657	767	391	296	828	348	2	-	179,289
-  corporate and commercial	93,220	1,606	532	77	173	12	4	-	95,624
-  financial	4,381	185	74	8	14	-	-	-	4,662
Repurchase agreements -  non-trading	9,333	-	-	-	-	-	-	-	9,333
Items in the course of transmission to other banks	304	-	-	-	-	-	-	-	304
Derivatives	83	2	-	6	17	33	74	89	304
Debt securities in issue	44	398	-	150	-	-	499	-	1,091
Accruals and other financial liabilities	1,993	341	231	94	12	37	529	32	3,269
Subordinated liabilities	-	-	-	1,247	-	2,158	4,406	4,538	12,349
Total financial liabilities at 31 Dec 2022	286,926	3,349	1,293	1,923	1,099	2,703	15,892	4,659	317,844
Non-financial liabilities	-	-	-	-	-	-	-	1,272	1,272
Total liabilities at 31 Dec 2022	286,926	3,349	1,293	1,923	1,099	2,703	15,892	5,931	319,116
Off-balance sheet commitments given
Loan and other credit-related commitments	57,179	-	-	-	-	-	-	-	57,179
-  personal	31,527	-	-	-	-	-	-	-	31,527
-  corporate and commercial	24,560	-	-	-	-	-	-	-	24,560
-  financial	1,092	-	-	-	-	-	-	-	1,092

1     'Customer accounts' includes £132,847m (2022: £136,451m) insured by guarantee schemes.

Contractual maturity of financial liabilities

The following table shows, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for derivatives not treated as hedging derivatives). For this reason, balances in the table below do not agree directly with those in our consolidated balance sheet and the bank's balance sheet. Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities. Derivatives not treated as hedging derivatives are included in the 'Due not more than 1 month' time bucket and not by contractual maturity.

In addition, loans and other credit-related commitments, financial guarantees and similar contracts are generally not recognised on our balance sheet. The undiscounted cash flows potentially payable under loan and other credit-related commitments and financial guarantees are classified on the basis of the earliest date they can be called.

Cash flows payable under financial liabilities by remaining contractual maturities
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 1 year	Due over 1 year but not more than 5 years	Due over 5 years	Total
The group	£m	£m	£m	£m	£m	£m
Deposits by banks	560	106	367	12,257	-	13,290
Customer accounts	253,436	4,658	8,744	1,818	-	268,656
Repurchase agreements - non-trading	4,568	84	-	-	-	4,652
Derivatives	91	148	449	874	939	2,501
Debt securities in issue	48	382	192	1,598	268	2,488
Subordinated liabilities	49	196	2,430	9,976	4,034	16,685
Other financial liabilities	2,804	390	411	121	36	3,762
	261,556	5,964	12,593	26,644	5,277	312,034
Loan and other credit-related commitments	72,921	24	16	160	71	73,192
Financial guarantees	1,122	-	-	-	-	1,122
At 31 Dec 2023	335,599	5,988	12,609	26,804	5,348	386,348
Proportion of cash flows payable in period %	87	2	3	7	1	100

Deposits by banks	406	57	121	10,942	-	11,526
Customer accounts	275,781	2,561	2,401	370	-	281,113
Repurchase agreements - non-trading	9,346	-	-	-	-	9,346
Derivatives	84	16	286	308	354	1,048
Debt securities in issue	44	405	173	882	-	1,504
Subordinated liabilities	29	56	1,485	7,369	4,683	13,622
Other financial liabilities	2,174	326	335	584	39	3,458
	287,864	3,421	4,801	20,455	5,076	321,617
Loan and other credit-related commitments	70,263	39	10	148	23	70,483
Financial guarantees	1,148	-	-	-	-	1,148
At 31 Dec 2022	359,275	3,460	4,811	20,603	5,099	393,248
Proportion of cash flows payable in period %	92	1	1	5	1	100

The bank
Deposits by banks	2,191	157	685	13,290	647	16,970
Customer accounts	249,216	3,316	8,416	1,691	-	262,639
Repurchase agreements - non-trading	4,568	84	-	-	-	4,652
Derivatives	90	148	449	873	939	2,499
Debt securities in issue	48	370	156	1,240	-	1,814
Subordinated liabilities	49	196	2,430	9,976	4,034	16,685
Other financial liabilities	2,685	343	404	103	31	3,566
	258,847	4,614	12,540	27,173	5,651	308,825
Loan and other credit-related commitments	56,063	-	-	-	-	56,063
Financial guarantees	1,122	-	-	-	-	1,122
At 31 Dec 2023	316,032	4,614	12,540	27,173	5,651	366,010
Proportion of cash flows payable in period %	86	1	4	7	2	100

Deposits by banks	925	78	289	11,145	-	12,437
Customer accounts	274,261	2,561	2,401	370	-	279,593
Repurchase agreements - non-trading	9,346	-	-	-	-	9,346
Derivatives	84	16	286	308	354	1,048
Debt securities in issue	44	399	155	591	-	1,189
Subordinated liabilities	29	56	1,485	7,369	4,683	13,622
Other financial liabilities	2,106	319	330	576	35	3,366
	286,795	3,429	4,946	20,359	5,072	320,601
Loan and other credit-related commitments	57,179	-	-	-	-	57,179
Financial guarantees	1,148	-	-	-	-	1,148
At 31 Dec 2022	345,122	3,429	4,946	20,359	5,072	378,928
Proportion of cash flows payable in period %	91	1	1	5	2	100

22	Offsetting of financial assets and financial liabilities

In the offsetting of financial assets and financial liabilities, the net amount is reported in the balance sheet when the offsetting criteria is met. This is achieved when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 

In the following table, the 'Amounts not set off in the balance sheet' include transactions where:

-     the counterparty has an offsetting exposure with the group and a master netting or similar arrangement is in place with a right to set off only in the event of default, insolvency or bankruptcy, or the offset criteria are otherwise not satisfied; and

-     cash and non-cash collateral (debt securities) has been received/pledged for derivatives and reverse repurchase/repurchase, stock borrowing/lending and similar agreements to cover net exposure in the event of a default or other predetermined events.

The effect of over-collateralisation is excluded.

Amounts not subject to enforceable master netting agreements' include contracts executed in jurisdictions where the rights of set off may not be upheld under the local bankruptcy laws.

For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored and the relevant customer agreements are subject to review and updated, as necessary, to ensure that the legal right of offset remains appropriate.

	Amounts subject to enforceable netting arrangements						Amounts not subject to enforceable netting arrangements4	Total
				Amounts not set off in the balance sheet		Net amount
	Gross amounts	Amounts offset	Net amounts in the balance sheet	Financial instrumens, including non-cash collateral	Cash collateral
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives (Note 9)	3,849	(3,674)	175	(37)	(128)	10	3	178
Reverse repos, stock borrowing and similar agreements classified as:
-  non-trading assets	10,936	(3,250)	7,686	(7,686)	-	-	-	7,686
Loans and advances to customers2	5,652	(1,910)	3,742	(2,922)	-	820	-	3,742
At 31 Dec 2023	20,437	(8,834)	11,603	(10,645)	(128)	830	3	11,606

Derivatives (Note 9)	2,708	(2,162)	546	(288)	(234)	24	-	546
Reverse repos, stock borrowing and similar agreements classified as:
-  non-trading assets	10,937	(3,531)	7,406	(7,406)	-	-	-	7,406
Loans and advances to customers2	5,555	(2,175)	3,380	(2,786)	-	594	-	3,380
At 31 Dec 2022	19,200	(7,868)	11,332	(10,480)	(234)	618	-	11,332

Financial liabilities
Derivatives1 (Note 9)	3,782	(3,674)	108	(86)	(18)	4	-	108
Repos, stock lending and similar agreements classified as:
-  non-trading liabilities	7,902	(3,250)	4,652	(4,652)	-	-	-	4,652
Customer accounts3	8,790	(1,910)	6,880	(2,922)	-	3,958	4	6,884
At 31 Dec 2023	20,474	(8,834)	11,640	(7,660)	(18)	3,962	4	11,644

Derivatives1 (Note 9)	2,466	(2,162)	304	(41)	(218)	45	-	304
Repos, stock lending and similar agreements classified as:
-  non-trading liabilities	12,864	(3,531)	9,333	(9,333)	-	-	-	9,333
Customer accounts3	9,057	(2,175)	6,882	(2,786)	-	4,096	2	6,884
At 31 Dec 2022	24,387	(7,868)	16,519	(12,160)	(218)	4,141	2	16,521

1     At 31 December 2023, the amount of cash margin paid that had been offset against the gross derivatives liabilities was £353m (2022: £1,123m).

2     At 31 December 2023, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £211,887m (2022: £204,143m) of which £3,742m (2022: £3,380m) was subject to offsetting.

3     At 31 December 2023, the total amount of 'Customer accounts' recognised on the balance sheet was £268,345m (2022: £281,095m) of which £6,880m (2022: £6,882m) was subject to offsetting.

4     This includes exposures that continue to be secured by financial collateral.

23	Called up share capital and other equity instruments

Called up share capital and share premium

HSBC UK Bank plc ordinary shares of £1.00 each, issued and fully paid
	2023		2022
	Number	£m	Number	£m
At 1 Jan and 31 Dec	50,002	-	50,002	-
HSBC UK Bank plc share premium
			2023	2022
			£m	£m
At 31 Dec			9,015	9,015

Total called up share capital and share premium
	2023	2022
	£m	£m
At 31 Dec	9,015	9,015

Other equity instruments

HSBC UK Bank plc additional tier 1 instruments
		2023	2022
		£m	£m
£1,096m	Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2019 onwards)	1,096	1,096
£1,100m	Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2024 onwards)	1,100	1,100
At 31 Dec		2,196	2,196

The bank has issued capital instruments that are included in the group's capital base as fully CRR II compliant additional tier 1 capital.

Interest on these instruments will be due and payable only at the sole discretion of the bank, and the bank has sole and absolute discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any date. There are limitations on the payment of principal, interest or other amounts if such payments are prohibited under UK banking regulations, or other requirements, if the bank has insufficient distributable items or if the bank fails to satisfy the solvency condition as defined in the instruments terms.

The instruments are undated and are repayable, at the option of the bank, in whole at the initial call date, or on any Interest Payment Date after the initial call date. In addition, the instruments are repayable at the option of the bank in whole for certain regulatory or tax reasons. Any repayments require the prior notification to and consent of the PRA. These instruments rank pari passu with the bank's most senior class or classes of issued preference shares and therefore ahead of ordinary shares. These instruments will be written down in whole, together with any accrued but unpaid interest if either the group's solo or consolidated Common Equity Tier 1 Capital Ratio falls below 7.00%.

24	Contingent liabilities, contractual commitments, guarantees and contingent assets

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Guarantees and other contingent liabilities:
-  financial guarantees1	1,121	1,148	1,121	1,148
-  performance and other guarantees	2,330	2,530	2,295	2,530
At 31 Dec	3,451	3,678	3,416	3,678
Commitments2:
-  documentary credits and short-term trade-related transactions	187	52	187	52
-  forward asset purchases and forward deposits placed	297	327	-	102
-  standby facilities, credit lines and other commitments to lend	72,708	70,104	55,876	57,025
At 31 Dec	73,192	70,483	56,063	57,179

1     Financial guarantees contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor fails to make payment when due, in accordance with the original or modified terms of a debt instrument. The amounts in the above table are nominal principal amounts.

2     Includes £70bn (2022: £68bn) for the group and £53bn (2022: £54bn) for the bank of commitments to which the impairment requirements in IFRS 9 are applied where the group and bank has become party to an irrevocable commitment.

The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the group, which represents the maximum amounts at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 19.

The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to the group's annual credit review process.

Contingent liabilities arising from legal proceedings, regulatory and other matters against group companies are excluded from this note but are disclosed in Note 26.

Financial Services Compensation Scheme

The FSCS provides compensation, up to certain limits, to eligible customers of financial services firms that are unable, or likely to be unable, to pay claims against them. The FSCS may impose a further levy on HSBC UK to the extent the industry levies imposed to date are not sufficient to cover the compensation due to customers in any future possible collapse. The ultimate FSCS levy to the industry as a result of a collapse cannot be estimated reliably. It is dependent on various uncertain factors including the potential recovery of assets by the FSCS, changes in the level of protected products (including deposits and investments) and the population of FSCS members at the time.

UK branches of HSBC overseas entities

In December 2017, HM Revenue & Customs ('HMRC') challenged the VAT status of certain UK branches of HSBC overseas entities. In Q1 2019, HMRC reaffirmed its assessment that the UK branches are ineligible to be members of the UK VAT group and HSBC filed appeals. In February 2022, the Upper Tribunal issued a judgment addressing several preliminary legal issues, which was partially in favour of HMRC and partially in favour of HSBC. The case has now returned to the First-tier Tax Tribunal for determination. Since January 2018, HSBC's returns have been prepared on the basis that the UK branches are not in the UK VAT group. In the event that HSBC is successful, HSBC will seek a refund of this VAT, of which £244m in estimated to be attributable to HSBC UK Bank plc.

25	Finance lease receivables

The group leases a variety of assets to third parties under finance leases, including transport assets, property and general plant and machinery. At the end of lease terms, assets may be sold to third parties or leased for further terms. Rentals are calculated to recover the cost of assets less their residual value, and earn finance income.

	2023			2022
	Total future minimum payments	Unearned finance income	Present Value	Total future minimum payments	Unearned finance income	Present Value
	£m	£m	£m	£m	£m	£m
Lease receivables1
-  No later than one year	1,363	(117)	1,246	1,256	(87)	1,169
-  One to two years	1,049	(82)	967	878	(62)	816
-  Two to three years	728	(50)	678	680	(40)	640
-  Three to four years	376	(28)	348	387	(24)	363
-  Four to five years	184	(17)	167	176	(14)	162
-  Later than 5 years	360	(55)	305	330	(57)	273
31 Dec2	4,060	(349)	3,711	3,707	(284)	3,423

1     Finance leases receivables are disclosed within 'Loans and advances to customers' in the balance sheet.

2     ECL of £27m (2022: £23m) is held in respect of loans and advances under Finance lease receivables.

26	Legal proceedings and regulatory matters

The group is party to legal proceedings and regulatory matters arising out of its normal business operations. Apart from the matters described below, the group considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2023. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 31 December 2023. Where an individual provision is material, the fact that a provision has been made is stated and quantified. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

PPI

Although the FCA deadline for bringing PPI complaints has passed, new litigation for historic PPI mis-selling is initiated.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of this matter, which could be significant.

Film Finance litigation

In June 2020, two separate investor groups issued claims against HSBC UK (as successor to HSBC Private Bank (UK) Limited ('PBGB')) in the High Court of England and Wales seeking damages for unspecified amounts in connection with PBGB's role in the development of Eclipse film finance schemes. These actions are ongoing.

Based on the facts currently known, it is not practicable at this time for HSBC UK to predict the resolution of these matters, including the timing or any possible impact on HSBC UK, which could be significant.

UK collections and recoveries investigation

Since 2019, the FCA has been investigating HSBC Bank plc's, HSBC UK's and Marks and Spencer Financial Services plc's compliance with regulatory standards relating to collections and recoveries operations in the UK between 2017 and 2018. HSBC continues to cooperate with this investigation.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of this matter, which could be significant.

UK depositor protection arrangements investigation

In January 2022, the UK Prudential Regulation Authority ('PRA') commenced an investigation into HSBC Bank plc's and HSBC UK's compliance with depositor protection arrangements under the Financial Services Compensation Scheme in the UK. In January 2024, the PRA concluded its investigation and imposed a £57m fine on HSBC Bank plc and HSBC UK, which has been paid, and this matter is now closed.

Silicon Valley Bank ('SVB') litigation

In May 2023, First-Citizens Bank & Trust Company ('First Citizens') brought a lawsuit in the US District Court for the Northern District of California against HSBC UK and HINV, certain other HSBC companies and seven US-based HSBC employees who had previously worked for SVB. The lawsuit seeks $1bn in damages and alleges, among other things, that the HSBC companies conspired with the individual defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB and/or First Citizens. In January 2024, the court denied the defendants' motion to dismiss in part and granted it in part, and directed the plaintiff to amend its complaint to specify its allegations as to each defendant. In February 2024, First Citizens filed its amended complaint. This action is ongoing.

Based on the facts currently known, it is not practicable at this time to predict the resolution of this matter, including the timing or any possible impact on HSBC UK, which could be significant.

27	Related party transactions

The immediate and ultimate parent company of the group is HSBC Holdings plc, which is incorporated in England.

Copies of the Group financial statements may be obtained from the following address:

HSBC Holdings plc

8 Canada Square

London E14 5HQ

The group's related parties include the parent, fellow subsidiaries, joint ventures, post-employment benefit plans for HSBC UK employees, KMP of the Company and its ultimate parent company, HSBC Holdings plc, close family members of KMP and entities which are controlled, jointly controlled or significantly influenced by KMP or their close family members.

Particulars of transactions between the group and its related parties are tabulated below in accordance with IAS 24 'Related party disclosures'. The disclosure of the year-end balance and the highest amounts outstanding during the year are considered to be the most meaningful information to represent the amount of the transactions and outstanding balances during the year.

Key Management Personnel

The KMP of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company and the group, and include the Directors of the Company, certain senior executives of the Company, directors of HSBC Holdings plc and certain senior executives of HSBC Holdings plc. The emoluments of those KMP who are not directors or senior executives of the Company are paid by other Group companies who make no recharge to the Company. It is therefore not possible to make a reasonable apportionment of their emoluments in respect of services they have provided to the Company during the year. Accordingly, no emoluments in respect of these KMP are included in the following disclosure.

The table below represents the compensation for KMP (Directors and certain senior executives) of the Company in exchange for services rendered to the Company for the period they served during the year.

Compensation of Key Management Personnel
	2023	2022
	£000	£000
Short-term employee benefits	10,960	9,306
Post-employment benefits	19	12
Other long-term employee benefits	841	1,179
Share-based payments	2,808	2,046
Year ended 31 Dec	14,628	12,543

Advances and credits, guarantees and deposit balances during the year with Key Management Personnel1
	2023		2022
	Balance at 31 Dec	Highest amounts outstanding during  year	Balance at 31 Dec	Highest amounts outstanding during year
	£m	£m	£m	£m
Advances and credits	9	11	10	11
Deposits	5	17	8	27

1     Includes close family members and entities which are controlled or jointly controlled by KMP or their close family members.

The above transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not involve more than the normal risk of repayment or present other unfavourable features.

In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the bank and its subsidiaries with Directors of the Company are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the Companies Act, there is no requirement to disclose transactions with other KMP.

Transactions with Directors: advances, credits and guarantees (Companies Act 2006)
	2023	2022
	Balance at 31 Dec	Balance at 31 Dec
	£000	£000
Loans	5,118	6,677

Other related parties

Transactions and balances during the year with KMP of the bank's ultimate parent company1,2
	2023		2022
	Balance at 31 Dec	Highest amounts outstanding during  the year	Balance at 31 Dec	Highest amounts outstanding during  the year
	£m	£m	£m	£m
Advances and credits	-	1	2	6
Deposits	14	33	12	30

1     Excludes those who are also KMP of the Company.

2     Includes close family members and entities which are controlled or jointly controlled by the KMP or their close family members.

The above transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not involve more than the normal risk of repayment or present other unfavourable features.

Transactions and balances during the year with the joint venture
	2023		2022
	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year
	£m	£m	£m	£m
Unsubordinated amounts due from the joint venture	74	76	74	115
Amounts due to joint venture	47	70	42	43
Guarantees and commitments	237	252	219	244

The group provides certain banking and financial services to its joint venture, including loans, overdrafts, interest and non-interest- bearing deposits and current accounts. Details of the interest in the joint venture are given in Note 12.

The group's transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2023				2022
	Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Derivatives	-	-	28	63	-	-	49	161
Loans and advances to banks	-	-	392	1,311	-	-	528	872
Reverse repos	-	-	400	495	-	-	-	3,085
Prepayments and accrued income	-	-	3	9	-	-	9	17
Other assets	-	1	573	935	1	1	935	935
Total related party assets at 31 Dec	-	1	1,396	2,813	1	1	1,521	5,070
Liabilities
Deposits by banks	-	-	464	713	-	-	378	1,238
Customer accounts	-	-	2,036	2,280	-	-	2,104	2,104
Repos	-	-	330	900	-	-	511	1,610
Other liabilities	54	54	259	800	40	40	278	432
Accruals & Deferred Income	203	203	6	8	89	140	5	40
Derivatives	-	-	22	54	-	-	42	84
Subordinated liabilities	14,598	14,598	-	-	12,349	12,648	-	-
Total related party liabilities at 31 Dec	14,855	14,855	3,117	4,755	12,478	12,828	3,318	5,508

The group routinely enters into related party transactions with other entities in the HSBC Group. These include transactions to facilitate third-party transactions with customers, transactions for internal risk management, and other transactions relevant to HSBC Group processes. These transactions and the above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties. The group's income statement included interest payable to HSBC Holdings plc of £513m (2022: £325m) and general and administrative expenses payable to other subsidiaries of HSBC Holdings plc of £1,724m (2022: £1,823m).

The bank's transactions and balances during the year with HSBC UK Bank plc subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2023						2022
	Due to/from subsidiaries of HSBC UK Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from subsidiaries of HSBC UK Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Derivatives	-	2	-	-	28	63	-	-	-	-	49	161
Loans and advances to banks	5,686	6,203	-	-	391	1,231	2,953	2,966	-	-	527	871
Loans and advances to customers	8,051	8,307	-	-	-	-	8,232	8,313	-	-	-	-
Reverse repos	-	-	-	-	400	495	-	-	-	-	-	3,085
Prepayments and accrued income	80	80	-	-	3	9	37	37	-	-	9	17
Other assets	1,006	1,187	-	1	572	935	1,040	1,068	1	1	935	935
Total related party assets at 31 Dec	14,823	15,779	-	1	1,394	2,733	12,262	12,384	1	1	1,520	5,069
Liabilities
Deposits by banks	3,276	3,276	-	-	464	673	898	1,053	-	-	378	1,238
Customer accounts	491	678	-	-	2,036	2,280	381	381	-	-	2,104	2,104
Repos	-	-	-	-	330	900	-	-	-	-	511	1,610
Derivatives	-	5	-	-	22	54	-	-	-	-	42	84
Other liabilities	16	152	54	54	253	796	11	23	40	40	274	428
Accruals & Deferred Income	25	26	203	203	6	8	5	10	89	140	5	40
Subordinated liabilities	-	-	14,598	14,598	-	-	-	-	12,349	12,648	-	-
Total related party liabilities at 31 Dec	3,808	4,137	14,855	14,855	3,111	4,711	1,295	1,467	12,478	12,828	3,314	5,504

The above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties.

Post-employment benefit plans

The HSBC Bank (UK) Pension Scheme has placed deposits of £87m (2022: £59m) with HSBC UK, earning interest of £0.5m (2022: £0.1m).

The above outstanding balances arose from the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties.

28	Business acquisitions

Silicon Valley Bank UK Limited (now HSBC Innovation Bank Limited)

On 13 March 2023, HSBC UK acquired SVB UK for £1, acquiring 100% of the equity and thereby obtaining control. The acquisition was funded from existing resources and brought the staff, assets and liabilities of SVB UK into the HSBC UK portfolio.On acquisition, we performed a preliminary assessment of the fair value of the assets and liabilities purchased. We established a provisional opening balance sheet on            13 March 2023 and applied the result of the fair value assessment, which resulted in a reduction in net assets of £134m. The provisional gain on acquisition of £1,307m represents the difference between the consideration paid of £1 and the net assets acquired. This gain could change as further due diligence is performed within 12 months of the acquisition, as allowed by IFRS 3 'Business Combinations'.

HSBC Innovation Bank Limited contributed £362m of revenue and £121m to the consolidated profit of HSBC UK for the period from 13 March 2023 to 31 December 2023. As per the disclosure requirements set out in IFRS 3 (Business Combinations), if HSBC Innovation Bank Limited had been acquired on 1 January 2023, management estimates that for the twelve months to 31 December 2023 consolidated revenue would have been £10,927m and consolidated profit after tax £5,308m. In determining these amounts, management has assumed that the fair value adjustments, determined previously, that arose on acquisition would have been the same if the acquisition had occurred on 1 January 2023.

The details of the business combination as follows:

	£m
Fair value of consideration transferred	-
Recognised fair value of identifiable assets acquired and liabilities assumed at the acquisition date
Assets
Cash and balances at central banks	589
Items in course of collection from other banks	302
Loans and advances to banks	147
Loans and advances to customers	5,369
Financial investments	2,540
Other assets	391
Total assets	9,338
Liabilities
Customer accounts	7,400
Repurchase agreements	403
Other liabilities	228
Total liabilities	8,031
Fair value of identifiable net assets acquired	1,307
Provisional gain on acquisition	1,307
Consideration transferred settled in cash	-
Cash and cash equivalents acquired	1,023
Net cash inflow on acquisition	1,023
Acquisition costs charged to expenses	6

29	Events after the balance sheet date

These accounts were approved by the Board of Directors on 20 February 2024 and authorised for issue.

On 9 February 2024, the Directors resolved to pay an interim dividend to ordinary shareholders of £1,412m in respect of the financial year ending 31 December 2023. No liability is recognised in the financial statements in respect of this dividend.

On 30 January 2024, the PRA concluded its investigation into HSBC Bank plc's and HSBC UK Bank plc's compliance with depositor protection arrangements under the Financial Services Compensation Scheme in the UK. The PRA imposed a fine of £57m on these entities, the majority of which was borne by HSBC Bank plc, had previously been fully provided for and has now been paid.

In its assessment of events after the balance sheet date, HSBC UK has considered and concluded that no material events have occurred resulting in adjustments to the financial statements.

30	HSBC UK Bank plc's subsidiaries and joint ventures

In accordance with section 409 of the Companies Act 2006 a list of HSBC UK Bank plc subsidiaries and joint ventures, the registered office address and the effective percentage of equity owned at 31 December 2023 is disclosed below.

Unless otherwise stated, the share capital comprises ordinary or common shares which are held by HSBC UK Bank plc subsidiaries. The ownership percentage is provided for each undertaking. The undertakings below are consolidated by HSBC UK Bank plc unless otherwise indicated.

HSBC UK Bank plc's registered office address is:

HSBC UK Bank plc

1 Centenary Square

Birmingham B1 1HQ

United Kingdom

Subsidiaries

The undertakings below are consolidated by HSBC UK Bank plc. Unless otherwise stated the place of incorporation is England and Wales.

Subsidiaries	% of share class held by immediate parent company (or by HSBC UK Bank plc where this varies)	Footnotes
Assetfinance December (F) Limited	100.00	3
Assetfinance June (D) Limited	100.00	3
Assetfinance March (D) Limited	100.00	3
Assetfinance September (G) Limited	100.00	3
B&Q Financial Services Limited	100.00	1, 4
Canada Square Nominees (UK) Limited	100.00	1, 4
HSBC Bank Pension Trust (UK) Limited	100.00	1, 4
HSBC Branch Nominee (UK) Limited	100.00	1, 3
HSBC UK Covered Bonds LLP	N/A	0, 3
HSBC Equipment Finance (UK) Limited	100.00	1, 3
HSBC Executor & Trustee Company (UK) Limited	100.00	3
HSBC Finance Limited	100.00	1, 4
HSBC Innovation Bank Limited	100.00	1,7
HSBC Invoice Finance (UK) Limited	100.00	1, 3
HSBC Private Bank (UK) Limited	100.00	1, 4
HSBC Trust Company (UK) Limited	100.00	1, 4
HSBC UK Client Nominee Limited	100.00	1, 3
HSBC UK Societal Projects Limited	100.00	1,3
HSBC Wealth Client Nominee Limited	100.00	1, 3
John Lewis Financial Services Limited	100.00	1, 4
Marks and Spencer Financial Services plc	100.00	1, 5
Marks and Spencer Unit Trust Management Limited	100.00	1, 5
Midland Bank (Branch Nominees) Limited	100.00	1, 3
Midland Nominees Limited	100.00	3
St Cross Trustees Limited	100.00	3
Turnsonic (Nominees) Limited	100.00	3

Joint venture

The undertaking below is a Joint Venture and equity accounted.

Joint venture	% of share class held by immediate parent company (or by HSBC UK Bank plc where this varies)	Footnotes
Vaultex UK Limited	50.00	2, 6

Footnotes
0	Where an entity is governed by voting rights, HSBC consolidates when it holds - directly or indirectly - the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC's consolidation policy is described in Note 1.2(a)
1	Directly held by HSBC UK Bank plc
2	Financial year ended 6 October 2023
Registered Offices
3	1 Centenary Square, Birmingham, United Kingdom, B1 1HQ
4	8 Canada Square, London, United Kingdom, E14 5HQ
5	Kings Meadow Chester Business Park, Chester, United Kingdom, CH99 9FB
6	All Saints Triangle, Caledonian Road, London, United Kingdom, N1 9UT
7	All Alphabeta, 14-18 Finsbury Square, London, United Kingdom, EC2A 1BR

Reconciliation of alternative performance measures

Return on equity and return on tangible equity

RoTE is computed as reported profit, divided by average reported equity adjusted for goodwill and intangibles impairment for the period. The adjustment to reported results and reported equity excludes amounts attributable to non-controlling interests. We provide RoTE in addition to RoE as a way of assessing our performance, which is closely aligned to our capital position. The measures are calculated in US dollars in line with the standard HSBC Group-wide calculation methodology.

The following table details the adjustments made to the reported results and equity:

Return on Equity and Return on Tangible Equity
	Year ended
	31 Dec	31 Dec
	2023	2022
	$m	$m
Profit
Profit attributable to the ordinary shareholders of the parent company	6,226	3,385
Profit attributable to the ordinary shareholders, excluding goodwill and other intangible assets impairment	6,226	3,385
Equity
Average shareholders' equity	30,016	28,757
Effect of average preference shares, additional Tier 1 and other equity instruments	(2,726)	(2,722)
Average ordinary shareholders' equity	27,290	26,035
Effect of goodwill and other intangibles (net of deferred tax)	(5,342)	(5,249)
Average tangible ordinary shareholders' equity	21,948	20,786
Ratio	%	%
Return on equity	22.8	13.0
Return on average tangible equity1,2	28.4	16.3

1     Excluding the provisional gain on acquisition of SVB UK the RoTE was 22.4%.

2   Under IAS 19 HSBC UK holds a pension fund surplus, and records pension income in the Income Statement. The IAS 19 pension fund surplus increases Tangible Equity but not CET1. In the event that the IAS 19 pension fund surplus was zero, RoTE would be 32.4% (25.5% excluding the provisional gain on acquisition of SVB UK) (2022: 17.7%), we refer to this as Pension Adjusted RoTE.

Abbreviations

Currencies
£	British pound sterling
€	Euro
$	United States dollar
Abbreviations
4Q24	Fourth quarter of 2024
2Q23	Second quarter of 2023
A
AGM	Annual General Meeting
AI	Artificial Intellegence
AIEA	Average interest-earning assets
ALCO	Asset and Liability Management Committee
AT1	Additional tier 1
B
BACS	Bankers' Automated Clearing System
Basel	Basel Committee on Banking Supervision
Basel III	Basel Committee's reforms to strengthen global capital and liquidity rules
BoE	Bank of England
Bps	Basis points. One basis point is equal to one hundredth of a percentage point
C
CBDC	Central Bank Digital Currency
CAPM	Capital asset pricing model
CBDC	Central Bank Digital Currencies
CEO	Chief Executive Officer
CET1	Common equity tier 1
CFO	Chief Financial Officer
CGU	Cash-generating Unit
CMB	Commercial Banking
CODM	Chief Operating Decision Maker
CDI	CORE Deposit Intangible
CRR	Customer risk rating
CRR II	Revised Capital Requirements Regulation and Directive, as implemented
CPI	Consumer Price Index
D
DBS	Digital Business Services
DCF	Discounted cash flows
DPD	Days past due
DBO	Defined Benefit Obligation
DECL	Disclosures about Expected Credit Losses
DRA	Dynamic Risk Assessment
E
EAD	Exposure at default
EBA	European Banking Authority
EC	European Commission
ECL	Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied.
EIR	Effective interest rate
ESG	Environmental, social and governance
EU	European Union
Euribor	Euro interbank offered rate
EVE	Economic value of equity
EPC	Energy Performance Certificate
F
FCA	Financial Conduct Authority (UK)
FSCS	Financial Services Compensation Scheme
FTE	Full-time equivalent staff
FVOCI	Fair value through other comprehensive income
FY	Full Year
FY22	Full Year 2022
FY23	Full Year 2023
G
GBM	Global Banking and Markets
GDP	Gross domestic product
GPSP	Group Performance Share Plans
group	HSBC UK Bank plc together with its subsidiary undertakings
Group	HSBC Holdings plc together with its subsidiary undertakings
GTRF	Global Trade and Receivables Finance
H
HMRC	HM Revenue and Customs
HMT	His Majesty's Treasury
HQLA	High-quality liquid assets
HSBC Group	HSBC Holdings plc together with its subsidiary undertakings
HSBC Holdings plc	HSBC Holdings plc, the parent company of HSBC UK
HSBC UK	HSBC UK Bank plc together with its subsidiary undertakings
HINV	HSBC Innovation Bank Limited, formerly Silicon Valley Bank UK Limited
HR	Human Resources
I
IAS	International Accounting Standards
IASB	International Accounting Standards Board
Ibor	Interbank offered rate
ICAAP	Internal capital adequacy assessment process
IFRS® Accounting Standards	International Financial Reporting Standards as issued by the IASB
IFRS® Sustainability Disclosure Standards	Standards issue by the International Sustainability Standards Board ('ISSB')
ISSB	International Sustainability Standards Board
ILAAP	Internal liquidity adequacy assessment process
IRB	Internal ratings-based
IT	Information technology
K
KMP	Key management personnel
KPI	Key performance indicator
L
LC	Large Corporates
LCR	Liquidity coverage ratio
LFRF	Liquidity and Funding Risk management Framework
LGD	Loss given default
Libor	London interbank offered rate
LTI	Long-term incentive
LTV	Loan to value
M
MI	Management Information
MME	Mid-Market Enterprises
MREL	EU minimum requirements for own funds and eligible liabilities
M&S	Marks and Spencer Financial Services plc
N
NII	Net interest income
NPS	Net Promoter Score
NSFR	Net stable funding ratio
O
OCI	Other comprehensive income
P
PD	Probability of default
PLCA	Purpose Led Conduct Approach
POCI	Purchased or originated credit impaired
PPA	Power Purchase Agreement
PPI	Payment protection insurance
PRA	Prudential Regulation Authority
PSR	Payment Systems Regulator
PIV	Pooled Investment Vehicles
PwC	PricewaterhouseCoopers LLP and its network of firms
R
RAS	Risk Appetite Statement
Revenue	Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit provisions, also referred to as revenue
RMM	Risk Management Meeting
RoE	Return on average ordinary shareholders' equity
RoTE	Return on average tangible equity
RPI	Retail Price Index
RWA	Risk-weighted asset
S
SAF	Subsidiary Accountability Framework
SME	Small and medium-sized enterprise
SOFR	Secured Overnight Financing Rate
Sonia	Sterling Overnight Index Average
SPPI	Solely payments of principal and interest
STD	Standardised Approach
SVB UK	Silicon Valley Bank UK Limited
T
TCFD	Taskforce on Climate-Related Financial Disclosures
U
UK	United Kingdom
US	United States of America
V
VaR	Value at risk
VAT	Value-added tax
VIU	Value in use
W
WPB	Wealth and Personal Banking
Y
sYoY	Year-on-year

 

END