HSBC Finance Corporation FY13 Form 10-K - Part 2

RNS Number : 7408A

HSBC Holdings PLC

24 February 2014

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note		Page	Note		Page
1	Organization.............................................................		12	Income Taxes...........................................................
2	Summary of Significant Accounting Policies and New Accounting Pronouncements...............		13	Redeemable Preferred Stock..................................
3	Discontinued Operations.......................................		14	Accumulated Other Comprehensive Income......
4	Securities..................................................................		15	Share-Based Plans..................................................
5	Receivables..............................................................		16	Pension and Other Postretirement Benefits........
6	Credit Loss Reserves..............................................		17	Related Party Transactions...................................
7	Receivables Held for Sale......................................		18	Business Segments.................................................
8	Properties and Equipment, Net.............................		19	Variable Interest Entities........................................
9	Long-Term Debt......................................................		20	Fair Value Measurements.......................................
10	Fair Value Option.....................................................		21	Commitments and Contingent Liabilities.............
11	Derivative Financial Instruments..........................		22	Litigation and Regulatory Matters.......................

1. Organization

HSBC Finance Corporation is an indirect wholly owned subsidiary of HSBC North America Holdings Inc. ("HSBC North America"), which is an indirect wholly-owned subsidiary of HSBC Holdings plc ("HSBC"). HSBC Finance Corporation and its subsidiaries may also be referred to in these notes to the consolidated financial statements as "we," "us" or "our." Historically, HSBC Finance Corporation provided middle-market consumers with several types of loan products in the United States. While we no longer originate any receivable products, our lending products historically included real estate secured, auto finance, personal non-credit card, MasterCard, Visa, American Express and Discover credit card receivables as well as private label receivables in the United States. We also historically offered tax refund anticipation loans and related products in the United States. Additionally, we also previously offered credit and specialty insurance in the United States and Canada. We have one reportable segment: Consumer, which consists of the run-off real estate secured receivable portfolio of our Consumer Lending and Mortgage Services businesses.

2. Summary of Significant Accounting Policies and New Accounting Pronouncements

Summary of Significant Accounting Policies

Basis of Presentation The consolidated financial statements have been prepared on the basis that we will continue as a going concern. Such assertion contemplates the significant losses recognized in recent years and the challenges we anticipate with respect to an on-going return to profitability under prevailing and forecasted economic conditions. HSBC continues to be fully committed and has the capacity to continue to provide the necessary capital and liquidity to fund continuing operations.

The consolidated financial statements include the accounts of HSBC Finance Corporation and all subsidiaries including all variable interest entities ("VIEs") in which we are the primary beneficiary. All significant intercompany accounts and transactions have been eliminated.

We assess whether an entity is a VIE and, if so, whether we are its primary beneficiary at the time of initial involvement with the entity and on an ongoing basis. A VIE is an entity in which the equity investment at risk is not sufficient to finance the entity's activities, the equity investors lack certain characteristics of a controlling financial interest, or voting rights are not proportionate to the economic interests of equity investors and the entity's activities are conducted primarily on behalf of investors having few voting rights. A VIE must be consolidated by its primary beneficiary, which is the entity with the power to direct the activities of a VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. We are involved with VIEs primarily in connection with our collateralized funding transactions. See Note 9, "Long-Term Debt," for additional discussion of those activities and the use of VIEs.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain reclassifications may be made to prior year amounts to conform to the current year presentation. Areas which we consider to be critical accounting estimates and require a high degree of judgment and complexity include credit loss reserves, valuation of financial instruments including receivables held for sale, deferred tax asset valuation allowance and contingent liabilities.

Unless otherwise indicated, information included in these notes to consolidated financial statements relates to continuing operations for all periods presented. In 2013, we completed the sale of our interests in substantially all of the subsidiaries of our Insurance business to Enstar Group Ltd ("Enstar"), and in 2012, we completed the sale of our credit card operations to Capital One Financial Corporation. Also starting in the second quarter of 2012, we reported our Commercial business in discontinued operations because it no longer had any outstanding receivable balances and does not generate any remaining significant cash flows. As a result, each of these businesses are reported as discontinued operations. See Note 3, "Discontinued Operations," for further details.

Securities Purchased under Agreements to Resell Securities purchased under agreements to resell are treated as collateralized financing transactions and are carried at the amounts at which the securities were acquired plus accrued interest. Interest income earned on these securities is included in net interest income.

Securities During the first quarter of 2013, we liquidated our remaining investment portfolio of debt securities (comprising primarily corporate debt securities) and, as a result, do not hold any debt or equity securities at December 31, 2013. Before the liquidation, our entire non-insurance investment securities portfolio was classified as available-for-sale and our entire insurance investment securities portfolio was reported in discontinued operations and included in the Insurance disposal group held for sale. See Note 3, "Discontinued Operations," for additional discussion.

Prior to the liquidation of our investment portfolios, available-for-sale investment securities were intended to be invested for an indefinite period but could be sold in response to events we might expect to occur in the foreseeable future. These investments were carried at fair value with changes in fair value recorded as adjustments to common shareholder's equity in other comprehensive income (loss), net of income taxes.

When the fair value of a security declined below its amortized cost basis, we evaluated the decline to assess whether it was other-than-temporary. For debt securities that we intended to sell or for which it was more likely than not that we would be required to sell before the recovery of its amortized cost basis, the decline in fair value below the security's amortized cost was deemed to be other than temporary and we recognized an other-than-temporary impairment loss in earnings equal to the difference between the security's amortized cost and its fair value. We measured the impairment loss for equity securities that were deemed other-than-temporarily impaired in the same manner. For a debt security that we did not intend to sell and for which it was not more likely than not that we would be required to sell prior to recovery of its amortized cost basis, but for which we nonetheless did not expect to recover the entire amortized cost basis of the security, we recognized the portion of the decline in the security's fair value below its amortized cost that represented a credit loss as an other-than-temporary impairment in earnings and the remaining portion of the decline as an other-than-temporary impairment in other comprehensive income. For these debt securities, a new cost basis was established, which reflected the amount of the other-than-temporary impairment loss recognized in earnings.

Cost of investment securities sold was determined using the specific identification method. Realized gains and losses from the investment portfolio were recorded in investment income. Interest income earned on the non-insurance investment portfolio was classified in the consolidated statement of income (loss) in net interest income, while investment income from the insurance portfolio was reflected in discontinued operations. Accrued investment income was classified with investment securities.

For cash flow presentation purposes, we considered available-for-sale securities with original maturities less than 90 days as short term, and thus purchases, sales and maturities were presented on a net basis.

Receivables Held for SaleReceivables are classified as held for sale when management does not have the intent or the ability to hold the receivables for the foreseeable future or until maturity or payoff. Such receivables are carried at the lower of cost or fair value with any subsequent write downs or recoveries charged to other income. While receivables are held for sale, the carrying amounts of any unearned income, unamortized deferred fees or costs (on originated receivables), or discounts and premiums (on purchased receivables) are not amortized into earnings.

Receivables Finance receivables are carried at amortized cost, which represents the principal amount outstanding, net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Finance receivables are further reduced by credit loss reserves and unearned credit insurance premiums and claims reserves applicable to credit risk on our consumer receivables. Finance income, which includes interest income, unamortized deferred fees and costs on originated receivables and premiums or discounts on purchased receivables, is recognized using the effective yield method. Premiums and discounts, including purchase accounting adjustments on receivables, are recognized as adjustments to the yield of the related receivables. Origination fees, which include points on real estate secured loans, are deferred and generally amortized to finance income over the estimated life of the related receivables, except to the extent they offset directly related lending costs.

Provision and Credit Loss ReservesProvision for credit losses on receivables is made in an amount sufficient to maintain credit loss reserves at a level considered adequate, but not excessive, to cover probable incurred losses of principal, accrued interest and fees, and, as it relates to loans which have been identified as troubled debt restructurings, credit loss reserves are based on the present value of expected future cash flows discounted at the loans' original effective interest rates. We estimate probable incurred losses for consumer receivables other than troubled debt restructuring using a roll rate migration analysis that estimates the likelihood that a loan will progress through the various stages of delinquency and ultimately charge-off. This analysis considers delinquency status, loss experience and severity and takes into account whether loans are in bankruptcy or have been subject to customer account management actions, such as the re-age of accounts or modification arrangements. Our credit loss reserves also take into consideration the loss severity expected based on the underlying collateral, if any, for the loan in the event of default based on historical and recent trends, which are updated monthly based on a rolling average of several months' data using the most recently available information. When customer account management policies and practices, or changes thereto, shift loans from a "higher" delinquency bucket to a "lower" delinquency bucket, this will be reflected in our roll rate statistics. To the extent that restructured accounts have a greater propensity to roll to higher delinquency buckets, this will be captured in the roll rates. Since the loss reserve is computed based on the composite of all these calculations, this increase in roll rate will be applied to receivables in all respective buckets, which will increase the overall reserve level. In addition, loss reserves on consumer receivables are maintained to reflect our judgment of portfolio risk factors which may not be fully reflected in the statistical roll rate calculation. Risk factors considered in establishing loss reserves on consumer receivables include product mix, unemployment rates, the credit performance of modified loans, loan product features such as adjustable rate loans, the credit performance of second lien loans where the first lien loan that we own or service is 90 or more days contractually delinquent, economic conditions, such as national and local trends in housing markets and interest rates, portfolio seasoning, account management policies and practices, changes in laws and regulations and other factors which can affect consumer payment patterns on outstanding receivables, such as natural disasters.

While our credit loss reserves are available to absorb losses in the entire portfolio, we specifically consider the credit quality and other risk factors for each of our products. We recognize the inherent loss characteristics in each of our products, and for certain products their vintages as well as customer account management policies and practices and risk management/collection practices. Charge-off policies are also considered when establishing loss reserve requirements. We also consider key ratios such as reserves to nonperforming loans and reserves as a percentage of receivables in developing our loss reserve estimate. Loss reserve estimates are reviewed periodically and adjustments are reported in earnings when they become known. As these estimates are influenced by factors outside our control, such as consumer payment patterns and economic conditions, there is uncertainty inherent in these estimates, making it reasonably possible that they could change.

Provisions for credit losses on consumer loans for which we have modified the terms as part of a troubled debt restructuring ("TDR Loans") are determined using a discounted cash flow impairment methodology. During the third quarter of 2011, we adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update No. 2011-02, "Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring," which provided additional guidance for determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring for purposes of the identification and reporting of TDR Loans as well as for recording impairment. Under this new guidance, we determined that substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods, should be reported as TDR Loans. Additionally, we determined that all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification, should be considered TDR Loans. Prior to 2011, loans which have been granted a permanent modification, a twelve-month or longer modification, or two or more consecutive six-month modifications were considered TDR Loans, and loans which were granted re-ages were not considered TDR Loans as these were not considered permanent modification events. Modifications may include changes to one or more terms of the loan, including but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount and partial forgiveness or deferment of principal or accrued interest. As a result of regulatory guidance adopted beginning in the fourth quarter of 2012, TDR Loans also include receivables discharged under Chapter 7 bankruptcy and not re-affirmed.

TDR Loans are considered to be impaired loans. Interest income on TDR Loans is recognized in the same manner as loans which are not TDRs. Once a loan is classified as a TDR Loan, it continues to be reported as such until it is paid off or charged-off.

Charge-Off and Nonaccrual Policies and Practices Our consumer charge-off and nonaccrual policies differ by product and are summarized below:

Product	Charge-off Policies and Practices	Nonaccrual Policies and Practices
Continuing Operations:
Real estate secured........................................	Carrying amounts in excess of fair value less cost to sell are generally charged-off at or before the time foreclosure is completed or settlement is reached with the borrower but, in any event, generally no later than the end of the month in which the account becomes six months contractually delinquent. If foreclosure is not pursued (which frequently occurs on second lien loans) and there is no reasonable expectation for recovery (insurance claim, title claim, pre-discharge bankrupt account), the account is generally charged-off no later than the end of the month in which the account becomes six months contractually delinquent.⁽¹⁾	Interest income accruals are suspended when principal or interest payments are more than three months contractually past due. Interest accruals are resumed and suspended interest recognized when the customer makes the equivalent of six qualifying payments⁽³⁾ under the terms of the loan, while maintaining a current payment status when we receive the sixth payment. If the re-aged receivable again becomes more than three months contractually delinquent, any interest accrued beyond three months delinquency is reversed. Interest income for all accounts that have been written down to the lower of amortized cost or fair value of the collateral less cost to sell is recognized on a cash basis as received.
Personal non-credit card⁽²⁾............................	Accounts are generally charged-off by the end of the month in which the account becomes six months contractually delinquent.	Interest income accruals are suspended when principal or interest payments are more than three months contractually past due. Interest subsequently received is generally recorded as collected and accruals are not resumed upon a re-age when the receivable becomes less than three months contractually delinquent.
Discontinued Operations:
Credit card⁽²⁾....................................................	Accounts are generally charged-off by the end of the month in which the account becomes six months contractually delinquent.	Interest generally accrues until charge-off.

⁽¹⁾Values are determined based upon broker price opinions or appraisals, which are updated at least every 180 days. During the quarterly period between updates, real estate price trends are reviewed on a geographic basis and additional reductions in value are recorded as necessary.

Fair values of foreclosed properties at the time of acquisition are initially determined based upon broker price opinions. Subsequent to acquisition, a more detailed property valuation is performed, reflecting information obtained from a walk-through of the property in the form of a listing agent broker price opinion as well as an independent broker price opinion or appraisal. A valuation is determined from this information within 90 days and any additional write-downs required are recorded through charge-off at that time.

⁽²⁾In the second quarter of 2013, we completed the sale of our personal non-credit card receivable portfolio. See Note 7, "Receivables Held for Sale," for further information. In 2012, we completed the sale of our Credit Card business, which was reported as a discontinued operation. See Note 3, "Discontinued Operations," for additional information.

⁽³⁾Our real estate secured receivables had historically been maintained on two mortgage loan servicing platforms. One platform (representing approximately two-thirds of our outstanding real estate secured receivables) established a qualifying payment as a payment that was within $10 of the required payment. The other platform (representing approximately one-third of our outstanding real estate secured receivables) established a qualifying payment as a payment that, on a life-to-date basis, left the total less than 50 percent of one required payment unpaid. In April 2013, we moved all closed-end real estate secured receivables onto the first platform discussed above which resulted in the substantial majority of our real estate secured receivables utilizing the same platform.

Charge-offs involving a bankruptcy for our credit card receivables occurred by the end of the month at the earlier of 60 days after notification or 180 days delinquent.

Delinquency status for loans is determined using the contractual method which is based on the status of payments under the loan. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status may be affected by customer account management policies and practices such as the re-age or modification of accounts.

Payments received on nonaccrual loans are generally applied first to reduce the current interest on the earliest payment due with any remainder applied to reduce the principal balance associated with that payment due.

Transfers of Financial Assets and Securitizations Transfers of financial assets in which we have surrendered control over the transferred assets are accounted for as sales. In assessing whether control has been surrendered, we consider whether the transferee would be a consolidated affiliate, the existence and extent of any continuing involvement in the transferred financial assets and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of transfer. Control is generally considered to have been surrendered when (i) the transferred assets have been legally isolated from us and our consolidated affiliates, even in bankruptcy or other receivership, (ii) the transferee (or, if the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing that is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received without any constraints that provide more than a trivial benefit to us, and (iii) neither we nor our consolidated affiliates and agents have (a) both the right and obligation under any agreement to repurchase or redeem the transferred assets before their maturity, (b) the unilateral ability to cause the holder to return specific financial assets that also provides us with a more-than-trivial benefit (other than through a cleanup call) and (c) an agreement that permits the transferee to require us to repurchase the transferred assets at a price so favorable that it is probable that it will require us to repurchase them.

If the sale criteria are met, the transferred financial assets are removed from our balance sheet and a gain or loss on sale is recognized. If the sale criteria are not met, the transfer is recorded as a secured borrowing in which the assets remain on our balance sheet and the proceeds from the transaction are recognized as a liability (a "secured financing"). For the majority of financial asset transfers, it is clear whether or not we have surrendered control. For other transfers, such as in connection with complex transactions or where we have continuing involvement such as servicing responsibilities, we generally obtain a legal opinion as to whether the transfer results in a true sale by law.

We have used collateral funding transactions for certain real estate secured, and previously for personal non-credit card receivables, where it provides an attractive source of funding. All collateralized funding transactions remaining on our balance sheet have been structured as secured financings.

Properties and Equipment, NetProperties and equipment are recorded at cost, net of accumulated depreciation and amortization. For financial reporting purposes, depreciation is provided on a straight-line basis over the estimated useful lives of the assets which generally range from 3 to 40 years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the lease. The costs of maintenance and repairs are expensed as incurred. Impairment testing is performed whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Repossessed Collateral We obtain real estate by taking possession of the collateral pledged as security for real estate secured receivables. Prior to our taking possession of the pledged collateral, the carrying amounts of receivables held for investment in excess of fair value less cost to sell are generally charged-off at or before the time foreclosure is completed or settlement is reached with the borrower but, in any event, generally no later than the end of the month in which the account becomes six months contractually delinquent. If foreclosure is not pursued (which frequently occurs on loans in the second lien position) and there is no reasonable expectation for recovery (insurance claim, title claim, pre-discharge bankrupt account), the account is generally charged-off no later than the end of the month in which the account becomes six months contractually delinquent. Values are determined based upon broker price opinions or appraisals which are updated every 180 days. During the quarterly period between updates, real estate price trends are reviewed on a geographic basis and additional adjustments are recorded as necessary.

Collateral acquired in satisfaction of a loan is initially recognized at the lower of amortized cost or fair value of the collateral less estimated costs to sell and reported as real estate owned ("REO"). Fair values of foreclosed properties at the time of acquisition are initially determined based upon broker price opinions. Subsequent to acquisition, a more detailed property valuation is performed, reflecting information obtained from a walk-through of the property in the form of a listing agent broker price opinion as well as an independent broker price opinion or appraisal. A valuation is determined from this information within 90 days and any additional write-downs required are recorded through charge-off at that time. This value, which includes the impact on fair value from the conditions inside the property, becomes the "Initial REO Carrying Amount."

In determining the appropriate amounts to charge-off when a property is acquired in exchange for a loan, we do not consider losses on sales of foreclosed properties resulting from deterioration in value during the period the collateral is held because these losses result from future loss events which cannot be considered in determining the fair value of the collateral at the acquisition date in accordance with generally accepted accounting principles. Once a property is classified as real estate owned, we do not consider the losses on past sales of foreclosed properties when determining the fair value of any collateral during the period it is held in REO. Rather, a valuation allowance is created to recognize any subsequent declines in fair value less cost to sell as they become known after the Initial REO Carrying Amount is determined with a corresponding amount reflected in operating expense. Property values are periodically reviewed for impairment until the property is sold and any impairment identified is immediately recognized through the valuation allowance. Recoveries in value are also recognized against the valuation allowance but not in excess of cumulative losses previously recognized subsequent to the date of repossession. Adjustments to the valuation allowance, costs of holding REO and any gain or loss on disposition are credited or charged to operating expense.

Our methodology for determining the fair values of the underlying collateral as described above is continuously validated by comparing our net investment in the loan subsequent to charging the loan down to the lower of amortized cost or fair value of the collateral less cost to sell, or our net investment in the property upon completing the foreclosure process, to the updated broker's price opinion and once the collateral has been obtained, any adjustments that have been made to lower the expected selling price, which may be lower than the broker's price opinion. Adjustments in our expectation of the ultimate proceeds that will be collected are recognized as they occur based on market information at that time and consultation with our listing agents for the properties.

Derivative Financial Instruments All derivatives are recognized on the balance sheet at their fair values. At the inception of a hedging relationship, we designate the derivative as a fair value hedge or a cash flow hedge. A fair value hedge offsets changes in the fair value of a recognized asset or liability, including certain foreign currency positions. A cash flow hedge offsets the variability of cash flows to be received or paid related to a recognized asset or liability, including those related to certain foreign currency positions. A derivative that does not qualify for or is not designated in a hedging relationship is accounted for as a non-hedging derivative.

Changes in the fair value of a derivative designated as a fair value hedge, along with the changes in fair value of the hedged asset or liability that is attributable to the hedged risk (including changes in fair value on firm commitments), are recorded as derivative related income (expense) in the current period. Changes in the fair value of a derivative designated as a cash flow hedge, to the extent effective as a hedge, are recorded in accumulated other comprehensive income (loss), net of income taxes, and reclassified into net interest margin in the period during which the hedged item affects earnings. Changes in the fair value of derivative instruments not designated as hedging instruments and ineffective portions of changes in the fair value of hedging instruments are recognized in other revenue as derivative related income (expense) in current period earnings. Realized gains and losses as well as changes in the fair value of derivative instruments associated with fixed rate debt we have designated at fair value are recognized in other revenues as gain (loss) on debt designated at fair value and related derivatives in the current period.

For derivative instruments designated as hedges, we formally document all relationships between hedging instruments and hedged items at the inception of the hedging relationship. This documentation includes our risk management objective and strategy for undertaking various hedge transactions as well as how hedge effectiveness and ineffectiveness will be measured. This process includes linking derivatives to specific assets and liabilities on the balance sheet. We also formally assess, both at the hedge's inception and on a quarterly basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. This assessment is conducted using statistical regression analysis. When as a result of the quarterly assessment, it is determined that a derivative is not expected to continue to be highly effective as a hedge or has ceased to be a highly effective hedge, we discontinue hedge accounting as of the beginning of the quarter in which such determination was made.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective hedge, the derivative will continue to be carried on the balance sheet at its fair value, with changes in its fair value recognized in current period earnings. For fair value hedges, the formerly hedged asset or liability will no longer be adjusted for changes in fair value and any previously recorded adjustments to the carrying amount of the hedged asset or liability will be amortized in the same manner that the hedged item affects income. For cash flow hedges, amounts previously recorded in accumulated other comprehensive income (loss) will be reclassified into income in the same manner that the hedged item affects income, unless the hedged item was a forecasted transaction for which it is probable that it will not occur by the end of the original specified time period or within an additional two-month period thereafter, in which case the amounts accumulated in other comprehensive income will be immediately reclassified into income.

If the hedging instrument is terminated early, the derivative is removed from the balance sheet. Accounting for the adjustments to the hedged asset or liability or adjustments to accumulated other comprehensive income (loss) are the same as described above when a derivative no longer qualifies as an effective hedge.

If the hedged asset or liability is sold or extinguished, the derivative will continue to be carried on the balance sheet until termination at its fair value, with changes in its fair value recognized in current period earnings. The hedged item, including previously recorded mark-to-market adjustments, is derecognized immediately as a component of the gain or loss upon disposition.

Foreign Currency Translation Effects of foreign currency translation in the statements of cash flows, primarily a result of the specialty insurance products we offer in Canada, are offset against the cumulative foreign currency adjustment within accumulated other comprehensive income. Foreign currency transaction gains and losses are included in income as they occur. As described in Note 3, "Discontinued Operations," we completed the sale of our interests in substantially all of the subsidiaries of our Insurance business, which previously offered the specialty insurance products in Canada, in the second quarter of 2013.

Share-Based Compensation We use the fair value based method of accounting for awards of HSBC stock granted to employees under various stock options, restricted share and employee stock purchase plans. Stock compensation costs are recognized prospectively for all new awards granted under these plans. Compensation expense relating to restricted share rights, restricted shares and restricted share units is based upon the fair value on the date of grant and is charged to earnings over their requisite service period (e.g., vesting period). Compensation expense relating to share options is calculated using a methodology that is based on the underlying assumptions of the Black-Scholes option pricing model and is charged to expense over the requisite service period (e.g., vesting period), generally one to five years. When modeling awards with vesting that is dependent on performance targets, these performance targets are incorporated into the model using Monte Carlo simulation. The expected life of these awards depends on the behavior of the award holders, which is incorporated into the model consistent with historical observable data.

Pension and Other Postretirement Benefits We recognize the funded status of our postretirement benefit plans on the consolidated balance sheet. Net postretirement benefit cost charged to current earnings related to these plans is based on various actuarial assumptions regarding expected future experience.

Certain of our employees are participants in various defined contribution and other non-qualified supplemental retirement plans. Our contributions to these plans are charged to current earnings.

We maintain a 401(k) plan covering substantially all employees. Employer contributions to the plan, which are charged to current earnings, are based on employee contributions.

Income Taxes HSBC Finance Corporation is included in HSBC North America's consolidated federal income tax return and in various combined state income tax returns. As such, we have entered into a tax allocation agreement with HSBC North America and its subsidiary entities ("the HNAH Group") included in the consolidated returns which governs the current amount of taxes to be paid or received by the various entities included in the consolidated return filings. Generally, such agreements allocate taxes to members of the HNAH Group based on the calculation of tax on a separate return basis, adjusted for the utilization or limitation of tax credits of the consolidated group. To the extent all the tax attributes available cannot be currently utilized by the consolidated group, the proportionate share of the utilized attribute is allocated based on each affiliate's percentage of the available attribute computed in a manner that is consistent with the taxing jurisdiction's laws and regulations regarding the ordering of utilization. In addition, we file some unconsolidated state tax returns.

We recognize deferred tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits and net operating and other losses. Deferred tax assets and liabilities are measured using the enacted tax rates including enacted rates for periods in which the deferred tax items are expected to be realized. If applicable, valuation allowances are recorded to reduce deferred tax assets to the amounts we conclude are more likely than not to be realized. Since we are included in HSBC North America's consolidated federal tax return and various combined state tax returns, the related evaluation of the recoverability of the deferred tax assets is performed at the HSBC North America consolidated level. We consider the HNAH Group's consolidated deferred tax assets and various sources of taxable income, including the impact of HSBC and HNAH Group tax planning strategies, in reaching conclusions on recoverability of deferred tax assets. The HNAH Group evaluates deferred tax assets for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies and any available carryback capacity. In evaluating the need for a valuation allowance, the HNAH Group estimates future taxable income based on management approved business plans, future capital requirements and ongoing tax planning strategies, including capital support from HSBC necessary as part of such plans and strategies. This process involves significant management judgment about assumptions that are subject to change from period to period. Only those tax planning strategies that are both prudent and feasible, and for which management has the ability and intent to implement, are incorporated into our analysis and assessment.

Where a valuation allowance is determined to be necessary at the HNAH consolidated level, such allowance is allocated to principal subsidiaries within the HNAH Group in a manner that is systematic, rational and consistent with the broad principles of accounting for income taxes. The methodology allocates the valuation allowance to the principal subsidiaries based primarily on the entity's relative contribution to the growth of the HSBC North America consolidated deferred tax asset against which the valuation allowance is being recorded.

Further evaluation is performed at the HSBC Finance Corporation legal entity level to evaluate the need for a valuation allowance where we file separate company state income tax returns.

Transactions with Related Parties In the normal course of business, we enter into transactions with HSBC and its subsidiaries. These transactions occur at prevailing market rates and terms and include funding arrangements, derivatives, servicing arrangements, information technology, item and statement processing services, centralized support services, banking and other miscellaneous services. Prior to 2013, we also sold receivables to related parties.

New Accounting Pronouncements Adopted The following new accounting pronouncements were adopted effective January 1, 2013:

• Disclosures About Offsetting Assets and Liabilities In December 2011, the FASB issued an Accounting Standards Update ("ASU") that required entities to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Entities are required to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and those which are subject to an agreement similar to master netting arrangement. The new guidance became effective for all annual and interim periods beginning January 1, 2013. Additionally, entities are required to provide the disclosures required by the new guidance retrospectively for all comparative periods. In January 2013, the FASB issued another ASU to clarify the instruments and transactions to which the guidance in the previously issued Accounting Standards Update would apply. The adoption of the guidance in these ASUs did not have an impact on our financial position or results of operations. See Note 11, "Derivative Financial Instruments."

• Accumulated Other Comprehensive Income In February 2013, the FASB issued an ASU that adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The new guidance became effective for all annual and interim periods beginning January 1, 2013 and was applied prospectively. The adoption of this guidance did not have an impact on our financial position or results of operations. See Note 14, "Accumulated Other Comprehensive Income (Loss)."

3. Discontinued Operations

2012 Discontinued Operations:

Insurance During the second quarter of 2012, we decided to exit the manufacturing of all insurance products through the sale of our interest in substantially all of our insurance subsidiaries as this business did not fit with HSBC's core strategy in the United States and Canada. Insurance products will continue to be offered to HSBC customers through non-affiliate providers. As a result, our Insurance operations are part of a disposal group held for sale and we began reporting this business as discontinued operations in the second quarter of 2012. Since the carrying value of the disposal group was greater than its estimated fair value less costs to sell, during 2012 we recorded a pre-tax lower of amortized cost or fair value less cost to sell adjustment of $119 million ($90 million after-tax) which took into consideration foreign currency translation adjustments and unrealized gains on available-for-sale securities associated with the disposal group which were reflected in accumulated other comprehensive income. At December 31, 2012, disposal group assets consisted primarily of available-for-sale securities totaling $1,411 million and disposal group liabilities consisted primarily of insurance policy and claim reserves totaling $988 million.

On March 29, 2013, we sold our interest in substantially all of our insurance subsidiaries to Enstar for $153 million in cash and recorded a gain on sale of $21 million ($13 million after-tax), which is reflected in the table below.

The following table summarizes the operating results of our discontinued Insurance business for the periods presented:

Year Ended December 31,	2013			2012			2011
	(in millions)
Net interest income and other revenues⁽¹⁾⁽²⁾........................................................................................	$	70		$	167		$	362
Income (loss) from discontinued operations before income tax⁽²⁾....................................................	(10		)	(162		)	17

⁽¹⁾Interest expense, which is included as a component of net interest income, was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

⁽²⁾For the year ended December 31, 2012 amounts include the lower of amortized cost or fair value adjustment of $119 million as discussed above which was reported as a component of other revenues.

Assets and liabilities of our discontinued Insurance operations, which are reported as a component of Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet, consisted of the following:

	December 31, 2013		December 31, 2012
	(in millions)
Cash...............................................................................................................................................................	$	-	$	2
Interest bearing deposits with banks........................................................................................................	-		29
Available-for-sale securities.......................................................................................................................	-		1,411
Other assets..................................................................................................................................................	-		226
Assets of discontinued operations...........................................................................................................	$	-	$	1,668
Insurance policy and claim reserves.........................................................................................................	$	-	$	988
Other liabilities..............................................................................................................................................	-		224
Liabilities of discontinued operations......................................................................................................	$	-	$	1,212

Commercial Beginning in the second quarter of 2012, we have reported our Commercial business in discontinued operations as there are no longer any outstanding receivable balances or any remaining significant cash flows generated from this business. The following table summarizes the operating results of our discontinued Commercial business for the periods presented:

Year Ended December 31,	2013		2012		2011
	(in millions)
Net interest income and other revenues⁽¹⁾...............................................................................	$	22	$	23	$	10
Income from discontinued operations before income tax.....................................................	14		20		6

2011 Discontinued Operations:

Card and Retail Services On May 1, 2012, HSBC, through its wholly-owned subsidiaries HSBC Finance Corporation, HSBC USA Inc. and other wholly-owned affiliates, sold its Card and Retail Services business to Capital One Financial Corporation ("Capital One") for a premium of 8.75 percent of receivables. In addition to receivables, the sale included real estate and certain other assets and liabilities which were sold at book value or, in the case of real estate, appraised value. Under the terms of the agreement, interests in facilities in Chesapeake, Virginia; Las Vegas, Nevada; Mettawa, Illinois; Volo, Illinois; Hanover, Maryland; Salinas, California; Sioux Falls, South Dakota and Tigard, Oregon were sold or transferred to Capital One, although we have entered into site-sharing arrangements for certain of these locations for a period of time. The total cash consideration was $11,786 million, which resulted in a pre-tax gain of $2,178 million ($1,421 million after-tax) being recorded during the second quarter of 2012. The majority of the employees in our Card and Retail Services business transferred to Capital One. As such, no significant one-time closure or severance costs were incurred as a result of this transaction. Our Card and Retail Services business is reported in discontinued operations.

The following table summarizes the operating results of our discontinued Card and Retail Services business for the periods presented:

Year Ended December 31,	2013			2012		2011
	(in millions)
Net interest income and other revenues⁽¹⁾⁽²⁾.........................................................................	$	1		$	3,342	$	3,729
Income (loss) from discontinued operations before income tax⁽²⁾⁽³⁾.................................	(253		)	2,649		1,364

⁽¹⁾ Interest expense, which is included as a component of net interest income, was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

⁽²⁾ For 2012, amounts include the gain on sale to Capital One of $2,178 million. For 2012, amounts also includes a gain of $79 million resulting from the sale of account relationships to HSBC Bank USA which we had previously purchased from HSBC Bank USA in July 2004.

⁽³⁾For 2013, amount includes an incremental expense of $87 million recorded based on actions taken and to be taken in connection with an industry review of enhancement services products. Additionally for 2013, the amounts also reflect expenses related to activities to complete the separation of the credit card operational infrastructure between us and Capital One. We expect costs associated with the separation of the credit card operational infrastructure to continue into 2014. For 2013 amounts also reflect a legal accrual of $40 million. See Note 22, "Litigation and Regulatory Matters," for further discussion of the legal matter.

Assets and liabilities of our discontinued Card and Retail Services business, which are reported as a component of Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet, consisted of the following:

	December 31, 2013		December 31, 2012
	(in millions)
Cash......................................................................................................................................................................	$	23	$	197
Other assets⁽¹⁾.....................................................................................................................................................	79		84
Assets of discontinued operations.................................................................................................................	$	102	$	281
...............................................................................................................................................................................
Other liabilities⁽²⁾.................................................................................................................................................	$	102	$	283
Liabilities of discontinued operations.............................................................................................................	$	102	$	283

⁽¹⁾At December 31, 2013 and December 31, 2012, other assets primarily consists of current and deferred taxes.

⁽²⁾At December 31, 2013 and December 31, 2012, other liabilities primarily consists of certain legal accruals as discussed above.

2010 Discontinued Operations:

Taxpayer Financial Services ("TFS") In December 2010, it was determined that we would not offer any tax refund anticipation loans or related products for the 2011 tax season and we exited the TFS business. As a result of this decision, our TFS business was reported in discontinued operations. There were no assets or liabilities in our TFS business as of December 31, 2013 and 2012. The following summarizes the operating results of our TFS business for the periods presented:

Year Ended December 31,	2013		2012		2011
	(in millions)
Net interest income and other revenues⁽¹⁾...............................................................................	$	-	$	-	$	2
Income (loss) from discontinued operations before income tax...........................................	-		-		(4		)

⁽¹⁾Interest expense, which is included as a component of net interest income, has been allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

Auto Finance In March 2010, we sold our auto finance receivable servicing operations as well as a portion of our auto finance receivable portfolio to Santander Consumer USA Inc. ("SC USA") and in August 2010, we sold the remainder of our auto finance receivable portfolio and other related assets to SC USA. As a result, our Auto Finance business, previously included in our Consumer Segment, is reported as discontinued operations. The assets and liabilities of our Auto Finance business as of December 31, 2013 and 2012 were not significant. The following summarizes the operating results of our Auto Finance business for the periods presented:

Year Ended December 31,	2013		2012		2011
	(in millions)
Net interest income and other revenues⁽¹⁾⁽²⁾............................................................................	$	-	$	14	$	-
Income (loss) from discontinued operations before income tax⁽²⁾........................................	-		14		(3		)

⁽²⁾For the year ended December 31, 2012, amounts reflect the receipt of a state sales tax refund from the state of California related to accounts that were charged-off prior to the sale of the Auto Finance business.

4. Securities

Securities Available-for-Sale During the first quarter of 2013, we liquidated our remaining securities available-for-sale portfolio and, as a result, do not have any available-for-sale securities at December 31, 2013. Securities available-for-sale for continuing operations consisted of the following at December 31, 2012:

December 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
....................................................................................................................................	(in millions)
Money market funds...............................................................................................	$	80	$	-	$	-	$	80
Securities available-for-sale....................................................................................	$	80	$	-	$	-	$	80

Securities Purchased Under Agreements to Resell Securities purchased under agreements to resell ("Resale Agreements") are treated as collateralized financing transactions and are carried on our balance sheet at the amount advanced plus accrued interest with a balance of $6.9 billion and $2.2 billion at December 31, 2013 and December 31, 2012, respectively, all of which were purchased from HSBC Securities (USA) Inc. ("HSI"). Resale Agreements are collateralized by securities, and the market value of the securities is regularly monitored, with additional collateral obtained when appropriate. At December 31, 2013 and December 31, 2012, the market value of the securities obtained as collateral exceeded the carrying value of the Resale Agreements.

5. Receivables

Receivables consisted of the following:

	December 31, 2013			December 31, 2012
	(in millions)
Real estate secured:
First lien......................................................................................................................................................	$	23,568		$	29,301
Second lien................................................................................................................................................	3,016			3,638
Total real estate secured receivables..........................................................................................................	26,584			32,939
Accrued finance income and other.............................................................................................................	862			952
Credit loss reserve for receivables..............................................................................................................	(3,273		)	(4,607		)
Total receivables, net.....................................................................................................................................	$	24,173		$	29,284

Deferred origination fees, net of costs, totaled $183 million and $221 million at December 31, 2013 and December 31, 2012, respectively, and are included in the receivable balance. Net unamortized premium on our receivables totaled $102 million and $127 million at December 31, 2013 and December 31, 2012, respectively.

Collateralized funding transactions Secured financings previously issued under public trusts with a balance of $2,200 million at December 31, 2013 are secured by $4,020 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts with a balance of $2,878 million at December 31, 2012 were secured by $4,898 million of closed-end real estate secured receivables.

Age Analysis of Past Due ReceivablesThe following tables summarize the past due status of our receivables at December 31, 2013 and December 31, 2012. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-age.

	Past Due				Total Past Due				Total Receivables⁽²⁾
December 31, 2013	30 - 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien....................................................................................	$	2,462	$	1,538	$	4,000	$	19,568	$	23,568
Second lien..............................................................................	249		192		441		2,575		3,016
Total real estate secured receivables⁽³⁾................................	$	2,711	$	1,730	$	4,441	$	22,143	$	26,584

	Past Due				Total Past Due				Total Receivables⁽²⁾
December 31, 2012	30 - 89 days		90+ days		Total Past Due		Current⁽¹⁾		Total Receivables⁽²⁾
	(in millions)
Real estate secured:
First lien...................................................................................	$	2,759	$	2,748	$	5,507	$	23,794	$	29,301
Second lien..............................................................................	316		239		555		3,083		3,638
Total real estate secured receivables⁽³⁾................................	$	3,075	$	2,987	$	6,062	$	26,877	$	32,939

⁽¹⁾Receivables less than 30 days past due are presented as current.

⁽²⁾The receivable balances included in this table reflects the principal amount outstanding on the loan and certain basis adjustments to the loan such as deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency and nonperforming receivable account balances.

⁽³⁾Our real estate secured receivables have historically been maintained on two mortgage loan servicing platforms which resulted in differences relating to how contractual delinquency was determined. In April 2013, we moved all closed-end real estate secured receivables onto one platform which resulted in the substantial majority of our real estate secured receivables utilizing the same platform.

Contractual maturities Contractual maturities of our receivables were as follows:

	2014		2015		2016		2017		2018		Thereafter		Total
	(in millions)
Real estate secured:
First lien..................................................	$	111	$	42	$	72	$	99	$	117	$	23,127	$	23,568
Second lien.............................................	86		13		27		30		28		2,832		3,016
Total real estate secured receivables.......	$	197	$	55	$	99	$	129	$	145	$	25,959	$	26,584

As a substantial portion of consumer receivables, based on our experience, will be repaid prior to contractual maturity, the above maturity schedule should not be regarded as a forecast of future cash collections.

The following table summarizes contractual maturities of receivables due after one year by repricing characteristic:

At December 31, 2013	Over 1 But Within 5 Years		Over 5 Years
	(in millions)
Receivables at predetermined interest rates.....................................................................................................	$	415	$	23,979
Receivables at floating or adjustable rates.......................................................................................................	13		1,980
Total........................................................................................................................................................................	$	428	$	25,959

Nonaccrual receivables Nonaccrual consumer receivables and nonaccrual receivables held for sale are all receivables which are 90 or more days contractually delinquent as well as second lien loans (regardless of delinquency status) where the first lien loan that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged loan subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual. Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:

	December 31, 2013		December 31, 2012
	(in millions)
Nonaccrual receivable portfolios:
Real estate secured⁽¹⁾...............................................................................................................................	$	1,769	$	3,032
Receivables held for sale⁽²⁾.....................................................................................................................	1,422		2,161
Total nonaccrual receivables⁽³⁾....................................................................................................................	$	3,191	$	5,193

⁽¹⁾At December 31, 2013 and December 31, 2012, nonaccrual real estate secured receivables held for investment include $639 million and $1,748 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽²⁾For a discussion of the movements between the components of nonaccrual receivables, see Note 7, "Receivables Held for Sale," which includes discussion of the transfer of real estate secured receivables that were carried at the lower of amortized cost or fair value of the collateral less cost to sell to held for sale during the second quarter of 2012 as well as discussion regarding the formal program introduced in the second quarter of 2013 to transfer receivables (meeting pre-determined criteria) to held for sale when the receivable is written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies.

⁽³⁾Non-accrual receivables do not include receivables totaling $953 million and $1,497 million at December 31, 2013 and December 31, 2012, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

The following table provides additional information on our total nonaccrual receivables:

Year Ended December 31,	2013		2012		2011
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period........................................	$	819	$	1,100	$	1,161
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual loans during the period...................................................................................	216		331		462

Troubled Debt Restructurings TDR Loans represent receivables for which the original contractual terms have been modified to provide for terms that are at less than a market rate of interest for new receivables because of deterioration in the borrower's financial status.

Modifications for real estate secured and personal non-credit card receivables may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount and partial forgiveness or deferment of principal. A substantial amount of our modifications involve interest rate reductions which lower the amount of finance income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate and making other changes to the loan terms, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. TDR Loans are reserved for based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans. The portion of the credit loss reserves on TDR Loans that is associated with the discounting of cash flows is released from credit loss reserves over the life of the TDR Loan.

During 2012, we evaluated recently issued regulatory guidance requiring receivables discharged under Chapter 7 bankruptcy and not re-affirmed to be classified as TDR Loan balances and made the decision to classify these receivables as TDR Loans which resulted in an increase in TDR Loans of $1,018 million at December 31, 2012, of which 37 percent had been carried at the lower of amortized cost or fair value of the collateral less cost to sell. Excluding the receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell, these receivables are now reserved for using a discounted cash flow analysis which resulted in an increase in credit loss reserves during 2012 of approximately $40 million. For the receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell, there was no change in the reserves.

During the third quarter of 2011 we adopted an Accounting Standards Update which provided additional guidance to determine whether a restructuring of a receivable meets the criteria to be considered a TDR Loan. Under this new guidance, we determined that substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods, should be reported as TDR Loans. Additionally, we determined that all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification since the first quarter of 2007, should be considered TDR Loans, as we believe that multiple or later stage delinquency re-ages or a need for a modification to any of the loan terms other than to provide a market rate of interest provides evidence the borrower is experiencing financial difficulty and a concession has been granted that is more than insignificant. As required, the new guidance was applied retrospectively to restructurings occurring on or after January 1, 2011 and resulted in the reporting of an additional $4,068 million of real estate secured receivables and an additional $717 million of personal non-credit card receivables as TDR Loans during the third quarter of 2011 with credit loss reserves of $1,308 million associated with these receivables at September 30, 2011.

The following summarizes the drivers of the additional TDR Loans reported as a result of the Accounting Standards Update:

New TDR Loan Volume Upon Adoption of New Accounting Standards Update	2011
	(in billions)
Interest rate loan modifications less than 12 months in duration during January 1, 2011 through September 30, 2011.	$	1.4
Trial modifications during January 1, 2011 through September 30, 2011...............................................................................	.2
Re-ages during January 1, 2011 through September 30, 2011, excluding first-time early stage delinquency re-ages.....	3.2
Total..................................................................................................................................................................................................	$	4.8

An incremental loan loss provision for these receivables using a discounted cash flow analysis of approximately $925 million was recorded during the third quarter of 2011. This discounted cash flow analysis, in addition to considering all expected future cash flows, also takes into consideration the time value of money and the difference between the current interest rate and the original effective interest rate on the loan. This methodology generally results in a higher reserve requirement for TDR Loans than loans for which credit loss reserves are established using a roll rate migration analysis that only considers incurred credit losses. The TDR Loan balances and related credit loss reserves for consumer receivables reported as of December 31, 2010 use our previous definition of TDR Loans and as such, are not directly comparable to the current period balances.

Prior to the adoption of the Accounting Standards Update, we did not view re-ages or temporary rate reductions (generally less than 12 months) as TDR Loans. We considered paragraph 5(c) of FASB Statement No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings" ("FAS 15"), codified in paragraph 15-9(c) of Accounting Standards Codification ("ASC") Subtopic 310-40, "Troubled Debt Restructurings by Creditors," which provides guidance on when the modification of the terms of a loan contract represents a concession that may result in a modification qualifying as a TDR Loan (the other criterion being the borrower experiencing financial difficulty). In applying paragraph 5(c) of FAS 15 or paragraph 15-9(c) of ASC Subtopic 310-40, we focused on whether re-ages or modifications resulted in reducing the interest rate on the loan for its remaining life. Accordingly, under our previous policy, although such concessions were an indication that the borrower was experiencing financial difficulty, we considered re-ages and temporary rate reductions (generally less than 12 months) granted to help borrowers overcome an unexpected financial difficulty not to be concessions. However, we viewed loans for which we granted a 12-month or longer or two or more consecutive six-month interest modifications as permanent modifications and, accordingly, concessions. Applying the clarifications in the Accounting Standards Update, including the examples in the implementation guidance, caused us to conclude that interest rate modifications of less than 12-months and re-ages (other than first-time early stage delinquency re-ages) were concessions to borrowers experiencing financial difficulty that were not insignificant and should be reported as TDR Loans.

The following table presents information about receivables and receivables held for sale which as a result of any account management action taken during the year ended December 31, 2013, 2012 and 2011 became classified as TDR Loans.

Year Ended December 31,	2013		2012		2011
	(in millions)
Real estate secured:
First lien................................................................................................................................................	$	1,358	$	2,871	$	6,145
Second lien...........................................................................................................................................	166		329		625
Real estate secured receivables held for sale..................................................................................	298		364		-
Total real estate secured..........................................................................................................................	1,822		3,564		6,770
Personal non-credit card receivables held for sale^{( 1)}..........................................................................	28		294		-
Personal non-credit card receivables held for investment.................................................................	-		-		1,058
Total⁽²⁾.........................................................................................................................................................	$	1,850	$	3,858	$	7,828

⁽¹⁾As discussed more fully in Note 7, "Receivables Held for Sale," we sold our personal non-credit card receivable portfolio on April 1, 2013.

⁽²⁾The following table summarizes the actions taken during the year ended December 31, 2013, 2012 and 2011 which resulted in the above receivables being classified as a TDR Loan.

Year Ended December 31,	2013		2012		2011
	(in millions)
Interest rate modification....................................................................................................................	$	692	$	1,814	$	3,630
Re-age of past due account..................................................................................................................	1,158		2,044		4,198
Total...................................................................................................................................................	$	1,850	$	3,858	$	7,828

Receivables and receivables held for sale reported as TDR Loans consisted of the following:

	December 31, 2013		December 31, 2012
	(in millions)
TDR Loans:⁽¹⁾⁽²⁾
Real estate secured:
First lien⁽⁴⁾..................................................................................................................................................	$	10,633	$	12,671
Second lien⁽⁴⁾.............................................................................................................................................	1,047		1,205
Real estate secured receivables held for sale⁽³⁾....................................................................................	1,392		1,936
Total real estate secured...............................................................................................................................	13,072		15,812
Personal non-credit card receivables held for sale⁽³⁾⁽⁶⁾.............................................................................	-		592
Total TDR Loans............................................................................................................................................	$	13,072	$	16,404

Credit loss reserves for TDR Loans:
Real estate secured:
First lien......................................................................................................................................................	$	2,294	$	3,104
Second lien................................................................................................................................................	360		523
Total credit loss reserves for real estate secured TDR Loans⁽³⁾⁽⁵⁾..........................................................	$	2,654	$	3,627

⁽¹⁾TDR Loans are considered to be impaired loans regardless of accrual status.

⁽²⁾The TDR Loan balances included in the table above reflect the current carrying amount of TDR Loans and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans as well as any charge-off recorded in accordance with our existing charge-off policies. Additionally, the carrying amount of TDR Loans classified as held for sale has been reduced by both the lower of amortized cost or fair value adjustment as well as the credit loss reserves associated with these receivables prior to the transfer. The following table reflects the unpaid principal balance of TDR Loans:

	December 31, 2013		December 31, 2012
	(in millions)
Real estate secured:
First lien..........................................................................................................................................	$	10,983	$	13,569
Second lien......................................................................................................................................	1,188		1,315
Real estate secured receivables held for sale......................................................................................	2,587		4,912
Total real estate secured........................................................................................................................	14,758		19,796
Personal non-credit card receivables held for sale..................................................................................	-		1,139
Total TDR Loans..................................................................................................................................	$	14,758	$	20,935

At December 31, 2013, the unpaid principal balances reflected above include $92 million which has received a reduction in the unpaid principal balance as part of an account management action.

⁽³⁾There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.

⁽⁴⁾At December 31, 2013 and December 31, 2012, TDR Loans held for investment totaling $604 million and $1,488 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽⁵⁾Included in credit loss reserves.

⁽⁶⁾As discussed more fully in Note 7, "Receivables Held for Sale," we sold our personal non-credit card receivable portfolio on April 1, 2013.

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the year ended December 31, 2013, 2012 and 2011.

Year Ended December 31,	2013		2012		2011
	(in millions)
Real estate secured:
First lien...........................................................................................................................................	$	765	$	1,837	$	1,941
Second lien......................................................................................................................................	116		259		189
Real estate secured receivables held for sale............................................................................	342		365		-
Total real estate secured.....................................................................................................................	1,223		2,461		2,130
Personal non-credit card receivables held for sale.........................................................................	21		262		-
Personal non-credit card receivables held for investment............................................................	-		-		418
Total.......................................................................................................................................................	$	1,244	$	2,723	$	2,548

The volume of TDR Loans which were classified as TDR Loans during the previous 12 months and became sixty days or greater contractually delinquent during 2013 decreased as a result of the lower new TDR Loan volumes as compared with the prior year.

The following table provides additional information relating to TDR Loans, including TDR Loans held for sale:

Year Ended December 31,	2013		2012		2011
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien..................................................................................................................................	$	14,430	$	14,657	$	11,450
Second lien............................................................................................................................	1,136		1,219		901
Total real estate secured...........................................................................................................	15,566		15,876		12,351
Personal non-credit card...........................................................................................................	144		925		1,161
Total average balance of TDR Loans...........................................................................................	$	15,710	$	16,801	$	13,512
Interest income recognized on TDR Loans:
Real estate secured:
First lien..................................................................................................................................	$	927	$	871	$	590
Second lien............................................................................................................................	108		104		62
Total real estate secured...........................................................................................................	1,035		975		652
Personal non-credit card...........................................................................................................	40		174		133
Total interest income recognized on TDR Loans.......................................................................	$	1,075	$	1,149	$	785

Consumer Receivable Credit Quality Indicators Credit quality indicators used for consumer receivables include a loan's delinquency status, whether the loan is performing and whether the loan is a TDR Loan.

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale ("delinquency ratio") for our loan portfolio:

	December 31, 2013				December 31, 2012
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured:
First lien............................................................................................................	$	2,387	10.13	%	$	3,645	12.44	%
Second lien......................................................................................................	275		9.12		349		9.59
Real estate secured receivables held for sale.............................................	1,473		71.96		2,176		72.01
Total real estate secured................................................................................	4,135		14.44		6,170		17.16
Personal non-credit card receivables held for sale.........................................	-		-		103		3.24
Total.......................................................................................................................	$	4,135	14.44	%	$	6,273	16.03	%

Nonperforming The following table summarizes the status of receivables and receivables held for sale:

	Accruing Loans		Nonaccrual Loans⁽³⁾		Total
	(in millions)
At December 31, 2013
Real estate secured⁽¹⁾⁽²⁾.........................................................................................................	$	24,815	$	1,769	$	26,584
Receivables held for sale......................................................................................................	625		1,422		2,047
Total.........................................................................................................................................	$	25,440	$	3,191	$	28,631
At December 31, 2012
Real estate secured⁽¹⁾⁽²⁾.........................................................................................................	$	29,907	$	3,032	$	32,939
Receivables held for sale......................................................................................................	4,042		2,161		6,203
Total.........................................................................................................................................	$	33,949	$	5,193	$	39,142

⁽²⁾At December 31, 2013 and December 31, 2012, nonaccrual real estate secured receivables held for investment include $1,245 million and $2,096 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.

⁽³⁾Nonaccrual loans do not include receivables totaling $953 million and $1,497 million at December 31, 2013 and December 31, 2012, respectively, which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell which are less than 90 days contractually delinquent and not accruing interest.

Troubled debt restructurings See discussion of TDR Loans above for further details on this credit quality indicator.

6. Credit Loss Reserves

The following table summarizes the changes in credit loss reserves by product/class and the related receivable balance by product during the years ended December 31, 2013, 2012 and 2011:

	Real Estate Secured						Personal Non- Credit Card			Other		Total
	First Lien			Second Lien			Personal Non- Credit Card			Other		Total
	(in millions)
Year Ended December 31, 2013:
Credit loss reserve balance at beginning of period...................................	$	3,867		$	740		$	-		$	-	$	4,607
Provision for credit losses........................................................................	(24		)	53			(50		)	-		(21		)
Net charge-offs:
Charge-offs⁽⁴⁾.........................................................................................	(1,186		)	(335		)	-			-		(1,521		)
Recoveries.............................................................................................	112			38			50			-		200
Total net charge-offs................................................................................	(1,074		)	(297		)	50			-		(1,321		)
Other........................................................................................................	8			-			-					8
Reserves on receivables transferred to held for sale	-			-			-			-		-
Credit loss reserve balance at end of period.............................................	$	2,777		$	496		$	-		$	-	$	3,273
Reserve components:
Collectively evaluated for impairment.....................................................	$	469		$	135		$	-		$	-	$	604
Individually evaluated for impairment⁽¹⁾..................................................	2,256			360			-			-		2,616
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	51			1			-			-		52
Receivables acquired with deteriorated credit quality..............................	1			-			-			-		1
Total credit loss reserves..........................................................................	$	2,777		$	496		$	-		$	-	$	3,273
Receivables:
Collectively evaluated for impairment.....................................................	$	12,656		$	1,961		$	-		$	-	$	14,617
Individually evaluated for impairment⁽¹⁾..................................................	10,073			1,003			-			-		11,076
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	830			49			-			-		879
Receivables acquired with deteriorated credit quality..............................	9			3			-			-		12
Total receivables.......................................................................................	$	23,568		$	3,016		$	-		$	-	$	26,584
Year ended December 31, 2012:
Credit loss reserve balance at beginning of period...................................	$	4,089		$	823		$	1,040		$	-	$	5,952
Provision for credit losses⁽²⁾....................................................................	1,812			397			15			-		2,224
Net charge-offs:
Charge-offs⁽⁴⁾.........................................................................................	(2,094		)	(538		)	(389		)	-		(3,021		)
Recoveries.............................................................................................	60			58			299			-		417
Total net charge-offs................................................................................	(2,034		)	(480		)	(90		)	-		(2,604		)
Reserves on receivables transferred to held for sale.................................	-			-			(965		)	-		(965		)
Credit loss reserve balance at end of period.............................................	$	3,867		$	740		$	-		$	-	$	4,607
Reserve components:
Collectively evaluated for impairment.....................................................	$	722		$	215		$	-		$	-	$	937
Individually evaluated for impairment⁽¹⁾..................................................	3,010			523			-			-		3,533
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	131			1			-			-		132
Receivables acquired with deteriorated credit quality..............................	4			1			-			-		5
Total credit loss reserves..........................................................................	$	3,867		$	740		$	-		$	-	$	4,607

Receivables:
Collectively evaluated for impairment.....................................................	$	16,012		$	2,414		$	-		$	-	$	18,426
Individually evaluated for impairment⁽¹⁾..................................................	11,233			1,155			-			-		12,388
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	2,043			66			-			-		2,109
Receivables acquired with deteriorated credit quality..............................	13			3			-			-		16
Total receivables.......................................................................................	$	29,301		$	3,638		$	-		$	-	$	32,939
Year ended December 31, 2011:
Credit loss reserve balance at beginning of period...................................	$	3,355		$	832		$	1,325		$	-	$	5,512
Provision for credit losses⁽³⁾....................................................................	3,227			758			433			-		4,418
Net charge-offs:
Charge-offs............................................................................................	(2,527		)	(827		)	(1,127		)	-		(4,481		)
Recoveries.............................................................................................	34			60			409			-		503
Total net charge-offs................................................................................	(2,493		)	(767		)	(718		)	-		(3,978		)
Credit loss reserve balance at end of period.............................................	$	4,089		$	823		$	1,040		$	-	$	5,952
Reserve components:
Collectively evaluated for impairment.....................................................	$	632		$	286		$	334		$	-	$	1,252
Individually evaluated for impairment⁽¹⁾..................................................	3,026			534			706			-		4,266
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	423			2			-			-		425
Receivables acquired with deteriorated credit quality..............................	8			1			-			-		9
Total credit loss reserves..........................................................................	$	4,089		$	823		$	1,040		$	-	$	5,952
Receivables:
Collectively evaluated for impairment.....................................................	$	21,660		$	3,358		$	3,855		$	3	$	28,876
Individually evaluated for impairment⁽¹⁾..................................................	10,693			1,024			1,341			-		13,058
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell......................................................................	5,847			90			-			-		5,937
Receivables acquired with deteriorated credit quality..............................	35			6			-			-		41
Total receivables.......................................................................................	$	38,235		$	4,478		$	5,196		$	3	$	47,912

⁽¹⁾These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $604 million, $1,488 million and $2,526 million at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. The reserve component above excludes credit loss reserves for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $38 million, $94 million and $143 million at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. These credit loss reserves are reflected within receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

⁽²⁾Provision for credit losses during 2012 includes $112 million related to the lower of amortized cost or fair value attributable to credit for personal non-credit card receivables transferred to held for sale at June 30, 2012. See Note 7, "Receivables Held for Sale," for additional information.

⁽³⁾Provision for credit losses for 2011 includes $925 million related to the adoption of new accounting guidance for TDR Loans in the third quarter of 2011 as discussed more fully in Note 5, "Receivables."

⁽⁴⁾For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during 2013 and 2012 that were carried at the lower of amortized cost or fair value of the collateral less cost to sell and recognized the existing credit loss reserves on these receivables as additional charge-off totaling $164 million during 2013 and $333 million during 2012.

We historically have estimated probable losses for real estate secured receivables collectively evaluated for impairment which do not qualify as a troubled debt restructure using a roll rate migration analysis that estimates the likelihood that a loan will progress through the various stages of delinquency and ultimately charge-off. This has historically resulted in the identification of a loss emergence period for these real estate secured receivables collectively evaluated for impairment using a roll rate migration analysis which results in approximately 7 months of losses in our credit loss reserves. A loss coverage of 12 months using a roll rate migration analysis would be more aligned with U.S. bank industry practice. As previously disclosed in 2012, our regulators indicated they would like us to more closely align our loss coverage period implicit within the roll rate methodology with U.S. bank industry practice. During 2012, we extended our loss emergence period to 12 months for U.S. GAAP. As a result, during 2012, we increased credit loss reserves by approximately $350 million for these loans. We will perform an annual review of our portfolio going forward to assess the period of time utilized in our roll rate migration period.

During 2011, we reviewed our existing models for determining credit loss reserves. As part of this process, we considered recent environmental activity including the impact of foreclosure delays, unique characteristics of our run-off portfolio and changes in how loans are ultimately running off. As a result, we made certain enhancements to our credit loss reserve estimation process during 2011. These changes in estimation were necessary because previous estimation techniques no longer represented the composition of the run-off portfolio or the current environment. These changes involved enhancements to the process for determining loss severity associated with real estate loans; revisions to our estimate of projected cash flows for TDR Loans; and increased segmentation of the loan portfolio based on the risk characteristics of the underlying loans.

7. Receivables Held for Sale

Real Estate Secured Receivables As discussed in prior filings, we have been engaged in an on-going evaluation of our balance sheet taking into consideration our liquidity, capital and funding requirements as well as capital requirements of HSBC. As part of this on-going evaluation, we identified a pool of real estate secured receivables, all of which at one time were greater than 180 days past due, for which we no longer had the intent to hold for the foreseeable future and, as a result, transferred this pool of real estate secured receivables to receivables held for sale during the second quarter of 2012. The receivable pool identified comprised first lien partially charged-off accounts as of June 30, 2012, with an unpaid principal balance of approximately $8.1 billion at the time of transfer. The net realizable value of these receivables after considering the fair value of the property less cost to sell was approximately $4.6 billion prior to transfer. Selling these types of assets is expected to be capital accretive and will reduce funding requirements, accelerate portfolio wind-down and also alleviate some operational burden given that these receivables are servicing intense and subject to foreclosure delays. Receivables which were at one time greater than 180 days past due require substantial amounts of capital under U.K. banking regulatory requirements and the extension of the foreclosure timeline in the U.S. has increased the capital requirements for this run-off book of business. These factors combined with the increase in the market's appetite for this asset class, led us to the decision that the sale of certain of these assets would be the best financial decision.

During 2013, we sold real estate secured receivables in multiple transactions to a third-party investor with an aggregate unpaid principal balance of $5,685 million (aggregate carrying value of $3,127 million) at the time of sale, which included $4,561 million (aggregate carrying value of $2,493 million) that was sold during the fourth quarter of 2013. Aggregate cash consideration received during 2013 for these real estate secured receivables totaled $3,131 million. We incurred a loss on these transactions of approximately $89 million during 2013, reflecting transaction fees and any lower of amortized cost or fair value adjustment recorded upon sale since the last quarterly reporting date prior to sale.

The market demand for first lien partially charged-off accounts has been strong throughout 2013. As a result of this increased market demand, in June 2013, we decided we no longer have the intent to hold for investment first lien real estate secured receivables once they have been written down to the lower of amortized cost or fair value of the collateral less cost to sell, subject to certain exceptions, primarily receivables associated with secured financings which are not saleable. As a result, we adopted a formal program to initiate sale activities for real estate secured receivables in our held for investment portfolio when a receivable meeting pre-determined criteria is written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). During 2013, we transferred real estate secured receivables to held for sale with an unpaid principal balance of approximately $3,612 million at the time of transfer. The net realizable value (carrying value) of these receivables prior to transfer after considering the fair value of the property less cost to sell was approximately $2,506 million during 2013.

As we now plan to sell these receivables to third party investors, fair value represents the price we believe a third party investor would pay to acquire the receivable portfolios. A third party investor would incorporate a number of assumptions in predicting future cash flows, such as differences in overall cost of capital assumptions, which may result in a lower estimate of fair value for the cash flows associated with the receivables. Accordingly, during 2013 we recorded a lower of amortized cost or fair value adjustment of $212 million associated with the newly transferred loans, all of which was attributable to non-credit related factors as these receivables were already carried at the lower of amortized cost or fair value of the collateral less cost to sell and was recorded as a component of total other revenues in the consolidated statement of income (loss).

We expect that receivables held for sale at December 31, 2013 will be sold in multiple transactions generally over the next 15 months or, if the foreclosure process is completed prior to sale, the underlying properties acquired in satisfaction of the receivables will be classified as real estate owned ("REO") and sold. As we continue to work with borrowers, we may also agree to a short sale whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation. Accordingly, based on the projected timing of loan sales and the expected flow of foreclosure volume into REO over the next 15 months, a portion of the real estate secured receivables classified as held for sale will ultimately become REO. As a result, a portion of the fair value adjustment on receivables held for sale may be reversed in earnings over time. This estimate of fair value is highly dependent upon the timing and size of future receivable sales as well as the volume and timelines associated with foreclosure activity. During 2013 and 2012, we transferred a portion of our real estate secured receivable portfolio held for sale with a carrying value of $529 million and $168 million, respectively, to REO after obtaining title to the underlying collateral and reversed a portion of the lower of amortized cost or fair value adjustment previously recorded totaling $40 million and $50 million, respectively. Additionally, during 2013 and 2012, we completed short sales on real estate secured receivables with a carrying value of $182 million and $96 million, respectively. As a result of these short sales, we reversed a portion of the lower of amortized cost or fair value adjustment previously recorded totaling $22 million and $20 million, respectively, during 2013 and 2012, respectively, as the agreed price was higher than the carrying value.

Personal Non-Credit Card Receivables In the second quarter of 2012, we determined that, given market conditions for the personal non-credit card receivable portfolio, a sale of our remaining personal non-credit card receivables would reduce a significant amount of risk-weighted assets which would provide net capital relief, reduce funding requirements and allow us to exit an entire product line, reducing both the related cost infrastructure and operational risk. As such, during the second quarter of 2012, we made the decision to pursue a sale of the personal non-credit card receivable portfolio. The personal non-credit card receivable portfolio was previously held for investment purposes and was transferred to held for sale during the second quarter of 2012 as we no longer had the intention to hold our portfolio of personal non-credit card receivables for the foreseeable future and expected these receivables would be sold in the near term. The personal non-credit card receivable portfolio has not been reported as discontinued operations as it does not qualify as a component of our business as the cash flows and operations related to our personal non-credit card receivable portfolio are not clearly distinguishable from the cash flows and operations of our real estate secured receivable portfolio.

On March 5, 2013, we entered into an agreement to sell our personal non-credit card receivable portfolio to trusts for which affiliates of Springleaf Finance, Inc. ("Springleaf"), Newcastle Investment Corp. and Blackstone Tactical Opportunities Advisors L.L.C. are the sole beneficiaries (collectively, the "Purchasers"). On March 5, 2013, we also entered into an agreement to sell a loan servicing facility and related assets located in London, Kentucky (the "Facility") to Springleaf. On April 1, 2013, we completed the sale of our personal non-credit card receivable portfolio with an aggregate unpaid principal balance of $3,760 million (aggregate carrying value of $2,947 million) at March 31, 2013 to the Purchasers. Total cash consideration received was $2,964 million. During the second quarter of 2013, we recorded a loss on sale of $11 million primarily related to transaction fees. On September 1, 2013, we completed the sale of the Facility to Springleaf and recognized an immaterial gain on sale of the Facility. Additionally, on September 1, 2013 the personal non-credit card receivables were converted onto the Purchasers' system and we transferred to the Purchasers over 200 employees who had performed servicing activities for these and other receivables. Prior to the conversion of these receivable to the Purchaser's systems, we serviced these personal non-credit card receivables for the Purchasers for a fee. Servicing fee revenues recorded for servicing these personal non-credit card receivables during 2013 totaled $28 million.

Receivables held for sale which are carried at the lower of amortized cost or fair value consisted of the following:

	December 31, 2013		December 31, 2012
	(in millions)
First lien real estate secured........................................................................................................................	$	2,047	$	3,022
Personal non-credit card..............................................................................................................................	-		3,181
Total receivables held for sale.....................................................................................................................	$	2,047	$	6,203

The following table summarizes the activity in receivables held for sale during 2013 and 2012:

	Real Estate Secured			Personal Non-Credit Card			Total
	(in millions)
Year Ended December 31, 2013:
Receivables held for sale at beginning of period............................................................	$	3,022		$	3,181		$	6,203
Receivable sales:
First lien real estate secured.........................................................................................	(3,127		)	-			(3,127		)
Personal non-credit card receivables..........................................................................	-			(2,947		)	(2,947		)
Lower of amortized cost or fair value adjustment on receivables held for sale..........	830			(82		)	748
Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO..........................................................................................	(711		)	-			(711		)
Change in receivable balance, including collections.....................................................	(97		)	(152		)	(249		)
Transfer of first lien real estate secured into held for sale at the lower of amortized cost or fair value⁽¹⁾...............................................................................................................	2,130			-			2,130
Receivables held for sale at end of period⁽²⁾....................................................................	$	2,047		$	-		$	2,047

Year Ended December 31, 2012:
Receivables held for sale at beginning of period............................................................	$	-		$	-		$	-
Lower of amortized cost or fair value adjustment on receivables held for sale..........	(3		)	21			18
Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO..........................................................................................	(264		)	-			(264		)
Change in receivable balance, including collections.....................................................	2			(309		)	(307		)
Transfer of receivables into held for sale at the lower of amortized cost or fair value⁽¹⁾...................................................................................................................................	3,287			3,469			6,756
Receivables held for sale at end of period⁽²⁾....................................................................	$	3,022		$	3,181		$	6,203

⁽¹⁾The lower of amortized cost or fair value adjustment on receivables transferred into held for sale during 2013 and 2012 totaled $212 million and $1,659 million, respectively, including the credit component recorded in the provision for credit losses for the personal non-credit card receivables transferred to held for sale during 2012.

⁽²⁾Net of a valuation allowance of $329 million and $1,452 million at December 31, 2013 and December 31, 2012, respectively. The following table provides a rollforward of our valuation allowance for 2013 and 2012:

Year Ended December 31,	2013			2012
	(in millions)
Balance at beginning of period.............................................................................................................	$	1,452		$	-
Initial valuation allowance for receivables transferred to held for sale during the period.......................	212			1,529
Release of valuation allowance resulting from improvements in fair value...........................................	(748		)	-
Change in of valuation allowance for collections, loans sold, charged-off, transferred to REO or short sale..................................................................................................................................................	(587		)	(77		)
Balance at end of period......................................................................................................................	$	329		$	1,452

The following table summarizes the components of the lower of amortized cost or fair value adjustment recorded in provision for credit losses and other revenues during 2013 and 2012:

	Lower of Amortized Cost or Fair Value Adjustments Associated With
	Fair Value			REO			Short Sales			Total
	(in millions)
(Income)/Expense:
Year Ended December 31, 2013:
Lower of amortized cost or fair value adjustments recorded as a component of:
Other revenues:
Initial lower of amortized cost or fair value adjustment..............	$	212		$	-		$	-		$	212
Subsequent to initial transfer to held for sale⁽¹⁾...........................	(686		)	(40		)	(22		)	(748		)
Total recorded through other revenues........................................	(474		)	(40		)	(22		)	(536		)
Lower of amortized cost or fair value adjustment...................................	$	(474	)	$	(40	)	$	(22	)	$	(536	)
Year Ended December 31, 2012:
Lower of amortized cost or fair value adjustments recorded as a component of:
Provision for credit losses....................................................................	$	112		$	-		$	-		$	112
Other revenues:
Initial lower of amortized cost or fair value adjustment..............	1,547			-			-			1,547
Subsequent to initial transfer to held for sale	52			(50		)	(20		)	(18		)
Total recorded through other revenues........................................	1,599			(50		)	(20		)	1,529
Lower of amortized cost or fair value adjustment...................................	$	1,711		$	(50	)	$	(20	)	$	1,641

⁽¹⁾For 2013, the fair value of the lower of amortized cost or fair value adjustment reflects an increase in the relative fair value of $768 million related to real estate secured receivables held for sale and an additional charge of $82 million related to personal non-credit card receivables prior to the sale of this portfolio on April 1, 2013.

During 2013, we reversed $768 million of the lower of amortized cost or fair value adjustment previously recorded primarily due to an increase in the relative fair value of the real estate secured receivables held for sale during 2013 largely due to improved conditions in the housing industry driven by increased property values and, to a lesser extent, lower required market yields and increased investor demand for these types of receivables. During the first quarter of 2013, the fair value of the personal non-credit card receivables held for sale decreased by $82 million, reflecting the excess of the interest and fee income on the loans over the fees received from the Purchasers as the sale agreement called for interest and fees on the loans to pass to the Purchasers after December 31, 2012 in return for a cost of carry and servicing fee to be paid to the seller.

8. Properties and Equipment, Net

Property and Equipment consisted of the following:

	December 31, 2013			December 31, 2012			Depreciable Life
	(dollars are in millions)
Land....................................................................................................................................	$	2		$	3		-
Buildings and improvements..........................................................................................	95			99			10-40 years
Furniture and equipment.................................................................................................	26			26			3-10 years
Total....................................................................................................................................	123			128
Accumulated depreciation and amortization................................................................	(55		)	(57		)
Properties and equipment, net........................................................................................	$	68		$	71

Depreciation and amortization expense for continuing operations totaled $6 million, $6 million and $11 million in 2013, 2012 and 2011, respectively.

9. Long-Term Debt

Long-term debt consisted of the following:

	December 31, 2013			December 31, 2012
	(in millions)
Senior debt:
Fixed rate:
Secured financings:
5.00% to 5.99%; due 2013 to 2017....................................................................................................	$	90		$	189
Other fixed rate senior debt:
1.00% to 1.99%; due 2013 to 2014....................................................................................................	13			16
2.00% to 2.99%; due 2013 to 2015....................................................................................................	206			347
3.00% to 3.99%; due 2014 to 2016....................................................................................................	420			422
4.00% to 4.99%; due 2013 to 2018....................................................................................................	2,444			3,675
5.00% to 5.49%; due 2013 to 2021....................................................................................................	5,358			6,156
5.50% to 5.99%; due 2013 to 2018....................................................................................................	2,339			2,638
6.00% to 6.49%; due 2013 to 2017....................................................................................................	1,714			1,818
6.50% to 6.99%; due 2013.................................................................................................................	-			2
7.00% to 7.49%; due 2023 to 2032....................................................................................................	42			42
7.50% to 7.99%; due 2019 to 2032....................................................................................................	288			284
Variable interest rate:
Secured financings - .32% to 2.71%; due 2013 to 2018...............................................................	2,110			2,689
Other variable interest rate senior debt - .49% to 5.42%; due 2013 to 2016.............................	2,595			6,932
Subordinated debt.........................................................................................................................................	2,208			2,208
Junior subordinated notes issued to capital trusts................................................................................	1,031			1,031
Unamortized discount..................................................................................................................................	(43		)	(54		)
HSBC acquisition purchase accounting fair value adjustments.........................................................	24			31
Total long-term debt.....................................................................................................................................	$	20,839		$	28,426

HSBC acquisition purchase accounting fair value adjustments represent adjustments which have been "pushed down" to record our long-term debt at fair value at the date of our acquisition by HSBC.

At December 31, 2013, long-term debt included fair value adjustments relating to fair value hedges of our debt which increased the debt's carrying value by $5 million and a foreign currency translation adjustment relating to our foreign denominated debt which increased the debt balance by $484 million. At December 31, 2012, long-term debt included fair value adjustments relating to fair value hedges of our debt which increased the debt's carrying value by $17 million and a foreign currency translation adjustment relating to our foreign currency denominated debt which increased the debt balance by $828 million.

At December 31, 2013 and December 31, 2012, we have elected fair value option accounting for certain of our fixed rate debt issuances. See Note 10, "Fair Value Option," for further details. At December 31, 2013 and December 31, 2012, long-term debt totaling $8,025 million and $9,725 million, respectively, was carried at fair value.

Interest expense for long-term debt was $1,141 million, $1,585 million and $2,166 million in 2013, 2012 and 2011, respectively. The weighted-average interest rates on long-term debt were 4.35 percent and 4.48 percent at December 31, 2013 and December 31, 2012, respectively. There are no restrictive financial covenants in any of our long-term debt agreements. Debt denominated in a foreign currency is included in the applicable rate category based on the effective U.S. dollar equivalent rate as summarized in Note 11, "Derivative Financial Instruments."

During the fourth quarter of 2013, we decided to call $102 million of senior long-term debt. This transaction was completed during November 2013. This transaction was funded through cash flows from operating and investing activities.

During the third quarter of 2012, we decided to call $512 million of senior long-term debt. This transaction was completed during September 2012. This transaction was funded through a $512 million loan agreement with HSBC USA Inc. which matures in September 2017. At December 31, 2013 and December 31, 2012, $512 million was outstanding under this loan agreement.

Receivables we have sold in collateralized funding transactions structured as secured financings remain on our balance sheet. The entities used in these transactions are VIEs and we are deemed to be their primary beneficiary because we hold beneficial interests that expose us to the majority of their expected losses. Accordingly, we consolidate these entities and report the debt securities issued by them as secured financings in long-term debt. Secured financings previously issued under public trusts with a balance of $2,200 million at December 31, 2013 are secured by $4,020 million of closed-end real estate secured receivables, which are reported as receivables in the consolidated balance sheet. Secured financings previously issued under public trusts with a balance of $2,878 million at December 31, 2012 were secured by $4,898 million of closed-end real estate secured receivables. The holders of debt instruments issued by consolidated VIEs have recourse only to the receivables securing those instruments and have no recourse to our general credit.

The following table summarizes our junior subordinated notes issued to capital trusts ("Junior Subordinated Notes") and the related company-obligated mandatorily redeemable preferred securities ("Preferred Securities"):

	HSBC Finance Capital Trust IX ("HFCT IX")
	(dollars are in millions)
Junior Subordinated Notes:
Principal balance................................................................................................................................................	$1,031
Interest rate:
Through November 30, 2015.......................................................................................................................	5.91%
December 1, 2015 through maturity...........................................................................................................	3-month LIBOR plus 1.926%
Redeemable by issuer.......................................................................................................................................	November 2015
Stated maturity...................................................................................................................................................	November 2035
Preferred Securities:
Rate:
Through November 30, 2015.......................................................................................................................	5.91%
December 1, 2015 through maturity...........................................................................................................	3-month LIBOR plus 1.926%
Face value...........................................................................................................................................................	$1,000
Issue date............................................................................................................................................................	November 2005

The Preferred Securities must be redeemed when the Junior Subordinated Notes are paid. The Junior Subordinated Notes have a stated maturity date, but are redeemable by us, in whole or in part, beginning on the dates indicated above at which time the Preferred Securities are callable at par ($25 per Preferred Security) plus accrued and unpaid dividends. Dividends on the Preferred Securities are cumulative, payable quarterly in arrears, and are deferrable at our option for up to five years. We cannot pay dividends on our preferred and common stocks during such deferments. The Preferred Securities have a liquidation value of $25 per preferred security. Our obligations with respect to the Junior Subordinated Notes, when considered together with certain undertakings of HSBC Finance Corporation with respect to HFCT IX, constitute full and unconditional guarantees by us of HFCT IX's obligations under the Preferred Securities.

Maturities of long-term debt at December 31, 2013, including secured financings and conduit facility renewals, were as follows:

	(in millions)
2014⁽¹⁾..............................................................................................................................................................................................	$	3,939
2015.................................................................................................................................................................................................	5,681
2016.................................................................................................................................................................................................	5,462
2017.................................................................................................................................................................................................	1,751
2018.................................................................................................................................................................................................	295
Thereafter.......................................................................................................................................................................................	3,711
Total................................................................................................................................................................................................	$	20,839

⁽¹⁾Weighted average interest rate on long-term debt maturing in 2014 is 2.285 percent.

Certain components of our long-term debt may be redeemed prior to stated maturity.

10. Fair Value Option

We have elected to apply fair value option ("FVO") reporting to certain of our fixed rate debt issuances which also qualify for FVO reporting under International Financial Reporting Standards. The following table summarizes fixed rate debt issuances accounted for under FVO:

	December 31, 2013		December 31, 2012
	(in millions)
Fixed rate debt accounted for under FVO reported in:
Long-term debt.........................................................................................................................................	$	8,025	$	9,725
Due to affiliates........................................................................................................................................	496		514
Total fixed rate debt accounted for under FVO.........................................................................................	$	8,521	$	10,239

Unpaid principal balance of fixed rate debt accounted for under FVO⁽¹⁾.............................................	$	7,942	$	9,415

Fixed rate long-term debt not accounted for under FVO.......................................................................	$	7,083	$	8,057

⁽¹⁾Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which increased the debt balance by $245 million and $247 million at December 31, 2013 and December 31, 2012, respectively.

We determine the fair value of the fixed rate debt accounted for under FVO through the use of a third party pricing service. Such fair value represents the full market price (including credit and interest rate impacts) based on observable market data for the same or similar debt instruments. See Note 20, "Fair Value Measurements," for a description of the methods and significant assumptions used to estimate the fair value of our fixed rate debt accounted for under FVO.

The following table summarizes the components of the gain (loss) on debt designated at fair value and related derivatives for the year ended December 31, 2013, 2012 and 2011:

Year Ended December 31,	2013			2012			2011
	(in millions)
Mark-to-market on debt designated at fair value⁽¹⁾:
Interest rate component................................................................................................................	$	314		$	166		$	25
Credit risk component...................................................................................................................	(71		)	(758		)	616
Total mark-to-market on debt designated at fair value..................................................................	243			(592		)	641
Mark-to-market on the related derivatives⁽¹⁾...................................................................................	(333		)	(260		)	(81		)
Net realized gains on the related derivatives..................................................................................	318			403			604
Gain (loss) on debt designated at fair value and related derivatives..........................................	$	228		$	(449	)	$	1,164

⁽¹⁾Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related income (expense) associated with debt designated at fair value was a loss of $73 million, a loss of $35 million and a gain of $63 million during 2013, 2012 and 2011, respectively. Offsetting gains (losses) recorded in derivative related income (expense) associated with the related derivatives was and a gain of $73 million, a gain of $35 million and a loss of $63 million during 2013, 2012 and 2011, respectively.

The movement in the fair value reflected in gain (loss) on debt designated at fair value and related derivatives includes the effect of our own credit spread changes and interest rate changes, including any economic ineffectiveness in the relationship between the related derivatives and our debt and any realized gains or losses on those derivatives. With respect to the credit component, as our credit spreads narrow accounting losses are booked and the reverse is true if credit spreads widen. Differences arise between the movement in the fair value of our debt and the fair value of the related derivative due to the different credit characteristics and differences in the calculation of fair value for debt and derivatives. The size and direction of the accounting consequences of such changes can be volatile from period to period but do not alter the cash flows intended as part of the documented interest rate management strategy. On a cumulative basis, we have recorded fair value option adjustments which increased the value of our debt by $581 million and $824 million at December 31, 2013 and December 31, 2012, respectively.

The change in the fair value of the debt and the change in value of the related derivatives during 2013 and 2012 reflect the following:

• Interest rate curve - Rising long-term interest rates during 2013 resulted in a gain in the interest rate component on the mark-to-market of the debt and a loss on the mark-to-market of the related derivative. During 2012 and 2011, changes in market movements on certain debt and related derivatives that mature in the near term resulted in a gain in the interest rate component on the mark-to-market of the debt and a loss on the mark-to-market of the related derivative. As these items near maturity, their values are less sensitive to interest rate movements. Changes in the value of the interest rate component of the debt as compared with the related derivative are also affected by differences in cash flows and valuation methodologies for the debt and the derivatives. Cash flows on debt are discounted using a single discount rate from the bond yield curve for each bond's applicable maturity while derivative cash flows are discounted using rates at multiple points along an interest rate yield curve. The impacts of these differences vary as short-term and long-term interest rates shift and time passes. Furthermore, certain FVO debt no longer has any corresponding derivatives.

• Credit - Our secondary market credit spreads tightened during 2013 and 2012 on overall positive economic news, although the tightening was more pronounced during 2012. In 2011, our secondary market credit spreads widened due to the continuing concerns with the European sovereign debt crisis which caused spreads to widen throughout the financial services industry as well as the uncertain economic recovery in the United States.

Net income volatility, whether based on changes in the interest rate or credit risk components of the mark-to-market on debt designated at fair value and the related derivatives, impacts the comparability of our reported results between periods. Accordingly, gain (loss) on debt designated at fair value and related derivatives for 2013 should not be considered indicative of the results for any future periods.

11. Derivative Financial Instruments

Our business activities involve analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Accordingly, we have comprehensive risk management policies to address potential financial risks, which include credit risk, liquidity risk, market risk, and operational risks. Our risk management policy is designed to identify and analyze these risks, to set appropriate limits and controls, and to monitor the risks and limits continually by means of reliable and up-to-date administrative and information systems. Our risk management policies are primarily carried out in accordance with practice and limits set by the HSBC Group Management Board. Prior to January 2014, the HSBC Finance Corporation Asset Liability Committee met regularly to review risks and approved appropriate risk management strategies within the limits established by the HSBC Group Management Board. In January 2014, this oversight was transferred to the HSBC North America Asset Liability Committee ("HSBC North America ALCO"). Additionally, our Risk Management Committee receives regular reports on our interest rate and liquidity risk positions in relation to the established limits. In accordance with the policies and strategies established by HSBC North America ALCO, in the normal course of business, we enter into various transactions involving derivative financial instruments. These derivative financial instruments primarily are used as economic hedges to manage risk.

Objectives for Holding Derivative Financial Instruments Market risk (which includes interest rate and foreign currency exchange risks) is the possibility that a change in interest rates or foreign exchange rates will cause a financial instrument to decrease in value or become more costly to settle. Prior to our ceasing originations in our Consumer Lending business and ceasing loan purchase activities in our Mortgage Services business, customer demand for our loan products shifted between fixed rate and floating rate products, based on market conditions and preferences. These shifts in loan products resulted in different funding strategies and produced different interest rate risk exposures. Additionally, the mix of receivables on our balance sheet and the corresponding market risk is changing as we manage the liquidation of all of our receivable portfolios. We maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to our debt liabilities. We manage our exposure to interest rate risk primarily through the use of interest rate swaps with the main objective of managing the interest rate volatility due to a mismatch in the duration of our assets and liabilities. We manage our exposure to foreign currency exchange risk primarily through the use of cross currency interest rate swaps.

Interest rate swaps are contractual agreements between two counterparties for the exchange of periodic interest payments generally based on a notional principal amount and agreed-upon fixed or floating rates. The majority of our interest rate swaps are used to manage our exposure to changes in interest rates by converting floating rate debt to fixed rate or by converting fixed rate debt to floating rate. We have also entered into currency swaps to convert both principal and interest payments on debt issued from one currency to the appropriate functional currency.

We do not manage credit risk or the changes in fair value due to the changes in credit risk by entering into derivative financial instruments such as credit derivatives or credit default swaps.

Control Over Valuation Process and Procedures A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for derivatives are measured by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Quantitative Risk and Valuation Group of an HSBC affiliate. These valuation models utilize discounted cash flows or an option pricing model adjusted for counterparty credit risk and market liquidity. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indices and therefore demonstrate a similar response to market factors.

Credit Risk By utilizing derivative financial instruments, we are exposed to counterparty credit risk. Counterparty credit risk is the risk that the counterparty to a transaction fails to perform according to the terms of the contract. We manage the counterparty credit (or repayment) risk in derivative instruments through established credit approvals, risk control limits, collateral, and ongoing monitoring procedures. We utilize an affiliate, HSBC Bank USA, as the primary provider of derivative products. We have never suffered a loss due to counterparty failure.

At December 31, 2013 and December 31, 2012, 100.0 percent and 99.7 percent, respectively, of our existing derivative contracts are with HSBC subsidiaries, making them our primary counterparty in derivative transactions. Derivative agreements require that payments be made to, or received from, the counterparty when the fair value of the agreement reaches a certain level. Generally, we provide non-affiliate counterparties collateral in the form of cash which is recorded in our balance sheet as derivative financial assets or derivative related liabilities. At December 31, 2012, the fair value of our agreements with non-affiliate counterparties did not require us or the non-affiliates to provide collateral. When the fair value of our agreements with affiliate counterparties requires the posting of collateral, it is provided in either the form of cash and recorded on the balance sheet, consistent with third party arrangements, or in the form of securities which are not recorded on our balance sheet. The fair value of our agreements with affiliate counterparties required the affiliates to provide collateral to us of $811 million and $75 million at December 31, 2013 and December 31, 2012, respectively, all of which was received in cash. These amounts are offset against the fair value amount recognized for derivative instruments that have been offset under the same master netting arrangement and recorded in our balance sheet as a component of derivative financial assets or derivative related liabilities. At December 31, 2013, we had derivative contracts with a notional amount of $16.5 billion, all of which is outstanding with HSBC Bank USA. At December 31, 2012, we had derivative contracts with a notional amount of approximately $26.1 billion, including $26.0 billion outstanding with HSBC Bank USA. Derivative financial instruments are generally expressed in terms of notional principal or contract amounts which are much larger than the amounts potentially at risk for nonpayment by counterparties.

To manage our exposure to changes in interest rates, we entered into interest rate swap agreements and currency swaps which have been designated as fair value or cash flow hedges under derivative accounting principles, or are treated as non-qualifying hedges. We currently utilize the long-haul method to assess effectiveness of all derivatives designated as hedges.

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.

	December 31, 2013					December 31, 2012
	Derivative Financial Assets⁽¹⁾		Derivative Financial Liabilities			Derivative Financial Assets⁽¹⁾		Derivative Financial Liabilities
	(in millions)
Derivatives⁽²⁾
Derivatives accounted for as fair value hedges
Interest rate swaps.............................................................................................	$	-	$	-		$	7	$	-
Currency swaps..................................................................................................	-		-			-		-
Fair value hedges................................................................................................	-		-			7		-

Derivatives accounted for as cash flow hedges
Interest rate swaps.............................................................................................	16		(138		)	24		(474		)
Currency swaps..................................................................................................	255		(28		)	482		(38		)
Cash flow hedges...............................................................................................	271		(166		)	506		(512		)

Non-qualifying hedge activities
Derivatives not designated as hedging instruments
Interest rate swaps........................................................................................	24		(171		)	23		(1,111		)
Currency swaps.............................................................................................	-		-			-		(7		)
Derivatives not designated as hedging instruments...............................	24		(171		)	23		(1,118		)

Derivatives associated with debt carried at fair value
Interest rate swaps........................................................................................	270		-			469		-
Currency swaps.............................................................................................	542		-			678		-
Derivatives associated with debt carried at fair value.............................	812		-			1,147		-
Total derivatives.......................................................................................................	1,107		(337		)	1,683		(1,630		)
Less: Gross amounts offset in the balance sheet⁽³⁾............................................	1,107		(337		)	1,683		(1,608		)
Net amounts of derivative financial assets and liabilities presented in the balance sheet⁽⁴⁾.........................................................................................................	$	-	$	-		$	-	$	(22	)

⁽¹⁾ Derivative assets related to cash flow hedges and non-qualifying hedge activities are recorded within other assets in our consolidated balance sheet.

⁽²⁾ All of our derivatives are bilateral over-the-counter ("OTC") derivatives.

⁽³⁾ Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes collateral received as of December 31, 2013 and December 31, 2012 of $811 million and $75 million, respectively. At December 31, 2013 and December 31, 2012, we did not have any financial instrument collateral received/posted.

⁽⁴⁾ At December 31, 2013 and December 31, 2012, we had not received any cash or financial instruments not subject to an enforceable master netting agreement.

Fair Value Hedges Fair value hedges include interest rate swaps to convert our fixed rate debt to variable rate debt and currency swaps to convert debt issued from one currency into U.S. dollar variable rate debt. We terminated all of our active positions during the first quarter of 2013 to better align our overall hedge position with our overall interest rate risk position, which had changed after the issuance of $1.5 billion in fixed rate debt to HSBC USA Inc. in December 2012. We recorded fair value adjustments to the carrying value of our debt for fair value hedges which increased the debt balance by $5 million and $17 million at December 31, 2013 and December 31, 2012, respectively.

The following table presents fair value hedging information, including the gain (loss) recorded on the derivative and where that gain (loss) is recorded in the consolidated statement of income (loss) as well as the offsetting gain (loss) on the hedged item that is recognized in current earnings, the net of which represents hedge ineffectiveness.

		Location of Gain (Loss) Recognized in Income on Hedged Item and Derivative	Amount of Gain (Loss) Recognized in Income on the Derivative								Amount of Gain (Loss) Recognized in Income on Hedged Item
			Year Ended December 31,								Year Ended December 31,
	Hedged Item		2013		2012			2011			2013		2012			2011
			(in millions)
Interest rate swaps................................	Fixed rate borrowings	Derivative related income	$	-	$	(3	)	$	34		$	-	$	(2	)	$	(40	)
Currency swaps....	Fixed rate borrowings	Derivative related income	-		(17		)	(29		)	-		19			44
Total.......................			$	-	$	(20	)	$	5		$	-	$	17		$	4

Cash Flow Hedges Cash flow hedges include interest rate swaps to convert our variable rate debt to fixed rate debt by fixing future interest rate resets of floating rate debt as well as currency swaps to convert debt issued from one currency into U.S. dollar fixed rate debt. Gains and losses on derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) ("OCI") net of tax and totaled a loss of $97 million and $329 million at December 31, 2013 and December 31, 2012, respectively. We expect $64 million ($41 million after-tax) of currently unrealized net losses will be reclassified to earnings within one year. However, these reclassified unrealized losses will be offset by decreased interest expense associated with the variable cash flows of the hedged items and will result in no significant net economic impact to our earnings.

The following table provides the gain or loss recorded on our cash flow hedging relationships.

	Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)							Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassed From AOCI into Income (Effective Portion)									Location of Gain (Loss) Recognized in Income on the Derivative(Ineffective Portion)	Gain (Loss) Recognized In Income on Derivative (Ineffective Portion)
	2013		2012		2011				2013			2012			2011				2013		2012		2011
	(in millions)
Interest rate swaps............	$	118	$	95	$	(116	)	Interest expense	$	(2	)	$	(7	)	$	(34	)	Derivative related income	$	2	$	1	$	4
Currency swaps............	73		89		189			Interest expense	(13		)	(20		)	(25		)	Derivative related income	27		22		22
.....................								Derivative loss recognized on termination of hedges	(199		)	-			-
Total.............	$	191	$	184	$	73			$	(214	)	$	(27	)	$	(59	)		$	29	$	23	$	26

Non-Qualifying Hedging Activities We have entered into interest rate and currency swaps which are not designated as hedges under derivative accounting principles. However, as of December 31, 2013, we no longer have any open currency swap positions. These financial instruments are economic hedges but do not qualify for hedge accounting and are primarily used to minimize our exposure to changes in interest rates and currency exchange rates through more closely matching both the structure and duration of our liabilities to the structure and duration of our assets.

The following table provides detail of the realized and unrealized gain or loss recorded on our non-qualifying hedges:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)
		Year Ended December 31,
		2013		2012			2011
		(in millions)
Interest rate contracts...............................................................	Derivative related income	$	315	$	(221	)	$	(1,185	)
Currency contracts....................................................................	Derivative related income	-		(6		)	4
Total.............................................................................................		$	315	$	(227	)	$	(1,181	)

We have elected the fair value option for certain issuances of our fixed rate debt and have entered into interest rate and currency swaps related to debt carried at fair value. The interest rate and currency swaps associated with this debt are non-qualifying hedges but are considered economic hedges and realized gains and losses are reported as "Gain (loss) on debt designated at fair value and related derivatives" within other revenues. The derivatives related to fair value option debt are included in the tables below.

The following table provides the gain or loss recorded on the derivatives related to fair value option debt primarily due to changes in interest rates. See Note 10, "Fair Value Option," for further discussion.

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)
		Year Ended December 31,
		2013			2012		2011
		(in millions)
Interest rate contracts.......................	Gain (loss) on debt designated at fair value and related derivatives	$	10		$	70	$	263
Currency contracts............................	Gain (loss) on debt designated at fair value and related derivatives	(25		)	73		260
Total.....................................................		$	(15	)	$	143	$	523

Notional Amount of Derivative Contracts The following table provides the notional amounts of derivative contracts.

	December 31, 2013		December 31, 2012
	(in millions)
Derivatives designated as hedging instruments:
Interest rate swaps.........................................................................................................................................	$	3,256	$	4,949
Currency swaps..............................................................................................................................................	2,277		6,063
...........................................................................................................................................................................	5,533		11,012
Non-qualifying hedges:
Derivatives not designated as hedging instruments:
Interest rate swaps...................................................................................................................................	3,699		6,219
Currency swaps........................................................................................................................................	-		122
..........................................................................................................................................................................	3,699		6,341
Derivatives associated with debt carried at fair value:
Interest rate swaps...................................................................................................................................	4,343		5,573
Currency swaps........................................................................................................................................	2,892		3,134
...........................................................................................................................................................................	7,235		8,707
Total..................................................................................................................................................................	$	16,467	$	26,060

The decrease in the notional amount of our derivative contracts at December 31, 2013 as compared with December 31, 2012 reflects maturities of $5.8 billion and the termination of $2.5 billion of non-qualifying hedges and $300 million of fair value hedges to better align our overall hedge position with our overall interest rate risk position, which changed after the issuance of $1.5 billion in fixed rate debt to HSBC USA Inc. in December 2012 and revisions in our estimates of the prepayment speeds on the underlying mortgages we are funding.

Additionally, we terminated $1.0 billion of cash flow hedge positions during the first quarter of 2013. As discussed in previous filings, we have approximately $1.0 billion of junior subordinated notes issued to an affiliate, HFCT IX. HFCT IX, which is a related but unconsolidated entity, which issued trust preferred securities to third party investors to fund the purchase of the junior subordinated notes. In October 2013, U.S. Regulators published a final rule in the Federal Register implementing the Basel III capital framework under which the trust preferred securities will no longer qualify as Tier I capital. In anticipation of these changes as well as other recent changes in our assessment of cash flow needs, including long term funding considerations, in 2013 we terminated the associated cash flow hedges associated with these notes, which resulted in the reclassification to income of $199 million of unrealized losses previously accumulated in other comprehensive income during the first quarter of 2013.

12. Income Taxes

Total income taxes were as follows:

Year Ended December 31,	2013			2012			2011
	(in millions)
Provision (benefit) for income taxes related to continuing operations................................	$	325		$	(1,406	)	$	(1,431	)
Income taxes related to adjustments included in common shareholder's equity:
Unrealized gains (losses) on securities available-for-sale, not other-than-temporarily impaired, net........................................................................................................................	(62		)	7			13
Unrealized gains on other-than-temporarily impaired debt securities available-for-sale........................................................................................................................................	(1		)	1			3
Unrealized gains on cash flow hedging instruments........................................................	143			75			52
Changes in funded status of postretirement benefit plans..............................................	8			(8		)	(6		)
Foreign currency translation adjustments..........................................................................	(10		)	1			(1		)
Total...............................................................................................................................................	$	403		$	(1,330	)	$	(1,370	)

Provisions (benefits) for income taxes related to our continuing operations all of which were in the United States were:

Year Ended December 31,	2013			2012			2011
	(in millions)
Current benefit..............................................................................................................................	$	(917	)	$	(958	)	$	(772	)
Deferred provision (benefit).......................................................................................................	1,242			(448		)	(659		)
Total income provision (benefit)................................................................................................	$	325		$	(1,406	)	$	(1,431	)

The significant components of deferred provisions (benefits) attributable to income from continuing operations were:

Year Ended December 31,	2013			2012			2011
	(in millions)
Deferred income tax provision (benefit) (excluding the effects of other components).....	$	1,443		$	(597	)	$	(602	)
Increase in Federal operating loss carryforwards...................................................................	(141		)	-			-
(Decrease) increase in State valuation allowance...................................................................	(51		)	323			(65		)
Decrease (increase) in State operating loss carryforwards and credits...............................	11			(296		)	(65		)
(Increase) decrease in foreign and general business tax credits..........................................	(20		)	122			73
Deferred income tax provision (benefit)...................................................................................	$	1,242		$	(448	)	$	(659	)

The decrease in state operating loss carryforwards and corresponding decrease in valuation allowance in the table above pertain mainly to states with net operating losses that were utilized against 2012 taxable income on returns filed in 2013.

A reconciliation of income tax expense (benefit) compared with the amounts at the U.S. federal statutory rates was as follows:

Year Ended December 31,	2013					2012					2011
	(dollars are in millions)
Tax provision (benefit) at the U.S. federal statutory income tax rate.................................	$	363		35.0	%	$	(1,334	)	(35.0	)%	$	(1,315	)	(35.0	)%
Increase (decrease) in rate resulting from:
State and local taxes, net of Federal benefit...........................................................................	9			.9		(19		)	(.5	)	(19		)	(.5	)
Adjustment with respect to tax for prior periods⁽¹⁾..........................................................	11			1.1		(51		)	(1.3	)	5			.1
Adjustment of tax rate used to value deferred taxes..................................................	(5		)	(.5	)	(7		)	(.2	)	-			-
Change in valuation allowance and reserves⁽²⁾.........................................................	(11		)	(1.1	)	15			.4		(130		)	(3.5	)
Uncertain tax adjustments⁽³⁾..........................	(10		)	(1.0	)	(15		)	(.4	)	-			-
Other non-deductible/non-taxable items⁽⁴⁾.	(29		)	(2.8	)	-			-		29			.8
Other.................................................................	(3		)	(.3	)	5			.1		(1		)	-
Total income tax benefit......................................	$	325		31.3	%	$	(1,406	)	(36.9	)%	$	(1,431	)	(38.1	)%

⁽¹⁾For 2013, 2012 and 2011, the amount relates to corrections to current and deferred tax balance sheet accounts and changes in estimates as a result of filing the Federal and state income tax returns.

⁽²⁾For 2013 and 2012, the amounts relate to changes in valuation allowance in states with net operating loss carryforward periods of 12 to 20 years. For 2011, the amount relates mainly to the release of a valuation allowance previously established on foreign tax credits.

⁽³⁾For 2013 and 2012, the amounts primarily relate to the conclusion of state audits and expiration of state statutes of limitations.

⁽⁴⁾For 2013, the amount includes a change in the estimated deductibility of accrued costs for certain regulatory matters that were accrued during 2011.

Temporary differences which gave rise to a significant portion of deferred tax assets and liabilities were as follows:

	December 31, 2013			December 31, 2012
	(in millions)
Deferred Tax Assets:
Credit loss reserves..........................................................................................................................................	$	1,220		$	1,678
Receivables held for sale.................................................................................................................................	101			921
Federal and state unused tax benefit carryforwards...................................................................................	1,080			930
Market value adjustment related to derivatives and long-term debt carried at fair value.....................	392			624
Interests in Real Estate Mortgage Investment Conduits ⁽¹⁾.......................................................................	394			505
Accrued expenses not currently deductible................................................................................................	199			183
Other...................................................................................................................................................................	271			280
Total deferred tax assets..................................................................................................................................	3,657			5,121
Valuation allowance.........................................................................................................................................	(931		)	(982		)
Total deferred tax assets net of valuation allowance..................................................................................	2,726			4,139
Deferred Tax Liabilities:
Fee income.........................................................................................................................................................	82			105
Other...................................................................................................................................................................	64			145
Total deferred tax liabilities.............................................................................................................................	146			250
Net deferred tax asset......................................................................................................................................	$	2,580		$	3,889

⁽¹⁾Real Estate Mortgage Investment Conduits ("REMIC") are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. We hold portfolios of noneconomic residual interests in a number of REMICs through one of our subsidiaries. This item represents the tax basis in such interests which has accumulated as a result of tax rules requiring the recognition of income related to such noneconomic residuals.

The deferred tax valuation allowance is attributed to the following deferred tax assets that based on the available evidence it is more-likely-than-not that the deferred tax asset will not be realized:

	December 31, 2013		December 31, 2012
	(in millions)
State unused tax benefit carryforwards........................................................................................................	$	875	$	926
Deferred capital loss on sale to affiliates......................................................................................................	49		49
Other...................................................................................................................................................................	7		7
Total....................................................................................................................................................................	$	931	$	982

The state deferred tax assets against which a valuation allowance is maintained primarily relate to unused tax benefits associated with our run off business for which recovery is highly unlikely.

A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:

	2013			2012			2011
	(in millions)
Balance at beginning of year....................................................................................................	$	165		$	153		$	164
Additions based on tax positions related to the current year.............................................	-			8			4
Additions for tax positions of prior years..............................................................................	3			49			60
Reductions for tax positions of prior years............................................................................	(41		)	(27		)	(19		)
Settlements..................................................................................................................................	(8		)	(18		)	(42		)
Reductions for lapse of statute of limitations........................................................................	(8		)	-			(14		)
Balance at end of year...............................................................................................................	$	111		$	165		$	153

The total amount of unrecognized tax benefits related to uncertain tax positions that, if recognized, would affect the effective tax rate was $73 million, $113 million and $96 million at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. Included in the unrecognized tax benefits are some items the recognition of which would not affect the effective tax rate, such as the tax effect of temporary differences and the amount of state taxes that would be deductible for U.S. federal purposes. It is reasonably possible that there could be a change in the amount of our unrecognized tax benefits within the next 12 months due to settlements or statutory expirations in various state and local tax jurisdictions.

It is our policy to recognize accrued interest related to uncertain tax positions in interest income in the consolidated statement of income (loss) and to recognize penalties, if any, related to uncertain tax positions as a component of other servicing and administrative expenses in the consolidated statement of income (loss). We had accruals for the payment of interest and penalties associated with uncertain tax positions of $28 million and $42 million at December 31, 2013 and December 31, 2012, respectively. We decreased our accrual for the payment of interest and penalties associated with uncertain tax positions by $14 million during 2013 and $46 million during 2012.

HSBC North America Consolidated Income Taxes We are included in HSBC North America's consolidated Federal income tax return and in various combined state income tax returns. As such, we have entered into a tax allocation agreement with the HNAH Group entities included in the consolidated returns which govern the current amount of taxes to be paid or received by the various entities included in the consolidated return filings. As a result, we have looked at the HNAH Group's consolidated deferred tax assets and various sources of taxable income, including the impact of HSBC and HNAH Group tax planning strategies, in reaching conclusions on recoverability of deferred tax assets. Where a valuation allowance is determined to be necessary at the HSBC North America consolidated level, such allowance is allocated to the principal subsidiaries within the HNAH Group as described below in a manner that is systematic, rational and consistent with the broad principles of accounting for income taxes.

The HNAH Group evaluates deferred tax assets for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies and any available carryback capacity.

In evaluating the need for a valuation allowance, the HNAH Group estimates future taxable income based on management approved business plans, future capital requirements and ongoing tax planning strategies, including capital support from HSBC necessary as part of such plans and strategies. This evaluation process involves significant management judgment about assumptions that are subject to change from period to period.

Market conditions have created losses in the HNAH Group in recent periods and volatility in our pre-tax book income. As a consequence, our current analysis of the recoverability of the deferred tax assets significantly discounts any future taxable income expected from continuing operations and relies on continued capital support from our parent, HSBC, including tax planning strategies implemented in relation to such support. HSBC has indicated it remains fully committed and has the capacity and willingness to provide capital as needed to the HNAH Group to run operations, maintain sufficient regulatory capital, and fund certain tax planning strategies.

Only those tax planning strategies that are both prudent and feasible, and which management has the ability and intent to implement, are incorporated into our analysis and assessment. The primary and most significant strategy is HSBC's commitment to reinvest excess HNAH Group capital to reduce debt funding or otherwise invest in assets to ensure that it is more likely than not that the deferred tax assets will be utilized.

Currently, it has been determined that the HNAH Group's primary tax planning strategy, in combination with other tax planning strategies, provides support for the realization of the net deferred tax assets recorded for the HNAH Group. Such determination is based on HSBC North America 's business forecasts and assessment as to the most efficient and effective deployment of HSBC capital, most importantly including the length of time such capital will need to be maintained in the U.S. for purposes of the tax planning strategy.

Notwithstanding the above, the HNAH Group has valuation allowances against certain state deferred tax assets and certain Federal tax loss carryforwards for which the aforementioned tax planning strategies do not provide appropriate support.

HNAH Group valuation allowances are allocated to the principal subsidiaries, including us. The methodology allocates the valuation allowance to the principal subsidiaries based primarily on the entity's relative contribution to the growth of the HSBC North America consolidated deferred tax asset against which the valuation allowance is being recorded.

If future results differ from the HNAH Group's current forecasts or the tax planning strategies were to change, a valuation allowance against some or all of the remaining net deferred tax assets may need to be established which could have a material adverse effect on our results of operations, financial condition and capital position. The HNAH Group will continue to update its assumptions and forecasts of future taxable income, including relevant tax planning strategies, and assess the need for such incremental valuation allowances.

Absent the capital support from HSBC and implementation of the related tax planning strategies, the HNAH Group, including us, would be required to record a valuation allowance against the remaining deferred tax assets.

HSBC Finance Corporation Income Taxes We recognize deferred tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits and net operating and other losses. Our net deferred tax assets, including deferred tax liabilities and valuation allowances, totaled $2,580 million and $3,889 million as of December 31, 2013 and December 31, 2012, respectively.

The Internal Revenue Service ("IRS") concluded its examination of our 2006 through 2009 income tax returns in the third quarter of 2013. The IRS forwarded the Revenue Agents' Report ("RAR") to the Joint Committee of Taxation ("JCT") for approval in the fourth quarter of 2013. We expect the RAR to be approved by the JCT in the first half of 2014. The final impact is not expected to significantly affect our financial statements.

We remain subject to state and local income tax examinations for years 2003 and forward. We are currently under audit by various state and local tax jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and the closing of statute of limitations. Such adjustments are reflected in the tax provision.

At December 31, 2013, for Federal tax purposes, we had net operating loss carryforwards of $403 million.which expire in 2033; foreign tax credits of $12 million which expire in 2018; and general business credits of $8 million which expire in 2029.

At December 31, 2013, for state tax purposes, we had net operating loss carryforwards of $15,325 million for which we have valuation allowances totaling $14,126 million. These state net operating loss carryforwards expire as follows: $502 million in 2014 - 2018; $1,017 million in 2019 - 2023; $4,374 million in 2024 - 2028; and $9,432 million in 2029 and forward.

At December 31, 2013, for state tax purposes, we had general business tax credit carryforwards of $12 million of which $9 million expire in 2014 - 2018 and $3 million have no expiration period.

13. Redeemable Preferred Stock

In November 2010, we issued 1,000 shares of 8.625 percent Non-Cumulative Preferred Stock, Series C ("Series C Preferred Stock") to our parent, HSBC Investments (North America) Inc. ("HINO"), for a cash purchase price of $1,000 million. Dividends on the Series C Preferred Stock are non-cumulative and payable quarterly at a rate of 8.625 percent. The Series C Preferred Stock may be redeemed at our option after November 30, 2025 at $1 million per share, plus accrued dividends. The redemption and liquidation value is $1 million per share plus accrued and unpaid dividends. The holders of Series C Preferred Stock are entitled to payment before any capital distribution is made to the common shareholder and have no voting rights except for the right to elect two additional members to the board of directors in the event that dividends have not been declared and paid for six quarters, or as otherwise provided by law. Additionally, as long as any shares of the Series C Preferred Stock are outstanding, the authorization, creation or issuance of any class or series of stock that would rank prior to the Series C Preferred Stock with respect to dividends or amounts payable upon liquidation or dissolution of HSBC Finance Corporation must be approved by the holders of at least two-thirds of the shares of Series C Preferred Stock outstanding at that time. We began paying dividends during the first quarter of 2011. During 2013, 2012 and 2011, we declared dividends on the Series C Preferred Stock totaling $86 million, $86 million and $89 million, respectively, which were paid prior to December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

In June 2005, we issued 575,000 shares of 6.36 percent Non-Cumulative Preferred Stock, Series B ("Series B Preferred Stock") to third parties. Dividends on the Series B Preferred Stock are non-cumulative and payable quarterly at a rate of 6.36 percent. The Series B Preferred Stock may be redeemed at our option after June 23, 2010 at $1,000 per share, plus accrued dividends. The redemption and liquidation value is $1,000 per share plus accrued and unpaid dividends. The holders of Series B Preferred Stock are entitled to payment before any capital distribution is made to the common shareholder and have no voting rights except for the right to elect two additional members to the board of directors in the event that dividends have not been declared and paid for six quarters, or as otherwise provided by law. Additionally, as long as any shares of the Series B Preferred Stock are outstanding, the authorization, creation or issuance of any class or series of stock which would rank prior to the Series B Preferred Stock with respect to dividends or amounts payable upon liquidation or dissolution of HSBC Finance Corporation must be approved by the holders of at least two-thirds of the shares of Series B Preferred Stock outstanding at that time. In each of 2013, 2012 and 2011, we declared dividends totaling $37 million on the Series B Preferred Stock which were paid prior to December 31, 2013, December 31, 2012 and December 31, 2011, respectively.

14. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) ("AOCI") includes certain items that are reported directly within a separate component of shareholders' equity. The following table presents changes in accumulated other comprehensive income (loss) balances.

Year Ended December 31,	2013			2012			2011
	(in millions)
Unrealized gains (losses) on cash flow hedging instruments:
Balance at beginning of period.............................................................................................	$	(358	)	$	(494	)	$	(575	)
Other comprehensive income for period:
Net gains arising during period, net of tax of $67 million, $65 million and $29 million, respectively.......................................................................................................	123			118			45
Reclassification adjustment for losses realized in net income, net of tax of $76 million, $10 million and $23 million, respectively⁽³⁾........................................................	138			18			36
Total other comprehensive income for period....................................................................	261			136			81
Balance at end of period.........................................................................................................	(97		)	(358		)	(494		)

Unrealized gains (losses) on securities available-for-sale, not other-than temporarily impaired:
Balance at beginning of period.............................................................................................	115			102			78
Reclassification of unrealized losses on other-than-temporary impaired debt securities, net of tax of $- million, $- million and $- million, respectively..................	-			1			-
Other comprehensive income (loss) for period:
Net unrealized holding gains arising during period, net of tax of $- million, $16 million and $33 million, respectively............................................................................	-			28			60
Reclassification adjustment for losses realized in net income, net of tax of $(62)million, $(9) million and $(20) million, respectively⁽¹⁾............................................	(115		)	(16		)	(36		)
Total other comprehensive income (loss) for period.........................................................	(115		)	12			24
Balance at end of period.........................................................................................................	-			115			102
Unrealized gains (losses) on other-than-temporarily impaired debt securities available-for-sale:
Balance at beginning of period.............................................................................................	1			-			(4		)
Reclassification of unrealized gains on other-than-temporary impaired debt securities, net of tax of $- million, $- million and $- million, respectively..................	-			(1		)	-
Other comprehensive income (loss) for period:
Other-than-temporary impairment on debt securities available-for-sale recognized in other comprehensive income, net of tax of $- million, $1 million and $(1) million, respectively.......................................................................................................	-			2			(1		)
Reclassification adjustment for gains realized in net income, net of tax of $(1) million, $- million and $4 million, respectively⁽¹⁾............................................................	(1		)	-			5
Total other comprehensive income (loss) for period.........................................................	(1		)	2			4
Balance at end of period.........................................................................................................	-			1			-
Pension and postretirement benefit plan liability:
Balance at beginning of period.............................................................................................	(26		)	(11		)	-
Other comprehensive income for period:
Change in unfunded pension and postretirement liability, net of tax of $7 million, $(9) million and $(7) million, respectively.......................................................................	14			(17		)	(12		)
Reclassification adjustment for losses realized in net income, net of tax of $1 million, $1 million and $1 million, respectively⁽²⁾............................................................	1			2			1
Total other comprehensive income for period....................................................................	15			(15		)	(11		)
Balance at end of period.........................................................................................................	(11		)	(26		)	(11		)

Foreign currency translation adjustments:
Balance at beginning of period.............................................................................................	11			7			10
Other comprehensive income (loss) for period:
Translation losses, net of tax of $(1) million, $1 million and $(1) million, respectively.....................................................................................................................	(5		)	4			(3		)
Reclassification adjustment for gains realized in net income, net of tax of $(9) million, $- million and $- million, respectively⁽³⁾.............................................................	(6		)	-			-
Total other comprehensive income (loss) for period.........................................................	(11		)	4			(3		)
Balance at end of period.........................................................................................................	-			11			7
Total accumulated other comprehensive loss at end of period.............................................	$	(108	)	$	(257	)	$	(396	)

⁽¹⁾The amounts reclassified during 2013 are included in income (loss) from discontinued operations in our consolidated statement of income (loss).

⁽²⁾ The amounts reclassified during 2013 are included as a component of salaries and employee benefits in our consolidated statement of income (loss).

⁽³⁾See the tables below for the components of the amounts reclassified during 2013 into income and location in our consolidated statement of income (loss).

The following table provides additional information related to the amounts classified into the consolidated statement of income (loss) out of accumulated other comprehensive income during 2013.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)⁽¹⁾			Affected Line Item in the Statement of Income (Loss)
	(in millions)
Year Ended December 31, 2013:
Unrealized gains (losses) on cash flow hedging instruments:
Interest rate and currency swaps.....................................................	$	(15	)	Interest expense
Derivative loss recognized on termination of hedge relationship...........................................................................................................	(199		)	Derivative related income (expense)
Total before tax............................................................................................	(214		)
Tax expense (benefit)..................................................................................	(76		)
Net of tax......................................................................................................	$	(138	)
Foreign currency translation adjustments:
Sale of Insurance business..................................................................	$	(24	)	Income (loss) on discontinued operations
Closure of foreign legal entity.............................................................	9			Other income
Total before tax............................................................................................	(15		)
Tax expense (benefit)..................................................................................	(9		)
Net of tax......................................................................................................	$	(6	)

⁽¹⁾ Amounts in parenthesis indicate expenses recognized in the consolidated statement of income (loss).

15. Share-Based Plans

Employee Stock Purchase Plans The HSBC Holdings Savings-Related Share Option Plan (the "HSBC Sharesave Plan") allows eligible employees to enter into savings contracts of one, three or five year lengths, with the ability to decide at the end of the contract term to either use their accumulated savings to purchase HSBC ordinary shares at a discounted option price or have the savings plus any interest repaid in cash. The Sharesave Plan was not offered to employees during the enrollment period in 2013, and therefore, no options were granted. During 2012 and 2011, employees were able to save up to $400 per month over all their HSBC Sharesave Plan savings contracts. Compensation expense in 2013, 2012 and 2011 was insignificant.

Restricted Share Plans Subsequent to our acquisition by HSBC, key employees have been provided awards in the form of restricted share rights ("RSRs"), restricted shares ("RSs") and restricted share units ("RSUs") under the HSBC Group Share Plan. These shares have been granted subject to either time-based vesting or performance-based vesting, typically over three to five years. Currently, share-based awards granted to U.S. employees are granted in the form of RSUs. Annual awards to employees in 2013, 2012 and 2011 are generally subject to three-year time-based graded vesting. Also during 2011 we made a one-time grant of performance-based awards, which represented a significant portion of the shares awarded in 2011, that are subject to performance-based vesting periods ranging from 12 to 30 months. We also issue a small number of off-cycle grants each year, primarily for reasons related to recruitment of new employees. Compensation expense for these restricted share plans totaled $4 million, $9 million and $10 million in 2013, 2012 and 2011, respectively. As of December 31, 2013, future compensation cost related to grants which have not yet fully vested is approximately $13 million. This amount is expected to be recognized over a weighted-average period of 1.51 years.

16. Pension and Other Postretirement Benefits

Defined Benefit Pension PlanEffective January 1, 2005, our previously separate qualified defined benefit pension plan was combined with that of HSBC Bank USA's into a single HSBC North America qualified defined benefit pension plan (either the "HSBC North America Pension Plan" or the "Plan") which facilitates the development of a unified employee benefit policy and unified employee benefit plan administration for HSBC companies operating in the U.S.

The table below reflects the portion of pension expense and its related components of the HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income (loss).

Year Ended December 31,	2013			2012			2011
	(in millions)
Service cost - benefits earned during the period...................................................................	$	5		$	4		$	5
Interest cost on projected benefit obligation..........................................................................	50			47			33
Expected return on assets...........................................................................................................	(61		)	(65		)	(39		)
Recognized losses.......................................................................................................................	35			33			18
Curtailment gain...........................................................................................................................	-			(4		)	(1		)
Amortization of prior service costs...........................................................................................	-			(1		)	-
Pension expense...........................................................................................................................	$	29		$	14		$	16

Pension expense was higher during 2013 due to higher interest costs, higher recognized losses and lower expected returns on Plan assets. Contributions to the Plan by HSBC North America totaled $131 million, $181 million and $357 million during 2013, 2012 and 2011, respectively. The prior year period benefited from a curtailment gain that is more fully described below.

During 2012, a decision was made to cease all future contributions under the Cash Balance formula and freeze the Plan effective January 1, 2013. While participants with existing balances continue to receive interest credits until the account is distributed, they will no longer accrue benefits beginning in 2013. This resulted in the recognition of a $4 million curtailment gain during 2012.

During December 2011, an amendment was made to the Plan effective January 1, 2011 to amend the benefit formula, thus increasing the benefits associated with services provided by certain employees in past periods. The financial impact was being amortized to pension expense over the remaining life expectancy of the participants. As a result of the decision to cease all future contributions under the Cash Balance formula and freeze the Plan effective January 1, 2013, the remaining unamortized prior service credit was recognized during 2012.

The assumptions used in determining pension expense of the HSBC North America Pension Plan are as follows:

	2013		2012		2011
Discount rate.................................................................................................................................	3.95	%	4.60	%	5.30	%
Salary increase assumption........................................................................................................	*		2.75		2.75
Expected long-term rate of return on Plan assets....................................................................	6.00		7.00		7.25

^* As a result of the decision to cease all future contributions under the Cash Balance formula and to freeze the Plan effective January 1, 2013, a salary increase assumption no longer applies to the Plan.

The accumulated benefit obligation for the HSBC North America Pension Plan was $3,892 million and $4,374 million at December 31, 2013 and December 31, 2012, respectively. As the projected benefit obligation and the accumulated benefit obligation relate to the HSBC North America Pension Plan, only a portion of this deficit could be considered our responsibility.

Supplemental Retirement Plan Our employees also participate in a non-qualified supplemental retirement plan which has been frozen. This plan, which is currently unfunded, provides eligible employees defined pension benefits outside the qualified retirement plan. Benefits are based on average earnings, years of service and age at retirement. The projected benefit obligation was $54 million and $66 million at December 31, 2013 and December 31, 2012, respectively. Pension expense related to the supplemental retirement plan was $7 million, $17 million and $4 million in 2013, 2012 and 2011, respectively.

Defined Contribution Plans We participate in the HSBC North America 401(k) savings plan and profit sharing plan which exist for employees meeting certain eligibility requirements. Under these plans, each participant's contribution is matched up to a maximum of 6 percent of the participant's compensation. Contributions are in the form of cash. Total expense for these plans for HSBC Finance Corporation was $6 million, $4 million and $4 million in 2013, 2012 and 2011, respectively.

Postretirement Plans Other Than Pensions Our employees also participate in plans which provide medical and life insurance benefits to retirees and eligible dependents. These plans cover substantially all employees who meet certain age and vested service requirements. We have instituted dollar limits on our payments under the plans to control the cost of future medical benefits.

The net postretirement benefit cost for continuing operations included the following:

Year Ended December 31,	2013		2012		2011
	(in millions)
Service cost - benefits earned during the period...................................................................	$	-	$	-	$	-
Interest cost..................................................................................................................................	7		6		5
Net periodic postretirement benefit cost..................................................................................	$	7	$	6	$	5

The assumptions used in determining the net periodic postretirement benefit cost for our postretirement benefit plans are as follows:

	2013		2012		2011
Discount rate.................................................................................................................................	3.35	%	4.25	%	4.95	%
Salary increase assumption........................................................................................................	2.75		2.75		2.75

A reconciliation of the beginning and ending balances of the accumulated postretirement benefit obligation for both continuing and discontinued operations is as follows:

	2013			2012
	(in millions)
Accumulated benefit obligation at beginning of year............................................................................	$	197		$	195
Service cost...................................................................................................................................................	1			1
Interest cost..................................................................................................................................................	6			7
Actuarial (gains) losses..............................................................................................................................	(16		)	26
Benefits paid, net.........................................................................................................................................	(14		)	(21		)
Plan curtailment............................................................................................................................................	-			(11		)
Accumulated benefit obligation at end of year.......................................................................................	$	174		$	197

Our postretirement benefit plans are funded on a pay-as-you-go basis. We currently estimate that we will pay benefits of approximately $15 million relating to our postretirement benefit plans in 2014. The funded status of our postretirement benefit plans was a liability of $174 million and $197 million at December 31, 2013 and December 31, 2012, respectively.

Estimated future benefit payments for our postretirement benefit plans for both continuing and discontinued operations are as follows:

	(in millions)
2014.................................................................................................................................................................................................	$	15
2015.................................................................................................................................................................................................	14
2016.................................................................................................................................................................................................	14
2017.................................................................................................................................................................................................	14
2018.................................................................................................................................................................................................	13
2019-2023........................................................................................................................................................................................	65

The assumptions used in determining the benefit obligation of our postretirement benefit plans are as follows:

	2013		2012		2011
Discount rate.................................................................................................................................	4.35	%	3.35	%	4.25	%
Salary increase assumption........................................................................................................	2.75		2.75		2.75

A 7.2 percent annual rate of increase in the gross cost of covered health care benefits for participants under the age of 65 and a 6.8 percent annual rate for participants over the age of 65 was assumed for 2013. This rate of increase is assumed to decline gradually to 4.5 percent in 2027.

Assumed health care cost trend rates have an effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would increase (decrease) service and interest costs and the postretirement benefit obligation as follows:

	One Percent Point Increase		One Percent Point Decrease
	(in millions)
Effect on total of service and interest cost components.....................................................................	$	-	$	-
Effect on postretirement benefit obligation...........................................................................................	5.0		(4.0		)

17. Related Party Transactions

In the normal course of business, we conduct transactions with HSBC and its subsidiaries. These transactions occur at prevailing market rates and terms and include funding arrangements, derivatives, servicing arrangements, information technology, centralized support services, item and statement processing services, banking and other miscellaneous services. Prior to 2013, we also sold receivables to related parties. The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:

	December 31, 2013		December 31, 2012
	(in millions)
Assets:
Cash..............................................................................................................................................................	$	172	$	193
Securities purchased under agreements to resell⁽¹⁾...............................................................................	6,924		2,160
Other assets.................................................................................................................................................	86		105
Total assets..................................................................................................................................................	$	7,182	$	2,458
Liabilities:
Due to affiliates⁽²⁾........................................................................................................................................	$	8,742	$	9,089
Derivative related liability..........................................................................................................................	-		18
Other liabilities.............................................................................................................................................	51		83
Total liabilities..............................................................................................................................................	$	8,793	$	9,190

⁽¹⁾Securities under an agreement to resell are purchased from HSI and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below.

⁽²⁾Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances as well as HSBC's ownership of our subordinated debt and excludes preferred stock.

Year Ended December 31,	2013			2012			2011
	(in millions)
Income/(Expense):
Interest income from HSBC affiliates.........................................................................................	$	5		$	4		$	6
Interest expense paid to HSBC affiliates⁽¹⁾................................................................................	(474		)	(552		)	(578		)
Net interest income (loss).................................................................................................................	$	(469	)	$	(548	)	$	(572	)
Gain (loss) on FVO debt with affiliate.............................................................................................	$	18		$	(68	)	$	(10	)
Servicing and other fees from HSBC affiliates...............................................................................	26			35			20
Support services from HSBC affiliates............................................................................................	(281		)	(310		)	(270		)
Stock based compensation expense with HSBC⁽²⁾........................................................................	(4		)	(10		)	(8		)

⁽¹⁾Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt.

⁽²⁾Employees participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salary and employee benefits in our consolidated statement of income (loss). Employees also participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 16, "Pension and Other Postretirement Benefits."

Funding Arrangements with HSBC Affiliates:

We have historically used a variety of HSBC affiliates to fund a portion of our borrowing needs. However, in the first quarter of 2012, we revised our funding strategies and as a result, all of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans and our funding requirements are now sourced primarily through HSBC USA, Inc. Due to affiliates consists of the following:

	December 31, 2013		December 31, 2012
	(in millions)
HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries........................................................	$	4,300	$	5,625
HSBC USA Inc.............................................................................................................................................	3,012		2,012
HSBC Holdings plc (includes $496 million and $514 million at December 31, 2013 and December 31, 2012 carried at fair value, respectively)..........................................................................................	820		842
HSBC North America Holdings Inc..........................................................................................................	600		600
HSBC Asia Holdings BV............................................................................................................................	10		10
Due to affiliates...........................................................................................................................................	$	8,742	$	9,089

HSBC Private Banking Holdings (Suisse) S.A.and subsidiaries - We have various debt agreements with maturities between 2013 and 2016.

HSBC USA Inc. - We have a $5.0 billion, 364-day uncommitted revolving credit agreement with HSBC USA Inc. which expires during the fourth quarter of 2014. The credit agreement allows for borrowings with maturities of up to 15 years. Of the amounts outstanding at December 31, 2013, $512 million matures in September 2017, $1.5 billion matures in January 2018 and $1.0 billion matures in September 2018.

HSBC Holdings plc - We have a public subordinated debt issue with a carrying amount of $3.0 billion at December 31, 2013 which matures in 2021. Of this amount, HSBC Holdings plc holds $820 million.

HSBC North America Holdings Inc. -We have a $600 million loan agreement with HSBC North America which provides for three $200 million borrowings with maturities between 2034 and 2035.

HSBC Asia Holdings BV - We have two $5 million loan agreements with maturity dates in 2014 and 2015.

We have the following funding arrangements available with HSBC affiliates, although there are no outstanding balances at either December 31, 2013 or December 31, 2012:

• $1.5 billion uncommitted secured credit facility with HSBC Bank USA was available at December 31, 2012. In December 2013, the amount available was reduced to $0. Any draws on this credit facility required regulatory approval;

• $2.0 billion committed revolving credit facility with HSBC USA Inc. was available at December 31, 2012. In December 2013, the amount available was reduced to $1.0 billion. This credit facility expires in May 2017;

• $100 million committed revolving credit facility with HSBC Investments (Bahamas) Limited which matures in April 2014; and

• $455 million, 364-day uncommitted revolving credit facility with HSBC North America was available at December 31, 2013 and 2012.

As discussed more fully in Note 21, "Commitments, Contingent and Other Liabilities," and in Note 22, "Litigation and Regulatory Matters," in November 2013, we obtained a surety bond to secure a stay of execution of the partial judgment in the Jaffe litigation pending the outcome of our appeal in the Jaffe litigation. This surety bond has been guaranteed by HSBC North America and we will pay HSBC North America an annual fee for providing the guarantee which is included as a component of interest expense paid to HSBC affiliates.

As previously discussed, we maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to affiliate and third-party debt liabilities. HSBC Bank USA is our primary counterparty in derivative transactions. The notional amount of derivative contracts outstanding with HSBC Bank USA totaled $16.5 billion and $26.0 billion at December 31, 2013 and December 31, 2012, respectively. When the fair value of our agreements with affiliate counterparties requires the posting of collateral, it is provided in either the form of cash and recorded on the balance sheet or in the form of securities which are not recorded on our balance sheet. The fair value of our agreements at December 31, 2013 and December 31, 2012 with HSBC Bank USA required HSBC Bank USA to provide collateral to us of $811 million and $75 million, respectively, all of which was received in cash. These amounts are offset against the fair value amount recognized for derivative instruments that have been offset under the same master netting arrangement. See Note 11, "Derivative Financial Instruments," for additional information about our derivative portfolio.

In addition to the lending arrangements discussed above, during the fourth quarter of 2010, we issued 1,000 shares of Series C preferred stock to HINO for $1.0 billion. Dividends paid on the Series C Preferred Stock totaled $86 million, $86 million and $89 million in 2013, 2012 and 2011, respectively.

Services Provided Between HSBC Affiliates:

Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. The following summarizes these activities:

• Servicing activities for real estate secured receivables across North America are performed both by us and HSBC Bank USA. As a result, we receive servicing fees from HSBC Bank USA for services performed on their behalf and pay servicing fees to HSBC Bank USA for services performed on our behalf. The fees we receive from HSBC Bank USA are reported in Servicing and other fees from HSBC affiliates. This includes fees received for servicing real estate secured receivables (with a carrying amount of $1.0 billion and $1.2 billion at December 31, 2013 and December 31, 2012, respectively) that we sold to HSBC Bank USA in 2003 and 2004. Fees we pay to HSBC Bank USA are reported in Support services from HSBC affiliates.

• We also provide various services to HSBC Bank USA, including processing activities and other operational and administrative support. Fees received for these services are included in Servicing and other fees from HSBC affiliates.

• HSBC North America's technology and certain centralized support services including human resources, corporate affairs, risk management, legal, compliance, tax, finance and other shared services are centralized within HSBC Technology & Services (USA) Inc. ("HTSU"). HTSU also provides certain item processing and statement processing activities for us. The fees we pay HTSU for the centralized support services and processing activities are included in Support services from HSBC affiliates. We also receive fees from HTSU for providing certain administrative services to them as well as receiving rental revenue from HTSU for certain office space. The fees and rental revenue we receive from HTSU are included in Servicing and other fees from HSBC affiliates.

• We use HSBC Global Resourcing (UK) Ltd., an HSBC affiliate located outside of the United States, to provide various support services to our operations including among other areas, customer service, systems, collection and accounting functions. The expenses related to these services are included in Support services from HSBC affiliates.

• Banking services and other miscellaneous services are provided by other subsidiaries of HSBC, including HSBC Bank USA, which are included in Support services from HSBC affiliates.

Transactions with HSBC Affiliates involving our Discontinued Operations:

As it relates to our discontinued credit card operations, in January 2009 we sold our General Motors ("GM") and Union Plus ("UP") portfolios to HSBC Bank USA with an outstanding principal balance of $12.4 billion at the time of sale but retained the customer account relationships. In December 2004, we sold our private label receivable portfolio (excluding retail sales contracts at our Consumer Lending business) to HSBC Bank USA and also retained the customer account relationships. In July 2004, we purchased the account relationships associated with $970 million of credit card receivables from HSBC Bank USA. In each of these transactions, we agreed to sell on a daily basis all new receivable originations on these account relationships to HSBC Bank USA and serviced these receivables for a fee. In March 2012, we sold the account relationships we had previously purchased in July 2004 to HSBC Bank USA resulting in a gain of $79 million during the first quarter of 2012 which is included as a component of income from discontinued operations. As discussed in Note 3, "Discontinued Operations," on May 1, 2012, we sold our Card and Retail Services business to Capital One, which included these account relationships and receivables.

During 2012 and 2011, we sold a cumulative total of $10.4 billion and $35.7 billion, respectively, of receivables on a daily basis to HSBC Bank USA prior to the sale of our Card and Retail Services business which resulted in gains on the daily sales of receivables in 2012 through the date of sale of $89 million and $567 million in 2011. Fees received for servicing these receivable portfolios in 2012 through the date of sale totaled $207 million and $594 million in 2011. The gains on the daily sale of these receivables as well as the fees received for servicing these receivable portfolios of our Card and Retail Services business are included as a component of income from discontinued operations in the consolidated statement of income (loss).

We guaranteed the long-term and medium-term notes issued by our Canadian business prior to its sale to HSBC Bank Canada through May 2012 when the notes were paid in full. The fees recorded for providing this guarantee in 2012 and 2011 were not significant and are included in interest income from HSBC affiliates in the table above. As part of the sale of our Canadian business to HSBC Bank Canada, the sale agreement allowed us to continue to distribute various insurance products through the branch network for a fee which is included as a component of income from discontinued operations. We distributed insurance products for HSBC Bank Canada until the Insurance business was sold on March 29, 2013.

18. Business Segments

We have one reportable segment: Consumer. Our Consumer segment consists of our run-off Consumer Lending and Mortgage Services businesses. Prior to the first quarter of 2009, the Consumer segment provided real estate secured and personal non-credit card loans with both revolving and closed-end terms and with fixed or variable interest rates. Loans were originated through branch locations and direct mail. Products were also offered and customers serviced through the Internet. Prior to the first quarter of 2007, we acquired loans from correspondent lenders and prior to September 2007 we also originated loans sourced through mortgage brokers. While these businesses are operating in run-off, they have not been reported as discontinued operations because we continue to generate cash flow from the ongoing collections of the receivables, including interest and fees.

Previously we reported our corporate and treasury activities, which included the impact of FVO debt, in the All Other caption in our segment reporting. With the completion of the sale of our Insurance business on March 29, 2013 as more fully discussed in Note 3, "Discontinued Operations," our corporate and treasury activities are now solely supporting our Consumer Lending and Mortgage Services businesses. As a result, beginning in 2013, we now report these activities within the Consumer Segment and no longer present an "All Other" caption within segment reporting. Segment financial information has been restated for all periods presented to reflect this new segmentation. There have been no other changes in measurement or composition of our segment reporting as compared with the presentation in our 2012 Form 10-K.

We report financial information to our parent, HSBC, in accordance with International Financial Reporting Standards ("IFRSs"). Our segment results are presented in accordance with IFRSs (a non-U.S. GAAP financial measure) on a legal entity basis as operating results are monitored and reviewed and trends are evaluated on an IFRSs basis. However, we continue to monitor liquidity and capital adequacy, establish dividend policy and report to regulatory agencies on a U.S. GAAP basis.

A summary of differences between U.S. GAAP and IFRSs as they impact our results are presented below:

Net Interest Income

Effective interest rate - The calculation of effective interest rates under IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39"), requires an estimate of changes in estimated contractual cash flows, including fees and points paid or received between parties to the contract that are an integral part of the effective interest rate be included. U.S. GAAP generally prohibits recognition of interest income to the extent the net investment in the loan would increase to an amount greater than the amount at which the borrower could settle the obligation. Under U.S. GAAP, prepayment penalties are generally recognized as received. U.S. GAAP also includes interest income on loans originated as held for sale which is included in other operating revenues for IFRSs. During 2011, for IFRSs there was approximately $185 million of cumulative effective interest rate adjustments recognized to correct prior period errors.

Deferred loan origination costs and fees - Loan origination cost deferrals under IFRSs are more stringent and generally resulted in lower costs being deferred than permitted under U.S. GAAP. In addition, all deferred loan origination fees, costs and loan premiums must be recognized based on the expected life of the receivables under IFRSs as part of the effective interest calculation while under U.S. GAAP they may be recognized on either a contractual or expected life basis.

Net interest income - Under IFRSs, net interest income includes the interest element for derivatives which corresponds to debt designated at fair value. For U.S. GAAP, this is included in gain (loss) on debt designated at fair value and related derivatives which is a component of other revenues.

Other Operating Income (Total Other Revenues)

Loans held for sale - For receivables transferred to held for sale subsequent to origination, IFRSs requires these receivables to be reported separately on the balance sheet when certain criteria are met which are generally more stringent than those under U.S. GAAP, but does not change the recognition and measurement criteria. Accordingly, for IFRSs such loans continue to be accounted for and impairment continues to be measured in accordance with IAS 39 with any gain or loss recorded at the time of sale. U.S. GAAP requires loans that meet the held for sale classification requirements be transferred to a held for sale category at the lower of amortized cost or fair value. Under U.S. GAAP, the component of the lower of amortized cost or fair value adjustment related to credit risk at the time of transfer is recorded in the statement of income (loss) as provision for credit losses while the component related to interest rates and liquidity factors is reported in the statement of income (loss) in other revenues.

Extinguishment of debt - During the fourth quarter of 2010, we exchanged $1,800 million in senior debt for $1,900 million in new fixed rate subordinated debt. Under IFRSs, the population of debt exchanged which qualified for extinguishment treatment was larger than under U.S. GAAP which resulted in a gain on extinguishment of debt under IFRSs compared with a small loss under U.S. GAAP. Under U.S. GAAP, we continue to account for a portion of this debt under the fair value option election and, therefore, changes in the fair market value are recognized in earnings under U.S. GAAP. Under IFRSs, the debt is held at amortized cost.

Securities - Under IFRSs, securities include HSBC shares held for stock plans at fair value. These shares held for stock plans are measured at fair value through other comprehensive income. If it is determined that these shares have become impaired, the unrealized loss in accumulated other comprehensive income is reclassified to profit or loss. There is no similar requirement under U.S. GAAP.

During the second quarter of 2009, under IFRSs we recorded income for the value of additional shares attributable to HSBC shares held for stock plans as a result of HSBC's rights offering earlier in 2009. During 2011, under IFRSs we recorded additional gains as these shares vest. The additional shares are not recorded under U.S. GAAP.

Other-than-temporary impairments - Under U.S. GAAP, a decline in fair value of an available-for-sale debt security below its amortized cost may indicate that the security is other-than-temporarily impaired under certain conditions. IFRSs do not have an "other than temporary" impairment concept. Under IFRSs, a decline in fair value of an available-for-sale debt security below its amortized cost is considered evidence of impairment if the decline can, at least partially, be attributed to an incurred loss event that impacts the estimated future cash flows of the security (i.e., a credit loss event). Thus a security may not be considered impaired if the decline in value is the result of events that do not negatively impact the estimated future cash flows of the security (e.g., an increase in the risk-free interest rate). However, until the entity sells the security, it will have to assess the security for credit losses at each reporting date.

Another difference between U.S. GAAP and IFRSs is the amount of the loss that an entity recognizes in earnings on an impaired (other-than-temporarily impaired for U.S. GAAP) available-for-sale debt security. Under U.S. GAAP, if an entity has decided to sell a debt security whose fair value has declined below its amortized cost, or will be more likely than not required to sell the debt security before it recovers its amortized cost basis, it will recognize an impairment loss in earnings equal to the difference between the debt security's carrying amount and its fair value. If the entity has not decided to sell the debt security and will not be more likely than not required to sell the debt security before it recovers its amortized cost basis, but nonetheless expects that it will not recover the security's amortized cost basis, it will bifurcate the impairment loss into a credit loss component and a non-credit loss component, and recognize the credit loss component in earnings and the non-credit loss component in other comprehensive income. Under IFRSs, the entity recognizes the entire decline in fair value below amortized cost in earnings.

REO expense - Other revenues under IFRSs include losses on sale and the lower of amortized cost or fair value of the collateral less cost to sell adjustments on REO properties which are classified as other expense under U.S. GAAP.

Loan Impairment Charges (Provision for Credit Losses)

IFRSs requires a discounted cash flow methodology for estimating impairment on pools of homogeneous customer loans which requires the discounting of cash flows including recovery estimates at the original effective interest rate of the pool of customer loans. The amount of impairment relating to the discounting of future cash flows unwinds with the passage of time, and is recognized in interest income. Also under IFRSs, if the recognition of a write-down to fair value on secured loans decreases because collateral values have improved and the improvement can be related objectively to an event occurring after recognition of the write-down, such write-down is reversed, which is not permitted under U.S. GAAP. Additionally under IFRSs, future recoveries on charged-off loans or loans written down to fair value less cost to obtain title and sell the collateral are accrued for on a discounted basis and a recovery asset is recorded. Subsequent recoveries are recorded to earnings under U.S. GAAP, but are adjusted against the recovery asset under IFRSs. Under IFRSs, interest on impaired loans is recorded at the effective interest rate on the customer loan balance net of impairment allowances, and therefore reflects the collectability of the loans.

As discussed above, under U.S. GAAP the credit risk component of the initial lower of amortized cost or fair value adjustment related to the transfer of receivables to held for sale is recorded in the statement of income (loss) as provision for credit losses. There is no similar requirement under IFRSs.

Credit loss reserves on TDR Loans for U.S. GAAP are established based on the present value of expected future cash flows discounted at the loans' original effective interest rate. Under IFRSs, impairment on the residential mortgage loans where we have granted the borrower a concession as a result of financial difficulty is measured based on the cash flows attributable to the credit loss events which occurred before the reporting date. HSBC's accounting policy under IFRSs is to remove such loans from the category of impaired loans after a defined period of re-performance, although such loans remain segregated from loans that were not impaired in the past for the purposes of collective impairment assessment to reflect their credit risk. Under U.S. GAAP, when a loan is impaired the impairment is measured based on all expected cash flows over the remaining expected life of the loan. Such loans remain impaired for the remainder of their lives under U.S. GAAP.

For loans collectively evaluated for impairment under U.S. GAAP, bank industry practice adopted in the fourth quarter of 2012 generally results in a loss emergence period for these loans using a roll rate migration analysis which results in 12 months of losses in our credit loss reserves. Under IFRSs, we concluded that the estimated average period of time from last current status to write-off for real estate secured loans collectively evaluated for impairment using a roll rate migration analysis was 10 months which was also adopted in the fourth quarter of 2012. In the second quarter of 2013, we updated our review under IFRSs to reflect the period of time after a loss event that a loan remains current before delinquency is observed which resulted in an estimated average period of time from a loss event occurring and its ultimate migration from current status through to delinquency and ultimately write-off for real estate secured loans collectively evaluated for impairment using a roll rate migration analysis of 12 months.

Operating Expenses

Pension and other postretirement benefit costs - Pension expense under U.S. GAAP is generally higher than under IFRSs as a result of the amortization of the amount by which actuarial losses exceeds the higher of 10 percent of the projected benefit obligation or fair value of plan assets (the "corridor"). As a result of an amendment to the applicable IFRSs effective January 1, 2013, interest cost and expected return on plan assets is replaced by a finance cost component comprising the net interest on the net defined benefit liability. This has resulted in an increase in pension expense as the net interest does not reflect the benefit from the expectation of higher returns on the riskier plan assets. In 2010, changes to future accruals for legacy participants under the HSBC North America Pension Plan were accounted for as a plan curtailment under IFRSs, which resulted in immediate income recognition. Under U.S. GAAP, these changes were considered to be a negative plan amendment which resulted in no immediate income recognition.

Litigation accrual - Under U.S. GAAP litigation accruals are recorded when it is probable a liability has been incurred and the amount is reasonably estimable. Under IFRSs, a present obligation must exist for an accrual to be recorded. In certain cases, this creates differences in the timing of accrual recognition between IFRSs and U.S. GAAP.

Share-based bonus arrangements - Under IFRSs, the recognition of compensation expense related to share-based bonuses begins on January 1 of the current year for awards expected to be granted in the first quarter of the following year. Under U.S. GAAP, the recognition of compensation expense related to share-based bonuses does not begin until the date the awards are granted.

Assets

Customer loans (Receivables) - As discussed more fully above under "Other Operating Income (Total Other Revenues) - Loans held for sale," on an IFRSs basis, loans designated as held for sale at the time of origination and accrued interest are classified as trading assets. However, the accounting requirements governing when receivables previously held for investment are transferred to a held for sale category are more stringent under IFRSs than under U.S. GAAP. Unearned insurance premiums are reported as a reduction to receivables on a U.S. GAAP basis but are reported as insurance reserves for IFRSs. IFRSs also allows for reversals of write-downs to fair value on secured loans when collateral values have improved which is not permitted under U.S. GAAP.

Derivatives - Under U.S. GAAP, derivative receivables and payables with the same counterparty may be reported on a net basis in the balance sheet when there is an executed International Swaps and Derivatives Association, Inc. ("ISDA") Master Netting Arrangement. In addition, under U.S. GAAP, fair value amounts recognized for the obligation to return cash collateral received or the right to reclaim cash collateral paid are offset against the fair value of derivative instruments. Under IFRSs, these agreements do not necessarily meet the requirements for offset, and therefore such derivative receivables and payables are presented gross on the balance sheet.

The following table reconciles our IFRSs segment results to the U.S. GAAP consolidated totals:

	IFRSs Consumer Segment Totals			IFRSs Adjustments⁽¹⁾			IFRSs Reclassifications⁽²⁾			U.S. GAAP Consolidated Totals
	(in millions)
Year Ended December 31, 2013:
Net interest income...........................................................................	$	2,031		$	(643	)	$	(320	)	$	1,068
Other operating income (Total other revenues).................................	(413		)	966			328			881
Total operating income (loss)............................................................	1,618			323			8			1,949
Loan impairment charges (Provision for credit losses).......................	711			(732		)	-			(21		)
Net interest income and other operating income less loan impairment charges.......................................................................	907			1,055			8			1,970
Operating expenses............................................................................	857			67			8			932
Profit (loss) before tax......................................................................	$	50		$	988		$	-		$	1,038
Depreciation and amortization..........................................................	5			2			1			8
Expenditures for long-lived assets......................................................	6			-			-			6
Balances at end of period:
Customer loans (Receivables).............................................................	$	29,262		$	(2,644	)	$	(34	)	$	26,584
Assets................................................................................................	39,503			(1,796		)	-			37,707

Year Ended December 31, 2012:
Net interest income...........................................................................	$	2,540		$	(500	)	$	(394	)	$	1,646
Other operating income (Total other revenues).................................	(960		)	(1,609		)	450			(2,119		)
Total operating income (loss)............................................................	1,580			(2,109		)	56			(473		)
Loan impairment charges (Provision for credit losses).......................	2,556			(332		)	-			2,224
Net interest income and other operating income less loan impairment charges.......................................................................	(976		)	(1,777		)	56			(2,697		)
Operating expenses............................................................................	1,014			44			56			1,114
Profit (loss) before tax......................................................................	$	(1,990	)	$	(1,821	)	$	-		$	(3,811	)
Depreciation and amortization..........................................................	13			-			(6		)	7
Expenditures for long-lived assets......................................................	3			-			-			3
Balances at end of period:
Customer loans (Receivables).............................................................	$	37,556		$	(4,557	)	$	(60	)	$	32,939
Assets................................................................................................	47,820			(3,074		)	-			44,746

Year Ended December 31, 2011:
Net interest income...........................................................................	$	2,881		$	(522	)	$	(583	)	$	1,776
Other operating income (Total other revenues).................................	(577		)	3			714			140
Total operating income (loss)............................................................	2,304			(519		)	131			1,916
Loan impairment charges (Provision for credit losses).......................	4,913			(495		)	-			4,418
Net interest income and other operating income less loan impairment charges.......................................................................	(2,609		)	(24		)	131			(2,502		)
Operating expenses............................................................................	1,164			(40		)	131			1,255
Profit (loss) before tax......................................................................	$	(3,773	)	$	16		$	-		$	(3,757	)
Depreciation and amortization..........................................................	15			8			(4		)	19
Expenditures for long-lived assets......................................................	4			-			-			4
Balances at end of period:
Customer loans (Receivables).............................................................	$	48,135		$	(162	)	$	(61	)	$	47,912
Assets................................................................................................	53,530			(2,974		)	110			50,666

⁽¹⁾IFRSs Adjustments which have been described more fully above, consist of the following:

	Net Interest Income			Other Revenues			Provision For Credit Losses			Total Costs and Expenses			Profit (Loss) Before Tax			Receivables			Total Assets
	(in millions)
Year Ended December 31, 2013:
Derivatives and hedge accounting....................	$	5		$	-		$	-		$	-		$	5		$	-		$	(6	)
Purchase accounting......	-			16			43			-			(27		)	35			29
Deferred loan origination costs and premiums......................	(15		)	4			-			-			(11		)	97			63
Credit loss impairment provisioning..................	(649		)	250			(110		)	-			(289		)	(911		)	(719		)
Loans held for sale........	4			671			(665		)	(5		)	1,345			(1,871		)	94
Interest recognition......	9			8			-			-			17			7			27
Other............................	3			17			-			72			(52		)	(1		)	(1,284		)
Total.............................	$	(643	)	$	966		$	(732	)	$	67		$	988		$	(2,644	)	$	(1,796	)
Year Ended December 31, 2012:
Derivatives and hedge accounting....................	$	15		$	-		$	-		$	-		$	15		$	-		$	(4	)
Purchase accounting......	(5		)	3			14			-			(16		)	19			46
Deferred loan origination costs and premiums......................	(15		)	(5		)	-			-			(20		)	125			70
Credit loss impairment provisioning..................	(535		)	(14		)	15			-			(564		)	(222		)	(533		)
Loans held for sale........	4			(1,523		)	(361		)	5			(1,163		)	(4,487		)	(768		)
Interest recognition......	34			-			-			-			34			8			16
Other............................	2			(70		)	-			39			(107		)	-			(1,901		)
Total.............................	$	(500	)	$	(1,609	)	$	(332	)	$	44		$	(1,821	)	$	(4,557	)	$	(3,074	)
Year Ended December 31, 2011:
Derivatives and hedge accounting....................	$	5		$	-		$	-		$	-		$	5		$	-		$	-
Goodwill and intangible assets............................	-			-			-			-			-			-			(111		)
Purchase accounting......	(4		)	32			14			-			14			21			57
Deferred loan origination costs and premiums......................	(30		)	-			-			-			(30		)	143			83
Credit loss impairment provisioning..................	(499		)	-			(506		)	-			7			(300		)	(170		)
Loans held for sale........	6			-			-			-			6			(36		)	(23		)
Interest recognition......	(2		)	-			-			-			(2		)	10			(6		)
Other............................	2			(29		)	(3		)	(40		)	16			-			(2,804		)
Total.............................	$	(522	)	$	3		$	(495	)	$	(40	)	$	16		$	(162	)	$	(2,974	)

⁽²⁾Represents differences in balance sheet and income statement presentation between U.S. GAAP and IFRSs.

19. Variable Interest Entities

We consolidate variable interest entities ("VIEs") in which we are deemed to be the primary beneficiary through our holding of a variable interest which is determined as a controlling financial interest. The controlling financial interest is evidenced by the power to direct the activities of a VIE that most significantly impact its economic performance and obligations to absorb losses of, or the right to receive benefits from, the VIE that could be potentially significant to the VIE. We take into account all of our involvements in a VIE in identifying (explicit or implicit) variable interests that individually or in the aggregate could be significant enough to warrant our designation as the primary beneficiary and hence require us to consolidate the VIE or otherwise require us to make appropriate disclosures. We consider our involvement to be significant where we, among other things, (i) provide liquidity facilities to support the VIE's debt issuances, (ii) enter into derivative contracts to absorb the risks and benefits from the VIE or from the assets held by the VIE, (iii) provide a financial guarantee that covers assets held or liabilities issued, (iv) design, organize and structure the transaction and (v) retain a financial or servicing interest in the VIE.

We are required to evaluate whether to consolidate a VIE when we first become involved and on an ongoing basis. In almost all cases, a qualitative analysis of our involvement in the entity provides sufficient evidence to determine whether we are the primary beneficiary. In rare cases, a more detailed analysis to quantify the extent of variability to be absorbed by each variable interest holder is required to determine the primary beneficiary.

Consolidated VIEs In the ordinary course of business, we have organized special purpose entities ("SPEs") primarily to meet our own funding needs through collateralized funding transactions. We transfer certain receivables to these trusts which in turn issue debt instruments collateralized by the transferred receivables. The entities used in these transactions are VIEs. As we are the servicer of the assets of these trusts and have retained the benefits and risks, we determined that we are the primary beneficiary of these trusts. Accordingly, we consolidate these entities and report the debt securities issued by them as secured financings in long-term debt. As a result, all receivables transferred in these secured financings have remained and continue to remain on our balance sheet and the debt securities issued by them have remained and continue to be included in long-term debt.

The assets and liabilities of these consolidated secured financing VIEs consisted of the following as of December 31, 2013 and December 31, 2012:

	December 31, 2013						December 31, 2012
	Consolidated Assets			Consolidated Liabilities			Consolidated Assets			Consolidated Liabilities
	(in millions)
Real estate collateralized funding vehicles:
Cash..........................................................................................................	$	-		$	-		$	6		$	-
Receivables, net:.....................................................................................
Real estate secured receivables......................................................	4,020			-			4,898			-
Accrued finance income and other................................................	156			-			103			-
Credit loss reserves..........................................................................	(556		)	-			(804		)	-
Receivables, net......................................................................................	3,620			-			4,197			-
Other liabilities........................................................................................	-			(41		)	-			(39		)
Long-term debt.......................................................................................	-			2,200			-			2,878
Total...............................................................................................................	$	3,620		$	2,159		$	4,203		$	2,839

The assets of the consolidated VIEs serve as collateral for the obligations of the VIEs. The holders of the debt securities issued by these vehicles have no recourse to our general assets.

Unconsolidated VIEs As of December 31, 2013 and December 31, 2012, all of our unconsolidated VIEs, which relate to low income housing partnerships and investments in community partnerships, are reported within our discontinued operations. We do not have any unconsolidated VIEs within continuing operations.

As it relates to our discontinued Card and Retail Services business, prior to the sale of our Card and Retail Services business to Capital One on May 1, 2012 we were also involved with other VIEs which provided funding to HSBC Bank USA through collateralized funding transactions. In April 2011, the collateralized funding facilities were terminated by HSBC Bank USA.

20. Fair Value Measurements

Accounting principles related to fair value measurements provide a framework for measuring fair value and focus on an exit price that would be received to sell an asset or paid to transfer a liability in the principal market (or in the absence of the principal market, the most advantageous market) accessible in an orderly transaction between willing market participants (the "Fair Value Framework"). Where required by the applicable accounting standards, assets and liabilities are measured at fair value using the "highest and best use" valuation premise. Fair value measurement guidance effective in 2012 clarifies that financial instruments do not have alternative use and, as such, the fair value of financial instruments should be determined using an "in-exchange" valuation premise. However, the fair value measurement literature provides a valuation exception and permits an entity to measure the fair value of a group of financial assets and financial liabilities with offsetting credit risk and/or market risks based on the exit price it would receive or pay to transfer the net risk exposure of a group of assets or liabilities if certain conditions are met. We have not elected to make fair value adjustments to a group of derivative instruments with offsetting credit and market risks.

Fair Value Adjustments The best evidence of fair value is quoted market price in an actively traded market, where available. In the event listed price or market quotes are not available, valuation techniques that incorporate relevant transaction data and market parameters reflecting the attributes of the asset or liability under consideration are applied. Where applicable, fair value adjustments are made to ensure the financial instruments are appropriately recorded at fair value. The fair value adjustments reflect the risks associated with the products, contractual terms of the transactions, and the liquidity of the markets in which the transactions occur.

Credit risk adjustment - The credit risk adjustment is an adjustment to a group of financial assets and financial liabilities, predominantly derivative assets and derivative liabilities, to reflect the credit quality of the parties to the transaction in arriving at fair value. A credit valuation adjustment to a financial asset is required to reflect the default risk of the counterparty. A debit valuation adjustment to a financial liability is recorded to reflect our default risk. Where applicable, we take into consideration the credit risk mitigating arrangements including collateral agreements and master netting arrangements in estimating the credit risk adjustments.

Valuation Control Framework A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S.Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for debt securities and long-term debt for which we have elected fair value option are measured by a third-party valuation source (pricing service) by reference to external quotations on the identical or similar instruments. Once fair values have been obtained from the third-party valuation source, an independent price validation process is performed and reviewed by the HSBC U.S. Valuation Committee. For price validation purposes, we obtain quotations from at least one other independent pricing source for each financial instrument, where possible. We consider the following factors in determining fair values:

Ÿ similarities between the asset or the liability under consideration and the asset or liability for which quotation is received;

Ÿ collaboration of pricing by reference to other independent market data such as market transactions and relevant benchmark indices;

Ÿ whether the security is traded in an active or inactive market;

Ÿ consistency among different pricing sources;

Ÿ the valuation approach and the methodologies used by the independent pricing sources in determining fair value;

Ÿ the elapsed time between the date to which the market data relates and the measurement date; and

Ÿ the manner in which the fair value information is sourced.

Greater weight is given to quotations of instruments with recent market transactions, pricing quotes from dealers who stand ready to transact, quotations provided by market-makers who originally underwrote such instruments, and market consensus pricing based on inputs from a large number of participants. Any significant discrepancies among the external quotations are reviewed by management and adjustments to fair values are recorded where appropriate.

Fair values for derivatives are determined by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Quantitative Risk and Valuation Group of an HSBC affiliate. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indexes and therefore demonstrate a similar response to market factors.

We have various controls over our valuation process and procedures for receivables held for sale. As these fair values are generally determined using value estimates from third party and affiliate valuation specialists, the controls may include analytical reviews of quarterly value trends, corroboration of inputs by observable market data, direct discussion with potential investors and results of actual sales of such receivable, all of which are submitted to the HSBC U.S. Valuation Committee for review.

Fair Value of Financial Instruments The fair value estimates, methods and assumptions set forth below for our financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this Form 10-K. The following table summarizes the carrying values and estimated fair value of our financial instruments at December 31, 2013 and December 31, 2012.

	December 31, 2013
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash..................................................................................................................	$	175	$	175	$	175	$	-	$	-
Securities purchased under agreements to resell......................................	6,924		6,924		-		6,924		-
Real estate secured receivables⁽¹⁾:
First lien......................................................................................................	21,514		18,577		-		-		18,577
Second lien.................................................................................................	2,659		1,418		-		-		1,418
Total real estate secured receivables......................................................	24,173		19,995		-		-		19,995
Receivables held for sale...............................................................................	2,047		2,047		-		-		2,047
Due from affiliates...........................................................................................	86		86		-		86		-
Financial liabilities:
Due to affiliates carried at fair value............................................................	496		496		-		496		-
Due to affiliates not carried at fair value.....................................................	8,246		8,369		-		8,369		-
Long-term debt carried at fair value.............................................................	8,025		8,025		-		8,025		-
Long-term debt not carried at fair value......................................................	12,814		13,301		-		11,232		2,069

	December 31, 2012
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash..................................................................................................................	$	197	$	197	$	197	$	-	$	-
Interest bearing deposits with banks..........................................................	1,371		1,371		-		1,371		-
Securities purchased under agreements to resell......................................	2,160		2,160		-		2,160		-
Securities..........................................................................................................	80		80		80		-		-
Real estate secured receivables⁽¹⁾:
First lien......................................................................................................	26,218		19,586		-		-		19,586
Second lien.................................................................................................	3,066		1,113		-		-		1,113
Total real estate secured receivables......................................................	29,284		20,699		-		-		20,699
Receivables held for sale...............................................................................	6,203		6,203		-		-		6,203
Due from affiliates...........................................................................................	105		105		-		105		-
Financial liabilities:
Due to affiliates carried at fair value............................................................	514		514		-		514		-
Due to affiliates not carried at fair value.....................................................	8,575		8,654		-		8,654		-
Long-term debt carried at fair value.............................................................	9,725		9,725		-		9,725		-
Long-term debt not carried at fair value......................................................	18,701		19,172		-		16,537		2,635
Derivative financial liabilities........................................................................	22		22		-		22		-

⁽¹⁾The carrying amount of receivables presented in the table above reflects the amortized cost of the receivable, including any accrued interest, less credit loss reserves as well as any charge-offs recorded in accordance with our existing charge-off policies.

Receivable values presented in the table above were determined using the Fair Value Framework for measuring fair value, which is based on our best estimate of the amount within a range of values we believe would be received in a sale as of the balance sheet date (i.e. exit price). The secondary market demand and estimated value for our receivables has been heavily influenced by the challenging economic conditions during the past several years, including house price depreciation, elevated unemployment, changes in consumer behavior, changes in discount rates and the lack of financing options available to support the purchase of receivables. For certain consumer receivables, investors incorporate numerous assumptions in predicting cash flows, such as future interest rates, higher charge-off levels, slower voluntary prepayment speeds, different default and loss curves and estimated collateral values than we, as the servicer of these receivables, believe will ultimately be the case. The investor's valuation process reflects this difference in overall cost of capital assumptions as well as the potential volatility in the underlying cash flow assumptions, the combination of which may yield a significant pricing discount from our intrinsic value. The estimated fair values at December 31, 2013 and December 31, 2012 reflect these market conditions. The increase in the relative fair value of real estate secured receivables during 2013 is largely due to improved conditions in the housing industry driven by increased property values and, to a lesser extent, lower required market yields and increased investor demand for these types of receivables.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and December 31, 2012, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting⁽¹⁾			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
December 31, 2013
Derivative financial assets:
Interest rate swaps.................................................	$	-	$	310		$	-	$	-		$	310
Currency swaps......................................................	-		797			-		-			797
Derivative netting.................................................	-		-			-		(1,107		)	(1,107		)
Total derivative financial assets.............................	-		1,107			-		(1,107		)	-
Total assets.................................................................	$	-	$	1,107		$	-	$	(1,107	)	$	-
Due to affiliates carried at fair value...........................	$	-	$	(496	)	$	-	$	-		$	(496	)
Long-term debt carried at fair value............................	-		(8,025		)	-		-			(8,025		)
Derivative related liabilities:
Interest rate swaps.................................................	-		(309		)	-		-			(309		)
Currency swaps......................................................	-		(28		)	-		-			(28		)
Derivative netting.................................................	-		-			-		337			337
Total derivative related liabilities...........................	-		(337		)	-		337			-
Total liabilities............................................................	$	-	$	(8,858	)	$	-	$	337		$	(8,521	)
December 31, 2012
Derivative financial assets:
Interest rate swaps.................................................	$	-	$	524		$	-	$	-		$	524
Currency swaps......................................................	-		1,159			-		-			1,159
Derivative netting.................................................	-		-			-		(1,683		)	(1,683		)
Total derivative financial assets.............................	-		1,683			-		(1,683		)	-
Available-for-sale securities:
Money market funds	80		-			-		-			80
Total available-for-sale securities	80		-			-		-			80
Total assets.................................................................	$	80	$	1,683		$	-	$	(1,683	)	$	80
Due to affiliates carried at fair value	$	-	$	(514	)	$	-	$	-		$	(514	)
Long-term debt carried at fair value............................	-		(9,725		)	-		-			(9,725		)
Derivative related liabilities:
Interest rate swaps.................................................	-		(1,585		)	-		-			(1,585		)
Currency swaps......................................................	-		(45		)	-		-			(45		)
Derivative netting.................................................	-		-			-		1,608			1,608
Total derivative related liabilities...........................	-		(1,630		)	-		1,608			(22		)
Total liabilities............................................................	$	-	$	(11,869	)	$	-	$	1,608		$	(10,261	)

⁽¹⁾Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

We did not have any U.S. corporate debt securities at December 31, 2013 or December 31, 2012.

Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 during 2013 or 2012.

Information on Level 3 Assets and Liabilities There were no assets or liabilities recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2013 or 2012.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2013 and December 31, 2012, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	Non-Recurring Fair Value Measurements as of December 31, 2013								Total Gains (Losses) for the Year Ended December 31, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Receivables held for sale:
Real estate secured.......................................................................	$	-	$	-	$	2,047	$	2,047	$	618
Personal non-credit card..............................................................	-		-		-		-		(82		)
Total receivables held for sale..........................................................	-		-		2,047		2,047		536
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾...	-		879		-		879		955
Real estate owned⁽²⁾...........................................................................	-		389		-		389		(71		)
Total assets at fair value on a non-recurring basis........................	$	-	$	1,268	$	2,047	$	3,315	$	1,420

	Non-Recurring Fair Value Measurements as of December 31, 2012								Total Gains (Losses) for the Year Ended December 31, 2012
	Level 1		Level 2		Level 3		Total		Total Gains (Losses) for the Year Ended December 31, 2012
	(in millions)
Receivables held for sale:
Real estate secured.......................................................................	$	-	$	-	$	3,022	$	3,022	$	(1,352	)
Personal non-credit card..............................................................	-		-		3,181		3,181		(289		)
Total receivables held for sale..........................................................	-		-		6,203		6,203		(1,641		)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾...	-		2,109		-		2,109		1,793
Real estate owned⁽²⁾...........................................................................	-		248		-		248		(93		)
Total assets at fair value on a non-recurring basis........................	$	-	$	2,357	$	6,203	$	8,560	$	59

⁽¹⁾Total gains (losses) for the years ended December 31, 2013 and 2012 includes amounts recorded on receivables that were subsequently transferred to held for sale.

⁽²⁾Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of December 31, 2013 and December 31, 2012:

	Fair Value						Range of Inputs
Financial Instrument Type	Dec. 31, 2013		Dec. 31, 2012		Valuation Technique	Significant Unobservable Inputs	December 31, 2013				December 31, 2012
	(in millions)
Receivables held for sale carried at fair value:
Real estate secured............	$	2,047	$	3,022	Third party appraisal valuation based on	Collateral loss severity rates⁽¹⁾	0	%	-	93%	0	%	-	92	%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10	%
					market discount rate	Market discount rate	6	%	-	10%	10	%	-	15%
Personal non-credit card⁽²⁾	-		3,181		Third party valuation based on estimated loss rates, cash	Loss rate	-		-	-	13	%	-	19%
					flows and market discount rate	Market discount rate	-		-	-	10	%	-	15%

⁽¹⁾The majority of the real estate secured receivables held for sale consider collateral value, among other items, in determining fair value. Collateral values are based on the most recently available broker's price opinion and the collateral loss severity rates averaged 21 percent and 37 percent at December 31, 2013 and December 31, 2012, respectively. In the current market conditions, investors also take into consideration the fact that the most recently available broker's price opinion may not capture all of the home price appreciation due to the timing of the receipt of the opinion.

⁽²⁾Our personal non-credit card portfolio held for sale was classified as Level 3 at December 31, 2012. This portfolio of receivables was sold on April 1, 2013 as previously discussed.

Valuation Techniques The following summarizes the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value but for which fair value disclosures are required.

Cash: Carrying amount approximates fair value due to the liquid nature of cash.

Interest bearing deposits with banks: Carrying amount approximates fair value due to the asset's liquid nature.

Securities purchased under agreements to resell: The fair value of securities purchased under agreements to resell approximates carrying amount due to the short-term maturity of the agreements.

Securities: The carrying amount of money market funds held at December 31, 2012 approximates fair value due to the asset's liquid nature.

Receivables and receivables held for sale: The estimated fair value of our receivables held for sale is determined by developing an approximate range of value from a mix of various sources appropriate for the respective pools of assets aggregated by similar risk characteristics. These sources include recently observed over-the-counter transactions where available and fair value estimates obtained from an HSBC affiliate and a third party valuation specialist for distinct pools of receivables. These fair value estimates are based on discounted cash flow models using assumptions we believe are consistent with those that would be used by market participants in valuing such receivables and trading inputs from other market participants which includes observed primary and secondary trades. In all reporting periods prior to December 31, 2013, the valuation for receivables held for sale was based on individual loan level pricing for the pool of loans. At December 31, 2013, due to the significant sales that occurred during the fourth quarter of 2013, our advisors recommended we begin to consider valuation of the loans based on aggregated pools of loans to be sold over the next 15 months by similar risk characteristics. Valuing the loans at the pool level with December 31, 2013 market conditions resulted in a valuation that was lower than the valuation of the individual loans, as the pools that we expect to sell in future periods contain certain concentration risks based on the nature of how the loans were aggregated. We determined that the valuation of the loans should be based on the pools that we expect to sell and these lower valuations should be factored into our overall valuation at December 31, 2013. This change negatively impacted our lower of amortized cost or fair value adjustment by approximately $110 million, which is recorded in other revenues. The valuation of the receivables held for sale could be impacted in future periods if there are changes in how we expect to execute the loan sales.

Valuation inputs include estimates of future interest rates, prepayment speeds, default and loss curves, estimated collateral values (including expenses to be incurred to maintain the collateral) and market discount rates reflecting management's estimate of the rate of return that would be required by investors in the current market given the specific characteristics and inherent credit risk of the receivables held for sale. Some of these inputs are influenced by collateral value changes and unemployment rates. To the extent available, such inputs are derived principally from or corroborated by observable market data by correlation and other means. We perform analytical reviews of fair value changes on a quarterly basis and periodically validate our valuation methodologies and assumptions based on the results of actual sales of such receivables. We also may hold discussions on value directly with potential investors. Portfolio risk management personnel provide further validation through discussions with third party brokers. Since some receivables pools may have features which are unique, the fair value measurement processes use significant unobservable inputs which are specific to the performance characteristics of the various receivable portfolios.

Real estate owned: Fair value is determined based on third party valuations obtained at the time we take title to the property and, if less than the carrying amount of the loan, the carrying amount of the loan is adjusted to the fair value less estimated cost to sell. The carrying amount of the property is further reduced, if necessary, at least every 45 days to reflect observable local market data, including local area sales data.

Due from affiliates: Carrying amount approximates fair value because the interest rates on these receivables adjust with changing market interest rates.

Long-term debt and Due to affiliates: Fair value is primarily determined by a third party valuation source. The pricing services source fair value from quoted market prices and, if not available, expected cash flows are discounted using the appropriate interest rate for the applicable duration of the instrument adjusted for our own credit risk (spread). The credit spreads applied to these instruments are derived from the spreads recognized in the secondary market for similar debt as of the measurement date. Where available, relevant trade data is also considered as part of our validation process.

Derivative financial assets and liabilities: Derivative values are defined as the amount we would receive or pay to extinguish the contract using a market participant as of the reporting date. The values are determined by management using a pricing system maintained by HSBC Bank USA. In determining these values, HSBC Bank USA uses quoted market prices, when available. For non-exchange traded contracts, such as interest rate swaps, fair value is determined using discounted cash flow modeling techniques. Valuation models calculate the present value of expected future cash flows based on models that utilize independently-sourced market parameters, including interest rate yield curves, option volatilities, and currency rates. Valuations may be adjusted in order to ensure that those values represent appropriate estimates of fair value. These adjustments are generally required to reflect factors such as market liquidity and counterparty credit risk that can affect prices in arms-length transactions with unrelated third parties. Finally, other transaction specific factors such as the variety of valuation models available, the range of unobservable model inputs and other model assumptions can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded for a particular position.

Counterparty credit risk is considered in determining the fair value of a financial asset. The Fair Value Framework specifies that the fair value of a liability should reflect the entity's non-performance risk and accordingly, the effect of our own credit risk (spread) has been factored into the determination of the fair value of our financial liabilities, including derivative instruments. In estimating the credit risk adjustment to the derivative assets and liabilities, we take into account the impact of netting and/or collateral arrangements that are designed to mitigate counterparty credit risk.

21. Commitments and Contingent Liabilities

Litigation Bond As discussed more fully in Note 22, "Litigation and Regulatory Matters," we are currently appealing a $2.5 billion partial final judgment involving the Jaffe litigation. In November 2013, we obtained a surety bond to secure a stay of execution of the partial judgment pending the outcome of our appeal. The surety bond has a term of three years and an annual fee of $7 million. To reduce costs associated with posting cash collateral with the insurance companies, the surety bond has been guaranteed by HSBC North America and we will pay HSBC North America a fee of $6 million annually for this guarantee.

Lease Obligations We lease certain offices, buildings and equipment for periods which generally do not exceed 25 years. The leases have various renewal options. The office space leases generally require us to pay certain operating expenses. Net rental expense under operating leases was $11 million, $13 million and $9 million in 2013, 2012 and 2011, respectively. See Note 17, "Related Party Transactions," for additional information.

We have lease obligations on certain office space which has been subleased through the end of the lease period. Under these agreements, the sublessee has assumed future rental obligations on the lease.

Future net minimum lease commitments under noncancelable operating lease arrangements were:

Year Ending December 31,	Minimum Rental Payments		Minimum Sublease Income			Net
	(in millions)
2014................................................................................................................................................	$	9	$	(4	)	$	5
2015................................................................................................................................................	5		(4		)	1
2016................................................................................................................................................	4		(3		)	1
Net minimum lease commitments...............................................................................................	$	18	$	(11	)	$	7

22. Litigation and Regulatory Matters

In addition to the matters described below, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities.

In view of the inherent unpredictability of litigation and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of litigation and regulatory matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters.

Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

Litigation - Continuing Operations

Securities Litigation As a result of an August 2002 restatement of previously reported consolidated financial statements and other corporate events, including the 2002 settlement with 46 states and the District of Columbia relating to real estate lending practices, Household International, Inc. ("Household International") and certain former officers were named as defendants in a class action lawsuit, Jaffe v. Household International, Inc., et al. (N.D. Ill. No. 02 C5893), filed August 19, 2002 in the U.S. District Court for the Northern District of Illinois. The complaint asserted claims under § 10 and § 20 of the Securities Exchange Act of 1934 and alleged that the defendants knowingly or recklessly made false and misleading statements of material fact relating to Household International's Consumer Lending operations, including collections, sales and lending practices, some of which ultimately led to the 2002 state settlement agreement, and facts relating to accounting practices evidenced by the restatement. Ultimately, a class was certified on behalf of all persons who acquired and disposed of Household International common stock between July 30, 1999 and October 11, 2002.

A jury trial concluded in April 2009, which was decided partly in favor of the plaintiffs. Various legal challenges to the verdict were raised in post-trial briefing.

In December 2011, following the submission of claim forms by class members, the court-appointed claims administrator to the district court reported that the total number of claims that generated an allowed loss was 45,921, and that the aggregate amount of these claims was approximately $2.2 billion. Defendants filed legal challenges regarding the presumption of reliance as to the class and compliance with the claims form requirements, which the district court in September 2012 rejected for the most part. The district court directed further proceedings before a court-appointed Special Master to address certain claim submission issues.

On October 4, 2013, the district court denied defendants' additional posttrial motions for judgment as a matter of law or, in the alternative, for a new trial, and granted plaintiffs' motions for a partial final judgment and awarded pre-judgment interest at the Prime Rate, compounded annually. Subsequently, on October 17, 2013, the district court entered a partial final judgment against the defendants in the amount of $2.5 billion. In addition to the partial judgment that has been entered, there also remain approximately $527 million, prior to imposition of pre-judgment interest, in claims that still are subject to objections that have not yet been ruled upon by the district court. Defendants have filed a Notice of Appeal of the partial final judgment and a Supersedeas Bond in the approximate amount of the judgment in order to stay execution on the judgment pending appeal.

Given the complexity and uncertainties associated with the actual determination of damages, including the outcome of any appeals, there is a wide range of possible damages. We believe we have meritorious grounds for appeal on matters of both liability and damages, and will argue on appeal that damages should be zero or a relatively insignificant amount. If the Appeals Court rejects or only partially accepts our arguments, the amount of damages, based upon the claims submitted and the application of pre-judgment interest at the Prime Rate as ordered by the district court, may lie in a range from a relatively insignificant amount to an amount up to or exceeding $3.5 billion. Once a judgment is entered (such as the $2.5 billion partial final judgment entered on October 17, 2013), post-judgment interest accrues on the judgment at a rate equal to the weekly average of the 1-year constant maturity treasury yield as published by the Federal Reserve System. We continue to maintain a reserve for this matter in an amount that represents management's current estimate of probable losses.

Lender-Placed Insurance Matters Lender-placed insurance involves a lender obtaining an insurance policy (hazard or flood insurance) on a mortgaged property when the borrower fails to maintain their own policy. The cost of the lender-placed insurance is then passed on to the borrower. Industry practices with respect to lender-placed insurance are receiving heightened regulatory scrutiny from both federal and state agencies.

Beginning in October 2011, a number of mortgage servicers and insurers, including our affiliates, HSBC Insurance (USA) Inc. and HSBC Mortgage Services Inc., received subpoenas from the New York Department of Financial Services (the "NYDFS") with respect to lender-placed insurance activities dating back to September 2005. We have and will provide documentation and information to the NYDFS that is responsive to the subpoena. Additionally, in March 2013, the Massachusetts Attorney General issued a Civil Investigative Demand to HSBC Mortgage Services Inc. seeking information about lender-placed insurance activities. We continue to be engaged with the Massachusetts Attorney General regarding this matter.

Several putative class actions related to lender-placed insurance were filed against various HSBC U.S. entities, including actions against one or more of our subsidiaries: Montanez, et al. v. HSBC Mortgage Corporation (USA), et al. (E.D. Pa. No. 11-CV-4074); West, et al. v. HSBC Mortgage Corporation (USA), et al. (South Carolina Court of Common Pleas, 14th Circuit No. 12-CP-00687); Weller, et al. v. HSBC Mortgage Services, Inc., et al. (D. Col. No. 13-CV-00185); Hoover, et al. v. HSBC Bank USA, N.A., et al. (N.D.N.Y. 13-CV-00149); Lopez v. HSBC Bank USA, N.A., et al. (S.D. Fla. 13-CV-21104) Ross F. Gilmour v. HSBC Bank USA, N.A., et al. (S.D.N.Y. Case No. 1:13-cv-05896-ALC) and Blackburn v. HSBC Finance Corp., et al. (N.D. Ga. 13-CV-03714-ODE). These actions relate primarily to industry-wide practices, and include allegations regarding the relationships and potential conflicts of interest between the various entities that place the insurance, the value and cost of the insurance that is placed, back-dating policies to the date the borrower allowed it to lapse, self-dealing and insufficient disclosure.

The various HSBC defendants filed motions to dismiss the complaints in the Montanez, Lopez, Weller and Hoover matters. The Court denied the motion to dismiss in the Lopez matter and we await the court's ruling on the other motions. In addition, in Montanez, plaintiffs filed a motion for multi-district litigation treatment to consolidate the action with Lopez, which was denied on July 25, 2013.

Mortgage Securitization Activity In the course of 2012 and 2013, we have received notice of several claims from investors and from trustees of residential mortgage-backed securities ("RMBS") related to our activities as a sponsor and the activities of our subsidiaries as originators in connection with RMBS transactions closed between 2005 and 2007. In addition, we have received the following lawsuits: (i) Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp.; and (ii) Deutsche Bank, as Trustee of HASCO 2007-HE2 v. Decision One, HSBC Finance Corp. and HSBC Bank USA. These actions seek to have Decision One Mortgage Company LLC ("Decision One") and/or HSBC Finance Corporation repurchase mortgage loans originated by Decision One and securitized by third parties. In the aggregate, these actions seek repurchase of loans, or compensatory damages, totaling approximately $500 million. A previously reported matter, Seagull Point LLC, individually and on behalf of the MSAC 2007-HE5 Trust v. Decision One Mortgage Company LLC, et al., was dismissed voluntarily in January 2014. In addition, HSBC Finance Corporation was dismissed, on motion, as a defendant in the Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp. matter, but the case remains pending against Decision One. The range of reasonably possible losses in excess of our recorded repurchase liability is between zero and $62 millionat December 31, 2013 related to claims that have been filed. Furthermore, real estate secured receivables sold during 2007 for which additional claims could be filed totaled approximately $5.5 billion. We believe that we would have strong defenses against any additional claims brought against us.

We expect these types of claims may continue. As a result, we may be subject to additional claims, litigation and governmental and regulatory scrutiny related to our participation as a sponsor or originator in the U.S. mortgage securitization market.

Litigation - Discontinued Operations

Credit Card Litigation Since June 2005, HSBC Bank USA, HSBC Finance Corporation, HSBC North America and HSBC, as well as other banks and Visa Inc. ("Visa") and MasterCard Incorporated ("Mastercard"), have been named as defendants in four class actions filed in Connecticut and the Eastern District of New York: Photos Etc. Corp. et al v. Visa U.S.A., Inc., et al.(D. Conn. No. 3:05-CV-01007 (WWE)); National Association of Convenience Stores, et al. v. Visa U.S.A., Inc., et al.(E.D.N.Y. No. 05-CV 4520 (JG)); Jethro Holdings, Inc., et al. v. Visa U.S.A., Inc. et al. (E.D.N.Y. No. 05-CV-4521(JG)); and American Booksellers Asps' v. Visa U.S.A., Inc. et al. (E.D.N.Y. No. 05-CV-5391 (JG)). Numerous other complaints containing similar allegations were filed across the country against Visa, MasterCard and other banks and various individual actions were also brought by merchants against Visa and MasterCard. These class and individual merchant actions principally allege that the imposition of a no-surcharge rule by the associations and/or the establishment of the interchange fee charged for credit card transactions causes the merchant discount fee paid by retailers to be set at supracompetitive levels in violation of the Federal antitrust laws. These suits were consolidated and transferred to the Eastern District of New York as In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL 1720, E.D.N.Y. ("MDL 1720"). On February 7, 2011, MasterCard, Visa, the other defendants, including HSBC Finance Corporation, and certain affiliates of the defendants entered into settlement and judgment sharing agreements (the "Sharing Agreements") that provide for the apportionment of certain defined costs and liabilities that the defendants, including HSBC Finance Corporation and our affiliates, may incur, jointly and/or severally, in the event of an adverse judgment or global settlement of one or all of these actions. The district court granted final approval of the class settlement on December 13, 2013. Certain objecting merchants have filed notices of appeal to the Court of Appeals for the Second Circuit. On January 14, 2014, the district court entered the Class Settlement Order and final judgment dismissing the class action. We have deposited our portions of the class settlement and individual merchants' settlements into escrow accounts pursuant to the terms of the Sharing Agreements.

Numerous merchants objected and/or opted out of the settlement during the exclusion period. We anticipate that most of the larger merchants who opted out of the settlement will initiate separate actions seeking to recover damages. To date, opt-out merchants have filed 27 opt-out suits in either state or federal court, including one, Speedy Stop Food Stores LLC v. Visa Inc. (Tex. Dist. Ct., Victoria City, No. 13-10-75377-A), that names certain HSBC entities as defendants. Pursuant to the MDL 1720 Sharing Agreements, certain HSBC entities are responsible for a pro rata portion of any judgment or settlement amount awarded in actions consolidated into MDL 1720.

Salveson v. JPMorgan Chase et al.(N.D.Cal. No. 13-CV-5816) was filed on December 16, 2013 against HSBC Bank USA, HSBC North America, HSBC Finance Corporation, and HSBC, as well as other banks. This putative class action was filed in the U.S. District Court for the Northern District of California. The complaint asserts federal and California state antitrust claims on behalf of a putative class composed of all Visa and MasterCard cardholders in the United States. The substantive allegations regarding defendants' conduct parallel the merchant claims in MDL 1720. Unlike the merchant suits, however, the Salveson complaint alleges that cardholders pay the interchange fee charged for credit card transaction, not merchants, and that card holders were therefore injured by the alleged anticompetitive conduct. In January 2014, the Judicial Panel on Multidistrict Litigation denied the Salveson defendants' request that the action be transferred to the district court for consolidation with the MDL 1720 proceedings.

Debt Cancellation Litigation Between July 2010 and May 2011, eight substantially similar putative class actions were filed against our subsidiaries, HSBC Bank Nevada, N.A. ("HSBC Bank Nevada") and HSBC Card Services Inc.: Rizera et al v. HSBC Bank Nevada et al. (D.N.J. No. 10-CV-03375); Esslinger et al v. HSBC Bank Nevada, N.A. et al. (E.D. Pa. No. 10-CV-03213); McAlister et al. v. HSBC Bank Nevada, N.A. et al. (W.D. Wash. No. 10-CV-05831); Mitchell v. HSBC Bank Nevada, N.A. et al. (D. Md. No. 10-CV-03232); Samuels v. HSBC Bank Nevada, N.A. et al. (N.D. III. No. 11-CV-00548); McKinney v. HSBC Card Services et al. (S.D. III. No. 10-CV-00786); Chastain v. HSBC Bank Nevada, N.A. (South Carolina Court of Common Pleas, 13^thCircuit) (filed as a counterclaim to a pending collections action); Colton et al. v. HSBC Bank Nevada, N.A. et al. (C.D. Ca. No. 11-CV-03742). These actions principally allege that cardholders were enrolled in debt cancellation or suspension products and challenge various marketing or administrative practices relating to those products. The plaintiffs' claims include breach of contract and the implied covenant of good faith and fair dealing, unconscionability, unjust enrichment, and violations of state consumer protection and deceptive acts and practices statutes. The Mitchell action was withdrawn by the plaintiff in March 2011. In July 2011, the parties in Rizera, Esslinger, McAlister, Samuels, McKinney and Colton executed a memorandum of settlement and subsequently submitted the formal settlement on a consolidated basis for approval by the U.S. District Court for the Eastern District of Pennsylvania in the Esslinger matter. In November 2012, the district court entered a final approval order confirming the settlement and it became effective in May 2013. In the memorandum accompanying the final approval order, in response to objections brought by several Attorneys General, the district court noted that claims belonging solely to the states are not impacted by the settlement, but that claims brought by a state seeking recovery for class members are precluded by the Esslinger settlement. Chastain and two other class members filed notices of appeal of the final approval order, which appeals were dismissed on motion or voluntarily. The district court entered the final distribution order in October 2013 for $24 million and payments were completed by October 31, 2013. Only Chastain remains as an individual action.

Beginning in August 2011, a number of state Attorneys General filed purported class actions against, among others, certain affiliates and/or subsidiaries asserting claims similar to those asserted in Esslinger. The Attorney General for the State of West Virginia filed a purported class action in the Circuit Court of Mason County, West Virginia, captioned State of West Virginia ex rel. Darrell V. McGraw, Jr. et al v. HSBC Bank Nevada, N.A. et al. (No. 11-C-93-N), in October 2011 alleging claims in connection with the marketing, selling and administering of ancillary services, including debt cancellation and suspension products to consumers in West Virginia. In September 2012, the Attorney General filed an amended complaint adding our affiliate, HSBC Bank USA, as a defendant. In addition to damages, the Attorney General sought civil money penalties and injunctive relief. In November 2013, the HSBC defendants settled the litigation with the West Virginia Attorney General, resolving all claims for a payment just under $2 million.

In April 2012, the Attorney General for the State of Hawaii filed lawsuits against seven credit card issuers, including certain of our subsidiaries, in the Circuit Court of the First Circuit for the State of Hawaii, captioned State of Hawaii ex rel David Louie, Attorney General v. HSBC Bank Nevada N.A. and HSBC Card Services, Inc., et al. (No. 12-1-0983-04), alleging claims in connection with the marketing, selling and administering of ancillary services, including debt cancellation and suspension products to consumers in Hawaii. The relief sought includes an injunction against deceptive and unfair practices, restitution and disgorgement of profits, and civil monetary penalties. The action was removed to federal court in May 2012. In June 2012, the Attorney General filed a motion to remand, which was denied. The Attorney General then withdrew its pending motion to consolidate the actions and appealed the decision to the Ninth Circuit, which is still pending.

In June 2012, the Attorney General for the State of Mississippi filed complaints against six credit card issuers, including our subsidiaries HSBC Bank Nevada and HSBC Card Services Inc. and our affiliate HSBC Bank USA. In an action captioned Jim Hood, Attorney General of the State of Mississippi, ex. rel. The State of Mississippi v. HSBC Bank Nevada, N.A., HSBC Card Services, Inc., and HSBC Bank USA, N.A., the Attorney General alleges claims in connection with the marketing, selling and administering of ancillary services, including debt cancellation and suspension products to consumers in Mississippi. The relief sought includes an injunction against deceptive and unfair practices, disgorgement of profits, and civil money penalties. In August 2012, this action was removed to federal court and the Attorney General filed a motion to remand, which was denied by the federal court. The Attorney General sought interlocutory review of certain issues regarding the denial of remand. The Court of Appeals overruled the federal district court's decision regarding remand, but the case remains pending in the federal district court where one remaining issue related to the propriety of federal jurisdiction is being litigated.

In April 2013, the Attorney General for the State of New Mexico also filed suit against nine credit card issuers, including our subsidiaries HSBC Bank Nevada and HSBC Card Services Inc. and our affiliate HSBC Bank USA. In the action, captioned State of New Mexico ex rel Gary King, Attorney General, v. HSBC Bank Nevada, N.A., HSBC Card Services, Inc., and HSBC Bank USA, N.A., the Attorney General alleges claims in connection with debt cancellation and suspension and other ancillary products marketed, administered and sold in connection with credit cards. The Attorney General seeks an injunction, restitution and civil money penalties, among other relief. The action was removed to Federal court in June 2013. Defendants filed a motion to dismiss on August 7, 2013. The district court dismissed the Attorney General's claim for restitution, but has not yet ruled on the remaining claims.

DeKalb County, et al. v. HSBC North America Holdings Inc., et al. In October 2012, three of the five counties constituting the metropolitan area of Atlanta, Georgia, filed a lawsuit pursuant to the Fair Housing Act against HSBC North America and numerous subsidiaries, including HSBC Finance Corporation and HSBC Bank USA, in connection with residential mortgage lending, servicing and financing activities. In the action, captioned DeKalb County, Fulton County, and Cobb County, Georgia v. HSBC North America Holdings Inc., et al. (N.D. Ga. No. 12-CV-03640), the plaintiff counties assert that the defendants' allegedly discriminatory lending and servicing practices led to increased loan delinquencies, foreclosures and vacancies, which in turn caused the plaintiff counties to incur damages in the form of lost property tax revenues and increased municipal services costs, among other damages. On October 23, 2013, following the court's denial of defendants' motion to dismiss, defendants filed an answer. This action is at an early stage.

Telephone Consumer Protection Act Litigation Between May 2012 and January 2013, two substantially similar putative class actions were filed against various HSBC U.S. entities, including actions against us or one or more of our subsidiaries. These two actions have been consolidated into a single action entitled: Mills & Wilkes v. HSBC Bank Nevada, N.A., HSBC Card Services, Inc., HSBC Mortgage Services, Inc. HSBC Auto Finance, Inc. & HSBC Consumer Lending (USA), Inc., Case No.: 12-cv-04010-MEJ (N.D. Cal.). A number of individual actions also have been filed. The plaintiffs in these actions allege that the HSBC defendants contacted them, or the members of the class they seek to represent, on their cellular telephones using an automatic telephone dialing system and/or an artificial or prerecorded voice, without their express consent, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. ("TCPA"). Plaintiffs seek statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful violations), although similar cases filed against other financial institutions have been resolved for amounts significantly less than these maximum statutory damage amounts due to, among other things, the availability of various defenses to the claims. The parties currently are engaged in discovery in Mills. The other actions are in various stages of proceedings.

Governmental and Regulatory Matters

Foreclosure Practices In April 2011, HSBC Finance Corporation and our indirect parent, HSBC North America, entered into a consent cease and desist order with the Federal Reserve Board (the "Federal Reserve") (the "Federal Reserve Servicing Consent Order"), and our affiliate, HSBC Bank USA, entered into a similar consent order with the Office of the Comptroller of the Currency ("OCC") (together with the Federal Reserve Servicing Consent Order, the "Servicing Consent Orders") following completion of a broad horizontal review of industry foreclosure practices. The Federal Reserve Servicing Consent Order requires us to take prescribed actions to address the deficiencies noted in the joint examination and described in the consent order. We continue to work with the Federal Reserve and the OCC to align our processes with the requirements of the Servicing Consent Orders and implement operational changes as required.

The Servicing Consent Orders required an independent review of foreclosures (the "Independent Foreclosure Review") pending or completed between January 2009 and December 2010 to determine if any borrower was financially injured as a result of an error in the foreclosure process. As required by the Servicing Consent Orders, an independent consultant was retained to conduct that review. On February 28, 2013, HSBC Finance Corporation and our indirect parent, HSBC North America, entered into an agreement with the Federal Reserve, and our affiliate, HSBC Bank USA, entered into an agreement with the OCC (together the "IFR Settlement Agreements"), pursuant to which the Independent Foreclosure Review ceased and has been replaced by a broader framework under which we and twelve other participating servicers are, in the aggregate, providing in excess of $9.3 billion in cash payments and other assistance to help eligible borrowers. Pursuant to the IFR Settlement Agreements, HSBC North America made a cash payment of $96 million into a fund used to make payments to borrowers that were in active foreclosure during 2009 and 2010 and is providing other assistance (e.g., loan modifications) to help eligible borrowers. As a result, in 2012, we recorded expenses of $85 million which reflects the portion of HSBC North America's total expense of $104 million that we believe is allocable to us. As of December 31, 2013, Rust Consulting, Inc., the paying agent, has issued almost all checks to eligible borrowers. Borrowers who receive compensation will not be required to execute a release or waiver of rights and will not be precluded from pursuing litigation concerning foreclosure or other mortgage servicing practices. For participating servicers, including HSBC Finance Corporation and HSBC Bank USA, fulfillment of the terms of the IFR Settlement Agreements will satisfy the Independent Foreclosure Review requirements of the Servicing Consent Orders, including the wind down of the Independent Foreclosure Review. While we believe compliance related costs have permanently increased to higher levels due to the remediation requirements of the Servicing Consent Orders, the IFR Settlement Agreements will positively impact compliance expenses in future periods as the significant resources working on the Independent Foreclosure Review will no longer be required.

The Servicing Consent Orders do not preclude additional enforcement actions against HSBC Finance Corporation or our affiliates by bank regulatory, governmental or law enforcement agencies, such as the U.S. Department of Justice or state Attorneys General, which could include the imposition of civil money penalties and other sanctions relating to the activities that are the subject of the Servicing Consent Orders. Pursuant to the IFR Settlement Agreement with the OCC, however, the OCC has agreed that it will not assess civil money penalties or initiate any further enforcement action with respect to past mortgage servicing and foreclosure-related practices addressed in the Servicing Consent Orders, provided the terms of the IFR Settlement Agreement are fulfilled. The OCC's agreement not to assess civil money penalties is further conditioned on HSBC North America making payments or providing borrower assistance pursuant to any agreement that may be entered into with the U.S. Department of Justice in connection with the servicing of residential mortgage loans within two years. The Federal Reserve has agreed that any assessment of civil money penalties by the Federal Reserve will reflect a number of adjustments, including amounts expended in consumer relief and payments made pursuant to any agreement that may be entered into with the U.S. Department of Justice in connection with the servicing of residential mortgage loans. In addition, the IFR Settlement Agreement does not preclude future private litigation concerning these practices.

Separate from the Servicing Consent Orders and the settlement related to the Independent Foreclosure Review discussed above, in February 2012, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development and state Attorneys General of 49 states announced a settlement with the five largest U.S. mortgage servicers with respect to foreclosure and other mortgage servicing practices. Following the February 2012 settlement, these government agencies initiated discussions with other mortgage industry servicers, including us. HSBC Finance Corporation, together with our affiliate HSBC Bank USA, have had discussions with U.S. bank regulators and other governmental agencies regarding a potential resolution, although the timing of any settlement is not presently known. We recorded an accrual of $157 million in 2011 (which was reduced by $14 million in 2013) reflecting the portion of the HSBC North America accrual we currently believe is allocable to HSBC Finance Corporation. As this matter progresses and more information becomes available, we will continue to evaluate our portion of the HSBC North America liability which may result in a change to our current estimate. Any such settlement, however, may not completely preclude other enforcement actions by state or federal agencies, regulators or law enforcement agencies related to foreclosure and other mortgage servicing practices, including, but not limited to, matters relating to the securitization of mortgages for investors. In addition, these practices have in the past resulted in private litigation and such a settlement would not preclude further private litigation concerning foreclosure and other mortgage servicing practices

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	2013												2012
	Fourth			Third			Second			First			Fourth			Third			Second			First
	(in millions)
Net interest income..........................................	$	207		$	229		$	238		$	394		$	430		$	417		$	391		$	408
Provision for credit losses⁽¹⁾..........................	(152		)	(160		)	267			24			408			287			738			791
Net interest income (loss) after provision for credit losses............................................	359			389			(29		)	370			22			130			(347		)	(383		)
Other revenues.................................................	(215		)	114			628			354			85			(144		)	(1,865		)	(195		)
Operating expenses.........................................	253			216			195			268			384			276			239			215
Income (loss) from continuing operations before income tax (expense) benefit..........	(109		)	287			404			456			(277		)	(290		)	(2,451		)	(793		)
Income tax (expense) benefit..........................	51			(91		)	(133		)	(152		)	81			98			939			288
Income (loss) from continuing operations...	(58		)	196			271			304			(196		)	(192		)	(1,512		)	(505		)
Income (loss) from discontinued operations........................................................................	(19		)	(29		)	(51		)	(78		)	(99		)	55			1,254			350
Net income (loss).............................................	$	(77	)	$	167		$	220		$	226		$	(295	)	$	(137	)	$	(258	)	$	(155	)

⁽¹⁾The provision for credit losses during the fourth quarter of 2012 included $350 million related to changes in the loss emergence period used in our roll rate migration analysis. See Note 6, "Credit Loss Reserves," in the accompanying consolidated financial statements for further discussion of the adoption of this new accounting guidance.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There were no disagreements on accounting and financial disclosure matters between HSBC Finance Corporation and its independent accountants during 2013.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures We maintain a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed by HSBC Finance Corporation in the reports we file or submit under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), is recorded, processed, summarized and reported on a timely basis. Board of Directors, operating through its Audit Committee, which is composed entirely of independent outside directors, provides oversight to our financial reporting process.

We conducted an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report so as to alert them in a timely fashion to material information required to be disclosed in reports we file under the Exchange Act.

Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management's Assessment of Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control structure and procedures over financial reporting as defined in Rule 13a-15(f) of the Exchange Act, and has completed an assessment of the effectiveness of HSBC Finance Corporation's internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria related to internal control over financial reporting described in "Internal Control - Integrated Framework (1992)" established by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the assessment performed, management concluded that as of December 31, 2013, HSBC Finance Corporation's internal control over financial reporting was effective.

Item 9B. Other Information.

Disclosures Pursuant to Section 13(r) of the Securities Exchange Act Section 13(r) of the Securities Exchange Act requires each issuer registered with the SEC to disclose in its annual or quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions with persons or entities targeted by U.S. sanctions programs relating to Iran, terrorism, or the proliferation of weapons of mass destruction, even if those activities are not prohibited by U.S. law and are conducted outside the U.S. by non-U.S. affiliates in compliance with local laws and regulations.

In order to comply with this requirement, HSBC has requested relevant information from its affiliates globally. During the period covered by this Form 10-K, HSBC Finance Corporation did not engage in any activities or transactions requiring disclosure pursuant to Section 13(r). The following activities conducted by our affiliates are disclosed in response to Section 13(r):

Loans in repayment Between 2001 and 2005, the Project and Export Finance ("PEF") division of HSBC arranged or participated in a portfolio of loans to Iranian energy companies and banks. All of these loans were guaranteed by European and Asian export credit agencies, and they have varied maturity dates with final maturity in 2018. For those loans that remain outstanding, the HSBC Group continues to seek repayment in accordance with its obligations to the supporting export credit agencies and, in all cases, with appropriate regulatory approvals. Details of these loans follow.

HSBC has 13 loans outstanding to an Iranian petrochemical and energy company. These loans are supported by the official Export Credit Agencies of the following countries: the United Kingdom, France, Germany, Spain, The Netherlands, South Korea and Japan. The HSBC Group continues to seek repayments from the company under the existing loans in accordance with the original maturity profiles. All repayments made by the Iranian company have received a license or an authorization from relevant authorities. Two repayments have been received under each loan in 2013.

Bank Melli and Bank Saderat acted as sub-participants in three of the aforementioned loans. The repayments due to these banks under the loan agreements were paid into frozen accounts under licenses or authorizations from relevant European governments.

In 2002, the HSBC Group provided a loan to Bank Tejarat with a guarantee from the Government of Iran to fund the construction of a petrochemical plant undertaken by a U.K. contractor. This loan was supported by the U.K. Export Credit Agency and is administered under license from the relevant European Government. No repayments have been received directly from Bank Tejarat in 2013 and claims have been settled by the supporting Export Credit Agency.

The HSBC Group also maintains sub-participations in four loans provided by other international banks to Bank Tejarat and Bank Mellat with guarantees from the Government of Iran. These sub-participations were supported by the Export Credit Agencies of Italy, The Netherlands and Spain. The repayments due under the sub-participations were not received during 2013, and claims are being processed and settled by the relevant European Export Credit Agencies. Licenses and relevant authorizations have been obtained from the competent authorities of the European Union in respect of the transactions.

Estimated gross revenue to the HSBC Group generated by these loans in repayment for 2013, which includes interest and fees, was approximately $2.2 million. Estimated net profit for the HSBC Group during 2013 was approximately $1.3 million. While the HSBC Group intends to continue to seek repayment, it does not intend to extend any new loans.

Legacy contractual obligations related to guarantees Between 1996 and 2007, the HSBC Group provided guarantees to a number of its non-Iranian customers in Europe and the Middle East for various business activities in Iran. In a number of cases, the HSBC Group issued counter indemnities in support of guarantees issued by Iranian banks as the Iranian beneficiaries of the guarantees required that they be backed directly by Iranian banks. The Iranian banks to which the HSBC Group provided counter indemnities included Bank Tejarat, Bank Melli, and the Bank of Industry and Mine.

The HSBC Group has worked with relevant regulatory authorities to obtain licenses where required and ensure compliance with laws and regulations while seeking to cancel the guarantees and counter indemnities. Several were canceled during 2013 and approximately 20 remain outstanding.

Estimated gross revenue to the HSBC Group for 2013, which includes fees and/or commissions was $10,000. The HSBC Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate profits measure. The HSBC Group is seeking to cancel all relevant guarantees and does not intend to provide any new guarantees involving Iran.

Check clearing Certain Iranian banks sanctioned by the United States continue to participate in official clearing systems in the U.A.E., Bahrain, Oman, Lebanon, Qatar, and Turkey. The HSBC Group has a presence in these countries and, as such, participates in the clearing systems. The Iranian banks participating in the clearing systems differ by location and include Bank Saderat, Bank Melli, Future Bank, and Bank Mellat. The HSBC Group has implemented automated and manual controls in order to preclude settling check transactions with these institutions. There was no measurable gross revenue or net profit generated by this activity in 2013.

Other relationships with Iranian banks Activity related to U.S.-sanctioned Iranian banks not covered elsewhere in this disclosure includes the following:

Ÿ The HSBC Group maintains a frozen account in the U.K. for an Iranian-owned, U.K.-regulated financial institution. In April 2007, the U.K. government issued a license to allow the HSBC Group to handle certain transactions (operational payments and settlement of pre-sanction transactions) for this institution. In December 2013, the U.K. government issued a new license allowing the HSBC Group to deposit certain check payments. There was some licensed activity in 2013.

Ÿ The HSBC Group acts as the trustee and administrator for pension schemes involving three employees of a U.S.-sanctioned Iranian bank in Hong Kong. Under the rules of these schemes, the HSBC Group accepts contributions from the Iranian bank each month and allocates the funds into the pension accounts of the three Iranian bank employees. The HSBC Group runs and operates these pension schemes in accordance with Hong Kong laws and regulations.

Ÿ In 2010, HSBC closed its representative office in Iran. The HSBC Group maintains a local account with a U.S.-sanctioned Iranian bank in Tehran in order to facilitate residual activity related to the closure. During 2013, the HSBC Group used this account to pay tax equivalent to approximately $20,000 to Iran's Social Security Organization. The HSBC Group has been authorized by the U.S. Government (and by relevant non-U.S. regulators) to make these types of payments in connection with the liquidation and deregistration of the representative office in Tehran, and anticipates making the last of such payments in 2014.

Estimated gross revenue to the HSBC Group in 2013 for all Iranian bank-related activity described in this section, which includes fees and/or commissions, was $109,013. The HSBC Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure. The HSBC Group intends to continue to wind down this Iranian bank-related activity and not enter into any new such activity.

Iranian embassy-related activity The HSBC Group held a bank account in London for the Iranian embassy London, which was used to support Iranian students studying in the U.K. and in which there was minimal activity during 2013. The account was closed in 2013, and the funds were moved into unclaimed balances.

Activity related to U.S. Executive Order 13224 The HSBC Group maintained a frozen personal account for an individual sanctioned under Executive Order 13224, and by the U.K. and the U.N. Security Council. Activity on this account in 2013 was permitted by a license issued by the U.K. There was no measurable gross revenue or net profits generated to the HSBC Group in 2013.

The HSBC Group held personal and business accounts in the U.K. for two individuals sanctioned by the U.S. under Executive Order 13224. U.K. and U.N. Security Council sanctions against both these individuals were lifted in 2012. All the accounts were closed during 2013. The account balances were returned to the relevant individual. There was no measurable gross revenue or net profit generated to the HSBC Group in 2013.

The HSBC Group holds a frozen personal account in the United Arab Emirates for an individual who was designated under Executive Order 13224 during 2013. Subsequent to designation and prior to the freezing of the account in the second quarter, there were several transactions. Estimated gross revenue in 2013 was approximately $250. There has been no activity and no measurable gross revenue or net profit generated since the second quarter of 2013. A second personal account held in Hong Kong for the same individual was closed in the third quarter of 2013 and the balance moved into unclaimed balances. There has been no activity and no measurable gross revenue or net profit generated on the account in 2013 since designation.

The HSBC Group held an account and had an outstanding loan for a partnership that included one individual sanctioned under Executive Order 13224. The account has been closed, and the sanctioned individual has been removed from the loan account. There was no measurable gross revenue or net profits to the HSBC Group recognized in 2013 for this activity.

Activity related to U.S. Executive Order 13382 The HSBC Group held an account for a customer in the United Arab Emirates that was sanctioned under Executive Order 13382 in 2013. The account was closed in 2013, and the funds were moved into unclaimed balances. The estimated gross revenue or net profits generated to the HSBC Group in 2013 was $37.00.

Frozen accounts and transactions The HSBC Group maintains several accounts that are frozen under relevant sanctions programs and on which no activity, other than the posting of nominal amounts of interest, took place during 2013. In 2013, the HSBC Group also froze payments where required under relevant sanctions programs. There was no gross revenue or net profit to the HSBC Group.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors Set forth below is certain biographical information relating to the members of HSBC Finance Corporation's Board of Directors, including descriptions of the specific experience, qualifications, attributes and skills that support such person's service as a Director of HSBC Finance Corporation. We have also set forth below the minimum director qualifications reviewed by HSBC and the Board in choosing Board members.

All of our non-executive Directors are or have been either chief executive officers or senior executives at other companies or firms, with significant general and specific corporate experience and knowledge that promotes the successful implementation of the strategic plans of HSBC Finance Corporation and its indirect parent HSBC North America, for which each of our Directors, with the exception of Mr. Burke, also serve as a Director. Our Directors also have high levels of personal and professional integrity and ethical character. Each possesses the ability to be collaborative but also assertive in expressing his or her views and opinions to the Board and management. Based upon his or her management experience, each Director has demonstrated sound judgment and the ability to function in an oversight role.

Directors are elected to three-year terms until their tenure exceeds six years, at which point they are elected annually. Consequently, Messrs. Ameen and Whitford will be considered for election in 2015 and 2017, respectively, and all other Directors are subject to annual elections. There are no family relationships among the Directors.

Phillip D. Ameen, age 65, joined HSBC Finance Corporation's Board in April 2012. He has been a member of the HSBC Finance Corporation Audit and Risk Committees since May 2012 and became Chair of the Audit Committee in May 2013. Since April 2012, he has also served as a member of the Board of Directors of HSBC North America, HSBC Bank USA and HSBC USA and as a member of the respective Audit and Risk Committees since May 2012. Effective May 2013, Mr. Ameen was also appointed as Chair of the HSBC North America, HSBC Bank USA and HSBC USA Audit Committees. He was a Director of HSBC Bank Nevada from April 2012 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. Until March 2008, he served as Vice President, Comptroller, and Principal Accounting Officer of General Electric Capital Co. ("GE"). Prior to joining GE, he was Audit Partner of KPMG Peat Marwick. He joined GE in 1985, where he spent time in lending, leasing, and mergers and acquisitions before joining GE Headquarters staff.

Mr. Ameen served on the International Financial Reporting Interpretations Committee of the International Accounting Standards Board, the Accounting Standards Executive Committee of the American Institute of Certified Public Accounting, was the longest-serving member of the Financial Accounting Standards Board Emerging Issues Task Force and was Chair of the Committee on Corporate Reporting of Financial Executives International. He is a member of the Keenan Flagler Business School Board of Advisers and has served as Trustee of the Financial Accounting Foundation Inc. and of Elon University. Mr. Ameen is an alumnus of the University of North Carolina, Chapel Hill and was a Certified Public Accountant in New York and North Carolina. He now serves on the Boards of Directors of several private equity technology enterprises. His experience in the accounting profession provides him with highly relevant expertise for insight into business operations and financial performance and reporting, which are valuable as a member of the HSBC Finance Corporation Board and Chair of the Audit Committee.

Patrick J. Burke, age 52, joined HSBC Finance Corporation's Board in May 2011 and was appointed Chairman of the Board in November 2011. Mr. Burke has been the Chief Executive Officer of HSBC Finance Corporation since July 2010. He has been a Director since May 2011 and President since September 2010. He was Chairman of the Board of HSBC Bank Nevada from November 2011 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. Prior to his current position, he was Senior Executive Vice President and Chief Executive Officer, Card and Retail Services of HSBC Finance Corporation since June 2009. From February 2008 to June 2009, he was Senior Executive Vice President and Chief Operating Officer - Card and Retail Services of HSBC Finance Corporation. From December 2007 to February 2008 he was Managing Director - Card and Retail Services of HSBC Finance Corporation. He was Managing Director - Card Services from July 2006 to December 2007. He was appointed President and Chief Executive Officer of HSBC Financial Limited Canada in January 2003 until July 2006. Mr. Burke was appointed Chief Financial Officer with HFC Bank Limited from 2000 until 2003. From the start of his career with HSBC in 1989, Mr. Burke has served the company in many roles including Deputy Director of Mergers and Acquisitions and Vice President of Strategy and Development. Mr. Burke is Chair of the Compliance Committee.

Robert K. Herdman, age 65, joined HSBC Finance Corporation's Board in January 2004 and is Chair of its Risk Committee. He served as Chair of its Audit Committee until May 2013. Since March 2005, he has served as a member of the Board of Directors of HSBC North America and as Interim non-executive Chairman of the Board from May 2013 to December 2013. He was Chair of its Audit Committee until May 2013, and since May 2011 he has served as Chair of its Risk Committee. Mr. Herdman was re-appointed as a member of the HSBC North America Audit Committee in December 2013. Since May 2010, he has also been a member of the Boards of HSBC USA and HSBC Bank USA, Chair of their respective Risk Committees and served as Chair of their respective Audit Committees until May 2013. Mr. Herdman was a Director of HSBC Bank Nevada as well as Chair of its Audit and Risk Committees from July 2011 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. Mr. Herdman was a member of and the Chair of the HSBC Finance Corporation Compliance Committee from December 2010 and the HSBC USA Compliance Committee from August 2010 to May 2011. Mr. Herdman has also served on the Board of Directors of Cummins Inc. since February 2008 and is Chair of its Audit Committee, and on the Board of Directors of WPX Energy, Inc. and is Chair of its Audit Committee since December 2011. Since January 2004, Mr. Herdman has been a Managing Director of Kalorama Partners LLC, a Washington, D.C. consulting firm specializing in providing advice regarding corporate governance, risk assessment, crisis management and related matters. Mr. Herdman was the Chief Accountant of the SEC from October 2001 to November 2002. The Chief Accountant serves as the principal advisor to the SEC on accounting and auditing matters, and is responsible for formulating and administering the accounting program and policies of the SEC. Prior to joining the SEC, Mr. Herdman was Ernst & Young's Vice Chairman of Professional Practice for its Assurance and Advisory Business Services ("AABS") practice in the Americas and the Global Director of AABS Professional Practice for Ernst & Young International. Mr. Herdman was the senior Ernst & Young partner responsible for the firms' relationships with the SEC, FASB and American Institute of Certified Public Accountants ("AICPA"). He served on the AICPA's SEC Practice Section Executive Committee from 1995 to 2001 and as a member of the AICPA's Board of Directors from 2000 to 2001.

Mr. Herdman's membership on the Board is supported by his significant financial expertise. His experience with the SEC and in the public accounting profession provided Mr. Herdman with broad insight into the business operations and financial performance of a significant number of public and private companies.

George A. Lorch, age 72, joined HSBC Finance Corporation's Board in September 1994 and served as the Chair of its Compensation Committee until the committee was disbanded in 2008. Mr. Lorch was appointed a member of the HSBC Finance Corporation Audit Committee in July 2013 and of the Risk Committee in December 2010. He also serves as a member of the Board of Directors of HSBC North America since July 2011 and as a member of its Audit Committee since July 2013 and its Risk Committee since December 2010. He was a member of the Board of HSBC Bank Nevada from November 2011 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. From May 2000 until August 2000, Mr. Lorch served as Chairman, President and Chief Executive Officer of Armstrong Holdings Inc. (the parent of Armstrong World Industries, Inc.). Mr. Lorch served as Chairman of the Board, Chief Executive Officer and President of Armstrong World Industries, Inc. (a manufacturer of interior finishes) from 1994 and President and Chief Executive Officer from 1993 until May 1994. Mr. Lorch is a Director of WPX Energy, Autoliv, Inc., Pfizer Inc. and Masonite Inc. Mr. Lorch was Chairman of the Board of Pfizer Inc. from December 2010 through December 2011 and now serves as its Lead Director. Mr. Lorch served as an executive officer with Armstrong Holdings Inc. and its subsidiary Armstrong Industries for 17 years. He served as Chief Executive Officer of Armstrong World Industries, Inc. for over 7 years. In addition, he had been Chairman of the Board at these companies. In these roles, Mr. Lorch was responsible for aspects of the operations of a global public company, affording him experience in developing and executing strategic plans and motivating and managing the performance of the management team and the organization as a whole. Additionally, Mr. Lorch has served on the Board of Directors for HSBC Finance Corporation, which was previously Household International, since September 1994, and, as a result, he is able to provide a historical perspective to the Board of HSBC Finance Corporation.

Beatriz R. Perez, age 44, joined HSBC Finance Corporation's Board in May 2008. She has served on the Board of HSBC North America since April 2007. Ms. Perez is a member of the Compliance Committee and of the HSBC North America Compliance and Nominating and Governance Committees. She served as a member of the Risk Committee until June 2013. Ms. Perez was a Director of HSBC Bank Nevada from July 2011 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. Ms. Perez has been employed by Coca-Cola since 1994. She became Chief Sustainability Officer for the North America Division of Coca-Cola as of July 2011. Prior to her current position, Ms. Perez held the positions of Chief Marketing Officer North America from April 2010 to July 2011, Senior Vice President, Integrated Marketing for the North America Division of Coca-Cola from May 2007 to April 2010 and Vice President, Media, Sports and Entertainment Marketing from 2005 to 2007. From 1996 to 2005, she held the positions of Associate Brand Manager, Classic Coke, Sports Marketing and NASCAR Manager, Vice President of Sports, and Vice President Sports and Entertainment. Ms. Perez is active in the not-for-profit world. Ms. Perez is a member of the Foundation Board of Children's Healthcare of Atlanta and of the Victory Junction Group board. Ms. Perez is also the Chairman of the Grammy Foundation.

Ms. Perez's leadership roles in the sustainability and marketing functions at Coca-Cola bring a particular knowledge of mass and targeted marketing and sustainability programs that are of value in HSBC's efforts to promote its brand image and in its general product marketing efforts.

Larree M. Renda, age 55, joined HSBC Finance Corporation's Board in September 2001 and is a member of the Audit and Risk Committees. Since May 2008, she has served as a member of the Board of Directors of HSBC North America. Ms. Renda was a Director of HSBC Bank Nevada from July 2011 until August 2013, when HSBC Bank Nevada was merged into HSBC Finance Corporation. Ms. Renda has been employed by Safeway Inc. since 1974. In August 2010, Ms. Renda was appointed as Executive Vice President of Safeway Inc. and President of Safeway Health Inc. Prior to her current position, she had been Executive Vice President, Chief Strategist and Administrative Officer of Safeway Inc. since November 2005. From 1999 to November 2005, she served as Executive Vice President for Retail Operations, Human Resources, Public Affairs, Labor and Government Relations. Prior to this position, she was a Senior Vice President from 1994 to 1999, and a Vice President from 1991 to 1994. She is also a director and Chairwoman of the Board of The Safeway Foundation and serves on the Board of Directors for Casa Ley, S.A. de C.V. Ms. Renda serves as a Trustee on the National Joint Labor Management Committee. In addition, she serves on the Board of Directors for the California Chamber of Commerce and serves as a National Vice President of the Muscular Dystrophy Association. Ms. Renda is also on the Board of Regents for the University of Portland.

Ms. Renda has 21 years of experience as an executive officer at Safeway Inc. where she has held several roles critical to its operations. Ms. Renda's responsibilities at Safeway Inc. include public affairs, human resources, government relations, strategy, labor relations, philanthropy, corporate social responsibility, cost reduction, re-engineering, health initiatives, IT, real estate and communications. Ms. Renda has served on the Board of Directors for HSBC Finance Corporation, which was previously Household International, since September 2001, and, as a result, she is able to provide a historical perspective to the Board of HSBC Finance Corporation.

Thomas K. Whitford, age 57, joined HSBC Finance Corporation's Board in December 2013. He has also been a member of the HSBC Finance Corporation Compliance and Risk Committees since December 2013. Also since December 2013, Mr. Whitford has served as a member of the Board of Directors of HSBC North America and as a member of its Compliance and Risk Committees. Mr. Whitford retired in 2013 as Vice Chairman of PNC Financial Services Corporation ("PNC"), with responsibility for Technology and Operations, Corporate Communications and the Regional Presidents, a position he held since 2010. Following PNC's acquisition of National City Corporation in December 2008, he moved to Cleveland and was appointed Chairman of National City Bank and responsible for PNC's integration of National City Corporation. Mr. Whitford joined PNC in 1983 and held leadership positions in Consumer Banking, Personal Trust, Mutual Fund Servicing, Asset Management, and Strategic Planning. In 1997, he was named Chief Executive Officer of PNC's Wealth Management business. He was named Chief Risk Officer in May 2002 and helped PNC sharpen its strategic focus and integrated coordination of all risk management activities corporate-wide. Mr. Whitford was named PNC's Chief Administrative Officer in May 2007 and his responsibilities were expanded to include Corporate Communications, Operations, Human Resources, and the company's Regional Presidents.

Mr. Whitford has served as an Independent Trustee on the Delaware Investments Family of Funds since January 2013. He also serves as a trustee for The Barnes Foundation, as a member of the Wharton Graduate Executive Board, and as a member of Natural Lands Trust's President's Council.

Executive Officers Information regarding the executive officers of HSBC Finance Corporation as of February 24, 2014 is presented in the following table.

Name	Age	Year Appointed	Present Position
Patrick J. Burke............	52	2010	Chief Executive Officer
Michael A. Reeves......	51	2010	Executive Vice President and Chief Financial Officer
Steven G. Ekert.............	47	2013	Senior Executive Vice President and Chief Risk Officer
Mark Martinelli............	54	2013	Senior Executive Vice President and Chief Auditor
Gregory Zeeman..........	45	2012	Senior Executive Vice President and Chief Operating Officer, USA
Julie A. Davenport......	53	2011	Executive Vice President and General Counsel
Eric K. Ferren...............	40	2010	Executive Vice President and Chief Accounting Officer
Loren C. Klug..............	53	2013	Executive Vice President, Head of Strategy and Planning and Chief of Staff to the CEO
Kathryn Madison.......	52	2009	Executive Vice President and Chief Servicing Officer, Consumer and Mortgage Lending
Patrick D. Schwartz.....	56	2008	Executive Vice President and Corporate Secretary

Patrick J. Burke, Director and Chief Executive Officer of HSBC Finance Corporation. See Directors for Mr. Burke's biography.

Michael A. Reeves, Executive Vice President and Chief Financial Officer of HSBC Finance Corporation since May 2010. Prior to his current position, he was Executive Vice President, Chief Financial Officer of HSBC Consumer Finance since July 2009. From May 2008 to July 2009, he was Executive Vice President and Chief Financial Officer of HSBC Card and Retail Services, and from May 2005 to May 2008, he was Managing Director and Chief Financial Officer of Credit Card Services. Mr. Reeves joined HSBC in 1993 and has held a succession of management positions in Accounting, Finance and Treasury. Prior to joining HSBC, Mr. Reeves was an Audit Manager with Deloitte & Touche, LLP and practiced in its San Jose and London offices.

Steven G. Ekert, Senior Executive Vice President, Chief Risk Officer of HSBC Finance Corporation, HSBC North America and HSBC USA since June 2013. He is responsible for all Risk and Compliance functions in North America, including Credit Risk, Operational Risk, Market Risk, Financial Crime and Regulatory Compliance as well as the enterprise-wide risk and compliance framework. Prior to joining the organization Mr. Ekert held various positions with Citigroup Inc., including Chief Risk Officer of Citi Holdings and Citi Private Bank.

Mark Martinelli, Senior Executive Vice President and Chief Auditor of HSBC Finance Corporation since October 2013. He has also been the Chief Auditor of HSBC North America since November 2009 and Chief Auditor of HSBC USA since March 2007. Prior to that time, Mr. Martinelli was President and Chief Executive Officer of hsbc.com from 2006 to 2007, and Chief Financial Officer of hsbc.com from 2002 to 2006. Mr. Martinelli joined HSBC in the U.S. as part of Republic National Bank of New York in 1991, and has held various senior officer positions in Finance, Strategy, Planning and Audit. Prior to joining HSBC in the U.S., he was a senior manager with the public accounting firm of KPMG LLP. He is a Certified Public Accountant registered in the U.S, a Chartered Global Management Accountant and a member of the American Institute of Certified Public Accountants. Mr. Martinelli has served on the Audit Committee of the New York Clearing House since 2007 and served as its Chairman from January 2011 to February 2013. He has been a director on the Baruch College Fund Board of Trustees since April 2010 and has served as the Chairman of its Audit Committee since September 2011. Since October 2013, Mr. Martinelli has served on St. John's University Department of Accounting and Taxation Executive Advisory Board.

Gregory T. Zeeman, Senior Executive Vice President and Chief Operating Officer USA of HSBC Finance Corporation, HSBC USA, and HSBC North America since August 2012. From March 2012 to August 2012 he was Executive Vice President and Chief Operating Officer USA of HSBC Finance Corporation, HSBC USA, and HSBC North America. Prior to his current role, Mr. Zeeman served as Executive Vice President, Head of Change Delivery for the Americas since 2011. Mr. Zeeman served as Deputy Chief Executive Officer and Chief Technology Services Officer for HSBC in Singapore from 2009 through 2011 and Chief Servicing Officer for HSBC Consumer and Mortgage Lending from 2006 to 2009. Mr. Zeeman first joined the organization in 1999, where he has served in a wide range of general management and leadership roles, primarily focused on consumer oriented lines of business. Prior to joining the organization, he worked as a strategy consultant at the Boston Consulting Group.

Julie A. Davenport, Executive Vice President and General Counsel HSBC Finance Corporation since April 2011, and General Counsel HSBC Retail Banking and Wealth Management since December 2011. Ms. Davenport joined Household International in September of 1989. From 1989 to 1997, she held the positions of Counsel and then Senior Counsel in the Household Bank, f.s.b. law department, primarily supporting the Fannie Mae/Freddie Mac residential mortgage business. In 1997, Ms. Davenport moved to the Credit Card Services law department where she held the positions of Associate General Counsel and then Deputy General Counsel. In March 2004, Ms. Davenport was promoted to the position of General Counsel-Retail Services and after the integration of the Retail Services and Card Services business units in the summer of 2007, she became General Counsel of the combined businesses. In June 2009, Ms. Davenport was promoted to the position of Senior Vice President-Group General Counsel leading a team of lawyers supporting the Personal Financial Services, Card and Retail Services, Taxpayer Financial Services and Insurance businesses, as well as the Technology Services function. Effective April 2011, Ms. Davenport assumed the position of General Counsel of HSBC Finance Corporation providing support for Card and Retail Services, Consumer and Mortgage Lending and Insurance and effective December 2011 she assumed the additional role of General Counsel of HSBC's Retail Banking and Wealth Management business.

Eric K. Ferren, Executive Vice President and Chief Accounting Officer of HSBC Finance Corporation, HSBC North America and HSBC USA since July 2010. As of January 2014, Mr. Ferren is also Chief Financial Officer of HSBC USA and Deputy Chief Financial Officer of HSBC North America. Mr. Ferren is a Director of HSBC Trust Company (Delaware), National Association. Prior to Mr. Ferren's appointment as Chief Accounting Officer, Mr. Ferren was responsible for several accounting areas across HSBC North America and its subsidiaries. Prior to joining HSBC in the U.S., Mr. Ferren was the Controller for UBS's North American Asset Management business from May 2005 to June 2006. Prior to that, Mr. Ferren was the Controller for Washington Mutual's Home Loans Capital Market's business and several finance roles within the servicing business from January 2002 through May 2005. Prior to January 2002, Mr. Ferren was a Senior Manager at Ernst & Young LLP in Chicago where he focused on global banking, commercial banking, and securitizations. He is a Certified Public Accountant registered in the U.S. and a member of the American Institute of Certified Public Accountants.

Loren C. Klug, Executive Vice President, Head of Strategy and Planning of HSBC Finance Corporation, HSBC North America and HSBC USA. since January 2012 and since September 2013 he has held the additional title of Chief of Staff to the Chief Executive Officer. He was previously Executive Vice President, Strategy & Planning of HSBC Finance Corporation and of HSBC North America from February 2008 through December 2011. From March 2004 to January 2008, he was Managing Director - Strategy and Development, and concurrently from January 2005 to November 2007 he was responsible for strategy development and customer group oversight for HSBC Group's global consumer finance activities. Mr. Klug joined HSBC Finance Corporation in 1989, and since that time has held a variety of commercial finance and strategy positions. Prior to such time he held positions in commercial real estate and banking.

Kathryn Madison, Executive Vice President and Chief Servicing Officer, Consumer and Mortgage Lending of HSBC Finance Corporation since July 2009. From August 2005 through December 2008, she was Executive Vice President of originations for Consumer and Mortgage Lending. From 2003 through July 2005, Ms. Madison was the Managing Director of Strategic Planning and Development for the Consumer Lending business. Prior to such time, she held various leadership positions in the consumer and direct lending businesses. Ms. Madison joined HSBC Finance Corporation in 1988 as a Manager of Strategic Planning for Consumer Lending.

Patrick D. Schwartz, Corporate Secretary of HSBC Finance Corporation since September 2007 and Executive Vice President since February 2008. From June 2009 to May 2011 he was also the General Counsel and from May 2004 to June 2009 he was Deputy General Counsel. Mr. Schwartz served as a senior legal advisor of HSBC North America from February 2004 to May 2011 and has served as its Corporate Secretary since September 2007. Mr. Schwartz has been an Executive Vice President and Secretary of HSBC USA since May 2008. He has held several different legal titles for HSBC USA since September 2007, but served as its Secretary continuously since that time. Mr. Schwartz counsels management and the Board of Directors of HSBC Finance Corporation, HSBC USA and HSBC North America with respect to corporate governance matters.

Corporate Governance

Board of Directors - Board Structure The business of HSBC Finance Corporation is managed under the oversight of the Board of Directors, whose principal responsibility is to enhance the long-term value of HSBC Finance Corporation to HSBC. The Board of Directors also provides leadership in the maintenance of prudent and effective controls that enable management to assess and manage risks of the business. The affairs of HSBC Finance Corporation are governed by the Board of Directors, in conformity with the Corporate Governance Standards, in the following ways:

Ÿ providing input and endorsing business strategy formulated by management and HSBC;

Ÿ providing input and approving the annual operating, funding and capital plans and Risk Appetite Statement prepared by management;

Ÿ monitoring the implementation of strategy by management and HSBC Finance Corporation's performance relative to approved operating, funding and capital plans and its risk appetite;

Ÿ reviewing and advising as to the adequacy of the succession plans for the Chief Executive Officer and senior executive management;

Ÿ reviewing and providing input to HSBC concerning evaluation of the Chief Executive Officer's performance;

Ÿ reviewing and approving the Corporate Governance Standards and monitoring compliance with the standards;

Ÿ assessing and monitoring the major risks facing HSBC Finance Corporation consistent with the Board of Director's responsibilities to HSBC; and

Ÿ monitoring the risk management structure designed by management to ensure compliance with applicable law and regulation, HSBC policies, ethical standards and business strategies.

Board of Directors - Committees and Charters The Board of Directors of HSBC Finance Corporation has three standing committees: the Audit Committee, the Compliance Committee and the Risk Committee. The charters of the Audit Committee, the Compliance Committee and the Risk Committee, as well as our Corporate Governance Standards, are available on our website at www.us.hsbc.com or upon written request made to HSBC Finance Corporation, 26525 North Riverwoods Boulevard, Suite 100, Mettawa, Illinois 60045, Attention: Corporate Secretary.

Audit Committee The Audit Committee is responsible, on behalf of the Board of Directors, for oversight and advice to the Board of Directors with respect to:

Ÿ the integrity of HSBC Finance Corporation's financial reporting processes and effective systems of internal controls relating to financial reporting;

Ÿ HSBC Finance Corporation's compliance with legal and regulatory requirements that may have a material impact on our financial statements; and

Ÿ the qualifications, independence, performance and remuneration of HSBC Finance Corporation's independent auditors.

The Audit Committee is currently comprised of the following independent directors (as defined by our Corporate Governance Standards which are based upon the rules of the New York Stock Exchange ("NYSE")): Phillip D. Ameen (Chair), George A. Lorch and Larree M. Renda. The Board of Directors has determined that each of these individuals is financially literate. The Board of Directors has also determined that Mr. Ameen qualifies as an "audit committee financial expert."

Audit Committee Report During the previous year, the Audit Committee met and held discussions with management and KPMG LLP. The Audit Committee reviewed and discussed with management and KPMG LLP the audited financial statements contained in HSBC Finance Corporation's Annual Report on Form 10-K for the year ended December 31, 2013. The Audit Committee also discussed with KPMG LLP the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, such communications also included its findings related to internal controls in conjunction with its financial statement audit. The Audit Committee also discussed management's assessment of the effectiveness of internal controls over financial reporting.

KPMG LLP submitted to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence. The Audit Committee discussed with KPMG LLP such firm's independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in this Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.

	Audit Committee

	Phillip D. Ameen (Chair)
	George A. Lorch
	Larree M. Renda

Compliance Committee The Compliance Committee is responsible, on behalf of the Board of Directors, for monitoring and oversight of:

Ÿ the Bank Secrecy Act and Anti-Money Laundering functions of HSBC Finance Corporation;

Ÿ the corrective actions in the foreclosure processing and loss mitigation functions of HSBC Finance Corporation and to ensure that HSBC Finance Corporation complies with the Federal Reserve Servicing Consent Order; and

Ÿ HSBC Finance Corporation's Compliance function and the development of a strong Compliance culture.

The Compliance Committee is currently comprised of the following Directors: Patrick J. Burke (Chair), Beatriz R. Perez and Thomas K. Whitford.

Risk Committee The Risk Committee is responsible, on behalf of the Board of Directors, for oversight and advice to the Board with respect to:

Ÿ HSBC Finance Corporation's risk appetite, tolerance and strategy;

Ÿ our systems of risk management and internal control to identify, measure, aggregate, control and report risk;

Ÿ management of capital levels and regulatory ratios, related targets, limits and thresholds, and the composition of our capital;

Ÿ alignment of strategy with our risk appetite, as defined by the Board of Directors; and

Ÿ maintenance and development of a supportive and proactive risk management culture that is appropriately embedded through procedures, training and leadership actions so that all employees are alert to the wider impact on the whole organization of their actions and decisions and appropriately communicate regarding identified risks.

The Risk Committee is currently comprised of the following Directors: Robert K. Herdman (Chair), Phillip D. Ameen, George A. Lorch, Larree M. Renda and Thomas K. Whitford.

Nominating and Compensation Committees The Board of Directors of HSBC Finance Corporation does not maintain a standing nominating committee or compensation committee. The Nominating and Governance Committee of the HSBC North America Board of Directors (the "Nominating and Governance Committee") is responsible for, among other things, oversight and advice to the HSBC North America Board of Directors with respect to:

Ÿ making recommendations concerning the structure and composition of the HSBC North America Board of Directors and its committees and the Boards and committees of its subsidiaries, including HSBC Finance Corporation, to enable these Boards to function most effectively; and

Ÿ identifying qualified individuals to serve on the HSBC North America Board of Directors and its committees and the Boards and committees of its subsidiaries, including HSBC Finance Corporation.

The Nominating and Governance Committee also has specified responsibilities with respect to executive officer compensation. See Item 11. Executive Compensation - Compensation Discussion and Analysis - Oversight of Compensation Decisions. The Nominating and Governance Committee is currently comprised of the following Directors: Anthea Disney (Chair), Samuel Minzberg Nancy G. Mistretta and Beatriz R. Perez. Ms. Disney, Mr. Minzberg and Ms. Mistretta currently serve as Directors of HSBC North America, HSBC USA and HSBC Bank USA. Ms. Perez currently serves as a Director of HSBC North America and HSBC Finance Corporation.

Board of Directors - Director Qualifications HSBC and the Board of Directors believe a Board comprised of members from diverse professional and personal backgrounds who provide a broad spectrum of experience in different fields and expertise best promotes the strategic objectives of HSBC Finance Corporation. HSBC and the Board of Directors evaluate the skills and characteristics of prospective Board members in the context of the current makeup of the Board of Directors. This assessment includes an examination of whether a candidate is independent, as well as consideration of diversity, skills and experience in the context of the needs of the Board of Directors, including experience as a chief executive officer or other senior executive or in fields such as financial services, finance, technology, communications and marketing, and an understanding of and experience in a global business. Although there is no formal written diversity policy, the Board considers a broad range of attributes, including experience, professional and personal backgrounds and skills, to ensure there is a diverse Board. A majority of the non-executive Directors are expected to be active or retired senior executives of large companies, educational institutions, governmental agencies, service providers or non-profit organizations. Advice and recommendations from others, such as executive search firms, may be considered, as the Board of Directors deems appropriate.

The Board of Directors reviews all of these factors, and others considered pertinent by HSBC and the Board of Directors, in the context of an assessment of the perceived needs of the Board of Directors at particular points in time. Consideration of new Board candidates typically involves a series of internal discussions, development of a potential candidate list, review of information concerning candidates, and interviews with selected candidates. Under our Corporate Governance Standards, in the event of a major change in a Director's career position or status, including a change in employer or a significant change in job responsibilities or a change in the Director's status as an "independent director," the Director is expected to offer to resign. The Chairman of the Board, in consultation with the Chief Executive Officer and senior executive management, will determine whether to present the resignation to the Board of Directors. If presented, the Board of Directors has discretion after consultation with management to either accept or reject the resignation. In addition, the Board of Directors discusses the effectiveness of the Board and its committees on an annual basis, which discussion includes a review of the composition of the Board.

As set forth in our Corporate Governance Standards, while representing the best interests of HSBC and HSBC Finance Corporation, each Director is expected to:

Ÿ promote HSBC's brand values and standards in performing their responsibilities;

Ÿ have the ability to spend the necessary time required to function effectively as a Director;

Ÿ develop and maintain a sound understanding of the strategies, business and senior executive succession planning of HSBC Finance Corporation;

Ÿ carefully study all Board materials and provide active, objective and constructive participation at meetings of the Board and its committees;

Ÿ assist in affirmatively representing HSBC to the world;

Ÿ be available to advise and consult on key organizational changes and to counsel on corporate issues;

Ÿ develop and maintain a good understanding of global economic issues and trends; and

Ÿ seek clarification from experts retained by HSBC Finance Corporation (including employees of HSBC Finance Corporation) to better understand legal, financial or business issues affecting HSBC Finance Corporation.

Under the Corporate Governance Standards, Directors have full access to senior management and other employees of HSBC Finance Corporation. Additionally, the Board and its committees have the right at any time to retain independent outside financial, legal and other advisors, at the expense of HSBC Finance Corporation.

Board of Directors - Delegation of Authority The HSBC North America Board of Directors has delegated its powers, authorities and discretion, to the extent they concern the management and day to day operation of the businesses and support functions of HSBC North America and its subsidiaries to a management Executive Committee comprised of senior executives from the businesses and staff functions. Under this authority, the Executive Committee approves and addresses all matters which are of a routine or technical nature and relate to matters in the ordinary course of business. The HSBC Finance Corporation Chief Executive Officer, Chief Risk Officer, Head of Regulatory Compliance, Head of Financial Crimes Compliance, Chief Operating Officer, Head of Strategy and Planning, Chief Servicing Officer of Consumer and Mortgage Lending, Corporate Secretary and Head of Communications are members of the HSBC North America Executive Committee.

The objective of the Executive Committee is to maintain a reporting and control structure in which all of the line operations of HSBC North America and all its subsidiaries, including HSBC Finance Corporation, are accountable to individual members of the Executive Committee who report to the HSBC North America Chief Executive Officer, who in turn reports to the HSBC Chief Executive Officer.

Board of Directors - Risk Oversight by Board HSBC Finance Corporation has a comprehensive risk management framework designed to ensure all risks, including credit, liquidity, interest rate, market, operational, reputational and strategic risk, are appropriately identified, measured, monitored, controlled and reported. The risk management function oversees, directs and integrates the various risk-related functions, processes, policies, initiatives and information systems into a coherent and consistent risk management framework. Our risk management policies are primarily implemented in accordance with the practices and limits by the HSBC Group Management Board. Oversight of all risks specific to HSBC Finance Corporation commences with the Board of Directors, which has delegated principal responsibility for a number of these matters to the Audit Committee, the Risk Committee and the Compliance Committee.

Audit Committee The Audit Committee has responsibility for oversight of and advice to the Board of Directors on matters relating to financial reporting and for oversight of internal controls over financial reporting. As set forth in our Audit Committee charter, the Audit Committee is responsible, on behalf of the Board of Directors, for oversight and advice to the Board of Directors with respect to:

Ÿ the integrity of HSBC Finance Corporation's financial reporting processes and effective systems of internal controls relating to financial reporting;

Ÿ HSBC Finance Corporation's compliance with legal and regulatory requirements that may have a material impact on our financial statements; and

Ÿ the qualifications, independence, performance and remuneration of HSBC Finance Corporation's independent auditors.

The Audit Committee also has the responsibility, power, direction and authority to receive regular reports from the Internal Audit Department concerning major findings of internal audits and to review the periodic reports from the Internal Audit Department that include an assessment of the adequacy and effectiveness of HSBC Finance Corporation's processes for controlling activities and managing risks.

Risk Committee As set forth in our Risk Committee charter, the Risk Committee has the responsibility, power, direction and authority to:

Ÿ receive regular reports from the Chief Risk Officer that enable the Risk Committee to assess the risks involved in the business and how risks are monitored and controlled by management and to give explicit focus to current and forward-looking aspects of risk exposure which may require an assessment of our vulnerability to previously unknown or unidentified risks;

Ÿ review and discuss with the Chief Risk Officer the adequacy and effectiveness of our internal control and risk management framework in relation to our strategic objectives and related reporting;

Ÿ oversee and advise the Board of Directors on all high-level risks;

Ÿ approve with HSBC the appointment and replacement of the Chief Risk Officer;

Ÿ review and approve the annual key objectives and performance review of the Chief Risk Officer;

Ÿ seek appropriate assurance as to the Chief Risk Officer's authority, access, independence and reporting lines;

Ÿ review the effectiveness of our internal control and risk management framework and whether management has discharged its duty to maintain an effective internal control system;

Ÿ consider the risks associated with proposed strategic acquisitions or dispositions;

Ÿ receive reports from the HSBC North America ALCO in order to assess major financial risk exposures and the steps management has taken to monitor and control such exposures;

Ÿ review with senior management and, as appropriate, approve, guidelines and policies to govern the process for assessing and managing various risk topics, including litigation risk and reputational risk; and

Ÿ oversee the continuing maintenance and enhancement of a strong enterprise-wide risk management culture.

At each quarterly Risk Committee meeting, the Chief Risk Officer makes a presentation to the committee reviewing key and emerging risks for HSBC Finance Corporation, which may include operational and internal controls, market, credit, information security, capital management, liquidity and litigation. In addition, the head of each Risk functional area is available to provide the Risk Committee a review of particular potential risks to HSBC Finance Corporation and management's plan for mitigating these risks.

In 2011, the HSBC Finance Corporation Risk Management Committee was combined with the HSBC North America Risk Management Committee (the "Risk Management Committee"), which provides strategic and tactical direction to risk management functions throughout HSBC North America, including HSBC Finance Corporation, focusing on: credit, funding and liquidity, capital, market, operational, security, fraud, reputational and compliance risks. The Risk Management Committee is comprised of the function heads of each of these areas, as well as other control functions within the organization. The Chief Risk Officer of HSBC North America is the Chair of this committee. On an annual basis, the HSBC North America and HSBC Finance Corporation Boards review the Risk Management Committee's charter and framework. The HSBC North America Operational Risk & Internal Control Committee ("ORIC Committee") and the HSBC Finance Corporation Disclosure Committee report to the Risk Management Committee and, together with the HSBC North America ALCO, define the risk appetite, policies and limits; monitor excessive exposures, trends and effectiveness of risk management; and promulgate a suitable risk management culture, focused within the parameters of their specific areas of risk.

HSBC North America ALCO provides oversight and strategic guidance concerning the composition of the balance sheet and pricing as it affects net interest income. It establishes limits of acceptable risk and oversees maintenance and improvement of the management tools and framework used to identify, report, assess and mitigate market, interest rate and liquidity risks.

In 2011, the HSBC Finance Corporation Operational Risk & Internal Control Committee was combined with the ORIC Committee, which is responsible for oversight of the identification, assessment, monitoring, appetite for, and proactive management and control of, operational risk for HSBC North America, including HSBC Finance Corporation. Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The ORIC Committee is designed to ensure that senior management fully considers and effectively manages our operational risk in a cost-effective manner so as to reduce the level of operational risk losses and to protect the organization from foreseeable future operational losses.

The HSBC Finance Corporation Disclosure Committee is responsible for maintenance and evaluation of our disclosure controls and procedures and for assessing the materiality of information required to be disclosed in periodic reports filed with the SEC. Among its responsibilities is the review of quarterly certifications of business and financial officers throughout HSBC Finance Corporation as to the integrity of our financial reporting process, the adequacy of our internal and disclosure control practices and the accuracy of our financial statements.

Compliance Committee As set forth in our Compliance Committee charter, the Compliance Committee has the responsibility, power, direction and authority to:

Ÿ receive regular reports from management on plans to strengthen our compliance risk management practices;

Ÿ oversee the continuing maintenance and enhancement of a strong compliance culture;

Ÿ receive regular reports from the Chief Risk Officer that enable the Compliance Committee to assess major compliance exposures and the steps management has taken to monitor and control such exposures, including the manner in which the regulatory and legal requirements of pertinent jurisdictions are evaluated and addressed;

Ÿ approve the appointment and replacement of the Chief Risk Officer and other statutory compliance officers and review and approve the annual key objectives and performance review of the Chief Risk Officer;

Ÿ review the budget, plan, changes in plan, activities, organization and qualifications of the compliance functions as necessary or advisable in the Committee's judgment;

Ÿ review and monitor the effectiveness of the compliance functions and the Compliance Program, including testing and monitoring functions, and obtain assurances that the compliance functions, including testing and monitoring functions, are appropriately resourced, have appropriate standing within the organization and are free from management or other restrictions;

Ÿ seek such assurance as it may deem appropriate that the Chief Risk Officer participates in the risk management and oversight process at the highest level on an enterprise-wide basis; has total independence from individual business units; reports to the Compliance Committee and has internal functional reporting lines to the HSBC Head of Group Risk; and has direct access to the Chairman of the Compliance Committee, as needed; and

Ÿ upon request of the Board, provide the Board with negative assurance as to such regulatory and legal requirements as the Compliance Committee deems possible.

In support of these responsibilities, HSBC Finance Corporation maintains an Executive Compliance Steering Committee, which is a management committee established to provide overall strategic direction and oversight to significant HSBC Finance Corporation compliance issues. Patrick Burke, the Chief Executive Officer and a Director, is the Chair of this committee, the membership of which also includes the heads of our business segments, our Chief Risk Officer and senior management of our compliance, Legal and other control functions. The Executive Compliance Steering Committee reports to both the Compliance Committee of the Board of Directors and the HSBC North America Executive Committee. This committee defines deliverables, provides ongoing direction to project teams, approves all regulatory submissions and prepares materials for presentation to the Board of Directors. The Project Steering Committee also provides oversight to individual project managers, compliance subject matter experts, and external consultants to ensure any regulatory requested deliverables are met.

For further discussion of risk management generally, see the "Risk Management" section of the MD&A.

Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act, as amended, requires certain of our Directors, executive officers and any persons who own more than 10 percent of a registered class of our equity securities to report their initial ownership and any subsequent change to the SEC and the NYSE. With respect to the issue of HSBC Finance Corporation preferred stock outstanding, we reviewed copies of all reports furnished to us and obtained written representations from our Directors and executive officers that no other reports were required. Based solely on a review of copies of such forms furnished to us and written representations from the applicable Directors and executive officers, all required reports of changes in beneficial ownership were filed on a timely basis for the 2013 fiscal year.

Code of Ethics HSBC Finance Corporation has adopted a Code of Ethics that is applicable to its chief executive officer, chief financial officer, chief accounting officer and controller, which Code of Ethics is incorporated by reference in Exhibit 14 to this Annual Report on Form 10-K. HSBC North America also has a general code of ethics applicable to all U.S. employees, including employees of HSBC Finance Corporation, which is referred to as its Statement of Business Principles and Code of Ethics. That document is available on our website at www.us.hsbc.com or upon written request made to HSBC Finance Corporation, 26525 North Riverwoods Boulevard, Suite 100, Mettawa, Illinois 60045, Attention: Corporate Secretary.

Item 11. Executive Compensation.

Compensation Discussion and Analysis

The following compensation discussion and analysis (the "2013 CD&A") summarizes the principles, objectives and factors considered in evaluating and determining the 2013 compensation for our executive officers. Specific compensation information relating to our Chief Executive Officer, Chief Financial Officer, and the next three most highly compensated executives is contained in this portion of the Form 10-K. In addition, the 2013 CD&A and accompanying tables also contain compensation disclosures for two individuals, who served as executive officers during the part of 2013. If these former executives were employed at the end of fiscal year, December 31, 2013, their total compensation would place them among the three most highly compensated executives. Collectively, these officers are referred to as the Named Executive Officers ("NEOs").

Oversight of Compensation Decisions

Remuneration Committee

The HSBC Board of Directors has a Remuneration Committee ("REMCO") which meets regularly to consider terms and conditions of employment, remuneration and retirement benefits. With authority delegated by the HSBC Board, REMCO is responsible for approving the remuneration policy of HSBC, including the terms of variable pay plans, share plans and other long-term incentive plans worldwide. In this role, REMCO is also responsible for approving the individual remuneration packages for the most senior HSBC executives, generally those having an impact on HSBC's risk profile and those in position of significant influence ("senior executives").

The members of REMCO during 2013 are the following non-executive directors of HSBC: Sir Simon Robertson (Chairman as of May 24, 2013), J. L. Thornton (retired as chairman on May 24, 2013), J. D. Coombe, W. S. H. Laidlaw and R. Fassbind. As an indirect wholly owned subsidiary of HSBC, HSBC Finance Corporation is subject to the remuneration policy established by HSBC, and the Chief Executive Officer of HSBC Finance Corporation is one of the senior executives whose compensation is reviewed and approved by REMCO.

Delegation of Authority from Remuneration Committee

The remuneration of executives who are not "senior executives" within the broader view of HSBC is determined by HSBC executives who have the authority delegated to them by REMCO to endorse remuneration (up to pre-determined levels of compensation and levels of management that differ by level of delegated authority). At the highest level, REMCO delegates this authority to the HSBC Group Chief Executive, Stuart T. Gulliver. Within his powers, Mr. Gulliver further delegated this authority regionally to approve pay packages to Irene M. Dorner, who as HSBC North America's Chief Executive Officer had authority and oversight recommendation responsibility for HSBC North America and its subsidiaries. In a similar manner, Mr. Patrick J. Burke, as HSBC Finance Corporation's Chief Executive Officer, received delegated authority for approval over executive remuneration from Ms. Dorner. Remuneration decisions for executives can be further delegated to other relevant authorities within HSBC, as appropriate, depending on their level of responsibility and the scope of their role. Those with delegated authority to approve remuneration for executives do so after consultation with HSBC's Group Managing Director of Human Resources as well as with the relevant heads of global business segments or heads of global staff functions, such as Finance or Risk.

Board of Directors; HSBC North America Nominating and Governance Committee

The HSBC North America Board of Directors reviewed and made recommendations concerning proposed 2013 performance assessments and variable pay compensation award proposals for the Chief Executive Officer, direct reports to the Chief Executive Officer and certain other Covered Employees ("Covered Employees"), including the NEOs. The Board of Directors also reviewed fixed pay recommendations for 2014 for the NEOs and had the opportunity to recommend changes before awards were finalized.

The Nominating and Governance Committee of HSBC North America (the "HNAH Nominating and Governance Committee") performed certain responsibilities related to oversight and endorsements of compensation for 2013 performance with respect to HSBC North America and its subsidiaries. The duties of the HNAH Nominating and Governance Committee, among others, include: i) reviewing the corporate governance framework to ensure that best practices are maintained and relevant stakeholders are effectively represented, ii) overseeing the framework for assessing risk in the responsibilities of employees, the determination of who are Covered Employees under the Interagency Guidelines on Incentive Based Compensation Arrangements as published by the Federal Reserve Board, and the measures used to ensure that risk is appropriately considered in making discretionary variable pay compensation recommendations, iii) making recommendations concerning proposed performance assessments and discretionary variable pay compensation award proposals for the Chief Executive Officer, direct reports of the Chief Executive Officer and certain other Covered Employees, including any recommendations for reducing or canceling discretionary variable pay compensation previously awarded, and iv) reviewing the coverage and competitiveness of employee pension and retirement plans and general benefits. The recommendations related to employee compensation are incorporated into the submissions to REMCO, or to Mr. Gulliver, Ms. Dorner and Mr. Burke, in instances where REMCO has delegated remuneration authority. During the fourth quarter of 2013 and in January 2014, the HNAH Nominating and Governance Committee reviewed the enhanced risk assessment measures with respect to risks taken and risk outcomes in connection with the performance review process and compensation recommendations for senior executives for 2013 performance. During the fourth quarter of 2013 and in January 2014, the HNAH Nominating and Governance Committee reviewed performance review summaries and compensation recommendations for senior executives for 2013 performance. During the first quarter of 2014, the HNAH Nominating and Governance Committee reviewed a summary provided by the Compensation and Performance Management Governance Committee ("CPMG Committee") of the approved risk evidence statements that are required of all U.S. business units and functions to support 2013 variable pay recommendations.

Compensation and Performance Management Governance Committee

In 2010, HSBC North America established the Compensation and Performance Management Governance Committee ("CPMG Committee"). The CPMG Committee was created to provide a more systematic approach to incentive compensation governance and ensure the involvement of the appropriate levels of leadership in a comprehensive view of compensation practices and associated risks. The members of the CPMG Committee are senior executive representatives from HSBC North America's staff and control functions, consisting of Risk, Legal, Finance, Audit, Human Resources and Corporate Secretary. The CPMG Committee approves the list of Covered Employees and their mandatory performance scorecard objectives; reviews compensation recommendations related to regulatory and audit findings; and can make recommendations to reduce or cancel previous grants of incentive compensation based on actual results and risk outcomes. The CPMG Committee can make its recommendations to the HNAH Nominating and Governance Committee, REMCO, Mr. Gulliver, Ms. Dorner or Mr. Burke, depending on the nature of the recommendation or the delegation of authority for making final decisions. The CPMG Committee held six formal meetings in 2013, as well as two formal meetings during the first quarter of 2014.

Objectives of HSBC Finance Corporation's Compensation Program

A global reward strategy for the HSBC Group, as approved by REMCO, is utilized by HSBC Finance Corporation. The usage of a global reward strategy promotes a uniform compensation philosophy throughout the HSBC Group, common standards and practices throughout HSBC Group's global operations, and a particular framework for REMCO to use in carrying out its responsibilities. The reward strategy includes the following elements:

Ÿ A focus on total compensation (fixed pay and annual discretionary variable pay) with the level of annual discretionary variable pay (namely, cash, deferred cash and the value of long-term equity incentives) differentiated by performance;

Ÿ An assessment of reward with reference to clear and relevant objectives set within a performance scorecard framework;

Our most senior executives, including Messrs. Burke, Michael A. Reeves, Gregory T. Zeeman, Steven G. Ekert, Loren C. Klug, C. Mark Gunton and Gary E. Peterson set objectives using a performance scorecard framework. Under a performance scorecard framework, objectives are separated into financial objectives and non-financial objectives, and the weighting between the categories varies by executive. The performance scorecard also requires an assessment of the executive's adherence to the HSBC Group values and behaviors consistent with managing a sound financial institution. Specific objectives required of all Covered Employees include targets relating to Compliance, Internal Audit and general risk and internal control measures.

In performance scorecards, certain objectives have quantitative standards that may include meeting designated financial performance targets for the company or the executive's function. Qualitative objectives may include key strategic business initiatives or projects for the company or executive's function. Quantitative and qualitative objectives only provide some guidance with respect to 2013 compensation. However, in keeping with HSBC Group's reward strategy, discretion played a considerable role in establishing the annual discretionary variable pay awards for HSBC Finance Corporation's senior executives;

Ÿ The use of considered discretion to assess the extent to which performance has been achieved, rather than applying a formulaic approach which, by its nature, is inherently incapable of considering all factors affecting results and may encourage inappropriate risk taking. In addition, environmental factors and social and governance aspects that would otherwise not be considered by applying absolute financial metrics may be taken into consideration. While there are specific quantitative goals as outlined above, the final reward decision is not solely dependent on the achievement of one or all of the objectives;

Ÿ Delivery of a significant proportion of variable pay in deferred HSBC ordinary shares to align recipient interests to the future performance of the HSBC Group and to retain key talent; and

Ÿ A total compensation package (fixed pay, annual discretionary variable pay, and other benefits) that is competitive in relation to comparable organizations in the market in which HSBC Finance Corporation operates.

Internal Equity

HSBC Finance Corporation's executive officer compensation is analyzed internally at the direction of HSBC's Group Managing Director of Human Resources with a view to align treatment globally and across business segments and functions, taking into consideration individual responsibilities, size and scale of the businesses the executives lead, and contributions of each executive, along with geography and local labor markets. These factors are then calibrated for business and individual performance within the context of their business environment against the respective Comparator Groups, as detailed herein.

Link to Company Performance

HSBC Group's compensation plans are designed to motivate its executives to improve the overall performance and profitability of the HSBC Group as well as the specific region, unit or function to which they are assigned. The HSBC Group seeks to offer competitive fixed pay with a significant portion of discretionary variable pay compensation components determined by measuring overall performance of the executive, his or her respective business unit or function, legal entity and the HSBC Group overall. The discretionary annual variable pay awards are based on individual and business performance, as more fully described under Elements of Compensation - Annual Discretionary Variable Pay Awards. Common objectives for the NEOs included: managing operating expenses; execution of transformation projects, enhancement of control environment, mitigation of risk and compliance to regulatory and HSBC standards or goals established around employee value proposition or attracting, developing and retaining talent. Each NEO also had other individual objectives specific to his role.

We have a strong orientation to use variable pay to reward performance. Consequently, variable pay makes up a significant proportion of total compensation, while maintaining an appropriate balance between fixed and variable elements. Actual compensation paid will increase or decrease based on the executive's individual performance, including business results and the management of risk within his or her responsibilities.

As the determination of the variable pay awards relative to 2013 performance considered the overall satisfaction of objectives that could not be evaluated until the end of 2013, the final determination on 2013 total compensation was not made until February 2014. To make that evaluation, Mr. Gulliver, Ms. Dorner and Mr. Burke received reports from management concerning satisfaction of 2013 corporate, business unit or function and individual objectives.

Competitive Compensation Levels and Benchmarking

When making compensation decisions, we look at the compensation paid to similarly-situated executives in our comparator groups, a practice referred to as "benchmarking." Benchmarking provides a point of reference for measurement, but does not replace analysis of internal pay equity and individual performance of the executive officers that HSBC also considers when making compensation decisions. We strive to maintain a compensation program that may attract and retain qualified executives, but also has levels of compensation that differ based on performance.

In 2013, REMCO retained Towers Watson to provide REMCO with market trend information for use during the annual pay review process and advise REMCO as to the competitive position of HSBC's total direct compensation levels in relation to the Comparator Groups. Towers Watson provided competitive positions on the highest level executives in HSBC, including Messrs. Burke, Zeeman, Ekert and Peterson. Comparative competitor information was provided to Mr. Gulliver to evaluate the competitiveness of proposed executive compensation.

The Comparator Groups are reviewed annually with the assistance of Towers Watson. The primary Comparator Group consists of our global peers with comparable business operations located within U.S. borders. Primary Comparator Group organizations are publicly held companies that compete with HSBC for business, customers and executive talent and are broadly similar in size and international scope. A secondary Comparator Group, consisting of the primary Comparator Group companies and a selection of U.S.-based peers, is also used. The secondary Comparator Group is used to benchmark compensation levels for certain roles that are more regionally focused. The Chief Executive Officer role was benchmarked using the secondary Comparator Group. All other NEO roles were benchmarked using the primary Comparator Group.

The primary Comparator Group for 2013 consisted of:


Bank of America		JPMorgan Chase
Barclays		Santander
BNP Paribas		Standard Chartered
Citigroup		UBS
Deutsche Bank

The secondary Comparator Group for 2013 consisted of the Global Peers listed above and the following U.S.-based peers:


Bank of New York Mellon		Regions
BB&T		State Street
Fifth Third		SunTrust
KeyCorp		TD Bank
M&T		U.S. Bank
Northern Trust		Wells Fargo
PNC

The aggregate fee paid to Towers Watson for services provided to HSBC was $537,258, of which $8,811 was apportioned to HSBC Finance Corporation for executive benchmarking. Separately, the management of HSBC North America retained Towers Watson to perform non-executive compensation consulting services. In 2013, the aggregate fee paid to Towers Watson by HSBC North America for these other services was $1,704,826.

The total compensation review for Messrs. Reeves and Klug included comparative competitor information based on broader financial services industry data and general industry data that was compiled from compensation surveys prepared by consulting firm McLagan Partners Inc. ("McLagan"). The aggregate fee paid to McLagan for executive compensation consulting services by HSBC North America was $43,174 and for non-executive consulting services was $86,117. Additionally, the HSBC Group paid $726,507 to McLagan for fees related to compensation surveys used globally.

Elements of Compensation

The primary elements of executive compensation, which are described in further detail below, are fixed pay and annual discretionary variable pay awards.

In addition, executives are eligible to receive company funded retirement benefits that are offered to employees at all levels who meet the eligibility requirements of such qualified and non-qualified plans. Although perquisites are provided to certain executives, they typically are not a significant component of compensation.

Fixed Pay

Fixed pay helps us attract and retain executive talent because it provides a degree of financial certainty and is less subject to risk than most other pay elements. In establishing individual fixed pay levels, consideration is given to market pay, as well as the specific responsibilities and experience of the NEO. Fixed Pay is reviewed annually and may be adjusted based on performance and changes in the competitive market. Consideration is given to compensation paid for similar positions at Comparator Group companies, particularly at the median level. Other factors such as specific job responsibilities, length of time in current position, pay history, internal equity, and retention concerns influence the final fixed pay recommendations for individual executives. Fixed pay increases proposed by senior management are prioritized towards high performing employees. Additionally, consideration is given to maintaining an appropriate ratio between fixed pay and variable pay as components of total compensation.

Annual Discretionary Variable Pay Awards

Annual discretionary variable pay ("variable pay") awards differ from year to year and are offered as part of the total compensation package to motivate and reward strong performance. Superior performance is encouraged by placing a part of the executive's total compensation at risk. In the event certain quantitative or qualitative performance goals are not met, cash awards may be reduced or not paid at all. Variable pay awards may be granted as cash, deferred cash, and long-term equity incentive awards. Employees will become fully entitled to deferred cash over a three to five year vesting period.

Long-term equity incentive awards may be made in the form of stock options, restricted shares, and restricted share units ("RSUs"). The purpose of equity-based compensation is to help us attract and retain outstanding employees and to promote success of HSBC Finance Corporation's business over a period of time by aligning the financial interests of these employees with those of HSBC's shareholders.

Historically, (prior to the merger into the HSBC Group in 2003), Household equity awards were primarily made in the form of stock options and restricted stock rights. The stock options typically vested in three, four or five equal installments, subject to continued employment and expire ten years from the grant date. No stock options have been granted to executive officers after 2004.

In 2005, the HSBC Group shifted its equity-based compensation awards to restricted shares with a time vesting condition, in lieu of stock options. Starting in 2009, RSUs have been awarded as the long-term equity incentive component of variable discretionary pay. The restricted shares and RSUs granted consist of a number of shares to which the employee will become fully entitled, generally over a three year vesting period. The restricted shares and RSUs granted by HSBC also carry rights to dividends or dividend equivalents which are paid or accrue on all underlying share or share unit awards at the same rate paid to ordinary shareholders. Following shareholder approval of the HSBC Share Plan 2011, HSBC introduced a new form of long-term equity incentive awards for senior executives under the Group Performance Share Plan ("GPSP"). Grants under the GPSP aim to achieve alignment between the interests of participants and the interests of shareholders and to encourage participants to deliver sustainable long-term business performance. Grants under the GPSP are approved by REMCO, by considering performance delivered prior to the date of grant against a pre-determined scorecard. Performance measures on the scorecard are reviewed annually and for 2013 composed of 60 percent financial measures, such as return on equity, capital efficiency ratio, capital strength and dividends, and 40 percent non-financial measures, including strategy execution, brand equity, compliance, reputation and people. Grants under the GPSP comprise a number of shares to which the employee will become fully entitled, over a five year vesting period, subject to continued employment with the HSBC Group. Shares which are released upon vesting of an award must be retained until the employee retires from or terminates employment with the HSBC Group.

REMCO considers and decides the grant of long term equity awards and considers individual executive performance and goal achievement as well as the total compensation package when determining the award allocation. While share dilution is not a primary factor in determining award amounts, there are limits to the number of shares that can be issued under HSBC equity-based compensation programs. These limits, more fully described in the various HSBC Share Plans, were established by vote of HSBC's shareholders.

Perquisites

Our philosophy is to provide perquisites that are intended to help executives be more productive and efficient or to protect us and our executives from certain business risks and potential threats. Our review of competitive market data indicates that the perquisites provided to executives are reasonable and within market practice. Perquisites are generally not a significant component of compensation, except as described below.

Mr. Gunton participated in general benefits available to executives of HSBC Finance Corporation and certain additional benefits and perquisites available to executives on international assignments. Compensation packages for international assignees are modeled to be competitive globally and within the country of assignment and attractive to the executive in relation to the significant commitment that must be made in connection with a global posting. The additional benefits and perquisites may be significant when compared with other compensation received by other executive officers of HSBC Finance Corporation and can consist of housing expenses, children's education costs, car allowances, travel expenses and tax equalization. These benefits and perquisites are, however, consistent with those paid to similarly-situated international assignees subject to appointment to HSBC Group locations globally and are deemed appropriate by the HSBC Group senior management. Perquisites are further described in the Summary Compensation Table.

Retirement Benefits

HSBC North America offered a qualified defined benefit pension plan under which HSBC Finance Corporation executives could participate and receive a benefit equal to that provided to all eligible employees of HSBC Finance Corporation with similar dates of hire. Effective January 1, 2013, this pension plan was frozen such that future contributions ceased under the Cash Balance formula, the plan closed to new participants and employees no longer accrue any future benefits. HSBC North America also maintains a qualified defined contribution plan with a 401(k) feature and company matching contributions. Executives and certain other highly compensated employees can elect to participate in a non-qualified deferred compensation plan, in which such employees can elect to defer the receipt of earned compensation to a future date. HSBC Finance Corporation does not pay any above-market or preferential interest in connection with deferred amounts. As an international assignee, Mr. Gunton, was accruing pension benefits under foreign-based defined benefit plans, through May 31, 2013 as his last day of service. Additional information concerning these plans is contained in the Pension Benefits Table.

Performance Year 2013 Compensation Actions

HSBC and HSBC Finance Corporation aim to have a reward policy that adheres to the governance initiatives of all relevant regulatory bodies and appropriately considers the risks associated with elements of total compensation.

Levels of fixed pay were reviewed and management determined that, in one instance, the market did warrant adjustments to the fixed pay of the NEO. Effective March 3, 2014, Mr. Zeeman received a fixed pay increase from $425,000 to $437,750.

On an IFRSs continuing operations basis, profit before taxes improved in 2013, reflecting significantly lower loan impairment charges, higher other operating income and lower operating expenses, partially offset by lower net interest income. Loan impairment charges decreased significantly due to significant improvements in market value adjustments on loan collateral driven by improvements in home prices as well as lower loan balances outstanding as the portfolio continues to liquidate and lower delinquency levels. While this performance reflects improvements in economic conditions, it also shows commitment towards the defined strategy to sell the portions of the portfolio when conditions are favorable and to collect out the remaining balances. We believe our strategic objectives and the direction of our executive officers will support and protect HSBC's interests. Variable pay awards for HSBC Finance Corporation were approved to be awarded to the NEOs who were employed as of December 31, 2013. Messrs. Gunton and Peterson were not employed with HSBC as of the end of fiscal year, thus they are not receiving variable pay for performance year 2013.

Variable pay awarded to most employees in respect of 2013 performance is subject to deferral requirements under the HSBC Group Minimum Deferral Policy, which requires 10% to 50% of variable pay be awarded in the form of RSUs for HSBC ordinary shares that are subject to a three year vesting period. The deferral percentage increases in a graduated manner in relation to the amount of total variable pay awarded.

Messrs. Burke and Ekert, however, are subject to a different set of deferral requirements because they are designated as Code Staff ("Code Staff"), as defined by the United Kingdom's Prudential Regulation Authority ("PRA") Remuneration Code ("the Code"). HSBC Finance Corporation, as a subsidiary of HSBC, must have remuneration practices for executive officers that comply with the Code, which requires firms to identify Code Staff employees. Code Staff are defined as all employees that have a material impact on the firm's risk profile, including individuals who perform significant influence functions for a firm, executives, senior managers, and risk takers, as defined by the Code. Certain employees whose remuneration level is commensurate with Code Staff employees are also subject to the Code Staff deferral requirements.

Variable pay awarded to Code Staff in respect of 2013 performance is subject to different deferral rates than other employees under the HSBC Group Minimum Deferral Policy. Variable pay awards in excess of $750,000 are subject to a 60% deferral rate, and variable pay awards below $750,000 are subject to 40% deferral rate. In cases where the total compensation for Code Staff is equal to or less than $750,000, and variable pay is less than 33% of the total compensation, the HSBC Group Minimum Deferral Policy applies. Deferral rates are applied to the total variable pay award (excluding the GPSP award amounts, if any, which are fully deferred). The deferral amounts are split equally between deferred cash and deferred RSUs. Thirty-three percent (33%) of the deferred cash and deferred RSUs vest on each of the first and second anniversaries of the grant date, and thirty-four percent (34%) on the third anniversary of the grant date. RSUs are subject to an additional six-month retention period upon becoming vested, with provision made for the release of shares as required to meet associated income tax obligations. At the end of the vesting period, deferred cash is credited with a notional rate of return equivalent to the annual dividend yield of HSBC shares over the period. Amounts not deferred are also split equally between non-deferred cash and non-deferred share awards. Non-deferred share awards granted are immediately vested, yet subject to a six-month retention period with a provision made for the release of shares as required to meet associated tax obligations. Non-deferred cash awarded for 2013 performance will be paid on March 21, 2014. Deferred cash, deferred RSUs, and non-deferred shares will be granted on March 10, 2014.

The proportions of the total variable pay award split between GPSP, deferred cash, deferred share award, non-deferred cash and non-deferred share award are shown below for Messrs. Burke and Ekert.

Ÿ Mr. Burke's variable pay award for performance 2013 is $1,800,000. He received GPSP award of $450,000. The deferred portion of his variable pay consists of $405,000 in deferred cash and $405,000 in deferred RSUs. Mr. Burke's remaining variable pay award is delivered in equal parts non-deferred cash ($270,000) and immediately-vested shares ($270,000).

Ÿ Mr. Ekert's variable pay award for performance year 2013 is $1,450,000. He did not receive a GPSP award. The deferred portion of his variable pay award consists of $435,000 in deferred cash and $435,000 in deferred RSUs. Mr. Ekert's remaining variable pay awards is delivered in equal parts non-deferred cash ($290,000) and immediately-vested shares ($290,000).

Messrs. Reeves, Zeeman and Klug are not recognized as Code Staff employees and are not subject to the deferral rates applicable only to Code Staff. Under the HSBC Group Minimum Deferral Policy applicable to those not recognized as Code Staff, Messrs. Zeeman and Klug each will receive 35% of their total variable pay award for performance in 2013 in RSUs. Mr. Reeves will receive 20% of his total variable pay award for performance in 2013 in RSUs. Messrs. Reeves, Zeeman and Klug did not receive GPSP awards.

The following table summarizes the compensation decisions made with respect to the NEOs for the 2012 and 2013 performance years. The table below differs from the Summary Compensation Table because we determine equity award amounts after the performance year concludes, while SEC rules require that the Summary Compensation Table include equity compensation in the year granted. Also, the Summary Compensation Table includes changes in pension value and non-qualified deferred compensation earnings and other elements of compensation as part of total compensation and those amounts are not shown in the table below.

	Fixed Pay				Annual Discretionary Variable Cash⁽¹⁾				Long-term Equity Incentive Award⁽²⁾				Total Compensation				Year over Year % Change
	2012		2013		2012		2013		2012		2013		2012		2013		Year over Year % Change
Patrick J. Burke Chairman and Chief Executive Officer	$	700,000	$	700,000	$	638,294	$	675,000	$	918,294	$	1,125,000	$	2,256,588	$	2,500,000	11	%
Michael A. Reeves⁽³⁾ Executive Vice President, Chief Financial Officer	$	342,694	$	360,750	$	200,880	$	208,000	$	50,220	$	52,000	$	593,794	$	620,750	5	%
Gregory T. Zeeman⁽⁴⁾⁽⁵⁾ Senior Executive Vice President and Chief Operating Officer	N/A		$	425,000	N/A		$	438,750	N/A		$	236,250	N/A		$	1,100,000	_
Steven G. Ekert ⁽⁶⁾⁽⁷⁾ Senior Executive Vice President, Chief Risk Officer	N/A		$	363,846	N/A		$	725,000	N/A		$	725,000	N/A		$	1,813,846	_
Loren C. Klug ⁽⁸⁾ Executive Vice President, Head of Strategy and Planning and Chief of Staff to the CEO	N/A		$	351,912	N/A		$	487,500	N/A		$	262,500	N/A		$	1,101,912	_
C. Mark Gunton⁽⁹⁾ Senior Executive Vice President, Chief Risk Officer (former)	$	513,843	$	240,811	$	362,700	$	-	$	195,300	$	-	$	1,071,843	$	240,811	(78	)%
Gary E. Peterson^(10)(11) Head of Regulatory Compliance & Financial Crimes Compliance (former)	$	595,192	$	590,000	$	392,925	$	-	$	211,575	$	-	$	1,199,692	$	590,000	(51	)%

⁽¹⁾Annual Discretionary Variable Cash amount pertains to the performance year indicated and is paid in the first quarter of the subsequent calendar year. Amounts include cash and deferred cash.

⁽²⁾Long-term Equity Incentive Award amount pertains to the performance year indicated and is typically awarded in the first quarter of the subsequent calendar year. For example, the Long-term Equity Incentive Award indicated above for 2013 is earned in performance year 2013 but will be granted in March 2014. However, as required in the Summary Compensation Table, the grant date fair market value of equity granted in March 2013 is disclosed for the 2013 fiscal year under the column of Stock Awards in that table. The grant date fair value of equity granted in March 2014 will be disclosed for the under the column of Stock Awards in the Summary Compensation Table reported for the 2014 fiscal year. Amounts include immediately-vested shares, deferred RSUs and GPSP awards.

⁽³⁾Mr. Reeves received one additional share award on October 31, 2013, with a grant date value of $500,000, as reported in the Grants of Plan-Based Awards Table.

⁽⁴⁾In his role as Senior Executive Vice President and Chief Operating Officer, HSBC North America, Mr. Zeeman had oversight over HSBC Finance Corporation, as well as HSBC USA. Amounts discussed within the 2013 CD&A and the accompanying executive compensation tables represent the full compensation paid to Mr. Zeeman for his role as Senior Executive Vice President and Chief Operating Officer for all three companies. Mr. Zeeman is also disclosed as an NEO in the HSBC USA Form 10-K for the year ended December 31, 2013.

⁽⁵⁾Mr. Zeeman received one additional share award April 30, 2013, with a grant date value of $750,000, as reported in the Grants of Plan-Based Awards Table.

⁽⁶⁾In his role as Senior Executive Vice President, Chief Risk Officer, HSBC North America, Mr. Ekert has risk oversight over HSBC Finance Corporation, as well as HSBC USA. Amounts discussed within the 2013 CD&A and the accompanying executive compensation tables represent the full compensation paid to Mr. Ekert for his role as Senior Executive Vice President, Chief Risk Officer for all three companies. Mr. Ekert is also disclosed as an NEO in the HSBC USA Form 10-K for the year ended December 31, 2013.

⁽⁷⁾Mr. Ekert received two additional share awards May 31, 2013, with grant date values of $450,000 and $784,900, as reported in the Grants of Plan-Based Awards Table.

⁽⁸⁾In his role as Executive Vice President, Strategy and Planning and and Chief of Staff to the CEO, HSBC North America, Mr. Klug has oversight over HSBC Finance Corporation, as well as HSBC USA. Amounts discussed within the 2013 CD&A and the accompanying executive compensation tables represent the full compensation paid to Mr. Klug for his role as Executive Vice President, Strategy and Planning and Chief of Staff to the CEO, for all three companies.

⁽⁹⁾In his role as Senior Executive Vice President, Chief Risk Officer, HSBC North America, Mr. Gunton had risk oversight over HSBC Finance Corporation, as well as HSBC USA. Amounts discussed within the 2013 CD&A and the accompanying executive compensation tables represent the full compensation paid to Mr. Gunton for his role as Senior Executive Vice President,Chief Risk Officer for all three companies. Mr. Gunton is also disclosed as an NEO in the HSBC USA Form 10-K for the year ended December 31, 2013. Mr. Gunton's employment with the company terminated June 1, 2013.

⁽¹⁰⁾In his role as Head of Regulatory Compliance and Financial Crimes Compliance, HSBC North America, Mr. Peterson had compliance oversight over HSBC Finance Corporation, as well as HSBC USA. Amounts discussed within the 2013 CD&A and the accompanying executive compensation tables represent the full compensation paid to Mr. Peterson for his role as Head of Regulatory Compliance and Financial Crimes Compliance for all three companies. Mr. Peterson's employment with the company terminated November 19, 2013.

⁽¹¹⁾Share award granted to Mr. Peterson in respect to performance year 2012 lapsed following termination of employment.

Compensation-Related Policies

Ex-Ante Adjustments to Variable Pay Award Recommendations

REMCO has the responsibility, power, authority and discretion to review and approve performance-based remuneration by reference to corporate goals and objectives. Further, REMCO may seek advice from the Group Risk Committee, as appropriate, on whether any adjustments for risk need to be applied when considering performance objectives or actual performance. Adjustments made to performance-based remuneration in advance of said remuneration actually being paid are commonly referred to as ex-ante adjustments. Additionally, the HNAH Nominating and Governance Committee includes among its duties making recommendations concerning proposed performance assessments and discretionary variable pay compensation award proposals for the Chief Executive Officer, direct reports of the Chief Executive Officer and certain other Covered Employees.

Reduction or Cancellation of Deferred Cash and Long-Term Equity Incentive Awards, including "Malus"

REMCO has the discretion to reduce or cancel all unvested awards under HSBC share plans after January 1, 2010, including RSUs, deferred cash, and any accrued dividends on unvested awards. Circumstances that may prompt such action by REMCO include, but are not limited to: participant conduct considered to be detrimental or bringing the business into disrepute; evidence that past performance was materially worse than originally understood; prior financial statements are materially restated, corrected or amended; and evidence that the employee or the employee's business unit engaged in improper or inadequate risk analysis or failed to raise related concerns.

REMCO will assess the seriousness of the circumstances to determine the award reduction, up to a cancellation of the award. Factors considered in the assessment can include the degree of individual responsibility and the proximity of individuals to the event leading to a malus action; the magnitude or the financial impact of the event; the extent of the internal mechanisms failed; circumstances pointing to control weaknesses or poor performance; and whether the financial impact of the circumstances can be adequately covered by adjustments to the variable pay awards in the year in which the circumstance is discovered. The awards that may be reduced are not limited to unvested awards granted in the year in which the malus event occurred, and all unvested awards are available for application of malus treatment.

Similarly, the HNAH Nominating and Governance Committee includes among its duties making recommendations for reducing or canceling discretionary variable pay compensation previously awarded for the Chief Executive Officer, direct reports of the Chief Executive Officer and certain other Covered Employees.

Additionally, all employees with unvested share awards or awards subject to a retention period will be required to certify annually that they have not used personal hedging strategies or remuneration contracts of insurance to mitigate the risk alignment of the unvested awards.

Severance Protection and Employment Contracts

The HSBC-North America (U.S.) Severance Pay Plan and the HSBC-North America (U.S.) Supplemental Severance Pay Plan provide any eligible employees with severance pay for a specified period of time in the event that his or her employment is involuntarily terminated for certain reasons, including displacement or lack of work or rearrangement of work. Regular U.S. full-time or part-time employees who are scheduled to work 20 or more hours per week are eligible. Employees are required to sign an employment release as a condition for receiving severance benefits. Benefit amounts differ according to position. However, the benefit is limited for all employees to a 52-week maximum.

Other than with respect to Mr. Burke, there are no employment agreements between HSBC Finance Corporation and the NEOs. HSBC Finance Corporation entered into a service agreement with Mr. Burke in July 2013. This agreement replaced the employment protection agreement previously in effect between Mr. Burke and HSBC Finance Corporation. In exchange for entering into the service agreement, Mr. Burke received an award of restricted share units. This award is conditional and will vest October 1, 2014, if: 1) conduct of Mr. Burke is aligned with HSBC Values until vesting date or cessation of employment if earlier; 2) Mr. Burke has achieved his business objectives until vesting date or cessation of employment if earlier; 3) the CML transaction has closed to the satisfaction of the CEO of HSBC Bank Inc., and 4) Mr. Burke has experienced an involuntary job loss as a result of no alternative new role being found which is commensurate with his current Global Career Band and is in both parties reasonable opinion appropriate in all the circumstances. Should Mr. Burke remain employed, his award will lapse on the day prior to the vesting date even though the other performance conditions may have been met. Vesting will not be pro-rated if Mr. Burke leaves HSBC or closure occurs prior to October 1, 2014. Subsequently, Mr. Burke was granted a second award of restricted share units under similar terms and conditions, which will only be effective if the award scheduled to vest on October 1, 2014, lapses. The second award, if effective, is subject to the same performance conditions and will vest on April 1, 2016.

The service agreement sets forth several obligations for HSBC Finance Corporation upon termination. If Mr. Burke's termination is due to death, disability or retirement, we will pay all Accrued Obligations (i.e. base salary through the date of termination, and any vacation pay, expense reimbursements, and other cash entitlements), Variable Pay (if any) awarded on a pro-rata basis to the date of termination, and any deferred Variable Pay shall vest in accordance with the established vesting schedule. In the event of death or disability, the award of restricted share units referenced above will be afforded good leaver treatment (i.e. immediate vest in the case of death, continued vesting in the case of disability). In the event of retirement, good leaver treatment will be disapplied. If Mr. Burke's termination is due to discharge for cause or resignation, we will pay all Accrued Obligations. If Mr. Burke's termination is otherwise regarded as a Qualifying Termination (i.e. termination by reason other than for Cause, Death or Disability), we will pay all Accrued Obligations, Severance Pay under the HSBC - North America (U.S.) Severance Pay Plan, Variable Pay (if any), and any otherwise not fully vested equity awards will vest. The variable pay (if any) would be awarded on a pro-rata basis to the date of termination and to vest in accordance with the established vesting schedule. While the agreement is in effect and during the six-month period following termination Mr. Burke may not become associated with the Comparator Groups, whether as a principal, partner, employee, consultant or shareholder (other than as a holder of 1% or less of the outstanding voting shares of any publicly traded company in the Comparator Groups) without our written consent, such consent not to be unreasonably withheld if Mr. Burke will be working for a member of the Comparator Groups in a role or business that does not directly or indirectly compete with us.

Certain payments under the service agreement between Mr. Burke and HSBC Finance Corporation may be nonqualified deferred compensation subject to the Internal Revenue Code Section 409A and the related regulations ("Section 409A"). HSBC believes that all nonqualified deferred compensation payable under the terms of the service agreement will be paid in compliance with Section 409A, including, but not limited to, the requirement that payments made to a specified employee on account of voluntary separation from service be delayed until at least six months after separation from service. This agreement will be interpreted and administered so as to avoid insofar as possible the imposition of excise taxes and other penalties under Section 409A.

Repricing of Stock Options and Timing of Option Grants

HSBC Finance Corporation does not, and our parent, HSBC, does not, reprice stock option grants. In addition, neither HSBC Finance Corporation, nor HSBC has ever engaged in the practice known as "back-dating" of stock option grants, nor have we attempted to time the granting of historical stock options in order to gain a lower exercise price. For HSBC equity option plans, the exercise price of awards made in 2003 and 2004 was the higher of the average market value for HSBC ordinary shares on the five business days preceding the grant date or the market value on the date of the grant.

HSBC also offers to all employees a stock purchase plan under its Sharesave Plan in which an employee who commits to contributing up to 250 GBP each month for one, three or five years is awarded options to acquire HSBC ordinary shares. At the end of the term, the employee may opt to use the accumulated amount, plus interest, if any, to purchase shares under the option. The exercise price for each option is the average market value of HSBC ordinary shares on the five business days preceding the date of the invitation to participate, less a 15 to 20 percent discount (depending on the term). The Sharesave Plan was discontinued in 2013. Option contracts awarded in previous years remain outstanding and will be administered in accordance with Plan provisions.

Tax Considerations

Limitations on the deductibility of compensation paid to executive officers under Section 162(m) of the Internal Revenue Code are not applicable to HSBC Finance Corporation, as it is not a public corporation as defined by Section 162(m). As such, all compensation to our executive officers is deductible for federal income tax purposes, unless there are excess golden parachute payments under Section 4999 of the Internal Revenue Code following a change in control.

Compensation Committee Interlocks and Insider Participation

As described in the 2013 CD&A, HSBC Finance Corporation is subject to the remuneration policy established by REMCO and the delegations of authority with respect to executive officer compensation described above under "Oversight of Compensation Decisions."

Compensation Committee Report

HSBC Finance Corporation does not have a Compensation Committee. While the HSBC North America Board of Directors and HSBC Finance Corporation Board of Directors were presented with information on proposed compensation for performance in 2013, the final decisions regarding remuneration policies and executive officer awards were made by REMCO or by Mr. Gulliver, Ms. Dorner or Mr. Burke, as well as the relevant heads of global business segments or global staff functions, where REMCO has delegated final decisions. We, the members of the Board of Directors of HSBC Finance Corporation, have reviewed the 2013 CD&A and discussed it with management, and have been advised that management of HSBC has reviewed the 2013 CD&A and believes it accurately reflects the policies and practices applicable to HSBC Finance Corporation executive compensation in 2013. HSBC Finance Corporation senior management has advised us that they believe the 2013 CD&A should be included in this Annual Report on Form 10-K. Based upon the information available to us, we have no reason to believe that the 2013 CD&A should not be included in this Annual Report on Form 10-K and therefore recommend that it should be included.

Board of Directors of HSBC Finance Corporation

Phillip D. Ameen

Patrick J. Burke

Robert K. Herdman

George A. Lorch

Beatriz R. Perez

Larree M. Renda

Thomas K. Whitford

Executive Compensation

The following tables and narrative text discuss the compensation awarded to, earned by or paid as of December 31, 2013 to (i) Mr. Patrick J. Burke who served as HSBC Finance Corporation's Chief Executive Officer, (ii) Mr. Michael A. Reeves, who served as HSBC Finance Corporation's Chief Financial Officer, (iii) the next three most highly compensated executive officers (other than the Chief Executive Officer and Chief Financial Officer) who were serving as executive officers as of December 31, 2013 and (iv) two additional executives (Messrs. Gunton and Peterson) who would have been among the top three highest paid but for the fact that they were not employed as of December 31, 2013.

Summary Compensation Table

Name and Principal Position	Year	Salary		Bonus⁽¹⁾		Stock Awards⁽²⁾		Option Awards		Non-Equity Incentive Plan Compen- sation		Change in Pension Value and Non-Qualified Deferred Compen- sation Earnings⁽³⁾		All Other Compensation⁽⁴⁾		Total
Patrick J. Burke	2013	$	700,000	$	675,000	$	3,518,294	$	-	$	-	$	-	$	15,384	$	4,908,678
Chairman and Chief Executive Officer	2012	$	700,000	$	638,294	$	1,175,000	$	-	$	-	$	877,143	$	83,597	$	3,474,034
	2011	$	688,885	$	825,000	$	825,000	$	-	$	-	$	1,881,648	$	103,220	$	4,323,753
Michael A. Reeves	2013	$	360,750	$	208,000	$	550,220	$	-	$	-	$	-	$	15,300	$	1,134,270
Executive Vice President, Chief Financial Officer	2012	$	342,694	$	200,880	$	310,000	$	-	$	-	$	279,899	$	15,000	$	1,148,473
	2011	$	330,008	$	240,000	$	66,000	$	-	$	-	$	219,106	$	15,462	$	870,576
Gregory T. Zeeman⁽⁵⁾⁽⁶⁾	2013	$	425,000	$	438,750	$	929,025	$	-	$	-	$	-	$	222,863	$	2,015,638
Senior Executive Vice President and Chief Operating Officer
Steven G. Ekert⁽⁵⁾⁽⁶⁾	2013	$	363,846	$	725,000	$	1,234,900	$	-	$	-	$	-	$	15,300	$	2,339,046
Senior Executive Vice President, Chief Risk Officer
Loren C. Klug⁽⁵⁾⁽⁶⁾	2013	$	351,912	$	487,500	$	227,850	$	-	$	-	$	-	$	15,300	$	1,082,562
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO
C. Mark Gunton⁽⁵⁾	2013	$	240,811	$	-	$	195,300	$	-	$	-	$	-	$	2,032,330	$	2,468,441
Senior Executive Vice President, Chief Risk Officer (former)	2012	$	513,843	$	362,700	$	240,450	$	-	$	-	$	860,445	$	813,436	$	2,790,874
	2011	$	523,144	$	446,550	$	227,500	-		-		$	268,826	$	540,587	$	2,006,607
Gary E. Peterson⁽⁵⁾⁽⁶⁾	2013	$	590,000	$	-	$	211,575	$	-	$	-	$	-	$	324,915	$	1,126,490
Head of Regulatory Compliance and Financial Crimes Compliance (former)	2012	$	595,192	$	392,925	$	120,000	$	-	$	-	$	8,161	$	288,269	$	1,404,547

(1) The amounts disclosed in 2013 are related to 2013 performance but paid in 2014. In the case of Messrs. Burke and Ekert amount includes portion granted in the form of deferred cash as disclosed under Performance Year 2013 Compensation Actions. Messrs. Burke and Ekert will become fully entitled to the deferred cash over a three year vesting period, and during the period, the deferred cash will be credited with a notional rate of return equal to the annual dividend yield of HSBC ordinary shares over the period.

(2) Reflects the aggregate grant date fair value of awards granted during the year. Aggregate grant date fair value is determined by multiplying the number of shares awarded by the prior day closing price for HSBC ordinary shares and the applicable foreign exchange rate. The grants are subject to various time vesting conditions as disclosed in the footnotes to the Outstanding Equity Awards at Fiscal Year End Table. Dividend equivalents, in the form of cash and additional shares, are paid on all underlying shares and restricted share units at the same rate as dividends paid on shares of HSBC.

(3) The HSBC - North America (U.S.) Pension Plan ("Pension Plan"), the HSBC - North America Non-Qualified Deferred Compensation Plan ("NQDCP"), the Supplemental HSBC Finance Corporation Retirement Income Plan ("SRIP") and the HSBC International Staff Retirement Benefit Scheme (Jersey) ("ISRBS") are described under Savings and Pension Plans. Increase/(decrease) in values by plan for each participant are: Mr. Burke - ($140,735) (Pension Plan), ($470,095) (SRIP); Mr. Reeves - ($90,187) (Pension Plan), ($68,592) (SRIP) $56,625 (NQDCP); Mr. Zeeman ($70,168) (Pension Plan), ($78,920) (SRIP); Mr. Klug - ($153,083) (Pension Plan), ($212,158) (SRIP), $34,807 (NQDCP); Mr. Gunton - ($51,976) (ISRBS); Mr. Peterson - ($1,249) (Pension Plan). Mr. Ekert does not participate in defined benefit pension plan..

(4) Components of All Other Compensation are disclosed in the aggregate. All Other Compensation includes perquisites and other personal benefits received by each Named Executive Officer, such as car and driver services, expatriate benefits and housing allowance to the extent such perquisites and other personal benefits exceeded $10,000 in 2013. The value of perquisites provided to Messrs. Burke, Reeves, Klug and Ekert did not exceed $10,000. The following itemizes perquisites and other benefits for each named executive officer who received perquisites and other benefits in excess of $10,000: Executive Travel Allowances for Mr. Gunton in amount of $129,152; Housing Allowance for Mr. Peterson was $309,615; Housing Furniture and Utilities Allowance for Mr. Gunton in amount of $51,749; Residential Lease Payments on behalf of Mr. Zeeman totaling $120,000; Tax Gross Up on Mr. Zeeman's residential lease payments in amount of $75,718; Tax Equalization resulted in net payments to Messrs. Zeeman and Gunton of $2,743 and $636,439 respectively; Mortgage Subsidies for Mr. Gunton in amount of $5,659; Children's Education Allowance for Mr. Gunton in amount of $51,518; Special Termination Agreement Payment for Mr. Gunton in amount of $1,138,149; Car and Driver Services for Messrs. Zeeman and Gunton in amount of $729 and $312 respectively.

All Other Compensation also includes HSBC Finance Corporation's contribution for the named executive officer's participation in the HSBC - North America (U.S.) Tax Reduction Investment Plan ("TRIP") in 2013, as follows: Messrs. Burke, Reeves, Zeeman, Klug, Ekert and Peterson each had a contribution of $15,300. Mr. Gunton had a company contribution in the HSBC International Retirement Benefit Plan ("IRBP") for International Managers in amount of $19,352. The value of Mr. Gunton's company contribution in the IRBP was calculated using an exchange rate from GBP to U.S. dollars of 1.6531. TRIP and IRBP are described under Savings and Pension Plans - Deferred Compensation Plans.

(5) Amounts shown for Messrs. Zeeman, Klug, Ekert, Gunton and Peterson represent the compensation earned in connection with their respective service to HSBC North America, HSBC Finance Corporation, and for HSBC USA. Messrs. Zeeman, Ekert and Gunton are also disclosed as Named Executive Officers in the HSBC USA Form 10-K for the year ended 2013.

(6) This table only reflects those officers who were Named Executive Officers for the particular referenced years above. Accordingly, Mr. Peterson was not a Named Executive Officer in 2011, so the table only reflects his compensation in fiscal years 2012 and 2013. Similarly, Messrs. Zeeman, Ekert and Klug were not Named Executive Officers in 2011 or 2012, so the table only reflects their compensation in fiscal year 2013.

Grants of Plan-Based Awards Table

			Estimated Future Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units	All Other Option Awards: Number of Securities Underlying Options	Exercise or Base Price of Option Awards	Grant Date Fair Value of Stock and Option Awards
	Grant		Thres-hold	Target	Maxi-mum	Thres-hold	Target	Maxi-mum			Exercise or Base Price of Option Awards	Grant Date Fair Value of Stock and Option Awards
Name	Date		($)	($)	($)	(#)	(#)	(#)	(#)	(#)	($/Sh)	($)
Patrick J. Burke	3/11/2013	⁽¹⁾							34,529			$	382,976
Chairman and Chief Executive Officer	3/11/2013	⁽²⁾							23,020			$	255,318
	3/11/2013	⁽³⁾							25,245			$	280,000
	3/11/2013	⁽⁴⁾		$382,976
	3/11/2013	⁽⁵⁾							117,210			$	1,300,000
	6/28/2013	⁽⁵⁾							125,227			$	1,300,000
Michael A. Reeves	3/11/2013	⁽⁶⁾							4,527			$	50,220
Executive Vice President, Chief Financial Officer	10/31/2013	⁽⁷⁾							45,504			$	500,000
Gregory T. Zeeman	3/11/2013	⁽⁶⁾							16,141			$	179,025
Senior Executive Officer and Chief Operating Officer	4/30/2013	⁽⁸⁾							68,797			$	750,000
Steven G. Ekert	5/31/2013	⁽⁹⁾							40,187			$	450,000
Senior Executive Vice President, Chief Risk Officer	5/31/2013	⁽¹⁰⁾							70,096			$	784,900
Loren C. Klug	3/11/2013	⁽⁶⁾							20,543			$	227,850
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO
C. Mark Gunton	3/11/2013	⁽⁶⁾							17,608			$	195,300
Senior Executive Vice President, Chief Risk Officer (former)
Gary E. Peterson	3/11/2013	⁽⁶⁾							19,076			$	211,575
Head of Regulatory Compliance and Financial Crimes Compliance (former)

(1) Reflects grant of RSUs, which vest one-hundred percent (100%) on the fifth anniversary of grant date. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 11, 2013 of GBP 7.37 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5049.

(2) Reflects grant of immediately-vested shares, yet subject to an additional six-month retention period, with provision made for the release of shares as required to meet associated income tax obligations. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 11, 2013 of GBP 7.37 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5049.

(3) Reflects grant of GPSP award, which vests one-hundred percent (100%) on March 11, 2018. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 11, 2013 of GBP 7.37 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5049.

(4) Reflects grant of deferred cash, which vests one-hundred percent (100%) on March 11, 2018. At the end of the vesting period, deferred cash is credited with a notional rate of return equal to the annual dividend yield of HSBC ordinary shares over the period.

⁽⁵⁾Reflects one time grants of performance-based restricted share units ("PRSUs"). The award granted in March 2013 ("March Award") which vest one-hundred percent (100%) on October 1, 2014, subject to satisfaction of corresponding performance conditions. The award granted in June 2013 ("June Award"),will vest one-hundred percent (100%) on April 1, 2016 subject to the satisfaction of corresponding performance conditions. The performance conditions for the two awards are interdependent in that if the March Award vests, the June Award will lapse immediately. Similarly, the June Award will only vest if the March Award has lapsed. It is also possible that neither award will vest if the corresponding performance conditions are not satisfied as of the vesting date. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on grant date: GBP 7.37 for March Award, GBP 6.83 for June Award, and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5049 for March Award and 1.5206 for June Award.

(6) Reflects grant of RSUs, which vest thirty-three percent (33%) on the first and second anniversaries of the grant date, and thirty-four percent (34%) on the third anniversary of the grant date. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 11, 2013 of GBP 7.37 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5049.

(7) Reflects one time grant of performance-based RSUs, which vest one-hundred percent (100%) on December 31, 2016. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on October 31, 2013 of GBP 6.84 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.6076. The award is subject to the satisfaction of certain performance conditions. Mr. Reeves is required to maintain a performance rating of strong or higher throughout the duration of the performance period along with behaviors aligned to the HSBC Group values.

⁽⁸⁾Reflects one time grant of performance-based RSUs, which vest one-hundred percent (100%) on April 30, 2016. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on April 30, 2013 of GBP 7.04 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5494. The award is subject to the satisfaction of certain performance conditions. Mr. Zeeman is required to maintain a performance rating of strong or higher throughout the duration of the performance period along with behaviors aligned to the HSBC Group values.

⁽⁹⁾Reflects grant of RSUs, which vest thirty-three percent (33%) on April 30, 2014 and April 30, 2015 and thirty-four percent (34%) will vest on April 29, 2016. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on May 31, 2013 of GBP 7.36 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5216. Represents a new hire award to Mr. Ekert for the purpose of retaining his services and providing an appropriate level of realized pay during the vesting period.

⁽¹⁰⁾Reflects grant of RSUs, which vest thirty-seven percent (37%) on March 31, 2014, twenty-nine percent (29%) on March 31, 2015, twenty-three percent (23%) on March 31, 2016 and eleven percent (11%) on March 31, 2017. The total grant date fair value is based on 100% of the fair market value of the underlying HSBC ordinary shares on May 31, 2013 of GBP 7.36 and converted into U.S. dollars using the GBP exchange rate as of the date of grant which was 1.5216. Mr. Ekert received this award to replace deferred compensation which was forfeited with his previous employer when he joined the HSBC Group.

Outstanding Equity Awards At Fiscal Year-End Table

				Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexer- cisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)⁽¹⁾		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)⁽¹⁾
Patrick J. Burke	68,852	⁽²⁾			GBP 7.2181	4/30/2014	27,502	⁽³⁾	$	301,151
Chairman and Chief Executive Officer							8,618	⁽⁴⁾	$	94,368
							43,453	⁽⁵⁾	$	475,816
							41,175	⁽⁶⁾	$	450,872
							26,383	⁽⁷⁾	$	288,897
							36,086	⁽⁸⁾	$	395,147
							122,497	⁽⁹⁾	$	1,341,359
							127,556	⁽¹⁰⁾	$	1,396,755
Michael A. Reeves							2,421	⁽³⁾	$	26,510
Executive Vice President, Chief Financial Officer							4,990	⁽⁶⁾	$	54,641
							20,796	⁽⁶⁾	$	227,719
							4,731	⁽¹¹⁾	$	51,805
							45,504	⁽¹²⁾	$498,275
Gregory T. Zeeman							5,534	⁽³⁾	$60,598
Senior Executive Vice President and Chief Operating Officer							12,028	⁽⁶⁾	$	131,708
							16,869	⁽¹¹⁾	$	184,718
							70,705	⁽¹³⁾	$	774,229
Steven G. Ekert							71,399	⁽¹⁴⁾	$	781,829
Senior Executive Vice President, Chief Risk Officer							40,934	⁽¹⁵⁾	$	448,233

Loren C. Klug							1,685	⁽³⁾	$	18,451
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO							25,952	⁽⁶⁾	$	284,178
							21,469	⁽¹¹⁾	$	235,088
C. Mark Gunton							8,341	⁽³⁾	$	91,335
Senior Executive Vice President, Chief Risk Officer (former)							20,002	⁽⁶⁾	$	219,025
							18,402	⁽¹¹⁾	$	201,504
Gary E. Peterson
Head of Regulatory Compliance and Financial Crimes Compliance (former)							-	⁽¹⁶⁾	$	-

(1) The HSBC ordinary shares market value of the shares on December 31, 2013 was GBP 6.624 and the exchange rate from GBP to U.S. dollars was 1.6531.

(2) Reflects fully vested options adjusted for the HSBC ordinary share rights issue completed in April 2009. During the rights issue, HSBC raised capital by offering the opportunity to purchase new shares at a fixed price to all qualifying shareholders on the basis of five new shares for every twelve existing shares. The number of unvested restricted shares and restricted share units held by employees was automatically increased, without any action required on the part of employees, in an effort to not disadvantage employees by the rights issue. Similarly, the number of unexercised stock options held by employees was automatically increased and a corresponding decrease was made in the option exercise price, without any action required on the part of employees and such that the employee will pay the same total amount to exercise the adjusted stock option award as before the rights issue. The adjustments to stock options, restricted shares and restricted share units were made based on a formula that HSBC's auditors, KPMG, confirmed was fair and reasonable.

(3) Thirty-three percent (33%) of this award vested on March 15, 2012, thirty-three percent (33%) vested on March 15, 2013, and thirty-four percent (34%) will vest on March 17, 2014.

(4) This award will vest in full on March 15, 2016.

(5) This award will vest in full on March 13, 2017.

(6) Thirty-three percent (33%) of this award vested on March 12, 2013, thirty-three percent (33%) will vest on March 12, 2014, and thirty-four percent (34%) will vest on March 12, 2015.

(7) This award will vest in full on March 12, 2018.

⁽⁸⁾This award will vest in full on March 11, 2018, if related performance conditions have been satisfied. In 2012, HSBC North America, HSBC Bank USA and HSBC entered into a deferred prosecution with the United States Department of Justice in connection with failure to have effective anti-money laundering controls in place. Related to this agreement, executives holding the title of Group General Manager or higher in 2012 have their deferred cash and deferred RSUs granted for performance in 2012 vest five years after the grant date.

(9) This award will vest on October 1, 2014, subject to the satisfaction of a condition linked to performance (the "Performance Condition"). The Performance Condition requires the attainment of individual performance targets.

⁽¹⁰⁾This award will vest in full on April 1, 2016 if the related performance conditions have been satisfied and if the award in footnote nine (9) has lapsed.

⁽¹¹⁾Thirty-three percent (33%) of this award will vest on March 11, 2014, thirty-three percent (33%) will vest on March 11, 2015, and thirty-four percent (34%) will vest on March 11, 2016.

⁽¹²⁾This award of restricted share units is eligible to vest on December 31, 2016, subject to the satisfaction of a condition linked to performance (the Performance Condition"). The Performance Condition requires the attainment of individual performance targets.

⁽¹³⁾This award of restricted share units is eligible to vest April 30, 2016, subject to the satisfaction of a condition linked to performance (the "Performance Condition"). The Performance Condition requires the attainment of individual performance targets.

⁽¹⁴⁾This award will vest thirty-seven percent (37%) on March 31, 2014, twenty-nine percent (29%) on March 31, 2015, twenty-three percent (23%) on March 31, 2016 and eleven percent (11%) on March 31, 2017.

⁽¹⁵⁾This award will vest thirty-three percent (33%) on April 30, 2014 and April 30, 2015 and thirty-four percent (34%) will vest on April 29, 2016.

⁽¹⁶⁾All unvested share awards lapsed following Mr. Peterson's termination of employment (November 19, 2013).

Option Exercises and Stock Vested Table

	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise (#)⁽¹⁾		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)⁽¹⁾
Patrick J. Burke				82,880	⁽²⁾	$	907,859
Chairman and Chief Executive Officer
Michael A. Reeves				17,204	⁽³⁾	$	188,730
Executive Vice President, Chief Financial Officer
Gregory T. Zeeman				83,291	⁽⁴⁾	$	931,942
Senor Executive Vice President and Chief Operating Officer
Steven G. Ekert				-	⁽⁵⁾	$	-
Senior Executive Vice President, Chief Risk Officer
Loren C. Klug				15,123	⁽⁶⁾	$	166,492
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO
C. Mark Gunton				28,360	⁽⁷⁾	$	307,654
Senior Executive Vice President, Chief Risk Officer (former)
Gary E. Peterson				4,704	⁽⁸⁾	$	52,013
Head of Regulatory Compliance and Financial Crimes Compliance (former)

(1) Value realized on exercise or vesting uses the GBP fair market value on the date of exercise / release and the exchange rate from GBP to USD on the date of settlement.

⁽²⁾Includes the release of 23,020 shares granted on March 11, 2013, partial release of 56,199 shares granted on March 12, 2012, and partial release of 71,913 shares granted on March 15, 2011, and partial release of 37,321 shares granted on March 1, 2010.

(3) Includes partial release of 7,223 shares granted on March 1, 2010, partial release of 6,328 shares granted on March 15, 2011, and partial release of 6,812 shares granted on March 12, 2012.

⁽⁴⁾Includes partial release of 12,553 shares granted on March 1, 2010, partial release of 14,470 shares granted on March 15, 2011, partial release of 16,417 shares granted on March 12, 2012, and a release of 62,187 shares granted on September 30, 2011.

⁽⁵⁾Mr. Ekert did not exercise options nor had any shares released in 2013.

⁽⁶⁾Includes partial release of 3,370 shares granted on March 1, 2010, partial release of 4,410 shares granted on March 15, 2011, and partial release of 35,422 shares granted on March 12, 2012.

⁽⁷⁾Includes the partial release of 28,894 shares granted on March 1, 2010, partial release of 21,813 shares granted on March 15, 2011, and the partial release of 27,299 shares granted on March 12, 2012.

⁽⁸⁾Includes the partial release of 13,624 shares granted on March 12, 2012.

Pension Benefits

Name	Plan Name⁽¹⁾	Number of Years Credited Service (#)		Present Value of Accumulated Benefit ($)⁽²⁾			Payments During Last Fiscal Year ($)
Patrick J. Burke⁽³⁾	Pension Plan-Household	23.8		$	918,609		$	-
Chairman and Chief Executive Officer	SRIP-Household	21.8		$	3,075,213		$	-
Michael A. Reeves	Pension Plan-Household	19.7		$	552,710		$	-
Executive Vice President, Chief Financial Officer	SRIP-Household	17.7		$	435,313		$	-
Gregory T. Zeeman	Pension Plan-Household	13.4		$	265,967		$	-
Senior Executive Vice President and Chief Operating Officer	SRIP-Household	11.4		$	361,995
Steven G. Ekert ⁽⁴⁾				$	-		$	-
Senior Executive Vice President, Chief Risk Officer
Loren C. Klug	Pension Plan-Household	23.3		$	976,485		$	-
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO	SRIP-Household	21.3		$	1,510,932
C. Mark Gunton	ISRBS	35.0		$	4,374,109	⁽⁵⁾	$	-
Senior Executive Vice President, Chief Risk Officer (former)
Gary E. Peterson⁽⁶⁾	Pension Plan	17.0	⁽⁷⁾	$	30,135		$	-
Head of Regulatory Compliance and Financial Crimes Compliance (former)

(1) Plan described under Savings and Pension Plans.

(2) Value of benefit at normal retirement age (or current year, if later). Calculations as of December 31, 2013.

(3) Value of age 65 benefit. Participant is also eligible for an immediate early retirement benefit with a value of $1,121,184 (Pension Plan) and $3,862,309 (SRIP).

(4) Mr. Ekert does not participate in the defined benefit pension plan.

⁽⁵⁾The amounts were converted into USD from GBP utilizing the exchange rate of 1.6531 at December 31, 2013.

(6) Value of age 65 benefit. Participant is also eligible for an immediate early retirement benefit with a value of $33,176 (Pension Plan).

⁽⁷⁾Number of years credited service for Mr. Peterson includes 15 years earned while employed by Midland Bank, which was acquired by HSBC in 1992.

Savings and Pension Plans

Pension Plan

The HSBC - North America (U.S.) Pension Plan ("Pension Plan"), formerly known as the HSBC - North America (U.S.) Retirement Income Plan, is a non-contributory, defined benefit pension plan for employees of HSBC North America and its U.S. subsidiaries who are at least 21 years of age with one year of service and not part of a collective bargaining unit. Benefits are determined under a number of different formulas that vary based on year of hire and employer. As further described in Note 16, "Pension and Other Postretirement Benefits," in the accompanying consolidated financial statements, effective January 1, 2013, the Pension Plan was frozen such that future contributions ceased under the Cash Balance formula and the Pension Plan closed to new participants and employees no longer accrue any future benefits under the Pension Plan. Effective January 1, 2011, no benefits presently were earned under any of the legacy formulas of the Pension Plan. However, the Legacy Household Formula (New) was amended in 2011 to provide an Adjusted Benefit Formula to all participants who were actively employed by of HSBC North America and its U.S. subsidiaries at any time in 2011 and did not meet the requirements for early retirement eligibility upon their termination of employment. The Adjusted Benefit Formula accelerated the service proration component of the Legacy Household benefit calculation that previously would have occurred only upon satisfying the age and service requirements for early retirement eligibility. This change was made to ensure full compliance with applicable regulations and eliminate the need to complete annual testing of early retirement benefits.

Supplemental Retirement Income Plan (SRIP)

The Supplemental HSBC Finance Corporation Retirement Income Plan ("SRIP") is a non-qualified defined benefit retirement plan that is designed to provide benefits that are precluded from being paid to legacy Household employees by the Pension Plan due to legal constraints applicable to all qualified plans. SRIP benefits are calculated without regard to these limits but are reduced effective January 1, 2008, for compensation deferred to the HSBC - North America Non-Qualified Deferred Compensation Plan ("NQDCP"). The resulting benefit is then reduced by the value of qualified benefits payable by the Pension Plan so that there is no duplication of payments. Benefits are paid in a lump sum to executives covered by a Household or Account Based Formula between July and December in the calendar year following the year of termination. No additional benefits accrued under SRIP after December 31, 2010.

Formulas for Calculating Benefits

Legacy Household Formula (Old): Applies to executives who were hired prior to January 1, 1990 by Household International. The benefit at age 65 is determined under whichever formula, A or B below, provides the higher amount. Executives who are at least age 50 with 15 years of service or at least age 55 with 10 years of service may retire before age 65, in which case the benefits are reduced.

A. The normal retirement benefit at age 65 is the sum of (i) 51 percent of average salary that does not exceed the integration amount and (ii) 57 percent of average compensation in excess of the integration amount. For this purpose, the integration amount is an average of the Social Security taxable wage bases for the 35 year period ending with the year of retirement. The benefit is reduced pro rata for executives who retire with less than 15 years of service. If an executive has more than 30 years of service, the benefit percentages in the formula, (the 51 percent and 57 percent) are increased 1/24 of 1 percentage point for each month of service in excess of 30 years, but not more than 5 percentage points. The benefit percentages are reduced for retirement prior to age 65.

B. The normal retirement benefit at age 65 is determined under (a) below, limited to a maximum amount determined in (b):

(a) 55 percent of average salary, reduced pro rata for less than 15 years of service, and increased 1/24 of 1 percentage point for each month in excess of 30 years, but not more than 5 percentage points; the benefit percentage of 55 percent is reduced for retirement prior to age 65.

(b) The amount determined in (a) is reduced as needed so that when added to 50 percent of the primary Social Security benefit, the total does not exceed 65 percent of the average salary. This maximum is applied for payments following the age at which full Social Security benefits are available.

Both formulas use an average of salaries for the 48 highest consecutive months selected from the 120 consecutive months preceding date of retirement; for this purpose, salary includes total base wages and bonuses.

Legacy Household Formula (New): Applies to executives who were hired after December 31, 1989, but prior to January 1, 2000, by Household International, Inc. The normal retirement benefit at age 65 is the sum of (i) 51% of average salary that does not exceed the integration amount and (ii) 57% of average compensation in excess of the integration amount. For this purpose, compensation includes total fixed pay and cash variable pay (as earned); provided, effective January 1, 2008, compensation is reduced by any amount deferred under the NQDCP, and is averaged over the 48 highest consecutive months selected from the 120 consecutive months preceding date of retirement. The integration amount is an average of the Social Security taxable wage bases for the 35 year period ending with the year of retirement. The benefit is reduced pro rata for executives who retire with less than 30 years of service. If an executive has more than 30 years of service, the percentages in the formula, (the 51% and 57%) are increased 1/24 of 1 percentage point for each month of service in excess of 30 years, but not more than 5 percentage points. Executives who are at least age 55 with 10 or more years of service may retire before age 65 in which case the benefit percentages (51% and 57%) are reduced.

Account Based Formula: Applies to executives who were hired by Household after December 31, 1999. It also applies to executives who were hired by HSBC Bank USA after December 31, 1996 and became participants in the Pension Plan on January 1, 2005, or were hired by HSBC after March 28, 2003. The formula provides for a notional account that accumulates 2% of annual fixed pay for each calendar year of employment. For this purpose, compensation includes total fixed pay and cash incentives as paid (effective January 1, 2008, compensation is reduced by any amount deferred under the NQDCP). At the end of each calendar year, interest is credited on the notional account using the value of the account at the beginning of the year. The interest rate is based on the lesser of average yields for 10-year and 30-year Treasury bonds during September of the preceding calendar year. The notional account is payable at termination of employment for any reason after three years of service although payment may be deferred to age 65.

Provisions Applicable to All Formulas: The amount of compensation used to determine benefits is subject to an annual maximum that differ by calendar year. The limit for 2013 is $255,000. The limit for years after 2013 will increase from time-to-time as specified by IRS regulations. Benefits are payable as a life annuity, or for married participants, a reduced life annuity with 50% continued to a surviving spouse. Participants (with spousal consent, if married) may choose from a variety of other optional forms of payment, which are all designed to be equivalent in value if paid over an average lifetime. Retired executives covered by a Legacy Household or Account Based Formula may elect a lump sum form of payment (spousal consent is required for married executives).

HSBC International Staff Retirement Benefits Scheme (Jersey) (ISRBS)

The HSBC International Staff Retirement Benefits Scheme (Jersey) ("ISRBS") is a defined benefit plan maintained for certain international managers. Each member must contribute five percent of his fixed pay to the plan during his service, but each member who has completed 20 years of service or who enters the senior management or general management sections during his service shall contribute 6 2/3 percent of his salary. In addition, a member may make voluntary contributions, but the total of voluntary and mandatory contributions cannot exceed 15 percent of his total compensation. Upon leaving service, the value of the member's voluntary contribution fund, if any, shall be commuted for a retirement benefit.

The annual pension payable at normal retirement is 1/480 of the member's final fixed pay for each completed month in the executive section, 1.25/480 of his final fixed pay for each completed month in the senior management section, and 1.50/480 of his final fixed pay for each completed month in the general management section. A member's normal retirement date is the first day of the month coincident with or next following his 53rd birthday. Payments may be deferred or suspended but not beyond age 75.

If a member leaves before normal retirement with at least 15 years of service, he will receive a pension which is reduced by 0.25 percent for each complete month by which termination precedes normal retirement. If he terminates with at least 5 years of service, he will receive an immediate lump sum equivalent of his reduced pension.

If a member dies before age 53 while he is still accruing benefits in the ISRBS then both a lump sum and a widow's pension will be payable immediately.

The lump sum payable would be the cash sum equivalent of the member's Anticipated Pension, where the Anticipated Pension is the notional pension to which the member would have been entitled if he had continued in service until age 53, computed on the assumption that his final fixed pay remains unaltered. In addition, where applicable, the member's voluntary contributions fund will be paid as a lump sum.

In general, the widow's pension payable would be equal to one half of the member's Anticipated Pension. As well as this, where applicable, a children's allowance is payable on the death of the Member equal to 25% of the amount of the widow's pension.

If the member retires before age 53 on the grounds of infirmity he will be entitled to a pension as from the date of his leaving service equal to his Anticipated Pension, where Anticipated Pension has the same definition as in the previous section.

Present Value of Accumulated Benefits

For the Account Based formula: The value of the notional account balances currently available on December 31, 2013.

For other formulas: The present value of the benefit payable at assumed retirement using interest and mortality assumptions consistent with those used for financial reporting purposes under SFAS 87 with respect to the company's audited financial statements for the period ending December 31, 2013. However, no discount has been assumed for separation prior to retirement due to death, disability or termination of employment. Further, the amount of the benefit so valued is the portion of the benefit at assumed retirement that has accrued in proportion to service earned on December 31, 2013.

Deferred Compensation Plans

Tax Reduction Investment Plan: HSBC North America maintains the HSBC - North America (U.S.) Tax Reduction Investment Plan ("TRIP"), which is a deferred profit-sharing and savings plan for its eligible employees. With certain exceptions, a U.S. employee who has been employed for 30 days and who is not part of a collective bargaining unit may contribute into TRIP, on a pre-tax and after-tax basis (after-tax contributions are limited to employees classified as non-highly compensated), up to 40 percent of the participant's cash compensation (subject to a maximum annual pre-tax contribution by a participant of $17,500 for 2013 (plus an additional $5,500 catch-up contribution for participants age 50 and over for 2013), as adjusted for cost of living increases, and certain other limitations imposed by the Internal Revenue Code) and invest such contributions in separate equity or income funds.

If the employee has been employed for at least one year, HSBC Finance Corporation contributes three percent of compensation each pay period on behalf of each participant who contributes one percent and matches any additional participant contributions up to four percent of compensation. However, matching contributions will not exceed six percent of a participant's compensation if the participant contributes four percent or more of compensation. The plan provides for immediate vesting of all contributions. With certain exceptions, a participant's after-tax contributions that have not been matched by us can be withdrawn at any time. Both our matching contributions made prior to 1999 and the participant's after-tax contributions that have been matched may be withdrawn after five years of participation in the plan. A participant's pre-tax contributions and our matching contributions after 1998 may not be withdrawn except for an immediate financial hardship, upon termination of employment, or after attaining age 59½. Participants may borrow from their TRIP accounts under certain circumstances.

Supplemental Tax Reduction Investment Plan: HSBC North America also maintains the Supplemental HSBC Finance Corporation Tax Reduction Investment Plan ("STRIP"), which is an unfunded plan for eligible employees of HSBC Finance Corporation and its participating subsidiaries who are legacy Household employees and whose compensation exceeded limits imposed by the Internal Revenue Code. Beginning January 1, 2008, STRIP participants received a 6% contribution for such excess compensation, reduced by any amount deferred under the NQDCP, invested in STRIP through a credit to a bookkeeping account maintained by us which deems such contributions to be invested in equity or income funds selected by the participant. Employer contributions to STRIP participants terminated on December 31, 2010.

Non-Qualified Deferred Compensation Plan: HSBC North America maintains the NQDCP for the highly compensated employees in the organization, including executives of HSBC Finance Corporation. Certain NEOs are eligible to contribute up to 80 percent of their fixed pay and/or cash variable pay in any plan year. Participants are required to make an irrevocable election with regard to the percentage of compensation to be deferred and the timing and manner of future payout. Two types of distributions are permitted under the plan, either a scheduled in-service withdrawal, which must be scheduled at least 2 years after the end of the plan year in which the deferral is made, or payment upon termination of employment. For either the scheduled in-service withdrawal or payment upon termination, the participant may elect either a lump sum payment or, if the participant has over 10 years of service, installment payments over 10 years. Due to the unfunded nature of the plan, participant elections are deemed investments whose gains or losses are calculated by reference to actual earnings of the investment choices. In order to provide the participants with the maximum amount of protection under an unfunded plan, a Rabbi Trust has been established where the participant contributions are segregated from the general assets of HSBC Finance Corporation. The Investment Committee for the plan endeavors to invest the contributions in a manner consistent with the participant's deemed elections, reducing the likelihood of an underfunded plan.

HSBC International Retirement Benefit Plan ("IRBP") for International Managers: The HSBC International Retirement Benefit Plan ("IRBP") is a defined contribution retirement savings plan maintained for certain international managers who have attained the maximum number of years of service for participation in other plans covering international managers, including the ISRBS. Participants receive an employer paid contribution equal to 15% of fixed pay and may elect to contribute 2.5% of fixed pay as non-mandatory employee contributions, which contributions are matched by employer contributions. Additionally, participants can make unlimited additional voluntary contributions of fixed pay. The plan provides for participant direction of account balances in a wide range of investment funds and immediate vesting of all contributions.

Non-Qualified Defined Contribution and Other Non-Qualified Deferred Compensation Plans

Name	Executive Contributions in 2013⁽¹⁾		Employer Contributions in 2013 ⁽²⁾		Aggregate Earnings in 2013		Aggregate Withdrawals/ Distributions in 2013		Aggregate Balance at 12/31/2013⁽³⁾
Patrick J. Burke	$	-	$	-	$	123,588	$	-	$	505,436
Chairman and Chief Executive Officer
Michael A. Reeves	$	-	$	-	$	58,324	$	-	$	700,679
Executive Vice President, Chief Financial Officer
Gregory T. Zeeman	$	-	$	-	$	70,118			$	293,073
Senior Executive Vice President and Chief Operating Officer
Steven G. Ekert	N/A		N/A		N/A		N/A		N/A
Senior Executive Vice President, Chief Risk Officer
Loren C. Klug	$	-	$	-	$	66,221			$	432,303
Executive Vice President, Strategy and Planning and Chief of Staff to the CEO
C. Mark Gunton	$	13,823	$	19,352	$	26,542	N/A		$	317,824
Senior Executive Vice President, Chief Risk Officer (former)
Gary E. Peterson	N/A		N/A		N/A		N/A		N/A
Head of Regulatory Compliance and Financial Crimes Compliance (former)

(1) For Mr. Gunton, amount reflects contributions under the International Retirement Benefit Plan ("IRBP") for International Managers, converted from GBP to USD using the exchange rate of 1.6531 as of December 31, 2013. The IRBP for International Managers are described under Savings and Pension Plans.

(2) For Mr. Gunton, amount reflects employer contributions under the IRBP for International Managers, converted from GBP to USD using the exchange rate of 1.6531 as of December 31, 2013.

(3) For Messrs. Burke, Reeves, Zeeman, Klug the aggregate balance includes their respective balances under the Supplemental HSBC Finance Corporation Tax Reduction Investment Plan ("STRIP"). For Messrs. Reeves and Klug the aggregate balance also includes his balance under the HSBC-North America Non-Qualified Deferred Compensation Plan ("NQDCP"). For Mr. Gunton his respective aggregate balance reflects his balance under the IRBP. The NQDCP, STRIP and the IRBP are described under Savings and Pension Plans.

Potential Payments Upon Termination Or Change-In-Control

The following tables describe the payments that HSBC Finance Corporation would be required to make as of December 31, 2013 to each of Messrs. Burke, Reeves, Zeeman, Ekert and Klug as result of their termination, retirement, disability or death or a change in control of the company as of that date. For Messrs. Gunton and Peterson, the effective date of separation from service is reflected. These amounts shown are in addition to those generally available to salaried employees, such as disability benefits and accrued vacation pay. The specific circumstances that would trigger such payments are identified, and the terms of such payments are defined under the HSBC North America (U.S.) Severance Pay Plan and the particular terms of deferred cash awards and long-term equity incentive awards.

Patrick J. Burke

Executive Benefits and Payments Upon Termination	Voluntary Termination	Disability			Normal Retirement			Involuntary Not for Cause Termin- ation			For Cause Termination	Voluntary for Good Reason Termination			Death			Change in Control Termination
Fixed Pay								$	646,154	⁽¹⁾								$	646,154	⁽¹⁾
Variable Pay		$	1,800,000	⁽²⁾	$	1,800,000	⁽²⁾	$	1,800,000	⁽²⁾					$	1,800,000	⁽²⁾	$	1,800,000	⁽²⁾
Deferred Cash		$	714,626	⁽³⁾	$	714,626	⁽³⁾	$	714,626	⁽³⁾		$	714,626	⁽³⁾	$	714,626	⁽³⁾	$	714,626	⁽³⁾
Restricted Stock/Units		$	3,347,609	⁽⁴⁾	$	2,006,251	⁽⁵⁾	$	2,006,251	⁽⁵⁾		$	2,006,251	⁽⁵⁾	$	3,347,609	⁽⁴⁾	$	2,006,251	⁽⁵⁾

(1) Under the terms of the HSBC - North America (U.S.) Severance Pay Plan, Mr. Burke would receive 48 weeks of his current fixed pay upon separation from the company.

(2) Refer to the description of Mr. Burke's service agreement in Severance Protection and Employment Contracts. Mr. Burke is eligible to receive pro-rata variable pay through the date of termination. The disclosed amount assumes a termination date of December 31, 2013. The amount, format and awarding of variable pay is determined at absolute discretion of the HSBC Board of Directors.

(3) This amount represents a full vesting of the outstanding deferred cash assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013.

(4) This amount represents a full vesting of the outstanding time-based restricted share units and full vesting of first award of performance-based restricted share unit (March 2013 grant), assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013. Refer to the vesting details for Mr. Burke's performance-based restricted share awards as disclosed in Severance Protection and Employment Contracts, the two performance-based share unit awards are interdependent in that if the March Award vests, the June Award will lapse immediately.

⁽⁵⁾This amount represents a full vesting of the outstanding time-vested restricted share units assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013. This amount does not include the value of the performance-based restricted share units, as good leaver treatment for these awards would only be considered in case of disability or death.

Michael A. Reeves

Executive Benefits and Payments Upon Termination	Voluntary Termination	Disability			Normal Retirement			Involuntary Not for Cause Termin- ation			For Cause Termination	Voluntary for Good Reason Termination			Death			Change in Control Termination
Fixed Pay								$	288,462	⁽¹⁾
Restricted Stock/Units		$	386,901	⁽³⁾	$	360,676	⁽⁴⁾	$	386,901	⁽³⁾		$	386,901	⁽³⁾	$	858,950	⁽²⁾	$	386,901	⁽³⁾

(1) Under the terms of the HSBC - North America (U.S.) Severance Pay Plan, Mr. Reeves would receive 40 weeks of his current fixed pay upon separation from the company.

(2) This amount represents a full vesting of the outstanding time-based restricted share units assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013.

⁽³⁾This amount represents a full vesting of the outstanding time-based restricted share units and pro-rata vesting of the outstanding performance-based vesting restricted share units assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013.

⁽⁴⁾This amount represents a full vesting of the outstanding time-based restricted share units and forfeiture of the outstanding performance-based vesting restricted share units assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013.

Gregory T. Zeeman

Executive Benefits and Payments Upon Termination	Voluntary Termination	Disability			Normal Retirement			Involuntary Not for Cause Termin- ation			For Cause Termination	Voluntary for Good Reason Termination			Death			Change in Control Termination
Fixed Pay								$	228,846	⁽¹⁾
Restricted Stock/Units		$	549,073	⁽³⁾	$	549,073	⁽³⁾	$	549,073	⁽³⁾		$	549,073	⁽³⁾	$	1,151,253	⁽²⁾	$	549,073	⁽³⁾

(1) Under the terms of the HSBC - North America (U.S.) Severance Pay Plan, Mr. Zeeman would receive 28 weeks of his current fixed pay upon separation from the company.

Steven G. Ekert

Executive Benefits and Payments Upon Termination	Voluntary Termination	Disability			Normal Retirement			Involuntary Not for Cause Termin- ation			For Cause Termination	Voluntary for Good Reason Termination			Death			Change in Control Termination
Fixed Pay								$	169,231	⁽¹⁾
Restricted Stock/Units		$	1,230,061	⁽²⁾	$	1,230,061	⁽²⁾	$	1,230,061	⁽²⁾		$	1,230,061	⁽²⁾	$	1,230,061	⁽²⁾	$	1,230,061	⁽²⁾

(1) Under the terms of the HSBC - North America (U.S.) Severance Pay Plan, Mr. Ekert would receive 16 weeks of his current fixed pay upon separation from the company.

(2) This amount represents a full vesting of the outstanding restricted share units assuming "good leaver" status is granted by REMCO and a termination date of December 31, 2013, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2013.

Loren C. Klug

Executive Benefits and Payments Upon Termination	Voluntary Termination	Disability			Normal Retirement			Involuntary Not for Cause Termin- ation			For Cause Termination	Voluntary for Good Reason Termination			Death			Change in Control Termination
Fixed Pay								$	324,842	⁽¹⁾
Restricted Stock/Units		$	537,717	⁽²⁾	$	537,717	⁽²⁾	$	537,717	⁽²⁾		$	537,717	⁽²⁾	$	537,717	⁽²⁾	$	537,717	⁽²⁾

(1) Under the terms of the HSBC - North America (U.S.) Severance Pay Plan, Mr. Klug would receive 48 weeks of his current fixed pay upon separation from the company.

C. Mark Gunton

Executive Benefits and

Payments Upon

Termination

Voluntary

Termination

Disability

Normal

Retirement

Involuntary

Not for

Cause

Termin-

ation

For Cause

Termination

Voluntary for

Good Reason

Termination

Death

Change in

Control

Termination

Fixed Pay

1,138,149

⁽¹⁾

Restricted

Stock/Units

506,569

⁽²⁾

(1) Mr. Gunton's employment with the company terminated June 1, 2013. This amount represents consideration for entering into a special termination agreement upon separation from service.

⁽²⁾This amount represents a full vesting value of the outstanding restricted share units as of the effective date of employment termination (June 1, 2013). The "good leaver" status was granted by REMCO in respect to these awards.

Gary E. Peterson ⁽¹⁾

Executive Benefits and

Payments Upon

Termination

Voluntary

Termination

Disability

Normal

Retirement

Involuntary

Not for

Cause

Termin-ation

For Cause

Termination

Voluntary for

Good Reason

Termination

Death

Change in

Control

Termination

Fixed Pay

Restricted Stock/Units

(1) Mr. Peterson employment with the company terminated on November 19, 2013. No payments or benefits were triggered by this event.

Director Compensation The following table and narrative footnotes discuss the compensation earned by our Non-Executive Directors in 2013. As an Executive Director, Mr. Burke received no additional compensation for service on the Board of Directors in 2013.

The table below outlines the annual compensation program for Non-Executive Directors for 2013. Amounts are pro-rated based on dates of service for newly appointed Non-Executive Directors.

Annualized Compensation Rates for Non-Executive Directors Related to Service on the Board of Directors and Committees for HSBC Finance Corporation and HSBC North America
Board Retainer
HSBC North America	$	105,000
HSBC Finance Corporation	$	105,000
Audit Committee
Audit Committee Chair for HSBC North America, HBSC USA and HSBC Finance Corporation	$	80,000
Audit Committee Member for HSBC North America and HBSC Finance Corporation	$	20,000
Risk Committee
Risk Committee Chair for HSBC North America, HBSC USA and HSBC Finance Corporation	$	80,000
Risk Committee Member for HSBC North America and HBSC Finance Corporation	$	20,000
Compliance Committee
Compliance Committee Chair for HSBC Finance Corporation	$	80,000
Compliance Committee Member for HSBC North America and HSBC Finance Corporation	$	50,000
Nominating Committee
Nominating Committee Member for HSBC North America	$	20,000
Grandfathered Amount
George A. Lorch	$	55,000

The 2013 total compensation of our Non-Executive Directors in their capacities as directors of HSBC North America and HSBC Finance Corporation, and in the case of Messrs. Ameen, Herdman, and Minzberg, also as the director of HSBC USA, is shown in the following table:

Name	Fees Earned or Paid in Cash ($)⁽¹⁾		Stock Awards ($)⁽²⁾		Option Awards ($)⁽²⁾		Change in Pension Value And Non-Qualified Deferred Compensation Earnings ($)⁽³⁾		All Other Compensation ($)⁽⁴⁾		Total ($)
Phillip D. Ameen.................	$	347,917	$	-	$	-	$	98,347	$	182	$	446,446
Robert K. Herdman.............	$	735,000	$	-	$	-	$	-	$	182	$	735,182
George A. Lorch..................	$	400,000	$	-	$	-	$	39,000	$	1,870	$	440,870
Samuel Minzberg................	$	265,000	$	-	$	-	$	-	$	1,870	$	266,870
Beatriz R. Perez....................	$	290,000	$	-	$	-	$	-	$	1,870	$	291,870
Larree M. Renda.................	$	260,000	$	-	$	-	$	125	$	1,870	$	261,995
Thomas K. Whitford..........	$	23,333	$	-	$	-	$	-	$	-	$	23,333

(1) Represents aggregate compensation for service on Board of Directors and Committees HSBC North America, HSBC Finance Corporation and, in the case of Messrs. Ameen, Herdman and Minzberg, HSBC USA.

Fees paid to Mr. Ameen include the following amounts for 2013: $105,000 annual cash retainer for membership on each of the HSBC North America and HSBC Finance Corporation boards, and $61,250 annual cash retainer for membership on the HSBC USA board; $18,889 for membership and serving as Chair of the HSBC North America Audit Committee, $22,222 for membership and serving as Chair of the HSBC Finance Corporation Audit Committee, and $15,556 for membership and serving as Chair of the HSBC USA Audit Committee; $6,667 for membership on the HSBC North America Risk Committee, and $13,333 for membership on the HSBC Finance Corporation Risk Committee.

Fees paid to Mr. Herdman include the following amounts for 2013: $300,000 for serving as Interim Chair of the HSBC North America board; $105,000 annual cash retainer for membership on each of the HSBC North America, HSBC Finance Corporation and HSBC USA boards; $13,333 for serving as Chair of each of the Audit Committees of HSBC North America, HSBC Finance Corporation and HSBC USA; and $26,667 for serving as Chair of each of the Risk Committees of HSBC North America, HSBC Finance Corporation and HSBC USA.Fees paid to Mr. Lorch include the following amounts for 2013: $105,000 annual cash retainer for membership on each of the HSBC North America and HSBC Finance Corporation boards; $5,000 for membership on the HSBC North America Audit Committee, $10,000 for membership on the HSBC Finance Corporation Audit Committee; $80,000 for serving as Chair of the Compliance Committee for HSBC Finance Corporation; $20,000 for membership on the HSBC North America Nominating Committee; $6,667 for membership on the HSBC North America Risk Committee, and $13,333 for membership on the HSBC Finance Corporation Risk Committee; and $55,000 in grandfathered fees related to his level of compensation in 2007.

Fees paid to Mr. Minzberg include the following amounts for 2013: $105,000 annual cash retainer for membership on the HSBC North America board, $26,250 annual cash retainer for membership on the HSBC Finance Corporation board, and $78,750 annual cash retainer for membership on the HSBC USA board; $6,667 for membership on the HSBC North America Audit Committee, $3,333 for membership on the HSBC Finance Corporation Audit Committee, and $10,000 for membership on the HSBC USA Audit Committee; $6,667 for membership on the HSBC North America Risk Committee, $3,333 for membership on the HSBC Finance Corporation Risk Committee, and $10,000 for membership on the HSBC USA Risk Committee.

Fees paid to Ms. Perez include the following amounts for 2013: $105,000 annual cash retainer for membership on each of the HSBC North America and HSBC Finance Corporation boards; $16,667 for membership on the HSBC North America Compliance Committee, and $33,333 for membership on the HSBC Finance Corporation Compliance Committee; $10,000 for membership on the Nominating Committee for HSBC North America; $6,667 for membership on the HSBC North America Risk Committee, and $13,333 for membership on the HSBC Finance Corporation Risk Committee.

Fees paid to Ms. Renda include the following amounts for 2013: $105,000 annual cash retainer for membership on HSBC North America and HSBC Finance Corporation boards; $10,000 for membership on the Nominating Committee for HSBC North America; $6,667 for membership on the HSBC North America Audit Committee, and $13,333 for membership on the HSBC Finance Corporation Audit Committee; $6,667 for membership on the HSBC North America Risk Committee, and $13,333 for membership on the HSBC Finance Corporation Risk Committee.

Fees paid to Mr. Whitford include the following amounts for 2013: $8,750 annual cash retainer for membership on HSBC North America and HSBC Finance Corporation boards; $1,389 for membership on the HSBC North America Compliance Committee, and $2,777 for membership on the HSBC Finance Corporation Compliance Committee; $556 for membership on the HSBC North America Risk Committee, and $1,111 for membership on the HSBC Finance Corporation Risk Committee.

(2) HSBC Finance Corporation does not grant stock awards or stock options to its Non-Executive Directors.

Prior to the merger with HSBC, Non-Executive Directors could elect to receive all or a portion of their cash compensation in shares of common stock of Household International, Inc., defer it under the Deferred Fee Plan for Directors or purchase options to acquire common stock. Under the Deferred Fee Plan, Directors were permitted to invest their deferred compensation in either units of phantom shares of the common stock of HSBC Finance Corporation (then called Household International, Inc.), with dividends credited toward additional stock units, or cash, with interest credited at a market rate set under the plan. Prior to 1995, HSBC Finance Corporation offered a Directors' Retirement Income Plan where the present value of each Director's accrued benefit was deposited into the Deferred Phantom Stock Plan for Directors. Under the Deferred Phantom Stock Plan, Directors with less than ten years of service received 750 phantom shares of common stock of Household International, Inc. annually during the first ten years of service as a Director. In January 1997, the Board eliminated this and all future Director retirement benefits. All payouts to Directors earned under the Deferred Phantom Stock Plan will be made only when a Director leaves the Board due to death, retirement or resignation and will be paid in HSBC ordinary shares either in a lump sum or in installments as selected by the Director. Following the acquisition, all rights to receive common stock of Household International, Inc. under both plans described above were converted into rights to receive HSBC ordinary shares. In May 2004, when the plans were rolled into the HSBC North America Directors Non-Qualified Deferred Compensation Plan, those rights were revised into rights to receive American Depository Shares in HSBC ordinary shares, each of which represents five ordinary shares. No new shares may be issued under the plans. As of December 31, 2013, 8,470 American Depository Shares were held in the deferred compensation plan account for Directors currently serving on the Board of Directors. Of the current Non-Executive Directors, Mr. Lorch held 8,444 American Depository Shares and Ms. Renda held 26 American Depository Shares.

(3) The HSBC North America Directors Non-Qualified Deferred Compensation Plan allows Non-Executive Directors to elect to defer their cash fees in any plan year. Directors have the ability to defer up to 100% of their annual retainers and/or fees into the HSBC-North America Directors Non-Qualified Deferred Compensation Plan. Under this plan, pre-tax dollars may be deferred with the choice of receiving payouts while still serving on the Board of HSBC Finance Corporation according to a schedule established by the Director at the time of deferral or a distribution after leaving the Board in either lump sum or quarterly installments. Amounts shown for Messrs. Ameen and Lorch and Ms. Renda reflect the gains or losses calculated by reference to the actual earnings of the investment choices.

(4) Components of All Other Compensation are disclosed in aggregate. We provide each Director with $250,000 of accidental death and dismemberment insurance for which the company paid a premium of $181 per annum for each participating Director and a $10,000,000 personal excess liability insurance policy for which the company paid premium of $1,689 per annum for each participating Director. Mr. Ameen and Mr. Herdman declined the personal excess liability insurance policy; the amount shown pertains to the annual premium for AD&D insurance exclusively.

Under HSBC's Matching Gift Program, for all Non-Executive Directors who were members of the Board in 2006 and continue to be on the Board, we match charitable gifts to qualified organizations (subject to a maximum of $10,000 per year), including eligible non-profit organizations which promote neighborhood revitalization or economic development for low and moderate income populations, with a double match for the first $500 donated to higher education institutions (both public and private). Additionally, each current Non-Executive Director, who was a member of the Board in 2006 and continues to be on the Board, may ask us to contribute up to $10,000 annually to charities of the Director's choice which qualify under our philanthropic program. We made charitable donations of $11,250 under the Matching Gift Program and $10,000 under the philanthropic program at Mr. Lorch's request and $20,500 under the Matching Gift Program and $10,000 under the philanthropic program at Ms. Renda's request.

Compensation Policies and Practices Related to Risk Management

All HSBC Finance Corporation employees are eligible for some form of incentive compensation; however, those who actually receive payments are a subset of eligible employees, based on positions held and individual and business performance. The annual discretionary variable pay plan is the primary incentive compensation plan for all employees. Specific groups of employees who are typically involved in servicing environments participate in formulaic plans.

A key feature of our remuneration policy is that it is risk informed, seeking to ensure that risk-adjusted returns on capital are factored into the determination of annual variable pay and that variable pay pools are calculated only after appropriate risk-adjusted return has accrued on shareholders' capital. We apply Economic Profit (defined as the average annual difference between return on invested capital and HSBC's benchmark cost of capital) and other metrics to develop variable pay levels and target a 12 percent to 15 percent return on shareholder equity. These requirements are built into the performance scorecard of the senior HSBC executives and are incorporated in regional and business scorecards in an aligned manner, thereby ensuring that return, risk, and efficient capital usage shape reward considerations. The HSBC Group Chief Risk Officer and the Global Risk Function of HSBC provide input into the performance scorecard, ensuring that key risk measures are included.

The use of a performance scorecard framework ensures an aligned set of objectives and impacts the level of individual pay received, as achievement of objectives is considered when determining the level of variable pay awarded under the annual discretionary cash award plan. On a performance scorecard, objectives are separated into two categories: financial and non-financial. Financial objectives, as well as other objectives relating to efficiency and risk mitigation, customer development and the productivity of human capital are all measures of performance that may influence reward levels. Overall performance under both scorecards is also judged on adherence to the HSBC Group values principles of being 'open, connected and dependable' and acting with 'courageous integrity'.

In 2010, building upon the combined strengths of our performance scorecard and risk management processes, outside consultants were engaged to assist in the development of a formal incentive compensation risk management framework. Commencing with the 2011 objectives-setting process, standard risk performance measures and targets were established and monitored for employees who were identified as having the potential to expose the organization to material risks, or who are responsible for controlling those risks.

The Nominating and Governance Committee of HSBC North America and the Compensation and Performance Management Governance Committee ("CPMG Committee") have been established, which among other duties, have oversight for objectives-setting and risk monitoring. The Nominating and Governance Committee of HSBC North America has oversight and endorsement of certain compensation matters. As part of its duties, the Nominating and Governance Committee oversees the framework for assessing risk in the responsibilities of employees, the determination of who are Covered Employees ("Covered Employees") under the Interagency Guidelines on Incentive Based Compensation Arrangements as published by the Federal Reserve Board, and the measures used to ensure that risk is appropriately considered in making variable pay recommendations. The Nominating and Governance Committee also can make recommendations concerning proposed performance assessments and incentive compensation award proposals for the Chief Executive Officer, direct reports of the Chief Executive Officer and certain other Covered Employees, including any recommendations for reducing or canceling incentive compensation previously awarded. The recommendations related to employee compensation are incorporated into the submissions to the HSBC Holdings plc Remuneration Committee ("REMCO") of the Board of Directors of HSBC, or to Mr. Gulliver, Ms. Dorner, or Mr. Burke in instances where REMCO has delegated remuneration authority.

In 2010, HSBC North America established the CPMG Committee. The CPMG Committee was created to provide a more systematic approach to discretionary compensation governance and to ensure the involvement of the appropriate levels of leadership, while providing a comprehensive view of compensation practices and associated risks. The CPMG Committee comprises senior executive representatives from HSBC North America's staff and control functions, consisting of Risk, Legal, Finance, Audit, Human Resources and Corporate Secretary. The CPMG Committee approves the list of Covered Employees and their mandatory performance scorecard objectives; reviews compensation impact related to regulatory and audit findings; and can make recommendations to REMCO of malus actions of previous grants of discretionary compensation based on actual results and risk outcomes. Additionally, compensation processes for employees are evaluated by the CPMG Committee to ensure adequate controls are in place, while reinforcing the distinct performance expectations for employees. The CPMG Committee can make its recommendations to the Nominating and Governance Committee, REMCO, Mr. Gulliver, Ms. Dorner, or Mr. Burke, depending on the nature of the recommendation or the delegation of authority for making final decisions.

Discretionary compensation awards are also impacted by controls established under a comprehensive risk management framework that provides the necessary controls, limits, and approvals for risk taking initiatives on a day-to-day basis ("Risk Management Framework"). Business management cannot bypass these risk controls to achieve scorecard targets or performance measures. As such, the Risk Management Framework is the foundation for ensuring excessive risk taking is avoided. The Risk Management Framework is governed by a defined risk committee structure, which oversees the development, implementation, and monitoring of the risk appetite process for HSBC Finance Corporation. Risk Appetite is set by the Board of HSBC. A risk appetite for U.S. operations and is annually reviewed and approved by the HSBC North America Risk Management Committee and the HSBC North America Board of Directors.

Risk Adjustment of Discretionary Compensation

HSBC Finance Corporation uses a number of techniques to ensure that the amount of discretionary compensation received by an employee appropriately reflects risk and risk outcomes, including risk adjustment of awards, deferral of payment, appropriate performance periods, and reducing sensitivity to short-term performance. The techniques used differ depending on whether the discretionary compensation is paid under the general discretionary cash award plan or a formulaic plan.

The discretionary plan is designed to allow managers to exercise judgment in making variable pay recommendations, subject to appropriate oversight. When making award recommendations for an employee participating in the discretionary plan, performance against the objectives established in the performance scorecard is considered. Where objectives have been established with respect to risk and risk outcomes, managers will consider performance against these objectives when making variable pay award recommendations. Managers will also consider pertinent material risk events when making variable pay award recommendations.

Participants in the discretionary plan are subject to the HSBC Group Minimum Deferral Policy, which provides minimum deferral guidelines for variable pay awards. Deferral rates applicable to compensation earned in performance year 2013, ranging from 0 to 60%, increase in relation to the level of variable pay earned and in respect of an employee's classification under the United Kingdom's PRA Remuneration Code ("the Code"), as further described under the section "Performance Year 2013 Compensation Actions" in the 2013 CD&A. Variable pay is deferred in the form of cash and/or through the use of Restricted Share Units. The deferred Restricted Share Units have a three-year graded vesting. At the end of the vesting period, deferred cash is credited with a notional rate of return equivalent to the annual dividend yield of HSBC ordinary shares over the period. The economic value of pay deferred in the form of Restricted Share Units will ultimately be determined by the ordinary share price and foreign exchange rate in effect when each tranche of shares awarded is released. Grants under the Group Performance Share Plan ("GPSP") consist of a number of shares to which the employee will become fully entitled, generally over a five-year vesting period, subject to the individual remaining in employment. Shares that are released upon vesting of an award must be retained until the employee retires from or terminates employment with the HSBC Group. An employee who retires from or terminates employment with "good leaver status" will have vested awards under the GPSP released immediately. An employee who terminates employment without "good leaver status" will have vested awards under the GPSP released in three equal installments on the first, second and third anniversaries of the termination of employment with the HSBC Group.

An employee who terminates employment without "good leaver" status being granted by REMCO forfeits all unvested equity and deferred cash. Deferred variable pay awards are also subject to malus treatment, as further described under the section "Reduction or Cancellation of Long-Term Equity Awards" in the 2013 CD&A. Additionally, all employees with unvested awards or awards subject to a retention period are required to certify annually that they have not used personal hedging strategies or remuneration contracts of insurance to mitigate the risk alignment of the unvested awards.

Employees in formulaic plans are held to performance standards that may result in a loss of incentive compensation when quality standards are not met. For example, participants in these plans may be subject to a reduction in variable pay if they commit a "reportable event" (e.g., an error or omission resulting in a loss or expense to the company) or fail to follow required regulations, procedures, policies, and/or associated training. Participants may be altogether disqualified from participation in the plans for unethical acts, breach of company policy, or any other conduct that, in the opinion of HSBC USA, is sufficient reason for disqualification or subject to a recapture provision. Some formulaic incentive plans in servicing environments include limits or caps on the financial measures that are considered in the determination of incentive award amounts

Performance periods for formulaic plans are often one month.

Discretionary Compensation Monitoring

HSBC North America monitors and evaluates the performance of its incentive compensation arrangements, both the discretionary and formulaic plans, to ensure adequate focus and control.

The nature of the discretionary plan allows for compensation decisions to reflect individual and business performance based on performance scorecard achievements. Payments under the discretionary plan are not tied to a formula, which enables payments to be adjusted as appropriate based on individual performance, business performance, and risk assessment. Performance scorecards may also be updated as needed by leadership during the performance year to reflect significant changes in the operating plan, risk, or business strategy of HSBC Finance Corporation. The discretionary plan is reviewed annually by REMCO to ensure that it is meeting the desired objectives. The review includes a comparison of actual payouts against the targets established, a cost/benefit analysis, the ratio of payout to overall business performance and a review of any unintended consequences (e.g., deteriorating service standards).

In 2012, HSBC Finance Corporation initiated enhanced monitoring activity consisting of: 1) validating relationships among measures of financial performance, risks taken, risk outcomes, and amounts of incentive compensation awards/payouts; 2) reviewing how discretion is used in evaluating performance and adjusting incentive compensation awards for high levels of risk taking and adverse risk outcomes, and whether discretionary decisions are having an appropriate impact; and 3) evaluating the extent to which automated systems play, or could play a role in monitoring activities. Consequently, HSBC Finance Corporation identified areas for improvement, not only with respect to tactical reward decisions and documenting discretion, but also in terms of utilizing information systems to support monitoring and validation activities. HSBC Finance Corporation will strive to make improvements to its monitoring and validation activities in future reward cycles.

Formulaic programs are reviewed and revised annually by HSBC North America. Formulaic plans leverage a specific plan template, and include an examination of overall plan expenditures versus actual business performance; an examination of individual pay out levels within plans; and a determination of whether payment levels align with expected performance levels and market indicators. Compensation mix is reviewed for formulaic plans to ensure it is appropriate based on global alignment and business philosophy.

In addition to the annual review, plan performance is monitored regularly by the business management and periodically by HSBC North America Human Resources, which tracks plan expenditures and plan performance to ensure that plan payouts are consistent with expectations. Calculations for plans are performed systematically based on plan measurement factors to ensure accurate calculation of incentives, and all performance payouts are subject to the review of the designated plan administrator to ensure payment and performance of the plan are tracking in line with expectations. Plan inventories are refreshed during the course of the year to identify plans to be eliminated, consolidated, or restructured based on relevant business and commercial factors. Finally, all plans contain provisions that enable modification of the plan if necessary to meet business objectives.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners HSBC Finance Corporation's common stock is 100 percent owned by HSBC Investments (North America) Inc. ("HINO"). HINO is an indirect wholly owned subsidiary of HSBC.

Security Ownership by Management The following table lists the beneficial ownership, as of January 31, 2014, of HSBC ordinary shares or interests in HSBC ordinary shares and Series B Preferred Stock of HSBC Finance Corporation held by each director and each executive officer named in the Summary Compensation Table, individually, and the directors and executive officers as a group. Each of the individuals listed below and all directors and executive officers as a group own less than one percent of the HSBC ordinary shares and the Series B Preferred Stock of HSBC Finance Corporation. No director or executive officer of HSBC Finance Corporation owned any of HSBC's American Depositary Shares, Series A at January 31, 2014.

	Number of Shares Beneficially Owned of HSBC Holdings plc⁽¹⁾⁽²⁾	HSBC Shares That May Be Acquired Within 60 Days By Exercise of Options⁽³⁾	HSBC Restricted Shares Released Within 60 Days⁽⁴⁾	Number of HSBC Ordinary Share Equivalents⁽⁵⁾	Total HSBC Ordinary Shares⁽²⁾	Series B Preferred of HSBC Finance Corporation
Directors
Patrick J. Burke⁽⁶⁾...........................................	50,470	68,852	48,079	-	167,401	-
Phillip D. Ameen............................................	-	-	-	-	-	-
Robert K. Herdman........................................	82	-	-	-	82	-
George A. Lorch..............................................	2,370	-	-	8,444	10,814	-
Beatriz R. Perez..............................................	150	-	-	-	150	-
Larree M. Renda.............................................	650	-	-	26	676	10⁽⁷⁾
Thomas K. Whitford......................................	-	-	-	-	-	-
Named Executive Officers
Michael A. Reeves..........................................	5,280	-	16,870	-	22,150	-
Gregory Zeeman.............................................	13,814	-	17,112	-	30,926	-
Steven G. Ekert...............................................	-	-	26,418	-	26,418	-
C. Mark Gunton.............................................	115	-	28,360	-	28,475	-
Loren Klug......................................................	6,290	-	21,740	-	28,030	-
Gary E. Peterson............................................	-	-	4,704	-	4,704	-
All directors and executive officers as a group..............................................................	127,341	68,852	199,078	8,470	403,741	10

⁽¹⁾ Directors and executive officers have sole voting and investment power over the shares listed above, except that the number of ordinary shares held by spouses, children and charitable or family foundations in which voting and investment power is shared (or presumed to be shared) is as follows: Directors and executive officers as a group, 11,432.

⁽²⁾ Some of the shares included in the table above were held in American Depository Shares, each of which represents five HSBC ordinary shares.

⁽³⁾ Represents the number of ordinary shares that may be acquired by HSBC Finance Corporation's Directors and executive officers through April 1, 2014 pursuant to the exercise of stock options.

⁽⁴⁾ Represents the number of ordinary shares that may be acquired by HSBC Finance Corporation's Directors and executive officers through April 1, 2014 pursuant to the satisfaction of certain conditions.

⁽⁵⁾ Represents the number of ordinary share equivalents owned by executive officers under the HSBC North America Employee Non-Qualified Deferred Compensation Plan and by Directors under the HSBC North America Directors Non-Qualified Deferred Compensation Plan. The shares included in the table above were held in American Depository Shares, each of which represents five HSBC ordinary shares.

⁽⁶⁾ Also a Named Executive Officer.

⁽⁷⁾ Represents 400 Depositary Shares, each representing one-fortieth of a share of 6.36% Non-Cumulative Preferred Stock, Series B.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Persons During the fiscal year ended December 31, 2013, HSBC Finance Corporation was not a participant in any transaction, and there is currently no proposed transaction, in which the amount involved exceeded or will exceed $120,000, and in which a director or an executive officer, or a member of the immediate family of a director or an executive officer, had or will have a direct or indirect material interest, other than the agreement with Mr. Burke described in Item 11. Executive Compensation - Compensation Discussion and Analysis - Compensation of Officers Reported in the Summary Compensation Table.

HSBC Finance Corporation maintains a written Policy for the Review, Approval or Ratification of Transactions with Related Persons (the "Policy") which provides that any "Transaction with a Related Person" must be reviewed and approved or ratified in accordance with specified procedures. The term "Transaction with a Related Person" includes any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness), in which (1) the aggregate dollar amount involved will or may be expected to exceed $120,000 in any calendar year, (2) HSBC Finance Corporation or any of its subsidiaries is, or is proposed to be, a participant, and (3) a director or an executive officer, or a member of the immediate family of a director or an executive officer, has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity). The following categories of transactions are deemed pre-approved even if the aggregate amount involved exceeds $120,000, provided, however, that if a Transaction with a Related Person falling in a category described below would cause one of our directors whom the Board of Directors currently deems independent to lose or risk losing their independence, the director must consult with the Chair of the Audit Committee prior to entering such Transaction with a Related Person:

• Compensation paid to directors and executive officers reportable under rules and regulations promulgated by the Securities and Exchange Commission;

• Transactions with other companies if the only relationship of the director, executive officer or family member to the other company is as an employee (other than an executive officer), director or beneficial owner of less than 10 percent of such other company's equity interests so long as the aggregate amount involved does not exceed the greater of $1,000,000 or 2 percent of the other company's total annual revenues;

• Charitable contributions, grants or endowments by us or any of our subsidiaries to charitable organizations, foundations or universities if the only relationship of the director, executive officer or family member to the organization, foundation or university is as an employee (other than an executive officer), trustee or a director, so long as the aggregate annual amount of such contribution, grant or endowment, excluding any matching contributions from us, do not exceed the lesser of $1,000,000 or 2 percent of the organization's total annual revenues;

• Transactions where the interest of the director, executive officer or family member arises solely from the ownership of our equity securities and all holders of such securities received or will receive the same benefit on a pro rata basis;

• Transactions involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or government authority;

• Transactions where the rates or charges involved are determined by competitive bids;

• Certain ordinary course transactions:

○ Any financial services, including brokerage services, investment management or advisory services, banking services, loans, insurance services and other financial services, provided to any director or an immediate family member of a director, provided that the services are on substantially the same terms as those prevailing at the time for comparable services provided to persons not related to us or our subsidiaries;

○ Personal loans to a related person and loans to a director's primary business affiliation or the primary business affiliation of an immediate family member of a director, in each case that (i) are made or maintained in the ordinary course of business on substantially the same terms (including interest rates and collateral requirements) as those prevailing at the time for comparable loans with persons not related to us or our subsidiaries; (ii) when made do not involve more than the normal risk for collectability or present other unfavorable features; (iii) comply with applicable law including the Sarbanes-Oxley Act of 2002 and Regulation O of the Board of Governors of the Federal Reserve; (iv) are not classified as Substandard (II) or worse, as defined in the OCC's "Rating Credit Risk" Comptroller's Handbook; and (v) in the case of and loans to a director's primary business affiliation or the primary business affiliation of an immediate family member of a director, complies with any applicable FDIC Guidelines; and

○ All business relationships, lending relationships, brokerage, investment advisory relationships, insurance, deposit and other banking relationships with a director's primary business affiliation or the primary business affiliation of an Immediate Family Member of a director made in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with persons not related to us or our subsidiaries; and

• Transactions involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services.

The Policy requires each director and executive officer to promptly notify the Office of the General Counsel in writing of any Transaction with a Related Person in which the director, executive officer or an immediate family member has or will have an interest and to provide specified details of the transaction. The Office of the General Counsel, through the Corporate Secretary, will provide a copy of the notice to the Chair of the Audit Committee along with any other information as the Office of the General Counsel or the Corporate Secretary believes would be useful to the Audit Committee in performing its review. The Audit Committee will review the material facts of each proposed Transaction with a Related Person at each regularly scheduled committee meeting and approve or disapprove the transaction. If it is impractical or undesirable to delay a decision on a proposed Transaction with a Related Person, the Chair of the Audit Committee may review and approve the transaction in accordance with the criteria set forth in the Policy or may convene a special meeting of the Audit Committee to consider the transaction, at the Chair's discretion. Any such approval must be reported to the Audit Committee at its next regularly scheduled meeting.

The vote of a majority of disinterested members of the Audit Committee is required for the approval or ratification of any Transaction with a Related Person. The Audit Committee may approve or ratify a Transaction with a Related Person if the Audit Committee determines, in its business judgment, based on the facts and circumstances it deems relevant in its sole good faith discretion that the transaction is fair and reasonable to, and consistent with our best interests and those of our subsidiaries. Any transaction that is not fair and reasonable to, and consistent with our best interests and those of our subsidiaries will be discontinued, allowing for a reasonable transition period as may be necessary or advisable so as not to prejudice us and our subsidiaries. In making this determination, the Audit Committee will consider, among other things:

• Information about the goods and services to be or being provided;

• The nature or business purpose of the transaction and the costs to be incurred by us or the payments to us;

• The terms of the transaction and whether it is entered into on an arms-length basis or in the ordinary course of our business;

• Whether the related person's interest in the transaction is material;

• The apparent benefits of the transaction to us;

• The availability of other sources for the product or services involved in the transaction;

• The potential public perception of the transaction;

• The potential impact of the transaction on the independence of any of our or our subsidiaries' directors; and

• Whether the transaction violates any provisions of the HSBC Finance Corporation Statement of Business Principles and Code of Ethics, the HSBC Finance Corporation Code of Ethics for Senior Financial Officers or the HSBC Finance Corporation Corporate Governance Standards, as applicable.

In any case where the Audit Committee determines not to approve or ratify a Transaction with a Related Person, the matter will be referred to the Office of the General Counsel for review and consultation regarding the appropriate disposition of such transaction including, but not limited to, termination of the transaction, rescission of the transaction or modification of the transaction in a manner that would permit it to be ratified and approved.

If we become aware of a Transaction with a Related Person that has not been approved under the Policy, the matter will be referred by the Audit Committee for review. The Audit Committee will consider the relevant facts and circumstances respecting such Transaction with a Related Person, and will evaluate the options available, including ratification, revision or termination of the transaction.

Director Independence The HSBC Finance Corporation Corporate Governance Standards, together with the charters of committees of the Board of Directors, provide the framework for our corporate governance. Director independence is defined in the HSBC Finance Corporation Corporate Governance Standards which are based upon the rules of the New York Stock Exchange. The HSBC Finance Corporation Corporate Governance Standards are available on our website at www.us.hsbc.com or upon written request made to HSBC Finance Corporation, 26525 North Riverwoods Boulevard, Mettawa, Illinois 60045, Attention: Corporate Secretary.

According to the HSBC Finance Corporation Corporate Governance Standards, a majority of the members of the Board of Directors must be independent. The composition requirement for each committee of the Board of Directors is as follows:

Committee	Independence/Member Requirements
Audit Committee.................................................................................................................	Chair and all voting members
Compliance Committee......................................................................................................	A majority of all members
Risk Committee...................................................................................................................	Chair and all voting members

Messrs. Ameen, Herdman, Lorch and Whitford, Ms. Perez and Ms. Renda are considered to be independent directors. Mr. Burke currently serves as Chief Executive Officer of HSBC Finance Corporation and is a Group General Manager of HSBC. Because of the positions held by Mr. Burke, he is not considered to be an independent director.

See Item 10. Directors, Executive Officers and Corporate Governance - Corporate Governance - Board of Directors - Committees and Charters for more information about our Board of Directors and its committees.

Item 14. Principal Accountant Fees and Services.

Audit Fees. The aggregate amount billed by our principal accountant, KPMG LLP, for audit services performed during the fiscal years ended December 31, 2013 and 2012 was $2,139,000 and $2,613,000, respectively. Audit services include the auditing of financial statements, quarterly reviews, statutory audits, and the preparation of comfort letters, consents and review of registration statements.

Audit Related Fees. The aggregate amount billed by KPMG LLP in connection with audit related services performed during the fiscal years ended December 31, 2013 and 2012 was $434,000 and $492,650, respectively. Audit related services include employee benefit plan audits, and audit or attestation services not required by statute or regulation.

Tax Fees. The aggregate amount billed by KPMG LLP for tax related services performed during the fiscal year ended December 31, 2013 and 2012 was $204,860 and $317,043, respectively. These services include tax related research, general tax services in connection with transactions and legislation and tax services for review of Federal and state tax accounts for possible over assessment of interest and/or penalties.

All Other Fees. The aggregate amount billed by KPMG LLP for other services performed during the fiscal years ended December 31, 2013 were $111,265. These services included fees related to corporate governance matters. There were no amounts billed for the year ended December 31, 2012.

All of the fees described above were approved by HSBC Finance Corporation's Audit Committee.

The Audit Committee has a written policy that requires pre-approval of all services to be provided by KPMG LLP, including audit, audit-related, tax and all other services. Pursuant to the policy, the Audit Committee annually pre-approves the audit fee and terms of the audit services engagement. The Audit Committee also approves a specified list of audit, audit-related, tax and permissible non-audit services deemed to be routine and recurring services. Any service not included on this list must be submitted to the Audit Committee for pre-approval. On an interim basis, any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Chair of the Audit Committee for approval and to the full Audit Committee at its next regular meeting.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

The consolidated financial statements listed below, together with an opinion of KPMG LLP dated February 24, 2014 with respect thereto, are included in this Form 10-K pursuant to Item 8. Financial Statements and Supplementary Data of this Form 10-K.

HSBC Finance Corporation and Subsidiaries:

Report of Independent Registered Public Accounting Firm

Consolidated Statement of Income (Loss)

Consolidated Balance Sheet

Consolidated Statement of Cash Flows

Consolidated Statement of Changes in Shareholders' Equity

Notes to Consolidated Financial Statements

Selected Quarterly Financial Data (Unaudited)

(a)(2) Not applicable.

(a)(3) Exhibits.

3(i)		Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation's Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation's Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed November 30, 2010).
3(ii)		Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 24, 2013 (incorporated by reference to Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed April 29, 2013).
4.1		Amended and Restated Standard Multiple-Series Indenture Provisions for Senior Debt Securities of HSBC Finance Corporation dated as of December 15, 2004 (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to HSBC Finance Corporation's Registration Statements on Form S-3 Nos. 333-120494, 333-120495 and 333-120496.
4.2		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and U.S. Bank National Association (formerly known as First Trust of Illinois, National Association, successor in interest to Bank of America Illinois, formerly known as Continental Bank, National Association), as Trustee, amending and restating the Indenture dated as of October 1, 1992 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.3		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A. (formerly BNY Midwest Trust Company, formerly Harris Trust and Savings Bank), as Trustee, amending and restating the Indenture dated as of December 19, 2003 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.4 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.4		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association, as successor in interest to Bank One, National Association, formerly known as the First National Bank of Chicago), as Trustee, amending and restating the Indenture dated as of April 1, 1995 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.5 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.5		Indenture for Senior Debt Securities dated as of March 7, 2007 between HSBC Finance and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.12 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-130580).
4.6		Indenture for Senior Subordinated Debt Securities dated December 17, 2008 between HSBC Finance and The Bank of New York Mellon Trust Company, N.A., as Trustee, as amended and supplemented (incorporated by reference to Exhibit 4.2 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-156219 and Exhibit 4.3 to HSBC Finance Corporation's Current Report on Form 8-K filed December 9, 2010).
4.7		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance Corporation (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A., as Trustee, amended and restating the Indenture for Senior Debt Securities dated December 1, 1993 between Household Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., as successor to The Chase Manhattan Bank (National Association)), as Trustee (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120495).
4.8		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance Corporation (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A., as Trustee, amended and restating the Indenture for Senior Debt Securities dated March 1, 2001 and amended and restated April 30, 2003, between Household Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly known as The Chase Manhattan Bank), as Trustee (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120496).
4.9		The principal amount of debt outstanding under each other instrument defining of the rights of Holders of our long-term senior and senior subordinated debt does not exceed 10 percent of our total assets. HSBC Finance Corporation agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument defining the rights of holders of our long-term senior and senior subordinated debt.
10.1		Purchase and Assumption Agreement, dated August 10, 2011, among HSBC Finance Corporation, HSBC USA Inc., HSBC Technology and Services (USA) Inc. and Capital One Financial Corporation (incorporated by reference to Exhibit 2.1 of HSBC Finance Corporation's Current Report on Form 8-K filed August 12, 2011).
10.2		Service Agreement between HSBC Finance Corporation and Patrick J. Burke, dated July 5, 2013. (incorporated by reference to Exhibit 10.2 of HSBC Finance Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 2013, filed November 4, 2013).
12		Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
14		Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 of HSBC Finance Corporation's Annual Report on Form 10-K for the year ended December 31, 2004 filed February 28, 2005).
21		Subsidiaries of HSBC Finance Corporation.
23		Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24		Power of Attorney (included on the signature page of this Form 10-K).
31		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document^(1),(2)
101.SCH		XBRL Taxonomy Extension Schema Document^(1),(2)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document^(1),(2)
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document^(1),(2)
101.LAB		XBRL Taxonomy Extension Label Linkbase Document^(1),(2)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document^(1),(2)

⁽¹⁾Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Annual Report on Form 10-K for the year ended December 31, 2013, formatted in eXentsible Business Reporting Language ("XBRL") interactive data files: (i) the Consolidated Statement of Income (Loss) for the years ended December 31, 2013, 2012 and 2011, (ii) the Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2013, 2012 and 2011, (iii) the Consolidated Balance Sheet as of December 31, 2013 and 2012, (iv) the Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011, (iv) the Consolidated Statement of Cash Flows for the years ended December 31, 2013, 2012 and 2011, and (v) the Notes to Consolidated Financial Statements.

⁽²⁾As provided in Rule 406T of Regulation S-T, this information shall be not be deemed "filed" for purposes of Section 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

Upon receiving a written request, we will furnish copies of the exhibits referred to above free of charge. Requests should be made to HSBC Finance Corporation, 26525 North Riverwoods Boulevard, Mettawa, Illinois 60045, Attention: Corporate Secretary.

Index

Accounting:		concentration
new pronouncements		critical accounting policy
policies (critical)		management
policies (significant)		Critical accounting policies and estimates
Account management policies and practices		Current environment
Assets:		Deferred tax assets
by business segment		Derivatives:
fair value of financial assets		accounting policy
fair value measurements		cash flow hedges
nonperforming		critical accounting policy
Audit committee		fair value hedges
Auditor's report		income (expense)
Balance sheet (consolidated)		non-qualifying hedges
Basel II		notional value
Basel III		Directors:
Basis of reporting		biographies
Business:		board of directors
consolidated performance review		executive
focus		compensation (executives)
operations		responsibilities
organizational history		Discontinued operations
Capital:		Employees:
2014 funding strategy		compensation and benefits
common equity movements		number of
consolidated statement of changes		Equity:
selected capital ratios		consolidated statement of changes
Cash flow (consolidated)		ratios
Cautionary statement regarding forward-looking statements		Estimates and assumptions
Committees		Executive overview
Competition		Fair value measurements:
Compliance committee		assets and liabilities recorded at fair value on a recurring basis
Compliance risk		assets and liabilities recorded at fair value on a non-recurring basis
Consumer business segment		fair value adjustments
Contingent liabilities:		financial instruments
critical accounting policy		hierarchy
litigation		transfers into/out of Level 1 and Level 2
Controls and procedures		transfers into/out of Level 2 and Level 3
Corporate governance and controls		valuation control framework
Customers		valuation techniques
Credit quality		Financial highlights metrics
Credit risk:
accounting policy

Financial liabilities:		New accounting pronouncements to be adopted in future periods
designated at fair value		Nominating and compensation committee
fair value of financial liabilities		Off-balance sheet arrangements
Forward looking statements		Operating expenses
Funding		Operational risk
Gain (loss) from debt designated at fair value and related derivatives		Other revenues
Geographic concentration of receivables		Pension and other postretirement benefits:
Impairment:		accounting policy
accounting policy		risk management
credit losses		Performance, developments and trends
critical accounting policy		Profit (loss) before tax:
nonaccrual receivables		by segment - IFRSs basis
nonperforming receivables		consolidated
Income taxes:		Properties
accounting policy		Property and equipment:
critical accounting policy - deferred taxes		accounting policy
expense		Provision for credit losses
Internal control		Ratios:
Interest income:		capital
net interest income		charge-off (net)
sensitivity		credit loss reserve related
Interest rate risk		delinquency
Key performance indicators		earnings to fixed charges - Exhibit 12
Legal proceedings		efficiency
Liabilities:		financial
commitments		Re-aged receivables
financial liabilities designated at fair value		Real estate owned
lines of credit		Receivables:
long-term debt		by category
Lease commitments		by charge-off (net)
Liquidity and capital resources		by delinquency
Liquidity risk		geographic concentration
Litigation and regulatory matters		held for sale
LTV Ratios		modified and/or re-aged
Loans and advances - see Receivables		nonaccrual
Loan impairment charges - see Provision for credit losses		overall review
Market risk		risk concentration
Market turmoil - see Current environment		troubled debt restructures
Model risk		Reconciliation of Non-U.S. GAAP financial measures to U.S. GAAP financial measures
Mortgage Lending products		Reconciliation of U.S. GAAP results to IFRSs
Net interest income		Regulation
New accounting pronouncements adopted		Related party transactions

Repurchase liability		Selected financial data
Reputational risk		Senior management:
Results of operations		biographies
Risk committee		Sensitivity:
Risk and uncertainties		projected net interest income
Risk factors		Share-based payments:
Risk management:		accounting policy
credit		Statement of cash flows
compliance		Statement of changes in shareholders' equity
interest rate		Statement of comprehensive income (loss)
liquidity		Statement of income (loss)
market		Strategic initiatives and focus
model		Strategic risk
operational		Table of contents
overview		Tangible common equity to tangible assets
pension		Tax expense
reputational		Troubled debt restructures
security and fraud		Unresolved staff comments
strategic		Variable interest entities
Security and fraud risk
Segment results - IFRSs basis:
consumer
overall summary

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, HSBC Finance Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this, the 24th day of February, 2014.

HSBC FINANCE CORPORATION

By:		/s/ Patrick J. Burke
		Patrick J. Burke
		Chief Executive Officer

Each person whose signature appears below constitutes and appoints P. D. Schwartz and K. P. Pisarczyk as his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her in his/her name, place and stead, in any and all capacities, to sign and file, with the Securities and Exchange Commission, this Form 10-K and any and all amendments and exhibits thereto, and all documents in connection therewith, granting unto each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or their substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of HSBC Finance Corporation and in the capacities indicated on the 24th day of February, 2014.

Signature	Title

/s/ P. J. BURKE	Chief Executive Officer, Chairman and Director
(P. J. Burke)	(as Principal Executive Officer)

/s/ P. D. AMEEN	Director
(P. D. Ameen)

/s/ R. K. HERDMAN	Director
(R. K. Herdman)

/s/ G. A. LORCH	Director
(G. A. Lorch)

/s/ B. R. PEREZ	Director
(B. R. Perez)

/s/ L. M. RENDA	Director
(L. M. Renda)

/s/ T. K. WHITFORD	Director
(T. K. Whitford)

/s/ M. A. REEVES	Executive Vice President and Chief Financial Officer
(M. A. Reeves)	(as Principal Financial Officer)

/s/ E. K. FERREN	Executive Vice President and Chief Accounting Officer
(E. K. Ferren)	(as Principal Accounting Officer)

Exhibit Index

3(i)		Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation's Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation's Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed November 30, 2010).
3(ii)		Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 24, 2013 (incorporated by reference to Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed April 29, 2013).
4.1		Amended and Restated Standard Multiple-Series Indenture Provisions for Senior Debt Securities of HSBC Finance Corporation dated as of December 15, 2004 (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to HSBC Finance Corporation's Registration Statements on Form S-3 Nos. 333-120494, 333-120495 and 333-120496).
4.2		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and U.S. Bank National Association (formerly known as First Trust of Illinois, National Association, successor in interest to Bank of America Illinois, formerly known as Continental Bank, National Association), as Trustee, amending and restating the Indenture dated as of October 1, 1992 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.3		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A. (formerly BNY Midwest Trust Company, formerly Harris Trust and Savings Bank), as Trustee, amending and restating the Indenture dated as of December 19, 2003 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.4 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.4		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association, as successor in interest to Bank One, National Association, formerly known as the First National Bank of Chicago), as Trustee, amending and restating the Indenture dated as of April 1, 1995 between Household Finance Corporation and the Trustee (incorporated by reference to Exhibit 4.5 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120494).
4.5		Indenture for Senior Debt Securities dated as of March 7, 2007 between HSBC Finance and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.12 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-130580).
4.6		Indenture for Senior Subordinated Debt Securities dated December 17, 2008 between HSBC Finance and The Bank of New York Mellon Trust Company, N.A., as Trustee, as amended and supplemented (incorporated by reference to Exhibit 4.2 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-156219 and Exhibit 4.3 to HSBC Finance Corporation's Current Report on Form 8-K filed December 9, 2010).
4.7		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance Corporation (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A., as Trustee, amended and restating the Indenture for Senior Debt Securities dated December 1, 1993 between Household Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., as successor to The Chase Manhattan Bank (National Association)), as Trustee (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120495).
4.8		Amended and Restated Indenture for Senior Debt Securities dated as of December 15, 2004 between HSBC Finance Corporation (successor to Household Finance Corporation) and The Bank of New York Mellon Trust Company, N.A., as Trustee, amended and restating the Indenture for Senior Debt Securities dated March 1, 2001 and amended and restated April 30, 2003, between Household Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A., formerly known as The Chase Manhattan Bank), as Trustee (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to HSBC Finance Corporation's Registration Statement on Form S-3, Registration No. 333-120496).
4.9		The principal amount of debt outstanding under each other instrument defining of the rights of Holders of our long-term senior and senior subordinated debt does not exceed 10 percent of our total assets. HSBC Finance Corporation agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument defining the rights of holders of our long-term senior and senior subordinated debt.
10.1		Purchase and Assumption Agreement, dated August 10, 2011, among HSBC Finance Corporation, HSBC USA Inc., HSBC Technology and Services (USA) Inc. and Capital One Financial Corporation (incorporated by reference to Exhibit 2.1 of HSBC Finance Corporation's Current Report on Form 8-K filed August 12, 2011).
10.2		Service Agreement between HSBC Finance Corporation and Patrick J. Burke, dated July 5, 2013. (incorporated by reference to Exhibit 10.2 of HSBC Finance Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 2013, filed November 4, 2013).
12		Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
14		Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 of HSBC Finance Corporation's Annual Report on Form 10-K for the year ended December 31, 2004 filed February 28, 2005).
21		Subsidiaries of HSBC Finance Corporation.
23		Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24		Power of Attorney (included on the signature page of this Form 10-K).
31		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document^(1),(2)
101.SCH		XBRL Taxonomy Extension Schema Document^(1),(2)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document^(1),(2)
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document^(1),(2)
101.LAB		XBRL Taxonomy Extension Label Linkbase Document^(1),(2)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document^(1),(2)

EXHIBIT 12

HSBC FINANCE CORPORATION

COMPUTATION OF RATIO OF EARNINGS (LOSS) TO FIXED CHARGES AND TO

COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

Twelve Months Ended December 31,	2013			2012			2011			2010			2009
	(dollars are in millions)
Income (loss) from continuing operations.............................................	$	713		$	(2,405	)	$	(2,326	)	$	(2,549	)	$	(5,908	)
Income tax (expense) benefit................................................................	(325		)	1,406			1,431			1,453			2,881
Income (loss) from continuing operations before income tax (expense) benefit...................................................................................................	1,038			(3,811		)	(3,757		)	(4,002		)	(8,789		)
Fixed charges:
Interest expense...............................................................................	1,370			1,777			2,346			2,905			3,602
Interest portion of rentals⁽¹⁾..............................................................	5			8			9			7			34
Total fixed charges................................................................................	1,375			1,785			2,355			2,912			3,636
Total earnings from continuing operations as defined............................	$	2,413		$	(2,026	)	$	(1,402	)	$	(1,090	)	$	(5,153	)
Ratio of earnings to fixed charges..........................................................	1.75			(1.14		)	(.60		)	(.37		)	(1.42		)
Preferred stock dividends⁽²⁾....................................................................	$	189		$	189		$	194		$	57		$	57
Ratio of earnings to combined fixed charges and preferred stock dividends................................................................................................	1.54			(1.03		)	(.55		)	(.37		)	(1.40		)

(1) Represents one-third of rentals, which approximates the portion representing interest.

(2) Preferred stock dividends are grossed up to their pretax equivalents.

EXHIBIT 21

Subsidiaries of HSBC Finance Corporation

Names of Subsidiaries	US - State Organized
Beneficial Commercial Corporation	Delaware
Beneficial Commercial Holding Corporation	Delaware
Beneficial Company LLC	Delaware
Beneficial Connecticut Inc.	Delaware
Beneficial Consumer Discount Company	Pennsylvania
dba BMC of PA
Beneficial Credit Services Inc.	Delaware
Beneficial Credit Services of Connecticut Inc.	Delaware
Beneficial Credit Services of Mississippi Inc.	Delaware
Beneficial Credit Services of South Carolina Inc.	Delaware
Beneficial Direct, Inc.	New Jersey
Beneficial Finance Co.	Delaware
Beneficial Financial I Inc.	California
dba Beneficial Member HSBC Group
Beneficial Florida Inc.	Delaware
Beneficial Homeowner Service Corporation	Delaware
Beneficial Kentucky Inc.	Delaware
Beneficial Leasing Group, Inc.	Delaware
Beneficial Loan & Thrift Co.	Minnesota
Beneficial Louisiana Inc.	Delaware
Beneficial Maine Inc.	Delaware
dba Beneficial Credit Services of Maine
Beneficial Management Corporation of America	Delaware
Beneficial Massachusetts Inc.	Delaware
Beneficial Michigan Inc.	Delaware
Beneficial Mortgage Corporation	Delaware
Beneficial New Hampshire Inc.	Delaware
Beneficial New York Inc.	New York
Beneficial Oregon Inc.	Delaware
Beneficial Rhode Island Inc.	Delaware
Beneficial South Dakota Inc.	Delaware
Beneficial Tennessee Inc.	Tennessee
Beneficial West Virginia, Inc.	West Virginia
Beneficial Wyoming Inc.	Wyoming
BFC Insurance Agency of Nevada	Nevada
Cal-Pacific Services, Inc.	California
Capital Financial Services Inc.	Nevada
dba Capital Financial Services I Inc.
dba Capital Financial Services No. 1 Inc.
dba CFSI, Inc.
dba HB Financial Services
Decision One Mortgage Company, LLC	North Carolina
HFC Commercial Realty, Inc.	Delaware
HFC Company LLC	Delaware
HFC Leasing Inc.	Delaware
Household Capital Markets LLC	Delaware
Household Commercial Financial Services, Inc.	Delaware
Household Commercial of California, Inc.	California
Household Finance Consumer Discount Company	Pennsylvania
Household Finance Corporation II	Delaware
dba Household Finance Corporation of Virginia
Household Finance Corporation III	Delaware
dba HFC Mortgage of Nebraska
dba Household Mortgage Services
dba HSBC Mortgage
Household Finance Corporation of Alabama	Alabama
Household Finance Corporation of California	Delaware
Household Finance Corporation of Nevada	Delaware
Household Finance Corporation of West Virginia	West Virginia
Household Finance Industrial Loan Company of Iowa	Iowa
Household Finance Realty Corporation of Nevada	Delaware
Household Finance Realty Corporation of New York	Delaware
Household Financial Center Inc.	Tennessee
Household Global Funding, Inc.	Delaware
Household Industrial Finance Company	Minnesota
Household Industrial Loan Co. of Kentucky	Kentucky
Household Insurance Agency, Inc. Nevada	Nevada
Household Insurance Group Holding Company	Delaware
Household Ireland Holdings Inc.	Delaware
Household Pooling Corporation	Nevada
Household Realty Corporation	Delaware
dba Household Realty Corporation of Virginia
Household Servicing, Inc.	Delaware
Household Servicing Limited Partnership	Delaware
HSBC Card Services Inc.	Delaware
HSBC Consumer Lending (USA) Inc.	Delaware
HSBC Credit Center, Inc.	Delaware
HSBC Home Equity Loan Corporation I	Delaware
HSBC Home Equity Loan Corporation II	Delaware
HSBC Mortgage Services Inc.	Delaware
HSBC Retail Services Inc.	Delaware
HSBC Taxpayer Financial Services Inc.	Delaware
HSBC TFS I 2005 LLC	Delaware
HSBC TFS II 2005 LLC	Delaware
Mortgage One Corporation	Delaware
Mortgage Two Corporation	Delaware
Neil Corporation	Delaware
Palatine Hills Leasing, Inc.	Delaware
PHL Four, Inc.	New Jersey
Real Estate Collateral Management Company	Delaware
Renaissance Bankcard Services of Kentucky	Kentucky

Names of Subsidiaries	US - State Organized
Silliman Associates Limited Partnership	Massachusetts
Silliman Corporation	Delaware
SPE 1 2005 Manager Inc.	Delaware


Non-US Affiliates
Names of Subsidiaries	Country Organized
BFC Ireland (Holdings) Limited	Ireland
ICOM Limited	Bermuda

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

To the Board of Directors

HSBC Finance Corporation

We consent to the incorporation by reference in the Registration Statement No. 333-174628 on Form S-4 of HSBC Finance Corporation of our report dated February 24, 2014, with respect to the consolidated balance sheet of HSBC Finance Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2013, which report appears in the December 31, 2013 annual report on Form 10-K of HSBC Finance Corporation.

Our report refers to HSBC Finance Corporation's adoption of the provisions of Accounting Standards Update No. 2011-02 - Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring, in the third quarter of 2011.

/s/ KPMG LLP

Chicago, Illinois

February 24, 2014

EXHIBIT 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Chief Executive Officer

I, Patrick J. Burke, Chairman of the Board and Chief Executive Officer of HSBC Finance Corporation, certify that:

1. I have reviewed this report on Form 10-K of HSBC Finance Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 24, 2014

/s/ PATRICK J. BURKE

Patrick J. Burke

Chairman of the Board and Chief Executive

Officer

Certification of Chief Financial Officer

I, Michael A. Reeves, Executive Vice President and Chief Financial Officer of HSBC Finance Corporation, certify that:

1. I have reviewed this report on Form 10-K of HSBC Finance Corporation;

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 24, 2014

/s/ MICHAEL A. REEVES

Michael A. Reeves

Executive Vice President and

Chief Financial Officer

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The certification set forth below is being submitted in connection with the HSBC Finance Corporation (the "Company") Annual Report on Form 10-K for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report") for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Patrick J. Burke, Chairman of the Board and Chief Executive Officer of the Company, certify that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation.

Date: February 24, 2014

/s/ PATRICK J. BURKE

Patrick J. Burke

Chairman of the Board and Chief Executive Officer

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Michael A. Reeves, Executive Vice President and Chief Financial Officer of the Company, certify that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation.

Date: February 24, 2014

/s/ MICHAEL A. REEVES

Michael A. Reeves

Executive Vice President

and Chief Financial Officer

These certifications accompany each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by HSBC Finance Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Signed originals of these written statements required by Section 906 of the Sarbanes-Oxley Act of 2002 have been provided to HSBC Finance Corporation and will be retained by HSBC Finance Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

This information is provided by RNS

The company news service from the London Stock Exchange

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