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HSBC Holdings PLC (HSBA)

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Tuesday 18 February, 2020

HSBC Holdings PLC

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

RNS Number : 2817D
HSBC Holdings PLC
18 February 2020
 

To view the full document please click here

http://www.rns-pdf.londonstockexchange.com/rns/2817D_1-2020-2-18.pdf

 

 

Pillar 3 Disclosures at 31 December 2019 continued… 

The Incremental Risk Charge

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

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

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

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

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

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

Structural foreign exchange exposures

 

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

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

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

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

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

Interest rate risk in the banking book

 

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

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

 

 

  

Prudent valuation adjustment

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

Table 64: Prudential valuation adjustments (PV1)

 

Equity

Interest rates

FX

Credit

Commodities

Total

Of which:

in the trading book

Of which:

in the banking book

 

$m

$m

$m

$m

$m

$m

$m

$m

Closeout uncertainty

260

 

361

 

47

 

137

 

5

 

810

 

606

 

204

 

-  of which:

 

 

 

 

 

 

 

 

Mid-market value

198

 

135

 

19

 

57

 

4

 

413

 

312

 

101

 

Closeout cost

20

 

91

 

9

 

8

 

1

 

129

 

115

 

14

 

Concentration

42

 

135

 

19

 

72

 

-

 

268

 

179

 

89

 

Early termination

-

 

-

 

-

 

4

 

-

 

4

 

4

 

-

 

Model risk

25

 

85

 

6

 

9

 

-

 

125

 

122

 

3

 

Operational risk

22

 

28

 

3

 

9

 

-

 

62

 

50

 

12

 

Investing and funding costs

-

 

56

 

-

 

2

 

-

 

58

 

58

 

-

 

Unearned credit spreads

-

 

90

 

4

 

8

 

-

 

102

 

102

 

-

 

Future administrative costs

-

 

1

 

-

 

7

 

-

 

8

 

8

 

-

 

Other

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Total adjustment at 31 Dec 2019

307

 

621

 

60

 

176

 

5

 

1,169

 

950

 

219

 

 

 

 

 

 

 

 

 

 

Closeout uncertainty, of which:

196

 

360

 

29

 

149

 

2

 

736

 

470

 

266

 

-  of which:

 

 

 

 

 

 

 

 

Mid-market value

127

 

98

 

4

 

54

 

-

 

283

 

127

 

156

 

Closeout cost

21

 

94

 

10

 

9

 

2

 

136

 

123

 

13

 

Concentration

48

 

168

 

15

 

86

 

-

 

317

 

220

 

97

 

Early termination

-

 

-

 

-

 

5

 

-

 

5

 

5

 

-

 

Model risk

21

 

116

 

4

 

5

 

-

 

146

 

146

 

-

 

Operational risk

15

 

29

 

2

 

11

 

-

 

57

 

39

 

18

 

Investing and funding costs

-

 

95

 

1

 

2

 

-

 

98

 

98

 

-

 

Unearned credit spreads

1

 

90

 

7

 

19

 

3

 

120

 

120

 

-

 

Future administrative costs

-

 

5

 

-

 

4

 

-

 

9

 

9

 

-

 

Other

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Total adjustment at 31 Dec 2018

233

 

695

 

43

 

195

 

5

 

1,171

 

887

 

284

 

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

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

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

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

Non-financial risk

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

Operational risk capital requirements

Operational risk is part of non-financial risk. Table

65

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

Table 65: Operational risk RWAs

 

 

 

31 Dec 2019

31 Dec 2018

 

RWAs

Capital required

RWAs

Capital required

 

$bn

$bn

$bn

$bn

By global business

92.8

 

7.4

 

91.1

 

7.3

 

Retail Banking and Wealth Management

30.2

 

2.4

 

27.3

 

2.2

 

Commercial Banking

25.9

 

2.1

 

24.3

 

1.9

 

Global Banking and Markets

30.8

 

2.5

 

31.5

 

2.5

 

Global Private Banking

2.8

 

0.2

 

2.8

 

0.2

 

Corporate Centre

3.1

 

0.2

 

5.2

 

0.5

 

By geographical region

92.8

 

7.4

 

91.1

 

7.3

 

Europe

24.5

 

2.0

 

27.3

 

2.2

 

Asia

45.2

 

3.6

 

39.5

 

3.2

 

Middle East and North Africa

6.2

 

0.5

 

6.8

 

0.5

 

North America

11.9

 

0.9

 

11.7

 

0.9

 

Latin America

5.0

 

0.4

 

5.8

 

0.5

 

Organisation and responsibilities

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

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

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

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

Measurement and monitoring

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

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

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

Risk and control assessment approach

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

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

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

Recording

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

Liquidity

 

Strategies and processes

 

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

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

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

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

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

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

Structure and organisation

 

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

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

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

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

 

 

Management of liquidity and funding risk

Liquidity coverage ratio

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

Net stable funding ratio

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

Currency mismatch in the LCR

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

Governance

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

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

Internal Audit provide independent assurance that risk is managed effectively.

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

Table 66: Level and components of HSBC Group consolidated liquidity coverage ratio (LIQ1)

 

Quarter ended
31 Dec 2019

Quarter ended
30 Sep 2019

Quarter ended
30 Jun 2019

Quarter ended
31 Mar 2019

 

Total unweighted value

Total weighted value

Total unweighted value

Total weighted value

Total unweighted value

Total weighted value

Total unweighted value

Total weighted value

 

$m

$m

$m

$m

$m

$m

$m

$m

Number of data points used in the calculation of averages

 

 

 

12

 

12

 

12

 

12

 

High quality liquid assets

 

 

 

 

 

 

 

 

Total high quality liquid assets ('HQLA')

 

542,436

 

543,249

 

548,045

 

540,986

Cash outflows

 

 

 

 

 

 

 

 

Retail deposits and small business funding

747,510

77,146

741,029

76,814

740,337

76,875

739,011

76,577

-  of which:

 

 

 

 

 

 

 

 

stable deposits

304,474

15,224

293,281

14,651

286,926

14,293

286,380

14,225

less stable deposits

441,819

61,548

446,634

61,820

452,473

62,297

451,828

62,116

Unsecured wholesale funding

643,185

303,439

635,166

298,301

622,518

291,807

612,755

286,357

-  operational deposits (all counterparties) and deposits in networks of cooperative banks

200,638

48,996

200,875

48,992

198,169

48,206

195,587

47,487

-  non-operational deposits (all counterparties)

427,855

239,751

420,574

235,592

411,775

231,027

406,102

227,804

-  unsecured debt

14,692

14,692

13,717

13,717

12,574

12,574

11,066

11,066

Secured wholesale funding

 

11,532

 

12,737

 

13,249

 

13,181

Additional requirements

310,100

89,589

306,075

88,533

305,290

88,350

308,002

90,119

-  outflows related to derivative exposures and other collateral requirements

39,394

39,011

38,254

37,849

38,540

37,906

40,395

39,588

-  outflows related to loss of funding on debt products

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  credit and liquidity facilities

270,706

50,578

267,821

50,684

266,750

50,444

267,607

50,531

Other contractual funding obligations

88,055

37,881

92,249

38,326

96,962

37,942

97,645

36,037

Other contingent funding obligations

464,319

12,375

425,446

12,222

390,535

12,471

359,989

12,510

Total cash outflows

 

531,962

 

526,933

 

520,694

 

514,781

Cash inflows

 

 

 

 

 

 

 

 

Secured lending transactions (including reverse repos)

307,567

32,831

310,390

34,147

303,143

36,126

295,235

38,746

Inflows from fully performing exposures

102,549

70,653

105,650

73,971

110,404

79,002

112,583

81,523

Other cash inflows

114,166

48,542

111,556

48,084

101,067

46,246

93,069

45,893

(Difference between total weighted inflows and total weighted outflows arising from transactions in third countries where there are transfer restrictions or which are denominated in non-convertible currencies)

 

-

 

 

-

 

 

-

 

 

-

 

(Excess inflows from a related specialised credit institution)

 

-

 

 

-

 

 

-

 

 

-

 

Total cash inflows

524,282

 

152,026

527,596

156,202

514,614

161,374

500,887

166,162

Fully exempt inflows

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Inflows Subject to 90% Cap

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Inflows Subject to 75% Cap

493,752

 

152,026

497,429

156,202

484,373

161,374

467,328

166,162

Liquidity coverage ratio (Adjusted value)

 

 

 

 

 

 

 

 

Liquidity Buffer

 

542,436

 

543,249

 

548,045

 

540,986

Total net cash outflows

 

379,936

 

370,731

 

359,320

 

348,619

Liquidity coverage ratio (%)

 

142.8

%

 

146.5

%

 

152.5

%

 

155.2

%

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

On-balance sheet encumbered and unencumbered assets

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

Off-balance sheet collateral

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

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

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

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

Table 67: Analysis of on-balance sheet encumbered and unencumbered assets
 

 

Assets encumbered as a result of transactions with counterparties other than central banks

Assets
positioned 
at central
banks 
(i.e. pre-positioned
plus
encumbered)

Unencumbered assets not
positioned at central banks

Total

 

As a result of covered bonds

As a result of
securitisations

Other

Assets readily available for
encumbrance

Other assets capable of being
encumbered

Reverse
repos/stock 
borrowing 
receivables  and derivative 
assets

Assets that cannot be
encumbered

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

Cash and balances at central banks

-

 

-

 

-

 

244

 

151,247

 

39

 

-

 

2,569

 

154,099

 

Items in the course of collection from other banks

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4,956

 

4,956

 

Hong Kong Government certificates of indebtedness

-

 

-

 

-

 

-

 

-

 

-

 

-

 

38,380

 

38,380

 

Trading assets

-

 

-

 

58,310

 

3,440

 

159,552

 

10,019

 

21,349

 

1,601

 

254,271

 

-  treasury and other eligible bills

-

 

-

 

1,650

 

2,354

 

17,215

 

531

 

-

 

39

 

21,789

 

-  debt securities

-

 

-

 

32,034

 

1,086

 

90,783

 

2,088

 

-

 

52

 

126,043

 

-  equity securities

-

 

-

 

24,626

 

-

 

51,534

 

2,648

 

-

 

19

 

78,827

 

-  loans and advances to banks

-

 

-

 

-

 

-

 

20

 

1,797

 

5,538

 

1,047

 

8,402

 

-  loans and advances to customers

-

 

-

 

-

 

-

 

-

 

2,955

 

15,811

 

444

 

19,210

 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

-

 

-

 

1,145

 

-

 

2,507

 

4,896

 

642

 

34,437

 

43,627

 

-  treasury and other eligible bills

-

 

-

 

629

 

-

 

-

 

-

 

-

 

32

 

661

 

-  debt securities

-

 

-

 

-

 

-

 

266

 

179

 

-

 

6,107

 

6,552

 

-  equity securities

-

 

-

 

1

 

-

 

2,182

 

1,086

 

-

 

27,670

 

30,939

 

-  loans and advances to banks and customers

-

 

-

 

-

 

-

 

59

 

3,227

 

642

 

628

 

4,556

 

-  other assets

-

 

-

 

515

 

-

 

-

 

404

 

-

 

-

 

919

 

Derivatives

-

 

-

 

-

 

-

 

-

 

-

 

242,995

 

-

 

242,995

 

Loans and advances to banks

-

 

-

 

85

 

2,920

 

1,337

 

44,318

 

-

 

20,543

 

69,203

 

Loans and advances to customers

7,471

 

7,812

 

3,328

 

53,343

 

15,815

 

909,677

 

53

 

39,244

 

1,036,743

 

Reverse repurchase agreements - non-trading

-

 

-

 

-

 

-

 

-

 

-

 

240,862

 

-

 

240,862

 

Financial investments

-

 

405

 

25,517

 

19,503

 

321,651

 

4,957

 

-

 

71,279

 

443,312

 

-  treasury and other eligible bills

-

 

405

 

564

 

9,000

 

93,486

 

1,228

 

-

 

836

 

105,519

 

-  debt securities

-

 

-

 

24,953

 

10,503

 

227,665

 

3,013

 

-

 

69,661

 

335,795

 

-  equity securities

-

 

-

 

-

 

-

 

500

 

716

 

-

 

697

 

1,913

 

-  other instruments

-

 

-

 

-

 

-

 

-

 

-

 

-

 

85

 

85

 

Prepayments, accrued income and other assets

-

 

17

 

49,580

 

398

 

4,444

 

27,736

 

-

 

54,505

 

136,680

 

Current tax assets

-

 

-

 

-

 

-

 

-

 

-

 

-

 

755

 

755

 

Interest in associates and joint ventures

-

 

-

 

-

 

-

 

14

 

24,029

 

-

 

431

 

24,474

 

Goodwill and intangible assets

-

 

-

 

-

 

-

 

-

 

-

 

-

 

20,163

 

20,163

 

Deferred tax

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4,632

 

4,632

 

At 31 Dec 2019

7,471

 

8,234

 

137,965

 

79,848

 

656,567

 

1,025,671

 

505,901

 

293,495

 

2,715,152

 

 

 

Table 67: Analysis of on-balance sheet encumbered and unencumbered assets (continued)
 

 

Assets encumbered as a result

of transactions with counterparties

other than central banks

Assets positioned
at central banks

(i.e. pre- positioned plus encumbered)

Unencumbered assets not
positioned at central banks

Total

 

As a
result of

covered bonds

As a
result of

securitisations

Other

Assets readily

available for

encumbrance

Other assets

capable
of being

encumbered

Reverse
repos/stock 
borrowing 
receivables 
and derivative 
assets

Assets that

cannot be

encumbered

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

Cash and balances at central banks

-

 

-

 

-

 

493

 

155,813

 

24

 

-

 

6,513

 

162,843

 

Items in the course of collection from other banks

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,787

 

5,787

 

Hong Kong Government certificates of indebtedness

-

 

-

 

-

 

-

 

-

 

-

 

-

 

35,859

 

35,859

 

Trading assets

-

 

-

 

68,877

 

3,221

 

137,589

 

8,493

 

18,279

 

1,671

 

238,130

 

-  treasury and other eligible bills

-

 

-

 

2,367

 

2,357

 

17,707

 

209

 

-

 

34

 

22,674

 

-  debt securities

-

 

-

 

44,000

 

864

 

83,640

 

1,803

 

-

 

232

 

130,539

 

-  equity securities

-

 

-

 

22,510

 

-

 

36,242

 

2,070

 

-

 

74

 

60,896

 

-  loans and advances to banks

-

 

-

 

-

 

-

 

-

 

2,768

 

6,753

 

904

 

10,425

 

-  loans and advances to customers

-

 

-

 

-

 

-

 

-

 

1,643

 

11,526

 

427

 

13,596

 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

-

 

-

 

1,177

 

-

 

2,135

 

7,601

 

605

 

29,593

 

41,111

 

-  treasury and other eligible bills

-

 

-

 

627

 

-

 

-

 

-

 

-

 

43

 

670

 

-  debt securities

-

 

-

 

-

 

-

 

297

 

4

 

-

 

6,246

 

6,547

 

-  equity securities

-

 

-

 

-

 

-

 

1,676

 

1,035

 

-

 

22,638

 

25,349

 

-  loans and advances to banks and customers

-

 

-

 

-

 

-

 

162

 

6,331

 

605

 

619

 

7,717

 

-  other assets

-

 

-

 

550

 

-

 

-

 

231

 

-

 

47

 

828

 

Derivatives

-

 

-

 

-

 

-

 

-

 

-

 

207,825

 

-

 

207,825

 

Loans and advances to banks

-

 

-

 

170

 

2,367

 

1,947

 

45,992

 

-

 

21,691

 

72,167

 

Loans and advances to customers

6,621

 

7,653

 

4,036

 

58,737

 

15,867

 

847,301

 

28

 

41,453

 

981,696

 

Reverse repurchase agreements - non-trading

-

 

-

 

-

 

-

 

-

 

-

 

242,804

 

-

 

242,804

 

Financial investments

-

 

670

 

28,723

 

21,310

 

285,374

 

5,157

 

-

 

66,199

 

407,433

 

-  treasury and other eligible bills

-

 

276

 

1,079

 

5,377

 

88,556

 

1,235

 

-

 

798

 

97,321

 

-  debt securities

-

 

394

 

27,644

 

15,933

 

196,436

 

3,466

 

-

 

64,485

 

308,358

 

-  equity securities

-

 

-

 

-

 

-

 

382

 

456

 

-

 

819

 

1,657

 

-  other investments

-

 

-

 

-

 

-

 

-

 

-

 

-

 

97

 

97

 

Prepayments, accrued income and other assets

-

 

3

 

35,407

 

88

 

3,609

 

33,060

 

-

 

38,404

 

110,571

 

Current tax assets

-

 

-

 

-

 

-

 

-

 

-

 

-

 

684

 

684

 

Interest in associates and joint ventures

-

 

-

 

-

 

-

 

15

 

21,994

 

-

 

398

 

22,407

 

Goodwill and intangible assets

-

 

-

 

-

 

-

 

-

 

-

 

-

 

24,357

 

24,357

 

Deferred tax

-

 

-

 

-

 

-

 

-

 

-

 

-

 

4,450

 

4,450

 

At 31 Dec 2018

6,621

 

8,326

 

138,390

 

86,216

 

602,349

 

969,622

 

469,541

 

277,059

 

2,558,124

 

 

Other risks

Non-trading book exposures in equities

At 31 December

2019

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

5.9

bn (

2018

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

68

.

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

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

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

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

Table 68: Non-trading book equity investments

 

Fair value through other comprehensive income (FVOCI)

Mandatorily measured at fair value through profit and loss

Total

 

$bn

$bn

$bn

Private equity holdings

-

 

2.4

 

2.4

 

Investment to facilitate ongoing business1

2.0

 

1.3

 

3.3

 

Other strategic investments

-

 

0.2

 

0.2

 

At 31 Dec 2019

2.0

 

3.9

 

5.9

 

 

 

 

 

Private equity holdings

-

 

1.9

 

1.9

 

Investment to facilitate ongoing business

1.7

 

1.1

 

2.8

 

Other strategic investments

-

 

0.3

 

0.3

 

At 31 Dec 2018

1.7

 

3.3

 

5.0

 

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

Risk management of insurance operations

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

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

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

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

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

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

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

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

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

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

Climate change risk

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

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

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

  

Appendix I

 

Additional tables

Credit risk

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

Table 69: Wholesale IRB exposure - by obligor grade

 

 

 

Central governments and central banks

Institutions

Corporates2

Default risk

CRR

PD range

Average net carrying values1

Undrawn commit-

ments

Mapped external rating

Average net carrying values1

Undrawn commit-

ments

Mapped external rating

Average net carrying values1

Undrawn commit-

ments

Mapped external rating

 

 

%

$bn

$bn

 

$bn

$bn

 

$bn

$bn

 

Minimal

0.1

 

0.000 to 0.010

214.4

 

0.9

 

AAA to AA

2.5

 

-

 

 AAA

0.4

 

-

 

-

 

1.1

 

0.011 to 0.028

70.1

 

1.2

 

AA- to A+

34.5

 

2.2

 

AA+ to AA

32.1

 

20.2

 

 AAA to AA

1.2

 

0.029 to 0.053

25.0

 

0.3

 

A to A-

13.6

 

1.5

 

AA-

67.4

 

44.6

 

 AA-

Low

2.1

 

0.054 to 0.095

9.7

 

0.3

 

BBB+

11.0

 

2.7

 

A+ to A

91.5

 

60.8

 

 A+ to A

2.2

 

0.096 to 0.169

9.6

 

-

 

BBB

11.9

 

3.6

 

A-

109.2

 

62.7

 

 A-

Satisfactory

3.1

 

0.170 to 0.285

2.4

 

0.3

 

BBB-

4.0

 

1.2

 

BBB+

123.9

 

71.4

 

 BBB+

3.2

 

0.286 to 0.483

2.1

 

-

 

BBB-

2.4

 

0.3

 

BBB

120.8

 

57.4

 

 BBB

3.3

 

0.484 to 0.740

3.0

 

0.3

 

BB+/BB

1.3

 

0.1

 

BBB-

108.3

 

46.9

 

 BBB-

Fair

4.1

 

0.741 to 1.022

1.4

 

-

 

BB-

0.9

 

0.3

 

BB+

77.0

 

35.3

 

 BB+

4.2

 

1.023 to 1.407

0.5

 

0.1

 

B+

0.5

 

0.1

 

BB

60.6

 

24.7

 

 BB

4.3

 

1.408 to 1.927

3.1

 

-

 

B+

0.2

 

0.1

 

BB-

47.5

 

21.0

 

 BB-

Moderate

5.1

 

1.928 to 2.620

1.5

 

-

 

B+

0.1

 

-

 

BB-

84.7

 

31.4

 

 BB-

5.2

 

2.621 to 3.579

-

 

-

 

B

-

 

-

 

B+

25.9

 

12.6

 

 B+

5.3

 

3.580 to 4.914

0.2

 

-

 

B

-

 

-

 

B

19.8

 

9.7

 

 B

Significant

6.1

 

4.915 to 6.718

-

 

0.1

 

B-

-

 

-

 

B-

10.7

 

4.5

 

 B-

6.2

 

6.719 to 8.860

0.4

 

0.1

 

B-

-

 

-

 

B-

6.1

 

1.8

 

 B-

High

7.1

 

8.861 to 11.402

-

 

-

 

B-

-

 

-

 

CCC+

4.1

 

1.7

 

 CCC+

7.2

 

11.403 to 15.000

-

 

-

 

CCC+

0.1

 

0.1

 

CCC+

1.9

 

0.5

 

 CCC+

Special Management

8.1

 

15.001 to 22.000

0.1

 

-

 

CCC+

-

 

-

 

CCC

2.6

 

1.4

 

 CCC

8.2

 

22.001 to 50.000

0.1

 

-

 

CCC

-

 

-

 

CCC- to CC

0.7

 

0.5

 

 CCC- to CC

8.3

 

50.001 to 99.999

0.3

 

-

 

CCC- to C

-

 

-

 

C

0.2

 

0.1

 

 C

Default

9/10

100.000

 

-

 

-

 

Default

-

 

-

 

Default

4.0

 

0.9

 

 Default

At 31 Dec 2019

343.9

 

3.6

 

 

83.0

 

12.2

 

 

999.4

 

510.1

 

 

Minimal

0.1

 

0.000 to 0.010

182.6

 

1.0

 

AAA

2.4

 

-

 

AAA

-

 

-

 

 

1.1

 

0.011 to 0.028

77.4

 

0.9

 

AA+ to AA

32.1

 

2.1

 

AA+ to AA

28.7

 

12.6

 

AAA to AA

1.2

 

0.029 to 0.053

22.5

 

0.4

 

AA- to A+

17.6

 

1.4

 

AA-

64.6

 

39.1

 

AA-

Low

2.1

 

0.054 to 0.095

8.1

 

0.3

 

A

13.1

 

2.8

 

A+ to A

89.9

 

50.3

 

A+ to A

2.2

 

0.096 to 0.169

10.6

 

-

 

A-

11.9

 

3.3

 

A-

106.9

 

73.1

 

A-

Satisfactory

3.1

 

0.170 to 0.285

2.6

 

-

 

BBB+

3.1

 

0.7

 

BBB+

125.2

 

68.9

 

BBB+

3.2

 

0.286 to 0.483

1.9

 

-

 

BBB

3.7

 

0.3

 

BBB

113.8

 

59.8

 

BBB

3.3

 

0.484 to 0.740

2.8

 

0.2

 

BBB-

2.4

 

0.2

 

BBB-

104.4

 

47.5

 

BBB-

Fair

4.1

 

0.741 to 1.022

1.8

 

0.1

 

BB+

0.9

 

0.2

 

BB+

75.9

 

33.7

 

BB+

4.2

 

1.023 to 1.407

0.3

 

0.1

 

BB

0.4

 

0.2

 

BB

54.2

 

28.8

 

BB

4.3

 

1.408 to 1.927

1.5

 

0.1

 

BB-

0.3

 

0.1

 

BB-

49.4

 

19.8

 

BB-

Moderate

5.1

 

1.928 to 2.620

2.6

 

-

 

BB-

0.1

 

-

 

BB-

82.2

 

30.8

 

BB-

5.2

 

2.621 to 3.579

-

 

-

 

B+

0.2

 

-

 

B+

24.0

 

10.1

 

B+

5.3

 

3.580 to 4.914

0.2

 

-

 

B

-

 

-

 

B

19.6

 

8.5

 

B

Significant

6.1

 

4.915 to 6.718

0.1

 

-

 

B

-

 

-

 

B-

11.7

 

4.8

 

B-

6.2

 

6.719 to 8.860

0.3

 

0.1

 

B-

-

 

-

 

B-

6.0

 

1.9

 

B-

High

7.1

 

8.861 to 11.402

0.1

 

-

 

CCC+

-

 

-

 

CCC+

3.1

 

1.0

 

CCC+

7.2

 

11.403 to 15.000

-

 

-

 

CCC+

0.1

 

0.1

 

CCC+

2.0

 

0.6

 

CCC+

Special Management

8.1

 

15.001 to 22.000

-

 

-

 

CCC+

-

 

-

 

CCC

2.5

 

1.5

 

CCC

8.2

 

22.001 to 50.000

-

 

-

 

CCC+

-

 

-

 

CCC- to CC

1.0

 

0.4

 

CCC- to CC

8.3

 

50.001 to 99.999

-

 

-

 

CCC to C

-

 

-

 

C

0.4

 

0.2

 

C

Default

9/10

100.000

 

-

 

-

 

Default

-

 

-

 

Default

4.3

 

1.2

 

Default

At 31 Dec 2018

315.4

 

3.2

 

 

88.3

 

11.4

 

 

969.8

 

494.6

 

 

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

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

PD, LGD, RWA and exposure by country/territory

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

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

Table 70.a: PD, LGD, RWA and exposure by country/territory - wholesale IRB advanced approach

 

Wholesale IRB advanced approach

 

All asset classes

 

Central governments and central banks

 

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

1.88

 

35.3

 

236.7

 

96.1

 

 

0.04

 

44.9

 

47.3

 

4.1

 

UK

1.87

 

35.8

 

186.9

 

76.5

 

 

0.03

 

44.7

 

39.6

 

2.9

 

France

2.31

 

30.2

 

39.3

 

17.5

 

 

0.03

 

45.0

 

0.7

 

0.1

 

Asia

0.65

 

42.9

 

573.8

 

176.4

 

 

0.03

 

43.7

 

208.6

 

15.9

 

Hong Kong

0.64

 

39.0

 

317.0

 

87.6

 

 

0.01

 

42.7

 

102.5

 

5.5

 

Australia

0.53

 

42.9

 

27.6

 

8.2

 

 

0.01

 

45.0

 

9.5

 

0.5

 

Mainland China

0.61

 

48.6

 

74.8

 

28.2

 

 

0.02

 

45.0

 

27.5

 

2.0

 

Singapore

0.41

 

41.7

 

45.5

 

10.5

 

 

0.01

 

44.1

 

18.6

 

1.0

 

Middle East and North Africa

0.43

 

43.9

 

24.0

 

7.6

 

 

0.40

 

45.0

 

18.2

 

6.0

 

North America

0.95

 

34.0

 

182.8

 

66.3

 

 

0.01

 

29.8

 

59.9

 

4.9

 

US

0.88

 

32.9

 

121.3

 

43.7

 

 

0.01

 

29.8

 

41.7

 

3.1

 

Canada

1.15

 

33.6

 

57.3

 

22.1

 

 

0.02

 

29.6

 

15.1

 

1.6

 

Latin America

11.10

 

44.8

 

10.2

 

5.8

 

 

11.84

 

45.0

 

9.5

 

5.4

 

 

 

Wholesale IRB advanced approach

 

Institutions

 

Corporates

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

0.16

 

32.5

 

17.2

 

3.4

 

 

2.56

 

33.0

 

172.2

 

88.6

 

UK

0.16

 

27.7

 

12.8

 

2.3

 

 

2.57

 

33.9

 

134.5

 

71.3

 

France

0.16

 

45.1

 

1.8

 

0.5

 

 

2.46

 

29.2

 

36.8

 

16.9

 

Asia

0.07

 

44.7

 

40.6

 

5.8

 

 

1.13

 

42.2

 

324.6

 

154.7

 

Hong Kong

0.05

 

38.5

 

27.2

 

3.3

 

 

1.06

 

37.0

 

187.3

 

78.8

 

Australia

0.06

 

42.5

 

2.2

 

0.4

 

 

0.91

 

41.7

 

15.9

 

7.3

 

Mainland China

0.10

 

46.1

 

4.3

 

0.8

 

 

1.03

 

51.1

 

43.0

 

25.4

 

Singapore

0.06

 

39.9

 

3.9

 

0.4

 

 

0.79

 

40.0

 

23.0

 

9.1

 

Middle East and North Africa

0.15

 

45.0

 

2.1

 

0.5

 

 

0.74

 

32.7

 

3.7

 

1.1

 

North America

0.06

 

41.4

 

5.8

 

0.8

 

 

1.47

 

36.4

 

117.1

 

60.6

 

US

0.13

 

44.4

 

1.5

 

0.4

 

 

1.37

 

34.3

 

78.1

 

40.2

 

Canada

0.03

 

21.4

 

3.4

 

0.2

 

 

1.69

 

36.2

 

38.8

 

20.3

 

Latin America

0.42

 

45.1

 

0.5

 

0.3

 

 

1.36

 

31.6

 

0.2

 

0.1

 

 

 

Table 70.b: PD, LGD, RWA and exposure by country/territory - wholesale IRB foundation approach

 

Wholesale IRB foundation approach

 

All asset classes

 

Central governments and central banks

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

2.04

 

43.7

 

38.1

 

22.7

 

 

0.02

 

45.0

 

-

 

-

 

UK

2.39

 

40.7

 

16.1

 

9.7

 

 

-

 

-

 

-

 

-

 

France

1.21

 

40.0

 

1.7

 

1.1

 

 

-

 

-

 

-

 

-

 

Asia

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Hong Kong

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Australia

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Mainland China

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Singapore

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Middle East and North Africa

3.70

 

43.2

 

16.9

 

9.6

 

 

0.03

 

45.0

 

0.1

 

-

 

North America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

US

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Canada

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Latin America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

 

Wholesale IRB foundation approach

 

Institutions

 

Corporates

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

0.14

 

45.0

 

0.1

 

-

 

 

2.05

 

43.7

 

38.0

 

22.7

 

UK

0.13

 

45.0

 

-

 

-

 

 

2.39

 

40.7

 

16.1

 

9.7

 

France

-

 

-

 

-

 

-

 

 

1.21

 

40.0

 

1.7

 

1.1

 

Asia

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Hong Kong

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Australia

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Mainland China

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Singapore

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Middle East and North Africa

0.07

 

45.0

 

0.6

 

0.2

 

 

3.86

 

43.1

 

16.2

 

9.4

 

North America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

US

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Canada

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Latin America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

 

Table 70.c: PD, LGD, RWA and exposure by country/territory - retail IRB approach

 

 

 

 

 

 

Retail IRB approach

 

All asset classes

 

Retail secured by mortgages

on immovable property non-SME

 

 

Retail secured by mortgages on

immovable property SME

 

 

At 31 Dec 2019

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

Exposure-
weighted
average PD

Exposure-
weighted
average LGD

Exposure
value

RWAs

 

Exposure-
weighted
average PD

Exposure-
weighted
average LGD

Exposure
value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

1.56

 

28.1

 

234.7

 

30.4

 

 

1.05

 

15.3

 

152.9

 

7.9

 

 

6.38

 

34.5

 

2.6

 

1.5

 

UK

1.35

 

31.2

 

200.3

 

26.9

 

 

0.95

 

15.4

 

149.6

 

7.3

 

 

4.25

 

36.8

 

2.0

 

1.1

 

France

3.42

 

13.1

 

26.5

 

3.3

 

 

6.01

 

13.9

 

3.3

 

0.6

 

 

13.91

 

26.4

 

0.6

 

0.4

 

Asia

0.88

 

28.9

 

192.3

 

36.1

 

 

0.83

 

10.7

 

123.0

 

24.1

 

 

0.77

 

11.4

 

0.5

 

-

 

Hong Kong

0.76

 

33.7

 

150.4

 

31.7

 

 

0.59

 

10.0

 

85.8

 

19.9

 

 

0.77

 

11.4

 

0.5

 

-

 

Australia

0.89

 

10.0

 

18.8

 

1.1

 

 

0.89

 

10.0

 

18.8

 

1.1

 

 

-

 

-

 

-

 

-

 

Mainland China

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Singapore

0.80

 

14.1

 

11.8

 

1.3

 

 

0.94

 

19.6

 

7.2

 

1.0

 

 

-

 

-

 

-

 

-

 

Middle East and North Africa

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

North America

2.75

 

39.7

 

46.6

 

11.3

 

 

2.74

 

32.6

 

39.8

 

8.4

 

 

0.88

 

18.4

 

0.3

 

-

 

US

4.85

 

60.8

 

22.9

 

8.7

 

 

5.36

 

51.0

 

17.7

 

6.3

 

 

-

 

-

 

-

 

-

 

Canada

0.72

 

19.3

 

23.8

 

2.6

 

 

0.64

 

17.8

 

22.1

 

2.1

 

 

0.88

 

18.4

 

0.3

 

-

 

Latin America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

 

Retail IRB approach

 

Retail QRRE

 

Other SME

 

Other non-SME

 

At 31 Dec 2019

 

At 31 Dec 2019

 

At 31 Dec 2019

 

Exposure-
weighted
average PD

Exposure-
weighted
average LGD

Exposure
value

RWAs

 

Exposure-
weighted
average PD

Exposure-
weighted
average LGD

Exposure
value

RWAs

 

Exposure-

weighted

average PD

Exposure-

weighted

average LGD

Exposure

value

RWAs

 

%

%

$bn

$bn

 

%

%

$bn

$bn

 

%

%

$bn

$bn

Europe

1.69

 

79.3

 

34.9

 

7.6

 

 

9.93

 

66.8

 

5.8

 

4.5

 

 

1.86

 

26.7

 

38.6

 

8.9

 

UK

1.69

 

79.3

 

34.9

 

7.6

 

 

8.05

 

81.4

 

4.1

 

3.9

 

 

2.99

 

79.5

 

9.7

 

7.0

 

France

32.83

 

77.5

 

-

 

-

 

 

14.53

 

31.3

 

1.7

 

0.6

 

 

1.83

 

11.2

 

20.9

 

1.7

 

Asia

1.02

 

96.7

 

40.7

 

9.1

 

 

0.28

 

26.9

 

0.1

 

-

 

 

0.86

 

10.6

 

27.9

 

2.9

 

Hong Kong

1.02

 

96.7

 

40.7

 

9.1

 

 

0.28

 

26.9

 

0.1

 

-

 

 

0.91

 

11.6

 

23.3

 

2.7

 

Australia

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Mainland China

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

Singapore

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

0.59

 

5.6

 

4.6

 

0.3

 

Middle East and North Africa

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

North America

2.64

 

91.7

 

4.7

 

2.1

 

 

3.31

 

51.2

 

0.3

 

0.2

 

 

3.39

 

67.0

 

1.6

 

0.6

 

US

2.65

 

93.6

 

4.4

 

1.9

 

 

-

 

-

 

-

 

-

 

 

5.45

 

96.7

 

0.8

 

0.5

 

Canada

2.38

 

63.8

 

0.3

 

0.1

 

 

3.31

 

51.2

 

0.3

 

0.2

 

 

1.15

 

34.6

 

0.8

 

0.2

 

Latin America

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

-

 

-

 

-

 

-

 

 

Table 71: Retail IRB exposure - by internal PD band

 

 

At 31 Dec 2019

At 31 Dec 2018

 

PD range

Average net carrying values1

Undrawn commitments

Average net  carrying values1

Undrawn commitments

 

%

$bn

$bn

$bn

$bn

Retail SME exposure secured by mortgages on immovable property

 

3.6

 

0.3

 

3.2

 

0.3

 

Band 1

0.000 to 0.483

1.1

 

0.1

 

1.0

 

0.1

 

Band 2

0.484 to 1.022

0.7

 

0.1

 

0.6

 

0.1

 

Band 3

1.023 to 4.914

1.3

 

0.1

 

1.2

 

0.1

 

Band 4

4.915 to 8.860

0.3

 

-

 

0.2

 

-

 

Band 5

8.861 to 15.000

0.1

 

-

 

0.1

 

-

 

Band 6

15.001 to 50.000

-

 

-

 

-

 

-

 

Band 7

50.001 to 100.000

0.1

 

-

 

0.1

 

-

 

Retail non-SME exposure secured by mortgages on immovable property

 

298.9

 

17.4

 

280.9

 

17.3

 

Band 1

0.000 to 0.483

252.0

 

15.8

 

234.9

 

15.5

 

Band 2

0.484 to 1.022

22.2

 

0.8

 

21.4

 

1.0

 

Band 3

1.023 to 4.914

18.7

 

0.7

 

17.7

 

0.7

 

Band 4

4.915 to 8.860

1.9

 

-

 

2.4

 

-

 

Band 5

8.861 to 15.000

0.6

 

0.1

 

0.5

 

-

 

Band 6

15.001 to 50.000

1.3

 

-

 

1.6

 

0.1

 

Band 7

50.001 to 100.000

2.2

 

-

 

2.4

 

-

 

Qualifying revolving retail exposure

 

135.1

 

117.8

 

129.1

 

111.6

 

Band 1

0.000 to 0.483

107.1

 

101.9

 

102.7

 

95.0

 

Band 2

0.484 to 1.022

12.0

 

8.1

 

11.5

 

8.1

 

Band 3

1.023 to 4.914

13.0

 

6.7

 

12.3

 

7.5

 

Band 4

4.915 to 8.860

1.5

 

0.6

 

1.4

 

0.6

 

Band 5

8.861 to 15.000

0.6

 

0.2

 

0.5

 

0.2

 

Band 6

15.001 to 50.000

0.6

 

0.2

 

0.5

 

0.2

 

Band 7

50.001 to 100.000

0.3

 

0.1

 

0.2

 

-

 

Other retail SME exposure

 

7.8

 

4.3

 

8.7

 

3.8

 

Band 1

0.000 to 0.483

1.3

 

1.1

 

1.2

 

0.9

 

Band 2

0.484 to 1.022

1.2

 

0.9

 

1.4

 

0.9

 

Band 3

1.023 to 4.914

3.8

 

1.7

 

4.3

 

1.6

 

Band 4

4.915 to 8.860

0.8

 

0.3

 

1.0

 

0.2

 

Band 5

8.861 to 15.000

0.3

 

0.1

 

0.3

 

0.1

 

Band 6

15.001 to 50.000

0.3

 

0.1

 

0.3

 

0.1

 

Band 7

50.001 to 100.000

0.1

 

0.1

 

0.2

 

-

 

Other retail non-SME exposure

 

62.6

 

27.4

 

54.8

 

15.9

 

Band 1

0.000 to 0.483

39.4

 

22.7

 

34.1

 

12.4

 

Band 2

0.484 to 1.022

10.7

 

2.2

 

9.1

 

1.6

 

Band 3

1.023 to 4.914

10.4

 

2.4

 

9.6

 

1.7

 

Band 4

4.915 to 8.860

1.2

 

0.1

 

1.1

 

0.1

 

Band 5

8.861 to 15.000

0.4

 

-

 

0.4

 

-

 

Band 6

15.001 to 50.000

0.2

 

-

 

0.2

 

-

 

Band 7

50.001 to 100.000

0.3

 

-

 

0.3

 

0.1

 

Total retail exposure

 

508.0

 

167.3

 

476.7

 

149.0

 

Band 1

0.000 to 0.483

400.9

 

141.7

 

373.9

 

124.0

 

Band 2

0.484 to 1.022

46.8

 

12.1

 

44.0

 

11.7

 

Band 3

1.023 to 4.914

47.2

 

11.6

 

45.1

 

11.6

 

Band 4

4.915 to 8.860

5.7

 

1.0

 

6.1

 

0.9

 

Band 5

8.861 to 15.000

2.0

 

0.4

 

1.8

 

0.3

 

Band 6

15.001 to 50.000

2.4

 

0.3

 

2.6

 

0.4

 

Band 7

50.001 to 100.000

3.0

 

0.2

 

3.2

 

0.1

 

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

Table 72: IRB expected loss and CRAs - by exposure class

 

 

 

CRA

 

 

Expected loss

Balances

Charge for the year

 

 

$bn

$bn

$bn

1

Total IRB approach

 

 

 

2

Central governments and central banks

0.6

 

0.1

 

-

 

3

Institutions

-

 

-

 

-

 

4

Corporates

5.5

 

4.3

 

1.0

 

5

Retail

2.6

 

2.0

 

1.1

 

 

-  secured by mortgages on immovable property SME

0.1

 

0.1

 

-

 

 

-  secured by mortgages on immovable property non-SME

0.8

 

0.2

 

-

 

 

-  qualifying revolving retail

0.9

 

1.0

 

0.6

 

 

-  other SME

0.4

 

0.3

 

0.2

 

 

-  other non-SME

0.4

 

0.4

 

0.3

 

6

Total at 31 Dec 2019

8.7

 

6.4

 

2.1

 

 

 

 

 

 

1

Total IRB approach

 

 

 

2

Central governments and central banks

0.1

 

0.1

 

-

 

3

Institutions

-

 

-

 

-

 

4

Corporates

5.0

 

4.1

 

0.5

 

5

Retail

2.4

 

1.8

 

0.9

 

 

-  secured by mortgages on immovable property SME

0.1

 

0.1

 

0.1

 

 

-  secured by mortgages on immovable property non-SME

0.8

 

0.3

 

-

 

 

-  qualifying revolving retail

0.7

 

0.7

 

0.4

 

 

-  other SME

0.4

 

0.3

 

0.2

 

 

-  other non-SME

0.4

 

0.4

 

0.2

 

6

Total at 31 Dec 2018

7.5

 

6.0

 

1.4

 

 

 

 

 

 

1

Total IRB approach

 

 

 

2

Central governments and central banks

0.1

 

-

 

-

 

3

Institutions

-

 

-

 

-

 

4

Corporates

5.3

 

4.2

 

0.7

 

5

Retail

2.5

 

1.0

 

0.3

 

 

-  secured by mortgages on immovable property non-SME

0.8

 

0.3

 

-

 

 

-  qualifying revolving retail

0.8

 

0.2

 

0.2

 

 

-  other SME

0.5

 

0.3

 

-

 

 

-  other non-SME

0.4

 

0.2

 

0.1

 

6

Total at 31 Dec 2017

7.9

 

5.2

 

1.0

 

Table 73: Credit risk RWAs - by geographical region

 

RWAs

 

Europe

Asia

MENA

North

America

Latin

America

Total

 

$bn

$bn

$bn

$bn

$bn

$bn

IRB advanced approach

138.1

 

218.3

 

7.6

 

82.8

 

5.8

 

452.6

 

-  central governments and central banks

4.1

 

15.9

 

6.0

 

4.9

 

5.4

 

36.3

 

-  institutions

3.4

 

5.8

 

0.5

 

0.8

 

0.3

 

10.8

 

-  corporates

100.2

 

160.5

 

1.1

 

65.8

 

0.1

 

327.7

 

-  total retail

30.4

 

36.1

 

-

 

11.3

 

-

 

77.8

 

IRB securitisation positions

3.5

 

0.2

 

-

 

-

 

-

 

3.7

 

IRB non-credit obligation assets

4.6

 

4.9

 

0.9

 

2.0

 

0.9

 

13.3

 

IRB foundation approach

22.7

 

-

 

9.6

 

-

 

-

 

32.3

 

-  institutions

-

 

-

 

0.2

 

-

 

-

 

0.2

 

-  corporates

22.7

 

-

 

9.4

 

-

 

-

 

32.1

 

Standardised approach

39.4

 

68.5

 

29.9

 

13.7

 

23.2

 

174.7

 

-  central governments and central banks

3.5

 

1.9

 

0.5

 

4.3

 

1.0

 

11.2

 

-  regional governments or local authorities

-

 

-

 

0.9

 

-

 

0.7

 

1.6

 

-  public sector entities

-

 

-

 

-

 

-

 

-

 

-

 

-  institutions

0.1

 

0.1

 

0.6

 

-

 

0.1

 

0.9

 

-  corporates

15.1

 

17.0

 

20.1

 

5.0

 

15.3

 

72.5

 

-  retail

1.1

 

5.4

 

3.7

 

0.9

 

3.3

 

14.4

 

-  secured by mortgages on immovable property

3.3

 

5.5

 

1.4

 

0.6

 

1.2

 

12.0

 

-  exposures in default

0.8

 

0.5

 

1.9

 

0.3

 

0.6

 

4.1

 

-  items associated with particularly high risk

7.2

 

-

 

0.1

 

0.5

 

0.1

 

7.9

 

-  securitisation positions

2.3

 

1.3

 

-

 

0.8

 

0.2

 

4.6

 

-  claims in the form of CIU

0.4

 

-

 

-

 

-

 

-

 

0.4

 

-  equity

2.9

 

32.0

 

0.2

 

1.0

 

0.2

 

36.3

 

-  other items

2.7

 

4.8

 

0.5

 

0.3

 

0.5

 

8.8

 

Total at 31 Dec 2019

208.3

 

291.9

 

48.0

 

98.5

 

29.9

 

676.6

 

 

IRB advanced approach

150.3

 

216.2

 

7.3

 

86.5

 

7.9

 

468.2

 

-  central governments and central banks

4.2

 

15.1

 

5.0

 

5.4

 

7.2

 

36.9

 

-  institutions

4.5

 

7.6

 

0.5

 

1.1

 

0.5

 

14.2

 

-  corporates

113.2

 

162.0

 

1.8

 

67.9

 

0.2

 

345.1

 

-  total retail

28.4

 

31.5

 

-

 

12.1

 

-

 

72.0

 

IRB securitisation positions

5.6

 

0.2

 

-

 

0.5

 

-

 

6.3

 

IRB non-credit obligation assets

3.5

 

4.7

 

0.6

 

1.3

 

0.7

 

10.8

 

IRB foundation approach

21.0

 

-

 

9.5

 

-

 

-

 

30.5

 

-  institutions

-

 

-

 

0.2

 

-

 

-

 

0.2

 

-  corporates

21.0

 

-

 

9.3

 

-

 

-

 

30.3

 

Standardised approach

39.0

 

70.8

 

29.6

 

14.8

 

21.1

 

175.3

 

-  central governments and central banks

3.6

 

1.7

 

0.6

 

5.4

 

1.2

 

12.5

 

-  regional governments or local authorities

-

 

-

 

0.8

 

-

 

0.5

 

1.3

 

-  public sector entities

-

 

-

 

-

 

-

 

-

 

-

 

-  institutions

0.2

 

0.2

 

0.8

 

-

 

-

 

1.2

 

-  corporates

18.4

 

20.3

 

20.4

 

5.9

 

14.2

 

79.2

 

-  retail

0.9

 

6.3

 

3.7

 

0.9

 

3.0

 

14.8

 

-  secured by mortgages on immovable property

2.4

 

6.3

 

1.2

 

0.5

 

0.9

 

11.3

 

-  exposures in default

1.0

 

0.5

 

1.4

 

0.3

 

0.6

 

3.8

 

-  items associated with particularly high risk

6.3

 

-

 

0.1

 

0.4

 

0.1

 

6.9

 

-  securitisation positions

0.6

 

1.4

 

-

 

-

 

0.1

 

2.1

 

-  claims in the form of CIU

0.6

 

-

 

-

 

-

 

-

 

0.6

 

-  equity

2.8

 

30.6

 

0.2

 

1.1

 

0.3

 

35.0

 

-  other items

2.2

 

3.5

 

0.4

 

0.3

 

0.2

 

6.6

 

Total at 31 Dec 2018

219.4

 

291.9

 

47.0

 

103.1

 

29.7

 

691.1

 

 

Table 74: Standardised exposure - by credit quality step

 

At 31 Dec 2019

At 31 Dec 2018

 

Original

exposure1

Exposure

value

RWAs^

Original

exposure1

Exposure

value

RWAs^

 

$bn

$bn

$bn

$bn

$bn

$bn

Central governments and central banks

 

 

 

 

 

 

Credit quality step 1

171.3

 

180.5

 

 

158.0

 

166.3

 

 

Credit quality step 2

0.3

 

0.2

 

 

0.3

 

0.2

 

 

Credit quality step 3

0.4

 

0.4

 

 

0.4

 

0.5

 

 

Credit quality step 4

-

 

-

 

 

-

 

-

 

 

Credit quality step 5

-

 

-

 

 

-

 

-

 

 

Credit quality step unrated

4.6

 

4.4

 

 

5.0

 

5.0

 

 

 

176.6

 

185.5

 

11.2

 

163.7

 

172.0

 

12.5

 

Institutions

 

 

 

 

 

 

Credit quality step 1

0.3

 

0.4

 

 

0.4

 

0.4

 

 

Credit quality step 2

0.9

 

0.2

 

 

2.5

 

1.5

 

 

Credit quality step 3

0.7

 

0.6

 

 

-

 

-

 

 

Credit quality step 4

-

 

-

 

 

0.1

 

0.1

 

 

Credit quality step 5

0.1

 

0.1

 

 

-

 

-

 

 

Credit quality step unrated

0.4

 

0.3

 

 

0.2

 

0.2

 

 

 

2.4

 

1.6

 

0.9

 

3.2

 

2.2

 

1.2

 

Corporates

 

 

 

 

 

 

Credit quality step 1

1.6

 

4.0

 

 

1.9

 

3.6

 

 

Credit quality step 2

3.7

 

2.7

 

 

5.2

 

3.4

 

 

Credit quality step 3

2.4

 

1.7

 

 

5.4

 

3.6

 

 

Credit quality step 4

2.6

 

1.8

 

 

2.2

 

1.6

 

 

Credit quality step 5

0.6

 

0.4

 

 

1.2

 

0.7

 

 

Credit quality step 6

0.6

 

0.3

 

 

0.2

 

0.1

 

 

Credit quality step unrated

148.9

 

65.9

 

 

163.9

 

71.1

 

 

 

160.4

 

76.8

 

72.5

 

180.0

 

84.1

 

79.2

 

1   Figures presented on an 'obligor basis'.

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

Table 75: Specialised lending on slotting approach (CR10)

 

 

 

On-balance sheet amount

Off-balance sheet amount

Risk weight

Exposure amount

RWAs

Expected

loss

 

Regulatory categories

Remaining maturity

 

$bn

$bn

%

$bn

$bn

$bn

 

Category 1 - Strong

Less than 2.5 years

15.6

 

2.6

 

50

16.7

 

8.4

 

-

 

 

Equal to or more than 2.5 years

11.5

 

2.3

 

70

12.5

 

8.7

 

0.1

 

 

Category 2 - Good

Less than 2.5 years

3.6

 

0.3

 

70

3.7

 

2.6

 

-

 

 

Equal to or more than 2.5 years

2.0

 

0.8

 

90

2.3

 

2.1

 

-

 

 

Category 3 - Satisfactory

Less than 2.5 years

0.5

 

-

 

115

0.5

 

0.5

 

-

 

 

Equal to or more than 2.5 years

0.1

 

-

 

115

0.1

 

0.1

 

-

 

 

Category 4 - Weak

Less than 2.5 years

0.1

 

-

 

250

0.1

 

0.2

 

-

 

 

Equal to or more than 2.5 years

-

 

-

 

250

-

 

-

 

-

 

 

Category 5 - Default

Less than 2.5 years

0.5

 

-

 

-

 

0.8

 

-

 

0.4

 

 

Equal to or more than 2.5 years

-

 

-

 

-

 

0.1

 

-

 

-

 

 

Total at 31 Dec 2019

Less than 2.5 years

20.3

 

2.9

 

 

21.8

 

11.7

 

0.4

 

 

Equal to or more than 2.5 years

13.6

 

3.1

 

 

15.0

 

10.9

 

0.1

 

 

 

 

 

 

 

 

 

 

 

Category 1 - Strong

Less than 2.5 years

14.8

 

2.7

 

50

15.9

 

8.0

 

-

 

 

Equal to or more than 2.5 years

11.7

 

2.6

 

70

12.7

 

8.8

 

0.1

 

 

Category 2 - Good

Less than 2.5 years

2.7

 

0.4

 

70

2.9

 

2.0

 

-

 

 

Equal to or more than 2.5 years

2.0

 

0.5

 

90

2.2

 

2.0

 

-

 

 

Category 3 - Satisfactory

Less than 2.5 years

0.4

 

-

 

115

0.4

 

0.5

 

-

 

 

Equal to or more than 2.5 years

0.5

 

0.1

 

115

0.5

 

0.6

 

-

 

 

Category 4 - Weak

Less than 2.5 years

0.1

 

-

 

250

0.1

 

0.1

 

-

 

 

Equal to or more than 2.5 years

-

 

-

 

250

-

 

0.1

 

-

 

 

Category 5 - Default

Less than 2.5 years

0.3

 

-

 

-

 

0.5

 

-

 

0.2

 

 

Equal to or more than 2.5 years

0.1

 

-

 

-

 

0.1

 

-

 

0.1

 

 

Total at 31 Dec 2018

Less than 2.5 years

18.3

 

3.1

 

 

19.8

 

10.6

 

0.2

 

 

Equal to or more than 2.5 years

14.3

 

3.2

 

 

15.5

 

11.5

 

0.2

 

 

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6)

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Average CCF

EAD post-CRM and post-CCF

Average PD

Number of obligors

Average LGD

Average maturity

RWAs

RWA density

Expected loss

Value adjustments and provisions^

PD scale

$bn

$bn

%

$bn

%

 

%

years

$bn

%

$bn

$bn

AIRB - Central government and central banks

 

 

 

 

 

 

 

 

 

 

 

 

0.00 to <0.15

328.5

 

2.6

 

42.9

 

329.6

 

0.02

 

269

 

41.6

 

2.10

 

26.1

 

8

 

-

 

 

0.15 to <0.25

2.0

 

0.3

 

2.6

 

2.0

 

0.22

 

11

 

45.0

 

1.40

 

0.8

 

38

 

-

 

 

0.25 to <0.50

2.3

 

-

 

20.0

 

2.3

 

0.37

 

12

 

45.0

 

1.20

 

1.1

 

50

 

-

 

 

0.50 to <0.75

2.4

 

0.3

 

60.6

 

2.6

 

0.63

 

15

 

45.0

 

1.10

 

1.6

 

64

 

-

 

 

0.75 to <2.50

5.6

 

0.2

 

31.1

 

5.4

 

1.39

 

21

 

44.5

 

1.20

 

4.8

 

89

 

-

 

 

2.50 to <10.00

0.5

 

0.2

 

0.2

 

0.1

 

7.58

 

8

 

7.8

 

3.30

 

-

 

31

 

-

 

 

10.00 to <100.00

1.5

 

-

 

-

 

1.5

 

75.00

 

5

 

45.0

 

1.00

 

1.9

 

130

 

0.6

 

 

100.00 (Default)

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

 

Sub-total

342.8

 

3.6

 

40.1

 

343.5

 

0.37

 

341

 

41.7

 

2.10

 

36.3

 

11

 

0.6

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIRB - Institutions

 

 

 

 

 

 

 

 

 

 

 

 

0.00 to <0.15

56.7

 

9.9

 

32.4

 

59.6

 

0.05

 

2,520

 

37.1

 

1.40

 

7.9

 

13

 

-

 

 

0.15 to <0.25

2.9

 

1.2

 

27.4

 

3.3

 

0.22

 

290

 

33.7

 

1.00

 

1.0

 

30

 

-

 

 

0.25 to <0.50

1.3

 

0.3

 

56.5

 

1.5

 

0.37

 

145

 

41.3

 

1.10

 

0.7

 

48

 

-

 

 

0.50 to <0.75

0.8

 

0.1

 

3.8

 

0.8

 

0.63

 

102

 

45.0

 

1.40

 

0.6

 

82

 

-

 

 

0.75 to <2.50

0.8

 

0.6

 

28.6

 

0.9

 

1.14

 

177

 

28.3

 

2.10

 

0.5

 

59

 

-

 

 

2.50 to <10.00

-

 

-

 

36.7

 

0.1

 

3.60

 

25

 

45.3

 

0.90

 

0.1

 

125

 

-

 

 

10.00 to <100.00

-

 

0.1

 

17.9

 

-

 

15.75

 

19

 

45.8

 

1.90

 

-

 

216

 

-

 

 

100.00 (Default)

-

 

-

 

-

 

-

 

100.00

 

1

 

45.8

 

1.00

 

-

 

10

 

-

 

 

Sub-total

62.5

 

12.2

 

32.0

 

66.2

 

0.09

 

3,279

 

37.0

 

1.40

 

10.8

 

16

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIRB - Corporate - Specialised Lending (excluding Slotting)1

 

 

 

 

 

 

 

 

 

 

 

 

0.00 to <0.15

2.1

 

1.2

 

39.5

 

2.5

 

0.10

 

40

 

20.5

 

3.30

 

0.4

 

17

 

-

 

 

0.15 to <0.25

1.8

 

0.8

 

32.0

 

2.0

 

0.22

 

44

 

29.3

 

3.80

 

0.8

 

40

 

-

 

 

0.25 to <0.50

1.1

 

0.6

 

40.1

 

1.2

 

0.37

 

31

 

27.0

 

3.50

 

0.5

 

43

 

-

 

 

0.50 to <0.75

1.1

 

0.2

 

52.6

 

1.0

 

0.63

 

24

 

26.1

 

3.70

 

0.6

 

53

 

-

 

 

0.75 to <2.50

1.2

 

0.7

 

51.5

 

1.4

 

1.40

 

35

 

28.3

 

3.10

 

1.0

 

74

 

-

 

 

2.50 to <10.00

0.6

 

-

 

69.2

 

0.5

 

4.51

 

13

 

25.3

 

3.30

 

0.4

 

85

 

-

 

 

10.00 to <100.00

0.1

 

-

 

57.5

 

0.1

 

18.28

 

4

 

12.3

 

2.50

 

0.1

 

64

 

-

 

 

100.00 (Default)

0.2

 

0.1

 

66.2

 

0.2

 

100.00

 

12

 

19.5

 

4.50

 

0.3

 

129

 

-

 

 

Sub-total

8.2

 

3.6

 

41.8

 

8.9

 

3.45

 

203

 

25.4

 

3.50

 

4.1

 

46

 

-

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIRB - Corporate - Other

 

 

 

 

 

 

 

 

 

 

 

 

0.00 to <0.15

107.4

 

171.5

 

36.0

 

212.1

 

0.08

 

10,842

 

40.7

 

2.10

 

45.5

 

21

 

0.1

 

 

0.15 to <0.25

50.0

 

64.0

 

36.4

 

83.8

 

0.22

 

9,967

 

38.8

 

2.00

 

32.2

 

38

 

0.1

 

 

0.25 to <0.50

55.4

 

51.0

 

32.9

 

75.3

 

0.37

 

11,148

 

36.6

 

2.10

 

35.3

 

47

 

0.1

 

 

0.50 to <0.75

54.1

 

40.5

 

31.6

 

63.2

 

0.63

 

10,296

 

35.0

 

2.00

 

35.7

 

57

 

0.1

 

 

0.75 to <2.50

142.5

 

101.3

 

30.0

 

132.2

 

1.36

 

41,384

 

37.0

 

1.90

 

103.4

 

78

 

0.7

 

 

2.50 to <10.00

34.7

 

25.8

 

33.0

 

32.7

 

4.31

 

11,505

 

38.7

 

1.90

 

38.8

 

119

 

0.6

 

 

10.00 to <100.00

5.0

 

3.7

 

39.1

 

4.9

 

17.34

 

1,812

 

33.1

 

1.90

 

7.6

 

156

 

0.3

 

 

100.00 (Default)

4.2

 

0.6

 

35.8

 

4.4

 

100.00

 

2,246

 

46.1

 

1.80

 

2.5

 

57

 

2.4

 

 

Sub-total

453.3

 

458.4

 

34.1

 

608.6

 

1.56

 

99,200

 

38.4

 

2.00

 

301.0

 

49

 

4.4

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale AIRB - Total at 31 Dec 20192

929.2

 

477.8

 

34.2

 

1,089.6

 

1.09

 

103,023

 

39.3

 

2.00

 

365.5

 

34

 

5.0

 

3.6

 

 

 

<

Table 76: IRB - Credit risk exposures by portfolio and PD range (CR6) (continued)

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Average CCF

EAD post-CRM and post-CCF

Average PD

Number of obligors

Average LGD

Average maturity

RWAs

RWA density

Expected loss

Value adjustments and provisions^

PD scale

$bn

$bn

%

$bn

%

 

%

years

$bn

%

$bn

$bn

AIRB - Secured by mortgages on immovable property SME

 

 

 

 

 

 

 

 

 

 

 

 

0.00 to <0.15

0.4

 

-

 

46.0

 

0.3

 

0.06

 

1,196

 

11.8

 

-

 

-

 

4

 

-

 

 

0.15 to <0.25

0.1

 

-

 

36.2

 

0.1

 

0.21

 

2,192

 

32.7

 

-

 

-

 

13

 

-

 

 

0.25 to <0.50

0.6

 

-

 

41.6

 

0.6

 

0.35

 

6,785

 

27.0

 

-

 

0.1

 

15

 

-

 

 

0.50 to <0.75

0.3

 

0.1

 

38.7

 

0.4

 

0.62

 

5,423

 

33.1

 

-

 

0.1

 

27

 

-

 

 

0.75 to <2.50

1.0

 

0.2

 

37.8

 

1.0

 

1.44

 

13,167

 

33.6

 

-

 

0.5

 

48

 

-

 

 

2.50 to <10.00

0.7

 

0.1