Document
FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
For the month of September 2017

Commission File Number: 001-14930

HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X             Form 40-F ......
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ______


(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes.......             No    X
 
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ..............).
 




Pillar 3 Disclosures at 30 June 2017

Contents
 
Page

Regulatory framework for disclosures
3

Pillar 3 disclosures
3

Regulatory developments
3

Structure of the regulatory group
4

Capital and RWAs
7

Own funds
7

Leverage ratio
9

Capital buffers
11

Pillar 1 minimum capital requirements and RWA flow
11

Credit risk
14

Credit quality of assets
14

Defaulted exposures
14

Risk mitigation
14

Counterparty credit risk
24

Securitisation
28

Market risk
33

Other information
36

Abbreviations
36

Cautionary statement regarding forward-looking statements
37

Contacts
37

Certain defined terms
Unless the context requires otherwise, ‘HSBC Holdings’ means HSBC Holdings plc and ‘HSBC’, the ‘Group’, ‘we’, ‘us’ and ‘our’ refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People’s Republic of China is referred to as ‘Hong Kong’. When used in the terms ‘shareholders’ equity’ and ‘total shareholders’ equity’, ‘shareholders’ means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations ‘$m’ and ‘$bn’ and ‘$tn’ represent millions, billions (thousands of millions) and trillions of US dollars, respectively.
 
Tables
 
 
Page

1
Reconciliation of balance sheets – financial accounting to regulatory scope of consolidation
5

2
Own funds disclosure
7

3
Summary reconciliation of accounting assets and leverage ratio exposures
9

4
Leverage ratio common disclosure
9

5
Leverage ratio – Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures)
10

6
Overview of RWAs
12

7
RWA flow statements of credit risk exposures under IRB
12

8
RWA flow statements of CCR exposures under the IMM
13

9
RWA flow statements of market risk exposures under the IMA
13

10
Credit quality of assets
14

11
Changes in stock of defaulted loans and debt securities
14

12
Standardised approach – credit conversion factor (‘CCF’) and credit risk mitigation (‘CRM’) effects
15

13
Standardised approach – exposures by asset classes and risk weights
16

14
IRB – Credit risk exposures by portfolio and PD range
17

15
IRB – Effect on RWA of credit derivatives used as CRM techniques
23

16
Specialised lending
23

17
Analysis of counterparty credit risk (‘CCR’) exposure by approach (excluding centrally cleared exposures)
24

18
Credit valuation adjustment (‘CVA’) capital charge
24

19
Standardised approach – CCR exposures by regulatory portfolio and risk weights
24

20
IRB – CCR exposures by portfolio and PD scale
25

21
Composition of collateral for CCR exposure
27

22
Exposures to central counterparties
27

23
Credit derivatives exposures
28

24
Securitisation exposures in the non-trading book
28

25
Securitisation exposures in the trading book
29

26
Securitisation exposures in the non-trading book and associated regulatory capital requirements – bank acting as originator or as sponsor
29

27
Securitisation exposures in the non-trading book and associated capital requirements – bank acting as investor
31

28
Market risk under standardised approach
33

29
Market risk under IMA
33

30
IMA values for trading portfolios
34



2
HSBC Holdings plc


Regulatory framework for disclosures
HSBC is supervised on a consolidated basis in the United Kingdom (‘UK’) by the Prudential Regulation Authority (‘PRA’), which receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local banking supervisors, who set and monitor their local capital adequacy requirements. In most jurisdictions, non-banking financial subsidiaries are also subject to the supervision and capital requirements of local regulatory authorities.
At a consolidated Group level, we calculate capital for prudential regulatory reporting purposes using the Basel III framework of the Basel Committee on Banking Supervision (‘the Basel Committee’) as implemented by the European Union (‘EU’) in the amended Capital Requirements Directive and Regulation (‘CRD IV’), and in the PRA Rulebook for the UK banking industry. The regulators of Group banking entities outside the EU are at varying stages of implementation of the Basel III framework, so local regulation in 2017 may have been on the basis of the Basel I, II or III frameworks.
The Basel III framework is structured around three ‘pillars’: the Pillar 1 minimum capital requirements and Pillar 2 supervisory review process are complemented by Pillar 3 which concerns market discipline. The aim of Pillar 3 is to produce disclosures that allow market participants to assess the scope of application by banks of the Basel Committee’s framework and the rules in their jurisdiction, their capital condition, risk exposures and risk management processes, and hence their capital adequacy.
The PRA’s final rules adopted national discretions in order to accelerate significantly the transition timetable to full ‘end point’ CRD IV compliance.
Pillar 3 disclosures
Our Pillar 3 disclosures at 30 June 2017 comprise all information required under Pillar 3, both quantitative and qualitative. They are made in accordance with Part 8 of the Capital Requirements Regulation within CRD IV and as recommended by the European Banking Authority (‘EBA’) guidelines on disclosure requirements issued in December 2016. Additionally, we continue to present a number of Basel Committee’s templates where these do not overlap with the EBA guidelines. These disclosures are supplemented by specific additional requirements of the PRA and discretionary disclosures on our part.
The Pillar 3 disclosures are governed by the Group’s disclosure policy framework as approved by the Group Audit Committee (‘GAC’). Pillar 3 requires all material risks to be disclosed, enabling a comprehensive view of a bank’s risk profile.
Where disclosures have been enhanced, or are new, we do not generally restate or provide prior-year comparatives. The capital resources tables track the position from a CRD IV transitional to an end-point basis. Furthermore, specific rows and columns in the tables which are not considered to be relevant to HSBC’s activities have been omitted.
Pillar 3 requirements may be met by inclusion in other disclosure media. Where we adopt this approach, references are provided to the relevant pages of the Interim Report 2017 or to other locations.
We continue to engage constructively with the UK authorities and industry associations to improve the transparency and comparability of UK banks’ Pillar 3 disclosures.

 
Regulatory developments
Basel Committee
During the first half of 2017, the Basel Committee proposed further revisions to the regulatory capital framework. In particular, it published:
a second consultation regarding the identification and management of step-in risk;
the interim regulatory treatment and transitional requirements for International Financial Reporting Standard 9, Financial Instruments (‘IFRS 9’) provisions;
the final Phase 2 Pillar 3 standards; and
a consultation to revise the global systemically important banks (G-SIB’) assessment framework.
In addition, the Basel Committee confirmed that it has largely completed the technical work needed to revise the Basel III regulatory capital framework, including the approaches to credit risk, operational risk and the leverage ratio. The only outstanding area is the proposal to implement a capital floor for modelled risk-weighted assets (‘RWAs’), where the final calibration and associated transitional provisions are expected. In all instances, the final standards will have to be transposed into the relevant local law before coming into effect.
Financial Stability Board
In July 2017, the Financial Stability Board (‘FSB’) expanded its resolution reform policy framework with the publication of its ‘Guiding Principles on the Internal Total Loss-absorbing Capacity of G-SIBs (‘Internal TLAC’)’. These guidelines supplement the FSB’s TLAC standard published in November 2015. Again, this needs to be incorporated into the relevant local law before coming into effect.
European Union
In the EU, elements of the Basel Committee’s and FSB’s reforms are being implemented through revisions to the CRD IV and the EU resolution framework. The key components include changes to the market risk and counterparty credit risk frameworks, a binding leverage ratio and the regulatory recognition of IFRS 9. It also includes details of the minimum requirements for TLAC, which in the EU is known as the ‘Minimum Requirements for own funds and Eligible Liabilities’ (‘MREL’). These changes are expected to be finalised by 2019 and apply from 1 January 2021, with the exception of the rules on MREL and the transitional capital provisions for IFRS 9, which are expected to apply from 1 January 2019 and 1 January 2018, respectively.
In June, the EU reached agreement on the new securitisation capital rules. This is expected to be implemented on 1 January 2019 for new transactions and on 1 January 2020 for existing positions.
Bank of England
In the UK, the Bank of England (‘BoE’) published its policy on setting MREL in November 2016. Elements of this policy remain outstanding, including the application of MREL within groups and the treatment of holdings of TLAC instruments. Meanwhile, in March 2017, HSBC received from the BoE its indicative MREL requirement applicable to HSBC Holdings plc and its European Resolution Group (comprised of HSBC Bank plc and its subsidiaries). This includes interim MREL requirements effective from 1 January 2019 and final requirements effective from 1 January 2022. The BoE also formally confirmed ‘multiple-point-of-entry’ as the preferred resolution strategy for HSBC. In May, the BoE published the quantum of MREL requirements for major UK banks.

HSBC Holdings plc
3


Pillar 3 Disclosures at 30 June 2017

In June 2017, the Financial Policy Committee (‘FPC’) raised the countercyclical buffer rate for UK exposures to 0.5%, to apply from 27 June 2018. It will consider in November whether a further increase to 1% should take effect from November 2018.
In June 2017, the BoE also consulted on the UK leverage ratio framework, proposing to exclude claims on central banks from the leverage exposure measure and, as a result, recalibrating the minimum leverage ratio for HSBC from 3% to 3.25% of tier 1 capital, to take effect during 2017.
Structure of the regulatory group
Subsidiaries engaged in insurance activities are excluded from the regulatory consolidation by excluding assets, liabilities and post-acquisition reserves, leaving the Group’s investment
 
in these insurance subsidiaries to be recorded at cost and deducted from common equity tier 1 (‘CET1’) capital (subject to thresholds).
The regulatory consolidation also excludes special purpose entities (‘SPEs’) where significant risk has been transferred to third parties. Exposures to these SPEs are risk-weighted as securitisation positions for regulatory purposes.
Participating interests in banking associates are proportionally consolidated for regulatory purposes by including our share of assets, liabilities, profit and loss, and risk-weighted assets (‘RWAs’) in accordance with the PRA’s application of EU legislation. Non-participating significant investments along with non-financial associates are deducted from capital (subject to thresholds).


4
HSBC Holdings plc


Table 1: Reconciliation of balance sheets – financial accounting to regulatory scope of consolidation
 
 
Accounting
balance
sheet

Deconsolidation
of insurance/
other entities

Consolidation
of banking
associates

Regulatory
balance
sheet

 
Ref
$m

$m

$m

$m

Assets
 
 
 
 
 
Cash and balances at central banks
 
163,353

(43
)
1,177

164,487

Items in the course of collection from other banks
 
7,129


26

7,155

Hong Kong Government certificates of indebtedness
 
31,943



31,943

Trading assets
 
320,037

(334
)
2

319,705

Financial assets designated at fair value
 
27,937

(27,239
)

698

Derivatives
 
229,719

(143
)
56

229,632

Loans and advances to banks
 
86,633

(1,798
)
1,390

86,225

Loans and advances to customers
 
919,838

(3,303
)
12,919

929,454

– of which: impairment allowances on IRB portfolios
h
(4,884
)


(4,884
)
Reverse repurchase agreements – non-trading
 
196,834

424

1,642

198,900

Financial investments
 
385,378

(58,605
)
2,959

329,732

Assets held for sale
 
2,301



2,301

– of which: impairment allowances on IRB portfolios
h
(115
)


(115
)
Capital invested in insurance and other entities
 

2,406


2,406

Prepayments, accrued income and other assets
 
70,592

(3,491
)
330

67,431

– of which: retirement benefit assets
i
7,036



7,036

Current tax assets
 
1,054

(39
)

1,015

Interests in associates and joint ventures
 
21,071

(350
)
(3,826
)
16,895

– of which: positive goodwill on acquisition
e
500

(14
)

486

Goodwill and intangible assets
e
22,653

(6,888
)

15,765

Deferred tax assets
f
5,971

199

2

6,172

Total assets at 30 Jun 2017
 
2,492,443

(99,204
)
16,677

2,409,916

Liabilities and equity
 
 
 
 
 
Hong Kong currency notes in circulation
 
31,943



31,943

Deposits by banks
 
64,230

(107
)
559

64,682

Customer accounts
 
1,311,958

(45
)
15,100

1,327,013

Repurchase agreements – non-trading
 
145,306



145,306

Items in the course of transmission to other banks
 
7,799



7,799

Trading liabilities
 
202,401

819


203,220

Financial liabilities designated at fair value
 
93,163

(6,256
)

86,907

– of which:
 
 
 
 
 
included in tier 1
m
437



437

included in tier 2
n, q
24,182



24,182

Derivatives
 
223,413

3

55

223,471

Debt securities in issue
 
63,289

(2,787
)
324

60,826

Liabilities of disposal groups held for sale
 
620



620

Accruals, deferred income and other liabilities
 
42,724

1,207

499

44,430

Current tax liabilities
 
1,186

(47
)

1,139

Liabilities under insurance contracts
 
81,147

(81,147
)


Provisions
 
4,379

(18
)
140

4,501

– of which: credit-related contingent liabilities and contractual commitments on IRB portfolios
h
217



217

Deferred tax liabilities
 
1,886

(1,070
)

816

Subordinated liabilities
 
21,213

1


21,214

– of which:
 
 
 
 
 
included in tier 1
k, m
1,800



1,800

included in tier 2
n, o, q
19,413



19,413

Total liabilities at 30 Jun 2017
 
2,296,657

(89,447
)
16,677

2,223,887

Called up share capital
a
10,188



10,188

Share premium account
a, k
12,069



12,069

Other equity instruments
j, k
20,830



20,830

Other reserves
c, g
4,472

1,564


6,036

Retained earnings
b, c
140,837

(10,584
)

130,253

Total shareholders’ equity
 
188,396

(9,020
)

179,376

Non-controlling interests
d, l, m, p
7,390

(737
)

6,653

– of which: non-cumulative preference shares issued by subsidiaries included in tier 1 capital
m
270



270

Total equity at 30 Jun 2017
 
195,786

(9,757
)

186,029

Total liabilities and equity at 30 Jun 2017
 
2,492,443

(99,204
)
16,677

2,409,916

The references (a) – (q) identify balance sheet components that are used in the calculation of regulatory capital on page 7.

HSBC Holdings plc
5


Pillar 3 Disclosures at 30 June 2017

Table 1: Reconciliation of balance sheets – financial accounting to regulatory scope of consolidation (continued)
 
 
Accounting
balance sheet

Deconsolidation
of insurance/
other entities

Consolidation
of banking
associates

Regulatory
balance sheet

 
Ref
$m

$m

$m

$m

Assets
 
 
 
 
 
Cash and balances at central banks
 
128,009

(27
)
1,197

129,179

Items in the course of collection from other banks
 
5,003


26

5,029

Hong Kong Government certificates of indebtedness
 
31,228



31,228

Trading assets
 
235,125

(198
)
1

234,928

Financial assets designated at fair value
 
24,756

(24,481
)

275

Derivatives
 
290,872

(145
)
77

290,804

Loans and advances to banks
 
88,126

(1,845
)
922

87,203

Loans and advances to customers
 
861,504

(3,307
)
12,897

871,094

– of which: impairment allowances on IRB portfolios
h
(5,096
)


(5,096
)
Reverse repurchase agreements – non-trading
 
160,974

344

1,444

162,762

Financial investments
 
436,797

(54,904
)
3,500

385,393

Assets held for sale
 
4,389

(7
)

4,382

– of which:
 
 
 
 
 
goodwill and intangible assets
e
1



1

impairment allowances on IRB portfolios
h
(146
)


(146
)
Capital invested in insurance and other entities
 

2,214


2,214

Prepayments, accrued income and other assets
 
59,520

(3,066
)
306

56,760

– of which: retirement benefit assets
i
4,714



4,714

Current tax assets
 
1,145

(118
)

1,027

Interests in associates and joint ventures
 
20,029


(4,195
)
15,834

– of which: positive goodwill on acquisition
e
488


(475
)
13

Goodwill and intangible assets
e
21,346

(6,651
)
481

15,176

Deferred tax assets
f
6,163

176

5

6,344

Total assets at 31 Dec 2016
 
2,374,986

(92,015
)
16,661

2,299,632

Liabilities and equity
 
 
 
 
 
Hong Kong currency notes in circulation
 
31,228



31,228

Deposits by banks
 
59,939

(50
)
441

60,330

Customer accounts
 
1,272,386

(44
)
14,997

1,287,339

Repurchase agreements – non-trading
 
88,958



88,958

Items in course of transmission to other banks
 
5,977



5,977

Trading liabilities
 
153,691

643

1

154,335

Financial liabilities designated at fair value
 
86,832

(6,012
)

80,820

– of which:
 
 
 
 
 
included in tier 1
m
411



411

included in tier 2
n, q
23,172



23,712

Derivatives
 
279,819

193

64

280,076

Debt securities in issue
 
65,915

(3,547
)
662

63,030

Liabilities of disposal groups held for sale
 
2,790



2,790

Accruals, deferred income and other liabilities
 
41,501

1,810

495

43,806

Current tax liabilities
 
719

(26
)

693

Liabilities under insurance contracts
 
75,273

(75,273
)


Provisions
 
4,773

(18
)

4,755

– of which: credit-related contingent liabilities and contractual commitments on IRB portfolios
h
267



267

Deferred tax liabilities
 
1,623

(981
)
1

643

Subordinated liabilities
 
20,984

1


20,985

– of which:
 
 
 
 
 
included in tier 1
k, m
1,754



1,754

included in tier 2
n, o, q
18,652



18,652

Total liabilities at 31 Dec 2016
 
2,192,408

(83,304
)
16,661

2,125,765

Called up share capital
a
10,096



10,096

Share premium account
a, k
12,619



12,619

Other equity instruments
j, k
17,110



17,110

Other reserves
c, g
(1,234
)
1,735


501

Retained earnings
b, c
136,795

(9,442
)

127,353

Total shareholders’ equity
 
175,386

(7,707
)

167,679

Non-controlling interests
d, l, m, p
7,192

(1,004
)

6,188

– of which: non-cumulative preference shares issued by subsidiaries included in tier 1 capital

m
260



260

Total equity at 31 Dec 2016
 
182,578

(8,711
)

173,867

Total liabilities and equity at 31 Dec 2016
 
2,374,986

(92,015
)
16,661

2,299,632



6
HSBC Holdings plc


Capital and RWAs
The main features of HSBC’s capital instruments are set out in the Annual Report and Accounts 2016. Information on those instruments classified as liabilities under IFRSs is included in
 
Note 28 Subordinated liabilities on pages 244 to 247. Information on those instruments classified as equity under IFRSs is included in Note 32 Called up share capital and other equity instruments on pages 253 to 255.


Own funds
Table 2: Own funds disclosure



At
30 Jun
2017

CRD IV
prescribed
residual
amount

Final
CRD IV
text

Ref*

Ref
$m

$m

$m

 
Common equity tier 1 (‘CET1’) capital: instruments and reserves
 
 
 
 
1
Capital instruments and the related share premium accounts
 
20,852

 
20,852

 
– ordinary shares
a
20,852

 
20,852

2
Retained earnings
b
124,203

 
124,203

3
Accumulated other comprehensive income (and other reserves)
c
6,757

 
6,757

5
Minority interests (amount allowed in consolidated CET1)
d
4,496

 
4,496

5a
Independently reviewed interim net profits net of any foreseeable charge or dividend
b
3,718

 
3,718

6
Common equity tier 1 capital before regulatory adjustments
 
160,026

 
160,026

 
Common equity tier 1 capital: regulatory adjustments
 
 
 
 
7
Additional value adjustments
 
(1,201
)
 
(1,201
)
8
Intangible assets (net of related deferred tax liability)
e
(16,114
)
 
(16,114
)
10
Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)
f
(1,476
)
 
(1,476
)
11
Fair value reserves related to gains or losses on cash flow hedges
g
55

 
55

12
Negative amounts resulting from the calculation of expected loss amounts
h
(3,426
)
 
(3,426
)
14
Gains or losses on liabilities valued at fair value resulting from changes in own credit standing

2,656

 
2,656

15
Defined-benefit pension fund assets
i
(5,513
)
 
(5,513
)
16
Direct and indirect holdings of own CET1 instruments

(40
)
 
(40
)
19
Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions)
 
(6,058
)
 
(6,058
)
28
Total regulatory adjustments to common equity tier 1
 
(31,117
)

(31,117
)
29
Common equity tier 1 capital
 
128,909


128,909

 
Additional tier 1 (‘AT1’) capital: instruments
 
 
 
 
30
Capital instruments and the related share premium accounts
 
14,979


14,979

31
– classified as equity under IFRSs
j
14,979


14,979

33
Amount of qualifying items and the related share premium accounts subject to phase out
from AT1
k
6,621

(6,621
)

34
Qualifying tier 1 capital included in consolidated AT1 capital (including minority interests not included in CET1) issued by subsidiaries and held by third parties
l, m
2,095

(1,917
)
178

35
– of which: instruments issued by subsidiaries subject to phase out
m
1,584

(1,584
)

36
Additional tier 1 capital before regulatory adjustments
 
23,695

(8,538
)
15,157

 
Additional tier 1 capital: regulatory adjustments
 
 
 
 
37
Direct and indirect holdings of own AT1 instruments
 
(60
)
 
(60
)
41b
Residual amounts deducted from AT1 capital with regard to deduction from tier 2 (‘T2’) capital during the transitional period
 
(50
)
50


 
– direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities
 
(50
)
50


43
Total regulatory adjustments to additional tier 1 capital
 
(110
)
50

(60
)
44
Additional tier 1 capital
 
23,585

(8,488
)
15,097

45
Tier 1 capital (T1 = CET1 + AT1)
 
152,494

(8,488
)
144,006

 
Tier 2 capital: instruments and provisions
 
 
 
 
46
Capital instruments and the related share premium accounts
n
16,849

 
16,849

47
Amount of qualifying items and the related share premium accounts subject to phase out
from T2
o
4,746

(4,746
)


HSBC Holdings plc
7


Pillar 3 Disclosures at 30 June 2017

Table 2: Own funds disclosure (continued)
 
 
 
At
30 Jun
2017

CRD IV
prescribed
residual
amount

Final
CRD IV
text

Ref*
 
Ref
$m

$m

$m

48
Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in CET1 or AT1) issued by subsidiaries and held by third parties
p, q
10,290

(10,223
)
67

49
– of which: instruments issued by subsidiaries subject to phase out
q
10,236

(10,236
)

51
Tier 2 capital before regulatory adjustments
 
31,885

(14,969
)
16,916

 
Tier 2 capital: regulatory adjustments
 
 
 
 
52
Direct and indirect holdings of own T2 instruments
 
(40
)
 
(40
)
55
Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions)
 
(447
)
(50
)
(497
)
57
Total regulatory adjustments to tier 2 capital
 
(487
)
(50
)
(537
)
58
Tier 2 capital
 
31,398

(15,019
)
16,379

59
Total capital (TC = T1 + T2)
 
183,892

(23,507
)
160,385

60
Total risk-weighted assets
 
876,118


876,118

 
Capital ratios and buffers
 
 
 
 
61
Common equity tier 1
 
14.7%

 
14.7%

62
Tier 1
 
17.4%

 
16.4%

63
Total capital
 
21.0%

 
18.3%

64
Institution specific buffer requirement
 
2.70%

 
 
65
– capital conservation buffer requirement
 
1.25%

 
 
66
– countercyclical buffer requirement
 
0.20%

 
 
67a
– Global Systemically Important Institution (‘G-SII’) buffer
 
1.25%

 
 
68
Common equity tier 1 available to meet buffers
 
8.6%

 
 
 
Amounts below the threshold for deduction (before risk weighting)
 
 
 
 
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions)
 
4,213

 
 
73
Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 10% threshold and net of eligible short positions)
 
13,497

 
 
75
Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability)
 
5,765

 
 
 
Applicable caps on the inclusion of provisions in tier 2
 
 
 
 
77
Cap on inclusion of credit risk adjustments in T2 under standardised approach
 
2,267

 
 
79
Cap for inclusion of credit risk adjustments in T2 under IRB approach
 
3,015

 
 
 
Capital instruments subject to phase out arrangements (only applicable between
1 Jan 2013 and 1 Jan 2022)
 
 
 
 
82
Current cap on AT1 instruments subject to phase out arrangements
 
8,652

 
 
83
Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)
 
1,526

 
 
84
Current cap on T2 instruments subject to phase out arrangements
 
14,982

 
 
85
Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)
 
6,056

 
 
*
The references identify the lines prescribed in the European Banking Authority (‘EBA’) template. Lines represented in this table are those lines which are applicable and where there is a value.
The references (a) – (q) identify balance sheet components on page 5 which are used in the calculation of regulatory capital.

8
HSBC Holdings plc


Leverage ratio
Our leverage ratio calculated in accordance with CRD IV was 5.7% at 30 June 2017, up from 5.4% at 31 December 2016. This was mainly due to increased capital.
In 2016, following recommendations from the Bank of England’s Financial Policy Committee (‘FPC’), a modification to exclude qualifying central bank balances from the leverage exposure measure was made.
In June 2017, the FPC recommended that the PRA increase the minimum requirement of the UK leverage ratio from 3% to 3.25%. This is intended to compensate for the reduction in the capital requirement resulting from the modification to the UK leverage exposure measure. This increase is expected to come into effect before the end of the year.
At 30 June 2017, our UK minimum leverage ratio requirement of 3% was supplemented by an additional leverage ratio buffer of 0.4% and a countercyclical leverage ratio buffer of 0.1%.
 
These additional buffers translate into capital values of $10.4bn and $3.2bn respectively. We comfortably exceeded these leverage requirements.
The risk of excessive leverage is managed as part of HSBC’s global risk appetite framework and monitored using a leverage ratio metric within our risk appetite statement (‘RAS’). The RAS articulates the aggregate level and types of risk that HSBC is willing to accept in its business activities in order to achieve its strategic business objectives. The RAS measures are monitored via the risk appetite profile report, which includes comparisons of actual performance against the risk appetite and tolerance thresholds assigned to each metric, to ensure that any excessive risk is highlighted, assessed and mitigated appropriately. The risk appetite profile report is presented monthly to the Risk Management Meeting of the Group Management Board (‘RMM’) and the Group Risk Committee (‘GRC’).
Table 3: Summary reconciliation of accounting assets and leverage ratio exposures
 
 
At
 
 
30 Jun

31 Dec

 
 
2017

2016

Ref*
 
$bn

$bn

1
Total assets as per published financial statements
2,492.4

2,375.0

 
Adjustments for:
 
 
2
– entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation
(82.5
)
(75.4
)
4
– derivative financial instruments
(106.0
)
(158.6
)
5
– securities financing transactions (‘SFTs’)
12.5

10.1

6
– off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet exposures)
239.9

223.1

7
– other
(23.3
)
(19.8
)
8
Total leverage ratio exposure
2,533.0

2,354.4

*
The references identify the lines prescribed in the EBA template. Lines represented in this table are those lines which are applicable and where there is a value.
Table 4: Leverage ratio common disclosure
 
 
At
 
 
30 Jun

31 Dec

 
 
2017

2016

Ref*
 
$bn

$bn

 
On-balance sheet exposures (excluding derivatives and SFTs)
 
 
1
On-balance sheet items (excluding derivatives, SFTs and fiduciary assets, but including collateral)
1,967.6

1,844.4

2
(Asset amounts deducted in determining tier 1 capital)
(33.8
)
(34.4
)
3
Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary assets)
1,933.8

1,810.0

 
Derivative exposures
 
 
4
Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin)
29.3

43.7

5
Add-on amounts for potential future exposure (‘PFE’) associated with all derivatives transactions
(mark-to-market method)
120.5

110.2

6
Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to IFRSs
5.1

5.9

7
(Deductions of receivables assets for cash variation margin provided in derivatives transactions)
(26.0
)
(30.6
)
8
(Exempted central counterparty (‘CCP’) leg of client-cleared trade exposures)
(12.8
)
(4.1
)
9
Adjusted effective notional amount of written credit derivatives
167.5

216.4

10
(Adjusted effective notional offsets and add-on deductions for written credit derivatives)
(160.0
)
(209.3
)
11
Total derivative exposures
123.6

132.2

 
Securities financing transaction exposures
 
 
12
Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions
317.8

266.6

13
(Netted amounts of cash payables and cash receivables of gross SFT assets)
(94.5
)
(87.9
)
14
Counterparty credit risk exposure for SFT assets
12.4

10.4

16
Total securities financing transaction exposures
235.7

189.1

 
Other off-balance sheet exposures
 
 
17
Off-balance sheet exposures at gross notional amount
781.4

757.7

18
(Adjustments for conversion to credit equivalent amounts)
(541.5
)
(534.6
)
19
Total off-balance sheet exposures
239.9

223.1

 
Capital and total exposures
 
 
20
Tier 1 capital
144.0

127.3

21
Total leverage ratio exposure
2,533.0

2,354.4

22
Leverage ratio (%)
5.7

5.4

EU-23
Choice of transitional arrangements for the definition of the capital measure
 Fully phased in

Fully phased in

*
The references identify the lines prescribed in the EBA template. Lines represented in this table are those which are applicable and where there is a value.

HSBC Holdings plc
9


Pillar 3 Disclosures at 30 June 2017

Table 5: Leverage ratio – Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures)
 
 
At
 
 
30 Jun

31 Dec

 
 
2017

2016

Ref*
 
$bn

$bn

EU-1
Total on-balance sheet exposures (excluding derivatives, SFTs, and exempted exposures)
1,967.6

1,844.4

EU-2
– trading book exposures
296.3

267.5

EU-3
– banking book exposures
1,671.3

1,576.9

 
   ’banking book exposures’ comprises:
 
 
EU-4
covered bonds
1.4

1.1

EU-5
exposures treated as sovereigns
488.2

504.4

EU-6
exposures to regional governments, multilateral development banks (‘MDBs’), international organisations and public sector entities not treated as sovereigns
8.3

6.0

EU-7
institutions
78.0

67.6

EU-8
secured by mortgages of immovable properties
266.4

254.6

EU-9
retail exposures
85.0

84.6

EU-10
corporate
555.1

532.4

EU-11
exposures in default
11.3

12.4

EU-12
other exposures (e.g. equity, securitisations and other non-credit obligation assets)
177.6

113.8

*
The references identify the lines prescribed in the EBA template. Lines represented in this table are those lines which are applicable and where there is a value.

10
HSBC Holdings plc


Capital buffers
The geographical breakdown and institution specific countercyclical capital buffer disclosure is published annually on the HSBC website, www.hsbc.com. Our G-SIB Indicators Disclosure is published annually on the HSBC website, www.hsbc.com.
 
Pillar 1 minimum capital requirements and RWA flow
Pillar 1 covers the minimum capital resource requirements for credit risk, counterparty credit risk (‘CCR’), equity, securitisation, market risk and operational risk. These requirements are expressed in terms of RWAs.
 
Risk category
Scope of permissible approaches
Approach adopted by HSBC
 
Credit risk
The Basel Committee’s framework applies three approaches of increasing sophistication to the calculation of Pillar 1 credit risk capital requirements. The most basic level, the standardised approach, requires banks to use external credit ratings to determine the risk weightings applied to rated counterparties. Other counterparties are grouped into broad categories and standardised risk weightings are applied to these categories. The next level, the foundation IRB (‘FIRB’) approach, allows banks to calculate their credit risk capital requirements on the basis of their internal assessment of a counterparty’s probability of default (‘PD’), but subjects their quantified estimates of EAD and loss given default (‘LGD’) to standard supervisory parameters. Finally, the advanced IRB (‘AIRB’) approach allows banks to use their own internal assessment in both determining PD and quantifying EAD and LGD.
For consolidated Group reporting, we have adopted the advanced IRB approach for the majority of our business.
Some portfolios remain on the standardised or foundation IRB approaches:
pending the issuance of local regulations or model approval;
following supervisory prescription of a non-advanced approach; or
under exemptions from IRB treatment.
 
 
 
 
 
Counterparty credit risk
Four approaches to calculating CCR and determining exposure values are defined by the Basel Committee: mark-to-market, original exposure, standardised and Internal Model Method (‘IMM’). These exposure values are used to determine capital requirements under one of the credit risk approaches: standardised, foundation IRB or advanced IRB.
We use the mark-to-market and IMM approaches for CCR. Details of the IMM permission we have received from the PRA can be found in the Financial Services Register on the PRA website. Our aim is to increase the proportion of positions on IMM over time.
 
Equity
For the non-trading book, equity exposures can be assessed under standardised or IRB approaches.
For Group reporting purposes, all non-trading book equity exposures are treated under the standardised approach.
 
Securitisation
Basel specifies two approaches for calculating credit risk requirements for securitisation positions in non-trading books: the standardised approach and the IRB approach, which incorporates the Ratings Based Method (‘RBM’), the Internal Assessment Approach (‘IAA’) and the Supervisory Formula Method (‘SFM’). Securitisation positions in the trading book are treated within the market risk framework, using the CRD IV standard rules.
For the majority of the non-trading book securitisation positions we use the IRB approach, and within this principally the RBM, with lesser amounts on the IAA and the SFM. We also use the standardised approach for an immaterial amount of non-trading book positions. We follow the CRD IV standard rules for the securitisation positions in the trading book.
 
Market risk
Market risk capital requirements can be determined under either the standard rules or the Internal Models Approach (‘IMA’). The latter involves the use of internal value at risk (‘VaR’) models to measure market risks and determine the appropriate capital requirement.
In addition to the VaR models, other internal models include Stressed VaR (‘SVaR’), Incremental Risk Charge (‘IRC’) and Comprehensive Risk Measure.

The market risk capital requirement is measured using internal market risk models, where approved by the PRA, or under the standard rules. Our internal market risk models comprise VaR, stressed VaR and IRC. Non-proprietary details of the scope of our IMA permission are available in the Financial Services Register on the PRA website. We are in compliance with the requirements set out in Articles 104 and 105 of the Capital Requirements Regulation.
 
Operational risk
The Basel Committee allows firms to calculate their operational risk capital requirement under the basic indicator approach, the standardised approach or the advanced measurement approach.
We currently use the standardised approach in determining our operational risk capital requirement. We have in place an operational risk model that is used for economic capital calculation purposes.


HSBC Holdings plc
11


Pillar 3 Disclosures at 30 June 2017

Table 6: Overview of RWAs
 
 
At
 
 
30 Jun

31 Mar

30 Jun

 
 
2017

2017

2017

 
 
RWAs

RWAs

Capital1 
requirements

 
 
$bn

$bn

$bn

1
Credit risk (excluding counterparty credit risk)
601.9

592.8

48.2

2
– standardised approach
130.2

122.5

10.4

3
– foundation IRB approach
26.9

26.0

2.2

4
– advanced IRB approach
444.8

444.3

35.6

6
Counterparty credit risk
61.5

61.2

4.9

7
– mark-to-market
36.7

36.3

2.9

10
– internal model method
10.0

9.9

0.8

11
– risk exposure amount for contributions to the default fund of a central counterparty
0.7

0.7

0.1

12
– credit valuation adjustment
14.1

14.3

1.1

13
Settlement risk
0.3

0.2


14
Securitisation exposures in the non-trading book
22.7

21.3

1.8

15
– IRB ratings based method
19.7

18.5

1.6

16
– IRB supervisory formula method
0.2

0.2


17
– IRB internal assessment approach
1.6

1.5

0.1

18
– standardised approach
1.2

1.1

0.1

19
Market risk
43.6

38.9

3.5

20
– standardised approach
3.8

4.8

0.3

21
– internal models approach
39.8

34.1

3.2

23
Operational risk
98.0

98.0

7.9

25
– standardised approach
98.0

98.0

7.9

27
Amounts below the thresholds for deduction (subject to 250% risk weight)
48.1

45.5

3.8

29
Total
876.1

857.9

70.1

1
‘Capital requirements’ here and in all tables where the term is used, represents the Pillar 1 capital charge at 8% of RWAs.

Credit Risk, including amounts below the thresholds for deduction
RWAs increased by $11.8bn in the second quarter of the year, including an increase of $10.6bn due to foreign currency translation differences. The increase of $1.2bn (excluding foreign exchange translation) was mainly due to an increase in asset size of $10.5bn driven by corporate lending growth in Asia and Europe, partly offset by reductions due to management initiatives to reduce RWAs.
Counterparty credit risk
The $0.3bn increase in RWAs is primarily due to an increase in asset size of $1.7bn, partly offset by RWA initiatives of $1.6bn.
 
Securitisation in non-trading book
The $1.4bn RWA increase in the second quarter of the year, arises predominantly from new securitisation positions.
Market risk
RWAs increased by $4.7bn, driven by a $5.4bn increase in risk levels, partly offset by RWA initiatives of $0.7bn.
 
 
 
 
 
 
Table 7: RWA flow statements of credit risk exposures under the IRB approach1, 2
 
 
 
 
Three months to
 
 
 
30 Jun

31 Mar

30 Jun

 
 
 
2017

2017

2017

 
 
 
RWAs

RWAs

Capital
requirements

 
 
 
$bn

$bn

$bn

 
1
RWAs at the beginning of the period
470.3

468.5

37.6

 
2
Asset size
0.7

2.0

0.1

 
3
Asset quality
(4.1
)

(0.3
)
 
4
Model updates
0.7


0.1

 
5
Methodology and policy
(2.5
)
1.2

(0.2
)
 
6
Acquisitions and disposals
(1.5
)
(5.7
)
(0.1
)
 
7
Foreign exchange movements
8.1

4.3

0.6

 
9
RWAs at the end of the period
471.7

470.3

37.8

1
This table includes RWA initiatives of $12.1bn allocated across the RWA flow layers to which they relate.
2
Securitisation positions are not included in this table.

12
HSBC Holdings plc


RWAs under the IRB approach increased by $1.4bn in the second quarter of the year, including an increase of $8.1bn due to foreign currency translation differences.
The $6.7bn decrease in RWAs excluding foreign currency translation includes the following movements:
 
$4.1bn as a result of improvements in asset quality and lending growth in lower risk portfolios.
$2.5bn in methodology and policy movements mainly as a result of management initiatives.

 
 
 
 
 
 
Table 8: RWA flow statements of CCR exposures under the IMM1
 
 
 
Three months to
 
 
 
30 Jun

31 Mar

30 Jun

 
 
 
2017

2017

2017

 
 
 
RWAs

RWAs

Capital
requirements

 
 
 
$bn

$bn

$bn

 
1
RWAs at the beginning of the period
14.3

14.4

1.1

 
2
Asset size
0.7

(0.4
)
0.1

 
3
Asset quality
(0.2
)
(0.2
)

 
4
Model updates

1.0


 
5
Methodology and policy
(0.7
)
(0.5
)
(0.1
)
 
9
RWAs at the end of the period
14.1

14.3

1.1

1
This table includes RWA initiatives of $0.9bn allocated across the RWA flow layers to which they relate.
The $0.2bn decrease in counterparty credit risk RWAs under the IMM during the second quarter of the year is driven by RWA initiatives of $0.9bn, partially offset by an increase in asset size of $0.7bn.
 
 
 
 
 
 
 
 
 
Table 9: RWA flow statements of market risk exposures under the IMA1
 
 
 
 
VaR

Stressed
VaR

IRC

Other

Total
RWAs1

Total capital requirements

 
 
 
$bn

$bn

$bn

$bn

$bn

$bn

 
1
RWAs at 1 Apr 2017
9.5

12.3

10.1

2.2

34.1

2.7

 
2
Movement in risk levels
0.4

1.9

1.7

2.5

6.5

0.5

 
3
Model updates/changes
(1.6
)
(0.2
)


(1.8
)
(0.1
)
 
4
Methodology and policy
0.5

0.5



1.0

0.1

 
8
RWAs at 30 Jun 2017
8.8

14.5

11.8

4.7

39.8

3.2

 
 
 
 
 
 
 
 
 
 
1
RWAs at 1 Jan 2017
8.7

15.8

9.5

2.5

36.5

2.9

 
2
Movement in risk levels
0.8

(3.5
)
0.6

(0.3
)
(2.4
)
(0.2
)
 
3
Model updates/changes






 
4
Methodology and policy






 
8
RWAs at 31 Mar 2017
9.5

12.3

10.1

2.2

34.1

2.7

1
This table includes RWA initiatives of $0.7bn allocated across the RWA flow layers to which they relate.
The $5.7bn increase in RWAs during the second quarter of the year is driven by movements in risk levels of $6.5bn and a methodology update to VaR multipliers of $1bn, partially offset by a $1.8bn reduction as a result of model updates.


HSBC Holdings plc
13


Pillar 3 Disclosures at 30 June 2017

Credit risk
Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from direct lending, trade finance and leasing business, but also from other products, such as guarantees and credit derivatives and from holding assets in the form of debt securities. Credit risk represents our largest regulatory capital
 
requirement. There have been no material changes to our policies and practices, which are described in the Capital and Risk Management Pillar 3 Disclosures 2016.
Credit quality of assets
We are a universal bank with a conservative approach to credit risk. This is reflected in our credit risk profile being diversified across a number of asset classes and geographies with a credit quality profile concentrated in the higher quality bands.
Table 10: Credit quality of assets
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
Gross carrying values of
Allowances/
impairments

Net values
(a+b-c)

Gross carrying values of
Allowances/impairments

Net values
(a+b-c)

 
 
Defaulted exposures

Non-defaulted exposures

Defaulted exposures

Non-
defaulted exposures

 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

1
Loans
16.6

1,198.9

8.0

1,207.5

17.9

1,067.8

8.3

1,077.4

2
Debt securities

279.6


279.6


377.4


377.4

3
Off-balance sheet exposures
1.9

743.8

0.2

745.5

1.5

735.0

0.3

736.2

4
Total
18.5

2,222.3

8.2

2,232.6

19.4

2,180.2

8.6

2,191.0

Defaulted exposures
The accounting definition of impaired and the regulatory definition of default are generally aligned. For particular retail exposures regulatory default is identified at 180 days past due, while the exposures are identified as impaired at 90 days
 
past due. In the retail portfolio in the US, for accounting purposes, a renegotiation would normally trigger identification as ‘impaired’, whereas for regulatory purposes, default is identified mainly based on the 180 days past due criterion.
Table 11: Changes in stock of defaulted loans and debt securities
 
 
 
6 months to

12 months to

 
 
 
30 Jun

31 Dec

 
 
 
2017

2016

 
 
Footnote
$bn

$bn

1
Defaulted loans and debt securities at the beginning of the period
 
17.9

22.7

2
Loans and debt securities that have defaulted since the last reporting period
 
3.2

8.6

3
Returned to non-defaulted status
 
(1.2
)
(1.5
)
4
Amounts written off
 
(1.1
)
(2.8
)
5
Other changes
1
(0.1
)
(5.1
)
7
Repayments
 
(2.1
)
(4.0
)
6
Defaulted loans and debt securities at the end of the period
 
16.6

17.9

1
Other changes include foreign exchange and assets held for sale in default.
Risk mitigation
Our approach when granting credit facilities is to do so on the basis of capacity to repay, rather than placing primary reliance on credit risk mitigants. Depending on a customer’s standing and the type of product, facilities may be provided unsecured. Mitigation of credit risk is a key aspect of effective risk management and takes many forms.
Our general policy is to promote the use of credit risk mitigation, justified by commercial prudence and capital efficiency. Specifically, detailed policies cover the acceptability, structuring and terms with regard to the availability of credit risk mitigation; for example, in the form of collateral security.
 
These policies, together with the setting of suitable valuation parameters, are subject to regular review to ensure that they are supported by empirical evidence and continue to fulfil their intended purpose.


14
HSBC Holdings plc


Table 12: Standardised approach – credit conversion factor (‘CCF’) and credit risk mitigation (‘CRM’) effects
 
 
Exposures before CCF
and CRM
Exposures post-CCF
and CRM
RWAs and RWA density
 
 
On-balance sheet amount

Off-balance sheet amount

On-balance sheet amount

Off-balance sheet amount

RWAs

RWA density

 
 
$bn

$bn

$bn

$bn

$bn

%

 
Asset classes1
 
 
 
 
 
 
1
Central governments or central banks
170.3

0.9

174.5

0.8

14.8

8

2
Regional governments or local authorities
2.6

0.3

2.6


0.9

33

3
Public sector entities
0.1

0.1

0.1


0.1

100

4
Multilateral development banks
0.2


0.2



7

5
International organisations
2.2


2.2




6
Institutions
2.6


2.4


1.1

48

7
Corporates
90.7

78.7

74.9

12.1

81.6

94

8
Retail
23.0

45.7

21.7

0.4

16.3

74

9
Secured by mortgages on immovable property
26.6

1.0

26.6

0.2

9.7

36

10
Exposures in default
3.4

0.3

3.3

0.1

4.3

128

11
Higher-risk categories
2.4

1.8

2.4

1.7

6.2

150

14
Collective investment undertakings
0.6


0.6


0.6

100

15
Equity
16.2


16.2


36.4

224

16
Other items
13.0


13.0


6.3

49

17
Total at 30 Jun 2017
353.9

128.8

340.7

15.3

178.3

50

 
 
 
 
 
 
 
 
1
Central governments or central banks
161.9

1.5

166.2

1.1

14.7

9

2
Regional governments or local authorities
2.9

0.3

2.9


0.9

32

3
Public sector entities






4
Multilateral development banks
0.2


0.2



5

5
International organisations
2.7


2.7




6
Institutions
2.2


2.1


1.0

46

7
Corporates
80.2

79.9

66.3

12.1

75.0

96

8
Retail
22.7

44.2

21.6

0.4

16.3

74

9
Secured by mortgages on immovable property
25.5

0.8

25.5

0.2

9.3

36

10
Exposures in default
3.2

0.4

3.2

0.1

4.3

130

11
Higher-risk categories
2.1

1.4

2.1

1.3

5.1

150

14
Collective investment undertakings
0.5


0.5


0.5

100

15
Equity
15.2


15.2


33.6

221

16
Other items
9.5


9.5


4.7

50

17
Total at 31 Dec 2016
328.8

128.5

318.0

15.2

165.4

50

1
Securitisation positions are not included in this table.

HSBC Holdings plc
15


Pillar 3 Disclosures at 30 June 2017

Table 13: Standardised approach – exposures by asset classes and risk weights
 
Risk weight (‘RW’)
0%

2%

20%

35%

50%

70%

75%

100%

150%

250%

Deducted

Total credit
exposure amount (post-CCF and post-CRM)

of which unrated

 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

 
Asset classes1
 
 
 
 
 
 
 
 
 
 
 
 
 
1
Central governments or central banks
169.2




0.1



0.2


5.8


175.3

5.8

2
Regional governments or local authorities


1.7


0.7



0.2




2.6

1.4

3
Public sector entities







0.1




0.1


4
Multilateral development banks
0.1


0.1









0.2

0.2

5
International organisations
2.2











2.2


6
Institutions

0.1

0.4


1.6



0.3




2.4

0.3

7
Corporates


3.7

0.2

4.0

0.1


78.5

0.5



87.0

72.5

8
Retail






22.1





22.1

22.1

9
Secured by mortgages on immovable property



26.2




0.6




26.8

26.8

10
Exposures in default







1.4

2.0



3.4

3.4

11
Higher-risk categories








4.1



4.1

4.1

14
Collective investment undertakings







0.6




0.6

0.6

15
Equity







2.8


13.4


16.2

16.2

16
Other items
1.0


7.1





4.9




13.0

13.0

17
Total at 30 Jun 2017
172.5

0.1

13.0

26.4

6.4

0.1

22.1

89.6

6.6

19.2


356.0

166.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
Central governments or central banks
160.4


0.8


0.3



0.2


5.6


167.3

5.7

2
Regional governments or local authorities
0.2


1.8


0.7



0.2




2.9

0.3

3
Public sector entities













4
Multilateral development banks
0.1


0.1









0.2

0.2

5
International organisations
2.7


 








2.7


6
Institutions

0.1

0.8


0.7



0.5




2.1

0.3

7
Corporates


2.1

0.2

2.7

0.1


72.6

0.7



78.4

67.9

8
Retail






22.0





22.0

22.0

9
Secured by mortgages on immovable property



25.2




0.5




25.7

25.7

10
Exposures in default







1.3

2.0



3.3

3.3

11
Higher-risk categories








3.4



3.4

3.4

14
Collective investment undertakings







0.5




0.5

0.5

15
Equity







2.9


12.3


15.2

15.2

16
Other items
0.7


5.1





3.7




9.5

9.5

17
Total at 31 Dec 2016
164.1

0.1

10.7

25.4

4.4

0.1

22.0

82.4

6.1

17.9


333.2

154.0

1
Securitisation positions are not included in this table.

16
HSBC Holdings plc


Table 14: IRB – Credit risk exposures by portfolio and PD range1
 
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
304.1

2.6

51.8

305.5

0.02
356

42.6
2.03

25.0

8



0.15 to <0.25
2.4


78.2

2.5

0.22
12

42.9
1.82

1.0

40



0.25 to <0.50
2.4


39.9

2.4

0.37
16

45.0
1.29

1.2

50



0.50 to <0.75
0.6


0.3

0.6

0.63
8

45.0
1.43

0.4

67



0.75 to <2.50
3.9

0.1

27.7

3.8

1.44
27

45.0
1.32

3.5

92



2.50 to <10.00
1.8


40.9

1.8

3.06
11

45.0
1.02

2.2

122



10.00 to <100.00

0.2



10.00
2

50.0
1.00





100.00 (Default)










Sub-total
315.2

2.9

49.7

316.6

0.06
432

42.7
2.01

33.3

11


 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Institutions
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
71.8

9.7

46.4

76.3

0.05
2,635

40.1
1.42

11.7

15



0.15 to <0.25
3.5

1.4

47.2

4.2

0.22
418

45.7
1.03

1.7

40



0.25 to <0.50
3.0

0.3

28.8

3.1

0.37
276

45.5
0.77

1.8

58



0.50 to <0.75
1.2

0.4

39.8

1.4

0.63
155

45.3
0.85

1.0

71



0.75 to <2.50
1.5

0.8

65.0

2.0

1.02
323

45.4
1.01

1.8

90



2.50 to <10.00


65.8


4.80
48

54.2
0.90

0.1




10.00 to <100.00
0.1

0.2

17.9

0.1

17.40
45

48.7
0.98

0.3

300



100.00 (Default)




100.00
2

45.0
2.50





Sub-total
81.1

12.8

46.7

87.1

0.13
3,902

40.8
1.36

18.4

21


 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Corporate – Specialised Lending (excluding Slotting)2
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
0.7

1.4

40.4

1.4

0.11
393

25.8
2.71

0.3

21



0.15 to <0.25
2.3

0.3

47.5

2.3

0.22
569

30.9
3.54

0.9

39



0.25 to <0.50
0.8

0.3

47.8

1.0

0.37
312

31.7
3.87

0.5

50



0.50 to <0.75
0.9

0.1

49.3

1.0

0.63
271

22.2
4.08

0.5

50



0.75 to <2.50
1.5

0.7

46.4

1.8

1.33
461

30.2
3.09

1.3

72



2.50 to <10.00
0.3


33.6

0.3

5.71
136

23.0
4.27

0.3

100



10.00 to <100.00
0.6

0.2

44.7

0.6

20.87
176

22.0
2.15

0.7

117



100.00 (Default)
0.2

0.1

64.8

0.2

100.00
108

42.1
3.20

0.3

150
0.1



Sub-total
7.3

3.1

44.2

8.6

4.88
2,426

28.4
3.32

4.8

56
0.1

0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Corporate – Other
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
95.4

144.9

38.3

182.1

0.08
9,941

39.0
2.24

40.6

22
0.1



0.15 to <0.25
43.1

57.2

36.8

71.3

0.22
9,339

39.6
2.00

27.8

39
0.1



0.25 to <0.50
46.3

48.5

35.4

70.5

0.37
10,100

39.2
2.06

35.1

50
0.1



0.50 to <0.75
39.8

38.0

34.0

51.0

0.63
9,253

38.2
1.97

31.1

61
0.1



0.75 to <2.50
134.0

95.1

32.6

135.0

1.36
42,719

37.1
1.96

106.5

79
0.7



2.50 to <10.00
33.1

26.7

34.3

31.0

4.28
11,536

38.7
1.95

36.4

117
0.5



10.00 to <100.00
4.7

3.6

40.4

4.8

19.13
2,182

38.3
1.90

8.2

171
0.3



100.00 (Default)
5.3

1.1

43.0

5.8

100.00
2,320

46.1
2.14

5.9

102
2.3



Sub-total
401.7

415.1

36.1

551.5

1.94
97,390

38.6
2.07

291.6

53
4.2

3.3

 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale AIRB –
Total at 30 Jun 20173
861.5

433.9

36.5

1,020.0

1.19
104,150

40.1
2.00

360.8

35
4.3

3.4


HSBC Holdings plc
17


Pillar 3 Disclosures at 30 June 2017

Table 14: IRB – Credit risk exposures by portfolio and PD range (continued)1
 
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
0.3

0.1

100.0
0.4

0.07
1,243

10.6





0.15 to <0.25
0.1


100.0
0.1

0.17
166

16.7





0.25 to <0.50
0.2


72.3
0.2

0.32
966

16.0





0.50 to <0.75
0.1


100.0
0.1

0.62
521

26.0





0.75 to <2.50
0.3


96.4
0.3

1.61
1,705

27.6

0.2

33



2.50 to <10.00
0.4


101.7
0.4

5.15
1,952

24.2

0.1

25



10.00 to <100.00
0.1


80.2
0.1

16.65
367

26.6





100.00 (Default)


99.4

100.00
120

24.3





Sub-total
1.5

0.1

98.4
1.6

3.92
7,040

20.8

0.3

19


 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Secured by mortgages on immovable property non-SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
148.0

13.4

92.5
163.8

0.06
915,452

14.3

8.8

5



0.15 to <0.25
25.4

1.2

81.6
26.6

0.21
105,077

16.3

2.8

11



0.25 to <0.50
22.9

2.5

44.2
24.1

0.37
104,912

18.3

4.0

17



0.50 to <0.75
11.7

0.3

100.3
12.1

0.61
52,845

15.8

2.1

17



0.75 to <2.50
22.3

1.2

63.3
23.1

1.33
104,933

17.8

6.8

29
0.1



2.50 to <10.00
6.1

0.2

93.7
6.3

4.76
29,784

13.9

3.0

48



10.00 to <100.00
2.0

0.1

98.6
2.1

25.85
22,083

22.4

3.0

143
0.1



100.00 (Default)
3.2


64.8
3.2

100.00
27,716

33.7

1.5

47
1.1



Sub-total
241.6

18.9

83.8
261.3

1.77
1,362,802

15.6

32.0

12
1.3

0.4

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Qualifying revolving retail exposures
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
4.7

66.8

47.2
36.2

0.07
12,980,596

93.6

1.6

4



0.15 to <0.25
1.3

12.6

43.8
6.7

0.21
2,233,716

94.7

0.7

10



0.25 to <0.50
2.1

9.5

43.0
6.1

0.37
1,808,489

93.4

1.1

18



0.50 to <0.75
1.9

4.0

49.9
3.8

0.60
1,090,090

93.5

1.0

26



0.75 to <2.50
5.4

6.7

48.2
8.6

1.39
2,120,633

91.5

4.1

48
0.1



2.50 to <10.00
2.9

1.5

59.3
3.7

4.81
756,679

90.0

4.2

114
0.2



10.00 to <100.00
0.8

0.3

56.0
0.9

29.47
271,805

91.8

2.0

222
0.4



100.00 (Default)
0.1


6.8
0.1

100.00
31,687

82.7

0.1

100



Sub-total
19.2

101.4

46.7
66.1

1.12
21,293,695

93.2

14.8

22
0.7

0.3

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Other SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
0.1

0.1

42.4
0.2

0.09
91,261

56.5





0.15 to <0.25
0.2

0.2

50.3
0.2

0.22
70,839

60.5

0.1

50



0.25 to <0.50
0.3

0.4

50.9
0.5

0.38
131,336

62.3

0.2

40



0.50 to <0.75
0.4

0.6

69.0
0.9

0.63
165,665

58.7

0.3

33



0.75 to <2.50
2.1

1.3

62.0
2.9

1.58
404,217

58.7

1.5

55



2.50 to <10.00
2.5

0.7

78.8
3.1

4.83
204,675

53.4

2.0

65
0.1



10.00 to <100.00
0.5

0.2

51.5
0.6

17.82
84,419

70.4

0.7

117
0.1



100.00 (Default)
0.6

0.1

95.5
0.7

100.00
19,812

39.1


0.4



Sub-total
6.7

3.6

63.9
9.1

10.64
1,172,224

56.4

4.8

53
0.6

0.3

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Other non-SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
9.0

6.4

33.8
11.7

0.07
445,575

21.5

0.7

6



0.15 to <0.25
6.1

3.4

35.5
7.7

0.21
358,094

29.0

1.1

14



0.25 to <0.50
5.7

2.4

28.6
6.6

0.37
313,570

30.8

1.4

21



0.50 to <0.75
4.2

1.4

28.6
4.7

0.60
173,653

27.1

1.1

23



0.75 to <2.50
9.0

0.8

26.9
9.4

1.38
337,011

25.0

3.0

33



2.50 to <10.00
2.6

1.0

23.7
2.9

4.32
192,322

35.1

1.7

59



10.00 to <100.00
0.5


9.8
0.5

24.30
75,477

47.1

0.6

120
0.1



100.00 (Default)
0.3

0.1

5.0
0.3

100.00
54,536

43.3

0.1

33
0.2



Sub-total
37.4

15.5

31.6
43.8

1.85
1,950,238

27.0

9.7

22
0.3

0.2

 




















Retail AIRB – Total at 30 Jun 2017
306.4

139.5

50.5
381.9

1.89
25,785,999

31.3

61.6

16
2.9

1.2



18
HSBC Holdings plc


Table 14: IRB – Credit risk exposures by portfolio and PD range (continued)1
 
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

FIRB – Central government and central banks
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15


0.1

0.03
1

45.0
5.00





0.15 to <0.25









0.25 to <0.50









0.50 to <0.75









0.75 to <2.50









2.50 to <10.00









10.00 to <100.00









100.00 (Default)









Sub-total


0.1

0.03
1

45.0
5.00




 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Institutions
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15


49.3
0.2

0.08

45.0
1.95





0.15 to <0.25
0.2


75.1
0.1

0.22

45.0
1.54

0.1

100



0.25 to <0.50









0.50 to <0.75









0.75 to <2.50









2.50 to <10.00









10.00 to <100.00









100.00 (Default)









Sub-total
0.2


50.6
0.3

0.16

45.0
1.73

0.1

33


 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Corporate – Other
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
8.8

13.4

41.4
14.3

0.08
1,148

44.9
2.29

3.7

26



0.15 to <0.25
3.3

5.7

43.5
5.8

0.22
1,272

44.5
2.10

2.6

45



0.25 to <0.50
4.5

5.9

35.6
6.5

0.37
1,391

44.2
1.85

3.6

55



0.50 to <0.75
2.8

4.4

27.5
4.0

0.63
1,024

42.9
2.06

2.8

70



0.75 to <2.50
8.4

8.4

27.0
10.4

1.34
3,196

43.1
1.69

9.3

89
0.1



2.50 to <10.00
2.6

1.8

29.7
3.0

4.61
825

43.2
1.97

4.2

140
0.1



10.00 to <100.00
0.3

0.3

31.1
0.4

18.69
182

42.4
1.17

0.6

150



100.00 (Default)
0.5

0.1

23.3
0.6

100.00
286

44.8
1.13


0.2



Sub-total
31.2

40.0

35.6
45.0

2.16
9,324

44.0
2.00

26.8

60
0.4

0.4

 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Total at
30 Jun 2017

31.4

40.0

35.7
45.4

2.15
9,325

44.0
2.00

26.9

59
0.4

0.4

1
Securitisation positions are not included in this table.
2
Slotting exposures are disclosed in Table 16: Specialised lending.
3
The Wholesale AIRB Total includes Non-credit obligation assets (‘NCOA’) amounting to $56.2bn of Original exposure and EAD, and $12.7bn of RWAs.


HSBC Holdings plc
19


Pillar 3 Disclosures at 30 June 2017

Table 14: IRB – Credit risk exposures by portfolio and PD range (continued)1
 
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
326.6

1.9

60.5
327.7

0.02
417

42.9
2.05

26.0

8

 
0.15 to <0.25
2.2


27.5
2.3

0.22
19

43.9
1.48

0.8

37

 
0.25 to <0.50
2.0


42.3
2.0

0.37
33

43.5
1.36

0.9

49

 
0.50 to <0.75
0.5


50.1
0.5

0.63
15

45.0
1.49

0.4

69

 
0.75 to <2.50
3.7

0.1

26.7
3.7

1.35
35

45.0
1.27

3.4

91

 
2.50 to <10.00
3.2


76.5
3.2

3.49
20

45.0
1.07

3.9

123
0.1

 
10.00 to <100.00


50.2

10.00
4

47.0
0.55


189

 
100.00 (Default)



100.00
11

88.0
5.00



 
Sub-total
338.2

2.0

59.1
339.4

0.07
554

43.0
2.02

35.4

10
0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Institutions
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
62.5

16.3

30.5
67.7

0.05
2,772

40.2
1.34

10.2

15

 
0.15 to <0.25
2.0

2.0

26.4
2.5

0.22
384

44.7
0.72

0.9

37

 
0.25 to <0.50
2.5

0.6

30.9
2.7

0.37
278

44.9
0.69

1.5

54

 
0.50 to <0.75
0.8

0.2

53.1
0.9

0.63
175

44.7
1.15

0.7

73

 
0.75 to <2.50
1.8

1.1

28.8
1.9

1.11
270

42.2
0.98

1.6

83

 
2.50 to <10.00


21.7

4.37
57

41.7
0.37


161

 
10.00 to <100.00

0.2

17.4

26.64
44

53.2
1.53

0.1

307

 
100.00 (Default)



100.00
5

45.0
2.54


295

 
Sub-total
69.6

20.4

30.1
75.7

0.12
3,985

40.6
1.29

15

20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Corporate – Specialised Lending (excluding Slotting)2
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
0.9

0.4

62.7
1.2

0.13
614

26.5
3.43

0.3

27

 
0.15 to <0.25
0.9

0.3

45.5
1.0

0.22
659

25.4
3.85

0.4

36

 
0.25 to <0.50
0.4

0.1

58.4
0.4

0.37
296

30.7
3.73

0.2

52

 
0.50 to <0.75
0.4

0.1

31.0
0.4

0.63
250

26.0
4.29

0.2

58

 
0.75 to <2.50
0.7

0.5

34.5
0.9

1.25
523

40.2
3.63

0.9

105

 
2.50 to <10.00
0.1


56.5
0.1

3.57
91

26.2
4.99

0.1

102

 
10.00 to <100.00
0.1


62.0
0.1

18.58
114

27.2
1.56

0.2

134

 
100.00 (Default)
0.1


94.7
0.1

100.00
159

53.3
3.22


11
0.1

 
Sub-total
3.6

1.4

47.7
4.2

4.36
2,706

30.3
3.66

2.3

56
0.1

0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Corporate – Other
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
105.5

144.3

37.9
186.0

0.08
10,931

38.1
2.26

41.4

22
0.1

 
0.15 to <0.25
39.2

55.0

38.8
67.0

0.22
9,588

39.3
2.04

26.6

40
0.1

 
0.25 to <0.50
45.3

48.8

36.4
69.6

0.37
10,306

39.2
2.08

34.9

50
0.1

 
0.50 to <0.75
43.1

38.7

33.4
55.0

0.63
9,322

37.5
1.95

33.5

61
0.1

 
0.75 to <2.50
120.2

89.8

31.9
123.5

1.37
42,812

37.2
2.00

99.7

81
0.6

 
2.50 to <10.00
32.7

27.3

34.4
31.9

4.59
11,786

36.5
1.99

36.3

114
0.5

 
10.00 to <100.00
5.6

4.8

39.8
6.4

19.65
2,459

36.5
2.05

11.1

174
0.5

 
100.00 (Default)
6.0

0.8

51.5
6.4

100.00
2,583

41.9
2.24

6.0

93
2.5

 
Sub-total
397.6

409.5

36.2
545.8

2.15
99,787

38.1
2.10

289.5

53
4.5

3.4

 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale AIRB – Total at 31 Dec 20163
860.94

433.3

36.0
1,017.0

1.27
107,032

40.0
2.00

354.3

36
4.7

3.5


20
HSBC Holdings plc


Table 14: IRB – Credit risk exposures by portfolio and PD range (continued)1
 
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
0.3


100.0
0.4

0.07
1,249

10.5


2

 
0.15 to <0.25
0.1


100.0
0.1

0.17
200

17.9


7

 
0.25 to <0.50
0.2


37.7
0.1

0.32
1,012

16.4


10

 
0.50 to <0.75
0.1

0.1

100.0
0.1

0.63
585

26.0


19

 
0.75 to <2.50
0.3


95.0
0.3

1.63
1,792

28.9

0.1

29

 
2.50 to <10.00
0.4


102.3
0.4

5.26
1,928

24.4

0.2

32

 
10.00 to <100.00
0.1


86.0
0.1

17.47
414

26.5


50

 
100.00 (Default)


97.8

100.00
138

26.2


48

 
Sub-total
1.5

0.1

97.7
1.5

4.01
7,318

21.1

0.3

21


 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Secured by mortgages on immovable property non-SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
137.7

11.5

92.3
151.4

0.06
900,158

14.1

8.0

5

 
0.15 to <0.25
24.4

1.1

81.0
25.5

0.21
106,945

16.5

2.7

11

 
0.25 to <0.50
22.0

2.3

43.8
23.1

0.37
120,044

22.0

4.6

20

 
0.50 to <0.75
12.0

0.4

96.0
12.4

0.61
56,427

15.9

2.2

18

 
0.75 to <2.50
23.1

1.1

61.8
23.9

1.33
129,916

22.0

8.8

37
0.1

 
2.50 to <10.00
6.4

0.2

93.6
6.6

4.76
36,051

20.0

4.7

71
0.1

 
10.00 to <100.00
2.2

0.1

98.3
2.3

27.26
24,716

27.4

3.9

171
0.2

 
100.00 (Default)
3.8


78.5
3.8

100.00
35,131

39.7

1.6

42
1.5

 
Sub-total
231.6

16.7

82.9
249.0

2.14
1,409,388

16.6

36.5

15
1.9

0.5

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Qualifying revolving retail exposures
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
4.9

62.5

47.4
34.4

0.07
11,894,411

93.7

1.5

4

 
0.15 to <0.25
1.3

12.0

44.0
6.5

0.21
1,824,704

95.0

0.8

11

 
0.25 to <0.50
2.1

9.0

42.9
5.9

0.37
1,732,829

93.3

1.0

17

 
0.50 to <0.75
2.0

4.0

50.2
3.9

0.60
1,069,619

93.4

1.0

26

 
0.75 to <2.50
5.5

6.6

47.3
8.6

1.39
1,991,102

91.4

4.0

48
0.1

 
2.50 to <10.00
2.9

1.4

57.8
3.7

4.78
679,874

89.9

4.2

112
0.2

 
10.00 to <100.00
0.8

0.3

55.7
0.9

28.87
268,254

91.7

2.1

219
0.3

 
100.00 (Default)
0.1


6.3
0.1

100.00
26,142

36.0

0.1

148

 
Sub-total
19.6

95.8

46.8
64.0

1.14
19,486,935

93.1

14.7

23
0.6

0.2

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Other SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
0.1

0.1

67.4
0.2

0.10
82,891

39.9


9

 
0.15 to <0.25
0.2

0.2

53.4
0.3

0.22
91,588

61.2

0.1

22

 
0.25 to <0.50
0.3

0.4

51.2
0.6

0.38
141,288

63.1

0.2

32

 
0.50 to <0.75
0.4

0.5

66.5
0.8

0.63
157,268

58.0

0.3

38

 
0.75 to <2.50
2.0

1.3

60.8
2.8

1.58
427,912

58.8

1.5

55

 
2.50 to <10.00
2.3

0.8

69.9
2.8

4.90
201,537

53.6

1.8

64
0.1

 
10.00 to <100.00
0.5

0.1

70.1
0.6

17.66
69,516

66.6

0.6

106
0.1

 
100.00 (Default)
0.6

0.1

94.5
0.6

100.00
21,873

39.5


3
0.3

 
Sub-total
6.4

3.5

63.4
8.7

10.84
1,193,873

56.1

4.5

52
0.5

0.3

 
 
 
 
 
 
 
 
 
 
 
 
 
AIRB – Other non-SME
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
9.5

6.1

34.4
11.9

0.07
442,581

20.0

0.5

5

 
0.15 to <0.25
6.0

2.7

35.8
7.3

0.20
393,748

31.2

1.0

14

 
0.25 to <0.50
5.4

2.9

29.6
6.3

0.36
276,509

29.9

1.2

19

 
0.50 to <0.75
4.0

1.2

29.1
4.5

0.60
176,642

29.3

1.1

24

 
0.75 to <2.50
8.7

0.6

31.7
9.1

1.37
345,838

28.9

3.2

35

 
2.50 to <10.00
2.8

1.0

26.8
3.2

4.31
188,614

39.5

1.9

61
0.1

 
10.00 to <100.00
0.7


17.1
0.8

25.11
79,970

65.7

1.1

138
0.1

 
100.00 (Default)
0.4


52.1
0.5

100.00
58,697

55.4

0.1

13
0.3

 
Sub-total
37.5

14.5

32.6
43.6

2.26
1,962,599

28.7

10.1

23
0.5

0.3

 
 
 
 
 
 
 
 
 
 
 
 
 
Retail AIRB – Total at
31 Dec 2016
296.6

130.6

50.3
366.8

2.19
24,060,113

32.3

66.1

18
3.5

1.3


HSBC Holdings plc
21


Pillar 3 Disclosures at 30 June 2017

Table 14: IRB – Credit risk exposures by portfolio and PD range (continued)1
 
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

FIRB – Central government and central banks
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15


75.0
0.1

0.04
1

45.0
5.00


32

 
0.15 to <0.25







 
0.25 to <0.50







 
0.50 to <0.75







 
0.75 to <2.50







 
2.50 to <10.00







 
10.00 to <100.00







 
100.00 (Default)







 
Sub-total


75.0
0.1

0.04
1

45.0
5.00


32


 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Institutions
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
0.1


45.2
0.1

0.06
2

45.0
2.75


23

 
0.15 to <0.25


20.7

0.22

45.0
3.82


62

 
0.25 to <0.50
0.1


75.0
0.2

0.37
1

45.0
1.71

0.1

55

 
0.50 to <0.75







 
0.75 to <2.50







 
2.50 to <10.00







 
10.00 to <100.00







 
100.00 (Default)







 
Sub-total
0.2


46.6
0.3

0.26
3

45.0
2.09

0.1

43


 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Corporate – Other
 
 
 
 
 
 
 
 
 
 
 
 
0.00 to <0.15
8.6

12.2

40.5
13.5

0.09
1,316

44.6
2.45

3.8

28

 
0.15 to <0.25
3.1

5.7

39.2
5.3

0.22
1,303

44.9
2.22

2.4

46

 
0.25 to <0.50
4.5

5.2

32.2
6.1

0.37
1,549

42.8
1.96

3.5

57

 
0.50 to <0.75
3.3

5.2

30.9
4.9

0.63
1,140

43.4
1.98

3.6

72

 
0.75 to <2.50
6.7

9.7

26.5
9.0

1.35
2,817

43.1
1.67

8.3

91
0.1

 
2.50 to <10.00
2.3

2.2

28.2
2.8

4.65
1,312

42.9
1.90

3.8

138
0.1

 
10.00 to <100.00
0.2

0.2

15.2
0.3

15.99
180

41.4
0.90

0.4

175

 
100.00 (Default)
0.4

0.1

45.8
0.5

100.00
414

44.9
1.43


0.2

 
Sub-total
29.1

40.5

33.9
42.4

1.95
10,031

43.8
2.07

25.8

61
0.4

0.4

 
 
 
 
 
 
 
 
 
 
 
 
 
FIRB – Total at 31 Dec 2016
29.3

40.5

34.0
42.8

1.94
10,035

43.8
2.1

25.9

61
0.4

0.4

1
Securitisation positions are not included in this table.
2
Slotting exposures are disclosed in Table 16: Specialised lending.
3
The Wholesale AIRB Total includes NCOA amounting to $51.9bn of EAD, and $12.1bn of RWAs.
4
$51.9bn of Original on-balance sheet gross exposure has been added to the Wholesale AIRB Total for 31 Dec 2016.


22
HSBC Holdings plc


Table 15: IRB – Effect on RWA of credit derivatives used as CRM techniques
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
Pre-credit derivatives RWAs

Actual
RWAs

Pre-credit derivatives RWAs
Actual
RWAs
 
 
$bn

$bn

$bn
$bn
1
Exposures under FIRB
0.5

0.5

0.3
0.3
6
Corporates – other
0.5

0.5

0.3
0.3
7
Exposures under AIRB1
172.5

171.4

159.7
158.6
8
Central governments and central banks
5.8

5.8

5.9
5.9
9
Institutions
4.7

4.7

2.7
2.7
11
Corporates – specialised lending
18.3

18.3

14.4
14.4
12
Corporates – other
115.1

114.0

105.2
104.1
14
Retail – Secured by real estate non-SMEs
13.8

13.8

18.4
18.4
15
Retail – Qualifying revolving
5.4

5.4

4.4
4.4
16
Retail – Other SMEs
4.0

4.0

3.0
3.0
17
Retail – Other non-SMEs
5.4

5.4

5.7
5.7
20
Total
173.0

171.9

160.0
158.9
1
Securitisation positions are not included in this table.
 
 
 
 
 
 
 
 
 
Table 16: Specialised lending1
 
 
 
On-balance sheet amount

Off-balance sheet amount

Risk weight

Exposure amount

RWAs

Expected loss

 
Regulatory categories
Regulatory maturity
 
$bn

$bn

%

$bn

$bn

$bn

 
Category 1
Less than 2.5 years
11.8

1.5

50

12.8

6.4


 
 
Equal to or more than 2.5 years
12.1

1.5

70

13.0

9.0

0.2

 
Category 2
Less than 2.5 years
3.5

0.3

70

3.6

2.5


 
 
Equal to or more than 2.5 years
2.6

0.2

90

2.7

2.4


 
Category 3
Less than 2.5 years
0.4


115

0.4

0.5


 
 
Equal to or more than 2.5 years
0.8


115

0.8

0.9


 
Category 4
Less than 2.5 years
0.1


250

0.2

0.4


 
 
Equal to or more than 2.5 years
0.1


250

0.1

0.3


 
Category 5
Less than 2.5 years
0.6



0.8


0.4

 
 
Equal to or more than 2.5 years
0.3



0.3


0.1

 
Total at 30 Jun 2017
Less than 2.5 years
16.4

1.8


17.8

9.8

0.4

 
 
Equal to or more than 2.5 years
15.9

1.7


16.9

12.6

0.3

 
 
 
 
 
 
 
 
 
 
Category 1
Less than 2.5 years
9.1

1.5

50

9.9

5.0


 
 
Equal to or more than 2.5 years
12.6

1.5

70

13.7

9.5

0.1

 
Category 2
Less than 2.5 years
2.9

0.4

70

3.1

2.1


 
 
Equal to or more than 2.5 years
2.8

0.1

90

2.8

2.5


 
Category 3
Less than 2.5 years
0.5


115

0.5

0.6


 
 
Equal to or more than 2.5 years
0.9


115

0.9

1.0


 
Category 4
Less than 2.5 years
0.3


250

0.3

0.8


 
 
Equal to or more than 2.5 years
0.1


250

0.1

0.3


 
Category 5
Less than 2.5 years
0.5



0.8


0.5

 
 
Equal to or more than 2.5 years
0.3



0.4


0.2

 
Total at 31 Dec 2016
Less than 2.5 years
13.3

1.9

 
14.6

8.5

0.5

 
 
Equal to or more than 2.5 years
16.7

1.6

 
17.9

13.3

0.3

1
High volatility commercial real estate (‘HVCRE’) exposures are not included in the above table. The value of exposures under HVCRE was nil at 30 Jun 2017 (31 Dec 2016: $0.6bn).


HSBC Holdings plc
23


Pillar 3 Disclosures at 30 June 2017

Counterparty credit risk
CCR risk arises for derivatives and SFTs. It is calculated in both the trading and non-trading books, and is the risk that a counterparty may default before settlement of the transaction. CCR is generated primarily in our wholesale global businesses.
 
Four approaches may be used under CRD IV to calculate exposure values for CCR: mark-to-market, original exposure, standardised and IMM. Exposure values calculated under these approaches are used to determine RWAs. Across the Group, we use the mark-to-market and IMM approaches.
Table 17: Analysis of counterparty credit risk (‘CCR’) exposure by approach (excluding centrally cleared exposures)
 
 
 
Replacement cost

Potential future exposure

EEPE

Alpha used for computing regulatory EAD

EAD
post-CRM

RWAs

 
 
Footnote
$bn

$bn

$bn

$bn

$bn

$bn

1
SA-CCR
1
20.8

46.3



67.1

27.4

2
Internal Model Method
 


17.0

1.4

23.8

10.0

4
Comprehensive Approach for credit risk mitigation
 




47.3

8.9

6
Total at 30 Jun 2017
 
20.8

46.3

17.0

1.4

138.2

46.3

 
 
 
 
 
 
 
 
 
1
SA-CCR
1
27.5

43.5



71.0

28.0

2
Internal Model Method
 


19.9

1.4

27.9

10.9

4
Comprehensive Approach for credit risk mitigation
 




38.3

7.3

6
Total at 31 Dec 2016
 
27.5

43.5

19.9

1.4

137.2

46.2

1
Prior to the implementation of SA-CCR, exposures reported here will be those under the mark-to-market method.
Table 18: Credit valuation adjustment (‘CVA’) capital charge
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
EAD
post-CRM

RWAs

EAD
post-CRM

RWAs

 
 
$bn

$bn

$bn

$bn

1
Total portfolios subject to the Advanced CVA capital charge
10.3

4.1

12.8

3.5

2
– VaR component (including the 3 × multiplier)

0.7


0.8

3
– stressed VaR component (including the 3 × multiplier)

3.4


2.7

4
All portfolios subject to the Standardised CVA capital charge
39.6

10.0

41.6

10.9

5
Total subject to the CVA capital charge
49.9

14.1

54.4

14.4

Table 19: Standardised approach – CCR exposures by regulatory portfolio and risk weights
Risk weight
0%

10%

20%

50%

75%

100%

150%

Others

Total credit exposure

Of which unrated

Central governments and central banks
6.7








6.7

5.6

Institutions



0.1





0.1

0.1

Corporates



0.1


2.3



2.4

2.0

Total at 30 Jun 2017
6.7



0.2


2.3



9.2

7.7

 
 
 
 
 
 
 
 
 
 
 
Central governments and central banks
7.3








7.3

4.3

Institutions



0.2





0.2

0.2

Corporates



0.1


2.5



2.6

2.3

Total at 31 Dec 2016
7.3



0.3


2.5



10.1

6.8



24
HSBC Holdings plc


Table 20: IRB – CCR exposures by portfolio and PD scale
 
EAD
post-CRM

Average
PD
Number of obligors

Average
LGD
Average maturity

RWAs

RWA
density
PD scale
$bn

%
 
%
years

$bn

%
AIRB – Central Government
and Central Banks
 
 
 
 
 
 
 
0.00 to <0.15
11.1

0.04
99

45.0
1.17

0.9

8
0.15 to <0.25
0.1

0.22
10

45.0
4.23

0.1

66
0.25 to <0.50
0.1

0.37
5

45.0
0.22

0.1

38
0.50 to <0.75

0.63
5

45.0
1.01


64
0.75 to <2.50
0.3

1.76
5

45.0
1.12

0.3

98
2.50 to <10.00
0.3

3.05
1

45.0
0.36

0.3

10.00 to <100.00




100.00 (Default)




Sub-total
11.9

0.16
125

45.0
1.17

1.7

14
 
 
 
 
 
 
 
 
AIRB – Institutions
 
 
 
 
 
 
 
0.00 to <0.15
52.4

0.06
3,405

40.1
1.09

11.1

21
0.15 to <0.25
6.2

0.22
299

46.4
1.44

3.1

50
0.25 to <0.50
2.1

0.37
134

45.0
1.14

1.2

58
0.50 to <0.75
0.3

0.63
84

45.0
2.77

0.3

100
0.75 to <2.50
0.6

1.23
121

45.1
1.83

0.7

113
2.50 to <10.00
0.1

4.82
28

36.4
0.86

0.1

158
10.00 to <100.00
0.1

22.98
23

33.0
1.79

0.2

284
100.00 (Default)




Sub-total
61.8

0.14
4,094

45.2
1.31

16.7

27
 
 
 
 
 
 
 
 
AIRB – Corporates
 
 
 
 
 
 
 
0.00 to <0.15
30.8

0.08
5,696

44.6
1.87

7.5

24
0.15 to <0.25
6.3

0.22
1,845

45.6
1.75

3.1

49
0.25 to <0.50
3.7

0.37
1,116

46.4
2.18

2.5

67
0.50 to <0.75
3.0

0.63
970

43.0
1.54

2.4

81
0.75 to <2.50
6.1

1.31
2,737

46.0
1.36

6.5

107
2.50 to <10.00
0.8

4.09
644

47.5
1.63

1.3

161
10.00 to <100.00
0.1

25.10
103

47.1
1.83

0.2

244
100.00 (Default)
0.1

100.00
30

45.0
4.28


Sub-total
50.9

0.56
13,141

45.2
1.81

23.5

46
Total at 30 Jun 2017
124.6

0.32
17,360

45.1
1.50

41.9

34
 
 
 
 
 
 
 
 
FIRB – Corporates
 
 
 
 
 
 
 
0.00 to <0.15
2.6

0.08
552

38.9
1.78

0.7

27
0.15 to <0.25
0.3

0.22
155

45.0
2.02

0.1

46
0.25 to <0.50
0.2

0.37
172

45.0
1.74

0.1

57
0.50 to <0.75
0.1

0.63
101

45.0
1.67

0.1

77
0.75 to <2.50
0.5

1.42
327

45.0
1.96

0.5

107
2.50 to <10.00
0.1

3.77
81

45.0
1.79

0.1

136
10.00 to <100.00

16.16
11

45.0
1.06


193
100.00 (Default)

100.00
7

45.0
1.11


Total at 30 Jun 2017
3.8

0.43
1,406

45.0
2.08

1.6

43
 
 
 
 
 
 
 
 
Total (all portfolios) at 30 Jun 2017
128.4

0.32
18,766

45.1
1.52

43.5

34

HSBC Holdings plc
25


Pillar 3 Disclosures at 30 June 2017

Table 20: IRB – CCR exposures by portfolio and PD scale (continued)
 
EAD
post-CRM

Average
PD

Number of obligors

Average
LGD

Average maturity

RWAs

RWA
density

PD scale
$bn

%

 
%

years

$bn

%

AIRB – Central Government
and Central Banks
 
 
 
 
 
 
 
0.00 to <0.15
11.7

0.04

104

45.3

1.00

1.1
8

0.15 to <0.25
0.2

0.22

4

45.0

1.00

0.1
32

0.25 to <0.50

0.37

5

45.0

0.20


38

0.50 to <0.75

0.63

5

45.0

0.20


55

0.75 to <2.50

1.34

12

41.2

2.80


111

2.50 to <10.00
0.4
4.20

3

45.0

0.90

0.5

10.00 to <100.00







100.00 (Default)







Sub-total
12.3
0.19

133

45.3

1.00

1.7
13

 
AIRB – Institutions
 
 
 
 
 
 
 
0.00 to <0.15
48.5
0.06

3,473

45.2

1.30

10.8
22

0.15 to <0.25
5.9
0.22

295

46.9

1.60

3.0
51

0.25 to <0.50
1.6
0.37

133

45.0

1.40

0.9
61

0.50 to <0.75
0.7
0.63

69

45.0

0.60

0.5
70

0.75 to <2.50
0.6
1.07

144

45.1

1.50

0.6
104

2.50 to <10.00
0.1
4.64

31

45.0

2.30

0.1
186

10.00 to <100.00
0.1
28.13

17

53.4

2.10

0.2
329

100.00 (Default)







Sub-total
57.5
0.14

4,162

45.3

1.40

16.1
28

 
 
 
 
 
 
 
 
AIRB – Corporates
 
 
 
 
 
 
 
0.00 to <0.15
30.9
0.07

5,839

41.6

1.90

7.5
24

0.15 to <0.25
7.3
0.22

1,870

46.3

1.90

3.7
51

0.25 to <0.50
3.4
0.37

1,131

47.1

1.70

2.1
62

0.50 to <0.75
3.3
0.63

968

43.3

1.40

2.6
79

0.75 to <2.50
5.7
1.35

3,112

46.3

1.40

6.1
107

2.50 to <10.00
0.7
4.24

693

47.6

1.70

1.2
171

10.00 to <100.00
0.1
24.67

121

49.9

2.00

0.3
300

100.00 (Default)
0.1
100.00

46

45.4

4.20



Sub-total
51.5
0.66

13,780

43.8

1.80

23.5
46

Total at 31 Dec 2016
121.3
0.34

18,075

44.5

1.50

41.3
34

 
 
 
 
 
 
 
 
FIRB – Corporates
 
 
 
 
 
 
 
0.00 to <0.15
4.2

0.06

553

45.0

1.90

0.9

23

0.15 to <0.25
0.3

0.22

137

45.0

2.20

0.1

48

0.25 to <0.50
0.3

0.37

160

45.0

1.70

0.2

58

0.50 to <0.75
0.4

0.63

96

45.0

1.70

0.3

73

0.75 to <2.50
0.3

1.35

496

45.0

2.20

0.3

108

2.50 to <10.00

4.61

79

45.0

2.00

0.1

151

10.00 to <100.00

13.52

10

45.0

1.00


218

100.00 (Default)

100.00

7

45.0

1.20



Total at 31 Dec 2016
5.5

0.20

1,538

45.0

1.91

1.9

35

 
 
 
 
 
 
 
 
Total (all portfolios) at 31 Dec 2016
126.8

0.33

19,613

44.5

1.52

43.2

34



26
HSBC Holdings plc


Table 21: Composition of collateral for CCR exposure
 
 
Collateral used in derivative transactions
Collateral used in SFTs
 
 
Fair value of
collateral received
Fair value of
posted collateral
Fair value of collateral received

Fair value of posted collateral

 
 
Segregated

Unsegregated

Segregated

Unsegregated

 
 
$bn

$bn

$bn

$bn

$bn

$bn

1
Cash – domestic currency

5.5

1.6

3.6

49.0

83.4

2
Cash – other currencies

38.7

4.2

33.3

219.8

280.1

3
Domestic sovereign debt

4.7


5.7

69.1

53.2

4
Other sovereign debt

5.2


8.3

227.0

191.1

5
Government agency debt

0.3


0.3

10.5

10.8

6
Corporate bonds

0.5



35.9

16.7

7
Equity securities

0.2



52.8

42.0

8
Other collateral



0.2

1.0

0.3

9
Total at 30 Jun 2017

55.1

5.8

51.4

665.1

677.6

 
 
 
 
 
 
 
 
1
Cash – domestic currency

5.2

2.0

3.0

42.9

73.1

2
Cash – other currencies

38.9

4.7

32.4

148.7

227.5

3
Domestic sovereign debt

4.2


7.1

64.5

49.1

4
Other sovereign debt

8.9


9.4

186.7

131.9

5
Government agency debt

0.3


0.2

7.8

2.3

6
Corporate bonds

0.4



23.7

11.1

7
Equity securities




39.5

34.4

8
Other collateral

0.1


0.2

2.0

7.6

9
Total at 31 Dec 2016

58.0

6.7

52.3

515.8

537.0

Table 22: Exposures to central counterparties
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
EAD post-CRM

RWAs

EAD post-CRM

RWAs

 
 
$bn

$bn

$bn

$bn

1
Exposures to QCCPs (total)
39.2

1.3

34.0

1.2

2
Exposures for trades at QCCPs (excluding initial margin and default fund contributions)
26.0

0.5

20.7

0.4

3
– OTC derivatives
13.7

0.3

10.4

0.2

4
– exchange-traded derivatives
10.5

0.2

7.2

0.1

5
– securities financing transactions
1.8


3.1

0.1

6
– netting sets where cross-product netting has been approved




7
Segregated initial margin
5.8


6.7


8
Non-segregated initial margin
7.4

0.1

6.6

0.1

9
Pre-funded default fund contributions

0.7


0.7

11
Exposures to non-QCCPs (total)


0.3

0.4

12
Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions)


0.3

0.4

13
– OTC derivatives


0.3

0.4

14
– exchange-traded derivatives




15
– securities financing transactions




16
– netting sets where cross-product netting has been approved





HSBC Holdings plc
27


Pillar 3 Disclosures at 30 June 2017

Table 23: Credit derivatives exposures
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
Protection bought

Protection sold

Protection bought

Protection sold

 
Footnote
$bn

$bn

$bn

$bn

Credit derivative products used for own credit portfolio – notionals
 
5.6

2.7

4.6

1.9

– index credit default swaps
 
5.6

2.7

4.6

1.9

– total return swaps
 




Credit derivative products used for intermediation – notionals
1
178.5

167.4

226.9

214.4

– index credit default swaps
 
171.6

154.9

214.6

207.4

– total return swaps
 
6.9

12.5

12.3

7.0

Total credit derivative notionals
 
184.1

170.1

231.5

216.3

Fair values
 




 
 
Positive fair value (asset)
 
1.4

2.6

2.3

2.9

Negative fair value (liability)
 
(2.7
)
(1.7
)
(3.1
)
(2.7
)
1
This is where we act as an intermediary for our clients, enabling them to take a position in the underlying securities. This does not increase risk for HSBC.
Securitisation
HSBC acts as originator, sponsor, liquidity provider and derivative counterparty to our own originated and sponsored securitisations, as well as those of third parties. Our strategy is to use securitisation to meet our needs for aggregate funding or capital management, to the extent that market, regulatory
 
treatments and other conditions are suitable, and for customer facilitation. We do not provide support to any of our originated or sponsored securitisations, and it is not our policy to do so.
We have senior exposures to three securities investment conduits (‘SICs’): Mazarin Funding Limited, Barion Funding Limited and Malachite Funding Limited. We also hold all of the commercial paper issued by Solitaire Funding Limited. These are considered legacy businesses, and exposures are being repaid as the securities they hold amortise.
Table 24: Securitisation exposures in the non-trading book
 
 
 
Bank acts as originator
Bank acts as sponsor
Bank acts as investor
 
 
 
Traditional

Synthetic

Sub-total

Traditional

Synthetic

Sub-total

Traditional

Synthetic

Sub-total

 
 
Footnote
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

1
Retail (total)
 
1.2


1.2

17.2


17.2

5.9


5.9

2
– residential mortgage
 






3.2


3.2

3
– credit card
 






0.6


0.6

4
– other retail exposures
 



17.2


17.2

2.1


2.1

5
– re-securitisation
 
1.2


1.2







6
Wholesale (total)
 

4.7

4.7

5.3


5.3

2.7


2.7

7
– loans to corporates
 

4.7

4.7

0.1


0.1




8
– commercial mortgage
 






1.8


1.8

9
– lease and receivables
 



0.8


0.8

0.4


0.4

10
– other wholesale
 






0.4


0.4

11
– re-securitisation
 



4.4


4.4

0.1


0.1

 
Total at 30 Jun 2017
 
1.2

4.7

5.9

22.5


22.5

8.6


8.6

 
 
 
 
 
 
 
 
 
 
 
 
1
Retail (total)
 
1.3


1.3

17.3


17.3

2.7


2.7

2
– residential mortgage
 



0.1


0.1

2.3


2.3

3
– credit card
 









4
– other retail exposures
 



17.2


17.2

0.4


0.4

5
– re-securitisation
1
1.3


1.3







6
Wholesale (total)
 

4.7

4.7

5.4


5.4

3.8


3.8

7
– loans to corporates
 

4.7

4.7







8
– commercial mortgage
 






2.9


2.9

9
– lease and receivables
 









10
– other wholesale
 






0.8


0.8

11
– re-securitisation
 



5.4


5.4

0.1


0.1

 
Total at 31 Dec 2016
 
1.3

4.7

6.0

22.7


22.7

6.5


6.5

1
In the comparative period, $1.2bn of traditional re-securitisation exposure originated by the Group has been reallocated from wholesale to retail.


28
HSBC Holdings plc


Table 25: Securitisation exposures in the trading book
 
 
At
 
 
30 Jun 2017
31 Dec 2016
 
 
Bank acts as investor1
Bank acts as investor1
 
 
Traditional

Synthetic

Sub-total

Traditional

Synthetic

Sub-total

 
 
$bn

$bn

$bn

$bn

$bn

$bn

1
Retail (total)
1.6


1.6

1.5


1.5

2
– residential mortgage
0.8


0.8

0.6


0.6

3
– credit card
0.2


0.2




4
– other retail exposures
0.6


0.6

0.9


0.9

5
– re-securitisation






6
Wholesale (total)
0.9


0.9

1.0


1.0

7
– loans to corporates



0.1


0.1

8
– commercial mortgage
0.7


0.7

0.7


0.7

9
– lease and receivables






10
– other wholesale
0.2


0.2

0.1


0.1

11
– re-securitisation



0.1


0.1

1
HSBC does not act as originator or sponsor for securitisation exposures in the trading book.
 
 
Table 26: Securitisation exposures in the non-trading book and associated regulatory capital requirements – bank acting as originator or as sponsor
 
 
 
Exposure values (by risk weight bands)
Exposure values (by regulatory approach)
 
 
 
≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to 1,250% RW

1,250% RW

IRB RBA (including IAA)

IRB SFA

SA

1,250%

 
 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

 
2
Traditional securitisation
17.5

1.6

0.2

0.2

4.2

19.4


0.1

4.2

 
3
Securitisation
17.5

0.4

0.1

0.1


18.0


0.1


 
4
– retail underlying
16.7

0.4


0.1


17.2




 
5
– wholesale
0.8


0.1



0.8


0.1


 
6
Re-securitisation

1.2

0.1

0.1

4.2

1.4



4.2

 
7
– senior









 
8
– non-senior

1.2

0.1

0.1

4.2

1.4



4.2

 
9
Synthetic securitisation
4.3


0.4



4.7




 
10
Securitisation
4.3


0.4



4.7




 
11
– retail underlying









 
12
– wholesale
4.3


0.4



4.7




 
13
Re-securitisation









 
14
– senior









 
15
– non-senior









 
1
Total at 30 Jun 2017
21.8

1.6

0.6

0.2

4.2

24.1


0.1

4.2

 
 
 
 
 
 
 
 
 
 
 
 
 
2
Traditional securitisation
16.7

2.0

0.2

0.2

4.9

18.9


0.2

4.9

 
3
Securitisation
16.7

0.4

0.1

0.1


17.2


0.2


 
4
– retail underlying
16.7

0.4

0.1

0.1


17.2


0.2


 
5
– wholesale









 
6
Re-securitisation

1.6

0.1

0.1

4.9

1.7



4.9

 
7
– senior









 
8
– non-senior

1.6

0.1

0.1

4.9

1.7



4.9

 
9
Synthetic securitisation
4.3


0.4



4.7




 
10
Securitisation
4.3


0.4



4.7




 
11
– retail underlying









 
12
– wholesale
4.3


0.4



4.7




 
13
Re-securitisation









 
14
– senior









 
15
– non-senior









 
1
Total at 31 Dec 2016
21.0

2.0

0.6

0.2

4.9

23.6


0.2

4.9



HSBC Holdings plc
29


Pillar 3 Disclosures at 30 June 2017

 
 
 
 
 
 
 
 
 
 
 
Table 26: Securitisation exposures in the non-trading book and associated regulatory capital requirements – bank acting as originator or as sponsor (continued)
 
 
 
 
RWAs (by regulatory approach)
Capital charge after cap
 
 
 
IRB RBA (including IAA)

IRB SFA

SA

1,250%

IRB RBA (including IAA)

IRB SFA

SA

1,250%

 
 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

 
2
Traditional securitisation
3.2


0.1

51.7

0.3



1.2

 
3
Securitisation
2.2


0.1


0.2




 
4
– retail underlying
2.1




0.2




 
5
– wholesale
0.1


0.1






 
6
Re-securitisation
1.0



51.7

0.1



1.2

 
7
– senior








 
8
– non-senior
1.0



51.7

0.1



1.2

 
9
Synthetic securitisation
0.8



0.3

0.1




 
10
Securitisation
0.8



0.3

0.1




 
11
– retail underlying








 
12
– wholesale
0.8



0.3

0.1




 
13
Re-securitisation








 
14
– senior








 
15
– non-senior








 
1
Total at 30 Jun 2017
4.0


0.1

52.0

0.4



1.2

 
 
 
 
 
 
 
 
 
 
 
 
2
Traditional securitisation
2.6


0.2

58.8

0.2



1.2

 
3
Securitisation
1.6


0.2


0.1




 
4
– retail underlying
1.6


0.2


0.1




 
5
– wholesale








 
6
Re-securitisation
1.0



58.8

0.1



1.2

 
7
– senior








 
8
– non-senior
1.0



58.8

0.1



1.2

 
9
Synthetic securitisation
0.9



0.4

0.1




 
10
Securitisation
0.9



0.4

0.1




 
11
– retail underlying








 
12
– wholesale
0.9



0.4

0.1




 
13
Re-securitisation








 
14
– senior








 
15
– non-senior








 
1
Total at 31 Dec 2016
3.5


0.2

59.2

0.3



1.2



30
HSBC Holdings plc


 
Table 27: Securitisation exposures in the non-trading book and associated capital requirements – bank acting as investor
 
 
 
Exposure values (by risk weight bands)
Exposure values (by regulatory approach)
 
 
 
≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to 1,250% RW

1,250% RW

IRB RBA (including IAA)

IRB SFA

SA

1,250%

 
 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

 
2
Traditional securitisation
6.6

0.4

1.5


0.1

7.3


1.2

0.1

 
3
Securitisation
6.6

0.4

1.5


0.1

7.3


1.2

0.1

 
4
– retail underlying
4.4

0.4

1.1


0.1

4.7


1.2

0.1

 
5
– wholesale
2.2


0.4



2.6




 
6
Re-securitisation









 
7
– senior









 
8
– non-senior









 
9
Synthetic securitisation









 
10
Securitisation









 
11
– retail underlying









 
12
– wholesale









 
13
Re-securitisation









 
14
– senior









 
15
– non-senior









 
1
Total at 30 Jun 2017
6.6

0.4

1.5


0.1

7.3


1.2

0.1

 
 
 
 
 
 
 
 
 
 
 
 
 
2
Traditional securitisation
4.9

0.3

1.2


0.1

5.6


0.8

0.1

 
3
Securitisation
4.9

0.2

1.1


0.1

5.4


0.8

0.1

 
4
– retail underlying
2.5

0.1



0.1

2.4


0.1

0.1

 
5
– wholesale
2.4

0.1

1.1



3.0


0.7


 
6
Re-securitisation

0.1

0.1



0.2




 
7
– senior


0.1



0.1




 
8
– non-senior

0.1




0.1




 
9
Synthetic securitisation









 
10
Securitisation









 
11
– retail underlying









 
12
– wholesale









 
13
Re-securitisation
 
 
 
 
 
 
 
 
 
 
14
– senior









 
15
– non-senior
 
 
 
 
 
 
 
 
 
 
1
Total at 31 Dec 2016
4.9

0.3

1.2


0.1

5.6


0.8

0.1


HSBC Holdings plc
31


Pillar 3 Disclosures at 30 June 2017

Table 27: Securitisation exposures in the non-trading book and associated capital requirements – bank acting as investor (continued)
 
 
 
RWAs (by regulatory approach)
Capital charge after cap
 
 
IRB RBA (including IAA)

IRB SFA

SA

1,250%

IRB RBA (including IAA)

IRB SFA

SA

1,250%

 
 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

$bn

2
Traditional securitisation
1.2


1.1

1.0

0.1


0.1

0.1

3
Securitisation
1.2


1.1

0.8

0.1


0.1

0.1

4
– retail underlying
0.5


1.1

0.8



0.1

0.1

5
– wholesale
0.7




0.1




6
Re-securitisation



0.2





7
– senior



0.1





8
– non-senior



0.1





9
Synthetic securitisation








10
Securitisation








11
– retail underlying








12
– wholesale








13
Re-securitisation








14
– senior








15
– non-senior








1
Total at 30 Jun 2017
1.2


1.1

1.0

0.1


0.1

0.1

 
 
 
 
 
 
 
 
 
 
2
Traditional securitisation
1.2


0.7

1.3

0.1


0.1

0.1

3
Securitisation
1.1


0.7

1.1

0.1


0.1

0.1

4
– retail underlying
0.3



1.0




0.1

5
– wholesale
0.8


0.7

0.1

0.1


0.1


6
Re-securitisation
0.1



0.2





7
– senior








8
– non-senior
0.1



0.2





9
Synthetic securitisation








10
Securitisation








11
– retail underlying








12
– wholesale








13
Re-securitisation








14
– senior








15
– non-senior








1
Total at 31 Dec 2016
1.2


0.7

1.3

0.1


0.1

0.1



32
HSBC Holdings plc


Market risk
Market risk is the risk that movements in market factors, such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices, will reduce our income or the value of our portfolios.
Exposure to market risk is separated into two portfolios:
trading portfolios comprise positions arising from market-making; and
 
non-trading portfolios comprise positions that primarily arise from the interest rate management of our retail and commercial banking assets and liabilities, financial investments designated as available-for-sale (‘AFS’) and held to maturity, and exposures arising from our insurance operations.
There were no material changes to the policies and practices for the management of market risk. A summary of our current policies and practices for the management of market risk is set out in ‘Market risk management’ on page 56 of the Capital and Risk Management Pillar 3 Disclosures 2016.

Table 28: Market risk under standardised approach
 
 
At
 
 
30 Jun

31 Dec

30 Jun

 
 
2017

2016

2017

 
 
RWAs

RWAs

Capital requirements


 
 
$bn

$bn

$bn

 
Outright products
2.1

3.5

0.2

1
– interest rate risk (general and specific)
1.9

1.5

0.2

2
– equity risk (general and specific)
0.1

1.7


3
– foreign exchange risk
0.1

0.3


8
Securitisation
1.7

1.5

0.1

9
Total
3.8

5.0

0.3

Table 29: Market risk under IMA
 
 
At 30 Jun 2017
 
 
RWAs

Capital requirements

 
 
$bn

$bn

1
VaR (higher of values a and b)
8.8

0.7

(a)
Previous day’s VaR


0.3

(b)
Average daily VaR


0.7

2
Stressed VaR (higher of values a and b)
14.5

1.2

(a)
Latest SVaR


0.5

(b)
Average SVaR


1.2

3
Incremental risk charge (higher of values a and b)
11.8

0.9

(a)
Most recent IRC value


0.9

(b)
Average IRC value


0.9

5
Other
4.7

0.4

6
Total
39.8

3.2


HSBC Holdings plc
33


Pillar 3 Disclosures at 30 June 2017

Table 30: IMA values for trading portfolios
 
 
At
 
 
30 Jun

31 Dec

 
 
2017

2016

 
 
$m

$m

VaR (10 day 99%)
 
 
 
1
Maximum value
319.0

327.1

2
Average value
208.4

229.6

3
Minimum value
180.4

186.4

4
Period end
201.1

215.7

Stressed VaR (10 day 99%)
 
 
 
5
Maximum value
385.2

454.0

6
Average value
324.3

389.9

7
Minimum value
198.2

269.7

8
Period end
309.4

269.7

Incremental risk charge (99.9%)
 
 
 
9
Maximum value
1,033.3

1,100.7

10
Average value
938.5

787.0

11
Minimum value
673.4

697.3

12
Period end
908.4

705.6

The period end trading VaR, before the effect of portfolio diversification, was higher reflecting larger exposures. The effects of portfolio diversification reduced the overall trading
 
VaR. For the other two market risk capital models, Stressed VaR and Incremental risk charge, there were no material changes in portfolio profiles or concentrations and the fluctuations were within normal expectations.
Chart: Comparison of VaR estimates with gains/losses
VaR back-testing exceptions against actual profit and loss
pillar3docu_chart-49868a01.jpg
 
Actual profit and loss
 
VaR
 

34
HSBC Holdings plc


Chart: Comparison of VaR estimates with gains/losses (continued)
VaR back-testing exceptions against hypothetical profit and loss
pillar3docu_chart-55855a01.jpg
 
Hypothetical profit and loss
 
VaR
 

There were no back-testing exceptions against both actual and hypothetical profit and loss for the Group in 1H17. The profit and loss series for both hypothetical and actual back-testing excludes fair value adjustments.


HSBC Holdings plc
35


Pillar 3 Disclosures at 30 June 2017

Other information
Abbreviations
The following abbreviated terms are used throughout this document.
Currencies
 
$
United States dollar
A
 
ABCP
Asset-backed commercial paper
ABS1
Asset-backed security
AFS1
Available-for-sale
AIRB
Advanced IRB
ALCM
Asset, Liability and Capital Management
ALCO
Asset and Liability Management Committee
AT1 capital
Additional tier 1 capital
AVA
Additional value adjustment
B
 
BCBS
Basel Committee on Banking Supervision
BoCom
Bank of Communications Co., Limited
BoE
Bank of England
BSM
Balance Sheet Management
C
 
CCB1
Capital conservation buffer
CCF1
Credit conversion factor
CCP
Central counterparty
CCR1
Counterparty credit risk
CCyB1
Countercyclical capital buffer
CDS1
Credit default swap
CET11
Common equity tier 1
CIU
Collective investment undertakings
CML1
Consumer and Mortgage Lending (US)
CRA1
Credit risk adjustment
CRD IV1
Capital Requirements Regulation and Directive
CRE1
Commercial real estate
CRM
Credit risk mitigation/mitigant
CRR1
Customer risk rating
CSA1
Credit Support Annex
CVA
Credit valuation adjustment
CVC
Conduct and Values Committee
E
 
EAD1
Exposure at default
EBA
European Banking Authority
EC
European Commission
ECA
Export Credit Agency
ECAI1
External Credit Assessment Institution
EEA
European Economic Area
EL1
Expected loss
EU
European Union
EVE1
Economic value of equity
F
 
FFVA
Funding Fair Value Adjustment
FIRB
Foundation IRB
Fitch
Fitch Ratings
FPC1
Financial Policy Committee (UK)
FSB
Financial Stability Board
FSVC
Financial System Vulnerabilities Committee
G
 
GAC
Group Audit Committee
GB&M
Global Banking and Markets, a global business
GMB
Group Management Board
GPB
Global Private Banking, a global business
 
 
 
 
 
GRC
Group Risk Committee
Group
HSBC Holdings together with its subsidiary undertakings
G-SIB1
Global systemically important bank
G-SII
Global systemically important institution
H
 
HKMA
Hong Kong Monetary Authority
Hong Kong
The Hong Kong Special Administrative Region of the People’s Republic of China
HSBC
HSBC Holdings together with its subsidiary undertakings
HVCRE
High volatility commercial real estate
I
 
IAA1
Internal Assessment Approach
ICAAP1
Internal Capital Adequacy Assessment Process
ICG
Individual capital guidance
IFRSs
International Financial Reporting Standards
ILAA
Individual Liquidity Adequacy Assessment
ILR
Inherent Liquidity Risk
IMA
Internal Models Approach
IMM1
Internal Model Method
IRB1/RBA
Internal ratings based approach
IRC1
Incremental risk charge
L
 
LCR
Liquidity Coverage Ratio
LFRF
Liquidity and Funding Risk Framework
LGD1
Loss given default
Libor
London interbank offered rate
M
 
MDB1
Multilateral Development Bank
MENA
Middle East and North Africa
MOC
Model Oversight Committee
Moody’s
Moody’s Investor Service
MREL
Minimum requirements for own funds and eligible liabilities
N
 
NCOA
Non-credit obligation asset
NSFR
Net Stable Funding Ratio
O
 
ORMF
Operational risk management framework
OTC1
Over-the-counter
P
 
PD1
Probability of default
PFE1
Potential future exposure
PIT1
Point-in-time
PRA1
Prudential Regulation Authority (UK)
PVA1
Prudent valuation adjustment
Q
 
QCCP
Qualifying Central Counterparty
R
 
RAS
Risk appetite statement
RBM1
Ratings Based Method
RBWM
Retail Banking and Wealth Management, a global business
Retail IRB1
Retail internal ratings based approach
RMM
Risk Management Meeting of the GMB

36
HSBC Holdings plc


RNIV
Risks not in VaR
RW
Risk weights
RWA1
Risk-weighted asset
S
 
SA/STD1
Standardised approach
SA-CCR
Standardised approach for counterparty credit risk
S&P
Standard and Poor’s rating agency
SFM1
Supervisory Formula Method
SFT1
Securities Financing Transactions
SIC
Securities Investment Conduit
SME
Small- and medium-sized enterprise
SPE1
Special Purpose Entity
SRB1
Systemic Risk Buffer
SSFA/SFA
Simplified supervisory formula approach
SVaR
Stressed value at risk
T
 
TLAC1
Total Loss Absorbing Capacity
TTC1
Through-the-cycle
T1 capital
Tier 1 capital
T2 capital
Tier 2 capital
U
 
UK
United Kingdom
V
 
VaR1
Value at risk
1
Full definition included in the Glossary published on HSBC website www.hsbc.com/investor-relations/group-results-and-reporting
Cautionary statement regarding forward-
looking statements
The Capital and Risk Management Pillar 3 Disclosures at 30 June 2017 contains certain forward-looking statements with respect to HSBC’s financial condition, results of operations, capital position and business.
Statements that are not historical facts, including statements about HSBC’s beliefs and expectations, are forward-looking statements. Words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors
 
could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These include, but are not limited to:
changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse
changes in the funding status of public or private defined benefit pensions; and consumer perception as to the continuing availability of credit and price competition in the market segments we serve;
changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and
factors specific to HSBC, including discretionary RWA growth and our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and our success in addressing operational, legal and regulatory, and litigation challenges, notably compliance with the DPA.
Contacts
Enquiries relating to HSBC’s strategy or operations may be directed to:
Group Head of Investor Relations
HSBC Holdings plc
8 Canada Square
London E14 5HQ
United Kingdom
Head of Investor Relations, Asia-Pacific
The Hongkong and Shanghai Banking Corporation Limited
1 Queen’s Road Central
Hong Kong
Telephone: +44 (0) 20 7991 6590
Telephone: +852 2822 4908
Email: investorrelations@hsbc.com
Email: investorrelations@hsbc.com.hk

HSBC Holdings plc
37











SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

HSBC Holdings plc

 
By:
/s/ Iain J Mackay
 
Name: Iain J Mackay
 
Title: Group Finance Director

Date: 05 September 2017