HSBC Bank plc Annual Report and Accounts 2023 5 of 5

RNS Number : 9291D

HSBC Bank plc

21 February 2024

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

	The group		The bank
	2023	2022	2023	2022
	Designated at fair value and otherwise mandatorily measured at fair value	Designated at fair value and otherwise mandatorily measured at fair value	Designated at fair value and otherwise mandatorily measured at fair value	Designated at fair value and otherwise mandatorily measured at fair value
	£m	£m	£m	£m
Securities	16,027	14,581	162	318
- debt securities	2,131	1,975	97	44
- equity securities	13,896	12,606	65	274
Loans and advances to banks and customers	2,814	971	2,791	971
Other	227	329	228	329
At 31 Dec	19,068	15,881	3,181	1,618

14	Derivatives

Notional contract amounts and fair values of derivatives by product contract type
	Notional contract amount		Fair value - Assets			Fair value - Liabilities
	Trading	Hedging	Trading	Hedging	Total	Trading	Hedging	Total
The group	£m	£m	£m	£m	£m	£m	£m	£m
Foreign exchange	6,601,151	1,799	68,197	62	68,259	(66,691)	(17)	(66,708)
Interest rate	9,113,678	75,080	154,860	856	155,716	(151,077)	(1,116)	(152,193)
Equities	543,083	-	11,503	-	11,503	(13,937)	-	(13,937)
Credit	115,062	-	1,099	-	1,099	(1,356)	-	(1,356)
Commodity and other	76,435	-	1,584	-	1,584	(1,325)	-	(1,325)
Offset (Note 28)					(64,045)			64,045
At 31 Dec 2023	16,449,409	76,879	237,243	918	174,116	(234,386)	(1,133)	(171,474)

Foreign exchange	6,101,153	582	88,244	2	88,246	(86,119)	(57)	(86,176)
Interest rate	10,141,018	56,144	206,689	433	207,122	(201,419)	(819)	(202,238)
Equities	465,626	-	7,751	-	7,751	(8,175)	-	(8,175)
Credit	146,522	-	865	-	865	(1,012)	-	(1,012)
Commodity and other	57,594	-	1,053	-	1,053	(1,065)	-	(1,065)
Offset (Note 28)					(79,799)			79,799
At 31 Dec 2022	16,911,913	56,726	304,602	435	225,238	(297,790)	(876)	(218,867)

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

Derivative asset and liability fair values decreased during 2023, driven by yield curve movements and changes in foreign exchange rates.

Notional contract amounts and fair values of derivatives by product contract type (continued)
	Notional contract amount		Fair value - Assets			Fair value - Liabilities
	Trading	Hedging	Trading	Hedging	Total	Trading	Hedging	Total
The bank	£m	£m	£m	£m	£m	£m	£m	£m
Foreign exchange	6,529,223	1,791	67,809	62	67,871	(66,018)	(17)	(66,035)
Interest rate	6,726,879	47,943	118,308	728	119,036	(116,658)	(1,051)	(117,709)
Equities	483,877	-	11,312	-	11,312	(13,532)	-	(13,532)
Credit	112,436	-	1,090	-	1,090	(1,328)	-	(1,328)
Commodity and other	75,871	-	1,584	-	1,584	(1,323)	-	(1,323)
Offset					(47,128)			47,128
At 31 Dec 2023	13,928,286	49,734	200,103	790	153,765	(198,859)	(1,068)	(152,799)

Foreign exchange	6,049,682	582	87,459	2	87,461	(84,885)	(56)	(84,941)
Interest rate	7,665,449	33,408	158,492	244	158,736	(157,315)	(780)	(158,095)
Equities	439,588	-	7,626	-	7,626	(7,325)	-	(7,325)
Credit	144,972	-	847	-	847	(982)	-	(982)
Commodity and other	57,346	-	1,051	-	1,051	(1,000)	-	(1,000)
Offset					(59,007)			59,007
At 31 Dec 2022	14,357,037	33,990	255,475	246	196,714	(251,507)	(836)	(193,336)

Use of derivatives

We undertake derivatives activity for three primary purposes: to create risk management solutions for clients, to manage the portfolio risks arising from client business, and to manage and hedge our own risks.

Trading derivatives

Most of the group's derivative transactions relate to sales and trading activities. Sales activities include the structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current or expected risks. Trading activities include market-making and risk management. Market-making entails quoting bid and offer prices to other market participants for the purpose of generating revenues based on spread and volume.

Risk management activity is undertaken to manage the risk arising from client transactions, with the principal purpose of retaining client margin. Other derivatives classified as held for trading include non-qualifying hedging derivatives.

Substantially all of the group's derivatives entered into with subsidiaries are managed in conjunction with financial liabilities designated at fair value.

Derivatives valued using models with unobservable inputs

The difference between the fair value at initial recognition (the transaction price) and the value that would have been derived had the valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases, is in the following table:

Unamortised balance of derivatives valued using models with significant unobservable inputs
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Unamortised balance at 1 Jan	64	64	56	64
Deferral on new transactions	103	110	96	99
Recognised in the income statement during the year:	(113)	(111)	(102)	(107)
- amortisation	(60)	(59)	(51)	(56)
- subsequent to unobservable inputs becoming observable	(6)	-	(6)	-
- maturity, termination or offsetting derivative	(47)	(52)	(45)	(51)
- risk hedged	-	-	-	-
Exchange differences and other	-	1	-	-
Unamortised balance at 31 Dec¹	54	64	50	56

1 This amount is yet to be recognised in the consolidated income statement.

Hedge accounting derivatives

The group applies hedge accounting to manage the following risks: interest rate and foreign exchange. The Report of the Directors - Risk presents more details on how these risks arise and how they are managed by the group.

Hedged risk components

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

Fair value hedges

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

Hedging instrument by hedged risk
	Hedging instrument
		Carrying amount
The group	Notional amount¹	Assets	Liabilities	Balance sheet presentation	Change in fair value²
Hedged risk	£m	£m	£m	Balance sheet presentation	£m
Interest rate³	32,750	849	(1,078)	Derivatives	(359)
At 31 Dec 2023	32,750	849	(1,078)		(359)


Interest rate³	26,649	428	(799)	Derivatives	981
At 31 Dec 2022	26,649	428	(799)		981

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

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

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

Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount²			Change in fair value¹	Recognised in profit and loss	Profit and loss presentation
The group	Assets	Liabilities	Assets	Liabilities	Balance sheet presentation	Change in fair value¹	Recognised in profit and loss
Hedged risk	£m	£m	£m	£m	Balance sheet presentation	£m	£m
Interest rate³	22,540	-	(179)	-	Financial assets at fair value through other comprehensive income	672	21	Net income from financial instruments held for trading or managed on a fair value basis
	-	-	-	-	Loans and advances to banks	-
	650	-	(17)	-	Loans and advances to customers	19
	-	-	-	-	Reverse Repos	12
	-	1,320	-	(155)	Debt securities in issue	(51)
	-	6,414	-	(369)	Subordinated liabilities and deposits by banks⁴	(272)
At 31 Dec 2023	23,190	7,734	(196)	(524)		380	21


Interest rate³	15,446	-	(1,095)	-	Financial assets at fair value through other comprehensive income	(1,850)	31	Net income from financial instruments held for trading or managed on a fair value basis
	-	-	-	-	Loans and advances to banks	-
	713	-	(31)	-	Loans and advances to customers	(40)
	431	-	(15)	-	Reverse Repos	(14)
	-	1,576	-	(169)	Debt securities in issue	398
	-	5,686	-	(659)	Subordinated liabilities and deposits by banks⁴	556
At 31 Dec 2022	16,590	7,262	(1,141)	(828)		(950)	31

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

2 The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were £(3)m (2022: £10m) for 'Financial assets at fair value through other comprehensive income', is nil (2022: nil) for 'Deposits by banks' and £7m (2022: £13m) for 'Debt securities in issue'.

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

4 The notional amount of non-dynamic fair value hedges was £6,755m (2022: £6,312m) of which the weighted-average maturity is March 2026 and the weighted average swap rate is 0.39% (2022: 0.06%, negative). £6,755m (2022: £6,312m) of these hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

Hedging instrument by hedged risk
	Hedging instrument
		Carrying amount			Change in fair value²
The bank	Notional amount¹	Assets	Liabilities	Balance sheet presentation	Change in fair value²
Hedged risk	£m	£m	£m	Balance sheet presentation	£m
Interest rate³	22,455	724	(1,033)	Derivatives	(34)
At 31 Dec 2023	22,455	724	(1,033)		(34)


Interest rate³	18,391	242	(773)	Derivatives	466
At 31 Dec 2022	18,391	242	(773)		466

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

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

Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount²			Change in fair value¹	Recognised in profit and loss
The bank	Assets	Liabilities	Assets	Liabilities	Balance sheet presentation	Change in fair value¹	Recognised in profit and loss	Profit and loss presentation
Hedged risk	£m	£m	£m	£m	Balance sheet presentation	£m	£m	Profit and loss presentation
Interest rate³	13,352	-	(36)	-	Financial assets at fair value through other comprehensive income	383	28	Net income from financial instruments held for trading or managed on a fair value basis
	71	-	(2)	-	Loans and advances to customers	2
					HTC (Amortised Cost)	-
	-	-	-	-	Reverse Repos	-
	-	1,292	-	(150)	Debt securities in issue	(51)
	-	6,414	-	(369)	Subordinated liabilities and deposits by banks⁴	(272)
At 31 Dec 2023	13,423	7,706	(38)	(519)		62	28


Interest rate³	9,072	-	(642)	-	Financial assets at fair value through other comprehensive income	(1,389)	31	Net income from financial instruments held for trading or managed on a fair value basis
	7	-	3	-	Loans and advances to customers	-
	-	-	-	-	Reverse Repos	-
	-	1,576	-	(169)	Debt securities in issue	398
	-	5,653	-	(659)	Subordinated liabilities and deposits by banks⁴	556
At 31 Dec 2022	9,079	7,229	(639)	(828)		(435)	31

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

2 The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were £(3)m (2022: £10m) for 'Financial assets at fair value through other comprehensive income', nil (2022: nil) for 'Deposits by banks' and £11m (2022: £13m) for 'Debt securities in issue'.

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

4 The notional amount of non-dynamic fair value hedges was £6,755m (2022: £6,312m), of which the weighted-average maturity is March 2026 and the weighted average swap rate is 0.39% (2022: 0.06%, negative). Those hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

Cash flow hedges

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

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

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

Hedging instrument by hedged risk⁴
	Hedging instrument					Hedged item	Ineffectiveness
		Carrying amount			Change in fair value²	Change in fair value³	Recognised in profit and loss	Profit and loss presentation
The group	Notional amount¹	Assets	Liabilities	Balance sheet presentation	Change in fair value²	Change in fair value³	Recognised in profit and loss
Hedged risk	£m	£m	£m	Balance sheet presentation	£m	£m	£m
Foreign exchange	1,799	62	(17)	Derivatives	109	109	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	42,332	7	(38)	Derivatives	522	505	17
At 31 Dec 2023	44,131	69	(55)		631	614	17

Foreign exchange	582	2	(57)	Derivatives	(84)	(84)	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	29,495	5	(20)	Derivatives	(1,345)	(1,334)	(11)
At 31 Dec 2022	30,077	7	(77)		(1,429)	(1,418)	(11)

	Hedging instrument					Hedged item	Ineffectiveness
		Carrying amount			Change in fair value²	Change in fair value³	Recognised in profit and loss	Profit and loss presentation
The bank	Notional amount¹	Assets	Liabilities	Balance sheet presentation	Change in fair value²	Change in fair value³	Recognised in profit and loss
Hedged risk	£m	£m	£m	Balance sheet presentation	£m	£m	£m
Foreign exchange	1,791	62	(17)	Derivatives	108	108	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	25,488	4	(18)		310	310	-
At 31 Dec 2023	27,279	66	(35)		418	418	-

Foreign exchange	582	2	(56)	Derivatives	(84)	(84)	-	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	15,017	2	(7)	Derivatives	(1,021)	(1,021)	-
At 31 Dec 2022	15,599	4	(63)		(1,105)	(1,105)	-

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

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

4 The amounts in the above table predominantly represent the bank's exposure.

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

Reconciliation of equity and analysis of other comprehensive income by risk type
	Interest rate	Foreign exchange
	£m	£m
Cash flow hedging reserve at 1 Jan 2023	(901)	(49)
Fair value gains	505	109
Fair value losses/(gains) reclassified from cash flow hedge reserve to income statement in respect of:
- hedged items that have affected profit or loss	382	(83)
Income taxes	(252)	-
Other	(39)	(2)
Cash flow hedging reserve at 31 Dec 2023	(305)	(25)

Cash flow hedging reserve at 1 Jan 2022	32	(39)
Fair value losses	(1,334)	(84)
Fair value losses reclassified from cash flow hedge reserve to income statement in respect of:
- hedged items that have affected profit or loss	53	74
Income taxes	348	-
Cash flow hedging reserve at 31 Dec 2022	(901)	(49)

Interest rate benchmark reform: amendments to IFRS 9 and IAS 39 'Financial Instruments'

HSBC has applied both the first set of amendments ('Phase 1') and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39 applicable to hedge accounting. The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue' and 'Deposits by banks'. The notional value of the derivatives impacted by the Ibors reform, including those designated in hedge accounting relationships, is disclosed in Note 29 on page 177.

For some of the Ibors included under the 'Other' header, in the table below, judgment has been needed to establish whether a transition is required, since there are Ibor benchmarks which are subject to computation methodology improvements and insertion of fallback provisions without full clarity being provided by their administrators on whether these Ibor benchmarks will be demised.

The notional amounts of Interest Rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure managed by the group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below.

Hedging instrument impacted by Ibor Reform
	Hedging instrument
	Impacted by Ibor Reform				NOT Impacted by Ibor Reform	Notional Amount¹
	EUR²	USD	Other³	Total	NOT Impacted by Ibor Reform	Notional Amount¹
The group	£m	£m	£m	£m	£m	£m
Fair Value Hedges	7,433	-	141	7,574	25,175	32,749
Cash Flow Hedges	8,508	-	-	8,508	33,823	42,331
At 31 Dec 2023	15,941	-	141	16,082	58,998	75,080

Fair Value Hedges	7,581	225	105	7,911	18,738	26,649
Cash Flow Hedges	7,359	-	-	7,359	22,136	29,495
At 31 Dec 2022	14,940	225	105	15,270	40,874	56,144

The bank
Fair Value Hedges	5,008	-	140	5,148	17,307	22,455
Cash Flow Hedges	-	-	-	-	25,488	25,488
At 31 Dec 2023	5,008	-	140	5,148	42,795	47,943

Fair Value Hedges	5,184	4	104	5,292	13,099	18,391
Cash Flow Hedges	-	-	-	-	15,017	15,017
At 31 Dec 2022	5,184	4	104	5,292	28,116	33,408

2 The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are Fair value hedges of £7,433m (31 Dec 2022: £7,581m) and Cash flow hedges £8,508m (31 Dec 2022: £7,359m).

3 Other benchmarks impacted by Ibor reform comprise derivatives that are expected to transition, but do not have a published cessation date.

15	Financial investments

Carrying amount of financial investments
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Financial investments measured at fair value through other comprehensive income	37,507	29,356	16,362	12,261
- treasury and other eligible bills	1,469	1,447	540	693
- debt securities	35,618	27,710	15,767	11,514
- equity securities	80	109	55	54
- other instruments¹	340	90	-	-
Debt instruments measured at amortised cost	8,861	3,248	12,029	6,378
- treasury and other eligible bills	723	1,030	719	976
- debt securities²	8,138	2,218	11,310	5,402
At 31 Dec	46,368	32,604	28,391	18,639

1 'Other instruments' are comprised of loans and advances.

2 The £5.7bn (2022: £4.2bn) of debt securities in the bank relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with Single Resolution Board requirements on Minimum Required Eligible Liabilities.

Equity instruments measured at fair value through other comprehensive income
	Instruments held at year end
	Fair value	Dividends recognised
Type of equity instruments	£m	£m
Business facilitation	68	1
Investments required by central institutions	12	-
Others	-	-
At 31 Dec 2023	80	1

Business facilitation	77	-
Investments required by central institutions	31	-
Others	1	-
At 31 Dec 2022	109	-

16	Assets pledged, collateral received and assets transferred

Assets pledged¹

Financial assets pledged as collateral
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Treasury bills and other eligible securities	1,252	1,649	720	877
Loans and advances to banks	3,800	3,300	3,800	3,300
Loans and advances to customers	3,861	4,996	-	-
Debt securities	21,060	17,407	10,539	9,699
Equity securities	27,610	25,408	27,096	25,014
Cash collateral	39,266	45,034	29,836	32,255
Other	228	330	228	329
Assets pledged at 31 Dec	97,077	98,124	72,219	71,474


Financial assets pledged as collateral which the counterparty has the right to sell or repledge
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Trading assets	44,072	38,896	35,168	32,371
Financial investments	2,606	3,588	902	1,974
At 31 Dec	46,678	42,484	36,070	34,345

Assets pledged as collateral includes all assets categorised as encumbered in the disclosure on page 76 except for assets held for sale.

The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the case of securitisations and covered bonds, the amount of liabilities issued, plus mandatory over-collateralisation, is less than the book value of the pool of assets available for use as collateral. This is also the case where assets are placed with a custodian or a settlement agent that has a floating charge over all the assets placed to secure any liabilities under settlement accounts.

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

Collateral received¹

The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and derivative margining, that the group is permitted to sell or repledge in the absence of default was £224,836m (2022: £180,233m) (the bank: 2023: £191,832m; 2022: £154,376m). The fair value of any such collateral sold or repledged was £175,100m (2022: £136,777m) (the bank: 2023: £147,131m; 2022: £113,917m).

The group is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard securities lending, reverse repurchase agreements and derivative margining.

Assets transferred¹

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

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

Transferred financial assets not qualifying for full derecognition and associated financial liabilities
	Carrying amount of:
	Transferred assets	Associated liabilities
The group	£m	£m
At 31 Dec 2023
Repurchase agreements	16,215	16,114
Securities lending agreements	30,463	3,707

At 31 Dec 2022
Repurchase agreements	13,349	13,371
Securities lending agreements	29,171	3,442

The bank
At 31 Dec 2023
Repurchase agreements	5,968	5,968
Securities lending agreements	30,102	3,748

At 31 Dec 2022
Repurchase agreements	5,795	5,795
Securities lending agreements	28,550	3,467

1 The group excludes assets classified as held for sale.

17	Interests in associates and joint ventures

Principal associates of the group and the bank

Business Growth Fund Group plc ('BGF') is a principal associate of the group. BGF is an independent company, established in 2011 to provide investment to growing small to medium-sized British businesses. BGF is backed by five of the UK's main banking groups: Barclays, HSBC, Lloyds, RBS and Standard Chartered. At 31 Dec 2023, the group had a 24.62% interest in the equity capital of BGF. Share of (Loss)/profit in BGF is £(6)m (2022: £(22)m; 2021: £192m) and carrying amount of interest in BGF is £652m (2022: £673m; 2021: £702m).

Interests in joint ventures

A list of all associates is set out on page 191.

18	Investments in subsidiaries

Main subsidiaries of HSBC Bank plc¹
	At 31 Dec 2023
	Country of incorporation or registration	HSBC Bank plc's interest in equity capital	Share class
	Country of incorporation or registration	%	Share class
HSBC Investment Bank Holdings Limited	England and Wales	100.00	£1 Ordinary
HSBC Life (UK) Limited	England and Wales	100.00	£1 Ordinary
HSBC Bank Bermuda Limited¹	Bermuda	100.00	BM$1Ordinary
HSBC Continental Europe	France	99.99	€5 Actions
HSBC Assurances Vie (France)	France	99.99	€287.5Actions
HSBC Bank Malta p.l.c	Malta	70.03	€0.3 Ordinary

1 Main subsidiaries are either held directly or indirectly via intermediate holding companies. There has been no material changes in HSBC's shareholding % for main existing subsidiaries since 2022.

2 During 2023, HSBC Bank plc acquired HSBC Bank Bermuda Limited ('HBBM') from HOHU.

All the above prepare their financial statements up to 31 December. Details of all group subsidiaries, as required under Section 409 of the Companies Act 2006, are set out in Note 38. The principal countries of operation are the same as the countries of incorporation.

Impairment testing of investments in subsidiaries

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

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

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

- Long-term growth rates: A long term growth rate is used to extrapolate the free cash flows in perpetuity. The growth rate reflects inflation for the country or territory within which the investment operates, and is based on the long-term average growth rates.

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

During 2022, an additional investment of £3.4bn was made in HSBC Continental Europe. Further, an impairment reversal of £2bn was recognised in the fourth quarter of 2022 as a result of the impairment test performed which relates to the investment in subsidiary i.e. HSBC Continental Europe. This was due to updates to inputs and assumptions in the model used to estimate VIU and increase in forecast free cash flows, resulting from acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH as well as interest rates rises in the eurozone. The increase in carrying amount from £7.7bn to £10.1bn during this year is due to £2bn impairment reversal, recognised in 2022. No investments in subsidiaries is impaired or reversed in 2023.

In October 2023, HSBC Bank plc acquired HBBM from HOHU and invested £1bn.

Impairment test results
Investments	Carrying amount	Value in use	Discount rate	Long-term growth	Headroom
HSBC Continental Europe	£m	£m	%	%	£m
At 31 Dec 2023	10,117	11,668	9.17	1.79	1,551
At 31 Dec 2022¹	7,743	11,507	9.95	1.56	3,764

1 2022 carrying amount does not include impairment reversal of £2bn which was recognised in the fourth quarter of 2022.

Sensitivities of key assumptions in calculating VIU

At 31 December 2023, the investment in HSBC Continental Europe was sensitive to reasonably possible changes in the key assumptions supporting the recoverable amount.

In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in respect of each input to the model. These include the external range of observable discount rates, historical performance against forecast, and risks attached to the key assumptions underlying cash flow.

The following table presents a summary of the key assumptions underlying the most sensitive inputs to the model for HSBC Continental Europe, the key risks attaching to each, and details of a reasonably possible change to assumptions where, in the opinion of management, there is a sufficient headroom to cover the changes which could not result in an impairment.

Reasonably possible changes in key assumptions

Investment
HSBC Continental Europe	Free Cash Flows projections	- Level of interest rates and yield curves. - Competitors' positions within the market. - Level and change in unemployment rates.	- Customer remediation and regulatory actions. - Achievement of strategic actions relating to revenue and costs.	- FCF projections decrease by 10%.
	Discount rate	- Discount rate used is a reasonable estimate of a suitable market rate for the profile of the business.	- External evidence arises to suggest that the rate used is not appropriate to the business.	- Discount rate increases by 1%.

Sensitivity of VIU in key assumptions and changes to current assumptions to reduce headroom to nil
			Increase/(decrease)
Investments¹	Carrying amount	Value in use	Discount rate	Free Cash flows
At 31 Dec 2023	£m	£m	bps	%
HSBC Continental Europe	10,117	11,668	143	(35.1)

1 As at 31 December 2022, An increase of 614bps in the discount rate and a decrease of 33.3% in the FCF to reduce the headroom to nil.

19	Structured entities

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

Consolidated structured entities

Total assets of the group's consolidated structured entities, split by entity type
	Conduits	Securitisations	HSBC managed funds	Other	Total
	£m	£m	£m	£m	£m
At 31 Dec 2023	2,809	180	4,272	398	7,659
At 31 Dec 2022	3,479	192	3,981	463	8,115

Conduits

The group has established and manages two types of conduits: securities investment conduits ('SICs') and multi-seller conduits.

Securities investment conduits

The SICs purchase highly rated ABSs to facilitate tailored investment opportunities.

At 31 December 2023, Solitaire, the group's principal SIC held £0.8bn of ABSs (2022: £1.1bn). It is currently funded entirely by commercial paper ('CP') issued to the group. At 31 December 2023, the group held £1.0bn of CP (2022: £1.3bn).

Multi-seller conduits

The group's multi-seller conduit was established to provide access to flexible market-based sources of finance for its clients. Currently, the group bears risk equal to transaction-specific facility offered to the multi-seller conduits, amounting to £4.2bn at 31 December 2023 (2022:£4.7bn). First loss protection is provided by the originator of the assets, and not by the group, through transaction-specific credit enhancements. A layer of secondary loss protection is provided by the group in the form of programme-wide enhancement facilities.

Securitisations

The group uses structured entities to securitise customer loans and advances it originates in order to diversify the sources of funding for asset origination and capital efficiency purposes. The loans and advances are transferred by the group to the structured entities for cash or synthetically through credit default swaps, and the structured entities issue debt securities to investors.

HSBC managed funds

The group together with other HSBC entities has established a number of money market and non-money market funds. Where it is deemed to be acting as principal rather than agent in its role as investment manager, the group controls these funds.

Other

The group has entered into a number of transactions in the normal course of business, which include asset and structured finance transactions where it has control of the structured entity. In addition, the group is deemed to control a number of third-party managed funds through its involvement as a principal in the funds.

Unconsolidated structured entities

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

Nature and risks associated with the group's interests in unconsolidated structured entities
	Securitisations	HSBC managed funds	Non-HSBC managed funds	Other	Total
Total asset values of the entities (£m)
0 - 400	1	154	977	13	1,145
400 - 1,500	1	50	874	1	926
1,500 - 4,000	-	34	329	-	363
4,000 - 20,000	-	20	149	-	169
20,000+	-	1	8	-	9
Number of entities at 31 Dec 2023	2	259	2,337	14	2,612

	£m	£m	£m	£m	£m
Total assets in relation to the group's interests in the unconsolidated structured entities	128	5,808	3,793	878	10,607
- trading assets	-	1	10	-	11
- financial assets designated and otherwise mandatorily measured at fair value	-	5,802	3,296	-	9,098
- loans and advances to banks	-	-	-	-	-
- loans and advances to customers	128	-	487	471	1,086
- financial investments	-	5	-	-	5
- other assets	-	-	-	407	407
Total liabilities in relation to the group's interests in the unconsolidated structured entities	-	5	-	-	5
Other off-balance sheet commitments	27	-	514	-	541
The group's maximum exposure at 31 Dec 2023	155	5,803	4,307	878	11,143

	Securitisations	HSBC managed funds	Non-HSBC managed funds	Other	Total
Total asset values of the entities (£m)
0 - 400	2	155	966	12	1,135
400 - 1,500	1	55	757	1	814
1,500 - 4,000	-	19	304	-	323
4,000 - 20,000	-	16	155	-	171
20,000+	-	3	14	-	17
Number of entities at 31 Dec 2022	3	248	2,196	13	2,460

	£m	£m	£m	£m	£m
Total assets in relation to the group's interests in the unconsolidated structured entities	220	4,671	4,425	925	10,241
- trading assets	-	1	104	-	105
- financial assets designated and otherwise mandatorily measured at fair value	-	4,665	3,869	-	8,534
- loans and advances to customers	220	-	452	497	1,169
- financial investments	-	5	-	-	5
- other assets	-	-	-	428	428
Total liabilities in relation to group's interests in the unconsolidated structured entities	-	4	-	-	4
Other off-balance sheet commitments	34	-	571	24	629
The group's maximum exposure at 31 Dec 2022	254	4,667	4,996	949	10,866

The maximum exposure to loss from the group's interests in unconsolidated structured entities represents the maximum loss it could incur as a result of its involvement with these entities regardless of the probability of the loss being incurred.

- For commitments, guarantees and written credit default swaps, the maximum exposure to loss is the notional amount of potential future losses.

- For retained and purchased investments and loans to unconsolidated structured entities, the maximum exposure to loss is the carrying amount of these interests at the balance sheet reporting date.

The maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered into to mitigate the group's exposure to loss.

Securitisations

The group has interests in unconsolidated securitisation vehicles through holding notes issued by these entities. In addition, the group has investments in ABSs issued by third-party structured entities.

HSBC managed funds

The group together with other HSBC entities establishes and manages money market funds and non-money market investment funds to provide customers with investment opportunities. The group, as fund manager, may be entitled to receive management and performance fees based on the assets under management. The group may also retain units in these funds.

Non-HSBC managed funds

The group purchases and holds units of third-party managed funds in order to facilitate business and meet customer needs.

Other

The group has established structured entities in the normal course of business, such as structured credit transactions for customers, to provide finance to public and private sector infrastructure projects, and for asset and structured finance transactions.

In addition to the interests disclosed above, the group enters into derivative contracts, reverse repos and stock borrowing transactions with structured entities. These interests arise in the normal course of business for the facilitation of third-party transactions and risk management solutions.

Group sponsored structured entities

The amount of assets transferred to and income received from such sponsored entities during 2023 and 2022 was not significant.

20	Goodwill and intangible assets

	The group		The bank
	2023	2022²	2023	2022²
	£m	£m	£m	£m
Goodwill	-	-	2	19
Other intangible assets¹	203	91	86	22
At 31 Dec	203	91	88	41

1 Included within the group's other intangible assets is internally generated software with a net carrying amount of £198m (2022: £87m). During 2023, capitalisation of internally generated software was £120m (2022: £47m), net impairment reversal was £(78)m (2022: £(13)m) and amortisation was £91m (2022: £34m).

2 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

21	Prepayments, accrued income and other assets

	The group		The bank
	2023	2022¹	2023	2022¹
	£m	£m	£m	£m
Cash collateral and margin receivables	39,125	44,932	29,835	32,255
Settlement accounts	13,028	6,926	9,942	5,441
Bullion	4,393	3,464	4,390	3,464
Prepayments and accrued income	2,521	1,769	1,556	994
Property, plant and equipment	819	761	11	9
Right-of-use assets	167	166	30	32
Employee benefit assets (Note 5)	51	73	10	12
Other accounts	3,531	3,353	1,626	1,700
At 31 Dec	63,635	61,444	47,400	43,907

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Prepayments, accrued income and other assets include £56,982m (2022: £55,846m) of financial assets, the majority of which are measured at amortised cost.

22	Trading liabilities

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Deposits by banks¹	5,313	4,337	5,387	4,350
Customer accounts¹	4,955	5,812	4,955	5,692
Other debt securities in issue	21	812	21	61
Other liabilities - net short positions in securities	31,987	30,304	14,569	15,662
At 31 Dec	42,276	41,265	24,932	25,765

1 'Deposits by banks' and 'Customer accounts' include repos, stock lending and other amounts.

23	Financial liabilities designated at fair value

	The group		The bank
	2023	2022¹	2023	2022
	£m	£m	£m	£m
Deposits by banks and customer accounts	5,555	4,864	5,542	4,864
Liabilities to customers under investment contracts	1,002	943	-	-
Debt securities in issue	25,194	20,666	17,110	13,742
Subordinated liabilities (Note 26)	794	809	794	809
At 31 Dec	32,545	27,282	23,446	19,415

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. 2022 comparative data have been restated.

The group

The carrying amount of financial liabilities designated at fair value was £2,407m less than the contractual amount at maturity
(2022: £3,431m lower). The cumulative amount of change in fair value attributable to changes in credit risk was a gain of £151m (2022: gain of £292m).

The bank

The carrying amount of financial liabilities designated at fair value was £1,974m less than the contractual amount at maturity (2022: £2,230m lower). The cumulative amount of change in fair value attributable to changes in credit risk was a gain of £42m (2022: gain of £139m).

24	Accruals, deferred income and other liabilities

	The group		The bank
	2023	2022¹	2023	2022
	£m	£m	£m	£m
Cash collateral and margin payables	43,305	55,467	31,920	40,356
Settlement accounts	9,789	4,915	9,861	4,485
Accruals and deferred income	2,603	1,909	1,633	1,241
Amount due to investors in funds consolidated by the group	1,158	991	-	-
Lease liabilities	227	269	36	45
Employee benefit liabilities (Note 5)	117	121	48	56
Reinsurance contract liabilities	33	33	-	-
Share-based payment liability to HSBC Holdings	107	98	77	72
Endorsements and acceptances	236	231	227	218
Other liabilities	2,869	2,986	1,120	1,509
At 31 Dec	60,444	67,020	44,922	47,982

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. 2022 comparative data have been restated.

For the group, accruals, deferred income and other liabilities include £59,806m (2022: £66,390m), and for the bank £44,679m (2022: £47,683m) of financial liabilities, the majority of which are measured at amortised cost.

25	Provisions

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The group	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2023	126	77	13	103	319
Additions	27	99	3	62	191
Amounts utilised	(43)	(54)	(3)	(25)	(125)
Unused amounts reversed	(28)	(16)	(3)	(29)	(76)
Exchange and other movements	(6)	(2)	(1)	7	(2)
At 31 Dec 2023	76	104	9	118	307
Contractual commitments¹
At 1 Jan 2023					105
Net change in expected credit loss provision and other movements					(22)
At 31 Dec 2023					83
Total Provisions
At 31 Dec 2022					424
At 31 Dec 2023					390

Provisions (excluding contractual commitments)
At 1 Jan 2022	164	175	21	99	459
Additions	117	61	4	63	245
Amounts utilised	(124)	(152)	(6)	(34)	(316)
Unused amounts reversed	(35)	(4)	(6)	(23)	(68)
Exchange and other movements	4	(3)	-	(2)	(1)
At 31 Dec 2022	126	77	13	103	319
Contractual commitments¹
At 1 Jan 2022					103
Net change in expected credit loss provision and other movements					2
At 31 Dec 2022					105
Total Provisions
At 31 Dec 2021					562
At 31 Dec 2022					424

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The bank	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2023	17	57	8	35	117
Additions	11	95	2	16	124
Amounts utilised	(12)	(51)	(2)	(5)	(70)
Unused amounts reversed	(7)	(1)	(2)	(11)	(21)
Exchange and other movements	-	(5)	(1)	-	(6)
At 31 Dec 2023	9	95	5	35	144
Contractual commitments¹
At 1 Jan 2023					50
Net change in expected credit loss provision and other movements					(18)
At 31 Dec 2023					32
Total Provisions
At 31 Dec 2022					167
At 31 Dec 2023					176

Provisions (excluding contractual commitments)
At 1 Jan 2022	12	155	13	27	207
Additions	36	51	1	32	120
Amounts utilised	(14)	(146)	(3)	(11)	(174)
Unused amounts reversed	(17)	(3)	(3)	(13)	(36)
Exchange and other movements	-	-	-	-	-
At 31 Dec 2022	17	57	8	35	117
Contractual commitments¹
At 1 Jan 2022					43
Net change in expected credit loss provision and other movements					7
At 31 Dec 2022					50
Total Provisions
At 31 Dec 2021					250
At 31 Dec 2022					167

1 The contractual commitments provision includes off-balance sheet loan commitments and guarantees, for which expected credit losses are provided under IFRS 9. Further analysis of the movement in the expected credit loss is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 47.

Restructuring costs

These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during the year relate to formal restructuring plans made within the group.

Legal proceedings and regulatory matters

Further details of legal proceedings and regulatory matters are set out in Note 33. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim), or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the actions of, regulatory or law enforcement agencies in connection with alleged wrongdoing.

26	Subordinated liabilities

Subordinated liabilities
	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
At amortised cost	14,920	14,528	14,658	14,252
- subordinated liabilities	14,220	13,828	14,658	14,252
- preferred securities	700	700	-	-
Designated at fair value (Note 23)	794	809	794	809
- subordinated liabilities	794	809	794	809
At 31 Dec	15,714	15,337	15,452	15,061

Subordinated liabilities rank behind senior obligations and generally count towards the capital base of HSBC. Capital securities may be called and redeemed by HSBC subject to prior notification to the PRA and, where relevant, the consent of the local banking regulator. If not redeemed at the first call date, coupons payable may reset or become floating rate based on relevant market rates. On subordinated liabilities other than floating rate notes, interest is payable at fixed rates of up to 7.650%.

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

Subordinated liabilities of the group
		Carrying amount
		2023	2022
		£m	£m
Additional tier 1 instruments guaranteed by the bank
£700m	5.844% Non-cumulative Step-up Perpetual Preferred Securities^1,5,6	605	569
Tier 2 instruments
£300m	6.5% Subordinated Notes 2023^3,7	-	134
€1,500m	Floating Rate Subordinated Loan 2032	1,299	1,326
€1,500m	Floating Rate Subordinated Loan 2024⁷	-	1,329
$300m	7.65% Subordinated Notes 2025²	136	141
$750m	HSBC Bank plc 4.19% Subordinated Loan 2027	571	593
£200m	Floating Rate Subordinated Loan 2028	200	200
€300m	Floating Rate Subordinated Loan 2028	261	266
€260m	Floating Rate Subordinated Loan 2029	226	230
£350m	5.375% Callable Subordinated Step-up Notes 2030^3,4,6	61	60
$2,000m	HSBC Bank plc 1.625% Subordinated Loan 2031	1,462	1,497
€2,000m	HSBC Bank plc 0.375% Subordinated Loan 2031	1,627	1,583
€2,000m	HSBC Bank plc 0.375% Subordinated Loan 2031	1,627	1,583
€1,250m	HSBC Bank plc 0.25% Subordinated Loan 2031	1,017	990
£500m	5.375% Subordinated Notes 2033³	162	152
£225m	6.25% Subordinated Notes 2041³	50	47
£600m	4.75% Subordinated Notes 2046³	191	191
$750m	Undated Floating Rate Primary Capital Notes⁷	-	624
$500m	Undated Floating Rate Primary Capital Notes⁷	-	415
$300m	Undated Floating Rate Primary Capital Notes (Series 3)⁷	-	249
$1,250m	HSBC Bank plc floating Subordinated Loan 2028	978	1,035
$1,100m	HSBC Bank plc floating Subordinated Loan 2033	860	910
€400m	HSBC Bank plc floating Subordinated Loan 2028	353	362
€400m	HSBC Bank plc floating Subordinated Loan 2027	353	361
€500m	HSBC Bank plc floating Subordinated Loan 2028	433	443
€500m	HSBC Bank plc floating Subordinated Loan 2028	433	-
€500m	HSBC Bank plc floating Subordinated Loan 2028	433	-
€85m	HSBC Bank plc 5.15% Subordinated Loan 2030	74	-
€800m	HSBC Bank plc floating Subordinated Loan 2029	693	-
€65m	HSBC Bank plc 5.24% Subordinated Loan 2033	56	-
$800m	HSBC Bank plc 6.79% Subordinated Loan 2028	651	-
€800m	HSBC Bank plc floating Subordinated Loan 2029	693	-
€800m	HSBC Bank plc floating Subordinated Loan 2029	173	-
Other Tier 2 instruments each less than £100m		36	47
At 31 Dec		15,714	15,337

1 The value of the security partially decreased as a result of a fair value hedge gain. The instrument was held at amortised cost in 2021. Also, the interest rate payable after November 2031 is the sum of the compounded daily Sonia rate plus 2.0366%.

2 The bank tendered for this security in November 2022. The principal balance is $180m. The original notional value of the security is $300m.

3 The bank tendered for these securities in November 2022. The principal balance is £135m, £61m, £157m, £70m and £237m respectively. The original notional values of these securities are £300m, £350m, £500m, £225m and £600m respectively.

4 The interest rate payable after November 2025 is the sum of the compounded daily Sonia rate plus 1.6193%.

5 See paragraph below, 'Guaranteed by HSBC Bank plc'.

6 These securities are ineligible for inclusion in the capital base of the group.

7 Redeemed in 2023.

Guaranteed by HSBC Bank plc

A capital security guaranteed by the bank was issued by a Jersey limited partnership. The proceeds of this was lent to the bank by the limited partnership in the form of a subordinated note. It qualified as additional tier 1 capital for the group (on a solo and consolidated basis) under CRR II until 31 December 2021 by virtue of the application of grandfathering provisions. Since 31 December 2021, this security has no longer qualified as regulatory capital for the group.

This preferred security, together with the guarantee, is intended to provide investors with rights to income, capital distributions and distributions upon liquidation of the company that are equivalent to the rights that they would have had if they had purchased non-cumulative perpetual preference shares of the company. There are limitations on the payment of distributions if such payments are prohibited under UK banking regulations or other requirements, if a payment would cause a breach of HSBC's capital adequacy requirements, or if the bank has insufficient distributable reserves (as defined).

The bank has individually covenanted that, if prevented under certain circumstances from paying distributions on the preferred security in full, it will not pay dividends or other distributions in respect of its ordinary shares, or repurchase or redeem its ordinary shares, until the distribution on the preferred security has been paid in full.

If the preferred security guaranteed by the bank is outstanding in November 2048, or if the total capital ratio of the group (on a solo or consolidated basis) falls below the regulatory minimum required, or if the Directors expect it to do so in the near term, provided that proceedings have not been commenced for the liquidation, dissolution or winding up of the bank, the holders' interests in the preferred security guaranteed by the bank will be exchanged for interests in preference shares issued by the bank that have economic terms which are in all material respects equivalent to the preferred security and its guarantee.

Tier 2 securities

Tier 2 capital securities are either perpetual or dated subordinated securities on which there is an obligation to pay coupons. These capital securities are included within the group's regulatory capital base as tier 2 capital under CRR II, either as fully eligible capital or by virtue of the application of grandfathering provisions. In accordance with CRR II, the capital contribution of all tier 2 securities is amortised for regulatory purposes in their final five years before maturity.

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

Contractual maturity of financial liabilities

The balances in the table below do not agree directly with those in our consolidated balance sheet as the table incorporates, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading liabilities and derivatives not treated as hedging derivatives).

Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities. Trading liabilities and derivatives not treated as hedging derivatives are included in the 'Due not more than 1 month' time bucket and not by contractual maturity.

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

Cash flows payable under financial liabilities by remaining contractual maturities
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due between 3 and 12 months	Due between 1 and 5 years	Due after 5 years	Total
The group	£m	£m	£m	£m	£m	£m
Deposits by banks	19,626	2,028	453	700	269	23,076
Customer accounts	197,730	14,148	10,649	671	81	223,279
Repurchase agreements - non-trading	42,743	7,801	1,761	1,686	-	53,991
Trading liabilities	42,276	-	-	-	-	42,276
Financial liabilities designated at fair value	12,107	1,183	8,003	7,589	6,862	35,744
Derivatives	170,391	127	326	798	1,198	172,840
Debt securities in issue	3,305	2,266	6,014	1,939	1,360	14,884
Subordinated liabilities	31	157	397	6,478	13,122	20,185
Other financial liabilities¹	57,982	292	691	159	1,220	60,344
	546,191	28,002	28,294	20,020	24,112	646,619
Loan and other credit-related commitments	131,829	-	-	-	-	131,829
Financial guarantees²	2,401	-	-	-	-	2,401
At 31 Dec 2023	680,421	28,002	28,294	20,020	24,112	780,849

Deposits by banks	16,178	36	2,479	1,994	256	20,943
Customer accounts	197,400	11,821	6,441	127	285	216,074
Repurchase agreements - non-trading	30,572	1,793	203	427	-	32,995
Trading liabilities	41,265	-	-	-	-	41,265
Financial liabilities designated at fair value	9,558	1,950	4,887	7,200	6,857	30,452
Derivatives	218,015	88	391	1,382	437	220,313
Debt securities in issue	832	3,047	2,352	812	851	7,894
Subordinated liabilities	9	137	427	3,300	14,713	18,586
Other financial liabilities¹	65,307	272	827	180	1,080	67,666
	579,136	19,144	18,007	15,422	24,479	656,188
Loan and other credit-related commitments	127,913	-	-	-	-	127,913
Financial guarantees²	5,327	-	-	-	-	5,327
At 31 Dec 2022	712,376	19,144	18,007	15,422	24,479	789,428

Cash flows payable under financial liabilities by remaining contractual maturities (continued)
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due between 3 and 12 months	Due between 1 and 5 years	Due after 5 years	Total
The bank	£m	£m	£m	£m	£m	£m
Deposits by banks	17,389	1,090	318	-	-	18,797
Customer accounts	119,019	7,694	6,759	59	-	133,531
Repurchase agreements - non-trading	38,794	7,337	1,588	1,686	-	49,405
Trading liabilities	24,932	-	-	-	-	24,932
Financial liabilities designated at fair value	11,693	743	5,675	3,927	4,021	26,059
Derivatives	151,766	127	326	754	1,179	154,152
Debt securities in issue	2,328	438	3,432	1,197	188	7,583
Subordinated liabilities	31	157	396	6,454	13,238	20,276
Other financial liabilities¹	44,915	129	408	18	16	45,486
	410,867	17,715	18,902	14,095	18,642	480,221
Loan and other credit-related commitments	35,270	-	-	-	-	35,270
Financial guarantees²	1,106	-	-	-	-	1,106
At 31 Dec 2023	447,243	17,715	18,902	14,095	18,642	516,597

Deposits by banks	13,327	6	214	53	-	13,600
Customer accounts	129,308	8,578	3,867	3	-	141,756
Repurchase agreements - non-trading	27,436	1,663	203	427	-	29,729
Trading liabilities	25,765	-	-	-	-	25,765
Financial liabilities designated at fair value	9,446	646	4,303	3,820	3,967	22,182
Derivatives	192,521	88	365	1,372	434	194,780
Debt securities in issue	-	2,878	1,525	83	314	4,800
Subordinated liabilities	9	137	417	3,283	14,874	18,720
Other financial liabilities¹	48,283	180	297	18	18	48,796
	446,095	14,176	11,191	9,059	19,607	500,128
Loan and other credit-related commitments	36,474	-	-	-	-	36,474
Financial guarantees²	1,363	-	-	-	-	1,363
At 31 Dec 2022	483,932	14,176	11,191	9,059	19,607	537,965

1 Excludes financial liabilities of disposal groups.

2 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.

Maturity analysis of financial assets and financial liabilities

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

- Financial assets and liabilities with no contractual maturity (such as equity securities) are included in the 'Due after more than 1 year' time bucket. Undated or perpetual instruments are classified based on the contractual notice period, which the counterparty of the instrument is entitled to give. Where there is no contractual notice period, undated or perpetual contracts are included in the 'Due after more than 1 year' time bucket.

- Financial instruments included within assets and liabilities of disposal groups held for sale are classified on the basis of the contractual maturity of the underlying instruments and not on the basis of the disposal transaction.

- Liabilities under investment contracts are classified in accordance with their contractual maturity. Undated investment contracts are included in the 'Due after more than 1 year' time bucket, however, such contracts are subject to surrender and transfer options by the policyholders.

Maturity analysis of financial assets and financial liabilities
	2023			2022¹
	Due within 1 year	Due after more than 1 year	Total	Due within 1 year	Due after more than 1 year	Total
The group	£m	£m	£m	£m	£m	£m
Assets
Financial assets designated or otherwise mandatorily measured at fair value	2,973	16,095	19,068	1,391	14,490	15,881
Loans and advances to banks	14,037	334	14,371	15,867	1,242	17,109
Loans and advances to customers	34,876	40,615	75,491	38,405	34,209	72,614
Reverse repurchase agreement - non-trading	71,676	1,818	73,494	52,324	1,625	53,949
Financial investments	7,481	38,887	46,368	7,201	25,403	32,604
Other financial assets	56,693	288	56,981	55,414	428	55,842
Assets held for sale	10,182	10,186	20,368	4,174	17,040	21,214
At 31 Dec	197,918	108,223	306,141	174,776	94,437	269,213
Liabilities
Deposits by banks	22,069	874	22,943	18,674	2,162	20,836
Customer accounts	222,215	726	222,941	215,562	386	215,948
Repurchase agreements - non-trading	51,848	1,568	53,416	32,486	415	32,901
Financial liabilities designated at fair value	21,163	11,382	32,545	16,281	11,001	27,282
Debt securities in issue	11,439	2,004	13,443	6,149	1,119	7,268
Other financial liabilities	58,433	1,372	59,805	65,145	1,248	66,393
Subordinated liabilities	-	14,920	14,920	142	14,386	14,528
Liabilities of disposal groups held for sale	17,590	3,094	20,684	21,621	3,090	24,711
At 31 Dec	404,757	35,940	440,697	376,060	33,807	409,867

The bank
Assets
Financial assets designated or otherwise mandatorily measured at fair value	2,897	284	3,181	1,287	331	1,618
Loans and advances to banks	10,673	997	11,670	13,338	1,148	14,486
Loans and advances to customers	19,785	12,658	32,443	25,814	11,178	36,992
Reverse repurchase agreement - non-trading	55,290	1,683	56,973	41,430	1,625	43,055
Financial investments	4,313	24,078	28,391	3,415	15,224	18,639
Other financial assets	42,285	-	42,285	39,605	2	39,607
Assets held for sale²	160	-	160	-	-	-
At 31 Dec	135,403	39,700	175,103	124,889	29,508	154,397
Liabilities
Deposits by banks	18,775	-	18,775	13,543	51	13,594
Customer accounts	133,314	59	133,373	141,712	2	141,714
Repurchase agreements - non-trading	47,274	1,568	48,842	29,223	415	29,638
Financial liabilities designated at fair value	18,005	5,441	23,446	14,290	5,125	19,415
Debt securities in issue	6,077	1,276	7,353	4,341	315	4,656
Other financial liabilities	44,646	30	44,676	47,651	32	47,683
Subordinated liabilities	-	14,658	14,658	133	14,119	14,252
At 31 Dec	268,091	23,032	291,123	250,893	20,059	270,952

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data of the financial year ended 31 December 2022 have been restated accordingly.

2 Includes planned transfer of hedge fund administration services.

28	Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously ('the offset criteria').

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

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

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

The effect of over-collateralisation is excluded.

'Amounts not subject to enforceable master netting agreements' include contracts executed in jurisdictions where the rights of set off may not be upheld under the local bankruptcy laws, and transactions where a legal opinion evidencing enforceability of the right of offset may not have been sought, or may have been unable to obtain.

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

	Amounts subject to enforceable netting arrangements						Amounts not subject to enforceable netting arrangements⁵	Total
				Amounts not set off in the balance sheet
	Gross amounts	Amounts offset	Net amounts in the balance sheet	Financial instruments, including non-cash collateral⁶	Cash collateral	Net amount
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives (Note 14)¹	237,360	(64,045)	173,315	(155,398)	(17,674)	243	801	174,116
Reverse repos, stock borrowing and similar agreements classified as²:
- trading assets	17,454	(473)	16,981	(16,981)	-	-	243	17,224
- non-trading assets	129,243	(58,972)	70,271	(70,204)	(62)	5	3,223	73,494
Loans and advances to customers³	20,950	(10,473)	10,477	(9,321)	-	1,156	1	10,478
At 31 Dec 2023	405,007	(133,963)	271,044	(251,904)	(17,736)	1,404	4,268	275,312

Derivatives (Note 14)¹	303,911	(79,799)	224,112	(193,720)	(29,998)	394	1,126	225,238
Reverse repos, stock borrowing and similar agreements classified as²:
- trading assets	14,490	(196)	14,294	(14,293)	-	1	63	14,357
- non-trading assets	103,839	(52,268)	51,571	(51,310)	(260)	1	2,378	53,949
Loans and advances to customers³	17,979	(8,105)	9,874	(8,143)	-	1,731	1	9,875
At 31 Dec 2022	440,219	(140,368)	299,851	(267,466)	(30,258)	2,127	3,568	303,419

Financial liabilities
Derivatives (Note 14)¹	234,304	(64,045)	170,259	(155,148)	(14,337)	774	1,215	171,474
Repos, stock lending and similar agreements classified as²:
- trading liabilities	10,249	(135)	10,114	(10,112)	-	2	5	10,119
- non-trading liabilities	112,726	(59,310)	53,416	(52,878)	(539)	(1)	-	53,416
Customer accounts⁴	26,395	(10,473)	15,922	(9,321)	-	6,601	6	15,928
At 31 Dec 2023	383,674	(133,963)	249,711	(227,459)	(14,876)	7,376	1,226	250,937

Derivatives (Note 14)¹	297,341	(79,799)	217,542	(197,201)	(19,662)	679	1,325	218,867
Repos, stock lending and similar agreements classified as²:
- trading liabilities	10,180	(196)	9,984	(9,983)	-	1	2	9,986
- non-trading liabilities	85,168	(52,268)	32,900	(32,719)	(182)	(1)	1	32,901
Customer accounts⁴	24,082	(8,105)	15,977	(8,143)	-	7,834	10	15,987
At 31 Dec 2022	416,771	(140,368)	276,403	(248,046)	(19,844)	8,513	1,338	277,741

1 At 31 Dec 2023, the amount of cash margin received that had been offset against the gross derivatives assets was £1,508m (2022: £2,373m). The amount of cash margin paid that had been offset against the gross derivatives liabilities was £4,296m (2022: £7,279m).

2 For the amount of repos, reverse repos, stock lending, stock borrowing and similar agreements recognised on the balance sheet within 'Trading assets' and 'Trading liabilities', see the 'Funding sources and uses' table on page 75.

3 At 31 Dec 2023, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £75,491m (2022: £72,614m) of which £10,477m (2022: £9,874m) was subject to offsetting.

4 At 31 Dec 2023, the total amount of 'Customer accounts' recognised on the balance sheet was £222,941m (2022: £215,948m) of which £15,922m (2022: £15,977m) was subject to offsetting.

5 These exposures continue to be secured by financial collateral, but we may not have sought or been able to obtain a legal opinion evidencing enforceability of the right of offset.

6 The disclosure was enhanced in year 2022 to support consistency across HSBC Group entities. All financial instruments (whether recognised on our balance sheet or as non-cash collateral received or pledged) are presented within 'financial instruments, including non-cash collateral' as balance sheet classification has no effect on the rights of set-off associated with financial instruments.

29	Interest rate benchmark reform

	Financial instruments yet to transition to alternative benchmarks, by main benchmark
	USD Libor	Others¹
At 31 Dec 2023	£m	£m
Non-derivative financial assets²	451	131
Non-derivative financial liabilities	4	-
Derivative notional contract amount	4,725	164,760

At 31 Dec 2022
Non-derivative financial assets²	5,976	136
Non-derivative financial liabilities	1,847	-
Derivative notional contract amount	1,643,433	155,951

1 Comprises financial instruments referencing other significant demising benchmark rates yet to transition to alternative benchmarks: Canadian dollar offered rate ('CDOR'), GBP libor, Mexican Interbank equilibrium interest rate ('TIIE'), SOR, THBFIX, MIFOR and Sibor). An announcement was made by the South African regulator during the first half of 2023 on the cessation of the Johannesburg interbank average rate ('JIBAR'). Therefore, JIBAR is also included in 'Others' during the current period.

2 Gross carrying amount excluding allowances for expected credit losses.

The amounts in the above table relate to the group's main operating entities where we have material exposures impacted by Ibor reform, including in the United Kingdom, France and Germany. The amounts provide an indication of the extent of the group's exposure to the Ibor benchmarks that are due to be replaced. Amounts are in respect of financial instruments that:

- contractually reference an interest rate benchmark that is planned to transition to an alternative benchmark;

- have a contractual maturity date beyond the date by which the reference interest rate benchmark is expected to cease; and

- are recognised on the group's consolidated balance sheet.

30	Called up share capital and other equity instruments

Issued and fully paid

HSBC Bank plc £1.00 ordinary shares
	2023		2022
	Number	£m	Number	£m
At 1 Jan	796,969,112	797	796,969,111	797
At 31 Dec	796,969,113	797	796,969,112	797

HSBC Bank plc share premium
	2023¹	2022
	£m	£m
At 31 Dec	1,004	420

1 Increase relates to share premium on issuance of 1 ordinary Share (£1/ per Share) to HSBC Holdings plc ('HGHQ').

Total called up share capital and share premium
	2023	2022
	£m	£m
At 31 Dec	1,801	1,217

HSBC Bank plc $0.01 non-cumulative third dollar preference shares
	2023		2022
	Number	£000	Number	£000
At 1 Jan and 31 Dec	35,000,000	172	35,000,000	172

The bank has no obligation to redeem the preference shares but may redeem them in part or in whole at any time, subject to prior notification to the Prudential Regulation Authority ('PRA'). Dividends on the preference shares in issue are paid annually at the sole and absolute discretion of the Board of Directors. The Board of Directors will not declare a dividend on the preference shares in issue if (i) payment of the dividend would cause a breach of the capital adequacy requirements of the bank (or its subsidiary undertakings) under applicable laws or regulations or (ii) the distributable profits of the bank are insufficient to enable the payment in full or in part (as applicable) of the dividends on the preference shares in issue. If either the solo or consolidated Common Equity Tier 1 Capital Ratio of the bank as of any date falls below 7.00% (a so-called 'right conversion event'), the rights attaching to the preference shares shall be altered irrevocably and permanently such that they have the same rights attaching to them as ordinary shares. Holders of the preference shares in issue will be able to attend any general meetings of shareholders of the bank and to vote on any resolution proposed to vary or abrogate any of the rights attaching to the preference shares or any resolution proposed to reduce the paid up capital of the preference shares. If the dividend payable on the preference shares in issue has not been paid in full for the most recent dividend period, if a rights conversion event has occurred or if any resolution is proposed for the winding-up of the bank or the sale of its entire business then, in such circumstances, holders of preference shares will be entitled to vote on all matters put to general meetings. In the case of unpaid dividends, the holders of preference shares in issue will be entitled to attend and vote at any general meetings until such time as dividends on the preference shares for the most recent dividend period have been paid in full, or a sum set aside for such payment in full, in respect of one dividend period. All shares in issue are fully paid.

Other equity instruments

HSBC Bank plc additional tier 1 instruments
		First call date	2023	2022
		First call date	£m	£m
€1,900m	5.950% Undated Subordinated Resettable Additional Tier 1 instrument 2015¹	Dec 2020	1,388	1,388
€235m	5.650% Undated Subordinated Resettable Additional Tier 1 instrument 2016¹	Jan 2022	197	197
€300m	3.813% Undated Subordinated Resettable Additional Tier 1 instrument 2018¹	Mar 2023	263	263
£555m	5.063% Undated Subordinated Resettable Additional Tier 1 instrument 2018¹	Mar 2023	555	555
£500m	4.750% Undated Subordinated Resettable Additional Tier 1 instrument 2019	Nov 2024	500	500
€250m	3.500% Undated Subordinated Resettable Additional Tier 1 instrument 2019	Nov 2024	213	213
£431m	4.551% Undated Subordinated Resettable Additional Tier 1 instrument 2019	Dec 2024	431	431
€200m	5.039% Undated Subordinated Resettable Additional Tier 1 instrument 2019	Jan 2025	175	175
€250m	FRN Undated Subordinated Resettable Additional Tier 1 instruments 2022²	Mar 2027	208	208
At 31 Dec			3,930	3,930

1 Instruments are contractually callable on any interest payment date after the first call date. Interest rates reset every five years if not called.

2 Interest is floating, based on 3 month EURIBOR + 4.060%.

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

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

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

31	Contingent liabilities, contractual commitments, guarantees and contingent assets

	The group		The bank
	2023	2022	2023	2022
	£m	£m	£m	£m
Guarantees and other contingent liabilities:
- financial guarantees	2,401	5,327	1,106	1,363
- performance and other guarantees	19,548	17,136	7,395	6,886
- other contingent liabilities	268	353	267	342
At 31 Dec	22,217	22,816	8,768	8,591
Commitments:¹
- documentary credits and short-term trade-related transactions	1,919	2,317	908	820
- forward asset purchases and forward deposits placed	38,704	33,684	4,539	3,317
- standby facilities, credit lines and other commitments to lend	91,206	91,912	29,823	32,337
At 31 Dec	131,829	127,913	35,270	36,474

1 Includes £125,616m of commitments (2022: £126,457m), to which the impairment requirements in IFRS 9 are applied where the group has become party to an irrevocable commitment.

The above table discloses the nominal principal amounts, which represent the maximum amounts at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and commitments is expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements.

UK branches of HSBC overseas entities

In December 2017, HM Revenue & Customs ('HMRC') challenged the VAT status of certain UK branches of HSBC overseas entities. HMRC has also issued notices of assessment covering the period from 1 October 2013 to 31 December 2017 totalling £262m, with interest to be determined. No provision has been recognised in respect of these notices. In Q1 2019, HMRC reaffirmed its assessment that the UK branches are ineligible to be members of the UK VAT group and, consequently, HSBC paid HMRC the sum of £262m and filed appeals. In February 2022, the Upper Tribunal issued a judgement addressing several preliminary legal issues, which was partially in favour of HMRC and partially in favour of HSBC. The case has now returned to the First-tier Tax tribunal for determination. Since January 2018, HSBC's returns have been prepared on the basis that the UK branches are not in the UK VAT group. In the event that HSBC's appeals are successful, HSBC will seek a refund of this VAT, of which £198m is estimated to be attributable to HSBC Bank plc.

Contingent liabilities arising from legal proceedings, regulatory and other matters against group companies are disclosed in Note 33.

Financial Services Compensation Scheme

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

Guarantees

	The group				The bank
	2023		2022		2023		2022
	In favour of third parties	By the group in favour of other HSBC Group entities	In favour of third parties	By the group in favour of other HSBC Group entities	In favour of third parties	By the bank in favour of other HSBC Group entities	In favour of third parties	By the bank in favour of other HSBC Group entities
	£m	£m	£m	£m	£m	£m	£m	£m
Financial guarantees¹	1,981	420	4,158	1,169	919	187	1,105	258
Performance and other guarantees	17,432	2,116	15,475	1,661	5,238	2,157	5,516	1,370
Total	19,413	2,536	19,633	2,830	6,157	2,344	6,621	1,628

1 Financial guarantees contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor fails to make payment when due, in accordance with the original or modified terms of a debt instrument. The amounts in the above table are nominal principal amounts. 'Financial guarantees' to which the impairment requirements in IFRS 9 are applied have been presented separately from other guarantees to align with credit risk disclosures.

The group provides guarantees and similar undertakings on behalf of both third-party customers and other entities within HSBC Group. These guarantees are generally provided in the normal course of the group's banking businesses. Guarantees with terms of more than one year are subject to the group's annual credit review process.

32	Finance lease receivables

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

	2023			2022
	Total future minimum payments	Unearned finance income	Present value	Total future minimum payments	Unearned finance income	Present Value
	£m	£m	£m	£m	£m	£m
Lease receivables:
No later than one year	238	(27)	211	211	(24)	187
One to two years	231	(24)	207	214	(26)	188
Two to three years	113	(15)	98	207	(21)	186
Three to four years	116	(13)	103	117	(16)	101
Four to five years	65	(12)	53	100	(13)	87
Later than one year and no later than five years	525	(64)	461	638	(76)	562
Later than five years	311	(28)	283	457	(50)	407
At 31 Dec	1,074	(119)	955	1,306	(150)	1,156

33	Legal proceedings and regulatory matters

The group is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, the group considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 31 December 2023 (see Note 25: 'Provisions'). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Bernard L. Madoff Investment Securities LLC

Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Bernard L. Madoff Investment Securities LLC ('Madoff Securities'). Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff. Based on information available to HSBC, the funds' actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud.

US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of alleged transfers from Madoff Securities to HSBC in the amount of $543m (plus interest), and these lawsuits remain pending in the US Bankruptcy Court for the Southern District of New York (the 'US Bankruptcy Court').

Certain Fairfield entities (together, 'Fairfield') (in liquidation) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments in the amount of $382m (plus interest). Fairfield's claims against most of the HSBC companies have been dismissed by the US Bankruptcy Court and the US District Court for the Southern District of New York, but remain pending on appeal before the US Court of Appeals for the Second Circuit. Fairfield's claims against HSBC Private Bank (Suisse) SA and HSBC Securities Services Luxembourg ('HSSL') have not been dismissed and their appeals are also pending before the US Court of Appeals for the Second Circuit. Meanwhile, proceedings before the US Bankruptcy Court with respect to the claims against HSBC Private Bank (Suisse) SA and HSSL are ongoing.

UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been specified.

Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in liquidation) brought an action against HSSL and Bank of Bermuda (Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming damages. Following dismissal of Primeo's action by the Grand Court and Court of Appeal of the Cayman Islands, in 2019, Primeo appealed to the Judicial Committee of the Privy Council. In November 2023, the Privy Council issued a judgment upholding the dismissal of Primeo's claims. This matter is now closed.

Luxembourg litigation: In 2009, Herald Fund SPC ('Herald') (in liquidation) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities in the amount of $2.5bn (plus interest), or damages in the amount of $2bn (plus interest). In 2018, HSBC Bank plc was added to the claim and Herald increased the amount of the alleged damages claim to $5.6bn (plus interest). The Luxembourg District Court has dismissed Herald's securities restitution claim, but reserved Herald's cash restitution and damages claims. Herald has appealed this dismissal to the Luxembourg Court of Appeal, where the matter is pending.

Beginning in 2009, various HSBC companies have been named as defendants in a number of actions brought by Alpha Prime Fund Limited ('Alpha Prime') in the Luxembourg District Court seeking damages for alleged breach of contract and negligence in the amount of $1.16bn (plus interest). These matters are currently pending before the Luxembourg District Court.

Beginning in 2014, HSSL and the Luxembourg branch of HSBC Bank plc have been named as defendants in a number of actions brought by Senator Fund SPC ('Senator') before the Luxembourg District Court seeking restitution of securities in the amount of $625m (plus interest), or damages in the amount of $188m (plus interest). These matters are currently pending before the Luxembourg District Court.

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

US Anti-Terrorism Act litigation

Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, alleged victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act, or provided banking services to customers alleged to have connections to terrorism financing. Seven actions, which seek damages for unspecified amounts, remain pending and HSBC Bank plc's motions to dismiss have been granted in three of these cases. These dismissals are subject to appeals and/or the plaintiffs re-pleading their claims. The four other actions are at an early stage.

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

Interbank offered rates investigation and litigation

Euro interest rate derivatives: In December 2016, the European Commission ('EC') issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January 2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate appeal by HSBC concerning the amount of the fine remains pending before the General Court of the European Union.

US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of individual and putative class action lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act ('US CEA'). HSBC has concluded class settlements with five groups of plaintiffs, and several class action lawsuits brought by other groups of plaintiffs have been voluntarily dismissed. A number of individual US dollar Libor-related actions seeking damages for unspecified amounts remain pending.

Foreign exchange-related investigations and litigation

Since 2017, HSBC Bank plc, among other financial institutions, has been defending a complaint filed by the Competition Commission of South Africa before the South African Competition Tribunal for alleged anti-competitive behaviour in the South African foreign exchange market. In January 2024, the South African Competition Appeal Court denied HSBC Bank plc's application to dismiss the complaint.

In January 2023, HSBC Bank plc and HSBC Holdings plc reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in the local courts alleging foreign exchange-related misconduct. The settlement remains subject to court approval. Lawsuits alleging foreign exchange-related misconduct remain pending against HSBC Bank plc and other banks in courts in Brazil.

In February 2024, HSBC Bank plc and HSBC Holdings plc were joined to an existing claim brought in the UK Competition Appeals Tribunal against various other banks alleging historical anti-competitive behaviour in the foreign exchange market and seeking damages for unspecified amounts. This matter is at an early stage. It is possible that additional civil actions will be initiated against HSBC Bank plc in relation to its historical foreign exchange activities.

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

Precious metals fix-related litigation

US litigation: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May 2023, this action, which seeks damages for unspecified amounts, was dismissed but remains pending on appeal.

HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In February 2023, the court reversed an earlier dismissal of the plaintiffs' third amended complaint and this action , which seeks damages for unspecified amounts, is proceeding.

Canada litigation: HSBC and other financial institutions are defending putative class actions filed in the Ontario and Quebec Superior Courts of Justice alleging that the defendants conspired to manipulate the price of silver, gold and related derivatives in violation of the Canadian Competition Act and common law. These actions each seek CA$1bn in damages plus CA$250m in punitive damages. Two of the actions are proceeding and the others have been stayed.

Tax-related investigations

Various tax administration, regulatory and law enforcement authorities around the world are conducting investigations in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation. HSBC continues to cooperate with these investigations.

In March 2023, the French National Financial Prosecutor announced an investigation into a number of banks, including HSBC Continental Europe and the Paris branch of HSBC Bank plc, in connection with alleged tax fraud related to the dividend withholding tax treatment of certain trading activities. HSBC Bank plc and HSBC Germany also continue to cooperate with investigations by the German public prosecutor into numerous financial institutions and their employees, in connection with the dividend withholding tax treatment of certain trading activities.

Gilts trading investigation and litigation

Since 2018, the UK Competition and Markets Authority ('CMA') has been investigating HSBC and four other banks for suspected anti-competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings plc; both HSBC companies are contesting the CMA's allegations.

In June 2023, HSBC Bank plc, among other banks, was named as a defendant in a putative class action filed in the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market and seeking damages for unspecified amounts. In September 2023, the defendants filed a motion to dismiss which remains pending. It is possible that additional civil actions will be initiated against HSBC Bank plc in relation to its historical gilts trading activities.

UK depositor protection arrangements investigation

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

UK collections and recoveries investigation

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

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

Stanford litigation

Since 2009, HSBC Bank plc has been named as a defendant in numerous claims filed in courts in the UK and the US arising from the collapse of Stanford International Bank Ltd, for which it was a correspondent bank from 2003 to 2009. In February 2023, HSBC Bank plc reached settlements with the plaintiffs to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.

Other regulatory investigations, reviews and litigation

HSBC Bank plc and/or certain of its affiliates are also subject to a number of other enquiries and examinations, requests for information, investigations and reviews by various regulators and competition and law enforcement authorities, as well as legal proceedings including litigation, arbitration and other contentious proceedings, in connection with various matters arising out of their ordinary course businesses and operations.

At the present time, HSBC Bank plc does not expect the ultimate resolution of any of these matters to be material to its financial position; however, given the uncertainties involved in legal proceedings and regulatory matters, there can be no assurance regarding the eventual outcome of a particular matter or matters.

34	Related party transactions

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

Copies of the group financial statements may be obtained from the below address.

HSBC Holdings plc

8 Canada Square

London E14 5HQ

IAS 24 'Related party disclosures' defines related parties as including the parent, fellow subsidiaries, associates, joint ventures, post-employment benefit plans for HSBC employees, Key Management Personnel ('KMP') of the group and its ultimate parent company, close family members of the KMP and entities which are controlled, jointly controlled or significantly influenced by the KMP or their close family members.

Particulars of transactions between the group and the related parties are tabulated below. The disclosure of the year-end balance and the highest amounts outstanding during the year are considered to be the most meaningful information to represent the amount of the transactions and outstanding balances during the year.

Key Management Personnel

The KMP of the bank are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the bank. They include the Directors and certain senior executives of the bank, directors and certain members of the Group Executive Committee of HSBC Holdings plc, to the extent they have a role in directing the affairs of the bank.

The emoluments of those KMP who are not Directors or senior executives of the bank are paid by other Group companies who make no recharge to the bank. Accordingly, no emoluments in respect of these KMP are included in the following disclosure.

The tables below represent the compensation for KMP (directors and certain senior executives) of the bank in exchange for services rendered to the bank for the period they served during the year.

Compensation of Key Management Personnel
	2023	2022	2021
	£000	£000	£000
Short-term employee benefits^1,2	13,003	13,487	13,678
Post-employment benefits	29	69	46
Other long-term employee benefits	1,081	1,152	1,378
Share-based payments	4,699	4,234	4,331
Year ended 31 Dec	18,812	18,942	19,433

1 Includes fees paid to non-executive Directors.

2 2023 includes payment of £30,000 (2022: £600,000) relating to compensation for loss of employment.

Advances and credits, guarantees and deposit balances during the year with Key Management Personnel
	2023		2022
	Balance at 31 Dec	Highest amounts outstanding during year²	Balance at 31 Dec	Highest amounts outstanding during year
	£m	£m	£m	£m
Key Management Personnel¹
Advances and credits	-	-	-	-
Deposits	27	83	21	32

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

2 Exchange rate applied for non-GBP amounts is the average for the year.

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

In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the group with Directors of HSBC Bank plc are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the Companies Act, there is no requirement to disclose transactions with other KMP. During the course of 2023, there were no advances, credits and guarantees entered into by the group with Directors of HSBC Bank plc.

Other related parties

Transactions and balances during the year with KMP of the bank's ultimate parent company

During the course of 2023, there were no transactions and balances between KMP of the bank's ultimate parent company, who were not considered KMP of the bank, in respect of advances and credits, guarantees and deposits.

Transactions and balances during the year with associates and joint ventures

During the course of 2023, there were no transactions and balances with associates and joint ventures, in respect of loans, deposits, guarantees and commitments.

The group's transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2023				2022
	Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Trading assets	75	10	2,883	78	62	17	7,074	848
Derivatives	7,495	4,767	27,928	23,035	7,196	5,714	39,341	27,473
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	5	5	26	26	6	5	28	25
Loans and advances to banks	-	-	5,633	4,434	-	-	6,237	5,585
Loans and advances to customers	211	-	571	408	183	-	496	424
Financial investments	194	194	-	-	154	136	-	-
Reverse repurchase agreements - non-trading	-	-	14,561	13,538	-	-	6,150	4,341
Prepayments, accrued income and other assets	62	4	12,146	6,961	1,263	21	11,591	8,389
Total related party assets at 31 Dec	8,042	4,980	63,748	48,480	8,864	5,893	70,917	47,085
Liabilities
Trading liabilities	83	79	1,239	1,196	45	21	522	91
Financial liabilities designated at fair value	594	571	242	8	1,162	593	-	-
Deposits by banks	-	-	6,230	2,073	-	-	6,034	3,310
Customer accounts	6,601	5,508	1,999	1,999	6,202	4,315	3,149	1,551
Derivatives	2,824	2,062	32,126	23,373	4,345	2,680	43,384	30,997
Subordinated liabilities	14,444	13,902	-	-	12,115	12,115	-	-
Repurchase agreements - non-trading	-	-	9,983	8,187	-	-	5,811	5,738
Provisions, accruals, deferred income and other liabilities	4,966	3,090	8,915	8,913	3,357	3,161	10,816	4,864
Total related party liabilities at 31 Dec	29,512	25,212	60,734	45,749	27,226	22,885	69,716	46,551
Guarantees and commitments	-	-	6,218	4,335	-	-	4,762	3,383

HSBC Bank plc routinely enters into related party transactions with other entities in the HSBC Group. These include transactions to facilitate third-party transactions with customers, transactions for internal risk management, and other transactions relevant to HSBC Group processes. These transactions and the above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties.

The bank's transactions and balances during the year with HSBC Bank plc subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2023						2022
	Due to/from subsidiaries of HSBC Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from subsidiaries of HSBC Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Trading assets	174	83	73	9	2,882	65	264	172	62	17	7,074	845
Derivatives	11,332	9,135	7,495	4,767	26,740	21,668	17,187	11,332	7,196	5,714	37,475	26,170
Loans and advances to banks	3,246	2,572	-	-	3,892	2,628	3,484	2,940	-	-	5,197	3,892
Loans and advances to customers	4,594	4,111	211	-	387	155	4,517	4,515	183	-	285	247
Financial investments	5,776	5,728	-	-	-	-	4,521	4,183	-	-	-	-
Reverse repurchase agreements - non-trading	4,102	4,102	-	-	14,314	12,768	4,683	2,332	-	-	5,920	3,947
Prepayments, accrued income and other assets	7,134	2,297	62	4	10,548	6,219	4,868	2,905	1,262	21	10,096	6,818
Investments in subsidiary undertakings	11,627	11,627	-	-	-	-	10,646	10,646	-	-	-	-
Total related party assets at 31 Dec	47,985	39,655	7,841	4,780	58,763	43,503	50,170	39,025	8,703	5,752	66,047	41,919
Liabilities
Trading liabilities	80	79	83	78	1,239	1,196	113	32	44	21	508	91
Financial liabilities designated at fair value	-	-	594	571	242	8	-	-	1,162	593	-	-
Deposits by banks	1,978	984	-	-	4,242	1,403	3,385	960	-	-	3,601	1,979
Customer accounts	583	405	6,601	5,508	1,877	1,877	1,095	514	6,202	4,315	3,048	1,426
Derivatives	13,361	10,388	2,824	2,062	29,977	21,869	13,479	13,361	4,345	2,680	40,460	29,001
Subordinated liabilities	700	700	14,217	13,676	-	-	700	700	11,884	11,884	-	-
Repurchase agreements - non-trading	2,362	1,135	-	-	9,983	8,142	1,279	429	-	-	5,328	5,030
Provisions, accruals, deferred income and other liabilities	7,397	1,250	4,951	3,087	8,202	8,186	7,596	1,015	3,349	3,167	9,511	4,437
Total related party liabilities at 31 Dec	26,461	14,941	29,270	24,982	55,762	42,681	27,647	17,011	26,986	22,660	62,456	41,964
Guarantees and commitments	5,315	3,321	-	-	4,406	2,964	4,469	2,655	-	-	2,690	1,380

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

Post-employment benefit plans

The HSBC Bank (UK) Pension Scheme (the 'Scheme') entered into swap transactions with the bank to manage the inflation and interest rate sensitivity of the liabilities. At 31 December 2023, the gross notional value of the swaps was £5,574m (2022: £5,449m), the swaps had a positive fair value of £429m to the bank (2022: positive fair value of £424m) and the bank had delivered collateral of £439m (2022: £425m) to the Scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market bid/offer spreads.

35	Assets held for sale and liabilities of disposal groups held for sale

Held for sale at 31 December
	2023	2022
	£m	£m
Held for sale at 31 Dec
Disposal groups	21,792	23,179
Unallocated impairment losses¹	(1,548)	(1,978)
Non-current assets held for sale	124	13
Assets held for sale	20,368	21,214
Liabilities of disposal groups held for sale	20,684	24,711

1 This represents impairment losses in excess of the carrying amount on the non-current assets, excluded from the measurement scope of IFRS 5.

Disposal groups

Sale of our retail banking operations in France

In the first quarter of 2023, the sale had become less certain, as a result of which we recognised a £1.7bn partial reversal of the impairment loss recognised in 2022, when the disposal group was classified as held for sale. In the fourth quarter of 2023, following the receipt of regulatory approvals and the satisfaction of other relevant conditions, we reclassified the disposal group as held for sale, and it was subsequently remeasured at the lower of the carrying amount and fair value less costs to sell. This resulted in the reinstatement of a €1.8bn (£1.5bn) pre-tax impairment loss reflecting the final terms of the sale, giving rise to a net reversal of impairment recognised in other operating income in the year of £0.2bn.

Upon completion and in accordance with the terms of the sale, HSBC Continental Europe received a €0.1bn (£0.1bn) profit participation interest in the ultimate holding company of My Money Group. The associated impacts on initial recognition of this stake at fair value were recognised as part of the pre-tax loss on disposal. In addition, we recognised the reversal of a €0.4bn (£0.4bn) deferred tax liability, which had arisen as a consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible in the French tax return in 2021.

In accordance with the terms of the sale, HSBC Continental Europe retained a portfolio of €7.1bn (£6.2bn) consisting of home and certain other loans, in respect of which it may consider on-sale opportunities at a suitable time, and the CCF brand, which it licensed to the buyer under a long-term licence agreement. Additionally, HSBC Continental Europe's subsidiaries, HSBC Assurances Vie (France) and HSBC Global Asset Management (France), have entered into distribution agreements with the buyer. Ongoing costs associated with the retention of the home and certain other loans, net of income on distribution agreements and the brand licence, are estimated to have an after-tax loss impact of €0.1bn (£0.1bn) in 2024 based on expected funding rates.

Planned sale of our business in Russia

On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an agreement for the sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). In 2022, a £0.2bn impairment loss on the planned sale was recognised, upon classification as held for sale in accordance with IFRS 5. As at 31 December 2023, following US sanctions designation of the buyer, the outcome of the planned sale became less certain. This resulted in the reversal of £0.2bn of the previously recognised loss, as the business was no longer classified as held for sale. However, owing to restrictions impacting the recoverability of assets in Russia, we recognised charges of £0.2bn in other operating income. Completion of the planned sale remains subject to regulatory approval. On completion, accumulated foreign currency translation reserves will be recycled to the income statement.

At 31 December 2023, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment losses, were as follows:

	France retail banking operations	Other¹	Total
	£m	£m	£m
Assets of disposal groups held for sale
Cash and balances at central banks ²	177	-	177
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss	38	-	38
Loans and advances to banks ²	8,103	-	8,103
Loans and advances to customers	13,255	90	13,345
Reverse repurchase agreements	-	-	-
Financial investments ³	25	-	25
Prepayments, accrued income and other assets	103	1	104
Total Assets at 31 Dec 2023	21,701	91	21,792

Liabilities of disposal groups held for sale
Customer accounts	17,492	95	17,587
Financial liabilities designated at fair value	1,858	-	1,858
Debt securities in issue	1,080	-	1,080
Liabilities under insurance contracts	-	-	-
Accruals, deferred income and other liabilities	159	-	159
Total Liabilities at 31 Dec 2023	20,589	95	20,684
Expected date of completion	1 January 2024	Second Half of 2024
Operating segment	WPB	CMB, GBM

1 Includes planned transfer of hedge fund administration services.

2 Under the financial terms of the sale of our retail banking operations in France, HSBC Continental Europe will transfer the business with a net asset value of €1.7bn (£1.4bn) for a consideration of €1. Any required increase to the net asset value of the business to achieve this will be satisfied by the inclusion of additional cash. Based upon the net liabilities of the disposal group at 31 December 2023, HSBC would be expected to include a cash contribution of £8.6bn, of which £8.3bn was reclassified as held for sale at 31 December 2023 ('Loans and advances to banks', £8.1bn, 'Cash and balances at central bank', £0.2bn).

3 Includes financial investments measured at fair value through other comprehensive income of £21.7m and debt instruments measured at amortised cost of £3.8m.

	France retail banking operations	Branch operations in Greece	Business in Russia	Total
	£m	£m	£m	£m
Assets of disposal groups held for sale
Cash and balances at central banks	60	1,502	-	1,562
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss	39	-	-	39
Loans and advances to banks	-	25	102	127
Loans and advances to customers	20,776	291	-	21,067
Reverse repurchase agreements	-	-	208	208
Financial investments	-	66	22	88
Prepayments, accrued income and other assets	63	4	21	88
Total Assets at 31 Dec 2022	20,938	1,888	353	23,179

Liabilities of disposal groups held for sale
Customer accounts	18,551	1,900	27	20,478
Financial liabilities designated at fair value	2,925	-	-	2,925
Debt securities in issue	1,100	-	-	1,100
Accruals, deferred income and other liabilities	138	52	18	208
Total Liabilities at 31 Dec 2022	22,714	1,952	45	24,711
Operating segment	WPB	All global businesses	CMB, GBM

Business disposals

Our branch operations in Greece

On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. In the second quarter of 2022, we recognised a loss of £0.1bn, upon reclassification as held for sale in accordance with IFRS 5. At completion on 28 July 2023, the disposal group included £0.2bn of loans and advances to customers and £0.8bn of customer accounts.

36	Effects of adoption of IFRS 17

On 1 January 2023 the group adopted IFRS 17 'Insurance Contracts' and as required by the standard applied the requirements retrospectively with comparatives restated from the transition date, 1 January 2022. The tables below provide the transition restatement impact on the group's consolidated balance sheet as at 1 January 2022, as well as the group consolidated income statement and the group consolidated statement of comprehensive income for the year ended 31 December 2022.

Further information about the effect of adoption of IFRS 17 is provided in Note 1: 'Basis of preparation of material accounting policies' on page 118.

IFRS 17 transition impact on the consolidated balance sheet at 1 January 2022
	Under IFRS 4	Removal of PVIF and IFRS 4 balances	Recognition of IFRS 17 fulfilment cash flows	Recognition of IFRS 17 contractual service margin	Tax effect	Under IFRS 17	Total movements
	£m	£m	£m	£m	£m	£m	£m
Assets
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	18,649	-	-	-	-	18,649	-
Loans and advances to banks	10,784	-	-	-	-	10,784	-
Loans and advances to customers	91,177	-	-	-	-	91,177	-
Financial investments	41,300	-	-	-	-	41,300	-
Goodwill and intangible assets	894	(811)	-	-	-	83	(811)
Deferred tax assets	599	-	-	-	199	798	199
All other assets	433,208	(114)	142	-	-	433,236	28
Total assets	596,611	(925)	142	-	199	596,027	(584)
Liabilities and equity
Liabilities
Insurance contract liabilities	22,264	(22,264)	21,311	890	-	22,201	(63)
Deferred tax liabilities	15	-	-	-	(10)	5	(10)
All other liabilities	550,617	4	68	(13)	-	550,676	59
Total liabilities	572,896	(22,260)	21,379	877	(10)	572,882	(14)
Total shareholders' equity	23,584	21,335	(21,237)	(877)	209	23,014	(570)
Non-controlling interests	131	-	-	-	-	131	-
Total equity	23,715	21,335	(21,237)	(877)	209	23,145	(570)
Total liabilities and equity	596,611	(925)	142	-	199	596,027	(584)

Transition drivers

Removal of PVIF and IFRS 4 balances

The PVIF intangible asset of £811m previously reported under IFRS 4 within 'Goodwill and intangible assets' arose from the upfront recognition of future profits associated with in-force insurance contracts. PVIF is no longer reported following the transition to IFRS 17, as future profits are deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within 'All other assets') and insurance contract liabilities are removed on transition, to be replaced with IFRS 17 balances.

Recognition of the IFRS 17 fulfilment cash flows

The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for fulfilling the insurance contract, such as premiums, expenses, insurance benefits and claims including policyholder returns and the cost of guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the risk adjustment for non-financial risk.

Recognition of the IFRS 17 contractual service margin

The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts that will be released to the profit and loss over the expected coverage period.

Tax effect

The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible, and new deferred tax assets are reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.

IFRS 17 transition impact on the reported consolidated income statement for the year ended 31 December 2022
	Under IFRS 4	Removal of PVIF and IFRS 4 balances	Insurance finance income/expense	Contractual service margin	Onerous contracts	Experience variance and other	Attributable expenses	Tax effect	Under IFRS 17
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Net interest income	1,904	-	-	-	-	-	-	-	1,904
Net fee income	1,261	-	-	-	-	-	34	-	1,295
Net income from financial instruments held for trading or managed on a fair value basis	2,875	-	-	-	-	-	-	-	2,875
Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	(1,370)	-	-	-	-	-	-	-	(1,370)
Losses recognised on assets held for sale	(1,947)	-	-	-	-	-	-	-	(1,947)
Net insurance premium income	1,787	(1,787)	-	-	-	-	-	-	-
Insurance finance income	-	-	1,106	-	-	-	-	-	1,106
Insurance service result	-	-	-	126	(7)	2	-	-	121
- insurance revenue	-	-	-	126	-	235	-	-	361
- insurance service expense	-	-	-	-	(7)	(233)	-	-	(240)
Other operating income¹	542	(219)	10	-	-	(13)	-	-	320
Total operating income	5,052	(2,006)	1,116	126	(7)	(11)	34	-	4,304
Net insurance claims and benefits paid and movement in liabilities to policyholders	(406)	406	-	-	-	-	-	-	-
Net operating income before change in expected credit losses and other credit impairment charges	4,646	(1,600)	1,116	126	(7)	(11)	34	-	4,304
Change in expected credit losses and other credit impairment charges	(222)	-	-	-	-	-	-	-	(222)
Net operating income	4,424	(1,600)	1,116	126	(7)	(11)	34	-	4,082
Total operating expenses	(5,353)	-	-	-	-	-	102	-	(5,251)
Operating loss	(929)	(1,600)	1,116	126	(7)	(11)	136	-	(1,169)
Share of loss in associates and joint ventures	(30)	-	-	-	-	-	-	-	(30)
Loss before tax	(959)	(1,600)	1,116	126	(7)	(11)	136	-	(1,199)
Tax charge	561	-	-	-	-	-	-	85	646
Loss for the period	(398)	(1,600)	1,116	126	(7)	(11)	136	85	(553)

1 'Other operating income' as shown in the table above is presented inclusive of 'Changes in fair value of long-term debt and related derivatives', 'Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss', and 'Net (losses)/gains from financial investments'.

Transition drivers

Removal of PVIF and IFRS 4 balances

As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of £219m for year ended 31 December 2022 that was previously reported within 'Other operating income' is no longer reported under IFRS 17. This includes the removal of the value of new business and changes to in-force book PVIF from valuation adjustments and experience variances.

On the implementation of IFRS 17 new income statement line items associated with insurance contract accounting were introduced. Consequently, the previously reported IFRS 4 line items 'Net insurance premium income', and 'Net insurance claims and benefits paid and movement in liabilities to policyholders' were also removed.

Introduction of IFRS 17 income statement

Insurance finance income/(expense)

Insurance finance income/(expense) of £1,106m for the year ended 31 December 2022 represents the change in the carrying amount of insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For VFA contracts, which represent more than 98% of HSBC's insurance contracts, the insurance finance income/(expense) includes the changes in the fair value of underlying items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying assets supporting insurance contracts. This includes an offsetting impact to the gains and losses on assets held at fair value through profit or loss, and which is now included in 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss'.

Contractual service margin

Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9% during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, changes to levels of actual returns earned on underlying assets, or changes to assumptions.

Onerous contracts

Losses on onerous contracts are taken to the income statement as incurred.

Experience variance and other

Experience variance and other represents the expected expenses, claims and amortisation of acquisition cash flows which are reported as part of the insurance service revenue. This is offset with the actual expenses and claims incurred in the period and recovery of acquisition cash flows.

Attributable expenses

Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable overheads which are included within the fulfilment cash flows and are no longer shown on the operating expenses line.

IFRS 17 transition impact on the consolidated statement of comprehensive income
	Year ended 31 Dec 2022
	Under IFRS 17	Under IFRS 4
	£m	£m
Opening equity for the year	23,145	23,715
of which
- Retained earnings	24,157	24,735
- Financial assets at FVOCI reserve	1,603	1,081
- Insurance finance reserve	(514)	-
Profit for the period	(553)	(398)
Debt instruments at fair value through other comprehensive income	(1,886)	(454)
Equity instruments designated at fair value through other comprehensive income	-	-
Insurance finance income/ (expense) recognised in other comprehensive income	1,408	-
Other comprehensive expense for the period, net of tax	96	125
Total comprehensive (expense)/income for the year	(935)	(727)
Other movements	1,023	1,028
Closing equity for the year	23,233	24,016

Transition drivers

Insurance finance reserve

The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of £(514)m was recognised and following transition, gains net of tax of £1,408m were recorded in the year ended 31 December 2022. An offsetting fair value through OCI reserve of £522m recorded on transition represents the accumulated fair value movements on assets supporting these insurance liabilities, with associated losses net of taxes of £1,506m recorded within the fair value through other comprehensive income reserve during the year ended 31 December 2022.

Consolidated balance sheet at transition date and at 31 December 2022.

Consolidated balance sheet
	Under IFRS 17		Under IFRS 4
	31 Dec	1 Jan	31 Dec	31 Dec
	2022	2022	2022	2021
	£m	£m	£m	£m
Assets
Cash and balances at central banks	131,433	108,482	131,433	108,482
Items in the course of collection from other banks	2,285	346	2,285	346
Trading assets	79,878	83,706	79,878	83,706
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	15,881	18,649	15,881	18,649
Derivatives	225,238	141,221	225,238	141,221
Loans and advances to banks	17,109	10,784	17,109	10,784
Loans and advances to customers	72,614	91,177	72,614	91,177
Reverse repurchase agreements - non-trading	53,949	54,448	53,949	54,448
Financial investments	32,604	41,300	32,604	41,300
Assets held for sale	21,214	9	21,214	9
Prepayments, accrued income and other assets	61,444	43,146	61,379	43,118
Current tax assets	595	1,135	595	1,135
Interests in associates and joint ventures	728	743	728	743
Goodwill and intangible assets	91	83	1,167	894
Deferred tax assets	1,583	798	1,279	599
Total assets	716,646	596,027	717,353	596,611

Liabilities and equity
Liabilities
Deposits by banks	20,836	32,188	20,836	32,188
Customer accounts	215,948	205,241	215,948	205,241
Repurchase agreements - non-trading	32,901	27,259	32,901	27,259
Items in the course of transmission to other banks	2,226	489	2,226	489
Trading liabilities	41,265	46,433	41,265	46,433
Financial liabilities designated at fair value	27,282	33,608	27,287	33,608
Derivatives	218,867	139,368	218,867	139,368
Debt securities in issue	7,268	9,428	7,268	9,428
Liabilities of disposal groups held for sale	24,711	-	24,711	-
Accruals, deferred income and other liabilities	67,020	43,515	66,945	43,456
Current tax liabilities	130	97	130	97
Insurance contract liabilities	20,004	22,201	19,987	22,264
Provisions	424	562	424	562
Deferred tax liabilities	3	5	14	15
Subordinated liabilities	14,528	12,488	14,528	12,488
Total liabilities	693,413	572,882	693,337	572,896
Equity
Called up share capital	797	797	797	797
Share premium account	420	-	420	-
Other equity instruments	3,930	3,722	3,930	3,722
Other reserves	(6,413)	(5,662)	(6,368)	(5,670)
Retained earnings	24,368	24,157	25,096	24,735
Total shareholders' equity	23,102	23,014	23,875	23,584
Non-controlling interests	131	131	141	131
Total equity	23,233	23,145	24,016	23,715
Total liabilities and equity	716,646	596,027	717,353	596,611

37	Events after the balance sheet date

On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking operations in France to CCF, a subsidiary of Promontoria MMB SAS ('My Money Group'). The sale also included HSBC Continental Europe's 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement. In the fourth quarter of 2023, a loss of £1.5bn was recognised upon reclassification to held for sale, in accordance with IFRS 5, which net of the £1.7bn partial reversal of impairment recognised in the first quarter of 2023, gave rise to a net reversal of impairment recognised in the year of £0.2bn.

On 30 January 2024, the PRA concluded its investigation into HSBC Bank plc's and HSBC UK Bank plc's compliance with depositor protection arrangements under the Financial Services Compensation Scheme in the UK. The PRA imposed a fine of £57m on these entities, the majority of which was borne by HSBC Bank plc, was fully provided for at 31 December 2023, and has since been paid.

On 1 February 2024, HSBC Bank plc invested £1.1bn to acquire HSBC Private Bank (Suisse) SA which is owned by HSBC Private Banking Holdings (Suisse) SA, a subsidiary of HSBC Overseas Holdings (UK) Limited as on 31 December 2023.

On 6 February 2024, HSBC Europe B.V., a direct subsidiary of HSBC Bank plc, signed an agreement to sell HSBC Bank Armenia CJSC, its wholly-owned subsidiary, to Ardshinbank CJSC subject to regulatory approvals. The transaction is expected to complete within the next 12 months.

In its assessment of events after the balance sheet date, the group has considered and concluded that there are no events requiring adjustment or disclosures in the financial statements.

38	HSBC Bank plc's subsidiaries, joint ventures and associates

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

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

HSBC Bank plc's registered office address is:

HSBC Bank plc

8 Canada Square

London E14 5HQ

Subsidiaries

The undertakings below are consolidated by the group.

Subsidiaries	% of share class held by immediate parent company (or by HSBC Bank plc where this varies)		Footnotes
AI Nominees (UK) One Limited	100.00		1, 2, 53
AI Nominees (UK) Two Limited	100.00		1, 2, 53
Assetfinance December (H) Limited	100.00		53
Assetfinance December (P) Limited	100.00		2, 53
Assetfinance December (R) Limited	100.00		53
Assetfinance June (A) Limited	100.00		53
Assetfinance Limited (In Liquidation)	100.00		8
Assetfinance March (B) Limited	100.00		9
Assetfinance March (F) Limited	100.00		53
Assetfinance September (F) Limited	100.00		53
Banco Nominees (Guernsey) Limited	100.00		10
Banco Nominees 2 (Guernsey) Limited	100.00		10
Banco Nominees Limited	100.00		11
Beau Soleil Limited Partnership	n/a		0, 12
BentallGreenOak China Real Estate Investments, L.P.	n/a		0, 1, 13
Canada Crescent Nominees (UK) Limited	100.00		2, 53
Canada Water Nominees (UK) Limited (In Liquidation)	100.00		2, 8
CCF & Partners Asset Management Limited	100.00	(99.99)	53
CCF Holding (Liban) S.A.L. (In Liquidation)	74.99		14
Charterhouse Administrators ( D.T.) Limited	100.00	(99.99)	53
Charterhouse Management Services Limited	100.00	(99.99)	53
Charterhouse Pensions Limited	100.00		2, 53
COIF Nominees Limited	n/a		0, 2, 53
Corsair IV Financial Services Capital Partners - B L.P	n/a		0, 1, 15
Dempar 1	100.00	(99.99)	3, 16
Eton Corporate Services Limited	100.00		10
Flandres Contentieux S.A.	100.00	(99.99)	3, 16
Foncière Elysées	100.00	(99.99)	3, 16
Griffin International Limited	100.00		53
HLF	100.00	(99.99)	3, 16
HSBC (BGF) Investments Limited	100.00		2, 53
HSBC Asset Finance (UK) Limited	100.00		2, 53
HSBC Asset Finance M.O.G. Holdings (UK) Limited	100.00		2, 53
HSBC Assurances Vie (France)	100.00	(99.99)	3, 17
HSBC Bank (General Partner) Limited	100.00		2, 18
HSBC Bank (RR) (Limited Liability Company)	n/a		0, 6, 19
HSBC Bank Armenia CJSC	100.00		20
HSBC Bank Bermuda Limited	100.00		2, 11
HSBC Bank Capital Funding (Sterling 1) LP	n/a		0, 18
HSBC Bank Capital Funding (Sterling 2) LP	n/a		0, 18
HSBC Bank Malta p.l.c.	70.03		21
HSBC Cayman Limited	100.00		26
HSBC Cayman Services Limited	100.00		22
HSBC City Funding Holdings (In Liquidation)	100.00		8
HSBC Client Holdings Nominee (UK) Limited	100.00		2, 53
HSBC Client Nominee (Jersey) Limited	100.00		2, 23
HSBC Continental Europe	99.99		3, 16
HSBC Corporate Trustee Company (UK) Limited	100.00		2, 53
HSBC Custody Services (Guernsey) Limited	100.00		10
HSBC Epargne Entreprise (France)	100.00	(99.99)	3, 17
HSBC Equity (UK) Limited	100.00		2, 53
HSBC Europe B.V.	100.00		53
HSBC Factoring (France)	100.00	(99.99)	3, 16
HSBC Global Asset Management (Bermuda) Limited	100.00		7, 11
HSBC Global Asset Management (Deutschland) GmbH	100.00	(99.99)	4, 24
HSBC Global Asset Management (France)	100.00	(99.99)	3, 17
HSBC Global Asset Management (Malta) Limited	100.00	(70.03)	25
HSBC Global Custody Nominee (UK) Limited	100.00		2, 53

HSBC Global Custody Proprietary Nominee (UK) Limited	100.00		1, 2, 53
HSBC Infrastructure Limited (In Liquidation)	100.00		8
HSBC Institutional Trust Services (Bermuda) Limited	100.00		11
HSBC Insurance Services Holdings Limited	100.00		2, 53
HSBC Investment Bank Holdings Limited	100.00		2, 53
HSBC Issuer Services Common Depositary Nominee (UK) Limited	100.00		2, 53
HSBC Issuer Services Depositary Nominee (UK) Limited (In Liquidation)	100.00		2, 8
HSBC Life (UK) Limited	100.00		2, 53
HSBC Life Assurance (Malta) Limited	100.00	(70.03)	25
HSBC LU Nominees Limited	100.00		2, 53
HSBC Marking Name Nominee (UK) Limited	100.00		2, 53
HSBC Middle East Leasing Partnership	n/a		0, 27
HSBC Operational Services GmbH	100.00	(99.99)	4, 24
HSBC Overseas Nominee (UK) Limited	100.00		2, 53
HSBC PB Corporate Services 1 Limited	100.00		28
HSBC Pension Trust (Ireland) DAC	100.00		2, 29
HSBC PI Holdings (Mauritius) Limited	100.00		30
HSBC Preferential LP (UK)	100.00		2, 53
HSBC Private Bank (Luxembourg) S.A.	100.00	(99.99)	31
HSBC Private Banking Nominee 3 (Jersey) Limited	100.00		28
HSBC Private Equity Investments (UK) Limited	100.00		53

Subsidiaries	% of share class held by immediate parent company (or by HSBC Bank plc where this varies)		Footnotes
HSBC Private Markets Management SARL	n/a		0, 1, 32
HSBC Property Funds (Holding) Limited	100.00		53
HSBC Real Estate Leasing (France)	100.00	(99.99)	3, 16
HSBC REIM (France)	100.00	(99.99)	3, 17
HSBC Securities (South Africa) (Pty) Limited	100.00		2, 34
HSBC Securities Services (Bermuda) Limited	100.00		11
HSBC Securities Services (Guernsey) Limited	100.00		10
HSBC Securities Services (Ireland) DAC	100.00		29
HSBC Securities Services (Luxembourg) S.A.	100.00		2, 31
HSBC Securities Services Holdings (Ireland) DAC	100.00		29
HSBC Service Company Germany GmbH	100.00	(99.99)	1, 4, 24
HSBC Services (France)	100.00	(99.99)	3, 16
HSBC SFH (France)	100.00	(99.99)	3, 17
HSBC SFT (C.I.) Limited	100.00		2, 10
HSBC Specialist Investments Limited	100.00		7, 53
HSBC Transaction Services GmbH	100.00	(99.99)	4, 24
HSBC Trinkaus & Burkhardt (International) S.A.	100.00	(99.99)	35
HSBC Trinkaus & Burkhardt Gesellschaft fur Bankbeteiligungen mbH	100.00	(99.99)	24
HSBC Trinkaus & Burkhardt GmbH	100.00	(99.99)	1, 4, 36
HSBC Trinkaus Family Office GmbH	100.00	(99.99)	4, 24
HSBC Trinkaus Real Estate GmbH	100.00	(99.99)	4, 24
HSBC Trustee (C.I.) Limited	100.00		2, 28
HSBC Trustee (Guernsey) Limited	100.00		2, 10
HSIL Investments Limited	100.00		53
INKA Internationale Kapitalanlagegesellschaft mbH	100.00	(99.99)	24
James Capel (Nominees) Limited	100.00		2, 53
James Capel (Taiwan) Nominees Limited	100.00		2, 53
Keyser Ullmann Limited	100.00	(99.99)	53
Midcorp Limited	100.00		2, 53
Prudential Client HSBC GIS Nominee (UK) Limited	100.00		2, 53
RLUKREF Nominees (UK) One Limited	100.00		1, 2, 53
RLUKREF Nominees (UK) Two Limited	100.00		1, 2, 53
S.A.P.C. - Ufipro Recouvrement	99.99		5, 16
Saf Baiyun	100.00	(99.99)	3, 16
Saf Guangzhou	100.00	(99.99)	3, 16
SCI HSBC Assurances Immo	100.00	(99.99)	5, 17
SFM	100.00	(99.99)	3, 16
SFSS Nominees (Pty) Limited	100.00		34
SNC Les Oliviers D'Antibes	60.00	(59.99)	5, 17
SNCB/M6-2008 A	100.00	(99.99)	3, 16
SNCB/M6-2007 A	100.00	(99.99)	3, 16
SNCB/M6-2007 B	100.00	(99.99)	3, 16
Société Française et Suisse	100.00	(99.99)	3, 16
Somers Dublin DAC	100.00	(99.99)	29
Somers Nominees (Far East) Limited	100.00		11
Sopingest	100.00	(99.99)	3, 16
South Yorkshire Light Rail Limited	100.00		53
Swan National Limited (In Liquidation)	100.00		8
The Venture Catalysts Limited (In Liquidation)	100.00		2, 8
Trinkaus Europa Immobilien-Fonds Nr.3 Objekt Utrecht Verwaltungs-GmbH	100.00	(99.99)	4, 24
Trinkaus Immobilien-Fonds Geschaeftsfuehrungs-GmbH	100.00	(99.99)	4, 24
Trinkaus Immobilien-Fonds Verwaltungs-GmbH	100.00	(99.99)	4, 24
Trinkaus Private Equity Management GmbH	100.00	(99.99)	4, 24
Trinkaus Private Equity Verwaltungs GmbH	100.00	(99.99)	4, 24
Valeurs Mobilières Elysées	100.00	(99.99)	3, 16
Woodex Limited	100.00		11

Joint ventures

The undertakings below are joint ventures and equity accounted.

Joint Ventures	% of share class held by immediate parent company (or by HSBC Bank plc where this varies)	Footnotes
HCM Holdings Limited (In Liquidation)	50.99	8
MK HoldCo Limited	50.32	1, 37
ProServe Bermuda Limited	50.00	38
The London Silver Market Fixing Limited	n/a	0, 1, 2, 39

Associates

The undertakings below are associates and equity accounted.

Associates	% of share class held by immediate parent company (or by HSBC Bank plc where this varies)	Footnotes
BGF Group plc	24.62	40
Bud Financial Limited	4.84	1, 41
Contour Pte Ltd	9.87	1, 42
Divido Financial Services Limited	7.70	1, 43
Episode Six Inc.	5.69	1, 44
Euro Secured Notes Issuer	16.67	45
LiquidityMatch LLC	n/a	0, 1, 46
London Precious Metals Clearing Limited	30.00	1, 2, 47
Monese Ltd	5.39	1, 48
Quantexa Limited	9.36	49
Services Epargne Entreprise	14.18	50
Threadneedle Software Holdings Limited	7.10	1, 51
Trade Information Network Limited	12.76	1, 52
Trinkaus Europa Immobilien-Fonds Nr. 7 Frankfurt Mertonviertel KG	n/a	0, 24
We Trade Innovation Designated Activity Company (In Liquidation)	9.88	1, 33

Footnotes
0	Where an entity is governed by voting rights, HSBC consolidates when it holds - directly or indirectly - the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC's consolidation policy is described in Note 1.2(a).
1	Management has determined that these undertakings are excluded from consolidation in the group accounts as these entities do not meet the definition of subsidiaries in accordance with IFRS Accounting Standards. HSBC's consolidation policy is described in Note 1.2(a).
2	Directly held by HSBC Bank plc
Description of shares
3	Actions
4	GmbH Anteil
5	Parts
6	Russian Limited Liability Company Shares
7	Preference Shares
Registered offices
8	c/o Teneo Financial Advisory Limited, The Colmore Building, 20 Colmore Circus, Queensway, Birmingham, United Kingdom, B4 6AT
9	5 Donegal Square South, Northern Ireland, Belfast, United Kingdom, BT1 5JP


Registered offices
10	Arnold House, St Julians Avenue, St Peter Port, Guernsey, GY1 3NF
11	37 Front Street, Harbourview Centre, Ground Floor, Hamilton, Pembroke, Bermuda, HM 11
12	HSBC Main Building, 1 Queen's Road Central, Hong Kong
13	Oak House Hirzel Street, St Peter Port, Guernsey, GY1 2NP
14	Solidere - Rue Saad Zaghloul Immeuble - 170 Marfaa, P.O. Box 17 5476 Mar Michael, Beyrouth, Lebanon, 11042040
15	c/o Walkers Corporate Services Limited, Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands, KY1-9005
16	38 avenue Kléber, Paris, France, 75116
17	Immeuble Cœur Défense, 110 esplanade du Général de Gaulle, Courbevoie, France, 92400
18	HSBC House Esplanade, St. Helier, Jersey, JE4 8UB
19	2 Paveletskaya Square Building 2, Moscow, Russia, 115054
20	90 Area 42 Paronyan Street, Yerevan, Armenia, 0015
21	116 Archbishop Street, Valletta, Malta
22	P.O. Box 1109, Strathvale House, Ground Floor, 90 North Church Street, George Town, Grand Cayman, Cayman Islands, KY1-1102
23	HSBC House Esplanade, St. Helier, Jersey, JE1 1HS
24	Hansaallee 3, Düsseldorf, Germany, 40549
25	80 Mill Street, Qormi, Malta, QRM 3101
26	P.O. Box 309, Ugland House, Grand Cayman, Cayman Islands, KY1-1104
27	Unit 401, Level 4, Gate Precinct Building 2, Dubai International Financial Centre, P. O. Box 506553, Dubai, United Arab Emirates
28	HSBC House Esplanade, St. Helier, Jersey, JE1 1GT
29	1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland, D02 P820
30	6th Floor, HSBC Centre 18, Cybercity, Ebene, Mauritius, 72201
31	18 Boulevard de Kockelscheuer, Luxembourg, Luxembourg, 1821
32	5 rue Heienhaff, Senningerberg, Luxembourg, L-1736
33	10 Earlsfort Terrace, Dublin, Ireland, D02 T380
34	1 Mutual Place, 107 Rivonia Road, Sandton, Gauteng, South Africa, 2196
35	16 Boulevard d'Avranches, Luxembourg, L-1160
36	3 Hansaallee, Düsseldorf, Nordrhein-Westfalen, Germany, 40549
37	35 Ballards Lane, London, United Kingdom, N3 1XW
38	c/o MUFG Fund Services (Bermuda) Limited, Cedar House, 4th Floor North, 41 Cedar Avenue, Hamilton, Bermuda, HM12
39	27 Old Gloucester Street, London, United Kingdom, WC1N 3AX
40	13-15 York Buildings, London, United Kingdom, WC2N 6JU
41	167-169 Great Portland Street, 5th Floor, London, United Kingdom, W1W 5PF
42	1 Harbourfront Avenue, #14-07 Keppel Bay Tower, Singapore, 098632
43	Office 7, 35-37 Ludgate Hill, London, United Kingdom, EC4M 7JN
44	251 Little Falls Drive, New Castle, Wilmington, United States of America, 19808
45	3 avenue de l'Opera, Paris, France, 75001
46	100 Town Square Place, Suite 201, Jersey City, New Jersey, United States of America, 07310
47	7th Floor, 62 Threadneedle Street, London, United Kingdom, EC2R 8HP
48	Eagle House, 163 City Road, London, United Kingdom, EC1V 1NR
49	Hill House, 1 Little New Street, London, United Kingdom, EC4A 3TR
50	32 rue du Champ de Tir, Nantes, France, 44300
51	2nd Floor, Regis House, 45 King William Street, London, United Kingdom, EC4R 9AN
52	3 More London Riverside, London, United Kingdom, SE1 2AQ
53	8 Canada Square, London, United Kingdom, E14 5HQ

HSBC Bank plc

8 Canada Square

London E14 5HQ

United Kingdom

Telephone: 44 020 7991 8888

www.hsbc.co.uk

Registered number 00014259

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