Standard Chartered PLC - Additional Financial
information
Highlights
Standard Chartered PLC (the Group) today
releases its results for the year ended 31 December 2023. The
following pages provide additional information related to the
announcement.
Table of contents
Risk review and Capital
review
|
|
Risk profile
|
2
|
Enterprise Risk Management
Framework
|
67
|
Principal risks
|
74
|
Capital review
|
94
|
Statement of directors'
responsibilities
|
100
|
Shareholder information
|
102
|
Risk profile
Credit Risk (audited)
Basis of preparation
Unless otherwise stated the balance sheet and
income statement information presented within this section is based
on the Group's management view. This is principally the location
from which a client relationship is managed, which may differ from
where it is financially booked and may be shared between businesses
and/or regions. This view reflects how the client segments and
regions are managed internally.
Loans and advances to customers and banks held
at amortised cost in this Risk profile section include reverse
repurchase agreement balances held at amortised cost, per Note 16
Reverse repurchase and repurchase agreements including other
similar secured lending and borrowing.
Credit Risk overview
Credit Risk is the potential for loss due to the
failure of a counterparty to meet its contractual obligations to
pay the Group. Credit exposures arise from both the banking and
trading books.
Impairment model
IFRS 9 mandates an impairment model that
requires the recognition of expected credit losses (ECL) on all
financial debt instruments held at amortised cost, Fair Value
through Other Comprehensive Income (FVOCI), undrawn loan
commitments and financial guarantees.
Staging of financial instruments
Financial instruments that are not already
credit-impaired are originated into stage 1 and a 12-month expected
credit loss provision is recognised.
Instruments will remain in stage 1 until they
are repaid, unless they experience significant credit deterioration
(stage 2) or they become credit-impaired (stage 3).
Instruments will transfer to stage 2 and a
lifetime expected credit loss provision is recognised when there
has been a significant change in the Credit Risk compared to what
was expected at origination.
The framework used to determine a significant
increase in credit risk is set out below.
Stage 2
• Lifetime expected
credit loss
• Performing but has
exhibited significant increase in Credit Risk (SICR)
Stage 3
•
Credit-impaired
•
Non-performing
Stage 1
• 12-month
ECL
• Performing
IFRS 9 expected credit loss principles and
approaches
The main methodology principles and approach
adopted by the Group are set out in the following table.
Title
|
Supplementary Information
|
Approach for determining expected credit
losses
|
IFRS 9 methodology
Determining lifetime expected credit loss for
revolving products
Post model adjustments
|
Incorporation of forward-looking
information
|
Incorporation of forward-looking
information
Forecast of key macroeconomic variables
underlying the expected credit loss calculation and the impact of
non-linearity
Judgemental adjustments and sensitivity to
macroeconomic variables
|
Significant increase in credit risk
(SICR)
|
Quantitative and qualitative
criteria
|
Assessment of credit-impaired financial
assets
|
Consumer and Business Banking
clients
CCIB and Private Banking clients
Write-offs
|
Transfers between stages
|
Movement in loan exposures and expected credit
losses
|
Modified financial assets
|
Forbearance and other modified loans
|
Governance and application of expert credit
judgement in respect of expected credit losses
|
|
Summary of performance in 2023
Loans and Advances
94 per cent (31 December 2022: 93 per cent) of
the Group's gross loans and advances to customers remain in stage 1
at $273.7 billion (31 December 2022: $295.2 billion), reflecting
our continued focus on high-quality origination.
Stage 1 loans decreased by $21.5 billion to $274
billion (31 December 2022: $295 billion). For Corporate, Commercial
and Institutional Banking (CCIB), stage 1 balances increased to 90
per cent of the gross loans and advances to customers (31 December
2022: 88 per cent), while there was an overall decrease due to
reductions in the financing, insurance and non-banking sectors.
Stage 1 balances for Consumer, Private and Business Banking (CPBB)
decreased by $5.6 billion, mainly driven by a slowdown in mortgages
sales in Korea and Hong Kong, which was partly offset by new Credit
Cards and Personal Loans businesses in Asia. Stage 1 balances for
Central and other items decreased by $10.8 billion due to exposure
reductions to a Central Bank in the Asia region. Stage 1 cover
ratio remained stable at 0.2 per cent (31 December 2022: 0.2 per
cent).
Stage 2 gross loans and advances to customers
decreased by $1.8 billion to $11.2 billion (31 December 2022: $13
billion). This was due to CCIB exposure reductions and transfers to
stage 3 in the Commercial Real Estate (CRE) sector, and exposure
reductions in the Transport sector. This was partially offset by an
increase in CPBB Korea and Hong Kong Mortgage portfolio and
Singapore Private Banking. Higher risk exposure net increase of $1
billion from Central and other items, was due to a short-term
exposure to a Central Bank in the Africa and Middle East region,
which was partly offset by exposure reductions and transfers to
stage 3 in CCIB. Stage 2 cover ratio increased by 0.3 per cent to
3.7 per cent (31 December 2022: 3.4 per cent). The increase was
driven by Ventures due to increased delinquencies and portfolio
growth mainly in Mox Bank. The increase in CCIB cover ratio was due
to a decrease in expected credit losses from exposure reductions
and transfers to Stage 3. The decrease in CPBB stage 2 cover ratio
was mainly due to an increase in secured portfolio exposures with
relatively lower Loss Given Default.
Stage 3 loans decreased by $0.6 billion to $7.2
billion (31 December 2022: $7.8 billion) as a result of repayments,
debt sales and write-offs in CCIB. Although the portfolio reduced
year on year, China CRE clients were the major inflows this year.
The CCIB stage 3 cover ratio increased by 4.5 per cent to 64 per
cent as a result of repayments and incremental provisions taken (31
December 2022: 60 per cent). The CPBB stage 3 cover ratio reduced
by 2.2 per cent to 51 per cent (31 December 2022: 53 per cent), due
to a small exposure increase mainly in Secured wealth products.
Ventures stage 3 exposures increased by $11 million to $12 million
(31 December 2022: $1 million). The cover ratio after collateral
remained stable at 76 per cent (31 December 2022: 76 per
cent)
Further details can be found in the 'Analysis of
financial instruments by stage' section; 'Credit quality by client
segment' section; 'Credit quality by industry' section. Stage 3
cover ratio is also disclosed in the 'Stage 3 cover ratio' and
'Credit-impaired (stage 3) loans and advances by geographic region'
sections.
Maximum exposure
The Group's on-balance sheet maximum exposure to
Credit Risk increased by $8.6 billion to $798 billion (31 December
2022: $790 billion). Cash at Central bank increased by $11.6
billion to $70 billion (31 December 2022: $58 billion) due to
deposits placed with the US Federal Reserve. Loans to banks also
increased by $5 billion to $45 billion (31 December 2022: $40
billion). Fair Value through profit and loss increased by $42
billion to $144 billion (31 December 2022: $103 billion), largely
due to an increase in Debt Securities and Reverse Repos. This was
partly offset by a $13 billion decrease in Derivative financial
instruments, and a $23.7 billion decrease in loans and advances to
customers to $287 billion (31 December 2022: $311 billion). Out of
the $23.7 billion decrease in loans and advances to customers, a
$10.5 billion reduction relates to reverse repos, and a $11 billion
reduction relates to Amortised Cost Debt Securities, as part of the
Group's liquidity management actions. Off-balance sheet instruments
increased by $28 billion to $257 billion (31 December 2022: $229
billion), which was driven by new businesses.
Further details can be found in the 'Maximum
exposure to Credit Risk'section.
Analysis of stage 2
The key SICR driver that caused exposures to be
classified as stage 2 remains increase in probability of default.
The proportion of exposures in CCIB in stage 2 due to increased PD
has decreased partly due to an increase in clients placed on
non-purely precautionary early alert that have not breached PD
thresholds. In CPBB, the proportion of loans in stage 2 loans from
30 days past due trigger decreased by 2 per cent to 6 per cent (31
December 2022: 8 per cent). 'Others' category includes exposures
where origination data is incomplete and the exposures are getting
allocated into stage 2.
Further details can be found in the 'Analysis of
stage 2 balances' section.
Credit impairment charges
The Group's ongoing credit impairment was a net
charge of $508 million (31 December 2022: $836 million).
For CCIB, stage 1 and 2 impairment charges
decreased by $137 million to $11 million (31 December 2022: $148
million), as 2022 included Pakistan Sovereign downgrades and China
CRE overlays, which was partly offset by a $102 million full
release of COVID-19 overlay. In 2023, $11 million impairment
charges were due to portfolio movements, including impairments on
Pakistan Sovereign clients, and China CRE overlays, which was
partly offset by a $13 million net release from model and
methodology updates.
CCIB stage 3 impairment charges decreased by
$165 million to $112 million (31 December 2022: $277 million)
largely due to higher releases and lower impairments on China CRE
clients. In 2023, $112 million impairment charges were largely
driven by impairments on China CRE clients, and releases across
multiple clients.
For CPBB, stage 1 and 2 impairment charges
decreased by $22 million to $129 million (31 December 2022: $151
million). In 2023, $129 million impairment charges were from normal
flows, largely from unsecured portfolios in China, Hong Kong, India
and Singapore. This was partially offset by $21 million of COVID-19
overlay releases, including the full release of $16 million
remaining COVID-19 overlays in Bahrain.
CPBB stage 3 impairment charges increased by
$114 million to $225 million (31 December 2022: $111 million). The
increase has been driven mainly by the unsecured business due to a
mix of higher bankruptcies in Singapore, Hong Kong and Korea, and
portfolio growth in digital partnerships.
For Ventures, stage 1 and 2 impairment charges
increased by $29 million to $42 million (31 December 2022: $13
million), mainly due to portfolio growth in Mox Bank.
Ventures stage 3 impairment charges increased by
$40 million to $43 million (31 December 2022: $3 million), mainly
due to portfolio growth in Mox Bank, and higher bankruptcies.
Mitigating actions have been taken to address these.
For Central and other items, stage 1 and 2
impairment charges decreased by $139 million due to a net release
of $44 million (31 December 2022: $95 million) as 2022 included
Pakistan Sovereign CG12 downgrades. In 2023, $44 million net
release of impairment charges were driven by exposure reductions
and shortening tenors of balances to the Pakistan Government. This
was partly offset by a $8 million charge due to Kenya Sovereign
downgrade.
Central and other items stage 3 impairment
charges decreased by $28 million to $10 million (31 December 2022:
$38 million) as Sri Lanka and Ghana exposures were downgraded to
Stage 3 in 2022.
Further details can be found in the 'Credit
impairment charge' section.
Vulnerable and Cyclical Sectors
Total net on-balance sheet exposure to
vulnerable and cyclical sectors decreased by $3 billion to $29
billion (31 December 2022: $32 billion) largely due to the exit of
the Aviation business and lower drawn balances particularly in the
CRE sector, where on-balance sheet exposure decreased by $1.8
billion to $14.5 billion (31 December 2022: $16.3 billion). Stage 2
vulnerable and cyclical sector loans decreased by $2.3 billion to
$3.3 billion (31 December 2022: $5.6 billion), primarily driven by
a $1.4 billion exposure reduction in the CRE sector and transfers
to Stage 3. Stage 3 vulnerable and cyclical sector loans decreased
by $0.5 billion to $3.6 billion (31 December 2022: $4 billion),
mainly due to the Oil and Gas, and Commodity sectors, which was
partly offset by new inflows into the CRE sector.
The Group provides loans to CRE counterparties
of which $9.6 billion is to counterparties in the CCIB segment
where the source of repayment is substantially derived from rental
or sale of real estate and is secured by real estate collateral.
The remaining CRE loans comprise working capital loans to real
estate corporates, loans with non-property collateral, unsecured
loans and loans to real estate entities of diversified
conglomerates. The average LTV ratio of the performing book CRE
portfolio has increased to 52 per cent (31 December 2022: 49 per
cent). The proportion of loans with an LTV greater than 80 per cent
has increased to 3 per cent (31 December 2022: 1 per
cent).
Further details can be found in the 'Vulnerable,
cyclical and high carbon sectors' section.
China commercial real estate
Total exposure to China CRE decreased by $0.8
billion to $2.6 billion (31 December 2022: $3.4 billion) mainly
from exposure reductions. The proportion of credit impaired
exposures increased to 58 per cent (31 December 2022: 33 per cent)
as market conditions continued to deteriorate during the period,
and provision coverage increased to 72 per cent (31 December 2022:
56 per cent) reflecting increased provision charges during the
period. The proportion of the loan book rated as Higher Risk
decreased by 8 per cent to 0.3 per cent (31 December 2022: 8.4 per
cent) primarily due to downgrades in the period.
The Group continues to hold a judgemental
management overlay, which decreased by $32 million to $141 million
(31 December 2022: $173 million), reflecting changes in the
portfolio and downgrades to Stage 3.
The Group is further indirectly exposed to China
CRE through its associate investment in China Bohai
Bank.
Further details can be found in the 'China
commercial real estate' section.
Management adjustments
Given the evolving nature of the risks in the
China CRE sector, a management overlay of $141 million (31 December
2022: $173 million) has been taken by estimating the impact of
further deterioration to exposures in this sector. Overlays of $5
million (31 December 2022: $16 million) have been applied in CPBB
to capture macroeconomic environment challenges caused by sovereign
defaults or heightened sovereign risk and an overlay of $17 million
(31 December 2022: nil) was applied in Central and other items, due
to a temporary market dislocation in the Africa and Middle
East.
The remaining COVID-19 overlay in CPBB of $21
million that was held at 31 December 2022 has been fully released
in 2023. The stage 3 overlay in CCIB of $9 million that was held at
31 December 2022, following the Sri Lanka Sovereign default was
also fully released in 2023.
Further details can be found in the 'Judgemental
management overlays' section. Model performance and judgemental
post model adjustments are also disclosed in the 'Model performance
post model adjustments' section.
Maximum exposure to Credit Risk
(audited)
The table below presents the Group's maximum
exposure to credit risk for its on-balance sheet and off-balance
sheet financial instruments as at 31 December 2023, before and
after taking into account any collateral held or other credit risk
mitigation.
|
2023
|
|
2022
|
Maximum exposure
$million
|
Credit risk management
|
Net Exposure
$million
|
Maximum exposure
$million
|
Credit risk management
|
Net exposure
$million
|
Collateral8
$million
|
Master netting agreements
$million
|
Collateral8
$million
|
Master netting agreements
$million
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
69,905
|
|
|
69,905
|
|
58,263
|
|
|
58,263
|
Loans and advances to banks1
|
44,977
|
1,738
|
|
43,239
|
|
39,519
|
978
|
|
38,541
|
of which - reverse repurchase agreements and
other similar
secured lending7
|
1,738
|
1,738
|
|
-
|
|
978
|
978
|
|
-
|
Loans and advances to customers1
|
286,975
|
118,492
|
|
168,483
|
|
310,647
|
135,194
|
|
175,453
|
of which - reverse repurchase agreements and
other similar
secured lending7
|
13,996
|
13,996
|
|
-
|
|
24,498
|
24,498
|
|
-
|
Investment securities - Debt securities and
other eligible bills2
|
160,263
|
|
|
160,263
|
|
171,640
|
|
|
171,640
|
Fair value through profit or loss3, 7
|
144,276
|
81,847
|
-
|
62,429
|
|
102,575
|
64,491
|
-
|
38,084
|
Loans and advances to banks
|
2,265
|
|
|
2,265
|
|
976
|
|
|
976
|
Loans and advances to customers
|
7,212
|
|
|
7,212
|
|
6,546
|
|
|
6,546
|
Reverse repurchase agreements and other similar
lending7
|
81,847
|
81,847
|
|
-
|
|
64,491
|
64,491
|
|
-
|
Investment securities - Debt securities and
other eligible bills2
|
52,952
|
|
|
52,952
|
|
30,562
|
|
|
30,562
|
Derivative financial instruments4, 7
|
50,434
|
8,440
|
39,293
|
2,701
|
|
63,717
|
9,206
|
50,133
|
4,378
|
Accrued income
|
2,673
|
|
|
2,673
|
|
2,706
|
|
|
2,706
|
Assets held for sale9
|
701
|
|
|
701
|
|
1,388
|
|
|
1,388
|
Other assets5
|
38,140
|
|
|
38,140
|
|
39,295
|
|
|
39,295
|
Total balance sheet
|
798,344
|
210,517
|
39,293
|
548,534
|
|
789,750
|
209,869
|
50,133
|
529,748
|
Off-balance sheet6
|
|
|
|
|
|
|
|
|
|
Undrawn Commitments
|
182,390
|
2,940
|
|
179,450
|
|
168,668
|
2,951
|
|
165,717
|
Financial Guarantees and
other equivalents
|
74,414
|
2,590
|
|
71,824
|
|
60,410
|
2,592
|
|
57,818
|
Total off-balance sheet
|
256,804
|
5,530
|
-
|
251,274
|
|
229,078
|
5,543
|
-
|
223,535
|
Total
|
1,055,148
|
216,047
|
39,293
|
799,808
|
|
1,018,828
|
215,412
|
50,133
|
753,283
|
1. An analysis of credit
quality is set out in the credit quality analysis section. Further
details of collateral held by client segment and stage are set out
in the collateral analysis section
2. Excludes equity and other
investments of $992 million (31 December 2022: $808 million).
Further details are set out in Note 13 financial
instruments
3. Excludes equity and other
investments of $2,940 million (31 December 2022: $3,230 million).
Further details are set out in Note 13 financial
instruments
4 The Group enters
into master netting agreements, which in the event of default
result in a single amount owed by or to the counterparty through
netting the sum of the positive and negative mark-to-market values
of applicable derivative transactions
5. Other assets include Hong
Kong certificates of indebtedness, cash collateral, and
acceptances, in addition to unsettled trades and other financial
assets
6. Excludes ECL allowances
which are reported under Provisions for liabilities and
charges
7. Collateral capped at
maximum exposure (over-collateralised)
8. Adjusted for
over-collateralisation, which has been determined with reference to
the drawn and undrawn component as this best reflects the effect on
the amount arising from expected credit losses
9. The amount is after ECL.
Further details are set out in Note 21 Assets held for sale and
associated liabilities
Analysis of financial instruments by stage
(audited)
The table below presents the gross and credit
impairment balances by stage for the Group's amortised cost and
FVOCI financial instruments as at 31 December 2023.
|
2023
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Cash and balances at central banks
|
69,313
|
-
|
69,313
|
|
207
|
(7)
|
200
|
|
404
|
(12)
|
392
|
|
69,924
|
(19)
|
69,905
|
Loans and advances
to banks (amortised cost)
|
44,384
|
(8)
|
44,376
|
|
540
|
(10)
|
530
|
|
77
|
(6)
|
71
|
|
45,001
|
(24)
|
44,977
|
Loans and advances to customers (amortised
cost)
|
273,692
|
(430)
|
273,262
|
|
11,225
|
(420)
|
10,805
|
|
7,228
|
(4,320)
|
2,908
|
|
292,145
|
(5,170)
|
286,975
|
Debt securities and other
eligible bills5
|
158,314
|
(26)
|
|
|
1,860
|
(34)
|
|
|
164
|
(61)
|
|
|
160,338
|
(121)
|
|
Amortised cost
|
56,787
|
(16)
|
56,771
|
|
103
|
(2)
|
101
|
|
120
|
(57)
|
63
|
|
57,010
|
(75)
|
56,935
|
FVOCI2
|
101,527
|
(10)
|
|
|
1,757
|
(32)
|
|
|
44
|
(4)
|
|
|
103,328
|
(46)
|
-
|
Accrued income (amortised cost)4
|
2,673
|
-
|
2,673
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
2,673
|
-
|
2,673
|
Assets held
for sale4
|
661
|
(33)
|
628
|
|
76
|
(4)
|
72
|
|
1
|
-
|
1
|
|
738
|
(37)
|
701
|
Other assets
|
38,139
|
-
|
38,139
|
|
-
|
-
|
-
|
|
4
|
(3)
|
1
|
|
38,143
|
(3)
|
38,140
|
Undrawn commitments3
|
176,654
|
(52)
|
|
|
5,733
|
(39)
|
|
|
3
|
-
|
|
|
182,390
|
(91)
|
|
Financial guarantees,
trade credits
and irrevocable letter of credits3
|
70,832
|
(10)
|
|
|
2,910
|
(14)
|
|
|
672
|
(112)
|
|
|
74,414
|
(136)
|
|
Total
|
834,662
|
(559)
|
|
|
22,551
|
(528)
|
|
|
8,553
|
(4,514)
|
|
|
865,766
|
(5,601)
|
|
1 Gross carrying
amount for off-balance sheet refers to notional values
2 These instruments
are held at fair value on the balance sheet. The ECL provision in
respect of debt securities measured at FVOCI is held within the OCI
reserve
3 These are
off-balance sheet instruments. Only the ECL is recorded on-balance
sheet as a financial liability and therefore there is no "net
carrying amount". ECL allowances on off-balance sheet instruments
are held as liability provisions to the extent that the drawn and
undrawn components of loan exposures can be separately identified.
Otherwise they will be reported against the drawn
component
4 Stage 1 ECL is not
material
5 Stage 3 gross
includes $80 million (31 December 2022: $28 million) originated
credit-impaired debt securities with impairment of $14 million (31
December 2022: $13 million)
|
2022
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net carrying value
$million
|
Cash and balances at central banks
|
57,643
|
-
|
57,643
|
|
333
|
(8)
|
325
|
|
295
|
-
|
295
|
|
58,271
|
(8)
|
58,263
|
Loans and advances
to banks (amortised cost)
|
39,149
|
(9)
|
39,140
|
|
337
|
(3)
|
334
|
|
59
|
(14)
|
45
|
|
39,545
|
(26)
|
39,519
|
Loans and advances to customers (amortised
cost)
|
295,219
|
(559)
|
294,660
|
|
13,043
|
(444)
|
12,599
|
|
7,845
|
(4,457)
|
3,388
|
|
316,107
|
(5,460)
|
310,647
|
Debt securities and other eligible
bills5
|
166,103
|
(25)
|
|
|
5,455
|
(90)
|
|
|
144
|
(106)
|
|
|
171,702
|
(221)
|
|
Amortised cost
|
59,427
|
(9)
|
59,418
|
|
271
|
(2)
|
269
|
|
78
|
(51)
|
27
|
|
59,776
|
(62)
|
59,714
|
FVOCI2
|
106,676
|
(16)
|
|
|
5,184
|
(88)
|
|
|
66
|
(55)
|
|
|
111,926
|
(159)
|
|
Accrued income (amortised cost)4
|
2,706
|
-
|
2,706
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
2,706
|
-
|
2,706
|
Assets held
for sale4
|
1,083
|
(6)
|
1,077
|
|
262
|
(4)
|
258
|
|
120
|
(67)
|
53
|
|
1,465
|
(77)
|
1,388
|
Other assets
|
39,294
|
-
|
39,294
|
|
-
|
-
|
-
|
|
4
|
(3)
|
1
|
|
39,298
|
(3)
|
39,295
|
Undrawn commitments3
|
162,958
|
(41)
|
|
|
5,582
|
(53)
|
|
|
128
|
-
|
|
|
168,668
|
(94)
|
|
Financial guarantees,
trade credits
and irrevocable letter of credits3
|
56,683
|
(11)
|
|
|
3,062
|
(28)
|
|
|
665
|
(147)
|
|
|
60,410
|
(186)
|
|
Total
|
820,838
|
(651)
|
|
|
28,074
|
(630)
|
|
|
9,260
|
(4,794)
|
|
|
858,172
|
(6,075)
|
|
1 Gross carrying
amount for off-balance sheet refers to notional values
2 These instruments
are held at fair value on the balance sheet. The ECL provision in
respect of debt securities measured at FVOCI is held within the OCI
reserve
3 These are
off-balance sheet instruments. Only the ECL is recorded on-balance
sheet as a financial liability and therefore there is no "net
carrying amount". ECL allowances on off-balance sheet instruments
are held as liability provisions to the extent that the drawn and
undrawn components of loan exposures can be separately identified.
Otherwise they will be reported against the drawn
component
4 Stage 1 ECL is not
material
5 Stage 3 gross
includes $28 million originated credit-impaired debt securities
with impairment of $13 million
Credit quality analysis (audited)
Credit quality by client segment
For CCIB, exposures are analysed by credit grade
(CG), which plays a central role in the quality assessment and
monitoring of risk. All loans are assigned a CG, which is reviewed
periodically and amended in light of changes in the borrower's
circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and
stage 2 (performing) clients or accounts, while CGs 13 and 14 are
assigned to stage 3 (credit-impaired) clients. Consumer and
Business Banking portfolios are analysed by days past due and
Private Banking by the type of collateral held.
Mapping of credit quality
The Group uses the following internal risk
mapping to determine the credit quality for loans.
Credit quality description
|
Corporate, Commercial & Institutional
Banking
|
|
Private Banking1
|
|
Consumer & Business Banking5
|
Internal grade mapping
|
S&P external ratings
equivalent
|
Regulatory
PD range (%)
|
Internal ratings
|
Internal grade mapping
|
Strong
|
1A to 5B
|
AAA/AA+ to BBB-/BB+²
|
0 to 0.425
|
|
Class I and Class IV
|
|
Current loans (no past dues nor
impaired)
|
Satisfactory
|
6A to 11C
|
BB+/BB to B-/CCC+³
|
0.426 to 15.75
|
|
Class II and Class III
|
|
Loans past due till 29 days
|
Higher risk
|
Grade 12
|
CCC+ to C⁴
|
15.751 to 99.999
|
|
Stressed Assets Group (SAG) managed
|
|
Past due loans 30 days and over
till 90 days
|
1 For Private Banking,
classes of risk represent the type of collateral held. Class I
represents facilities with liquid collateral, such as cash and
marketable securities. Class II represents unsecured/partially
secured facilities and those with illiquid collateral, such as
equity in private enterprises. Class III represents facilities with
residential or commercial real estate collateral. Class IV covers
margin trading facilities
2 Banks' rating:
AAA/AA+ to BB+. Sovereigns' rating: AAA to BB+
3 Banks' rating: BB to
"CCC+ to C". Sovereigns' rating: BB+/BB to B-/CCC+
4 Banks' rating: CCC+
to C. Sovereigns' rating: CCC+ to "CCC+ to C"
5 Medium enterprise
clients within Business Banking are managed using the same internal
credit grades as CCIB
The table below sets out the gross loans and
advances held at amortised cost, expected credit loss provisions
and expected credit loss coverage by business segment and stage.
Expected credit loss coverage represents the expected credit loss
reported for each segment and stage as a proportion of the gross
loan balance for each segment and stage.
Loans and advances by client segment
(audited)
Amortised cost
|
2023
|
Banks
$million
|
|
Customers
|
|
Undrawn commitments
$million
|
Financial Guarantees
$million
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Central &
other items
$million
|
Customer Total
$million
|
Stage 1
|
44,384
|
|
120,886
|
123,486
|
1,015
|
28,305
|
273,692
|
|
176,654
|
70,832
|
- Strong
|
35,284
|
|
84,248
|
118,193
|
1,000
|
27,967
|
231,408
|
|
162,643
|
47,885
|
- Satisfactory
|
9,100
|
|
36,638
|
5,293
|
15
|
338
|
42,284
|
|
14,011
|
22,947
|
Stage 2
|
540
|
|
7,902
|
2,304
|
54
|
965
|
11,225
|
|
5,733
|
2,910
|
- Strong
|
55
|
|
1,145
|
1,761
|
34
|
-
|
2,940
|
|
1,090
|
830
|
- Satisfactory
|
212
|
|
5,840
|
206
|
7
|
-
|
6,053
|
|
4,169
|
1,823
|
- Higher risk
|
273
|
|
917
|
337
|
13
|
965
|
2,232
|
|
474
|
257
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
-
|
|
78
|
206
|
7
|
-
|
291
|
|
-
|
-
|
- More than 30 days past due
|
-
|
|
10
|
337
|
13
|
-
|
360
|
|
-
|
-
|
Stage 3, credit-impaired
financial assets
|
77
|
|
5,508
|
1,484
|
12
|
224
|
7,228
|
|
3
|
672
|
Gross balance¹
|
45,001
|
|
134,296
|
127,274
|
1,081
|
29,494
|
292,145
|
|
182,390
|
74,414
|
Stage 1
|
(8)
|
|
(101)
|
(314)
|
(15)
|
-
|
(430)
|
|
(52)
|
(10)
|
- Strong
|
(3)
|
|
(34)
|
(234)
|
(14)
|
-
|
(282)
|
|
(31)
|
(2)
|
- Satisfactory
|
(5)
|
|
(67)
|
(80)
|
(1)
|
-
|
(148)
|
|
(21)
|
(8)
|
Stage 2
|
(10)
|
|
(257)
|
(141)
|
(21)
|
(1)
|
(420)
|
|
(39)
|
(14)
|
- Strong
|
(1)
|
|
(18)
|
(65)
|
(14)
|
-
|
(97)
|
|
(5)
|
-
|
- Satisfactory
|
(2)
|
|
(179)
|
(22)
|
(3)
|
-
|
(204)
|
|
(23)
|
(7)
|
- Higher risk
|
(7)
|
|
(60)
|
(54)
|
(4)
|
(1)
|
(119)
|
|
(11)
|
(7)
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
-
|
|
(2)
|
(22)
|
(3)
|
-
|
(27)
|
|
-
|
-
|
- More than 30 days past due
|
-
|
|
(1)
|
(54)
|
(4)
|
-
|
(59)
|
|
-
|
-
|
Stage 3, credit-impaired
financial assets
|
(6)
|
|
(3,533)
|
(760)
|
(12)
|
(15)
|
(4,320)
|
|
-
|
(112)
|
Total credit impairment
|
(24)
|
|
(3,891)
|
(1,215)
|
(48)
|
(16)
|
(5,170)
|
|
(91)
|
(136)
|
Net carrying value
|
44,977
|
|
130,405
|
126,059
|
1,033
|
29,478
|
286,975
|
|
|
|
Stage 1
|
0.0%
|
|
0.1%
|
0.3%
|
1.5%
|
0.0%
|
0.2%
|
|
0.0%
|
0.0%
|
- Strong
|
0.0%
|
|
0.0%
|
0.2%
|
1.4%
|
0.0%
|
0.1%
|
|
0.0%
|
0.0%
|
- Satisfactory
|
0.1%
|
|
0.2%
|
1.5%
|
6.7%
|
0.0%
|
0.4%
|
|
0.1%
|
0.0%
|
Stage 2
|
1.9%
|
|
3.3%
|
6.1%
|
38.9%
|
0.1%
|
3.7%
|
|
0.7%
|
0.5%
|
- Strong
|
1.8%
|
|
1.6%
|
3.7%
|
41.2%
|
0.0%
|
3.3%
|
|
0.5%
|
0.0%
|
- Satisfactory
|
0.9%
|
|
3.1%
|
10.7%
|
42.9%
|
0.0%
|
3.4%
|
|
0.6%
|
0.4%
|
- Higher risk
|
2.6%
|
|
6.5%
|
16.0%
|
30.8%
|
0.1%
|
5.3%
|
|
2.3%
|
2.7%
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
0.0%
|
|
2.6%
|
10.7%
|
42.9%
|
0.0%
|
9.3%
|
|
0.0%
|
0.0%
|
- More than 30 days past due
|
0.0%
|
|
10.0%
|
16.0%
|
30.8%
|
0.0%
|
16.4%
|
|
0.0%
|
0.0%
|
Stage 3, credit-impaired
financial assets (S3)
|
7.8%
|
|
64.1%
|
51.2%
|
100.0%
|
6.7%
|
59.8%
|
|
0.0%
|
16.7%
|
Cover ratio
|
0.1%
|
|
2.9%
|
1.0%
|
4.4%
|
0.1%
|
1.8%
|
|
0.0%
|
0.2%
|
Fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
Performing
|
32,813
|
|
58,465
|
13
|
-
|
-
|
58,478
|
|
-
|
-
|
- Strong
|
28,402
|
|
38,014
|
13
|
-
|
-
|
38,027
|
|
-
|
-
|
- Satisfactory
|
4,411
|
|
20,388
|
-
|
-
|
-
|
20,388
|
|
-
|
-
|
- Higher risk
|
-
|
|
63
|
-
|
-
|
-
|
63
|
|
-
|
-
|
Defaulted (CG13-14)
|
-
|
|
33
|
-
|
-
|
-
|
33
|
|
-
|
-
|
Gross balance (FVTPL)2
|
32,813
|
|
58,498
|
13
|
-
|
-
|
58,511
|
|
-
|
-
|
Net carrying value (incl FVTPL)
|
77,790
|
|
188,903
|
126,072
|
1,033
|
29,478
|
345,486
|
|
-
|
-
|
1. Loans and advances
includes reverse repurchase agreements and other similar secured
lending of $13,996 million under Customers and of $1,738 million
under Banks, held at amortised cost
2. Loans and advances
includes reverse repurchase agreements and other similar secured
lending of $51,299 million under Customers and of $30,548 million
under Banks, held at fair value through profit or loss
Amortised cost
|
2022
|
Banks
$million
|
|
Customers
|
|
Undrawn commitments
$million
|
Financial Guarantees
$million
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Central &
other items
$million
|
Customer Total
$million
|
Stage 1
|
39,149
|
|
126,261
|
129,134
|
691
|
39,133
|
295,219
|
|
162,958
|
56,683
|
- Strong
|
27,941
|
|
89,567
|
124,734
|
685
|
39,133
|
254,119
|
|
148,303
|
39,612
|
- Satisfactory
|
11,208
|
|
36,694
|
4,400
|
6
|
-
|
41,100
|
|
14,655
|
17,071
|
Stage 2
|
337
|
|
11,355
|
1,670
|
18
|
-
|
13,043
|
|
5,582
|
3,062
|
- Strong
|
148
|
|
2,068
|
1,215
|
10
|
-
|
3,293
|
|
1,449
|
522
|
- Satisfactory
|
119
|
|
7,783
|
146
|
4
|
-
|
7,933
|
|
3,454
|
2,134
|
- Higher risk
|
70
|
|
1,504
|
309
|
4
|
-
|
1,817
|
|
679
|
406
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
5
|
|
109
|
148
|
4
|
-
|
261
|
|
-
|
-
|
- More than 30 days past due
|
6
|
|
23
|
310
|
4
|
-
|
337
|
|
-
|
-
|
Stage 3, credit-impaired
financial assets
|
59
|
|
6,143
|
1,453
|
1
|
248
|
7,845
|
|
128
|
665
|
Gross balance1
|
39,545
|
|
143,759
|
132,257
|
710
|
39,381
|
316,107
|
|
168,668
|
60,410
|
Stage 1
|
(9)
|
|
(143)
|
(406)
|
(10)
|
-
|
(559)
|
|
(41)
|
(11)
|
- Strong
|
(3)
|
|
(43)
|
(332)
|
(10)
|
-
|
(385)
|
|
(28)
|
(3)
|
- Satisfactory
|
(6)
|
|
(100)
|
(74)
|
-
|
-
|
(174)
|
|
(13)
|
(8)
|
Stage 2
|
(3)
|
|
(323)
|
(120)
|
(1)
|
-
|
(444)
|
|
(53)
|
(28)
|
- Strong
|
-
|
|
(30)
|
(62)
|
(1)
|
-
|
(93)
|
|
(6)
|
-
|
- Satisfactory
|
(2)
|
|
(159)
|
(17)
|
-
|
-
|
(176)
|
|
(42)
|
(15)
|
- Higher risk
|
(1)
|
|
(134)
|
(41)
|
-
|
-
|
(175)
|
|
(5)
|
(13)
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
-
|
|
(2)
|
(17)
|
-
|
-
|
(19)
|
|
-
|
-
|
- More than 30 days past due
|
-
|
|
(1)
|
(41)
|
-
|
-
|
(42)
|
|
-
|
-
|
Stage 3, credit-impaired
financial assets
|
(14)
|
|
(3,662)
|
(776)
|
(1)
|
(18)
|
(4,457)
|
|
-
|
(147)
|
Total credit impairment
|
(26)
|
|
(4,128)
|
(1,302)
|
(12)
|
(18)
|
(5,460)
|
|
(94)
|
(186)
|
Net carrying value
|
39,519
|
|
139,631
|
130,955
|
698
|
39,363
|
310,647
|
|
|
|
Stage 1
|
0.0%
|
|
0.1%
|
0.3%
|
1.4%
|
0.0%
|
0.2%
|
|
0.0%
|
0.0%
|
- Strong
|
0.0%
|
|
0.0%
|
0.3%
|
1.5%
|
0.0%
|
0.2%
|
|
0.0%
|
0.0%
|
- Satisfactory
|
0.1%
|
|
0.3%
|
1.7%
|
0.0%
|
0.0%
|
0.4%
|
|
0.1%
|
0.0%
|
Stage 2
|
0.9%
|
|
2.8%
|
7.2%
|
5.6%
|
0.0%
|
3.4%
|
|
0.9%
|
0.9%
|
- Strong
|
0.0%
|
|
1.5%
|
5.1%
|
10.0%
|
0.0%
|
2.8%
|
|
0.4%
|
0.0%
|
- Satisfactory
|
1.7%
|
|
2.0%
|
11.6%
|
0.0%
|
0.0%
|
2.2%
|
|
1.2%
|
0.7%
|
- Higher risk
|
1.4%
|
|
8.9%
|
13.3%
|
0.0%
|
0.0%
|
9.6%
|
|
0.7%
|
3.2%
|
Of which (stage 2):
|
|
|
|
|
|
|
|
|
|
|
- Less than 30 days past due
|
0.0%
|
|
1.8%
|
11.5%
|
0.0%
|
0.0%
|
7.3%
|
|
0.0%
|
0.0%
|
- More than 30 days past due
|
0.0%
|
|
4.3%
|
13.2%
|
0.0%
|
0.0%
|
12.5%
|
|
0.0%
|
0.0%
|
Stage 3, credit-impaired
financial assets (S3)
|
23.7%
|
|
59.6%
|
53.4%
|
100.0%
|
7.3%
|
56.8%
|
|
0.0%
|
22.1%
|
Cover ratio
|
0.1%
|
|
2.9%
|
1.0%
|
1.7%
|
0.0%
|
1.7%
|
|
0.1%
|
0.3%
|
Fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
Performing
|
24,930
|
|
44,461
|
28
|
-
|
2,557
|
47,046
|
|
-
|
-
|
- Strong
|
21,451
|
|
36,454
|
27
|
-
|
2,409
|
38,890
|
|
-
|
-
|
- Satisfactory
|
3,479
|
|
8,007
|
1
|
-
|
148
|
8,156
|
|
-
|
-
|
- Higher risk
|
-
|
|
-
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Defaulted (CG13-14)
|
-
|
|
37
|
-
|
-
|
-
|
37
|
|
-
|
-
|
Gross balance (FVTPL)2
|
24,930
|
|
44,498
|
28
|
-
|
2,557
|
47,083
|
|
-
|
-
|
Net carrying value (incl FVTPL)
|
64,449
|
|
184,129
|
130,983
|
698
|
41,920
|
357,730
|
|
-
|
-
|
1. Loans and advances
includes reverse repurchase agreements and other similar secured
lending of $24,498 million under Customers and of $978 million
under Banks, held at amortised cost
2. Loans and advances
includes reverse repurchase agreements and other similar secured
lending of $40,537 million under Customers and of $23,954 million
under Banks, held at fair value through profit or loss
Loans and advances by client segment credit
quality analysis
Credit grade
|
Regulatory 1 year
PD range (%)
|
S&P external ratings equivalent
|
Corporate, Commercial & Institutional
Banking
|
2023
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
84,248
|
1,145
|
-
|
85,893
|
|
(34)
|
(18)
|
-
|
(52)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
10,891
|
81
|
-
|
10,972
|
|
(1)
|
-
|
-
|
(1)
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
31,974
|
558
|
-
|
32,532
|
|
(3)
|
-
|
-
|
(3)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
41,383
|
506
|
-
|
41,889
|
|
(30)
|
(18)
|
-
|
(48)
|
Satisfactory
|
|
|
36,638
|
5,840
|
-
|
42,478
|
|
(67)
|
(179)
|
-
|
(246)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
24,296
|
1,873
|
-
|
26,169
|
|
(38)
|
(77)
|
-
|
(115)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
8,196
|
2,273
|
-
|
10,469
|
|
(13)
|
(90)
|
-
|
(103)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
4,146
|
1,694
|
-
|
5,840
|
|
(16)
|
(12)
|
-
|
(28)
|
Higher risk
|
|
|
-
|
917
|
-
|
917
|
|
-
|
(60)
|
-
|
(60)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
917
|
-
|
917
|
|
-
|
(60)
|
-
|
(60)
|
Defaulted
|
|
|
-
|
-
|
5,508
|
5,508
|
|
-
|
-
|
(3,533)
|
(3,533)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
5,508
|
5,508
|
|
-
|
-
|
(3,533)
|
(3,533)
|
Total
|
|
|
120,886
|
7,902
|
5,508
|
134,296
|
|
(101)
|
(257)
|
(3,533)
|
(3,891)
|
Credit
grade
|
Regulatory 1 year
PD range (%)
|
S&P external
ratings equivalent
|
Corporate, Commercial & Institutional
Banking
|
2022
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
89,567
|
2,068
|
-
|
91,635
|
|
(43)
|
(30)
|
-
|
(73)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
8,247
|
117
|
-
|
8,364
|
|
(4)
|
-
|
-
|
(4)
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
36,379
|
321
|
-
|
36,700
|
|
(5)
|
-
|
-
|
(5)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
44,941
|
1,630
|
-
|
46,571
|
|
(34)
|
(30)
|
-
|
(64)
|
Satisfactory
|
|
|
36,694
|
7,783
|
-
|
44,477
|
|
(100)
|
(159)
|
-
|
(259)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
23,196
|
2,684
|
-
|
25,880
|
|
(67)
|
(94)
|
-
|
(161)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
9,979
|
3,116
|
-
|
13,095
|
|
(20)
|
(35)
|
-
|
(55)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
3,519
|
1,983
|
-
|
5,502
|
|
(13)
|
(30)
|
-
|
(43)
|
Higher risk
|
|
|
-
|
1,504
|
-
|
1,504
|
|
-
|
(134)
|
-
|
(134)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
1,504
|
-
|
1,504
|
|
-
|
(134)
|
-
|
(134)
|
Defaulted
|
|
|
-
|
-
|
6,143
|
6,143
|
|
-
|
-
|
(3,662)
|
(3,662)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
6,143
|
6,143
|
|
-
|
-
|
(3,662)
|
(3,662)
|
Total
|
|
|
126,261
|
11,355
|
6,143
|
143,759
|
|
(143)
|
(323)
|
(3,662)
|
(4,128)
|
Credit grade
|
Regulatory 1 year
PD range (%)
|
S&P external ratings equivalent
|
Corporate lending¹ - Asia
|
2023
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
36,959
|
802
|
-
|
37,761
|
|
(12)
|
(15)
|
-
|
(27)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
3,550
|
24
|
-
|
3,574
|
|
-
|
-
|
-
|
-
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
12,634
|
400
|
-
|
13,034
|
|
(1)
|
-
|
-
|
(1)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
20,775
|
378
|
-
|
21,153
|
|
(11)
|
(15)
|
-
|
(26)
|
Satisfactory
|
|
|
22,581
|
2,534
|
-
|
25,115
|
|
(35)
|
(137)
|
-
|
(172)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
14,740
|
739
|
-
|
15,479
|
|
(28)
|
(68)
|
-
|
(96)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
5,243
|
1,134
|
-
|
6,377
|
|
(5)
|
(66)
|
-
|
(71)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
2,598
|
661
|
-
|
3,259
|
|
(2)
|
(3)
|
-
|
(5)
|
Higher risk
|
|
|
-
|
231
|
-
|
231
|
|
-
|
(19)
|
-
|
(19)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
231
|
-
|
231
|
|
-
|
(19)
|
-
|
(19)
|
Defaulted
|
|
|
-
|
-
|
2,870
|
2,870
|
|
-
|
-
|
(2,014)
|
(2,014)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
2,870
|
2,870
|
|
-
|
-
|
(2,014)
|
(2,014)
|
Total
|
|
|
59,540
|
3,567
|
2,870
|
65,977
|
|
(47)
|
(171)
|
(2,014)
|
(2,232)
|
1
Corporate loans and advances to customers excludes loans to
"Financing, insurance and non-banking" and "Government"
counterparties
|
|
|
Corporate lending1 -
Asia
|
2022
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
40,402
|
1,361
|
-
|
41,763
|
|
(28)
|
(21)
|
-
|
(49)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
3,857
|
52
|
-
|
3,909
|
|
(3)
|
-
|
-
|
(3)
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
14,694
|
250
|
-
|
14,944
|
|
(2)
|
(1)
|
-
|
(3)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
21,851
|
1,059
|
-
|
22,910
|
|
(23)
|
(20)
|
-
|
(43)
|
Satisfactory
|
|
|
22,064
|
3,859
|
-
|
25,923
|
|
(55)
|
(99)
|
-
|
(154)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
14,512
|
1,285
|
-
|
15,797
|
|
(47)
|
(81)
|
-
|
(128)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
5,091
|
1,451
|
-
|
6,542
|
|
(7)
|
(7)
|
-
|
(14)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
2,461
|
1,123
|
-
|
3,584
|
|
(1)
|
(11)
|
-
|
(12)
|
Higher risk
|
|
|
-
|
463
|
-
|
463
|
|
-
|
(106)
|
-
|
(106)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
463
|
-
|
463
|
|
-
|
(106)
|
-
|
(106)
|
Defaulted
|
|
|
-
|
-
|
3,063
|
3,063
|
|
-
|
-
|
(1,748)
|
(1,748)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
3,063
|
3,063
|
|
-
|
-
|
(1,748)
|
(1,748)
|
Total
|
|
|
62,466
|
5,683
|
3,063
|
71,212
|
|
(83)
|
(226)
|
(1,748)
|
(2,057)
|
1 Corporate loans and
advances to customers excludes loans to "Financing, insurance and
non-banking" and "Government" counterparties
Credit grade
|
Regulatory 1 year
PD range (%)
|
S&P external ratings equivalent
|
Corporate lending1 -
Africa & Middle East
|
2023
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
7,756
|
43
|
-
|
7,799
|
|
(1)
|
(2)
|
-
|
(3)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
358
|
-
|
-
|
358
|
|
-
|
-
|
-
|
-
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
1,952
|
-
|
-
|
1,952
|
|
-
|
-
|
-
|
-
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
5,446
|
43
|
-
|
5,489
|
|
(1)
|
(2)
|
-
|
(3)
|
Satisfactory
|
|
|
2,801
|
492
|
-
|
3,293
|
|
(18)
|
(13)
|
-
|
(31)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
1,512
|
82
|
-
|
1,594
|
|
(2)
|
(3)
|
-
|
(5)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
587
|
175
|
-
|
762
|
|
(4)
|
(7)
|
-
|
(11)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
702
|
235
|
-
|
937
|
|
(12)
|
(3)
|
-
|
(15)
|
Higher risk
|
|
|
-
|
515
|
-
|
515
|
|
-
|
(37)
|
-
|
(37)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
515
|
-
|
515
|
|
-
|
(37)
|
-
|
(37)
|
Defaulted
|
|
|
-
|
-
|
1,435
|
1,435
|
|
-
|
-
|
(1,079)
|
(1,079)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
1,435
|
1,435
|
|
-
|
-
|
(1,079)
|
(1,079)
|
Total
|
|
|
10,557
|
1,050
|
1,435
|
13,042
|
|
(19)
|
(52)
|
(1,079)
|
(1,150)
|
1 Corporate loans and
advances to customers excludes loans to "Financing, insurance and
non-banking" and "Government" counterparties
Credit
grade
|
Regulatory 1 year
PD range (%)
|
S&P external
ratings equivalent
|
Corporate lending1 -
Africa & Middle East
|
2022
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
6,268
|
311
|
-
|
6,579
|
|
-
|
-
|
-
|
-
|
1A-2B
|
0 - 0.045
|
A+ and above
|
338
|
6
|
-
|
344
|
|
-
|
-
|
-
|
-
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
2,049
|
23
|
-
|
2,072
|
|
-
|
-
|
-
|
-
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
3,881
|
282
|
-
|
4,163
|
|
-
|
-
|
-
|
-
|
Satisfactory
|
|
|
4,389
|
642
|
-
|
5,031
|
|
(32)
|
(41)
|
-
|
(73)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
1,454
|
218
|
-
|
1,672
|
|
(11)
|
(3)
|
-
|
(14)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
2,361
|
320
|
-
|
2,681
|
|
(11)
|
(24)
|
-
|
(35)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
574
|
104
|
-
|
678
|
|
(10)
|
(14)
|
-
|
(24)
|
Higher risk
|
|
|
-
|
653
|
-
|
653
|
|
-
|
(26)
|
-
|
(26)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
653
|
-
|
653
|
|
-
|
(26)
|
-
|
(26)
|
Defaulted
|
|
|
-
|
-
|
1,735
|
1,735
|
|
-
|
-
|
(1,344)
|
(1,344)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
1,735
|
1,735
|
|
-
|
-
|
(1,344)
|
(1,344)
|
Total
|
|
|
10,657
|
1,606
|
1,735
|
13,998
|
|
(32)
|
(67)
|
(1,344)
|
(1,443)
|
1 Corporate loans and
advances to customers excludes loans to "Financing, insurance and
non-banking" and "Government" counterparties
Credit grade
|
Regulatory 1 year
PD range (%)
|
S&P external ratings equivalent
|
Corporate lending1 -
Europe &Americas
|
2023
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
9,283
|
198
|
-
|
9,481
|
|
(11)
|
-
|
-
|
(11)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
528
|
-
|
-
|
528
|
|
-
|
-
|
-
|
-
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
4,413
|
124
|
-
|
4,537
|
|
(1)
|
-
|
-
|
(1)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
4,342
|
74
|
-
|
4,416
|
|
(10)
|
-
|
-
|
(10)
|
Satisfactory
|
|
|
4,778
|
1,621
|
-
|
6,399
|
|
(5)
|
(22)
|
-
|
(27)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
3,912
|
768
|
-
|
4,680
|
|
(4)
|
(2)
|
-
|
(6)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
596
|
821
|
-
|
1,417
|
|
(1)
|
(15)
|
-
|
(16)
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
270
|
32
|
-
|
302
|
|
-
|
(5)
|
-
|
(5)
|
Higher risk
|
|
|
-
|
77
|
-
|
77
|
|
-
|
(7)
|
-
|
(7)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
77
|
-
|
77
|
|
-
|
(7)
|
-
|
(7)
|
Defaulted
|
|
|
-
|
-
|
980
|
980
|
|
-
|
-
|
(345)
|
(345)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
980
|
980
|
|
-
|
-
|
(345)
|
(345)
|
Total
|
|
|
14,061
|
1,896
|
980
|
16,937
|
|
(16)
|
(29)
|
(345)
|
(390)
|
1 Corporate loans and
advances to customers excludes loans to "Financing, insurance and
non-banking" and "Government" counterparties
Credit
grade
|
Regulatory 1 year
PD range (%)
|
S&P external
ratings equivalent
|
Corporate lending1 -
Europe & Americas
|
2022
|
Gross
|
|
Credit impairment
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1
$million
|
Stage 2
$million
|
Stage 3
$million
|
Total
$million
|
Strong
|
|
|
10,033
|
225
|
-
|
10,258
|
|
(13)
|
-
|
-
|
(13)
|
1A-2B
|
0 - 0.045
|
A+ and above
|
575
|
-
|
-
|
575
|
|
-
|
-
|
-
|
-
|
3A-4A
|
0.046 - 0.110
|
A/A- to BBB+/BBB
|
4,065
|
8
|
-
|
4,073
|
|
(1)
|
-
|
-
|
(1)
|
4B-5B
|
0.111 - 0.425
|
BBB to BBB-/BB+
|
5,393
|
217
|
-
|
5,610
|
|
(12)
|
-
|
-
|
(12)
|
Satisfactory
|
|
|
4,498
|
2,077
|
-
|
6,575
|
|
(4)
|
(25)
|
-
|
(29)
|
6A-7B
|
0.426 - 1.350
|
BB+/BB to BB-
|
3,867
|
1,376
|
-
|
5,243
|
|
(4)
|
(25)
|
-
|
(29)
|
8A-9B
|
1.351 - 4.000
|
BB-/B+ to B
|
537
|
636
|
-
|
1,173
|
|
-
|
-
|
-
|
-
|
10A-11C
|
4.001 - 15.75
|
B/B- to B-/CCC+
|
94
|
65
|
-
|
159
|
|
-
|
-
|
-
|
-
|
Higher risk
|
|
|
-
|
387
|
-
|
387
|
|
-
|
(1)
|
-
|
(1)
|
12
|
15.751 - 99.999
|
CCC+/C
|
-
|
387
|
-
|
387
|
|
-
|
(1)
|
-
|
(1)
|
Defaulted
|
|
|
-
|
-
|
1,230
|
1,230
|
|
-
|
-
|
(398)
|
(398)
|
13-14
|
100
|
Defaulted
|
-
|
-
|
1,230
|
1,230
|
|
-
|
-
|
(398)
|
(398)
|
Total
|
|
|
14,531
|
2,689
|
1,230
|
18,450
|
|
(17)
|
(26)
|
(398)
|
(441)
|
1 Corporate loans and
advances to customers excludes loans to "Financing, insurance and
non-banking" and "Government" counterparties
|
Consumer, Private & Business
Banking
|
2023
|
Asia
|
|
Africa & Middle East
|
|
Europe & Americas
|
Total
$million
|
Mort-gages
$million
|
Credit Cards
$million
|
Others
$million
|
Total
$million
|
Mort-gages
$million
|
Credit Cards
$million
|
Others
$million
|
Total
$million
|
Mort-gages
$million
|
Credit Cards
$million
|
Others
$million
|
Total
$million
|
Stage 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
77,270
|
6,234
|
30,027
|
113,531
|
|
974
|
263
|
2,471
|
3,708
|
|
335
|
-
|
619
|
954
|
118,193
|
Satisfactory
|
659
|
113
|
2,418
|
3,190
|
|
158
|
11
|
121
|
290
|
|
1,812
|
-
|
1
|
1,813
|
5,293
|
Total
|
77,929
|
6,347
|
32,445
|
116,721
|
|
1,132
|
274
|
2,592
|
3,998
|
|
2,147
|
-
|
620
|
2,767
|
123,486
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
(5)
|
(25)
|
(181)
|
(211)
|
|
(2)
|
(7)
|
(13)
|
(22)
|
|
-
|
-
|
(1)
|
(1)
|
(234)
|
Satisfactory
|
-
|
(57)
|
(19)
|
(76)
|
|
-
|
-
|
(2)
|
(2)
|
|
(2)
|
-
|
-
|
(2)
|
(80)
|
Total
|
(5)
|
(82)
|
(200)
|
(287)
|
|
(2)
|
(7)
|
(15)
|
(24)
|
|
(2)
|
-
|
(1)
|
(3)
|
(314)
|
Coverage %
|
0%
|
1%
|
1%
|
0%
|
|
0%
|
3%
|
1%
|
1%
|
|
0%
|
0%
|
0%
|
0%
|
0%
|
Stage 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
1,014
|
124
|
583
|
1,721
|
|
17
|
8
|
15
|
40
|
|
-
|
-
|
-
|
-
|
1,761
|
Satisfactory
|
122
|
14
|
29
|
165
|
|
4
|
1
|
9
|
14
|
|
27
|
-
|
-
|
27
|
206
|
Higher risk
|
161
|
39
|
118
|
318
|
|
5
|
3
|
11
|
19
|
|
-
|
-
|
-
|
-
|
337
|
Total
|
1,297
|
177
|
730
|
2,204
|
|
26
|
12
|
35
|
73
|
|
27
|
-
|
-
|
27
|
2,304
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
(1)
|
(12)
|
(43)
|
(56)
|
|
(1)
|
(1)
|
(7)
|
(9)
|
|
-
|
-
|
-
|
-
|
(65)
|
Satisfactory
|
-
|
(14)
|
(7)
|
(21)
|
|
-
|
-
|
(1)
|
(1)
|
|
-
|
-
|
-
|
-
|
(22)
|
Higher risk
|
(1)
|
(17)
|
(34)
|
(52)
|
|
-
|
(1)
|
(1)
|
(2)
|
|
-
|
-
|
-
|
-
|
(54)
|
Total
|
(2)
|
(43)
|
(84)
|
(129)
|
|
(1)
|
(2)
|
(9)
|
(12)
|
|
-
|
-
|
-
|
-
|
(141)
|
Coverage %
|
0%
|
24%
|
12%
|
6%
|
|
4%
|
17%
|
26%
|
16%
|
|
0%
|
0%
|
0%
|
0%
|
6%
|
Stage 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross credit impaired
|
382
|
53
|
841
|
1,276
|
|
53
|
3
|
59
|
115
|
|
85
|
-
|
8
|
93
|
1,484
|
ECL
|
(84)
|
(36)
|
(566)
|
(686)
|
|
(25)
|
(2)
|
(33)
|
(60)
|
|
(14)
|
-
|
-
|
(14)
|
(760)
|
Coverage %
|
22%
|
68%
|
67%
|
54%
|
|
47%
|
67%
|
56%
|
52%
|
|
16%
|
0%
|
0%
|
15%
|
51%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
78,284
|
6,358
|
30,610
|
115,252
|
|
991
|
271
|
2,486
|
3,748
|
|
335
|
-
|
619
|
954
|
119,954
|
Satisfactory
|
781
|
127
|
2,447
|
3,355
|
|
162
|
12
|
130
|
304
|
|
1,839
|
-
|
1
|
1,840
|
5,499
|
Higher risk
|
161
|
39
|
118
|
318
|
|
5
|
3
|
11
|
19
|
|
-
|
-
|
-
|
-
|
337
|
Credit-Impaired
|
382
|
53
|
841
|
1,276
|
|
53
|
3
|
59
|
115
|
|
85
|
-
|
8
|
93
|
1,484
|
Total
|
79,608
|
6,577
|
34,016
|
120,201
|
|
1,211
|
289
|
2,686
|
4,186
|
|
2,259
|
-
|
628
|
2,887
|
127,274
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
(6)
|
(37)
|
(224)
|
(267)
|
|
(3)
|
(8)
|
(20)
|
(31)
|
|
-
|
-
|
(1)
|
(1)
|
(299)
|
Satisfactory
|
-
|
(71)
|
(26)
|
(97)
|
|
-
|
-
|
(3)
|
(3)
|
|
(2)
|
-
|
-
|
(2)
|
(102)
|
Higher risk
|
(1)
|
(17)
|
(34)
|
(52)
|
|
-
|
(1)
|
(1)
|
(2)
|
|
-
|
-
|
-
|
-
|
(54)
|
Credit-Impaired
|
(84)
|
(36)
|
(566)
|
(686)
|
|
(25)
|
(2)
|
(33)
|
(60)
|
|
(14)
|
-
|
-
|
(14)
|
(760)
|
Total
|
(91)
|
(161)
|
(850)
|
(1,102)
|
|
(28)
|
(11)
|
(57)
|
(96)
|
|
(16)
|
-
|
(1)
|
(17)
|
(1,215)
|
Coverage %
|
0%
|
2%
|
2%
|
1%
|
|
2%
|
4%
|
2%
|
2%
|
|
1%
|
0%
|
0%
|
1%
|
1%
|
|
Consumer, Private & Business
Banking
|
2022
|
Asia
|
|
Africa & Middle East
|
|
Europe & Americas
|
Mort-gages
$million
|
Credit cards
$million
|
Others
$million
|
Total
$million
|
Mort-gages
$million
|
Credit cards
$million
|
Others
$million
|
Total
$million
|
Mort-gages
$million
|
Credit cards
$million
|
Others
$million
|
Total
$million
|
Total
$million
|
Stage 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
81,738
|
5,781
|
32,297
|
119,816
|
|
1,004
|
281
|
2,590
|
3,875
|
|
397
|
-
|
646
|
1,043
|
124,734
|
Satisfactory
|
1,155
|
145
|
1,378
|
2,678
|
|
189
|
9
|
71
|
269
|
|
1,372
|
-
|
81
|
1,453
|
4,400
|
Total
|
82,893
|
5,926
|
33,675
|
122,494
|
|
1,193
|
290
|
2,661
|
4,144
|
|
1,769
|
-
|
727
|
2,496
|
129,134
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
-
|
(49)
|
(233)
|
(282)
|
|
(3)
|
(6)
|
(37)
|
(46)
|
|
(2)
|
-
|
(2)
|
(4)
|
(332)
|
Satisfactory
|
(6)
|
(37)
|
(27)
|
(70)
|
|
(1)
|
-
|
(1)
|
(2)
|
|
(2)
|
-
|
-
|
(2)
|
(74)
|
Total
|
(6)
|
(86)
|
(260)
|
(352)
|
|
(4)
|
(6)
|
(38)
|
(48)
|
|
(4)
|
-
|
(2)
|
(6)
|
(406)
|
Coverage %
|
0%
|
1%
|
1%
|
0%
|
|
0%
|
2%
|
1%
|
1%
|
|
0%
|
0%
|
0%
|
0%
|
0%
|
Stage 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
576
|
88
|
388
|
1,052
|
|
112
|
2
|
46
|
160
|
|
1
|
-
|
2
|
3
|
1,215
|
Satisfactory
|
75
|
10
|
14
|
99
|
|
43
|
1
|
3
|
47
|
|
-
|
-
|
-
|
-
|
146
|
Higher risk
|
150
|
34
|
63
|
247
|
|
12
|
3
|
13
|
28
|
|
34
|
-
|
-
|
34
|
309
|
Total
|
801
|
132
|
465
|
1,398
|
|
167
|
6
|
62
|
235
|
|
35
|
-
|
2
|
37
|
1,670
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
(2)
|
(26)
|
(27)
|
(55)
|
|
(3)
|
(1)
|
(3)
|
(7)
|
|
-
|
-
|
-
|
-
|
(62)
|
Satisfactory
|
(1)
|
(9)
|
(7)
|
(17)
|
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
(17)
|
Higher risk
|
(2)
|
(6)
|
(28)
|
(36)
|
|
-
|
(1)
|
(4)
|
(5)
|
|
-
|
-
|
-
|
-
|
(41)
|
Total
|
(5)
|
(41)
|
(62)
|
(108)
|
|
(3)
|
(2)
|
(7)
|
(12)
|
|
-
|
-
|
-
|
-
|
(120)
|
Coverage %
|
1%
|
31%
|
13%
|
8%
|
|
2%
|
33%
|
11%
|
5%
|
|
0%
|
0%
|
0%
|
0%
|
7%
|
Stage 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross credit impaired
|
368
|
48
|
783
|
1,199
|
|
111
|
10
|
56
|
177
|
|
77
|
-
|
-
|
77
|
1,453
|
ECL
|
(97)
|
(35)
|
(524)
|
(656)
|
|
(76)
|
(7)
|
(30)
|
(113)
|
|
(7)
|
-
|
-
|
(7)
|
(776)
|
Coverage %
|
26%
|
73%
|
67%
|
55%
|
|
68%
|
70%
|
54%
|
64%
|
|
9%
|
0%
|
0%
|
9%
|
53%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
82,314
|
5,869
|
32,685
|
120,868
|
|
1,116
|
283
|
2,636
|
4,035
|
|
398
|
-
|
648
|
1,046
|
125,949
|
Satisfactory
|
1,230
|
155
|
1,392
|
2,777
|
|
232
|
10
|
74
|
316
|
|
1,372
|
-
|
81
|
1,453
|
4,546
|
Higher risk
|
150
|
34
|
63
|
247
|
|
12
|
3
|
13
|
28
|
|
34
|
-
|
-
|
34
|
309
|
Credit-Impaired
|
368
|
48
|
783
|
1,199
|
|
111
|
10
|
56
|
177
|
|
77
|
-
|
-
|
77
|
1,453
|
Total
|
84,062
|
6,106
|
34,923
|
125,091
|
|
1,471
|
306
|
2,779
|
4,556
|
|
1,881
|
-
|
729
|
2,610
|
132,257
|
ECL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strong
|
(2)
|
(75)
|
(260)
|
(337)
|
|
(6)
|
(7)
|
(40)
|
(53)
|
|
(2)
|
-
|
(2)
|
(4)
|
(394)
|
Satisfactory
|
(7)
|
(46)
|
(34)
|
(87)
|
|
(1)
|
-
|
(1)
|
(2)
|
|
(2)
|
-
|
-
|
(2)
|
(91)
|
Higher risk
|
(2)
|
(6)
|
(28)
|
(36)
|
|
-
|
(1)
|
(4)
|
(5)
|
|
-
|
-
|
-
|
-
|
(41)
|
Credit-Impaired
|
(97)
|
(35)
|
(524)
|
(656)
|
|
(76)
|
(7)
|
(30)
|
(113)
|
|
(7)
|
-
|
-
|
(7)
|
(776)
|
Total
|
(108)
|
(162)
|
(846)
|
(1,116)
|
|
(83)
|
(15)
|
(75)
|
(173)
|
|
(11)
|
-
|
(2)
|
(13)
|
(1,302)
|
Coverage %
|
0%
|
3%
|
2%
|
1%
|
|
6%
|
5%
|
3%
|
4%
|
|
1%
|
0%
|
0%
|
0%
|
1%
|
Credit quality by geographic region
The following table sets out the credit quality
for gross loans and advances to customers and banks, held at
amortised cost, by geographic region and stage.
Loans and advances to customers
Amortised cost
|
2023
|
|
2022
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Gross (stage 1)
|
229,289
|
17,536
|
26,867
|
273,692
|
|
248,625
|
17,553
|
29,041
|
295,219
|
Provision (stage 1)
|
(363)
|
(39)
|
(28)
|
(430)
|
|
(454)
|
(73)
|
(32)
|
(559)
|
Gross (stage 2)
|
6,660
|
3,276
|
1,289
|
11,225
|
|
8,302
|
3,122
|
1,619
|
13,043
|
Provision (stage 2)
|
(321)
|
(70)
|
(29)
|
(420)
|
|
(337)
|
(104)
|
(3)
|
(444)
|
Gross (stage 3)
|
4,604
|
2,273
|
351
|
7,228
|
|
4,562
|
2,725
|
558
|
7,845
|
Provision (stage 3)
|
(2,734)
|
(1,387)
|
(199)
|
(4,320)
|
|
(2,483)
|
(1,765)
|
(209)
|
(4,457)
|
Net loans1
|
237,135
|
21,589
|
28,251
|
286,975
|
|
258,215
|
21,458
|
30,974
|
310,647
|
1 Includes reverse
repurchase agreements and other similar secured lending
Loans and advances to banks
Amortised cost
|
2023
|
|
2022
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Gross (stage 1)
|
35,338
|
2,803
|
6,243
|
44,384
|
|
21,806
|
3,818
|
13,525
|
39,149
|
Provision (stage 1)
|
(7)
|
-
|
(1)
|
(8)
|
|
(3)
|
(4)
|
(2)
|
(9)
|
Gross (stage 2)
|
17
|
311
|
212
|
540
|
|
212
|
116
|
9
|
337
|
Provision (stage 2)
|
(2)
|
(8)
|
-
|
(10)
|
|
(2)
|
(1)
|
-
|
(3)
|
Gross (stage 3)
|
73
|
-
|
4
|
77
|
|
59
|
-
|
-
|
59
|
Provision (stage 3)
|
(2)
|
-
|
(4)
|
(6)
|
|
(14)
|
-
|
-
|
(14)
|
Net loans1
|
35,417
|
3,106
|
6,454
|
44,977
|
|
22,058
|
3,929
|
13,532
|
39,519
|
1 Includes reverse
repurchase agreements and other similar secured lending
Movement in gross exposures and credit
impairment for loans and advances, debt securities, undrawn
commitments and financial guarantees (audited)
The tables overleaf set out the movement in
gross exposures and credit impairment by stage in respect of
amortised cost loans to banks and customers, undrawn commitments,
financial guarantees and debt securities classified at amortised
cost and FVOCI. The tables are presented for the Group, debt
securities and other eligible bills.
Methodology
The movement lines within the tables are an
aggregation of monthly movements over the year and will therefore
reflect the accumulation of multiple trades during the year. The
credit impairment charge in the income statement comprises the
amounts within the boxes in the table below, less recoveries of
amounts previously written off. Discount unwind is reported in net
interest income and related to stage 3 financial instruments
only.
The approach for determining the key line items
in the tables is set out below.
• Transfers - transfers between stages are deemed
to occur at the beginning of a month based on prior month closing
balances.
• Net
remeasurement from stage changes - the remeasurement
of credit impairment provisions arising from a change in stage is
reported within the stage that the assets are transferred to. For
example, assets transferred into stage 2 are remeasured from a
12-month to a lifetime expected credit loss, with the effect of
remeasurement reported in stage 2. For stage 3, this represents the
initial remeasurement from specific provisions recognised on
individual assets transferred into stage 3 in the year.
• Net
changes in exposures - new business written
less repayments in the year. Within stage 1, new business written
will attract up to 12 months of expected credit loss charges.
Repayments of non-amortising loans (primarily within CCIB) will
have low amounts of expected credit loss provisions attributed to
them, due to the release of provisions over the term to maturity.
In stages 2 and 3, the net change in exposures reflect repayments
although stage 2 may include new facilities where clients are on
non-purely precautionary early alert, are CG 12, or when
non-investment grade debt securities are acquired.
• Changes in
risk parameters - for stages 1 and 2, this reflects
changes in the probability of default (PD), loss given default
(LGD) and exposure at default (EAD) of assets during the year,
which includes the impact of releasing provisions over the term to
maturity. It also includes the effect of changes in forecasts of
macroeconomic variables during the year. In stage 3, this line
represents additional specific provisions recognised on exposures
held within stage 3.
• Interest
due but not paid - change in contractual amount of
interest due in stage 3 financial instruments but not paid, being
the net of accruals, repayments and write-offs, together with the
corresponding change in credit impairment.
Changes to ECL models, which incorporate changes
to model approaches and methodologies, are not reported as a
separate line item as these have an impact over a number of lines
and stages.
Movements during the year
Stage 1 gross exposures increased by $3.8
billion to $724 billion (31 December 2022: $720 billion). CCIB
exposure increased by $21.8 billion to $337 billion (31 December
2022: $315 billion) due to off-balance sheet exposures, which was
partly offset by a decrease in loans and advances to customers.
CPBB decreased by $2.2 billion to $191 billion (31 December 2022:
$193 billion) which was largely driven by the mortgage portfolio in
Korea and Hong Kong. Stage 1 debt securities decreased by $7.8
billion to $158 billion (31 December 2022: $166 billion) due to
liquidity management and maturities.
Total stage 1 provisions decreased by $119
million to $526 million (31 December 2022: $645 million). CCIB
provisions decreased by $43 million to $151 million (31 December
2022: $194 million), primarily due to new originations, which was
partly offset by model updates. Debt securities provisions was
stable at $26 million (31 December 2022: $25 million). CPBB
decreased by $88 million to $325 million (31 December 2022: $413
million), mainly driven by the release of the judgemental
non-linearity post model adjustment and overlay releases, both of
which are reported in 'Changes in risk parameters'.
Stage 2 gross exposures decreased by $5.2
billion to $22 billion (31 December 2022: $27 billion), primarily
driven by a net reduction in exposures in CCIB, particularly in the
CRE and Transport sectors. CPBB exposures increased by $0.7 billion
to $2.5 billion (31 December 2022: $1.8 billion), of which
$0.4 billion was from the Secured portfolio. Debt securities
decreased by $3.6 billion to $1.9 billion (31 December 2022:
$5.5 billion).
Stage 2 provisions decreased by $101 million to
$517 million (31 December 2022: $618 million). CCIB provisions
decreased by $93 million to $318 million (31 December 2022: $411
million) from releases due to exposure reductions, transfers to
stage 3 for China CRE exposures and model updates. This was partly
offset by a further downgrade of Pakistan sovereign clients within
stage 2. CPBB provisions increased by $22 million to $140 million
(31 December 2022: $118 million) due to higher delinquencies. This
was partly offset by the release of judgemental non-linearity post
model adjustment and overlay releases which are reported within
'Changes in risk parameters' due to underlying factors not being
valid any more. Debt Securities decreased by $56 million to
$34 million (31 December 2022: $90 million) largely due to
exposure reductions and shortening of tenors, particularly in
Pakistan.
The impact of model and methodology updates in
2023 reduced stage 1 and 2 provisions by $15 million, of which $10
million was in CCIB and Central and other items, while $5 million
was in CPBB.
Stage 3 gross loans for CCIB decreased by $0.7
billion to $6.3 billion (31 December 2022: $7 billion) as
repayments and write-offs were partly offset by the downgrade of
China CRE clients. CCIB provisions decreased by $171 million to
$3.7 billion (31 December 2022: $3.8 billion) as charges from new
downgrades were offset by releases due to repayments and
write-offs. CPBB stage 3 loans was stable at $1.5 billion (31
December 2022: $1.5 billion) but provisions decreased by $17
million to $0.8 billion (31 December 2022: $0.8 billion). Debt
security gross assets increased by $20 million to $164 million (31
December 2022: $144 million).
All segments (audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 35
|
|
Total
|
Gross balance3
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance3
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance3
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance3
$million
|
Total credit impair-ment
$million
|
Net
$million
|
As at 1 January 2022
|
684,759
|
(609)
|
684,150
|
|
34,550
|
(652)
|
33,898
|
|
9,061
|
(4,941)
|
4,120
|
|
728,370
|
(6,202)
|
722,168
|
Transfers to stage 1
|
24,666
|
(555)
|
24,111
|
|
(24,633)
|
555
|
(24,078)
|
|
(33)
|
-
|
(33)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(46,960)
|
228
|
(46,732)
|
|
47,479
|
(246)
|
47,233
|
|
(519)
|
18
|
(501)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(176)
|
74
|
(102)
|
|
(3,630)
|
253
|
(3,377)
|
|
3,806
|
(327)
|
3,479
|
|
-
|
-
|
-
|
Net change in exposures
|
83,204
|
(137)
|
83,067
|
|
(24,324)
|
93
|
(24,231)
|
|
(1,710)
|
338
|
(1,372)
|
|
57,170
|
294
|
57,464
|
Net remeasurement from stage changes
|
-
|
45
|
45
|
|
-
|
(126)
|
(126)
|
|
-
|
(168)
|
(168)
|
|
-
|
(249)
|
(249)
|
Changes in risk parameters
|
-
|
106
|
106
|
|
-
|
(387)
|
(387)
|
|
-
|
(895)
|
(895)
|
|
-
|
(1,176)
|
(1,176)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(949)
|
949
|
-
|
|
(949)
|
949
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(157)
|
157
|
-
|
|
(157)
|
157
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
136
|
136
|
|
-
|
136
|
136
|
Exchange translation differences and
other movements¹
|
(25,381)
|
203
|
(25,178)
|
|
(1,963)
|
(108)
|
(2,071)
|
|
(658)
|
9
|
(649)
|
|
(28,002)
|
104
|
(27,898)
|
As at 31 December 2022²
|
720,112
|
(645)
|
719,467
|
|
27,479
|
(618)
|
26,861
|
|
8,841
|
(4,724)
|
4,117
|
|
756,432
|
(5,987)
|
750,445
|
Income statement ECL (charge)/release
|
|
14
|
|
|
|
(420)
|
|
|
|
(725)
|
|
|
|
(1,131)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
293
|
|
|
|
293
|
|
Total credit impairment
(charge)/release
|
|
14
|
|
|
|
(420)
|
|
|
|
(432)
|
|
|
|
(838)
|
|
As at 1 January 2023
|
720,112
|
(645)
|
719,467
|
|
27,479
|
(618)
|
26,861
|
|
8,841
|
(4,724)
|
4,117
|
|
756,432
|
(5,987)
|
750,445
|
Transfers to stage 1
|
19,594
|
(661)
|
18,933
|
|
(19,583)
|
661
|
(18,922)
|
|
(11)
|
-
|
(11)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(42,628)
|
174
|
(42,454)
|
|
42,793
|
(182)
|
42,611
|
|
(165)
|
8
|
(157)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(96)
|
6
|
(90)
|
|
(2,329)
|
326
|
(2,003)
|
|
2,425
|
(332)
|
2,093
|
|
-
|
-
|
-
|
Net change in exposures
|
23,717
|
(185)
|
23,532
|
|
(22,727)
|
22
|
(22,705)
|
|
(1,708)
|
624
|
(1,084)
|
|
(718)
|
461
|
(257)
|
Net remeasurement from stage changes
|
-
|
52
|
52
|
|
-
|
(199)
|
(199)
|
|
-
|
(163)
|
(163)
|
|
-
|
(310)
|
(310)
|
Changes in risk parameters
|
-
|
202
|
202
|
|
-
|
(32)
|
(32)
|
|
-
|
(1,100)
|
(1,100)
|
|
-
|
(930)
|
(930)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(1,027)
|
1,027
|
-
|
|
(1,027)
|
1,027
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(83)
|
83
|
-
|
|
(83)
|
83
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
180
|
180
|
|
-
|
180
|
180
|
Exchange translation differences and
other movements¹
|
3,177
|
531
|
3,708
|
|
(3,365)
|
(495)
|
(3,860)
|
|
(128)
|
(102)
|
(230)
|
|
(316)
|
(66)
|
(382)
|
As at 31 December 2023²
|
723,876
|
(526)
|
723,350
|
|
22,268
|
(517)
|
21,751
|
|
8,144
|
(4,499)
|
3,645
|
|
754,288
|
(5,542)
|
748,746
|
Income statement ECL
(charge)/release⁶
|
|
69
|
|
|
|
(209)
|
|
|
|
(639)
|
|
|
|
(779)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
271
|
|
|
|
271
|
|
Total credit impairment
(charge)/release4
|
|
69
|
|
|
|
(209)
|
|
|
|
(368)
|
|
|
|
(508)
|
|
1 Includes fair value
adjustments and amortisation on debt securities
2 Excludes Cash and
balances at central banks, Accrued income, Assets held for sale and
Other assets gross balances of $111,478 million (31 December 2022:
$101,740 million) and Total credit impairment of $59 million (31
December 2022: $88 million)
3 The gross balance
includes the notional amount of off -balance sheet
instruments
4 Reported
basis
5 Stage 3 includes
gross of $80 million (31 December 2022: $28 million) and ECL $14
million (31 December 2022: $13 million) originated credit-impaired
debt securities
6 Does not include
release relating to Other assets (31 December 2022: $2
million)
Of which - movement of debt securities,
alternative tier one and other eligible bills (audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 32
|
|
Total
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net3
$million
|
As at 1 January 2022
|
157,352
|
(67)
|
157,285
|
|
5,315
|
(42)
|
5,273
|
|
113
|
(66)
|
47
|
|
162,780
|
(175)
|
162,605
|
Transfers to stage 1
|
2,296
|
(22)
|
2,274
|
|
(2,296)
|
22
|
(2,274)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(3,942)
|
38
|
(3,904)
|
|
3,942
|
(38)
|
3,904
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 3
|
-
|
-
|
-
|
|
(66)
|
42
|
(24)
|
|
66
|
(42)
|
24
|
|
-
|
-
|
-
|
Net change in exposures
|
21,613
|
(44)
|
21,569
|
|
(752)
|
9
|
(743)
|
|
-
|
1
|
1
|
|
20,861
|
(34)
|
20,827
|
Net remeasurement from stage changes
|
-
|
10
|
10
|
|
-
|
(2)
|
(2)
|
|
-
|
(23)
|
(23)
|
|
-
|
(15)
|
(15)
|
Changes in risk parameters
|
-
|
38
|
38
|
|
-
|
(98)
|
(98)
|
|
-
|
(13)
|
(13)
|
|
-
|
(73)
|
(73)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(30)
|
30
|
-
|
|
(30)
|
30
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Exchange translation differences and
other movements1
|
(11,216)
|
22
|
(11,194)
|
|
(688)
|
17
|
(671)
|
|
(5)
|
7
|
2
|
|
(11,909)
|
46
|
(11,863)
|
As at 31 December 2022
|
166,103
|
(25)
|
166,078
|
|
5,455
|
(90)
|
5,365
|
|
144
|
(106)
|
38
|
|
171,702
|
(221)
|
171,481
|
Income statement ECL (charge)/release
|
|
4
|
|
|
|
(91)
|
|
|
|
(35)
|
|
|
|
(122)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total credit impairment
(charge)/release
|
|
4
|
|
|
|
(91)
|
|
|
|
(35)
|
|
|
|
(122)
|
|
As at 1 January 2023
|
166,103
|
(25)
|
166,078
|
|
5,455
|
(90)
|
5,365
|
|
144
|
(106)
|
38
|
|
171,702
|
(221)
|
171,481
|
Transfers to stage 1
|
371
|
(65)
|
306
|
|
(371)
|
65
|
(306)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(884)
|
14
|
(870)
|
|
884
|
(14)
|
870
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 3
|
-
|
-
|
-
|
|
(16)
|
-
|
(16)
|
|
16
|
-
|
16
|
|
-
|
-
|
-
|
Net change in exposures
|
(11,583)
|
(28)
|
(11,611)
|
|
(1,899)
|
(44)
|
(1,943)
|
|
7
|
-
|
7
|
|
(13,475)
|
(72)
|
(13,547)
|
Net remeasurement from stage changes
|
-
|
7
|
7
|
|
-
|
(18)
|
(18)
|
|
-
|
-
|
-
|
|
-
|
(11)
|
(11)
|
Changes in risk parameters
|
-
|
32
|
32
|
|
-
|
105
|
105
|
|
-
|
(4)
|
(4)
|
|
-
|
133
|
133
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Exchange translation differences and
other movements1
|
4,307
|
39
|
4,346
|
|
(2,193)
|
(38)
|
(2,231)
|
|
(3)
|
49
|
46
|
|
2,111
|
50
|
2,161
|
As at 31 December 2023
|
158,314
|
(26)
|
158,288
|
|
1,860
|
(34)
|
1,826
|
|
164
|
(61)
|
103
|
|
160,338
|
(121)
|
160,217
|
Income statement ECL (charge)/release
|
|
11
|
|
|
|
43
|
|
|
|
(4)
|
|
|
|
50
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total credit impairment
(charge)/release
|
|
11
|
|
|
|
43
|
|
|
|
(4)
|
|
|
|
50
|
|
1 Includes fair value
adjustments and amortisation on debt securities
2 Stage 3 includes
gross of $80 million (31 December 2022: $28 million) and ECL $14
million (31 December 2022: $13 million) originated credit-impaired
debt securities
3 FVOCI instruments
are not presented net of ECL. While the presentation is on a net
basis for the table, the total net on-balance sheet amount to
$160,263 million (31 December 2022: $171,640 million). Refer to the
Analysis of financial instrument by stage table
Corporate, Commercial & Institutional
Banking (audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
As at 1 January 2022
|
313,132
|
(163)
|
312,969
|
|
25,437
|
(425)
|
25,012
|
|
7,372
|
(4,079)
|
3,293
|
|
345,941
|
(4,667)
|
341,274
|
Transfers to stage 1
|
17,565
|
(227)
|
17,338
|
|
(17,565)
|
227
|
(17,338)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(37,505)
|
48
|
(37,457)
|
|
37,944
|
(66)
|
37,878
|
|
(439)
|
18
|
(421)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(42)
|
-
|
(42)
|
|
(2,478)
|
134
|
(2,344)
|
|
2,520
|
(134)
|
2,386
|
|
-
|
-
|
-
|
Net change in exposures
|
30,508
|
(44)
|
30,464
|
|
(21,915)
|
65
|
(21,850)
|
|
(1,314)
|
340
|
(974)
|
|
7,279
|
361
|
7,640
|
Net remeasurement from stage changes
|
-
|
2
|
2
|
|
-
|
(42)
|
(42)
|
|
-
|
(104)
|
(104)
|
|
-
|
(144)
|
(144)
|
Changes in risk parameters
|
-
|
21
|
21
|
|
-
|
(154)
|
(154)
|
|
-
|
(551)
|
(551)
|
|
-
|
(684)
|
(684)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(384)
|
384
|
-
|
|
(384)
|
384
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(130)
|
130
|
-
|
|
(130)
|
130
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
110
|
110
|
|
-
|
110
|
110
|
Exchange translation differences and
other movements
|
(8,221)
|
169
|
(8,052)
|
|
(1,275)
|
(150)
|
(1,425)
|
|
(631)
|
64
|
(567)
|
|
(10,127)
|
83
|
(10,044)
|
As at 31 December 2022
|
315,437
|
(194)
|
315,243
|
|
20,148
|
(411)
|
19,737
|
|
6,994
|
(3,822)
|
3,172
|
|
342,579
|
(4,427)
|
338,152
|
Income statement ECL
(charge)/release2
|
|
(21)
|
|
|
|
(131)
|
|
|
|
(315)
|
|
|
|
(467)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
49
|
|
|
|
49
|
|
Total credit impairment
(charge)/release
|
|
(21)
|
|
|
|
(131)
|
|
|
|
(266)
|
|
|
|
(418)
|
|
As at 1 January 2023
|
315,437
|
(194)
|
315,243
|
|
20,148
|
(411)
|
19,737
|
|
6,994
|
(3,822)
|
3,172
|
|
342,579
|
(4,427)
|
338,152
|
Transfers to stage 1
|
14,948
|
(347)
|
14,601
|
|
(14,948)
|
347
|
(14,601)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(34,133)
|
80
|
(34,053)
|
|
34,175
|
(88)
|
34,087
|
|
(42)
|
8
|
(34)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(17)
|
-
|
(17)
|
|
(1,270)
|
141
|
(1,129)
|
|
1,287
|
(141)
|
1,146
|
|
-
|
-
|
-
|
Net change in exposures
|
41,314
|
(73)
|
41,241
|
|
(20,084)
|
89
|
(19,995)
|
|
(1,335)
|
623
|
(712)
|
|
19,895
|
639
|
20,534
|
Net remeasurement from stage changes
|
-
|
15
|
15
|
|
-
|
(45)
|
(45)
|
|
-
|
(82)
|
(82)
|
|
-
|
(112)
|
(112)
|
Changes in risk parameters
|
-
|
60
|
60
|
|
-
|
(68)
|
(68)
|
|
-
|
(668)
|
(668)
|
|
-
|
(676)
|
(676)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(340)
|
340
|
-
|
|
(340)
|
340
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(120)
|
120
|
-
|
|
(120)
|
120
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
155
|
155
|
|
-
|
155
|
155
|
Exchange translation differences and
other movements
|
(360)
|
308
|
(52)
|
|
(1,148)
|
(283)
|
(1,431)
|
|
(188)
|
(184)
|
(372)
|
|
(1,696)
|
(159)
|
(1,855)
|
As at 31 December 2023
|
337,189
|
(151)
|
337,038
|
|
16,873
|
(318)
|
16,555
|
|
6,256
|
(3,651)
|
2,605
|
|
360,318
|
(4,120)
|
356,198
|
Income statement ECL
(charge)/release2
|
|
2
|
|
|
|
(24)
|
|
|
|
(127)
|
|
|
|
(149)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
31
|
|
Total credit impairment
(charge)/release
|
|
2
|
|
|
|
(24)
|
|
|
|
(96)
|
|
|
|
(118)
|
|
1 The gross balance
includes the notional amount of off balance sheet
instruments
2 Does not include
release relating to Other assets (31 December 2022: $2
million)
Consumer, Private and Business Banking
(audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance¹
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance¹
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance¹
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance¹
$million
|
Total credit impair-ment
$million
|
Net
$million
|
As at 1 January 2022
|
190,860
|
(377)
|
190,483
|
|
3,675
|
(185)
|
3,490
|
|
1,578
|
(797)
|
781
|
|
196,113
|
(1,359)
|
194,754
|
Transfers to stage 1
|
4,798
|
(314)
|
4,484
|
|
(4,765)
|
314
|
(4,451)
|
|
(33)
|
-
|
(33)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(5,498)
|
92
|
(5,406)
|
|
5,578
|
(92)
|
5,486
|
|
(80)
|
-
|
(80)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(81)
|
-
|
(81)
|
|
(890)
|
151
|
(739)
|
|
971
|
(151)
|
820
|
|
-
|
-
|
-
|
Net change in exposures
|
9,072
|
(49)
|
9,023
|
|
(1,611)
|
19
|
(1,592)
|
|
(396)
|
-
|
(396)
|
|
7,065
|
(30)
|
7,035
|
Net remeasurement from stage changes
|
-
|
32
|
32
|
|
-
|
(82)
|
(82)
|
|
-
|
(25)
|
(25)
|
|
-
|
(75)
|
(75)
|
Changes in risk parameters
|
-
|
63
|
63
|
|
-
|
(132)
|
(132)
|
|
-
|
(331)
|
(331)
|
|
-
|
(400)
|
(400)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(535)
|
535
|
-
|
|
(535)
|
535
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(27)
|
27
|
-
|
|
(27)
|
27
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
26
|
26
|
|
-
|
26
|
26
|
Exchange translation differences and
other movements
|
(5,912)
|
140
|
(5,772)
|
|
(166)
|
(111)
|
(277)
|
|
(24)
|
(60)
|
(84)
|
|
(6,102)
|
(31)
|
(6,133)
|
As at 31 December 2022
|
193,239
|
(413)
|
192,826
|
|
1,821
|
(118)
|
1,703
|
|
1,454
|
(776)
|
678
|
|
196,514
|
(1,307)
|
195,207
|
Income statement ECL (charge)/release
|
|
46
|
|
|
|
(195)
|
|
|
|
(356)
|
|
|
|
(505)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
245
|
|
|
|
245
|
|
Total credit impairment
(charge)/release
|
|
46
|
|
|
|
(195)
|
|
|
|
(111)
|
|
|
|
(260)
|
|
As at 1 January 2023
|
193,239
|
(413)
|
192,826
|
|
1,821
|
(118)
|
1,703
|
|
1,454
|
(776)
|
678
|
|
196,514
|
(1,307)
|
195,207
|
Transfers to stage 1
|
4,265
|
(246)
|
4,019
|
|
(4,254)
|
246
|
(4,008)
|
|
(11)
|
-
|
(11)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(7,544)
|
73
|
(7,471)
|
|
7,667
|
(73)
|
7,594
|
|
(123)
|
-
|
(123)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(64)
|
1
|
(63)
|
|
(1,049)
|
187
|
(862)
|
|
1,113
|
(188)
|
925
|
|
-
|
-
|
-
|
Net change in exposures
|
1,965
|
(78)
|
1,887
|
|
(1,713)
|
14
|
(1,699)
|
|
(395)
|
-
|
(395)
|
|
(143)
|
(64)
|
(207)
|
Net remeasurement from stage changes
|
-
|
31
|
31
|
|
-
|
(137)
|
(137)
|
|
-
|
(38)
|
(38)
|
|
-
|
(144)
|
(144)
|
Changes in risk parameters
|
-
|
110
|
110
|
|
-
|
(69)
|
(69)
|
|
-
|
(426)
|
(426)
|
|
-
|
(385)
|
(385)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(649)
|
649
|
-
|
|
(649)
|
649
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
37
|
(37)
|
-
|
|
37
|
(37)
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
24
|
24
|
|
-
|
24
|
24
|
Exchange translation differences and
other movements
|
(862)
|
197
|
(665)
|
|
-
|
(190)
|
(190)
|
|
59
|
33
|
92
|
|
(803)
|
40
|
(763)
|
As at 31 December 2023
|
190,999
|
(325)
|
190,674
|
|
2,472
|
(140)
|
2,332
|
|
1,485
|
(759)
|
726
|
|
194,956
|
(1,224)
|
193,732
|
Income statement ECL (charge)/release
|
|
63
|
|
|
|
(192)
|
|
|
|
(464)
|
|
|
|
(593)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
239
|
|
|
|
239
|
|
Total credit impairment
(charge)/release
|
|
63
|
|
|
|
(192)
|
|
|
|
(225)
|
|
|
|
(354)
|
|
1 The gross balance
includes the notional amount of off-balance sheet
instruments
Consumer, Private and Business Banking -
Secured (audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
As at 1 January 2022
|
136,600
|
(96)
|
136,504
|
|
2,685
|
(32)
|
2,653
|
|
1,103
|
(517)
|
586
|
|
140,388
|
(645)
|
139,743
|
Transfers to stage 1
|
3,080
|
(28)
|
3,052
|
|
(3,054)
|
28
|
(3,026)
|
|
(26)
|
-
|
(26)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(3,254)
|
11
|
(3,243)
|
|
3,319
|
(11)
|
3,308
|
|
(65)
|
-
|
(65)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(38)
|
1
|
(37)
|
|
(473)
|
1
|
(472)
|
|
511
|
(2)
|
509
|
|
-
|
-
|
-
|
Net change in exposures
|
3,093
|
(8)
|
3,085
|
|
(945)
|
1
|
(944)
|
|
(259)
|
-
|
(259)
|
|
1,889
|
(7)
|
1,882
|
Net remeasurement from stage changes
|
-
|
1
|
1
|
|
-
|
(1)
|
(1)
|
|
-
|
(4)
|
(4)
|
|
-
|
(4)
|
(4)
|
Changes in risk parameters
|
-
|
(4)
|
(4)
|
|
-
|
48
|
48
|
|
-
|
(80)
|
(80)
|
|
-
|
(36)
|
(36)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(78)
|
78
|
-
|
|
(78)
|
78
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Exchange translation differences and
other movements
|
(4,119)
|
63
|
(4,056)
|
|
(119)
|
(51)
|
(170)
|
|
(158)
|
(27)
|
(185)
|
|
(4,396)
|
(15)
|
(4,411)
|
As at 31 December 2022
|
135,362
|
(60)
|
135,302
|
|
1,413
|
(17)
|
1,396
|
|
1,028
|
(552)
|
476
|
|
137,803
|
(629)
|
137,174
|
Income statement ECL (charge)/release
|
|
(11)
|
|
|
|
48
|
|
|
|
(84)
|
|
|
|
(47)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
55
|
|
|
|
55
|
|
Total credit impairment
(charge)/release
|
|
(11)
|
|
|
|
48
|
|
|
|
(29)
|
|
|
|
8
|
|
As at 1 January 2023
|
135,362
|
(60)
|
135,302
|
|
1,413
|
(17)
|
1,396
|
|
1,028
|
(552)
|
476
|
|
137,803
|
(629)
|
137,174
|
Transfers to stage 1
|
3,311
|
(20)
|
3,291
|
|
(3,302)
|
20
|
(3,282)
|
|
(9)
|
-
|
(9)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(5,340)
|
11
|
(5,329)
|
|
5,436
|
(9)
|
5,427
|
|
(96)
|
(2)
|
(98)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(28)
|
1
|
(27)
|
|
(463)
|
1
|
(462)
|
|
491
|
(2)
|
489
|
|
-
|
-
|
-
|
Net change in exposures
|
(3,138)
|
(16)
|
(3,154)
|
|
(1,250)
|
3
|
(1,247)
|
|
(216)
|
-
|
(216)
|
|
(4,604)
|
(13)
|
(4,617)
|
Net remeasurement from stage changes
|
-
|
4
|
4
|
|
-
|
(16)
|
(16)
|
|
-
|
(3)
|
(3)
|
|
-
|
(15)
|
(15)
|
Changes in risk parameters
|
-
|
22
|
22
|
|
-
|
24
|
24
|
|
-
|
(110)
|
(110)
|
|
-
|
(64)
|
(64)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(109)
|
109
|
-
|
|
(109)
|
109
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(3)
|
3
|
-
|
|
(3)
|
3
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
12
|
12
|
|
-
|
12
|
12
|
Exchange translation differences and
other movements
|
(369)
|
25
|
(344)
|
|
(7)
|
(22)
|
(29)
|
|
(24)
|
20
|
(4)
|
|
(400)
|
23
|
(377)
|
As at 31 December 2023
|
129,798
|
(33)
|
129,765
|
|
1,827
|
(16)
|
1,811
|
|
1,062
|
(525)
|
537
|
|
132,687
|
(574)
|
132,113
|
Income statement ECL (charge)/release
|
|
10
|
|
|
|
11
|
|
|
|
(113)
|
|
|
|
(92)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
68
|
|
|
|
68
|
|
Total credit impairment
(charge)/release
|
|
10
|
|
|
|
11
|
|
|
|
(45)
|
|
|
|
(24)
|
|
1 The gross balance
includes the notional amount of off-balance sheet
instruments
Consumer, Private and Business Banking -
Unsecured (audited)
Amortised cost
and FVOCI
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
Gross balance1
$million
|
Total credit impair-ment
$million
|
Net
$million
|
As at 1 January 2022
|
54,260
|
(281)
|
53,979
|
|
990
|
(153)
|
837
|
|
475
|
(280)
|
195
|
|
55,725
|
(714)
|
55,011
|
Transfers to stage 1
|
1,718
|
(286)
|
1,432
|
|
(1,711)
|
286
|
(1,425)
|
|
(7)
|
-
|
(7)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(2,244)
|
81
|
(2,163)
|
|
2,259
|
(81)
|
2,178
|
|
(15)
|
-
|
(15)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(43)
|
(1)
|
(44)
|
|
(417)
|
150
|
(267)
|
|
460
|
(149)
|
311
|
|
-
|
-
|
-
|
Net change in exposures
|
5,979
|
(41)
|
5,938
|
|
(666)
|
18
|
(648)
|
|
(137)
|
-
|
(137)
|
|
5,176
|
(23)
|
5,153
|
Net remeasurement from stage changes
|
-
|
31
|
31
|
|
-
|
(81)
|
(81)
|
|
-
|
(21)
|
(21)
|
|
-
|
(71)
|
(71)
|
Changes in risk parameters
|
-
|
67
|
67
|
|
-
|
(180)
|
(180)
|
|
-
|
(251)
|
(251)
|
|
-
|
(364)
|
(364)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(457)
|
457
|
-
|
|
(457)
|
457
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(27)
|
27
|
-
|
|
(27)
|
27
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
26
|
26
|
|
-
|
26
|
26
|
Exchange translation differences and
other movements
|
(1,793)
|
77
|
(1,716)
|
|
(47)
|
(60)
|
(107)
|
|
134
|
(33)
|
101
|
|
(1,706)
|
(16)
|
(1,722)
|
As at 31 December 2022
|
57,877
|
(353)
|
57,524
|
|
408
|
(101)
|
307
|
|
426
|
(224)
|
202
|
|
58,711
|
(678)
|
58,033
|
Income statement ECL (charge)/release
|
|
57
|
|
|
|
(243)
|
|
|
|
(272)
|
|
|
|
(458)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
190
|
|
|
|
190
|
|
Total credit impairment
(charge)/release
|
|
57
|
|
|
|
(243)
|
|
|
|
(82)
|
|
|
|
(268)
|
|
As at 1 January 2023
|
57,877
|
(353)
|
57,524
|
|
408
|
(101)
|
307
|
|
426
|
(224)
|
202
|
|
58,711
|
(678)
|
58,033
|
Transfers to stage 1
|
954
|
(226)
|
728
|
|
(952)
|
226
|
(726)
|
|
(2)
|
-
|
(2)
|
|
-
|
-
|
-
|
Transfers to stage 2
|
(2,204)
|
62
|
(2,142)
|
|
2,231
|
(64)
|
2,167
|
|
(27)
|
2
|
(25)
|
|
-
|
-
|
-
|
Transfers to stage 3
|
(36)
|
-
|
(36)
|
|
(586)
|
186
|
(400)
|
|
622
|
(186)
|
436
|
|
-
|
-
|
-
|
Net change in exposures
|
5,103
|
(62)
|
5,041
|
|
(463)
|
11
|
(452)
|
|
(179)
|
-
|
(179)
|
|
4,461
|
(51)
|
4,410
|
Net remeasurement from stage changes
|
-
|
27
|
27
|
|
-
|
(121)
|
(121)
|
|
-
|
(35)
|
(35)
|
|
-
|
(129)
|
(129)
|
Changes in risk parameters
|
-
|
88
|
88
|
|
-
|
(93)
|
(93)
|
|
-
|
(316)
|
(316)
|
|
-
|
(321)
|
(321)
|
Write-offs
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
(540)
|
540
|
-
|
|
(540)
|
540
|
-
|
Interest due
but unpaid
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
40
|
(40)
|
-
|
|
40
|
(40)
|
-
|
Discount unwind
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
12
|
12
|
|
-
|
12
|
12
|
Exchange translation differences and
other movements
|
(493)
|
172
|
(321)
|
|
7
|
(168)
|
(161)
|
|
83
|
13
|
96
|
|
(403)
|
17
|
(386)
|
As at 31 December 2023
|
61,201
|
(292)
|
60,909
|
|
645
|
(124)
|
521
|
|
423
|
(234)
|
189
|
|
62,269
|
(650)
|
61,619
|
Income statement ECL (charge)/release
|
|
53
|
|
|
|
(203)
|
|
|
|
(351)
|
|
|
|
(501)
|
|
Recoveries of amounts previously written
off
|
|
-
|
|
|
|
-
|
|
|
|
171
|
|
|
|
171
|
|
Total credit impairment
(charge)/release
|
|
53
|
|
|
|
(203)
|
|
|
|
(180)
|
|
|
|
(330)
|
|
1 The gross balance
includes the notional amount of off-balance sheet
instruments
Page
24
Analysis of stage 2 balances
The table below analyses total stage 2 gross
on-and off-balance sheet exposures and associated expected credit
provisions by the key significant increase in credit risk (SICR)
driver that caused the exposures to be classified as stage 2 as at
31 December 2023 and 31 December 2022 for each segment.
Where multiple drivers apply, the exposure is
allocated based on the table order. For example, a loan may have
breached the PD thresholds and could also be on non-purely
precautionary early alert; in this instance, the exposure is
reported under 'Increase in PD'.
|
2023
|
Corporate, Commercial & Institutional
Banking
|
|
Consumer, Private & Business
Banking
|
|
Ventures
|
|
Central & other items1
|
|
Total
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Increase in PD
|
8,262
|
75
|
0.9%
|
|
1,962
|
109
|
5.6%
|
|
96
|
23
|
24.0%
|
|
599
|
13
|
2.2%
|
|
10,919
|
220
|
2.0%
|
Non-purely precautionary early
alert
|
5,136
|
26
|
0.5%
|
|
37
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
5,173
|
26
|
0.5%
|
Higher risk (CG12)
|
1,008
|
56
|
5.6%
|
|
26
|
1
|
3.8%
|
|
-
|
-
|
0.0%
|
|
2,020
|
17
|
0.8%
|
|
3,054
|
74
|
2.4%
|
Sub-investment grade
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
Top up/Sell down (Private
Banking)
|
-
|
-
|
0.0%
|
|
148
|
2
|
1.4%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
148
|
2
|
1.4%
|
Others
|
2,467
|
37
|
1.5%
|
|
151
|
16
|
10.6%
|
|
-
|
-
|
0.0%
|
|
489
|
-
|
0.0%
|
|
3,107
|
53
|
1.7%
|
30 days past due
|
-
|
-
|
0.0%
|
|
148
|
12
|
8.1%
|
|
2
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
150
|
12
|
8.0%
|
Management overlay
|
-
|
124
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
17
|
0.0%
|
|
-
|
141
|
0.0%
|
Total stage 2
|
16,873
|
318
|
1.9%
|
|
2,472
|
140
|
5.7%
|
|
98
|
23
|
23.5%
|
|
3,108
|
47
|
1.5%
|
|
22,551
|
528
|
2.3%
|
|
2022
|
Corporate, Commercial &
Institutional Banking
|
|
Consumer, Private &
Business Banking
|
|
Ventures
|
|
Central & other
items1
|
|
Total
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Gross
$million
|
ECL
$million
|
Coverage
%
|
Increase in PD
|
13,620
|
192
|
1.4%
|
|
1,389
|
89
|
6.4%
|
|
-
|
-
|
0.0%
|
|
2,973
|
11
|
0.4%
|
|
17,982
|
292
|
1.6%
|
Non-purely precautionary early
alert
|
3,272
|
12
|
0.4%
|
|
35
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
5
|
-
|
0.0%
|
|
3,312
|
12
|
0.4%
|
Higher risk (CG12)
|
653
|
30
|
4.6%
|
|
18
|
1
|
5.6%
|
|
-
|
-
|
0.0%
|
|
2,534
|
69
|
2.7%
|
|
3,205
|
100
|
3.1%
|
Sub-investment grade
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
95
|
11
|
11.6%
|
|
95
|
11
|
11.6%
|
Top up/Sell down (Private
Banking)
|
-
|
-
|
0.0%
|
|
111
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
111
|
-
|
0.0%
|
Others
|
2,603
|
41
|
1.6%
|
|
122
|
4
|
3.3%
|
|
-
|
-
|
0.0%
|
|
451
|
7
|
1.6%
|
|
3,176
|
52
|
1.6%
|
30 days past due
|
-
|
-
|
0.0%
|
|
146
|
12
|
8.2%
|
|
47
|
3
|
6.4%
|
|
-
|
-
|
0.0%
|
|
193
|
15
|
7.8%
|
Management overlay
|
-
|
136
|
0.0%
|
|
-
|
12
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
-
|
0.0%
|
|
-
|
148
|
0.0%
|
Total stage 2
|
20,148
|
411
|
2.0%
|
|
1,821
|
118
|
6.5%
|
|
47
|
3
|
6.4%
|
|
6,058
|
98
|
1.6%
|
|
28,074
|
630
|
2.2%
|
1 Includes Gross and
ECL for Cash and balances at central banks and Assets held for
sale
Page
25
Credit impairment charge (audited)
The table below analyses credit impairment
charges or releases of the ongoing business portfolio and
restructuring business portfolio for the year ended 31 December
2023.
Further details can be found in the 'Summary of
performance in 2023'.
|
2023
|
|
20221
|
Stage 1 & 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1 & 2
$million
|
Stage 3
$million
|
Total
$million
|
Ongoing business portfolio
|
|
|
|
|
|
|
|
Corporate, Commercial
& Institutional Banking
|
11
|
112
|
123
|
|
148
|
277
|
425
|
Consumer, Private & Business
Banking
|
129
|
225
|
354
|
|
151
|
111
|
262
|
Ventures
|
42
|
43
|
85
|
|
13
|
3
|
16
|
Central & other items
|
(44)
|
10
|
(34)
|
|
95
|
38
|
133
|
Credit impairment charge/(release)
|
138
|
390
|
528
|
|
407
|
429
|
836
|
Restructuring business portfolio
|
|
|
|
|
|
|
|
Others
|
1
|
(21)
|
(20)
|
|
(1)
|
1
|
-
|
Credit impairment charge/(release)
|
1
|
(21)
|
(20)
|
|
(1)
|
1
|
-
|
Total credit impairment
charge/(release)
|
139
|
369
|
508
|
|
406
|
430
|
836
|
1 Underlying credit impairment has
been restated for the removal of (i) exit markets and businesses in
AME and (ii) Aviation Finance. No change to reported credit
impairment
Problem credit management and provisioning
(audited)
Forborne and other modified loans by client
segment
A forborne loan arises when a concession has
been made to the contractual terms of a loan in response to a
customer's financial difficulties.
Net forborne loans decreased by $120 million to
$1,005 million (31 December 2022: $1,125 million) largely on
performing forborne loans stock. The net performing forborne loans
declined from $151 million to $38 million while net non-performing
forborne loans remained stable at $967 million (31 December 2022:
$974 million).
Amortised cost
|
2023
|
|
2022
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Total
$million
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Total
$million
|
All loans with forbearance measures
|
2,340
|
314
|
-
|
2,654
|
|
2,129
|
377
|
-
|
2,506
|
Credit impairment (stage 1 and 2)
|
-
|
(2)
|
-
|
(2)
|
|
(1)
|
-
|
-
|
(1)
|
Credit impairment (stage 3)
|
(1,529)
|
(118)
|
-
|
(1,647)
|
|
(1,253)
|
(127)
|
-
|
(1,380)
|
Net carrying value
|
811
|
194
|
-
|
1,005
|
|
875
|
250
|
-
|
1,125
|
Included within the above table
|
|
|
|
|
|
|
|
|
|
Gross performing forborne loans
|
-
|
40
|
-
|
40
|
|
89
|
63
|
-
|
152
|
Modification of terms and
conditions1
|
-
|
40
|
-
|
40
|
|
89
|
63
|
-
|
152
|
Refinancing2
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Impairment provisions
|
-
|
(2)
|
-
|
(2)
|
|
(1)
|
-
|
-
|
(1)
|
Modification of terms and
conditions1
|
-
|
(2)
|
-
|
(2)
|
|
(1)
|
-
|
-
|
(1)
|
Refinancing2
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Net performing forborne loans
|
-
|
38
|
-
|
38
|
|
88
|
63
|
-
|
151
|
Collateral
|
-
|
31
|
-
|
31
|
|
7
|
60
|
-
|
67
|
Gross non-performing forborne loans
|
2,340
|
274
|
-
|
2,614
|
|
2,040
|
314
|
-
|
2,354
|
Modification of terms and
conditions1
|
2,113
|
274
|
-
|
2,387
|
|
1,997
|
314
|
-
|
2,311
|
Refinancing2
|
227
|
-
|
-
|
227
|
|
43
|
-
|
-
|
43
|
Impairment provisions
|
(1,529)
|
(118)
|
-
|
(1,647)
|
|
(1,253)
|
(127)
|
-
|
(1,380)
|
Modification of terms and
conditions1
|
(1,337)
|
(118)
|
-
|
(1,454)
|
|
(1,210)
|
(127)
|
-
|
(1,337)
|
Refinancing2
|
(192)
|
-
|
-
|
(192)
|
|
(43)
|
-
|
-
|
(43)
|
Net non-performing forborne loans
|
811
|
156
|
-
|
967
|
|
787
|
187
|
-
|
974
|
Collateral
|
341
|
49
|
-
|
390
|
|
243
|
68
|
-
|
311
|
1 Modification of
terms is any contractual change apart from refinancing, as a result
of credit stress of the counterparty, i.e. interest reductions,
loan covenant waivers
2 Refinancing is a new
contract to a borrower in credit stress, such that they are
refinanced and can pay other debt contracts that they were unable
to honour
Page
26
Forborne and other modified loans by
region
Net forborne loans decreased by $120 million to
$1,005 million (31 December 2022: $1,125 million) mainly in the
performing forborne loans, in particular the Asia and the Europe
and Americas regions.
Amortised cost
|
2023
|
|
2022
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Performing forborne loans
|
34
|
4
|
-
|
38
|
|
129
|
9
|
13
|
151
|
Stage 3 forborne loans
|
661
|
75
|
231
|
967
|
|
568
|
144
|
262
|
974
|
Net forborne loans
|
695
|
79
|
231
|
1,005
|
|
697
|
153
|
275
|
1,125
|
Stage 3 cover ratio (audited)
The stage 3 cover ratio measures the proportion
of stage 3 impairment provisions to gross stage 3 loans, and is a
metric commonly used in considering impairment trends. This metric
does not allow for variations in the composition of stage 3 loans
and should be used in conjunction with other Credit Risk
information provided, including the level of collateral
cover.
The balance of stage 3 loans not covered by
stage 3 impairment provisions represents the adjusted value of
collateral held and the net outcome of any workout or recovery
strategies. Collateral provides risk mitigation to some degree in
all client segments and supports the credit quality and cover ratio
assessments post impairment provisions.
Further information on collateral is provided in
the 'Credit Risk mitigation' section.
Further details on stage 3 loans and advances
and cover ratio can be found in the 'Summary of performance in
2023'.
Amortised cost
|
2023
|
|
2022
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Central & Others
$million
|
Total
$million
|
Corporate, Commercial & Institutional
Banking
$million
|
Consumer, Private & Business Banking
$million
|
Ventures
$million
|
Central & Others
$million
|
Total
$million
|
Gross credit-impaired
|
5,508
|
1,484
|
12
|
224
|
7,228
|
|
6,143
|
1,453
|
1
|
248
|
7,845
|
Credit impairment provisions
|
(3,533)
|
(760)
|
(12)
|
(15)
|
(4,320)
|
|
(3,662)
|
(776)
|
(1)
|
(18)
|
(4,457)
|
Net credit-impaired
|
1,975
|
724
|
-
|
209
|
2,908
|
|
2,481
|
677
|
-
|
230
|
3,388
|
Cover ratio
|
64%
|
51%
|
100%
|
7%
|
60%
|
|
60%
|
53%
|
100%
|
7%
|
57%
|
Collateral ($ million)
|
623
|
554
|
-
|
-
|
1,177
|
|
956
|
543
|
-
|
-
|
1,499
|
Cover ratio (after collateral)
|
75%
|
89%
|
100%
|
7%
|
76%
|
|
75%
|
91%
|
100%
|
7%
|
76%
|
Credit-impaired (stage 3) loans and advances by
geographic region
Stage 3 gross loans decreased by $0.6 billion to
$7.2 billion (31 December 2022: $7.8 billion). The decrease was
primarily driven by repayments and write-offs in the Africa and the
Middle East, which was offset by new inflows in Asia.
Further details can be found in the 'Summary of
performance in 2023'.
Amortised cost
|
2023
|
|
2022
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Gross credit-impaired
|
4,604
|
2,273
|
351
|
7,228
|
|
4,562
|
2,725
|
558
|
7,845
|
Credit impairment provisions
|
(2,734)
|
(1,388)
|
(198)
|
(4,320)
|
|
(2,483)
|
(1,765)
|
(209)
|
(4,457)
|
Net credit-impaired
|
1,870
|
885
|
153
|
2,908
|
|
2,079
|
960
|
349
|
3,388
|
Cover ratio
|
59%
|
61%
|
56%
|
60%
|
|
54%
|
65%
|
37%
|
57%
|
Credit Risk mitigation
Potential credit losses from any given account,
customer or portfolio are mitigated using a range of tools such as
collateral, netting arrangements, credit insurance and credit
derivatives, taking into account expected volatility and
guarantees.
The reliance that can be placed on these
mitigants is carefully assessed in light of issues such as legal
certainty and enforceability, market valuation correlation and
counterparty risk of the guarantor.
Page
27
Collateral (audited)
A secured loan is one where the borrower pledges
an asset as collateral of which the Group is able to take
possession in the event that the borrower defaults.
The unadjusted market value of collateral across
all asset types, in respect of CCIB, without adjusting for
over-collateralisation, reduced to $290 billion (31 December 2022:
$345 billion) predominantly due to a reduction in reverse
repos.
The collateral values in the table below (which
covers loans and advances to banks and customers, excluding those
held at fair value through profit or loss) are adjusted where
appropriate in accordance with our risk mitigation policy and for
the effect of over-collateralisation. The extent of
over-collateralisation has been determined with reference to both
the drawn and undrawn components of exposure as this best reflects
the effect of collateral and other credit enhancements on the
amounts arising from expected credit losses. The value of
collateral reflects management's best estimate and is backtested
against our prior experience. On average, across all types of
non-cash collateral, the value ascribed is approximately half of
its current market value.
CCIB collateral decreased by $1.7 billion to
$36.5 billion (31 December 2022: $38.2 billion) and CPBB collateral
decreased by $5.5 billion to $86.8 billion (31 December 2022:
$92.4 billion) due to exposure reductions from the mortgage
portfolio. Total collateral for Central and other items decreased
by $8.7 billion to $2.5 billion (31 December 2022: $11.2 billion)
due to a decrease in stage 1 reverse repos. However, collateral for
stage 2 Central and other items increased by $1 billion (31
December 2022: Nil) due to short-term reverse repo with a Central
Bank in the Africa and Middle East region.
Collateral held on loans and
advances
The table below details collateral held against
exposures, separately disclosing stage 2 and stage 3 exposure and
corresponding collateral.
Amortised cost
|
2023
|
Net amount outstanding
|
|
Collateral
|
|
Net exposure
|
Total
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Total2
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Total
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Corporate, Commercial & Institutional
Banking1
|
175,382
|
8,175
|
2,046
|
|
36,458
|
2,972
|
623
|
|
138,924
|
5,203
|
1,423
|
Consumer, Private & Business
Banking
|
126,059
|
2,163
|
724
|
|
86,827
|
1,136
|
554
|
|
39,232
|
1,027
|
170
|
Ventures
|
1,033
|
33
|
-
|
|
-
|
-
|
-
|
|
1,033
|
33
|
-
|
Central & other items
|
29,478
|
964
|
209
|
|
2,475
|
964
|
-
|
|
27,003
|
-
|
209
|
Total
|
331,952
|
11,335
|
2,979
|
|
125,760
|
5,072
|
1,177
|
|
206,192
|
6,263
|
1,802
|
Amortised cost
|
2022
|
Net amount outstanding
|
|
Collateral
|
|
Net exposure
|
Total
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Total2
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Total
$million
|
Stage 2 financial
assets
$million
|
Credit-impaired financial
assets (S3)
$million
|
Corporate, Commercial & Institutional
Banking1
|
179,150
|
11,366
|
2,526
|
|
38,151
|
3,973
|
956
|
|
140,999
|
7393
|
1,570
|
Consumer, Private & Business
Banking
|
130,955
|
1,550
|
677
|
|
92,350
|
1,019
|
543
|
|
38,605
|
531
|
134
|
Ventures
|
698
|
17
|
-
|
|
-
|
-
|
-
|
|
698
|
17
|
-
|
Central & other items
|
39,363
|
-
|
230
|
|
11,214
|
-
|
-
|
|
28,149
|
-
|
230
|
Total
|
350,166
|
12,933
|
3,433
|
|
141,715
|
4,992
|
1,499
|
|
208,451
|
7,941
|
1,934
|
1 Includes loans and
advances to banks
2 Adjusted for
over-collateralisation based on the drawn and undrawn components of
exposures
Page
28
Collateral - Corporate, Commercial &
Institutional Banking (audited)
Collateral taken for longer-term and
sub-investment grade corporate loans reduced to 41 per cent (31
December 2022: 53 per cent) primarily due to the exit of the
Aviation business.
Our underwriting standards encourage taking
specific charges on assets and we consistently seek high-quality,
investment-grade collateral.
83 per cent (31 December 2022: 85 per cent) of
tangible collateral excluding reverse repurchase agreements and
financial guarantees held comprises physical assets or is property
based, with the remainder held in cash. Overall collateral
decreased by $2 billion to $36 billion (31 December 2022: $38
billion) mainly due to a decrease in property
collateral.
Non-tangible collateral, such as guarantees and
standby letters of credit, is also held against corporate
exposures, although the financial effect of this type of collateral
is less significant in terms of recoveries. However, this is
considered when determining the probability of default and other
credit-related factors. Collateral is also held against off balance
sheet exposures, including undrawn commitments and trade-related
instruments.
Corporate, Commercial & Institutional
Banking
Amortised cost
|
2023
$million
|
2022
$million
|
Maximum exposure
|
175,382
|
179,150
|
Property
|
9,339
|
10,152
|
Plant, machinery and other stock
|
933
|
1,168
|
Cash
|
2,985
|
2,797
|
Reverse repos
|
13,826
|
14,305
|
AA- to AA+2
|
1,036
|
92
|
A- to A+2
|
10,606
|
10,459
|
BBB- to BBB+
|
855
|
1,485
|
Lower than BBB-
|
169
|
-
|
Unrated
|
1,160
|
2,269
|
Financial guarantees and insurance
|
5,057
|
5,096
|
Commodities
|
5
|
37
|
Ships and aircraft
|
4,313
|
4,596
|
Total value of collateral1
|
36,458
|
38,151
|
Net exposure
|
138,924
|
140,999
|
1 Adjusted for
over-collateralisation based on the drawn and undrawn components of
exposures
2 Prior year has been
represented to provide granular credit ratings
Collateral - Consumer, Private & Business
Banking (audited)
In CPBB, fully secured products remain stable at
85 per cent of the total portfolio (31 December 2022: 86 per
cent).
The following table presents an analysis of
loans to individuals by product; split between fully secured,
partially secured and unsecured.
Amortised cost
|
2023
|
|
2022
|
Fully
secured
$million
|
Partially secured
$million
|
Unsecured
$million
|
Total
$million
|
Fully
secured
$million
|
Partially secured
$million
|
Unsecured
$million
|
Total
$million
|
Maximum exposure
|
106,914
|
505
|
18,640
|
126,059
|
|
112,556
|
449
|
17,950
|
130,955
|
Loans to individuals
|
|
|
|
|
|
|
|
|
|
Mortgages
|
82,943
|
-
|
-
|
82,943
|
|
87,212
|
-
|
-
|
87,212
|
CCPL
|
375
|
-
|
17,395
|
17,770
|
|
221
|
-
|
16,711
|
16,932
|
Auto
|
312
|
-
|
-
|
312
|
|
502
|
-
|
-
|
502
|
Secured wealth products
|
20,303
|
-
|
-
|
20,303
|
|
19,551
|
-
|
-
|
19,551
|
Other
|
2,981
|
505
|
1,245
|
4,731
|
|
5,070
|
449
|
1,239
|
6,758
|
Total collateral1
|
|
|
|
86,827
|
|
|
|
|
92,350
|
Net exposure2
|
|
|
|
39,232
|
|
|
|
|
38,605
|
Percentage of total loans
|
85%
|
0%
|
15%
|
|
|
86%
|
0%
|
14%
|
|
1 Collateral values
are adjusted where appropriate in accordance with our risk
mitigation policy and for the effect of
over-collateralisation
2 Amounts net of
ECL
Page
29
Mortgage loan-to-value ratios by geography
(audited)
Loan-to-value (LTV) ratios measure the ratio of
the current mortgage outstanding to the current fair value of the
properties on which they are secured.
In a majority of mortgages, the value of
property held as security significantly exceeds principal
outstanding of the mortgage loans. The average LTV of the overall
mortgage portfolio increased to 47.1 per cent (31 December 2022:
44.7 per cent) driven by property prices decrease in a few key
markets, including Hong Kong, Korea and China. Hong Kong, which
represents 39.9 per cent of the residential mortgage portfolio, has
an average LTV of 55.9 per cent (31 December 2022: 52.6 per cent).
The increase of Hong Kong residential mortgage LTV is due to a
decrease of the Property Price Index. All of our other key markets
continue to have low portfolio LTVs (Korea, Singapore and Taiwan at
40.5 per cent, 43.0 per cent and 47.0 per cent respectively). Korea
average LTV increase is due to government relaxations whereby
highly regulated areas have eased up to accommodate customers with
higher LTV.
An analysis of LTV ratios by geography for the
mortgage portfolio is presented in the table below.
Amortised cost
|
2023
|
Asia
%
Gross
|
Africa &
Middle East
%
Gross
|
Europe &
Americas
%
Gross
|
Total
%
Gross
|
Less than 50 per cent
|
55.5
|
51.1
|
31.0
|
54.8
|
50 per cent to 59 per cent
|
17.1
|
14.7
|
17.4
|
17.1
|
60 per cent to 69 per cent
|
11.4
|
13.7
|
33.9
|
12.0
|
70 per cent to 79 per cent
|
7.7
|
12.8
|
14.4
|
7.9
|
80 per cent to 89 per cent
|
3.3
|
3.9
|
2.5
|
3.3
|
90 per cent to 99 per cent
|
2.6
|
2.1
|
0.6
|
2.5
|
100 per cent and greater
|
2.5
|
1.7
|
0.3
|
2.4
|
Average portfolio loan-to-value
|
46.9
|
51.1
|
56.0
|
47.1
|
Loans to individuals - mortgages
($million)
|
79,517
|
1,183
|
2,243
|
82,943
|
Amortised cost
|
2022
|
Asia1
%
Gross
|
Africa &
Middle East
%
Gross
|
Europe &
Americas
%
Gross
|
Total
%
Gross
|
Less than 50 per cent
|
60.9
|
43.0
|
32.2
|
60.1
|
50 per cent to 59 per cent
|
15.5
|
18.2
|
19.2
|
15.6
|
60 per cent to 69 per cent
|
9.8
|
16.8
|
31.3
|
10.2
|
70 per cent to 79 per cent
|
6.5
|
12.8
|
14.8
|
6.7
|
80 per cent to 89 per cent
|
3.6
|
5.1
|
1.1
|
3.6
|
90 per cent to 99 per cent
|
2.5
|
2.0
|
-
|
2.4
|
100 per cent and greater
|
1.4
|
2.2
|
1.3
|
1.4
|
Average portfolio loan-to-value
|
44.4
|
54.3
|
56.6
|
44.7
|
Loans to individuals - mortgages
($million)
|
83,954
|
1,388
|
1,870
|
87,212
|
Collateral and other credit enhancements
possessed or called upon (audited)
The Group obtains assets by taking possession of
collateral or calling upon other credit enhancements (such as
guarantees). Repossessed properties are sold in an orderly fashion.
Where the proceeds are in excess of the outstanding loan balance
the excess is returned to the borrower.
Certain equity securities acquired may be held
by the Group for investment purposes and are classified as fair
value through profit or loss, and the related loan written off. The
carrying value of collateral possessed and held by the Group is
$16.5 million (31 December 2022: $14.9 million).
|
2023
$million
|
2022
$million
|
Property, plant and equipment
|
10.5
|
9.6
|
Guarantees
|
6.0
|
5.3
|
Total
|
16.5
|
14.9
|
Page
30
Other Credit risk mitigation
(audited)
Other forms of credit risk mitigation are set
out below.
Credit default swaps
The Group has entered into credit default swaps
for portfolio management purposes, referencing loan assets with a
notional value of $3.5 billion (31 December 2022: $5.1 billion).
These credit default swaps are accounted for as financial
guarantees as per IFRS 9 as they will only reimburse the holder for
an incurred loss on an underlying debt instrument. The Group
continues to hold the underlying assets referenced in the credit
default swaps and it continues to be exposed to related Credit Risk
and Foreign Exchange Rate Risk on these assets.
Credit linked notes
The Group has issued credit linked notes for
portfolio management purposes, referencing loan assets with a
notional value of $22.5 billion (31 December 2022: $13.5 billion).
The Group continues to hold the underlying assets for which the
credit linked notes provide mitigation. The credit linked notes are
recognised as a financial liability at amortised cost on the
balance sheet.
Derivative financial instruments
The Group enters into master netting agreements,
which in the event of default result in a single amount owed by or
to the counterparty through netting the sum of the positive and
negative mark-to-market values of applicable derivative
transactions. Credit Risk mitigation for derivative financial
instruments is set out below.
Off-balance sheet exposures
For certain types of exposures, such as letters
of credit and guarantees, the Group obtains collateral such as cash
depending on internal Credit Risk assessments, as well as in the
case of letters of credit holding legal title to the underlying
assets should a default take place.
Other portfolio analysis
This section provides maturity analysis by
credit quality by industry and industry and retail products
analysis by region.
Maturity analysis of loans and advances by
client segment
Loans and advances to the CCIB segment remain
predominantly short-term, with $91 billion (31 December 2022: $98
billion) maturing in less than one year. 98 per cent (31 December
2022: 96 per cent) of loans to banks mature in less than one year,
an increase compared with 2022 as net exposures increased by $5.5
billion to $45 billion (31 December 2022: $39.5 billion). Shorter
maturities give us the flexibility to respond promptly to events
and rebalance or reduce our exposure to clients or sectors that are
facing increased pressure or uncertainty.
The CPBB short-term book of one year or less and
long-term book of over five years is stable at 26 per cent (31
December 2022: 25 per cent) and 63 per cent (31 December 2022: 64
per cent) of the total portfolio respectively.
Amortised cost
|
2023
|
One year or less
$million
|
One to five years
$million
|
Over five years
$million
|
Total
$million
|
Corporate, Commercial & Institutional
Banking
|
90,728
|
30,746
|
12,822
|
134,296
|
Consumer, Private & Business
Banking
|
33,397
|
13,711
|
80,166
|
127,274
|
Ventures
|
747
|
334
|
-
|
1,081
|
Central & other items
|
29,448
|
43
|
3
|
29,494
|
Gross loans and advances to customers
|
154,320
|
44,834
|
92,991
|
292,145
|
Impairment provisions
|
(4,872)
|
(185)
|
(113)
|
(5,170)
|
Net loans and advances to customers
|
149,448
|
44,649
|
92,878
|
286,975
|
Net loans and advances to banks
|
43,955
|
1,021
|
1
|
44,977
|
Page
31
Amortised cost
|
2022
|
One year or less
$million
|
One to five years
$million
|
Over five years
$million
|
Total
$million
|
Corporate, Commercial & Institutional
Banking
|
98,335
|
34,635
|
10,789
|
143,759
|
Consumer, Private & Business
Banking
|
33,365
|
14,161
|
84,731
|
132,257
|
Ventures
|
548
|
162
|
-
|
710
|
Central & other items
|
39,373
|
-
|
8
|
39,381
|
Gross loans and advances to customers
|
171,621
|
48,958
|
95,528
|
316,107
|
Impairment provisions
|
(4,767)
|
(574)
|
(119)
|
(5,460)
|
Net loans and advances to customers
|
166,854
|
48,384
|
95,409
|
310,647
|
Net loans and advances to banks
|
38,105
|
1,211
|
203
|
39,519
|
Credit quality by industry
Loans and advances
This section provides an analysis of the Group's
amortised cost portfolio by industry on a gross, total credit
impairment and net basis.
Amortised cost
|
2023
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
9,397
|
(8)
|
9,389
|
|
672
|
(22)
|
650
|
|
949
|
(535)
|
414
|
|
11,018
|
(565)
|
10,453
|
Manufacturing
|
21,239
|
(8)
|
21,231
|
|
708
|
(16)
|
692
|
|
656
|
(436)
|
220
|
|
22,603
|
(460)
|
22,143
|
Financing, insurance and non-banking
|
31,633
|
(13)
|
31,620
|
|
571
|
(1)
|
570
|
|
80
|
(77)
|
3
|
|
32,284
|
(91)
|
32,193
|
Transport, telecom and utilities
|
14,710
|
(8)
|
14,702
|
|
1,722
|
(36)
|
1,686
|
|
481
|
(178)
|
303
|
|
16,913
|
(222)
|
16,691
|
Food and household products
|
7,668
|
(15)
|
7,653
|
|
323
|
(7)
|
316
|
|
355
|
(262)
|
93
|
|
8,346
|
(284)
|
8,062
|
Commercial
real estate
|
12,261
|
(30)
|
12,231
|
|
1,848
|
(129)
|
1,719
|
|
1,712
|
(1,191)
|
521
|
|
15,821
|
(1,350)
|
14,471
|
Mining and quarrying
|
5,995
|
(4)
|
5,991
|
|
220
|
(10)
|
210
|
|
151
|
(84)
|
67
|
|
6,366
|
(98)
|
6,268
|
Consumer durables
|
5,815
|
(3)
|
5,812
|
|
300
|
(21)
|
279
|
|
329
|
(298)
|
31
|
|
6,444
|
(322)
|
6,122
|
Construction
|
2,230
|
(2)
|
2,228
|
|
502
|
(8)
|
494
|
|
358
|
(326)
|
32
|
|
3,090
|
(336)
|
2,754
|
Trading companies & distributors
|
581
|
-
|
581
|
|
57
|
-
|
57
|
|
107
|
(58)
|
49
|
|
745
|
(58)
|
687
|
Government
|
33,400
|
(6)
|
33,394
|
|
1,783
|
(5)
|
1,778
|
|
367
|
(33)
|
334
|
|
35,550
|
(44)
|
35,506
|
Other
|
4,262
|
(4)
|
4,258
|
|
161
|
(3)
|
158
|
|
187
|
(70)
|
117
|
|
4,610
|
(77)
|
4,533
|
Retail Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
81,210
|
(8)
|
81,202
|
|
1,350
|
(5)
|
1,345
|
|
519
|
(123)
|
396
|
|
83,079
|
(136)
|
82,943
|
Credit Cards
|
7,633
|
(104)
|
7,529
|
|
244
|
(65)
|
179
|
|
69
|
(50)
|
19
|
|
7,946
|
(219)
|
7,727
|
Personal loans
and other
unsecured lending
|
10,867
|
(188)
|
10,679
|
|
324
|
(77)
|
247
|
|
315
|
(165)
|
150
|
|
11,506
|
(430)
|
11,076
|
Auto
|
310
|
-
|
310
|
|
1
|
-
|
1
|
|
1
|
-
|
1
|
|
312
|
-
|
312
|
Secured wealth products
|
19,923
|
(22)
|
19,901
|
|
278
|
(10)
|
268
|
|
474
|
(340)
|
134
|
|
20,675
|
(372)
|
20,303
|
Other
|
4,558
|
(7)
|
4,551
|
|
161
|
(5)
|
156
|
|
118
|
(94)
|
24
|
|
4,837
|
(106)
|
4,731
|
Net carrying value (customers)¹
|
273,692
|
(430)
|
273,262
|
|
11,225
|
(420)
|
10,805
|
|
7,228
|
(4,320)
|
2,908
|
|
292,145
|
(5,170)
|
286,975
|
1 Includes reverse
repurchase agreements and other similar secured lending held at
amortised cost of $13,996 million
Page
32
Amortised cost
|
2022
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Gross balance
$million
|
Total credit impair-ment
$million
|
Net carrying amount
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
10,959
|
(8)
|
10,951
|
|
818
|
(7)
|
811
|
|
1,324
|
(620)
|
704
|
|
13,101
|
(635)
|
12,466
|
Manufacturing
|
20,990
|
(23)
|
20,967
|
|
1,089
|
(27)
|
1,062
|
|
777
|
(518)
|
259
|
|
22,856
|
(568)
|
22,288
|
Financing, insurance and non-banking
|
34,915
|
(9)
|
34,906
|
|
774
|
(3)
|
771
|
|
195
|
(175)
|
20
|
|
35,884
|
(187)
|
35,697
|
Transport, telecom and utilities
|
14,273
|
(22)
|
14,251
|
|
2,347
|
(36)
|
2,311
|
|
669
|
(224)
|
445
|
|
17,289
|
(282)
|
17,007
|
Food and household products
|
7,841
|
(21)
|
7,820
|
|
695
|
(20)
|
675
|
|
418
|
(259)
|
159
|
|
8,954
|
(300)
|
8,654
|
Commercial real estate
|
12,393
|
(43)
|
12,350
|
|
3,217
|
(195)
|
3,022
|
|
1,305
|
(761)
|
544
|
|
16,915
|
(999)
|
15,916
|
Mining and quarrying
|
5,482
|
(4)
|
5,478
|
|
537
|
(5)
|
532
|
|
248
|
(174)
|
74
|
|
6,267
|
(183)
|
6,084
|
Consumer durables
|
6,403
|
(4)
|
6,399
|
|
420
|
(17)
|
403
|
|
358
|
(307)
|
51
|
|
7,181
|
(328)
|
6,853
|
Construction
|
2,424
|
(2)
|
2,422
|
|
407
|
(5)
|
402
|
|
495
|
(410)
|
85
|
|
3,326
|
(417)
|
2,909
|
Trading companies & distributors
|
2,205
|
(1)
|
2,204
|
|
170
|
(2)
|
168
|
|
122
|
(80)
|
42
|
|
2,497
|
(83)
|
2,414
|
Government
|
42,825
|
(2)
|
42,823
|
|
603
|
(1)
|
602
|
|
168
|
(15)
|
153
|
|
43,596
|
(18)
|
43,578
|
Other
|
4,684
|
(4)
|
4,680
|
|
278
|
(5)
|
273
|
|
312
|
(137)
|
175
|
|
5,274
|
(146)
|
5,128
|
Retail Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
85,859
|
(12)
|
85,847
|
|
996
|
(7)
|
989
|
|
556
|
(180)
|
376
|
|
87,411
|
(199)
|
87,212
|
Credit Cards
|
6,912
|
(103)
|
6,809
|
|
155
|
(46)
|
109
|
|
59
|
(44)
|
15
|
|
7,126
|
(193)
|
6,933
|
Personal loans
and other
unsecured lending
|
10,652
|
(253)
|
10,399
|
|
215
|
(57)
|
158
|
|
296
|
(156)
|
140
|
|
11,163
|
(466)
|
10,697
|
Auto
|
501
|
-
|
501
|
|
1
|
-
|
1
|
|
-
|
-
|
-
|
|
502
|
-
|
502
|
Secured wealth products
|
19,269
|
(45)
|
19,224
|
|
235
|
(10)
|
225
|
|
407
|
(305)
|
102
|
|
19,911
|
(360)
|
19,551
|
Other
|
6,632
|
(3)
|
6,629
|
|
86
|
(1)
|
85
|
|
136
|
(92)
|
44
|
|
6,854
|
(96)
|
6,758
|
Net carrying value (customers)¹
|
295,219
|
(559)
|
294,660
|
|
13,043
|
(444)
|
12,599
|
|
7,845
|
(4,457)
|
3,388
|
|
316,107
|
(5,460)
|
310,647
|
1 Includes reverse
repurchase agreements and other similar secured lending held at
amortised cost of $24,498 million
Industry and Retail Products analysis of loans
and advances by geographic region
This section provides an analysis of the Group's
amortised cost loan portfolio, net of provisions, by industry and
region.
In the CCIB and Central and other items segment,
our largest industry exposures are to Government, Financing,
insurance and non-banking and Manufacturing with each constituting
at least 8 per cent of CCIB and Central and other items loans and
advances to customers.
Financing, insurance and non-banking industry
clients are mostly investment-grade institutions and this lending
forms part of the liquidity management of the Group. The
Manufacturing sector group is spread across a diverse range of
industries, including automobiles and components, capital goods,
pharmaceuticals, biotech and life sciences, technology hardware and
equipment, chemicals, paper products and packaging, with lending
spread over 3,255 clients.
The Mortgage portfolio continues to be the
largest portion of the CPBB portfolio at $83.1 billion (31 December
2022: $87.4 billion), of which 96 per cent continues to be in Asia.
Credit cards, personal loans and other unsecured lending increased
to 15 per cent (31 December 2022: 14 per cent) of the CPBB
portfolio, mainly in Asia due to the growth from Mox Bank and
digital partnerships.
In Asia, the Financing, insurance and
non-banking industry decreased by $1.9 billion to $22.8 billion (31
December 2022: $24.7 billion) while the CRE sector decreased
by $2 billion to $11.2 billion (31 December 2022: $13.2 billion)
due to exposure reductions. The Government sector decreased by $9.2
billion to $30.5 billion (31 December 2022: $39.7 billion) due to
decreased lending to Korea.
Page
33
Amortisecd cost
|
2023
|
|
2022
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
Energy
|
4,143
|
3,986
|
2,324
|
10,453
|
|
6,250
|
2,278
|
3,938
|
12,466
|
Manufacturing
|
16,828
|
1,077
|
4,238
|
22,143
|
|
17,388
|
1,267
|
3,633
|
22,288
|
Financing, insurance and non-banking
|
22,771
|
829
|
8,593
|
32,193
|
|
24,674
|
761
|
10,262
|
35,697
|
Transport, telecom and utilities
|
12,122
|
2,650
|
1,919
|
16,691
|
|
10,841
|
3,567
|
2,599
|
17,007
|
Food and household products
|
4,856
|
1,726
|
1,480
|
8,062
|
|
4,160
|
2,566
|
1,928
|
8,654
|
Commercial real estate
|
11,176
|
623
|
2,672
|
14,471
|
|
13,179
|
598
|
2,139
|
15,916
|
Mining and quarrying
|
3,856
|
375
|
2,037
|
6,268
|
|
3,785
|
390
|
1,909
|
6,084
|
Consumer durables
|
5,033
|
429
|
660
|
6,122
|
|
5,860
|
461
|
532
|
6,853
|
Construction
|
1,803
|
333
|
618
|
2,754
|
|
1,775
|
625
|
509
|
2,909
|
Trading companies and distributors
|
527
|
109
|
51
|
687
|
|
2,281
|
101
|
32
|
2,414
|
Government
|
30,487
|
4,778
|
241
|
35,506
|
|
39,713
|
3,759
|
106
|
43,578
|
Other
|
3,401
|
584
|
548
|
4,533
|
|
3,636
|
702
|
790
|
5,128
|
Retail Products:
|
|
|
|
|
|
|
|
|
|
Mortgages
|
79,517
|
1,183
|
2,243
|
82,943
|
|
83,954
|
1,388
|
1,870
|
87,212
|
Credit Cards
|
7,449
|
278
|
-
|
7,727
|
|
6,642
|
291
|
-
|
6,933
|
Personal loans and other
unsecured lending
|
9,426
|
1,565
|
85
|
11,076
|
|
9,056
|
1,541
|
100
|
10,697
|
Auto
|
295
|
17
|
-
|
312
|
|
469
|
33
|
-
|
502
|
Secured wealth products
|
18,774
|
987
|
542
|
20,303
|
|
17,876
|
1,048
|
627
|
19,551
|
Other
|
4,671
|
60
|
-
|
4,731
|
|
6,676
|
82
|
-
|
6,758
|
Net loans and advances to customers
|
237,135
|
21,589
|
28,251
|
286,975
|
|
258,215
|
21,458
|
30,974
|
310,647
|
Net loans and advances to banks
|
35,417
|
3,106
|
6,454
|
44,977
|
|
22,058
|
3,929
|
13,532
|
39,519
|
Vulnerable, cyclical and high carbon
sectors
Vulnerable and cyclical sectors are those that
the Group considers to be most at risk from current economic
stresses, including volatile energy and commodity prices, and we
continue to monitor exposures to these sectors particularly
carefully.
Sectors are identified and grouped as per the
International Standard Industrial Classification (ISIC) system and
exposure numbers have been updated to include all in-scope ISIC
codes used for target setting among the high carbon
sectors.
The maximum exposures shown in the table include
Loans and Advances to Customers at Amortised cost, Fair Value
through profit or loss, and committed facilities available as per
IFRS 9 - Financial Instruments in $million.
Further details can be found in the 'Summary of
Performance in 2023'.
Page
34
Maximum exposure
|
2023
|
Maximum
on Balance Sheet Exposure (net of credit impairment)
$million
|
Collateral
$million
|
Net On Balance Sheet Exposure
$million
|
Undrawn Commitments (net of credit
impairment)
$million
|
Financial Guarantees (net of credit
impairment)
$million
|
Net Off Balance Sheet Exposure
$million
|
Total On & Off Balance Sheet Net
Exposure
$million
|
Industry:
|
|
|
|
|
|
|
|
Automotive manufacturers¹
|
3,564
|
65
|
3,499
|
3,791
|
538
|
4,329
|
7,828
|
Aviation1,2
|
1,775
|
974
|
801
|
1,794
|
668
|
2,462
|
3,263
|
Of which : High Carbon Sector
|
1,330
|
974
|
356
|
944
|
615
|
1,559
|
1,915
|
Commodity Traders2
|
7,406
|
303
|
7,103
|
2,591
|
6,281
|
8,872
|
15,975
|
Metals & Mining1.2
|
4,589
|
307
|
4,282
|
3,373
|
1,218
|
4,591
|
8,873
|
Of which: Steel1
|
1,596
|
193
|
1,403
|
601
|
358
|
959
|
2,362
|
Of which: Coal Mining1
|
29
|
9
|
20
|
51
|
99
|
150
|
170
|
Of which: Aluminium1
|
526
|
9
|
517
|
338
|
188
|
526
|
1,043
|
Of which: Other Metals & Mining1
|
2,438
|
96
|
2,342
|
2,383
|
573
|
2,956
|
5,298
|
Shipping1
|
5,964
|
3,557
|
2,407
|
2,261
|
291
|
2,552
|
4,959
|
Construction2
|
2,853
|
448
|
2,405
|
2,753
|
5,927
|
8,680
|
11,085
|
Commercial Real Estate2
|
14,533
|
6,363
|
8,170
|
4,658
|
311
|
4,969
|
13,139
|
Of which: High Carbon Sector
|
7,498
|
3,383
|
4,115
|
1,587
|
112
|
1,699
|
5,814
|
Hotels & Tourism2
|
1,680
|
715
|
965
|
1,339
|
227
|
1,566
|
2,531
|
Oil & Gas1,2
|
6,278
|
894
|
5,384
|
7,845
|
6,944
|
14,789
|
20,173
|
Power1
|
5,411
|
1,231
|
4,180
|
3,982
|
732
|
4,714
|
8,894
|
Total3
|
54,053
|
14,857
|
39,196
|
34,387
|
23,137
|
57,524
|
96,720
|
Of which: Vulnerable and cyclical
sectors
|
38,880
|
9,983
|
28,897
|
24,842
|
21,511
|
46,353
|
75,250
|
Of which: High carbon
sectors4
|
34,634
|
10,411
|
24,223
|
23,783
|
10,450
|
34,233
|
58,456
|
Total Corporate, Commercial & Institutional
Banking
|
130,405
|
32,744
|
97,661
|
104,437
|
63,183
|
167,620
|
265,281
|
Total Group
|
331,952
|
125,760
|
206,192
|
182,299
|
74,278
|
256,577
|
462,769
|
1 High carbon
sectors
2 Vulnerable and
cyclical sectors
3 Maximum On Balance
sheet exposure include FVTPL portion of $955 million, of which
Vulnerable sector is $821 million and High Carbon sector is $443
million
4 Excluded Cement to the value of $671
million net of ECL under Construction
Page
35
|
2022
|
Maximum
On Balance Sheet Exposure (net of credit impairment)
$million
|
Collateral
$million
|
Net On Balance Sheet Exposure
$million
|
Undrawn Commitments (net of credit
impairment)
$million
|
Financial Guarantees (net of credit
impairment)
$million
|
Net Off Balance Sheet Exposure
$million
|
Total On & Off Balance Sheet Net
Exposure
$million
|
Industry:
|
|
|
|
|
|
|
|
Automotive manufacturers1
|
3,167
|
84
|
3,083
|
3,683
|
560
|
4,243
|
7,326
|
Aviation1,2,3
|
3,154
|
1,597
|
1,557
|
1,762
|
632
|
2,394
|
3,951
|
Of which : High Carbon Sector
|
2,540
|
1,582
|
958
|
695
|
555
|
1,250
|
2,208
|
Commodity Traders2
|
8,133
|
341
|
7,792
|
2,578
|
6,095
|
8,673
|
16,465
|
Metals & Mining1.2
|
4,990
|
333
|
4,657
|
3,732
|
930
|
4,662
|
9,319
|
Of which: Steel1
|
1,227
|
157
|
1,070
|
1,450
|
327
|
1,777
|
2,847
|
Of which: Coal Mining1
|
48
|
15
|
33
|
8
|
7
|
15
|
48
|
Of which: Aluminium1
|
728
|
107
|
621
|
285
|
74
|
359
|
980
|
Of which: Other Metals & Mining1
|
2,987
|
54
|
2,933
|
1,989
|
522
|
2,511
|
5,444
|
Shipping1
|
5,322
|
3,167
|
2,155
|
1,870
|
256
|
2,126
|
4,281
|
Construction2
|
2,909
|
552
|
2,357
|
2,762
|
5,969
|
8,731
|
11,088
|
Commercial Real Estate2
|
16,286
|
7,205
|
9,081
|
6,258
|
224
|
6,482
|
15,563
|
Of which: High Carbon Sector
|
6,547
|
2,344
|
4,203
|
3,996
|
90
|
4,086
|
8,289
|
Hotels & Tourism2
|
1,741
|
919
|
822
|
1,346
|
138
|
1,484
|
2,306
|
Oil & Gas1,2
|
6,668
|
806
|
5,862
|
7,630
|
7,158
|
14,788
|
20,650
|
Power1
|
4,771
|
1,258
|
3,513
|
4,169
|
1,176
|
5,345
|
8,858
|
Total4
|
57,141
|
16,262
|
40,879
|
35,790
|
23,138
|
58,928
|
99,807
|
Of which: Vulnerable and cyclical
sectors
|
43,678
|
11,741
|
31,937
|
25,761
|
21,068
|
46,829
|
78,766
|
Of which: High carbon
sectors5
|
34,005
|
9,574
|
24,431
|
25,775
|
10,725
|
36,500
|
60,931
|
Total Corporate, Commercial & Institutional
Banking
|
139,631
|
35,229
|
104,402
|
95,272
|
51,662
|
146,934
|
251,336
|
Total Group
|
350,166
|
141,715
|
208,451
|
168,574
|
60,224
|
228,798
|
437,249
|
1 High carbon
sectors
2 Vulnerable and
cyclical sectors
3 In addition to the
aviation sector loan exposures, the Group owns $3.2 billion of
aircraft under operating leases in 2022
4 Maximum On Balance
sheet exposure include FVTPL portion of $1,251 million, of which
Vulnerable sector is $1,072 million and High Carbon sector is $574
million
5 Excluded Cement to the value of $671
million net of ECL under Construction
Loans and advances by stage
Amortised Cost
|
2023
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aviation
|
1,619
|
-
|
1,619
|
|
55
|
(1)
|
54
|
|
74
|
(15)
|
59
|
|
1,748
|
(16)
|
1,732
|
Commodity Traders
|
6,912
|
(2)
|
6,910
|
|
129
|
(1)
|
128
|
|
555
|
(504)
|
51
|
|
7,596
|
(507)
|
7,089
|
Metals & Mining
|
3,934
|
(1)
|
3,933
|
|
140
|
(8)
|
132
|
|
154
|
(88)
|
66
|
|
4,228
|
(97)
|
4,131
|
Construction
|
2,230
|
(2)
|
2,228
|
|
502
|
(8)
|
494
|
|
358
|
(326)
|
32
|
|
3,090
|
(336)
|
2,754
|
Commercial
Real Estate
|
12,261
|
(30)
|
12,231
|
|
1,848
|
(129)
|
1,719
|
|
1,712
|
(1,191)
|
521
|
|
15,821
|
(1,350)
|
14,471
|
Hotels & Tourism
|
1,468
|
(2)
|
1,466
|
|
61
|
-
|
61
|
|
126
|
(25)
|
101
|
|
1,655
|
(27)
|
1,628
|
Oil & Gas
|
5,234
|
(4)
|
5,230
|
|
615
|
(15)
|
600
|
|
571
|
(147)
|
424
|
|
6,420
|
(166)
|
6,254
|
Total
|
33,658
|
(41)
|
33,617
|
|
3,350
|
(162)
|
3,188
|
|
3,550
|
(2,296)
|
1,254
|
|
40,558
|
(2,499)
|
38,059
|
Total Corporate, Commercial & Institutional
Banking
|
120,886
|
(101)
|
120,785
|
|
7,902
|
(257)
|
7,645
|
|
5,508
|
(3,533)
|
1,975
|
|
134,296
|
(3,891)
|
130,405
|
Total Group
|
318,076
|
(438)
|
317,638
|
|
11,765
|
(430)
|
11,335
|
|
7,305
|
(4,326)
|
2,979
|
|
337,146
|
(5,194)
|
331,952
|
Page
36
Amortised Cost
|
2022
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Gross Balance
$million
|
Total Credit Impair-ment
$million
|
Net Carrying Amount
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aviation¹
|
2,377
|
(1)
|
2,376
|
|
573
|
-
|
573
|
|
155
|
(32)
|
123
|
|
3,105
|
(33)
|
3,072
|
Commodity Traders
|
7,187
|
(6)
|
7,181
|
|
138
|
(2)
|
136
|
|
689
|
(435)
|
254
|
|
8,014
|
(443)
|
7,571
|
Metals & Mining
|
4,184
|
(1)
|
4,183
|
|
475
|
(4)
|
471
|
|
257
|
(157)
|
100
|
|
4,916
|
(162)
|
4,754
|
Construction
|
2,424
|
(2)
|
2,422
|
|
407
|
(5)
|
402
|
|
497
|
(412)
|
85
|
|
3,328
|
(419)
|
2,909
|
Commercial
Real Estate
|
12,393
|
(43)
|
12,350
|
|
3,217
|
(195)
|
3,022
|
|
1,305
|
(761)
|
544
|
|
16,915
|
(999)
|
15,916
|
Hotels & Tourism
|
1,448
|
(2)
|
1,446
|
|
108
|
(1)
|
107
|
|
206
|
(18)
|
188
|
|
1,762
|
(21)
|
1,741
|
Oil & Gas
|
5,468
|
(4)
|
5,464
|
|
708
|
(6)
|
702
|
|
919
|
(442)
|
477
|
|
7,095
|
(452)
|
6,643
|
Total
|
35,481
|
(59)
|
35,422
|
|
5,626
|
(213)
|
5,413
|
|
4,028
|
(2,257)
|
1,771
|
|
45,135
|
(2,529)
|
42,606
|
Total Corporate, Commercial & Institutional
Banking
|
126,261
|
(143)
|
126,118
|
|
11,355
|
(323)
|
11,032
|
|
6,143
|
(3,662)
|
2,481
|
|
143,759
|
(4,128)
|
139,631
|
Total Group
|
334,368
|
(568)
|
333,800
|
|
13,380
|
(447)
|
12,933
|
|
7,904
|
(4,471)
|
3,433
|
|
355,652
|
(5,486)
|
350,166
|
1 In addition to the
aviation sector loan exposures, the Group owns $3.2 billion of
aircraft under operating leases in 2022
Loans and advances by region (net of credit
impairment)
|
2023
|
|
2022¹
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Asia
$million
|
Africa & Middle East
$million
|
Europe & Americas
$million
|
Total
$million
|
Industry:
|
|
|
|
|
|
|
|
|
|
Aviation
|
1,077
|
7
|
648
|
1,732
|
|
1,105
|
1,259
|
708
|
3,072
|
Commodity Traders
|
3,778
|
675
|
2,636
|
7,089
|
|
3,497
|
978
|
3,096
|
7,571
|
Metals & Mining
|
1,628
|
1,522
|
981
|
4,131
|
|
2,966
|
347
|
1,441
|
4,754
|
Construction
|
1,803
|
333
|
618
|
2,754
|
|
1,776
|
624
|
509
|
2,909
|
Commercial Real Estate
|
11,176
|
623
|
2,672
|
14,471
|
|
13,180
|
598
|
2,138
|
15,916
|
Hotel & Tourism
|
998
|
178
|
452
|
1,628
|
|
880
|
465
|
396
|
1,741
|
Oil & Gas
|
2,639
|
1,815
|
1,800
|
6,254
|
|
3,574
|
1,445
|
1,624
|
6,643
|
Total
|
23,099
|
5,153
|
9,807
|
38,059
|
|
26,978
|
5,716
|
9,912
|
42,606
|
1 In addition to the
aviation sector loan exposures, the Group owns $3.2 billion of
aircraft under operating leases in 2022
Credit quality - loans and advances
Amortised Cost
Credit Grade
|
2023
|
Aviation
Gross
$million
|
Commodity Traders
Gross
$million
|
Construction
Gross
$million
|
Metals & Mining
Gross
$million
|
Commercial Real Estate
Gross
$million
|
Hotel & Tourism
Gross
$million
|
Oil & Gas
Gross
$million
|
Total
Gross
$million
|
Strong
|
1,452
|
4,444
|
1,012
|
3,213
|
7,326
|
1,090
|
4,024
|
22,561
|
Satisfactory
|
222
|
2,592
|
1,702
|
788
|
6,751
|
439
|
1,726
|
14,220
|
Higher risk
|
-
|
5
|
18
|
73
|
32
|
-
|
101
|
229
|
Credit impaired (stage 3)
|
74
|
555
|
358
|
154
|
1,712
|
126
|
569
|
3,548
|
Total Gross Balance
|
1,748
|
7,596
|
3,090
|
4,228
|
15,821
|
1,655
|
6,420
|
40,558
|
Strong
|
-
|
(1)
|
(1)
|
-
|
(20)
|
(1)
|
(3)
|
(26)
|
Satisfactory
|
(1)
|
(2)
|
(6)
|
(1)
|
(139)
|
(1)
|
(12)
|
(162)
|
Higher risk
|
-
|
-
|
(4)
|
(8)
|
-
|
-
|
(4)
|
(16)
|
Credit impaired (stage 3)
|
(15)
|
(504)
|
(325)
|
(88)
|
(1,191)
|
(25)
|
(147)
|
(2,295)
|
Total Credit Impairment
|
(16)
|
(507)
|
(336)
|
(97)
|
(1,350)
|
(27)
|
(166)
|
(2,499)
|
Strong
|
0.0%
|
0.0%
|
0.1%
|
0.0%
|
0.3%
|
0.1%
|
0.1%
|
0.1%
|
Satisfactory
|
0.5%
|
0.1%
|
0.4%
|
0.1%
|
2.1%
|
0.2%
|
0.7%
|
1.1%
|
Higher risk
|
0.0%
|
0.0%
|
22.2%
|
11.0%
|
0.0%
|
0.0%
|
4.0%
|
7.0%
|
Credit impaired (stage 3)
|
20.3%
|
90.8%
|
90.8%
|
57.1%
|
69.6%
|
19.8%
|
25.8%
|
64.7%
|
Cover Ratio
|
0.9%
|
6.7%
|
10.9%
|
2.3%
|
8.5%
|
1.6%
|
2.6%
|
6.2%
|
Page
37
Credit Grade
|
2022
|
Aviation¹
Gross
$million
|
Commodity Traders
Gross
$million
|
Construction
Gross
$million
|
Metals & Mining
Gross
$million
|
Commercial Real Estate
Gross
$million
|
Hotel & Tourism
Gross
$million
|
Oil & Gas
Gross
$million
|
Total
Gross
$million
|
Strong
|
1,437
|
4,419
|
1,164
|
3,425
|
8,000
|
1,047
|
3,923
|
23,415
|
Satisfactory
|
1,413
|
2,894
|
1,634
|
1,208
|
7,334
|
494
|
2,215
|
17,192
|
Higher risk
|
100
|
12
|
33
|
26
|
276
|
15
|
38
|
500
|
Credit impaired (stage 3)
|
155
|
689
|
497
|
257
|
1,305
|
206
|
919
|
4,028
|
Total Gross Balance
|
3,105
|
8,014
|
3,328
|
4,916
|
16,915
|
1,762
|
7,095
|
45,135
|
Strong
|
-
|
(3)
|
-
|
-
|
(25)
|
(1)
|
(1)
|
(30)
|
Satisfactory
|
(1)
|
(4)
|
(3)
|
(5)
|
(129)
|
(1)
|
(7)
|
(150)
|
Higher risk
|
-
|
(1)
|
(4)
|
-
|
(84)
|
(1)
|
(2)
|
(92)
|
Credit impaired (stage 3)
|
(32)
|
(435)
|
(412)
|
(157)
|
(761)
|
(18)
|
(442)
|
(2,257)
|
Total Credit Impairment
|
(33)
|
(443)
|
(419)
|
(162)
|
(999)
|
(21)
|
(452)
|
(2,529)
|
Strong
|
0.0%
|
0.1%
|
0.0%
|
0.0%
|
0.3%
|
0.1%
|
0.0%
|
0.1%
|
Satisfactory
|
0.1%
|
0.1%
|
0.2%
|
0.4%
|
1.8%
|
0.2%
|
0.3%
|
0.9%
|
Higher risk
|
0.0%
|
8.3%
|
12.1%
|
0.0%
|
30.4%
|
6.7%
|
5.3%
|
18.4%
|
Credit impaired (stage 3)
|
20.6%
|
63.1%
|
82.9%
|
61.1%
|
58.3%
|
8.7%
|
48.1%
|
56.0%
|
Cover Ratio
|
1.1%
|
5.5%
|
12.6%
|
3.3%
|
5.9%
|
1.2%
|
6.4%
|
5.6%
|
1 In addition to the
aviation sector loan exposures, the Group owns $3.2 billion of
aircraft under operating leases in 2022
Maturity and expected credit loss for
high-carbon sectors
|
2023
|
|
Maturity Buckets¹
|
|
2023
|
Loans and advances (Drawn funding)
|
Less than
1 year
|
More than
1 to 5 years
|
More than
5 years
|
Expected
Credit Loss
|
Sector
|
$million
|
|
$million
|
$million
|
$million
|
|
$million
|
Automotive Manufacturers
|
3,566
|
|
3,106
|
460
|
-
|
|
2
|
Aviation
|
1,339
|
|
149
|
145
|
1,045
|
|
9
|
Cement
|
719
|
|
512
|
189
|
18
|
|
48
|
Coal Mining
|
42
|
|
9
|
33
|
-
|
|
13
|
Steel
|
1,649
|
|
1,258
|
185
|
206
|
|
53
|
Other Metals & Mining
|
2,151
|
|
1,886
|
240
|
25
|
|
34
|
Aluminium
|
537
|
|
442
|
63
|
32
|
|
11
|
Oil & Gas
|
6,444
|
|
2,980
|
1,576
|
1,888
|
|
166
|
Power
|
5,516
|
|
1,933
|
1,533
|
2,050
|
|
105
|
Shipping
|
5,971
|
|
1,051
|
2,568
|
2,352
|
|
7
|
Commercial Real Estate
|
7,664
|
|
3,722
|
3,935
|
7
|
|
166
|
Total balance1
|
35,598
|
|
17,048
|
10,927
|
7,623
|
|
614
|
1 Excluded fair value
of Other Metals & Mining of $321 million
|
2022
|
|
Maturity Buckets¹
|
|
2022
|
Loans and advances
(Drawn funding)
|
Less than
1 year
|
More than
1 to 5 years
|
More than
5 years
|
Expected
Credit Loss
|
Sector
|
$million
|
|
$million
|
$million
|
$million
|
|
$million
|
Automotive Manufacturers
|
3,167
|
|
2,450
|
717
|
-
|
|
-
|
Aviation
|
2,595
|
|
118
|
749
|
1,728
|
|
55
|
Cement
|
762
|
|
661
|
63
|
38
|
|
43
|
Coal Mining
|
60
|
|
2
|
41
|
17
|
|
12
|
Steel
|
1,268
|
|
1,080
|
180
|
8
|
|
41
|
Other Metals & Mining
|
1,964
|
|
1,660
|
281
|
23
|
|
44
|
Aluminium
|
744
|
|
528
|
114
|
102
|
|
16
|
Oil & Gas
|
6,550
|
|
3,100
|
1,734
|
1,716
|
|
238
|
Power
|
4,903
|
|
1,615
|
1,279
|
2,009
|
|
132
|
Shipping
|
5,374
|
|
918
|
2,567
|
1,889
|
|
52
|
Commercial Real Estate
|
6,598
|
|
2,568
|
3,949
|
81
|
|
51
|
Total balance2
|
33,985
|
|
14,700
|
11,674
|
7,611
|
|
684
|
1 Gross of credit
impairment
2 Excluded fair value
of Other Metals & Mining and Oil & Gas of $58
million
Page
38
China commercial real estate
The table below represents the on and
off-balance sheet items that are exposed to China CRE by credit
quality.
Further details can be found in the 'Summary of
Performance in 2023'
|
2023
|
China
$million
|
Hong Kong
$million
|
Rest of Group1
$million
|
Total
$million
|
Loans to customers
|
584
|
1,821
|
39
|
2,444
|
Off balance sheet
|
42
|
82
|
-
|
124
|
Total as at 31 December 2023
|
626
|
1,903
|
39
|
2,568
|
|
|
|
|
|
Loans to customers - By Credit
quality
|
|
|
|
|
Gross
|
|
|
|
|
Strong
|
33
|
-
|
-
|
33
|
Satisfactory
|
339
|
619
|
39
|
997
|
Higher risk
|
8
|
-
|
-
|
8
|
Credit impaired (stage 3)
|
204
|
1,202
|
-
|
1,406
|
Total as at 31 December 2023
|
584
|
1,821
|
39
|
2,444
|
|
|
|
|
|
Loans to customers - ECL
|
|
|
|
|
Strong
|
-
|
-
|
-
|
-
|
Satisfactory
|
(3)
|
(134)
|
(12)
|
(149)
|
Higher risk
|
-
|
-
|
-
|
-
|
Credit impaired (stage 3)
|
(70)
|
(941)
|
-
|
(1,011)
|
Total as at 31 December 2023
|
(73)
|
(1,075)
|
(12)
|
(1,160)
|
1 Rest of Group mainly
includes Singapore
|
2022
|
China
$million
|
Hong Kong
$million
|
Rest of Group1
$million
|
Total
$million
|
Loans to customers
|
953
|
2,248
|
39
|
3,240
|
Off balance sheet
|
74
|
85
|
8
|
167
|
Total as at 31 December 2022
|
1,027
|
2,333
|
47
|
3,407
|
|
|
|
|
|
Loans to customers - By Credit
quality
|
|
|
|
|
Gross
|
|
|
|
|
Strong
|
256
|
221
|
-
|
477
|
Satisfactory
|
459
|
921
|
39
|
1,419
|
Higher risk
|
-
|
271
|
-
|
271
|
Credit impaired (stage 3)
|
238
|
835
|
-
|
1,073
|
Total as at 31 December 2022
|
953
|
2,248
|
39
|
3,240
|
|
|
|
|
|
Loans to customers - ECL
|
|
|
|
|
Strong
|
-
|
(19)
|
-
|
(19)
|
Satisfactory
|
(9)
|
(110)
|
-
|
(119)
|
Higher risk
|
-
|
(83)
|
-
|
(83)
|
Credit impaired (stage 3)
|
(37)
|
(559)
|
-
|
(596)
|
Total as at 31 December 2022
|
(46)
|
(771)
|
-
|
(817)
|
1 Rest of Group mainly
includes Singapore
Page
39
Debt securities and other eligible bills
(audited)
This section provides further detail on gross
debt securities and treasury bills.
The standard credit ratings used by the Group
are those used by Standard & Poor's or its equivalent. Debt
securities held that have a short-term rating are reported against
the long-term rating of the issuer. For securities that are
unrated, the Group applies an internal credit rating, as described
under the credit rating and measurement section.
Total gross debt securities and other eligible
bills decreased by $11.4 billion to $160 billion (31 December 2022:
$172 billion) due to action taken to manage liquidity, primarily in
stage 1.
Stage 1 gross balance decreased by $7.8 billion
to $158 billion (31 December 2022: $166 billion) of which $3.4
billion of the decrease was from unrated.
Stage 2 gross balance decreased by $3.6 billion
to $2 billion (31 December 2022: $5 billion).
Stage 3 gross balance was broadly stable at $0.2
billion (31 December 2022: $0.1 billion).
Amortised cost and FVOCI
|
2023
|
|
2022
|
Gross
$million
|
ECL
$million
|
Net2
$million
|
Gross
$million
|
ECL
$million
|
Net2
$million
|
Stage 1
|
158,314
|
(26)
|
158,288
|
|
166,103
|
(25)
|
166,078
|
AAA
|
61,920
|
(5)
|
61,915
|
|
73,933
|
(10)
|
73,923
|
AA- to AA+
|
34,244
|
(2)
|
34,242
|
|
42,327
|
(4)
|
42,323
|
A- to A+
|
38,891
|
(2)
|
38,889
|
|
29,488
|
(2)
|
29,486
|
BBB- to BBB+
|
13,098
|
(7)
|
13,091
|
|
7,387
|
(1)
|
7,386
|
Lower than BBB-
|
1,611
|
(2)
|
1,609
|
|
1,047
|
(2)
|
1,045
|
Unrated
|
8,550
|
(8)
|
8,542
|
|
11,921
|
(6)
|
11,915
|
- Strong
|
7,415
|
(7)
|
7,408
|
|
11,760
|
(6)
|
11,754
|
- Satisfactory
|
1,135
|
(1)
|
1,134
|
|
161
|
-
|
161
|
Stage 2
|
1,860
|
(34)
|
1,826
|
|
5,455
|
(90)
|
5,365
|
AAA
|
98
|
-
|
98
|
|
21
|
-
|
21
|
AA- to AA+
|
22
|
-
|
22
|
|
40
|
-
|
40
|
A- to A+
|
81
|
-
|
81
|
|
17
|
(1)
|
16
|
BBB- to BBB+
|
499
|
(3)
|
496
|
|
2,605
|
(16)
|
2,589
|
Lower than BBB-
|
893
|
(30)
|
863
|
|
2,485
|
(71)
|
2,414
|
Unrated
|
267
|
(1)
|
266
|
|
287
|
(2)
|
285
|
- Strong
|
217
|
-
|
217
|
|
26
|
(2)
|
24
|
- Satisfactory
|
50
|
(1)
|
49
|
|
-
|
-
|
-
|
- Higher risk
|
-
|
-
|
-
|
|
261
|
-
|
261
|
Stage 3
|
164
|
(61)
|
103
|
|
144
|
(106)
|
38
|
Lower than BBB-
|
72
|
(4)
|
68
|
|
67
|
(55)
|
12
|
Unrated
|
92
|
(57)
|
35
|
|
77
|
(51)
|
26
|
Gross balance¹
|
160,338
|
(121)
|
160,217
|
|
171,702
|
(221)
|
171,481
|
1 Stage 3 gross
includes $80 million (31 December 2022: $28 million) originated
credit-impaired debt securities with impairment of $14 million (31
December 2022:
$13 million)
2 FVOCI instrument are
not presented net of ECL. While the presentation is on a net basis
for the table, the total net on-balance sheet amount is $160,263
million
(31 December 2022: $171,640 million). Refer to the Analysis of
financial instrument by stage table
Page
40
IFRS 9 expected credit loss methodology
(audited)
Approach for determining expected credit
losses
Credit loss terminology
Component
|
Definition
|
Probability of default (PD)
|
The probability that a counterparty will
default, over the next 12 months from the reporting date (stage 1)
or over the lifetime of the product (stage 2), incorporating the
impact of forward-looking economic assumptions that have an effect
on Credit Risk, such as unemployment rates and GDP
forecasts.
The PD estimates will fluctuate in line with the
economic cycle. The lifetime (or term structure) PDs are based on
statistical models, calibrated using historical data and adjusted
to incorporate forward-looking economic assumptions.
|
Loss given default (LGD)
|
The loss that is expected to arise on default,
incorporating the impact of forward-looking economic assumptions
where relevant, which represents the difference between the
contractual cashflows due and those that the bank expects to
receive.
The Group estimates LGD based on the history of
recovery rates and considers the recovery of any collateral that is
integral to the financial asset, taking into account
forward-looking economic assumptions where relevant.
|
Exposure at default (EAD)
|
The expected balance sheet exposure at the time
of default, taking into account expected changes over the lifetime
of the exposure. This incorporates the impact of drawdowns of
facilities with limits, repayments of principal and interest, and
amortisation.
|
To determine the expected credit loss, these
components are multiplied together: PD for the reference period (up
to 12 months or lifetime) x LGD x EAD and discounted to the balance
sheet date using the effective interest rate as the discount
rate.
IFRS 9 expected credit loss models have been
developed for the Corporate, Commercial and Institutional Banking
(CCIB) businesses on a global basis, in line with their respective
portfolios. However, for some of the key countries,
country-specific models have also been developed.
The calibration of forward-looking information
is assessed at a country or region level to take into account local
macroeconomic conditions.
Retail expected credit loss models are country
and product specific given the local nature of the CPBB
business.
For less material retail portfolios, the Group
has adopted less sophisticated approaches based on historical roll
rates or loss rates:
• For medium-sized
retail portfolios, a roll rate model is applied, which uses a
matrix that gives the average loan migration rate between
delinquency states from period to period. A matrix multiplication
is then performed to generate the final PDs by delinquency bucket
over different time horizons.
• For smaller retail
portfolios, loss rate models are applied. These use an adjusted
gross charge-off rate, developed using monthly write-off and
recoveries over the preceding 12 months and total outstanding
balances.
• While the loss rate
models do not incorporate forward-looking information, to the
extent that there are significant changes in the macroeconomic
forecasts an assessment will be completed on whether an adjustment
to the modelled output is required.
For a limited number of exposures, proxy
parameters or approaches are used where the data is not available
to calculate the origination PDs for the purpose of applying the
SICR criteria; or for some retail portfolios where a full history
of LGD data is not available, estimates based on the loss
experience from similar portfolios are used. The use of proxies is
monitored and will reduce over time.
The following processes are in place to assess
the ongoing performance of the models:
• Quarterly model
monitoring that uses recent data to compare the differences between
model predictions and actual outcomes against approved
thresholds.
• Annual independent
validations of the performance of material models by Group Model
Valuation (GMV); an abridged validation is completed for
non-material models.
Page
41
Application of lifetime
Expected credit loss is estimated based on the
period over which the Group is exposed to Credit Risk. For the
majority of exposures this equates to the maximum contractual
period. For retail credit cards and corporate overdraft facilities,
however, the Group does not typically enforce the contractual
period, which can be as short as one day. As a result, the period
over which the Group is exposed to Credit Risk for these
instruments reflects their behavioural life, which incorporates
expectations of customer behaviour and the extent to which Credit
Risk management actions curtail the period of that exposure. The
average behavioural life for retail credit cards is between 3 and 6
years across our footprint markets.
The behavioural life for corporate overdraft
facilities is 24 months.
Composition of credit impairment provisions
(audited)
The table below summarises the key components of
the Group's credit impairment provision balances at 31 December
2023 and 31 December 2022.
31 December 2023
|
Corporate, Commercial & Institutional
Banking
$ million
|
Consumer,
Private &
Business
Banking
$ million
|
Ventures
$ million
|
Central &
other items
$ million2
|
Total
$ million
|
Modelled ECL provisions (base
forecast)
|
372
|
553
|
48
|
98
|
1,071
|
Modelled impact of multiple economic
scenarios
|
20
|
18
|
-
|
6
|
44
|
Total ECL provisions before management
judgements
|
392
|
571
|
48
|
104
|
1,115
|
Includes: Model performance post model
adjustments
|
(3)
|
(28)
|
-
|
-
|
(31)
|
Judgemental post model adjustments
|
-
|
2
|
-
|
-
|
2
|
Management overlays1
|
|
|
|
|
|
- China commercial real estate
|
141
|
-
|
-
|
-
|
141
|
- Other
|
-
|
5
|
-
|
17
|
22
|
Total modelled provisions
|
533
|
578
|
48
|
121
|
1,280
|
Of which:
Stage 1
|
151
|
325
|
15
|
68
|
559
|
Stage 2
|
318
|
140
|
21
|
49
|
528
|
Stage 3
|
64
|
113
|
12
|
4
|
193
|
Stage 3 non-modelled provisions
|
3,587
|
646
|
-
|
88
|
4,321
|
Total credit impairment provisions
|
4,120
|
1,224
|
48
|
209
|
5,601
|
31 December 2022
|
Corporate, Commercial & Institutional
Banking
$ million
|
Consumer,
Private &
Business
Banking
$ million
|
Ventures
$ million
|
Central &
other items2
$ million
|
Total
$ million
|
Modelled ECL provisions (base
forecast)
|
505
|
556
|
12
|
194
|
1,267
|
Modelled impact of multiple economic
scenarios
|
38
|
6
|
-
|
6
|
50
|
Total ECL provisions before management
judgements
|
543
|
562
|
12
|
200
|
1,317
|
Includes: Model performance post model
adjustments
|
(22)
|
(38)
|
-
|
-
|
(60)
|
Judgemental post model adjustments
|
-
|
44
|
-
|
-
|
44
|
Management overlays1
|
|
|
|
|
|
- China commercial real estate
|
173
|
-
|
-
|
-
|
173
|
- Other
|
9
|
37
|
-
|
-
|
46
|
Total modelled provisions
|
725
|
643
|
12
|
200
|
1,580
|
Of which: Stage 1
|
194
|
413
|
10
|
34
|
651
|
Stage 2
|
411
|
118
|
1
|
100
|
630
|
Stage 3
|
120
|
112
|
1
|
66
|
299
|
Stage 3 non-modelled provisions
|
3,702
|
664
|
-
|
129
|
4,495
|
Total credit impairment provisions
|
4,427
|
1,307
|
12
|
329
|
6,075
|
1 $22 million (31
December 2022: $55 million) is in stage 1, $141 million (31
December 2022: $148 million) in stage 2 and $nil million (31
December 2022: $16 million) in stage 3
2 Includes ECL on cash
and balances at central banks, accrued income, assets held for sale
and other assets
Page
42
Model performance post model adjustments
(PMA)
As part of normal model monitoring and
validation operational processes, where a model's performance
breaches the monitoring thresholds or validation standards, an
assessment is completed to determine whether a model performance
post model adjustment is required to correct for the identified
model issue. Model performance post model adjustments are approved
by the Group Credit Model Assessment Committee and will be removed
when the models are updated to correct for the identified model
issue or the estimates return to being within the monitoring
thresholds.
As at 31 December 2023, model performance post
model adjustments have been applied for 5 models out of the total
of 172 models. In aggregate, these post model adjustments reduce
the Group's impairment provisions by $31 million (2 per cent of
modelled provisions) compared with a $60 million decrease at 31
December 2022. The most significant of these relates to an
adjustment to decrease ECL for Korea Personal Loans as the IFRS 9
PD model is sensitive to the higher range of interest
rates.
In addition to these model performance post
model adjustments, separate judgemental post model and management
adjustments have also been applied as set out on the following
pages.
|
2023
$ million
|
2022
$ million
|
Model performance PMAs
|
|
|
Corporate, Commercial & Institutional
Banking
|
(3)
|
(22)
|
Consumer, Private & Business
Banking
|
(28)
|
(38)
|
Total model performance PMAs
|
(31)
|
(60)
|
Key assumptions and judgements in determining
expected credit loss
Incorporation of forward-looking
information
The evolving economic environment is a key
determinant of the ability of a bank's clients to meet their
obligations as they fall due. It is a fundamental principle of IFRS
9 that the provisions banks hold against potential future Credit
Risk losses should depend, not just on the health of the economy
today, but should also take into account potential changes to the
economic environment. For example, if a bank were to anticipate a
sharp slowdown in the world economy over the coming year, it should
hold more provisions today to absorb the credit losses likely to
occur in the near future.
To capture the effect of changes to the economic
environment, the PDs and LGDs used to calculate ECL incorporate
forward-looking information in the form of forecasts of the values
of economic variables and asset prices that are likely to have an
effect on the repayment ability of the Group's clients.
The 'base forecast' of the economic variables
and asset prices is based on management's view of the five-year
outlook, supported by projections from the Group's in-house
research team and outputs from a third-party model that project
specific economic variables and asset prices. The research team
takes consensus views into consideration, and senior management
review projections for some core country variables against
consensus when forming their view of the outlook. For the period
beyond five years, management utilises the in-house research view
and third-party model outputs, which allow for a reversion to
long-term growth rates or norms. All projections are updated on a
quarterly basis.
Forecast of key macroeconomic variables
underlying the expected credit loss calculation and the impact on
non-linearity
In the Base Forecast - management's view of the
most likely outcome -the pace of growth of the world economy is
expected to slow marginally in the near term. Global GDP is
forecast to grow by just below 3 per cent in 2024. World GDP growth
averaged 3.7 per cent for the 10 years prior to COVID-19 (between
2010 and 2019). The world economy should be able to achieve a soft
landing after the most aggressive monetary tightening cycle in
years, although risks abound. The lagged impact of aggressive
central bank tightening is likely to be felt most acutely in
developed economies.
Page
43
Lingering inflation and geopolitical
developments are risks to the global soft-landing scenario. The
ongoing war in Ukraine, conflicts in the Middle East, ongoing
US-China tensions, and the November 2024 US election are key
sources of geopolitical and political risk; they come against a
backdrop of increasing global fragmentation. On the inflation
front, it is unclear whether it can slow on a sustained basis. Core
inflation has remained sticky in some markets, signalling
persistent underlying pressures. Structural factors - including
higher fiscal deficits, the cost of the climate transition and
recent under-investment in fossil fuels - could keep inflation
higher than during the pre-COVID period. Oil prices and
geopolitical conflict are also sources of upside inflation
risk.
While the quarterly Base Forecasts inform the
Group's strategic plan, one key requirement of IFRS 9 is that the
assessment of provisions should consider multiple future economic
environments. For example, the global economy may grow more quickly
or more slowly than the Base Forecast, and these variations would
have different implications for the provisions that the Group
should hold today. As the negative impact of an economic downturn
on credit losses tends to be greater than the positive impact of an
economic upturn, if the Group sets provisions only on the ECL under
the Base Forecast it might maintain a level of provisions that does
not appropriately capture the range of potential outcomes. To
address the inherent uncertainty in economic forecast, and the
property of skewness (or non-linearity), IFRS 9 requires reported
ECL to be a probability-weighted ECL, calculated over a range of
possible outcomes.
To assess the range of possible outcomes the
Group simulates a set of 50 scenarios around the Base Forecast,
calculates the ECL under each of them and assigns an equal weight
of 2 per cent to each scenario outcome. These scenarios are
generated by a Monte Carlo simulation, which addresses the
challenges of crafting many realistic alternative scenarios in the
many countries in which the Group operates by means of a model,
which produces these alternative scenarios while considering the
degree of historical uncertainty (or volatility) observed from Q1
1990 to Q3 2023 around economic outcomes, the trends in each
macroeconomic variable modelled and the correlation in the
unexplained movements around these trends. This naturally means
that each of the 50 scenarios do not have a specific narrative,
although collectively they explore a range of hypothetical
alternative outcomes for the global economy, including scenarios
that turn out better than expected and scenarios that amplify
anticipated stresses.
The GDP graphs below illustrate the shape of the
Base Forecast for key footprint markets in relation to prior
periods' actuals. The long-term growth rates are based on the pace
of economic expansion expected for 2030. The tables below provide a
summary of the Group's Base Forecast for these markets. The
peak/trough amounts show the highest and lowest points within the
Base Forecast.
China's GDP growth is expected to ease to 4.8
per cent in 2024 from over 5 per cent in 2023. This reflects a
continued contraction in the property sector, a negative
contribution from foreign trade, and low consumer and business
confidence. Similarly, Hong Kong is also facing several headwinds
with its GDP growth expected to ease to 2.9 per cent from 3.3 per
cent in 2023. These headwinds include a weak property sector and
elevated interest rates which will weigh on investment appetite for
Hong Kong assets. Limited external demand from key markets will
also weigh on exports. Growth in the US is expected to slow on the
impact of tighter financial and credit conditions and as the impact
of previous interest rate increases by the central bank feed
through to the economy. For similar reasons, Eurozone growth is
expected to remain weak in 2024. The uncertainty over the ongoing
war in Ukraine, conflicts in the Middle East has hit global
investor and business confidence. Growth in India is expected to
ease to 6 per cent from 6.7 per cent in 2023 due to impact
from pre-election uncertainties, tighter lending conditions and
global recession concerns.
In contrast, GDP growth for Singapore is
expected to accelerate to just over 2.5 per cent in 2024 from 0.8
per cent last year. Favourable base effects may boost exports,
despite the soft global growth outlook. The global electronics and
semiconductor industry is showing signs of bottoming out. Although
a strong rebound is not expected, inventory restocking may provide
a small boost to Singapore's electronics sector. Korea's economic
growth will also benefit from the turnaround in this key sector.
GDP growth there is expected to reach 2.3 per cent in 2024 from 1.3
per cent last year.
Page
44
|
2023 year-end forecasts
|
China
|
|
Hong Kong
|
GDP growth (YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices⁵ (YoY %)
|
GDP growth (YoY %)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices (YoY %)
|
Base forecast1
|
|
|
|
|
|
|
|
|
|
2023
|
5.4
|
4.1
|
2.0
|
(0.8)
|
|
3.3
|
3.0
|
4.8
|
(6.8)
|
2024
|
4.8
|
4.1
|
1.7
|
3.9
|
|
2.9
|
3.4
|
4.6
|
2.1
|
2025
|
4.5
|
4.0
|
1.8
|
5.6
|
|
2.5
|
3.4
|
4.1
|
3.8
|
2026
|
4.3
|
4.0
|
2.0
|
4.5
|
|
2.3
|
3.4
|
3.5
|
2.8
|
2027
|
4.0
|
3.9
|
2.2
|
4.4
|
|
2.4
|
3.4
|
2.5
|
2.7
|
5-year average2
|
4.3
|
4.0
|
2.1
|
4.6
|
|
2.5
|
3.4
|
3.4
|
2.8
|
Quarterly peak
|
5.7
|
4.1
|
2.5
|
7.2
|
|
3.8
|
3.4
|
5.0
|
4.6
|
Quarterly trough
|
3.8
|
3.8
|
1.7
|
1.5
|
|
1.5
|
3.4
|
2.3
|
(1.1)
|
Monte Carlo
|
|
|
|
|
|
|
|
|
|
Low3
|
0.6
|
3.3
|
0.8
|
(1.5)
|
|
(3.8)
|
1.4
|
0.3
|
(19.3)
|
High4
|
7.7
|
4.4
|
3.8
|
12.0
|
|
8.2
|
6.4
|
8.3
|
25.5
|
|
2023 year-end forecasts
|
Singapore
|
|
Korea
|
GDP growth (YoY%)
|
Unemployment
⁶ %
|
3-month
interest rates
%
|
House prices (YoY%)
|
GDP growth (YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices (YoY %)
|
Base forecast1
|
|
|
|
|
|
|
|
|
|
2023
|
0.8
|
2.7
|
4.1
|
6.8
|
|
1.3
|
2.7
|
3.8
|
(5.8)
|
2024
|
2.6
|
2.8
|
3.8
|
(0.2)
|
|
2.3
|
3.3
|
3.5
|
3.3
|
2025
|
3.1
|
2.8
|
3.3
|
0.4
|
|
2.5
|
3.3
|
3.1
|
5.0
|
2026
|
3.3
|
2.8
|
2.8
|
2.9
|
|
2.4
|
3.1
|
3.1
|
3.5
|
2027
|
2.8
|
2.8
|
2.4
|
3.9
|
|
2.2
|
3.0
|
3.1
|
2.4
|
5-year average2
|
2.9
|
2.8
|
2.9
|
2.2
|
|
2.3
|
3.1
|
3.1
|
3.3
|
Quarterly peak
|
3.8
|
2.9
|
4.1
|
3.9
|
|
2.6
|
3.5
|
3.7
|
5.3
|
Quarterly trough
|
1.9
|
2.8
|
2.3
|
(0.7)
|
|
2.0
|
3.0
|
3.1
|
(0.3)
|
Monte Carlo
|
|
|
|
|
|
|
|
|
|
Low3
|
(2.4)
|
1.7
|
0.6
|
(16.2)
|
|
(2.3)
|
1.4
|
0.7
|
(6.1)
|
High4
|
8.5
|
3.8
|
5.9
|
19.2
|
|
7.0
|
5.8
|
6.3
|
12.5
|
|
2023 year-end forecasts
|
India
|
Brent Crude
$ pb
|
GDP growth
(YoY%)
|
Unemployment
%
|
3month
interest rates
%
|
House prices
(YoY%)
|
Base forecast1
|
|
|
|
|
|
2023
|
6.7
|
NA
|
6.4
|
5.3
|
84.2
|
2024
|
6.0
|
NA
|
5.9
|
5.3
|
89.5
|
2025
|
6.0
|
NA
|
6.3
|
6.3
|
90.3
|
2026
|
6.4
|
NA
|
6.3
|
6.5
|
92.8
|
2027
|
6.5
|
NA
|
6.2
|
6.4
|
84.9
|
5-year average2
|
6.2
|
NA
|
6.2
|
6.1
|
88.2
|
Quarterly peak
|
9.1
|
NA
|
6.3
|
6.5
|
93.8
|
Quarterly trough
|
4.4
|
NA
|
5.8
|
4.7
|
82.8
|
Monte Carlo
|
|
|
|
|
|
Low3
|
2.1
|
NA
|
2.7
|
(0.5)
|
46.0
|
High4
|
10.5
|
NA
|
9.9
|
13.8
|
137.8
|
Page
45
|
2022 year-end forecasts
|
China
|
|
Hong Kong
|
GDP growth
(YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices⁵
(YoY%)
|
GDP growth
(YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices
(YoY%)
|
5-year average2
|
5.1
|
3.9
|
2.3
|
3.6
|
|
2.3
|
3.0
|
2.8
|
1.7
|
Quarterly peak
|
7.9
|
4.1
|
3.0
|
5.0
|
|
4.3
|
3.1
|
3.6
|
4.9
|
Quarterly trough
|
4.5
|
3.8
|
1.4
|
0.0
|
|
0.5
|
2.9
|
2.4
|
(8.4)
|
Monte Carlo
|
|
|
|
|
|
|
|
|
|
Low3
|
1.1
|
3.4
|
0.6
|
(3.4)
|
|
(3.8)
|
1.7
|
0.5
|
(22.0)
|
High4
|
9.6
|
4.3
|
4.4
|
10.0
|
|
8.0
|
4.2
|
6.1
|
26.8
|
|
2022 year-end forecasts
|
Singapore
|
|
Korea
|
GDP growth
(YoY%)
|
Unemployment⁶
%
|
3-month
interest rates
%
|
House prices
(YoY%)
|
GDP growth
(YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices
(YoY%)
|
5-year average2
|
2.7
|
3.0
|
3.1
|
2.8
|
|
2.2
|
3.1
|
3.1
|
2.1
|
Quarterly peak
|
3.7
|
3.2
|
4.7
|
4.7
|
|
2.5
|
3.3
|
3.9
|
2.8
|
Quarterly trough
|
1.7
|
3.0
|
2.4
|
(2.4)
|
|
1.8
|
3.0
|
2.7
|
(0.4)
|
Monte Carlo
|
|
|
|
|
|
|
|
|
|
Low3
|
(3.4)
|
2.1
|
0.8
|
(15.9)
|
|
(2.8)
|
1.1
|
1.1
|
(5.4)
|
High4
|
8.6
|
4.5
|
5.6
|
20.4
|
|
7.0
|
4.9
|
5.9
|
10.0
|
|
2022 year-end forecasts
|
India
|
Brent crude
$ pb
|
GDP growth
(YoY%)
|
Unemployment
%
|
3-month
interest rates
%
|
House prices
(YoY%)
|
5-year average2
|
6.4
|
NA
|
5.6
|
5.7
|
106.6
|
Quarterly peak
|
7.7
|
NA
|
6.3
|
7.2
|
118.8
|
Quarterly trough
|
3.2
|
NA
|
5.3
|
1.6
|
88.0
|
Monte Carlo
|
|
|
|
|
|
Low3
|
1.5
|
NA
|
1.9
|
(1.1)
|
42.4
|
High4
|
12.1
|
NA
|
9.5
|
13.0
|
204.2
|
1 Data presented are
those used in the calculation of ECL. These may differ slightly to
forecasts presented elsewhere in the Annual Report as they are
finalised before the period end.
2 5 year averages
reported cover Q1 2024 to Q4 2028 for the 2023 annual report. They
cover Q1 2023 to Q4 2027 for the numbers reported for the 2022
annual report.
3 Represents the 10th
percentile in the range of economic scenarios used to determine
non-linearity.
4 Represents the 90th
percentile in the range of economic scenarios used to determine
non-linearity.
5 A judgemental
management adjustment is held in respect of the China commercial
real estate sector as discussed.
6 Singapore
unemployment rate covers the resident unemployment rate, which
refers to citizens and permanent residents.
Impact of multiple economic
scenarios
The final probability-weighted ECL reported by
the Group is a simple average of the ECL for each of the 50
scenarios simulated using a Monte Carlo model. The Monte Carlo
approach has the advantage that it generates many alternative
scenarios that cover our global footprint.
The total amount of non-linearity, calculated as
the difference between the probability-weighted ECL calculated by
the Monte Carlo model and the unweighted base forecast ECL, is $44
million (31 December 2022: $50 million). The CCIB and Central and
other items portfolios accounted for $26 million (31 December 2022:
$44 million) of the calculated non-linearity with the remaining $18
million (31 December 2022: $6 million) attributable to CPBB
portfolios. As the non-linearity calculated for the CPBB portfolios
at 31 December 2022 was relatively low, a judgemental post model
adjustment of $34 million was applied. Subsequent stand-back
analysis was completed during the first half of 2023 to benchmark
the ECL non-linearity calculated using the Monte Carlo model, which
confirmed that the calculated non-linearity for CPBB portfolios was
appropriate and the judgemental post model adjustment was
released.
Page
46
The impact of multiple economic scenarios on
stage 1, stage 2 and stage 3 modelled ECL is set out in the table
below, together with the management overlay and other judgemental
adjustments.
|
Base forecast $million
|
Multiple economic scenarios1
$million
|
Management overlays and other judgemental
adjustments
$million
|
Total
modelled
ECL2
$million
|
Total expected credit loss at 31 December
2023
|
1,071
|
44
|
165
|
1.280
|
Total expected credit loss at 31 December
2022
|
1,267
|
84
|
229
|
1,580
|
1 Includes judgemental
post model adjustment of $nil million (31 December 2022: $34
million) relating to Consumer, Private and Business
Banking
2 Total modelled ECL comprises
stage 1 and stage 2 balances of $1,105 million (31 December 2022:
$1,281 million) and $193 million (31 December 2022: $299 million)
of modelled ECL on stage 3 loans
3 Includes ECL on Assets held for
sale of $37 million (31 December 2022: $10 million)
The average expected credit loss under multiple
scenarios is 4 per cent (2022: 7 per cent) higher than the expected
credit loss calculated using only the most likely scenario (the
Base Forecast). Portfolios that are more sensitive to non-linearity
include those with greater leverage and/or a longer tenor, such as
Project and Shipping Finance portfolios. Other portfolios display
minimal non-linearity owing to limited responsiveness to
macroeconomic impacts for structural reasons, such as significant
collateralisation as with the CPBB mortgage portfolios.
Judgemental adjustments
As at 31 December 2023, the Group held
judgemental adjustments for ECL as set out in the table below. All
of the judgemental adjustments have been determined after taking
account of the model performance post model adjustments reported.
They are reassessed quarterly and are reviewed and approved by the
IFRS 9 Impairment Committee and will be released when no longer
relevant.
31 December 2023
|
Corporate, Commercial & Institutional
Banking
$ million
|
Consumer, Private & Business
Banking
|
Central &
other
$ million
|
Total
$ million
|
Mortgages
$ million
|
Credit Cards
$ million
|
Other
$ million
|
Total
$ million
|
Judgemental post model adjustments
|
-
|
-
|
1
|
1
|
2
|
-
|
2
|
Judgemental management overlays:
|
|
|
|
|
|
|
|
- China CRE
|
141
|
-
|
-
|
-
|
-
|
-
|
141
|
- Other
|
-
|
1
|
2
|
2
|
5
|
17
|
22
|
Total judgemental adjustments
|
141
|
1
|
3
|
3
|
7
|
17
|
165
|
Judgemental adjustments by stage:
|
|
|
|
|
|
|
|
Stage 1
|
17
|
1
|
3
|
6
|
10
|
-
|
27
|
Stage 2
|
124
|
-
|
-
|
(3)
|
(3)
|
17
|
138
|
Stage 3
|
-
|
|
-
|
-
|
-
|
-
|
-
|
31 December 2022
|
Corporate, Commercial & Institutional
Banking
$ million
|
Consumer, Private & Business
Banking
|
Central &
other
$million
|
Total
$million
|
Mortgages
$ million
|
Credit Cards
$ million
|
Other
$ million
|
Total
$million
|
Judgemental post model adjustments
|
-
|
3
|
11
|
30
|
44
|
-
|
44
|
Judgemental management overlays:
|
|
|
|
|
|
|
|
- China CRE
|
173
|
-
|
-
|
-
|
-
|
-
|
173
|
- Other
|
9
|
2
|
5
|
30
|
37
|
-
|
46
|
Total judgemental adjustments
|
182
|
5
|
16
|
60
|
81
|
-
|
263
|
Judgemental adjustments by stage:
|
|
|
|
|
|
|
|
Stage 1
|
37
|
1
|
5
|
39
|
45
|
-
|
82
|
Stage 2
|
136
|
3
|
9
|
17
|
29
|
-
|
165
|
Stage 3
|
9
|
1
|
2
|
4
|
7
|
-
|
16
|
Judgemental post model adjustments
As at 31 December 2023, judgemental post model
adjustments to increase ECL by a net $2 million (31 December 2022:
$44 million increase) have been applied to certain CPBB models,
primarily to adjust for temporary factors impacting modelled
outputs. These will be released when these factors normalise. At 31
December 2022, $34 million of the increase in ECL related to
multiple economic scenarios, which was fully released in the first
half of 2023 (see 'Impact of multiple economic
scenarios').
Page
47
Judgemental management overlays
China CRE
The real estate market in China has now been in
a downturn since late 2021 as evidenced by continued decline in
sales, and investments in the sector. Liquidity issues experienced
by Chinese property developers continued into 2023 with more
developers defaulting on their obligations both offshore and
onshore. During 2023, authorities on the mainland have introduced a
slew of policies to help revive the sector and restore buying
sentiments. This has helped stabilise the market to an extent in
some cities, but demand and home prices remain muted overall.
Continued policy relaxations, including those related to house
purchase restrictions, completion support for eligible projects
from onshore financial institutions, relaxation in mortgage rates,
and further support for affordable housing, are key for reversing
the continued decline in sales and investments and ensuring a
stable outlook for 2024.
The Group's loans and advances to China CRE
clients was $2.4 billion at 31 December 2023 (31 December
2022: $3.2 billion). Client level analysis continues to be
done, with clients being placed on purely precautionary or
non-purely precautionary early alert, where appropriate, for closer
monitoring. Given the evolving nature of the risks in the China CRE
sector, a management overlay of $141 million (31 December
2022: $173 million) has been taken by estimating the impact of
further deterioration to exposures in this sector. The decrease
from 31 December 2022 was primarily driven by repayments and
movement of some of the exposures to Stage 3.
Other
Overlays of $5 million (31 December 2022: $16
million) have also been applied in CPBB to capture macroeconomic
environment challenges caused by sovereign defaults or heightened
sovereign risk, the impact of which is not fully captured in the
modelled outcomes. An overlay of $17 million (2022: nil) was
applied in Central & Other due to a temporary market
dislocation in the Africa and Middle East region.
The remaining COVID-19 overlay in CPBB of $21
million that was held as at 31 December 2022 has been fully
released in 2023. The stage 3 overlay in CCIB of $9 million that
was held as at 31 December 2022 following the Sri Lanka Sovereign
default was also fully released in 2023.
Stage 3 assets
Credit-impaired assets managed by Stressed Asset
Group (SAG) incorporate forward-looking economic assumptions in
respect of the recovery outcomes identified and are assigned
individual probability weightings per IFRS 9. These assumptions are
not based on a Monte Carlo simulation but are informed by the Base
Forecast.
Sensitivity of expected credit loss calculation
to macroeconomic variables
The ECL calculation relies on multiple variables
and is inherently non-linear and portfolio-dependent, which implies
that no single analysis can fully demonstrate the sensitivity of
the ECL to changes in the macroeconomic variables. The Group has
conducted a series of analyses with the aim of identifying the
macroeconomic variables which might have the greatest impact on the
overall ECL. These encompassed single variable and multi-variable
exercises, using simple up/ down variation and extracts from actual
calculation data, as well as bespoke scenario design
assessments.
The primary conclusion of these exercises is
that no individual macroeconomic variable is materially
influential. The Group believes this is plausible as the number of
variables used in the ECL calculation is large. This does not mean
that macroeconomic variables are uninfluential; rather, that the
Group believes that consideration of macroeconomics should involve
whole scenarios, as this aligns with the multi-variable nature of
the calculation.
The Group faces downside risks in the operating
environment related to the uncertainties surrounding the
macroeconomic outlook. To explore this, a sensitivity analysis of
ECL was undertaken to explore the effect of slower economic
recoveries across the Group's footprint markets. Two downside
scenarios were considered in particular to explore the current
uncertainties over commodity prices. The first scenario, Global
Stagflation, explores a temporary spike (relative to base) in
commodity prices, inflation and interest rates in the near term
from the ongoing war in Ukraine and conflicts in the Middle East.
The second more severe scenario is based on the Bank of England's
most recent Annual Cyclical Scenario (ACS), which explores a
persistent rise in commodity prices, inflation and interest
rates.
Page
48
|
Baseline
|
|
Global Stagflation
|
|
ACS
|
Five year
average
|
Peak/Trough
|
Five year
average
|
Peak/Trough
|
Five year
average
|
Peak/Trough
|
China GDP
|
4.3
|
5.7 / 3.8
|
|
3.7
|
6.2 / (0.8)
|
|
2.2
|
3.9 / (3.4)
|
China unemployment
|
4.0
|
4.1 / 3.8
|
|
5.3
|
6.4 / 3.8
|
|
5.3
|
5.7 / 4.6
|
China property prices
|
4.6
|
7.2 / 1.5
|
|
4.4
|
15.9 / (17.5)
|
|
(5.5)
|
9.2 / (16.3)
|
Hong Kong GDP
|
2.5
|
3.8 / 1.5
|
|
1.8
|
5.6 / (1.4)
|
|
(0.6)
|
2.9 / (9.4)
|
Hong Kong unemployment
|
3.4
|
3.4 / 3.4
|
|
5.4
|
7.4 / 3.4
|
|
6.3
|
7.5 / 3.9
|
Hong Kong property prices
|
2.8
|
4.6 / (1.1)
|
|
1.6
|
9.4 / (3.8)
|
|
(9.7)
|
6.2 / (22.5)
|
US GDP
|
1.7
|
2.3 / 0.8
|
|
1.4
|
2.7 / (1.3)
|
|
0.1
|
1.5 / (4.8)
|
Singapore GDP
|
2.9
|
3.8 / 1.9
|
|
2.7
|
5.0 / (1.6)
|
|
1.2
|
5.9 / (8.7)
|
India GDP
|
6.2
|
9.1 / 4.4
|
|
4.9
|
6.6 / 0.6
|
|
4.2
|
7.3 / (0.7)
|
Crude oil
|
88.2
|
93.8 / 82.8
|
|
95.3
|
152.9 / 82.8
|
|
118
|
147.9 / 83.6
|
Period covered from Q1 2024 to Q4
2028
|
Base (GDP, YoY%)
|
|
Global Stagflation
|
|
Difference from Base
|
2024
|
2025
|
2026
|
2027
|
2028
|
2024
|
2025
|
2026
|
2027
|
2028
|
2024
|
2025
|
2026
|
2027
|
2028
|
China
|
4.8
|
4.5
|
4.3
|
4.0
|
3.8
|
|
1.5
|
1.6
|
4.8
|
5.7
|
4.8
|
|
(3.3)
|
(2.9)
|
0.5
|
1.7
|
1.0
|
Hong Kong
|
2.9
|
2.5
|
2.3
|
2.4
|
2.2
|
|
0.9
|
(1.0)
|
1.7
|
5.0
|
2.4
|
|
(2.0)
|
(3.5)
|
(0.6)
|
2.5
|
0.2
|
US
|
1.4
|
1.5
|
1.8
|
1.9
|
1.9
|
|
0.0
|
0.2
|
1.8
|
2.6
|
2.4
|
|
(1.5)
|
(1.3)
|
0.0
|
0.7
|
0.5
|
Singapore
|
2.6
|
3.1
|
3.3
|
2.8
|
2.6
|
|
0.3
|
0.6
|
3.7
|
4.8
|
4.0
|
|
(2.3)
|
(2.4)
|
0.4
|
2.0
|
1.3
|
India
|
6.0
|
5.5
|
6.5
|
6.4
|
6.6
|
|
2.6
|
3.9
|
5.6
|
6.5
|
5.7
|
|
(3.4)
|
(1.6)
|
(0.8)
|
0.1
|
(0.9)
|
Each year is from Q1 to Q4. For example 2024 is
from Q1 2024 to Q4 2024.
|
Base (GDP, YoY%)
|
|
ACS
|
|
Difference from Base
|
2024
|
2025
|
2026
|
2027
|
2028
|
2024
|
2025
|
2026
|
2027
|
2028
|
2024
|
2025
|
2026
|
2027
|
2028
|
China
|
4.8
|
4.5
|
4.3
|
4.0
|
3.8
|
|
(0.9)
|
1.3
|
3.7
|
3.4
|
3.4
|
|
(5.6)
|
(3.2)
|
(0.5)
|
(0.6)
|
(0.4)
|
Hong Kong
|
2.9
|
2.5
|
2.3
|
2.4
|
2.2
|
|
(5.3)
|
(3.5)
|
2.6
|
1.8
|
1.5
|
|
(8.1)
|
(6.0)
|
0.3
|
(0.6)
|
(0.7)
|
US
|
1.4
|
1.5
|
1.8
|
1.9
|
1.9
|
|
(1.7)
|
(1.5)
|
1.0
|
1.3
|
1.3
|
|
(3.2)
|
(2.9)
|
(0.8)
|
(0.6)
|
(0.6)
|
Singapore
|
2.6
|
3.1
|
3.3
|
2.8
|
2.6
|
|
(3.8)
|
0.0
|
4.2
|
2.9
|
2.7
|
|
(6.4)
|
(3.1)
|
0.9
|
0.1
|
0.1
|
India
|
6.0
|
5.5
|
6.5
|
6.4
|
6.6
|
|
2.8
|
2.2
|
4.9
|
5.3
|
5.5
|
|
(3.2)
|
(3.3)
|
(1.6)
|
(1.1)
|
(1.2)
|
Each year is from Q1 to Q4. For example 2024 is
from Q1 2024 to Q4 2024
The total modelled stage 1 and 2 ECL provisions
(including both on and off-balance sheet instruments) would be
approximately $153 million higher under the Global Stagflation
scenario, and $489 million higher under the ACS scenario than the
baseline ECL provisions (which excluded the impact of multiple
economic scenarios and management overlays which may already
capture some of the risks in these scenarios). Stage 2 exposures as
a proportion of stage 1 and 2 exposures would increase from 3.7 per
cent in the base case to 4.1 per cent and 6.5 per cent respectively
under the Global Stagflation and ACS scenarios. This includes the
impact of exposures transferring to stage 2 from stage 1 but does
not consider an increase in stage 3 defaults.
Under both scenarios, the majority of the
increase in ECL in CCIB came from the main corporate and CRE
portfolios. For the main corporate portfolios, ECL would increase
by $20 million and $79 million for the Global stagflation and ACS
scenarios respectively and the proportion of stage 2 exposures
would increase from 5.5 per cent in the base case to 5.9 per cent
and 8.2 per cent respectively.
For the CPBB portfolios, most of the increase in
ECL came from the unsecured retail portfolios, with the Taiwan and
Korea Personal Loans impacted. Under the Global Stagflation and ACS
scenarios, Credit card ECL would increase by $28 million and $66
million respectively, largely in the Singapore and Hong Kong
portfolios and the proportion of stage 2 credit card exposures
would increase from 1.5 per cent in the base case to 2.1 per cent
and 3.3 per cent for each scenario respectively, with the Singapore
portfolio most impacted. Mortgages ECL would increase by $1 million
and $45 million for each scenario respectively, with portfolios in
Hong Kong and Korea most impacted and the proportion of stage 2
mortgages would increase from 1.2 per cent in the base case to 1.7
per cent and 14 per cent respectively, with the Hong Kong and
Singapore portfolios most impacted.
There was no material change in modelled stage 3
provisions as these primarily relate to unsecured CPBB exposures
for which the LGD is not sensitive to changes in the macroeconomic
forecasts. There is also no material change for non-modelled stage
3 exposures as these are more sensitive to client specific factors
than to alternative macroeconomic scenarios.
Page
49
The actual outcome of any scenario may be
materially different due to, among other factors, the effect of
management actions to mitigate potential increases in risk and
changes in the underlying portfolio.
|
Gross as
reported1
$ million
|
ECL as
reported2
$ million
|
ECL
Base case
$ million
|
ECL Global Stagflation
$ million
|
ECL ACS
$ million
|
Stage 1 modelled
|
|
|
|
|
|
Corporate, Commercial & Institutional
Banking
|
337,189
|
134
|
124
|
136
|
164
|
Consumer, Private & Business
Banking
|
190,999
|
315
|
306
|
355
|
455
|
Ventures
|
1,015
|
15
|
15
|
15
|
15
|
Central & Other items
|
194,673
|
35
|
32
|
40
|
50
|
Total stage 1 excluding management
judgements
|
723,876
|
499
|
477
|
546
|
684
|
Stage 2 modelled
|
|
|
|
|
|
Corporate, Commercial & Institutional
Banking
|
16,873
|
194
|
184
|
234
|
333
|
Consumer, Private & Business
Banking
|
2,472
|
143
|
134
|
167
|
263
|
Ventures
|
54
|
21
|
21
|
21
|
21
|
Central & Other items
|
2,869
|
21
|
18
|
19
|
22
|
Total stage 2 excluding management
judgements
|
22,268
|
379
|
357
|
441
|
639
|
Total Stage 1 & 2 modelled
|
|
|
|
|
|
Corporate, Commercial & Institutional
Banking
|
354.062
|
328
|
308
|
370
|
497
|
Consumer, Private & Business
Banking
|
193,471
|
458
|
440
|
522
|
718
|
Ventures
|
1,069
|
36
|
36
|
36
|
36
|
Central & Other items
|
197,542
|
56
|
50
|
59
|
72
|
Total excluding management
judgements
|
746,144
|
878
|
834
|
987
|
1,323
|
|
|
|
|
|
|
Stage 3 exposures excluding other
assets
|
8,144
|
4,499
|
|
|
|
Other financial assets3
|
111,478
|
59
|
|
|
|
ECL from management judgements
|
|
165
|
|
|
|
Total financial assets reported at 31 December
2023
|
865,766
|
5,601
|
|
|
|
1 Gross balances
includes both on- and off- balance sheet instruments; allocation
between stage 1 and 2 will differ by scenario
2 Includes ECL for
both on- and off- balance sheet instruments
3 Includes cash and
balances at central banks, Accrued income, Other financial assets;
and Assets held for sale
Significant increase in credit risk
(SICR)
Quantitative criteria
SICR is assessed by comparing the risk of
default at the reporting date to the risk of default at
origination. Whether a change in the risk of default is significant
or not is assessed using quantitative and qualitative criteria.
These criteria have been separately defined for each business and
where meaningful are consistently applied across business
lines.
Assets are considered to have experienced SICR
if they have breached both relative and absolute thresholds for the
change in the average annualised IFRS 9 lifetime probability of
default (IFRS 9 PD) over the residual term of the
exposure.
The absolute measure of increase in credit risk
is used to capture instances where the IFRS 9 PDs on exposures are
relatively low at initial recognition as these may increase by
several multiples without representing a significant increase in
credit risk. Where IFRS 9 PDs are relatively high at initial
recognition, a relative measure is more appropriate in assessing
whether there is a significant increase in credit risk, as the IFRS
9 PDs increase more quickly.
The SICR thresholds have been calibrated based
on the following principles:
• Stability - The
thresholds are set to achieve a stable stage 2 population at a
portfolio level, trying to minimise the number of accounts moving
back and forth between stage 1 and stage 2 in a short period of
time
• Accuracy - The
thresholds are set such that there is a materially higher
propensity for stage 2 exposures to eventually default than is the
case for stage 1 exposures
• Dependency from
backstops - The thresholds are stringent enough such that a high
proportion of accounts transfer to stage 2 due to movements in
forward-looking IFRS 9 PDs rather than relying on backward-looking
backstops such as arrears
Page
50
• Relationship with
business and product risk profiles - the thresholds reflect the
relative risk differences between different products, and are
aligned to business processes
For CCIB clients the quantitative thresholds are
a relative 100 per cent increase in IFRS 9 PD and an absolute
change in IFRS 9 PD of between 50 and 100 bps.
For Consumer and Business Banking clients,
portfolio specific quantitative thresholds in Hong Kong, Singapore,
Malaysia, UAE and Taiwan are applied for credit cards and one
personal loan portfolio. The thresholds include relative and
absolute increases in IFRS 9 PD with average lifetime IFRS 9 PD
cut-offs for those exposures that are within a range of customer
utilisation limits (for credit cards) and remaining tenor (for
personal loans) and differentiate between exposures that are
current and those that are 1 to 29 days past due.
The range of thresholds applied are:
Portfolio
|
Relative IFRS 9
PD increase
(%)
|
Absolute IFRS 9
PD increase
(%)
|
Customer
utilisation
(%)
|
Remaining
tenor
(%)
|
Average
IFRS 9 PD
(lifetime)
|
Credit cards - Current
|
50% - 150%
|
3.4% - 9.3%
|
15% - 90%
|
-
|
4.15% - 11.6%
|
Credit cards - 1-29 days past due
|
100% - 210%
|
3.5% - 6.1%
|
25% - 67%
|
-
|
1.5% - 18.5%
|
Personal loans - Current
|
-
|
3.5%
|
-
|
70%
|
2.8%
|
Personal loan - 1-29 days past due
|
25%
|
3%
|
-
|
75%
|
-
|
For all other Consumer and Business Banking
portfolios, the quantitative SICR thresholds applied are a relative
threshold of 100 per cent increase in IFRS 9 PD and an absolute
change in IFRS 9 PD of between 100 and 350 bps depending on the
product. Certain countries have a higher absolute threshold
reflecting the lower default rate within their personal loan
portfolios compared with the Group's other personal loan
portfolios.
Private Banking clients are assessed
qualitatively, based on a delinquency measure relating to
collateral top-ups or sell-downs.
Qualitative criteria
Qualitative factors that indicate that there has
been a significant increase in credit risk include processes linked
to current risk management, such as placing loans on non-purely
precautionary early alert.
Backstop
Across all portfolios, accounts that are 30 or
more days past due (DPD) on contractual payments of principal
and/or interest that have not been captured by the criteria above
are considered to have experienced a significant increase in credit
risk.
Expert credit judgement may be applied in
assessing SICR to the extent that certain risks may not have been
captured by the models or through the above criteria. Such
instances are expected to be rare, for example due to events and
material uncertainties arising close to the reporting
date.
CCIB clients
Quantitative criteria
Exposures are assessed based on both the
absolute and the relative movement in the IFRS 9 PD from
origination to the reporting date as described above.
To account for the fact that the mapping between
internal credit grades (used in the origination process) and IFRS 9
PDs is non-linear (e.g. a one-notch downgrade in the investment
grade universe results in a much smaller IFRS 9 PD increase than in
the sub-investment grade universe), the absolute thresholds have
been differentiated by credit quality at origination, as measured
by internal credit grades being investment grade or sub-investment
grade.
Qualitative criteria
All assets of clients that have been placed on
early alert (for non-purely precautionary reasons) are deemed to
have experienced a significant increase in credit risk.
An account is placed on non-purely precautionary
early alert if it exhibits risk or potential weaknesses of a
material nature requiring closer monitoring, supervision or
attention by management. Weaknesses in such a borrower's account,
if left uncorrected, could result in deterioration of repayment
prospects and the likelihood of being downgraded. Indicators could
include a rapid erosion of position within the industry, concerns
over management's ability to manage operations, weak/deteriorating
operating results, liquidity strain and overdue balances, among
other factors.
Page
51
All client assets that have been assigned a CG12
rating, equivalent to 'Higher risk', are deemed to have experienced
a significant increase in credit risk. Accounts rated CG12 are
primarily managed by relationship managers in the CCIB unit with
support from SAG for certain accounts. All CCIB clients are placed
in CG12 when they are 30 DPD unless they are granted a waiver
through a strict governance process.
Consumer and Business Banking
clients
Quantitative criteria
Material portfolios (defined as a combination of
country and product, for example Hong Kong mortgages, Singapore
credit cards, Taiwan personal loans) for which a statistical model
has been built, are assessed based on both the absolute and
relative movement in the IFRS 9 PD from origination to the
reporting date as described previously. For these portfolios, the
original lifetime IFRS 9 PD term structure is determined based on
the original Application Score or Risk Segment of the
client.
Qualitative and backstop criteria
Accounts that are 30 DPD that have not been
captured by the quantitative criteria are considered to have
experienced a significant increase in credit risk. For less
material portfolios, which are modelled based on a roll-rate or
loss-rate approach, SICR is primarily assessed through the 30 DPD
trigger. In addition, SICR is also assessed for where specific risk
elevation events have occurred in a market that are not yet
reflected in modelled outcomes or in other metrics. This is applied
collectively either to impacted specific products/customer cohorts
or across the overall consumer banking portfolio in the affected
market.
Private Banking clients
For Private Banking clients, SICR is assessed by
referencing the nature and the level of collateral against which
credit is extended (known as 'Classes of Risk').
Qualitative criteria
For all Private Banking classes, in line with
risk management practice, an increase in credit risk is deemed to
have occurred where margining or loan-to-value covenants have been
breached.
For Class I assets (lending against diversified
liquid collateral), if these margining requirements have not been
met within 30 days of a trigger, a significant increase in credit
risk is assumed to have occurred.
For Class I and Class III assets (real-estate
lending), a significant increase in credit risk is assumed to have
occurred where the bank is unable to 'sell down' the applicable
assets to meet revised collateral requirements within five days of
a trigger.
Class II assets are typically unsecured or
partially secured, or secured against illiquid collateral such as
shares in private companies. Significant credit deterioration of
these assets is deemed to have occurred when any early alert
trigger has been breached.
Debt securities
Quantitative criteria
For debt securities originated before 1 January
2018, the bank is utilising the low Credit Risk simplified
approach, where debt securities with an internal credit rating
mapped to an investment grade equivalent are allocated to stage 1
and all other debt securities are allocated to stage 2. Debt
securities originated after 1 January 2018 are assessed based on
the absolute and relative movements in IFRS 9 PD from origination
to the reporting date using the same thresholds as for Corporate,
Commercial and Institutional Banking clients.
Qualitative criteria
Debt securities utilise the same qualitative
criteria as the Corporate, Commercial and Institutional Banking
client segments, including being placed on non-purely precautionary
early alert or being classified as CG12.
Assessment of credit-impaired financial
assets
Consumer and Business Banking
clients
The core components in determining
credit-impaired expected credit loss provisions are the value of
gross charge-off and recoveries. Gross charge-off and/or loss
provisions are recognised when it is established that the account
is unlikely to pay through the normal process. Recovery of
unsecured debt post credit impairment is recognised based on actual
cash collected, either directly from clients or through the sale of
defaulted loans to third-party institutions. Release of credit
impairment provisions for secured loans is recognised if the loan
outstanding is paid in full (release of full provision), or the
provision is higher than the loan outstanding (release of the
excess provision).
Page
52
CCIB and Private Banking clients
Credit-impaired accounts are managed by the
Group's specialist recovery unit, Stressed Asset Group (SAG), which
is independent from its main businesses. Where a portion of
exposure is considered not recoverable, a stage 3 credit impairment
provision is raised. This stage 3 provision is the difference
between the loan-carrying amount and the probability-weighted
present value of estimated future cash flows, reflecting a range of
scenarios (typically the Upside, Downside and Likely recovery
outcomes). Where the exposure is secured by collateral, the values
used will incorporate the impact of forward-looking economic
information on the value recoverable collateral and time to realise
the same.
The individual circumstances of each client are
considered when SAR estimates future cashflows and the timing of
future recoveries which involves significant judgement. All
available sources, such as cashflow arising from operations,
selling assets or subsidiaries, realising collateral or payments
under guarantees, are considered. In any decision relating to the
raising of provisions, the Group attempts to balance economic
conditions, local knowledge and experience, and the results of
independent asset reviews.
Write-offs
Where it is considered that there is no
realistic prospect of recovering a portion of an exposure against
which an impairment provision has been raised, that amount will be
written off.
Governance and application of expert credit
judgement in respect of expected credit losses
The Group's Credit Policy and Standards
framework details the requirements for continuous monitoring to
identify any changes in credit quality and resultant ratings, as
well as ensuring a consistent approach to monitoring, managing and
mitigating credit risks. The framework aligns with the governance
of ECL estimation through the early recognition of significant
deteriorations in ratings which drive stage 2 and 3 ECL.
The models used in determining expected credit
losses are reviewed and approved by the Group Credit Model
Assessment Committee (CMAC), which is appointed by the Model Risk
Committee. CMAC has the responsibility to assess and approve the
use of models and to review all IFRS 9 interpretations related to
models. CMAC also provides oversight on operational matters related
to model development, performance monitoring and model validation
activities, including standards and regulatory matters.
Prior to submission to CMAC for approval, the
models are validated by GMV, a function which is independent of the
business and the model developers. GMV's analysis comprises review
of model documentation, model design and methodology, data
validation, review of the model development and calibration
process, out-of-sample performance testing, and assessment of
compliance review against IFRS 9 rules and internal
standards.
A quarterly model monitoring process is in place
that uses recent data to compare the differences between model
predictions and actual outcomes against approved thresholds. Where
a model's performance breaches the monitoring thresholds, an
assessment of whether a PMA is required to correct for the
identified model issue is completed.
Key inputs into the calculation and resulting
expected credit loss provisions are subject to review and approval
by the IFRS 9 Impairment Committee (IIC) which is appointed by the
Group Risk Committee. The IIC consists of senior representatives
from Risk, Finance, and Group Economic Research. It meets at least
twice every quarter; once before the models are run to approve key
inputs into the calculation, and once after the models are run to
approve the expected credit loss provisions and any judgemental
overrides that may be necessary.
The IFRS 9 Impairment Committee:
• Oversees the
appropriateness of all Business Model Assessment and Solely
Payments of Principal and Interest (SPPI) tests
• Reviews and approves
expected credit loss for financial assets classified as stages 1, 2
and 3 for each financial reporting period
• Reviews and approves
stage allocation rules and thresholds
• Approves material
adjustments in relation to expected credit loss for fair value
through other comprehensive income (FVOCI) and amortised cost
financial assets
• Reviews, challenges
and approves base macroeconomic forecasts and the multiple
macroeconomic scenarios approach that are utilised in the
forward-looking expected credit loss calculations
Page
53
The IFRS 9 Impairment Committee is supported by
an Expert Panel which also reviews and challenges the base case
projections and multiple macroeconomic scenarios. The Expert Panel
consists of members of Enterprise Risk Management (which includes
the Scenario Design team), Finance, Group Economic Research and
country representatives of major jurisdictions.
PMAs may be applied to account for identified
weaknesses in model estimates. The processes for identifying the
need for, calculating the level of, and approving PMAs are
prescribed in the Credit Risk IFRS 9 ECL Model Family Standards,
which are approved by the Global Head, Model Risk Management. PMA
calculation methodologies are reviewed by GMV and submitted to CMAC
as the model approver or the IIC. All PMAs have a remediation plan
to fix the identified model weakness, and these plans are reported
to and tracked at CMAC.
In addition, Risk Event Overlays account for
events that are sudden and therefore not captured in the Base Case
Forecast or the resulting ECL calculated by the models. All Risk
Event Overlays must be approved by the IIC having considered the
nature of the event, why the risk is not captured in the model, and
the basis on which the quantum of the overlay has been calculated.
Risk Event Overlays are subject to quarterly review and re-approval
by the IIC and will be released when the risks are no longer
relevant.
Traded Risk
Traded Risk is the potential for loss resulting
from activities undertaken by the Group in financial markets. Under
the Enterprise Risk Management Framework, the Traded Risk Framework
brings together Market Risk, Counterparty Credit Risk and
Algorithmic Trading. Traded Risk Management is the core risk
management function supporting market-facing businesses,
predominantly Financial Markets and Treasury Markets.
Market Risk (audited)
Market Risk is the potential for fair value loss
due to adverse moves in financial markets. The Group's exposure to
Market Risk arises predominantly from the following
sources:
• Trading
book:
- The Group
provides clients with access to financial markets, facilitation of
which entails the Group taking moderate Market Risk positions. All
trading teams support client activity. There are no proprietary
trading teams. Hence, income earned from Market Risk-related
activities is primarily driven by the volume of client activity
rather than risk-taking
• Non-trading
book:
- The Treasury
Markets desk is required to hold a liquid assets buffer, much of
which is held in high-quality marketable debt securities
- The Group has
capital invested and related income streams denominated in
currencies other than US dollars. To the extent that these income
streams are not hedged, the Group is subject to Structural Foreign
Exchange Risk which is reflected in reserves
A summary of our current policies and practices
regarding Market Risk management is provided in the Principal Risks
section.
The primary categories of Market Risk for the
Group are:
• Interest Rate Risk:
arising from changes in yield curves and implied volatilities on
interest rate options
• Foreign Exchange Rate
Risk: arising from changes in currency exchange rates and implied
volatilities on foreign exchange options
• Commodity Risk:
arising from changes in commodity prices and implied volatilities
on commodity options; covering energy, precious metals, base metals
and agriculture
• Credit Spread Risk:
arising from changes in the price of debt instruments and
credit-linked derivatives, driven by factors other than the level
of risk-free interest rates
• Equity Risk: arising
from changes in the prices of equities, equity indices, equity
baskets and implied volatilities on related options
Page
54
Market risk movements (audited)
Value at Risk (VaR) allows the Group to manage
Market Risk across the trading book and most of the fair valued
non-trading books.
The average level of total trading and
non-trading VaR in 2023 was $53.3 million, 1.5 per cent higher than
2022 ($52.5 million). The year end level of total trading and
non-trading VaR in 2023 was $44.5 million, 20.2 per cent lower than
2022 ($55.8 million), due to a reduction in non-trading
positions.
For the trading book, the average level of VaR
in 2023 was $21.5 million, 19.4 per cent higher than 2022 ($18.0
million). Trading activities have remained relatively unchanged,
and client driven.
Daily value at risk (VaR at 97.5%, one day)
(audited)
Trading1 and
non-trading2
|
2023
|
|
2022
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Interest Rate Risk
|
39.5
|
54.1
|
23.2
|
30.5
|
|
27.8
|
42.1
|
21.0
|
24.7
|
Credit Spread Risk
|
33.8
|
48.0
|
25.0
|
31.7
|
|
34.2
|
47.1
|
20.3
|
32.9
|
Foreign Exchange Risk
|
7.0
|
12.2
|
4.2
|
7.4
|
|
6.5
|
10.3
|
4.8
|
6.8
|
Commodity Risk
|
5.8
|
9.7
|
3.7
|
4.3
|
|
7.0
|
11.9
|
3.5
|
8.3
|
Equity Risk
|
0.1
|
0.4
|
-
|
-
|
|
0.1
|
0.2
|
-
|
0.1
|
Diversification effect
|
(32.9)
|
N/A
|
N/A
|
(29.4)
|
|
(23.1)
|
N/A
|
N/A
|
(17.0)
|
Total
|
53.3
|
65.5
|
44.2
|
44.5
|
|
52.5
|
64.1
|
40.3
|
55.8
|
Trading1
|
2023
|
|
2022
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Interest Rate Risk
|
13.1
|
20.4
|
7.7
|
11.6
|
|
8.1
|
11.7
|
5.3
|
9.0
|
Credit Spread Risk
|
9.4
|
12.4
|
7.4
|
9.4
|
|
9.5
|
14.9
|
5.0
|
8.7
|
Foreign Exchange Risk
|
7.0
|
12.2
|
4.2
|
7.4
|
|
6.5
|
10.3
|
4.8
|
6.8
|
Commodity Risk
|
5.8
|
9.7
|
3.7
|
4.4
|
|
7.0
|
11.9
|
3.5
|
8.3
|
Equity Risk
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Diversification effect
|
(13.8)
|
N/A
|
N/A
|
(11.5)
|
|
(13.1)
|
N/A
|
N/A
|
(11.0)
|
Total
|
21.5
|
30.6
|
14.7
|
21.3
|
|
18.0
|
24.4
|
12.6
|
21.8
|
Non-trading2
|
2023
|
|
2022
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Interest Rate Risk
|
34.2
|
43.6
|
19.7
|
23.9
|
|
26.3
|
44.5
|
18.1
|
23.5
|
Credit Spread Risk
|
28.3
|
40.1
|
21.5
|
24.4
|
|
28.8
|
37.8
|
18.7
|
29.2
|
Equity Risk
|
0.1
|
0.4
|
-
|
-
|
|
0.1
|
0.2
|
-
|
0.1
|
Diversification effect
|
(18.6)
|
N/A
|
N/A
|
(12.7)
|
|
(10.6)
|
N/A
|
N/A
|
(11.5)
|
Total
|
44.0
|
53.4
|
32.0
|
35.6
|
|
44.6
|
52.5
|
35.1
|
41.3
|
Page
55
The following table sets out how trading and
non-trading VaR is distributed across the Group's
businesses:
|
2023
|
|
2022
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Average
$million
|
High
$million
|
Low
$million
|
Year End
$million
|
Trading1 and
non-trading2
|
53.3
|
65.5
|
44.2
|
44.5
|
|
52.5
|
64.1
|
40.3
|
55.8
|
Trading1
|
|
|
|
|
|
|
|
|
|
Macro Trading3
|
13.8
|
20.2
|
9.2
|
15.4
|
|
12.8
|
17.4
|
10.2
|
16.9
|
Global Credit
|
12.8
|
18.2
|
8.5
|
10.1
|
|
10.1
|
15.7
|
4.2
|
8.4
|
XVA
|
4.8
|
7.0
|
3.4
|
4.5
|
|
3.9
|
5.0
|
2.4
|
4.6
|
Diversification effect
|
(9.9)
|
N/A
|
N/A
|
(8.7)
|
|
(8.8)
|
N/A
|
N/A
|
(8.1)
|
Total
|
21.5
|
30.6
|
14.7
|
21.3
|
|
18
|
24.4
|
12.6
|
21.8
|
|
|
|
|
|
|
|
|
|
|
Non-trading2
|
|
|
|
|
|
|
|
|
|
Treasury4
|
43.4
|
50.2
|
31.1
|
34.9
|
|
38.7
|
47.5
|
29.7
|
40.3
|
Global Credit
|
3.9
|
13.6
|
2.0
|
4.0
|
|
3.4
|
5.0
|
2.3
|
3.5
|
Listed Private Equity
|
0.1
|
0.4
|
0.0
|
0.0
|
|
0.1
|
0.2
|
-
|
0.1
|
Diversification effect
|
(3.4)
|
N/A
|
N/A
|
(3.3)
|
|
2.4
|
N/A
|
N/A
|
(2.6)
|
Total
|
44.0
|
53.4
|
32.0
|
35.6
|
|
44.6
|
52.5
|
35.1
|
41.3
|
1 The trading book for
Market Risk is defined in accordance with the UK onshored Capital
Requirements Regulation Part 3 Title I Chapter 3, which restricts
the positions permitted in the trading book
2 The non-trading book
VaR does not include syndicated loans
3 Macro Trading
comprises the Rates, FX and Commodities businesses
4 Treasury comprises
Treasury Markets and Treasury Capital Management
businesses
Risks not in VaR
In 2023, the main market risks not reflected in
VaR were:
• Basis risks for which
the historical market price data is limited and is therefore
proxied, giving rise to potential proxy basis risk that is not
captured in VaR
• Potential depeg risk
from currencies currently pegged or managed, as the historical
one-year VaR observation period does not reflect the possibility of
a change in the currency regime, such as sudden
depegging
• Volatility skew risk
due to movements in options volatilities at different strikes while
VaR reflects only movements in at-the-money volatilities
• Deal contingent risk
where a client is granted the right to cancel a hedging trade
contingent on conditions not being met within a time
window
Additional capital is set aside to cover such
'risks not in VaR'.
Backtesting
In 2023, there were five regulatory backtesting
negative exceptions at Group level (in 2022 there were eight
regulatory backtesting negative exceptions at Group level). Group
exceptions occurred on:
• 16 March: After the
US authorities put Silicon Valley Bank and Signature Bank into
administration there were strong market reactions, including
notable interest rate yield rises on 16 March
• 1 June: After
announcement of planned potential economic reforms in Nigeria,
there were sharp movements in the offshore Naira FX market in
anticipation of Naira devaluation
• 12 June: After the
governor of the Central Bank of Nigeria was removed there were
further sharp movements in the offshore Naira FX market
• 1 November and 3
November: After the Nigerian government announced on 30 October
that it plans to target an exchange rate of 750 Naira per dollar,
the onshore spot market became more volatile on low
volumes.
The VaR model is currently being enhanced to
increase its responsiveness to abrupt upturns in market
volatility.
There have been five Group exceptions in the
previous 250 business days. This is within the 'amber zone' applied
internationally to internal models by bank supervisors (Basel
Committee on Banking Supervision, Supervisory framework for the use
of backtesting in conjunction with the internal models approach to
market risk capital requirements, January 1996).
Page
56
The graph below illustrates the performance of
the VaR model used in capital calculations. It compares the 99
percentile profit and loss confidence level given by the VaR model
with the hypothetical profit and loss of each day given the actual
market movement without taking into account any intra-day trading
activity.
Trading loss days
|
2023
|
2022
|
Number of loss days reported for Financial
Markets trading book total product income1
|
16
|
15
|
1 Includes credit
valuation adjustment (CVA) and funding valuation adjustment (FVA),
and excludes Treasury Markets business (non-trading), periodic
valuation changes for Capital Markets, expected loss provisions,
overnight indexed swap (OIS) discounting and accounting adjustments
such as debit valuation adjustments
Average daily income earned from Market
Risk-related activities1
(audited)
The average level of total trading daily income
in 2023 was $12 million, 14 per cent lower than 2022 ($14 million).
The decrease is largely attributable to lower income in Commodities
in 2023 on the back of lower volatility and falling crude oil
prices. Additionally, the decrease in FX business was on the back
of lower cross-border flows and muted FX volatility.
The average level of total non-trading daily
income in 2023 was -$0.7 million, 217 per cent lower than 2022
($0.6 million). The decrease is primarily attributable to lower
income from the Credit Solutions business.
Trading
|
2023
$million
|
2022
$million
|
Interest Rate Risk
|
4.5
|
5.0
|
Credit Spread Risk
|
1.2
|
1.4
|
Foreign Exchange Risk
|
5.5
|
6.3
|
Commodity Risk
|
0.8
|
1.3
|
Equity Risk
|
-
|
-
|
Total
|
12.0
|
14.0
|
Non-trading
|
$million
|
$million
|
Interest Rate Risk
|
(0.1)
|
-
|
Credit Spread Risk
|
(0.7)
|
0.6
|
Equity Risk
|
0.1
|
-
|
Total
|
(0.7)
|
0.6
|
1 Reflects total
product income which is the sum of client income and own account
income. Includes elements of trading income, interest income and
non funded income which are generated from Market Risk-related
activities. Rates, XVA and Treasury income are included under
Interest Rate Risk whilst Credit Trading income is included under
Credit Spread Risk
Structural foreign exchange
exposures
The table below sets out the principal
structural foreign exchange exposures (net of investment hedges) of
the Group.
|
2023
$million
|
20221
$million
|
Hong Kong dollar
|
4,662
|
3,333
|
Renminbi
|
3,523
|
3,497
|
Indian rupee
|
3,309
|
4,396
|
Singapore dollar
|
2,415
|
1,888
|
Korean won
|
2,114
|
2,409
|
Malaysian ringgit
|
1,540
|
1,571
|
Taiwanese dollar
|
1,222
|
1,055
|
Euro
|
1,125
|
893
|
Bangladeshi Taka
|
1,007
|
832
|
Thai baht
|
782
|
782
|
UAE dirham
|
709
|
670
|
Pakistani rupee
|
306
|
352
|
Indonesian rupiah
|
293
|
261
|
Other
|
3,206
|
3,233
|
|
26,213
|
25,172
|
1 Prior year has been
represented to provide granular currency details
Page
57
As at 31 December 2023, the Group had taken net
investment hedges using derivative financial instruments to partly
cover its exposure to the Hong Kong dollar of $5,603 million (31
December 2022: $6,236 million), Korean won of $2,884 million (31
December 2022: $3,330 million), Indian rupee of $1,809 million (31
December 2022: $620 million), Renminbi of $1,516 million (31
December 2022: $1,608 million), UAE dirham of $1,470 million (31
December 2022: $1,334 million), Singapore dollar of $1,047 million
(31 December 2022: $1,608 million), Taiwanese dollar of $1,025
million (31 December 2022: $1,075 million) and South African rand
of $64 million (31 December 2022: $nil million). An analysis has
been performed on these exposures to assess the impact of a 1 per
cent fall in the US dollar exchange rates, adjusted to incorporate
the impacts of correlations of these currencies to the US dollar.
The impact on the positions above would be an increase of $260
million (31 December 2022: $421 million). Changes in the valuation
of these positions are taken to reserves. For analysis of the
Group's capital position and requirements, refer to the Capital
Review.
Counterparty Credit Risk
Counterparty Credit Risk is the potential for
loss in the event of the default of a derivative counterparty,
after taking into account the value of eligible collaterals and
risk mitigation techniques. The Group's counterparty credit
exposures are included in the Credit Risk section.
Derivative financial instruments Credit Risk
mitigation
The Group enters into master netting agreements,
which in the event of default result in a single amount owed by or
to the counterparty through netting the sum of the positive and
negative mark-to-market values of applicable derivative
transactions.
In addition, the Group enters into credit
support annexes (CSAs) with counterparties where collateral is
deemed a necessary or desirable mitigant to the exposure. Cash
collateral includes collateral called under a variation margin
process from counterparties if total uncollateralised
mark-to-market exposure exceeds the threshold and minimum transfer
amount specified in the CSA. With certain counterparties, the CSA
is reciprocal and requires us to post collateral if the overall
mark-to-market values of positions are in the counterparty's favour
and exceed an agreed threshold.
Liquidity and Funding Risk
Liquidity and Funding Risk is the risk that the
Group may not have sufficient stable or diverse sources of funding
to meet its obligations as they fall due.
The Group's Liquidity and Funding Risk framework
requires each country to ensure that it operates within predefined
liquidity limits and remains in compliance with Group liquidity
policies and practices, as well as local regulatory
requirements.
The Group achieves this through a combination of
setting Risk Appetite and associated limits, policy formation, risk
measurement and monitoring, prudential and internal stress testing,
governance and review.
Despite the challenging macroeconomic
environment, the Group has maintained resilience and retained a
robust liquidity position. The Group continues to focus on
improving the quality and diversification of its funding mix and
remains committed to supporting its clients.
Primary sources of funding (audited)
The Group's funding strategy is largely driven
by its policy to maintain adequate liquidity at all times, in all
geographic locations and for all currencies. This is done to ensure
the Group can meet all of its obligations as they fall due. The
Group's funding profile is therefore well diversified across
different sources, maturities and currencies.
The Group's assets are funded predominantly by
customer deposits, supplemented with wholesale funding, which is
diversified by type and maturity.
The Group maintains access to wholesale funding
markets in all major financial centres in which it operates. This
seeks to ensure that the Group has market intelligence, maintains
stable funding lines and can obtain optimal pricing when performing
cashflow management activities.
In 2023, the Group issued approximately $8.1
billion of securities, all in the form of senior debt, from its
holding company (HoldCo) Standard Chartered PLC (2022 $5.2 billion
of senior debt securities, $0.75 billion of subordinated debt
securities and $1.25 billion of Additional Tier 1 securities). In
the next 12 months, approximately $8.5 billion of the Group's
senior debt, subordinated debt and Additional Tier 1 securities in
total are either falling due for repayment contractually or
callable by the Group.
Page
58
Liquidity and Funding Risk metrics
The Group continually monitors key liquidity
metrics, both on a country basis and consolidated across the
Group.
The following liquidity and funding Board Risk
Appetite metrics define the maximum amount and type of risk that
the Group is willing to assume in pursuit of its strategy:
liquidity coverage ratio (LCR), liquidity stress survival horizons,
recovery capacity and net stable funding ratio (NSFR). In addition
to the Board Risk Appetite, there are further limits that apply at
Group and country level such as, external wholesale borrowing (WBE)
and cross currency limits.
Liquidity coverage ratio (LCR)
The LCR is a regulatory requirement set to
ensure the Group has sufficient unencumbered high-quality liquid
assets to meet its liquidity needs in a 30-calendar-day liquidity
stress scenario.
The Group monitors and reports its liquidity
positions under the Liquidity Coverage Ratio per PRA rulebook and
has maintained its LCR above the prudential requirement. The Group
maintained strong liquidity ratios despite a challenging
macroeconomic and geopolitical environment.
At the reporting date, the Group LCR was 145 per
cent (31 December 2022: 147 per cent), with a surplus to both
Board-approved Risk Appetite and regulatory
requirements.
Adequate liquidity was held across our footprint
to meet all local prudential LCR requirements where
applicable.
|
2023
$million
|
2022
$million
|
Liquidity buffer
|
185,643
|
177,037
|
Total net cash outflows
|
128,111
|
120,720
|
Liquidity coverage ratio
|
145%
|
147%
|
Stress coverage
The Group intends to maintain a prudent and
sustainable funding and liquidity position, in all countries and
currencies, such that it can withstand a severe but plausible
liquidity stress.
Our approach to managing liquidity and funding
is reflected in the Board-level Risk Appetite Statement which
includes the following:
"The Group should have sufficient stable and
diverse sources of funding to meet its contractual and contingent
obligations as they fall due."
The Group's internal liquidity stress testing
framework covers the following stress scenarios:
• Standard
Chartered-specific - Captures the liquidity impact from an
idiosyncratic event affecting Standard Chartered only with the rest
of the market assumed to be operating normally.
• Market wide -
Captures the liquidity impact from a market-wide crisis affecting
all participants in a country, region or globally.
• Combined - Assumes
both Standard Chartered-specific and market-wide events affect the
Group simultaneously and hence is the most severe
scenario.
All scenarios include, but are not limited to,
modelled outflows for retail and wholesale funding, off-balance
sheet funding risk, cross-currency funding risk, intraday risk,
franchise risk and risks associated with a deterioration of a
firm's credit rating. Concentration risk approach has been enhanced
to capture single name and industry concentration.
Stress testing results show that a positive
surplus was maintained under all scenarios at 31 December 2023, and
respective countries were able to survive for a period of time as
defined under each scenario. The results take into account currency
convertibility and portability constraints while calculating the
liquidity surplus at Group level.
Standard Chartered Bank's credit ratings as at
31 December 2023 were A+ with stable outlook (Fitch), A+ with
stable outlook (S&P) and A1 with stable outlook (Moody's). As
of 31 December 2023, the estimated contractual outflow of a
three-notch long-term ratings downgrade is $1.1 billion.
Page
59
External wholesale borrowing
A risk limit is set to prevent excessive
reliance on wholesale borrowing. Within the definition of wholesale
borrowing, limits are applied to all branches and operating
subsidiaries in the Group and as at the reporting date, the Group
remained within the Risk Appetite.
Advances-to-deposits ratio
This is defined as the ratio of total loans and
advances to customers relative to total customer deposits. An
advances-to-deposits ratio below 100 per cent demonstrates that
customer deposits exceed customer loans as a result of the emphasis
placed on generating a high level of funding from
customers.
The Group's advances-to-deposits ratio has
decreased by 4.1 per cent to 53.3 per cent, driven by an increase
in customer deposits of 3 per cent and with a reduction of 5 per
cent in customer loans and advances. Deposits from customers as at
31 December 2023 are $486,666 million (31 December 2022: $473,383
million).
|
2023
$million
|
2022
$million
|
Total loans and advances to
customers1,2
|
259,481
|
271,897
|
Total customer accounts3
|
486,666
|
473,383
|
Advances-to-deposits ratio
|
53.3%
|
57.4%
|
1 Excludes reverse
repurchase agreement and other similar secured lending of $13,996
million and includes loans and advances to customers held at fair
value through profit and loss of $7,212 million
2 Loans and advances
to customers for the purpose of the advances-to-deposits ratio
excludes $20,710 million of approved balances held with central
banks, confirmed as repayable at the point of stress (31 December
2022: $20,798 million)
3 Includes customer
accounts held at fair value through profit or loss of $17,248
million (31 December 2022: $11,706 million)
Page
60
Net stable funding ratio (NSFR)
The NSFR is a PRA regulatory requirement that
stipulates institutions to maintain a stable funding profile in
relation to an assumed duration of their assets and off-balance
sheet activities over a one-year horizon. It is the ratio between
the amount of available stable funding (ASF) and the amount of
required stable funding (RSF). ASF factors are applied to balance
sheet liabilities and capital, based on their perceived stability
and the amount of stable funding they provide. Likewise, RSF
factors are applied to assets and off-balance sheet exposures
according to the amount of stable funding they require. The
regulatory requirements for NSFR are to maintain a ratio of at
least 100 per cent. The average ratio for the past four quarters is
136 per cent.
Liquidity pool
The liquidity value of the Group's LCR eligible
liquidity pool at the reporting date was $186 billion. The figures
in the table below account for haircuts, currency convertibility
and portability constraints per PRA rules for transfer
restrictions, and therefore are not directly comparable with the
consolidated balance sheet. A liquidity pool is held to offset
stress outflows as defined in the LCR per PRA rulebook.
|
2023
|
Asia
$million
|
Africa &
Middle East
$million
|
Europe &
Americas
$million
|
Total
$million
|
Level 1 securities
|
|
|
|
|
Cash and balances at central banks
|
32,504
|
2,456
|
46,715
|
81,675
|
Central banks, governments/public sector
entities
|
54,562
|
1,363
|
15,843
|
71,768
|
Multilateral development banks and international
organisations
|
5,202
|
961
|
10,754
|
16,917
|
Other
|
130
|
-
|
1,161
|
1,291
|
Total Level 1 securities
|
92,398
|
4,780
|
74,473
|
171,651
|
Level 2A securities
|
6,194
|
128
|
6,946
|
13,268
|
Level 2B securities
|
348
|
-
|
376
|
724
|
Total LCR eligible assets
|
98,940
|
4,908
|
81,795
|
185,643
|
|
2022
|
Asia
$million
|
Africa &
Middle East
$million
|
Europe &
Americas
$million
|
Total
$million
|
Level 1 securities
|
|
|
|
|
Cash and balances at central banks
|
34,101
|
1,066
|
36,522
|
71,689
|
Central banks, governments/public sector
entities
|
50,881
|
2,712
|
23,680
|
77,273
|
Multilateral development banks and international
organisations
|
3,510
|
837
|
10,843
|
15,190
|
Other
|
37
|
7
|
1,430
|
1,474
|
Total Level 1 securities
|
88,529
|
4,622
|
72,475
|
165,626
|
Level 2A securities
|
4,044
|
139
|
6,033
|
10,216
|
Level 2B securities
|
71
|
21
|
1,103
|
1,195
|
Total LCR eligible assets
|
92,644
|
4,782
|
79,611
|
177,037
|
Page
61
Liquidity analysis of the Group's balance sheet
(audited)
Contractual maturity of assets and
liabilities
The following table presents assets and
liabilities by maturity groupings based on the remaining period to
the contractual maturity date as at the balance sheet date on a
discounted basis. Contractual maturities do not necessarily reflect
actual repayments or cashflows.
Within the tables below, cash and balances with
central banks, interbank placements and investment securities that
are fair valued through other comprehensive income are used by the
Group principally for liquidity management purposes.
As at the reporting date, assets remain
predominantly short-dated, with 63 per cent maturing in less than
one year. The less than six-month cumulative net funding gap
improved by $35 billion as of 31 December 2023 compared to 31
December 2022.
|
2023
|
One month or less
$million
|
Between one month and three months
$million
|
Between three months and
six months
$million
|
Between six months and nine months
$million
|
Between
nine months and one year
$million
|
Between
one year
and two years
$million
|
Between
two years
and five years
$million
|
More than
five years
and undated
$million
|
Total
$million
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and balances at
central banks
|
63,752
|
-
|
-
|
-
|
-
|
-
|
-
|
6,153
|
69,905
|
Derivative financial instruments
|
12,269
|
10,632
|
6,910
|
3,611
|
2,921
|
4,650
|
6,038
|
3,403
|
50,434
|
Loans and advances
to banks1,2
|
28,814
|
23,384
|
10,086
|
4,929
|
5,504
|
1,583
|
2,392
|
1,098
|
77,790
|
Loans and advances
to customers1,2
|
86,695
|
55,009
|
25,492
|
15,392
|
14,537
|
25,987
|
26,545
|
95,829
|
345,486
|
Investment securities1
|
12,187
|
28,999
|
17,131
|
18,993
|
20,590
|
24,244
|
44,835
|
50,168
|
217,147
|
Other assets1
|
17,611
|
31,729
|
1,286
|
409
|
587
|
67
|
93
|
10,300
|
62,082
|
Total assets
|
221,328
|
149,753
|
60,905
|
43,334
|
44,139
|
56,531
|
79,903
|
166,951
|
822,844
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Deposits by banks1,3
|
26,745
|
1,909
|
1,398
|
503
|
778
|
1,326
|
2,848
|
2
|
35,509
|
Customer accounts1,4
|
384,444
|
47,723
|
28,288
|
13,647
|
11,806
|
7,787
|
38,578
|
2,349
|
534,622
|
Derivative financial instruments
|
13,111
|
12,472
|
6,655
|
4,001
|
3,433
|
5,142
|
6,932
|
4,315
|
56,061
|
Senior debt5
|
130
|
1,111
|
1,537
|
1,389
|
624
|
11,507
|
20,127
|
14,443
|
50,868
|
Other debt securities in issue1
|
3,123
|
5,822
|
6,109
|
3,235
|
3,037
|
492
|
482
|
195
|
22,495
|
Other liabilities
|
14,929
|
26,447
|
1,695
|
544
|
883
|
1,830
|
1,809
|
12,763
|
60,900
|
Subordinated liabilities and other borrowed
funds
|
980
|
68
|
19
|
172
|
453
|
312
|
1,936
|
8,096
|
12,036
|
Total liabilities
|
443,462
|
95,552
|
45,701
|
23,491
|
21,014
|
28,396
|
72,712
|
42,163
|
772,491
|
Net liquidity gap
|
(222,134)
|
54,201
|
15,204
|
19,843
|
23,125
|
28,135
|
7,191
|
124,788
|
50,353
|
1 Loans and advances,
investment securities, deposits by banks, customer accounts and
debt securities in issue include financial instruments held at fair
value through profit or loss, see Note 13 Financial
instruments
2 Loans and advances
include reverse repurchase agreements and other similar secured
lending of $97.6 billion
3 Deposits by banks
include repurchase agreements and other similar secured borrowing
of $5.6 billion
4 Customer accounts
include repurchase agreements and other similar secured borrowing
of $48.0 billion
5 Senior debt maturity
profiles are based upon contractual maturity, which may be later
than call options over the debt held by the Group
Page
62
|
2022
|
One month
or less
$million
|
Between one month and three months
$million
|
Between three months and
six months
$million
|
Between six months and nine months
$million
|
Between
nine months and one year
$million
|
Between
one year
and two years
$million
|
Between
two years
and five years
$million
|
More than
five years
and undated
$million
|
Total
$million
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and balances at
central banks
|
49,097
|
-
|
-
|
-
|
-
|
-
|
-
|
9,166
|
58,263
|
Derivative financial instruments
|
15,558
|
12,030
|
8,352
|
4,446
|
3,602
|
6,026
|
8,410
|
5,293
|
63,717
|
Loans and advances
to banks1,2
|
24,135
|
15,293
|
11,595
|
4,971
|
4,138
|
2,608
|
1,022
|
687
|
64,449
|
Loans and advances
to customers1,2
|
96,351
|
58,605
|
27,751
|
12,540
|
13,444
|
19,150
|
33,413
|
96,476
|
357,730
|
Investment securities1
|
14,175
|
26,008
|
23,364
|
13,024
|
12,891
|
22,805
|
41,217
|
52,756
|
206,240
|
Other assets1
|
15,210
|
31,276
|
1,341
|
181
|
698
|
89
|
23
|
20,705
|
69,523
|
Total assets
|
214,526
|
143,212
|
72,403
|
35,162
|
34,773
|
50,678
|
84,085
|
185,083
|
819,922
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Deposits by banks1,3
|
29,733
|
2,042
|
2,245
|
871
|
349
|
1,432
|
144
|
7
|
36,823
|
Customer accounts1,4
|
402,069
|
49,769
|
25,110
|
15,961
|
15,216
|
7,830
|
2,451
|
1,823
|
520,229
|
Derivative financial instruments
|
15,820
|
15,810
|
8,645
|
5,002
|
4,102
|
6,795
|
7,904
|
5,784
|
69,862
|
Senior debt5
|
204
|
342
|
509
|
963
|
711
|
5,855
|
19,673
|
12,086
|
40,343
|
Other debt securities in issue1
|
2,758
|
5,504
|
8,732
|
7,316
|
2,935
|
1,088
|
870
|
268
|
29,471
|
Other liabilities
|
19,857
|
24,725
|
1,616
|
521
|
503
|
902
|
1,043
|
10,296
|
59,463
|
Subordinated liabilities and other borrowed
funds
|
2,004
|
105
|
22
|
248
|
25
|
1,882
|
2,045
|
7,384
|
13,715
|
Total liabilities
|
472,445
|
98,297
|
46,879
|
30,882
|
23,841
|
25,784
|
34,130
|
37,648
|
769,906
|
Net liquidity gap
|
(257,919)
|
44,915
|
25,524
|
4,280
|
10,932
|
24,894
|
49,955
|
147,435
|
50,016
|
1 Loans and advances,
investment securities, other assets, deposits by banks, customer
accounts and debt securities in issue include financial instruments
held at fair value through profit or loss, see Note 13 Financial
instruments
2 Loans and advances
include reverse repurchase agreements and other similar secured
lending of $90 billion
3 Deposits by banks
include repurchase agreements and other similar secured borrowing
of $7.0 billion
4 Customer accounts
include repurchase agreements and other similar secured borrowing
of $46.8 billion
5 Senior debt maturity
profiles are based upon contractual maturity, which may be later
than call options over the debt held by the Group
Behavioural maturity of financial assets and
liabilities
The cashflows presented in the previous section
reflect the cashflows that will be contractually payable over the
residual maturity of the instruments. However, contractual
maturities do not necessarily reflect the timing of actual
repayments or cashflow. In practice, certain assets and liabilities
behave differently from their contractual terms, especially for
short-term customer accounts, credit card balances and overdrafts,
which extend to a longer period than their contractual maturity. On
the other hand, mortgage balances tend to have a shorter repayment
period than their contractual maturity date. Expected customer
behaviour is assessed and managed on a country basis using
qualitative and quantitative techniques, including analysis of
observed customer behaviour over time.
Maturity of financial liabilities on an
undiscounted basis (audited)
The following table analyses the contractual
cashflows payable for the Group's financial liabilities by
remaining contractual maturities on an undiscounted basis. The
financial liability balances in the table below will not agree with
the balances reported in the consolidated balance sheet as the
table incorporates all contractual cashflows, on an undiscounted
basis, relating to both principal and interest payments.
Derivatives not treated as hedging derivatives are included in the
'On demand' time bucket and not by contractual maturity.
Within the 'More than five years and undated'
maturity band are undated financial liabilities, the majority of
which relate to subordinated debt, on which interest payments are
not included as this information would not be meaningful, given the
instruments are undated. Interest payments on these instruments are
included within the relevant maturities up to five
years.
Page
63
|
2023
|
One month
or less
$million
|
Between one month and three months
$million
|
Between three months and
six months
$million
|
Between six months and nine months
$million
|
Between
nine months and one year
$million
|
Between
one year
and two years
$million
|
Between
two years
and five years
$million
|
More than
five years
and undated
$million
|
Total
$million
|
Deposits by banks
|
26,759
|
1,921
|
1,417
|
513
|
790
|
1,328
|
2,848
|
4
|
35,580
|
Customer accounts
|
385,361
|
48,140
|
28,763
|
14,049
|
12,190
|
8,118
|
39,000
|
3,036
|
538,657
|
Derivative financial instruments
|
53,054
|
517
|
46
|
44
|
103
|
202
|
887
|
1,208
|
56,061
|
Debt securities in issue
|
3,507
|
6,995
|
8,015
|
5,070
|
4,002
|
13,663
|
23,413
|
16,396
|
81,061
|
Subordinated liabilities and other borrowed
funds
|
1,043
|
134
|
46
|
208
|
570
|
395
|
2,389
|
14,367
|
19,152
|
Other liabilities
|
12,200
|
26,291
|
1,560
|
515
|
884
|
1,832
|
1,810
|
11,513
|
56,605
|
Total liabilities
|
481,924
|
83,998
|
39,847
|
20,399
|
18,539
|
25,538
|
70,347
|
46,524
|
787,116
|
|
2022
|
One month
or less
$million
|
Between one month and three months
$million
|
Between three months and
six months
$million
|
Between six months and nine months
$million
|
Between
nine months and one year
$million
|
Between
one year
and two years
$million
|
Between
two years
and five years
$million
|
More than
five years
and undated
$million
|
Total
$million
|
Deposits by banks
|
29,742
|
2,048
|
2,275
|
876
|
362
|
1,455
|
144
|
8
|
36,910
|
Customer accounts
|
401,893
|
49,196
|
24,713
|
15,614
|
15,283
|
8,280
|
5,937
|
2,591
|
523,507
|
Derivative financial instruments
|
65,912
|
48
|
12
|
116
|
213
|
940
|
1,185
|
1,436
|
69,862
|
Debt securities in issue
|
3,060
|
5,912
|
9,631
|
8,574
|
3,979
|
7,844
|
22,259
|
18,465
|
79,724
|
Subordinated liabilities and other borrowed
funds
|
2,097
|
165
|
44
|
273
|
28
|
2,029
|
2,610
|
14,004
|
21,250
|
Other liabilities
|
17,275
|
25,751
|
1,517
|
504
|
496
|
895
|
901
|
9,669
|
57,008
|
Total liabilities
|
519,979
|
83,120
|
38,192
|
25,957
|
20,361
|
21,443
|
33,036
|
46,173
|
788,261
|
Interest Rate Risk in the Banking
Book
The following table provides the estimated
impact to a hypothetical base case projection of the Group's
earnings under the following scenarios:
• A 50 basis point
parallel interest rate shock (up and down) to the current
market-implied path of rates, across all yield curves
• A 100 basis point
parallel interest rate shock (up and down) to the current
market-implied path of rates, across all yield curves
These interest rate shock scenarios assume all
other economic variables remain constant. The sensitivities shown
represent the estimated change to a hypothetical base case
projected net interest income (NII), plus the change in interest
rate implied income and expense from FX swaps used to manage
banking book currency positions, under the different interest rate
shock scenarios.
The base case projected NII is based on the
current market-implied path of rates and forward rate expectations.
The NII sensitivities below stress this base case by a further 50
or 100bps. Actual observed interest rate changes will lag behind
market expectation. Accordingly, the shocked NII sensitivity does
not represent a forecast of the Group's net interest
income.
The interest rate sensitivities are indicative
stress tests and based on simplified scenarios, estimating the
aggregate impact of an unanticipated, instantaneous parallel shock
across all yield curves over a one-year horizon, including the time
taken to implement changes to pricing before becoming effective.
The assessment assumes that the size and mix of the balance sheet
remain constant and that there are no specific management actions
in response to the change in rates. No assumptions are made in
relation to the impact on credit spreads in a changing rate
environment.
Page
64
Significant modelling and behavioural
assumptions are made regarding scenario simplification, market
competition, pass-through rates, asset and liability re-pricing
tenors, and price flooring. In particular, the assumption that
interest rates of all currencies and maturities shift by the same
amount concurrently, and that no actions are taken to mitigate the
impacts arising from this are considered unlikely. Reported
sensitivities will vary over time due to a number of factors
including changes in balance sheet composition, market conditions,
customer behaviour and risk management strategy. Therefore, while
the NII sensitivities are a relevant measure of the Group's
interest rate exposure, they should not be considered an income or
profit forecast.
Estimated one-year impact to earnings from
a parallel shift in yield curves at the beginning
of the period of:
|
2023
|
USD bloc
$million
|
HKD bloc
$million
|
SGD bloc
$million
|
KRW bloc
$million
|
CNY bloc
$million
|
Other
currency bloc
$million
|
Total
$million
|
+ 50 basis points
|
90
|
10
|
50
|
10
|
30
|
160
|
350
|
- 50 basis points
|
(150)
|
(30)
|
(50)
|
(20)
|
(40)
|
(180)
|
(470)
|
|
|
|
|
|
|
|
|
+ 100 basis points
|
180
|
10
|
100
|
20
|
60
|
320
|
690
|
- 100 basis points
|
(280)
|
(40)
|
(100)
|
(40)
|
(80)
|
(350)
|
(890)
|
Estimated one-year impact to earnings from
a parallel shift in yield curves at the beginning
of the period of:
|
2022
|
USD bloc
$million
|
HKD bloc
$million
|
SGD bloc
$million
|
KRW bloc
$million
|
CNY bloc
$million
|
Other
currency bloc
$million
|
Total
$million
|
+ 50 basis points
|
80
|
20
|
40
|
50
|
30
|
150
|
370
|
- 50 basis points
|
(80)
|
(20)
|
(40)
|
(60)
|
(30)
|
(140)
|
(370)
|
|
|
|
|
|
|
|
|
+ 100 basis points
|
160
|
40
|
90
|
100
|
50
|
300
|
740
|
As at 31 December 2023, the Group estimates the
one-year impact of an instantaneous, parallel increase across all
yield curves of 50 basis points to increase projected NII by $350
million. The equivalent impact from a parallel decrease of 50 basis
points would result in a reduction in projected NII of $470
million. The Group estimates the one-year impact of an
instantaneous, parallel increase across all yield curves of 100
basis points to increase projected NII by $690 million. The
equivalent impact from a parallel decrease of 100 basis points
would result in a reduction in projected NII of $890
million.
The benefit from rising interest rates is
primarily from reinvesting at higher yields and from assets
re-pricing faster and to a greater extent than deposits. NII
sensitivity in falling rate scenarios has increased versus 31
December 2022, due to changes in modelling assumptions to reflect
expected re-pricing activity on Retail and Transaction Banking
current accounts and savings accounts in the current interest rate
environment.
Over the course of 2023 the size of the interest
rate swaps and HTC-accounted bond portfolios used to
programmatically hedge the behavioural lives of structural equity
and CASA balances increased from $31 billion to $47 billion. The
portfolios had a weighted average maturity of 2.9 years, which
reflects the behaviouralised lives of the rate-insensitive deposit
and equity balances that they hedge, and a yield of 3.1%, as at 31
December 2023.
Operational and Technology Risk
The Group defines Operational and Technology
risk as the potential for loss from inadequate or failed internal
processes, technology events, human error, or from the impact of
external events (including legal risks). Operational and Technology
risk may occur anywhere in the Group, including third-party
processes.
Operational and Technology risk
profile
Risk management practices help the business grow
safely and ensure governance and management of Operational and
Technology risk through the delivery and embedding of effective
frameworks and policies, together with continuous oversight and
assurance. Managing Operational and Technology risk makes the Group
more efficient and enables it to offer better, sustainable service
to its customers. The Group's Operational and Technology Risk Type
Framework ('O&T RTF') is designed to enable the Group to
govern, identify, measure, monitor and test, manage and report on
its Operational and Technology risks. The Group continues to ensure
the O&T RTF supports the business and the functions in
effectively managing risk and controls within risk appetite to meet
their strategic objectives.
Page
65
The Group has demonstrated progress on ensuring
visibility of risks and risk management through implementation of a
standardised risk taxonomy. Standardising the risk taxonomy enables
improved risk aggregation and reporting as well as providing
opportunities for simplifying the process of risk identification
and assessment. A revised process universe along with taxonomies
for causes and controls have been designed and will be implemented
in 2024, with control categories supporting the streamlining and
removal of duplicate controls, reducing complexity, and
improving
risk and control management. Macro processes
will provide a client-centric view and enable clearer
accountability for delivery as well as management of risks in line
with business objectives.
Operational and Technology risk is elevated in
areas such as Information and Cyber Security, Data Management and
Transaction Processing. Other key areas of focus are Change,
Systems Health/Technology risk, Third Party risk, Resilience and
Regulatory Compliance. Management has focused on addressing these
areas, improving the sustainable operating environment and has
initiated a number of programmes to enhance the control
environment. The Group continues to monitor and manage Operational
and Technology risks associated with the external environment such
as geopolitical factors and the increasing risk of cyber-attacks.
Digitalisation and inappropriate use of Artificial Intelligence,
various regulatory expectations across our footprint and the
changing technology landscape remain key emerging areas to manage,
allowing the Group to keep pace with new business developments,
whilst ensuring that risk and control frameworks evolve
accordingly. The Group continues to strengthen its risk management
to understand the full spectrum of risks in the operating
environment, enhance its defences and improve
resilience.
Operational and Technology risk events and
losses
Operational losses are one indicator of the
effectiveness and robustness of the non-financial risk control
environment.
The Group's profile of operational loss events
in 2023 and 2022 is summarised in the table below, which shows the
distribution of gross operational losses by Basel business
line.
Distribution of Operational Losses by Basel
business line
|
% Loss
|
2023
|
2022¹
|
Agency Services
|
1.8%
|
3.0%
|
Asset Management
|
0.1%
|
0.8%
|
Commercial Banking
|
8.4%
|
8.9%
|
Corporate Finance
|
7.6%
|
1.1%
|
Corporate Items
|
35.5%
|
2.5%
|
Payment and Settlements
|
17.6%
|
42.9%
|
Retail Banking
|
20.3%
|
25.5%
|
Retail Brokerage
|
0.0%
|
0.0%
|
Trading and Sales
|
8.5%
|
15.2%
|
1 Losses in 2022 have
been restated to include incremental events recognised in
2023
The Group's profile of operational loss events
in 2023 and 2022 is also summarised by Basel event type in the
table below. It shows the distribution of gross operational losses
by Basel event type.
Distribution of Operational Losses by Basel
event type
|
% Loss
|
2023
|
20221
|
Business disruption and system
failures
|
6.0%
|
3.5%
|
Clients' products and business
practices
|
3.6%
|
7.1%
|
Damage to physical assets
|
0.0%
|
0.0%
|
Employment practices and workplace
safety
|
0.6%
|
0.2%
|
Execution delivery and process
management
|
75.0%
|
79.6%
|
External fraud
|
14.6%
|
8.6%
|
Internal fraud
|
0.2%
|
0.9%
|
1 Losses in 2022 have
been restated to include incremental events recognised in
2023
Other principal risks
Losses arising from operational failures for
other principal and integrated risks are reported as operational
losses. Operational losses do not include operational risk-related
credit impairments.
Page
66
Enterprise Risk Management Framework
Risk management is at the heart of banking, it
is what we do. Managing risk effectively is how we drive commerce
and prosperity for our clients and our communities, and it is how
we grow sustainably and profitably as an organisation.
Effective risk management is essential in
delivering consistent and sustainable performance for all our
stakeholders and is a central part of the financial and operational
management of the Group. The Group adds value to clients and the
communities in which they operate by balancing risk and reward to
generate returns for shareholders.
The Enterprise Risk Management Framework (ERMF)
enables the Group to manage enterprise-wide risks, with the
objective of maximising risk-adjusted returns while remaining
within our Risk Appetite (RA). The ERMF is embedded across the
Group, including its branches and subsidiaries1, and is
reviewed annually. The latest version is effective from January
2024.
Annual review
In the 2023 review, the concepts of Integrated
Risk Types (IRTs) and IRT Owner roles were discontinued. Oversight
on IRTs, i.e. Climate Risk, Digital Assets and Third Party Risk, is
provided through the Risk Type Frameworks (RTFs) and relevant
dedicated policies. The subject matter experts as policy owners for
these risks provide overall governance and a holistic view of how
risks are monitored and managed across the Principal Risk Types
(PRTs).
Risk culture
Risk culture encompasses our general awareness,
attitudes, and behaviours towards risk, as well as how risk is
managed at enterprise level.
A healthy risk culture is one in which everyone
takes personal responsibility to identify and assess, openly
discuss, and take prompt action to address existing and emerging
risks. We expect those in our control functions to provide
oversight and challenge constructively, collaboratively, and in a
timely manner. This effort is reflected in our valued behaviours,
underpinned by our Code of Conduct and Ethics, and reinforced by
how we hire, develop, reward our people, serve our clients, and
contribute to communities around the world.
The risks we face constantly evolve, and we must
always look for ways to manage them as effectively as possible.
While unfavourable outcomes will occur from time to time, a healthy
risk culture means that we react quickly and transparently. We can
then take the opportunity to learn from our experience and improve
our framework and processes.
Strategic risk management
The Group's approach to strategic risk
management includes the following:
• Risk identification:
impact analyses of risks that arise from the Group's growth plans,
strategic initiatives, and business model vulnerabilities are
reviewed. This assesses how existing risks have evolved in terms of
relative importance or whether new risks have emerged.
• Risk Appetite: impact
analysis is performed to assess if strategic initiatives can be
achieved within RA and highlight areas where additional RA should
be considered.
• Stress testing: the
risks highlighted during the strategy review and other risk
identification processes are used to develop scenarios for
enterprise stress tests. In order to ensure that the Group's
Strategy remains within the approved RA, the Group Chief Risk
Officer (GCRO) and Group Chief Financial Officer (GCFO) recommend
strategic actions based on the stress test results.
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Roles and responsibilities
Senior Managers Regime2
Roles and responsibilities under the ERMF are
aligned to the objectives of the Senior Managers Regime (SMR). The
GCRO is responsible for the overall development and maintenance of
the Group's ERMF and for identifying material risks which the Group
may be exposed to. The GCRO delegates effective implementation of
the RTFs to Risk Framework Owners (RFO) who provide second line of
defence oversight for their respective PRTs.
In addition, the GCRO is the senior manager
responsible for the development of the Group's Digital Assets Risk
Assessment Approach, and management of Climate Risk.
1 The Group's ERMF and
System of Internal Control applies only to wholly controlled
subsidiaries of the Group, and not to Associates, Joint Ventures or
Structured Entities of the Group.
2 Senior managers
refers to individuals designated as senior management functions
under the FCA and PRA Senior Managers Regime.
The Risk function
The Risk function provides oversight and
challenge on the Group's risk management, ensuring that business is
conducted in line with regulatory expectations. The GCRO directly
manages the Risk function, which is independent from the
origination, trading, and sales functions of the businesses.
The Risk function is responsible for:
• Determining the RA
for approval by Group's Management Team (GMT) and the
Board.
• Maintaining the ERMF,
ensuring that it remains relevant and appropriate to the Group's
business activities, and is effectively communicated and
implemented across the Group.
• Ensuring that risks
are properly assessed, risk and return decisions are transparent
and risks are controlled in accordance with the Group's standards
and RA.
• Overseeing and
challenging the management of PRTs under the ERMF.
• Ensuring that the
necessary balance in making risk and return decisions is not
compromised by short-term pressures to generate revenues through
the independence of the Risk function.
In addition, the Risk function provides
specialist capabilities relevant to risk management processes in
the broader organisation.
The Risk function supports the Group's strategy
by building a sustainable ERMF that places regulatory and
compliance standards, together with culture of appropriate conduct,
at the forefront of the Group's agenda.
Our Conduct, Financial Crime and Compliance
(CFCC) function works alongside the Risk function within the ERMF
to deliver a unified second line of defence.
Three lines of defence model
The Group applies a three line of defence model
to its day-to-day activities for effective risk management, and to
reinforce a strong governance and control environment.
Typically:
• The businesses and
functions engaged in or supporting revenue generating activities
that own and manage the risks constitute the first line of
defence.
• The control
functions, independent of the first line of defence, that provide
oversight and challenge of risk management activities act as the
second line of defence.
• Internal Audit acts
as the third line of defence providing independent assurance on the
effectiveness of controls supporting the activities of the first
and second line of defence functions.
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Risk Appetite and profile
The Group recognises the following constraints
which determine the risks that we are willing to take in pursuit of
our strategy and the development of a sustainable
business:
• Risk capacity is the
maximum level of risk the Group can assume, given its current
capabilities and resources, before breaching constraints determined
by capital and liquidity requirements or the internal operational
environment, or otherwise failing to meet the expectations of
regulator and law enforcement agencies.
• RA is defined by the
Group and approved by the Board. It is the boundary for the risk
that the Group is willing to undertake to achieve its strategic
objectives and Corporate Plan.
The Board is responsible for approving the RA
Statements, which are underpinned by a set of financial and
operational control parameters known as RA metrics and their
associated thresholds. These directly constrain the aggregate risk
exposures that can be taken across the Group.
The Group RA is reviewed at least annually to
ensure that it is fit for purpose and aligned with strategy, with
focus given to new or emerging risks.
Risk Appetite Framework
The Group RA is defined in accordance with risk
management principles that inform our overall approach to risk
management and our risk culture. We set RA to enable us to grow
sustainably whilst managing our risks, giving confidence to our
stakeholders.
The Group RA is supplemented by risk control
tools such as granular-level limits, policies, standards, and other
operational control parameters that are used to maintain the
Group's risk profile within approved RA.
Risk Appetite Statement
The Group will not compromise compliance with
its Risk Appetite in order to pursue revenue growth or higher
returns.
See Table 1 for the set of RA
statements.
Risk identification and assessment
Identification and assessment of potentially
adverse risk events is an essential first step in managing the
risks of any business or activity. To ensure consistency in
communication, we use PRTs to classify our risk
exposures.
We also recognise the need to maintain a
holistic perspective since:
• a single transaction
or activity may give rise to multiple types of risk
exposure;
• risk concentrations
may arise from multiple exposures that are closely correlated;
and
• a given risk exposure
may change its form from one risk type to another.
There are also sources of risk that arise beyond
our own operations, such as the Group's dependency on suppliers for
the provision of services and technology.
As the Group remains accountable for risks
arising from the actions of such third parties, failure to
adequately monitor and manage these relationships could materially
impact the Group's ability to operate.
The Group maintains a dynamic risk-scanning
process with inputs on the internal and external risk environment,
as well as potential threats and opportunities from the business
and client perspectives. The Group maintains a taxonomy of the
PRTs, and risk sub-types; as well as the Topical and Emerging Risks
(TERs) inventory that includes near-term as well as longer-term
uncertainties. Risk assessments of planned growth and strategic
initiatives against the Group's RA is undertaken
annually.
The GCRO and the Group Risk Committee (GRC)
regularly review reports on the risk profile for the PRTs,
adherence to Group RA and the Group risk inventory, including TERs.
They use this information to escalate material developments and
make recommendations to the Board annually on any potential changes
to our Corporate Plan.
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Stress testing
The objective of stress testing is to support
the Group in assessing that it:
• does not have a
portfolio with excessive risk concentration that could produce
unacceptably high losses under severe but plausible
scenarios;
• has sufficient
financial resources to withstand severe but plausible
scenarios;
• has the financial
flexibility to respond to extreme but plausible
scenarios;
• understands key
business model risks and considers what kind of event might
crystallise those risks - even if extreme and with a low likelihood
of occurring;
• Identify, as
required, actions to mitigate the likelihood or impact of those
events;
• considers how the
outcome of plausible stress events, including TERs, may impact
availability of liquidity and regulatory capital; and
• has set RA metrics at
appropriate levels.
Enterprise stress tests incorporate Capital and
Liquidity Adequacy Stress Tests, including recovery and resolution,
as well as reverse stress tests.
Stress tests are performed at the Group,
country, business, and portfolio level under a wide range of risks
and at varying degrees of severity. Unless specifically set by the
regulator, scenario design is a bespoke process that aims to
explore risks that can adversely impact the Group.
The Board delegates approval of the Bank of
England (BoE) stress test submissions to the Board Risk Committee
(BRC), which reviews the recommendations from the GRC. Based on the
stress test results, the GCFO and GCRO can recommend strategic
actions to the Board to ensure that the Group's strategy remains
within RA.
In addition, analysis is run at PRT level to
assess specific risks and concentrations that the Group may be
exposed to. These include qualitative assessments such as stressing
of credit sectors or portfolios, measures such as Value at Risk
(VaR) and multi-factor scenarios in Traded Risk and internal
stressed liquidity metrics. Non-financial risk types are also
stressed to assess the necessary capital requirements under the
Operational & Technology RTF.
The Group has also undertaken a number of
Climate Risk stress tests, both those mandated by regulators as
well as management scenarios.
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Principal Risk Types
PRTs are those risks that are inherent in our
strategy and business model and have been formally defined in the
Group's ERMF. These risks are managed through distinct RTFs which
are approved by the GCRO.
The PRTs and associated RA Statements are
reviewed annually.
The table below shows the Group's current
PRTs.
Table 1: Principal Risk Types Definition and RA
Statement
Principal Risk Types
|
Definition
|
Risk Appetite Statement
|
Credit Risk
|
Potential for loss due to failure of a
counterparty to meet its agreed obligations to pay the
Group.
|
The Group manages its credit exposures following
the principle of diversification across products, geographies,
client segments and industry sectors.
|
Traded Risk
|
Potential for loss resulting from activities
undertaken by the Group in financial markets.
|
The Group should control its financial markets
and activities to ensure that market and counterparty credit risk
losses do not cause material damage to the Group's
franchise.
|
Treasury Risk
|
Potential for insufficient capital, liquidity,
or funding to support our operations, the risk of reductions in
earnings or value from movements in interest rates impacting
banking book items and the potential for losses from a shortfall in
the Group's pension plans.
|
The Group should maintain sufficient capital,
liquidity and funding to support its operations, and an interest
rate profile ensuring that the reductions in earnings or value from
movements in interest rates impacting banking book items does not
cause material damage to the Group's franchise. In addition, the
Group should ensure its pension plans are adequately
funded.
|
Operational and Technology Risk
|
Potential for loss resulting from inadequate or
failed internal processes, technology events, human error, or from
the impact of external events (including legal risks).
|
The Group aims to control operational and
technology risks to ensure that operational losses (financial or
reputational), including any related to conduct of business
matters, do not cause material damage to the Group's
franchise.
|
Financial Crime Risk1
|
Potential for legal or regulatory penalties,
material financial loss or reputational damage resulting from the
failure to comply with applicable laws and regulations relating to
international sanctions, anti-money laundering and anti-bribery and
corruption, and fraud.
|
The Group has no appetite for breaches in laws
and regulations related to Financial Crime, recognising that whilst
incidents are unwanted, they cannot be entirely avoided.
|
Compliance Risk
|
Potential for penalties or loss to the Group or
for an adverse impact to our clients, stakeholders or to the
integrity of the markets we operate in through a failure on our
part to comply with laws, or regulations.
|
The Group has no appetite for breaches in laws
and regulations related to regulatory non-compliance; recognising
that whilst incidents are unwanted, they cannot be entirely
avoided.
|
Information and Cyber Security Risk
|
Risk to the Group's assets, operations, and
individuals due to the potential for unauthorised access, use,
disclosure, disruption, modification, or destruction of information
assets and/or information systems.
|
The Group aims to mitigate and control ICS risks
to ensure that incidents do not cause the Bank material harm,
business disruption, financial loss or reputational damage -
recognising that whilst incidents are unwanted, they cannot be
entirely avoided.
|
Reputational and Sustainability Risk
|
Potential for damage to the franchise (such as
loss of trust, earnings or market capitalisation), because of
stakeholders taking a negative view of the Group through actual or
perceived actions or inactions, including a failure to uphold
responsible business conduct as we strive to do no significant
environmental and social harm through our client, third party
relationships, or our own operations.
|
The Group aims to protect the franchise from
material damage to its reputation by ensuring that any business
activity is satisfactorily assessed and managed with the
appropriate level of management and governance oversight. This
includes a potential failure to uphold responsible business conduct
in striving to do no significant environmental and social
harm.
|
Model Risk
|
Potential loss that may occur because of
decisions or the risk of mis-estimation that could be principally
based on the output of models, due to errors in the development,
implementation, or use of such models.
|
The Group has no appetite for material adverse
implications arising from misuse of models or errors in the
development or implementation of models; whilst accepting some
model uncertainty.
|
1 Fraud forms part of
the Financial Crime RA Statement but in line with market practice
does not apply a zero-tolerance approach
In addition to the PRTs, there is a RA
statement for Climate Risk: "The Group aims to measure and manage
financial and non-financial risks arising from climate change, and
reduce emissions related to our own activities and those related to
the financing of clients in alignment with the Paris
Agreement."
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71
ERMF effectiveness reviews
The GCRO is responsible for annually affirming
the effectiveness of the ERMF to the BRC via an effectiveness
review. This review uses evidence-based self-assessments for all
the RTFs and relevant policies. A top-down review and challenge of
the results is conducted by the GCRO with all RFOs and an opinion
on the internal control environment is provided by Group Internal
Audit.
The ERMF effectiveness review enables
measurement of year-on-year progress. The key outcomes of the 2023
review are:
• Continued focus on
embedding the ERMF across the organisation.
• Financial risks
continue to be more effectively managed and the Group continues to
make good progress in embedding non-financial risk
management.
• Other aspects of the
ERMF, including the key risk committees and key supporting
standards, are established.
• Country-led
self-assessments ensure adherence to the ERMF. Country and regional
risk committees continue to play an active role in managing and
overseeing material issues arising in countries.
Ongoing ffectiveness reviews allow for a
structured approach to identify improvement opportunities and build
plans to address them.
In 2024, the Group aims to further strengthen
its risk management practices by improving the management of
non-financial risks within its businesses, functions and across our
footprint.
Executive and Board risk oversight
Overview
The Board has ultimate responsibility for risk
management and is supported by five core Board level committees.
The Board approves the ERMF based on the recommendation from the
BRC, which also recommends the Group RA Statement for all PRTs. In
addition, the Culture and Sustainability Committee oversees the
Group's culture and key sustainability priorities.
Board and Executive level risk committee
governance structure
The Committee governance structure below
presents the view as of 2023.
Group Risk Committee
The GRC, which derives its authority from the
GCRO, is responsible for ensuring the effective management of risk
throughout the Group in support of the Group's strategy. The GCRO
chairs the GRC, whose members are drawn from the Group Management
Team. The GRC oversees the effective implementation of the ERMF for
the Group, including the delegation of any part of its authorities
to appropriate individuals or sub-committees.
Group Risk Committee sub-committees
• The
Group Non-Financial Risk Committee
(GNFRC), chaired by the Global Head, Risk, Functions
and Operational Risk, governs the non-financial risks throughout
the Group, in support of the ERMF and the Group's strategy. The
GNFRC also reviews the adequacy of the internal control system
across in-scope PRTs.
• The
Group Financial Crime Risk Committee
(GFCRC), chaired by the Group Head, CFCC, governs the
Financial Crime Risk Type (excluding Fraud Risk and Secondary
Reputational Risk arising from Financial Crime Risk). The GFCRC
ensures that the Financial Crime Risk profile is managed within RA
and policies.
• The
Group Responsibility and Reputational Risk
Committee (GRRRC), chaired by the Group Head, CFCC,
ensures the effective management of Reputational and Sustainability
Risk across the Group. This includes providing oversight of matters
arising from clients, products, transactions and strategic
coverage-related decisions and matters escalated by the respective
RFOs.
• The International
Financial Reporting Standards (IFRS) 9
Impairment Committee, co-chaired by the Global Head
Enterprise Risk Management (ERM) and Group Head, Central Finance,
ensures the effective management of Expected Credit Loss (ECL)
computations, as well as stage allocation of financial assets for
quarterly financial reporting.
• The
Model Risk Committee, chaired by the
Global Head, ERM, ensures the effective measurement and management
of Model Risk in line with internal policies and RA.
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72
• The
Corporate, Commercial and Institutional Banking
(CCIB) Risk Committee, chaired by the Chief Risk
Officer (CRO), CCIB and Europe and Americas, ensures the effective
management of risk throughout CCIB in support of the Group's
strategy.
• The
Consumer, Private and Business Banking
(CPBB) Risk Committee, chaired by the CRO, CPBB,
ensures the effective management of risk throughout CPBB in support
of the Group's strategy.
• The
Asia Risk Committee and the
Africa and Middle East Risk Committee
are chaired by the CRO for the respective region. These
committees ensure the effective management of risk in the regions
in support of the Group's strategy.
• The
Investment Committee, chaired by
representatives from the Risk function (CRO, Stressed Asset Group
(SAG), Chief Credit Officer), ensures the optimised wind-down of
the Group's existing direct investment activities in equities,
quasi-equities (excluding mezzanine), funds and other alternative
investments (excluding debt/debt-like instruments). This includes
equity or quasi-equity stakes obtained as a result of restructuring
of distressed debt, non-core equities and limited partner
investments in funds linked to CCIB and managed by the Credit and
Portfolio Management.
• The
SC Ventures (SCV) Risk Committee,
chaired by the CRO, SCV, receives authority directly from the GCRO
and oversees the effective management of risk throughout SCV and
the portfolio of subsidiaries operating under SCV, in support of
the Group's strategy.
• The
Climate Risk Management Committee
(CRMC), chaired by the Global Head, ERM, oversees the
effective implementation of the Group's Climate Risk Policy and
workplan. This includes relevant regulatory requirements and covers
Climate Risk related financial and non-financial risks.
• The
Regulatory Interpretation Committee,
co-chaired by the Global Head ERM and Group Head, Central Finance,
provides oversight of material regulatory interpretations for the
Capital Requirements Regulation (as amended by UK legislation), the
Prudential Regulatory Authority (PRA) rulebook and other relevant
regulations impacting Group regulatory capital calculations and
reporting. The areas and risk types in scope are credit risk,
traded risk, operational risk, large exposures, leverage ratio and
securitisation.
• The
Digital Assets Risk Committee,
chaired by the Global Head, ERM, oversees effective risk management
of the Digital Assets (DA) Risk profile of the Group. This includes
providing oversight and subject matter expertise of DA Risk matters
arising from DA-related activities across the PRTs.
Group Asset and Liability Committee
The Group Asset and Liability Committee (GALCO)
is chaired by the GCFO. Its members are drawn principally from the
Management Team. GALCO is responsible for determining the Group's
balance sheet strategy and for ensuring that, in executing the
Group's strategy, the Group operates within RA and regulatory
requirements relating to capital, loss-absorbing capacity,
liquidity, leverage, Interest Rate Risk in the Banking Book
(IRRBB), Banking Book Basis Risk and Structural Foreign Exchange
Risk. It also monitors the structural impact of decisions around
sustainable finance, net zero and climate risk. GALCO is also
responsible for ensuring that internal and external recovery
planning requirements are met.
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73
Principal risks
We manage and control our PRTs through distinct
RTFs, policies and RA.
Credit Risk
The Group defines Credit Risk as the potential
for loss due to failure of a counterparty to meet its agreed
obligations to pay the Group.
Risk Appetite Statement
The Group manages its credit exposures following
the principle of diversification across products, geographies,
client segments and industry sectors.
Roles and responsibilities
The Credit RTF for the Group are set and owned
by the CROs for the respective business segments.
The Credit Risk control function is the second
line of defence responsible for independent challenge, monitoring
and oversight of the Credit Risk management practices of the first
line of defence. In addition, they ensure that credit risks are
properly assessed and transparent; and that credit decisions are
controlled in accordance with the Group's RA, credit policies and
standards.
Mitigation
Segment-specific policies for CCIB and CPBB are
in place for the management of Credit Risk. The Credit Policy for
CCIB Client Coverage sets the principles that must be followed for
the end-to-end credit process, including credit initiation, credit
grading, credit assessment, product structuring, credit risk
mitigation, monitoring and control, and documentation.
The CPBB Credit Risk Management Policy sets the
principles for the management of CPBB segments, for end-to-end
credit process including credit initiation, credit assessment,
documentation and monitoring for lending to these
segments.
The Group also sets out standards for the
eligibility, enforceability, and effectiveness of Credit Risk
mitigation arrangements. Potential credit losses from a given
account, client or portfolio are mitigated using a range of tools,
such as collateral, netting agreements, credit insurance, credit
derivatives and guarantees.
Risk mitigants are also carefully assessed for
their market value, legal enforceability, correlation, and
counterparty risk of the protection provider.
Collateral is valued prior to drawdown and
regularly thereafter as required, to reflect current market
conditions, the probability of recovery and the period of time to
realise the collateral in the event of liquidation. The Group also
seeks to diversify its collateral holdings across asset classes and
markets.
Where guarantees, credit insurance, standby
letters of credit or credit derivatives are used as Credit Risk
mitigation, the creditworthiness of the protection provider is
assessed and monitored using the same credit approval process
applied to the obligor.
Governance committee oversight
At Board level, the BRC oversees the effective
management of Credit Risk. At the executive level, the GRC oversees
and appoints sub-committees for the management of all risk types
including Credit Risk - in particular the CCIB Risk Committee, CPBB
Risk Committee, Asia Risk Committee, and Africa and Middle East
Risk Committee. The GRC also receives reports from other key Group
Committees such as the Standard Chartered Bank Executive Risk
Committee (in relation to Credit Risk).
These committees are responsible for overseeing
all risk profiles including Credit Risk of the Group within the
respective business areas and regions. Meetings are held regularly,
and the committees monitor all material Credit Risk exposures, as
well as key internal developments and external trends, ensuring
that appropriate action is taken where necessary.
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Decision-making authorities and
delegation
The Credit RTF is the formal mechanism of
delegating Credit Risk authorities cascading from the GCRO, as the
Senior Manager of the Credit Risk PRT. The delegation is to
individuals such as the business segments' CROs. Further delegation
of credit authorities to individual credit officers may be
undertaken based on risk-adjusted scales by customer type or
portfolio.
Credit Risk authorities are reviewed at least
annually to ensure that they remain appropriate. In CCIB Client
Coverage, the individuals delegating the Credit Risk authorities
perform oversight by reviewing a sample of the limit applications
approved by the delegated credit officers periodically. In CPBB,
where credit decision systems and tools (e.g. application
scorecards) are used for credit decisioning, such risk models are
subject to performance monitoring and periodic validation. Where
manual or discretionary credit decisions are applied, the
individuals delegating the Credit Risk authorities perform periodic
quality control assessments and assurance checks.
Monitoring
The Group regularly monitors credit exposures,
portfolio performance, external trends and emerging risks that may
impact risk management outcomes. Internal risk management reports
that are presented to risk committees contain information on key
political and economic trends across major portfolios and
countries, portfolio delinquency and loan impairment
performance.
In CCIB Client Coverage, clients and portfolios
are subject to additional review when they display signs of actual
or potential weakness; for example, where there is a decline in the
client's position within the industry, financial deterioration, a
breach of covenants, or non-performance of an obligation within the
stipulated period. Such accounts are subject to a dedicated process
overseen by the Credit Issues Committee in the relevant countries
where client account strategies and credit grades are re-evaluated.
In addition, remedial actions, including placing accounts on early
alert for increased scrutiny, exposure reduction, security
enhancement or exiting the account could be undertaken. Certain
accounts could also be transferred into the control management of
the SAG, which is our specialist recovery unit for CCIB Client
Coverage that operates independently from our main
business.
On an annual basis, senior members from Business
and Risk participate in a more extensive portfolio review for
certain corporate industry groups. In addition to a review of the
portfolio information, this enhanced review (known as the industry
portfolio review) incorporates industry outlook, key elements of
business strategy, RA, credit profile and emerging/horizon risks. A
condensed version of these industry portfolio reviews will also be
shared with the CCIB Risk Committee.
Any material in-country developments that may
impact sovereign ratings are monitored closely by the Country Risk
Team. The Country Risk Early Warning system, a triage-based risk
identification system, categorises countries based on a
forward-looking view of possible downgrades and the potential
incremental risk-weighted assets (RWA) impact.
For CPBB, exposures and collateral monitoring
are performed at the counterparty and/or portfolio level across
different client segments to ensure transactions and portfolio
exposures remain within RA. Portfolio delinquency trends are also
monitored. Accounts that are past due (or perceived as high risk
but not yet past due) are subject to collections or recovery
processes managed by a specialist independent function. In some
countries, aspects of collections and recovery activities are
outsourced. For discretionary lending portfolios, similar processes
to those of CCIB client coverage are followed.
In addition, an independent Credit Risk Review
team (part of ERM function), performs judgement-based assessments
of the Credit Risk profiles at various portfolio levels. They focus
on selected countries and segments through deep dives, comparative
analysis, and review and challenge of the basis of credit
approvals. The review ensures that the evolving Credit Risk
profiles of CCIB and CPBB are well managed within RA and policies,
through forward-looking mitigating actions where
necessary.
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Credit rating and measurement
All credit proposals are subject to a robust
credit risk assessment. It includes a comprehensive evaluation of
the client's credit quality, including willingness, ability, and
capacity to repay. The primary lending consideration is based on
the client's credit quality and the repayment capacity from
operating cashflows for counterparties, and personal income or
wealth for individual borrowers. The risk assessment gives due
consideration to the client's liquidity and leverage
position.
Where applicable, the assessment includes a
detailed analysis of the Credit Risk mitigation arrangements to
determine the level of reliance on such arrangements as the
secondary source of repayment in the event of a significant
deterioration in a client's credit quality leading to default.
Client income, net worth, and the liquidity of asset by class are
considered for overall risk assessment for wealth lending. The
availability of Wealth Lending credit limits is subject to the
availability of qualified collateral.
Risk measurement plays a central role, along
with judgement and experience, in informing risk-taking and
portfolio management decisions. We adopt the Advanced Internal
Ratings Based (AIRB) approach under the Basel regulatory framework
to calculate Credit Risk capital requirements. The Group has also
established a global programme to assess capital requirements
necessary to be implemented to meet the latest revised Basel III
finalisation (referred to as Basel 3.1 or Basel IV)
regulations.
A standard alphanumeric Credit Risk grade system
is used for CCIB Client Coverage. The numeric grades run from 1 to
14 and some of the grades are further sub-classified. Lower numeric
credit grades are indicative of a lower likelihood of default.
Credit grades 1 to 12 are assigned to performing customers, while
credit grades 13 and 14 are assigned to non-performing or defaulted
customers.
CPBB internal ratings-based portfolios use
application and behavioural credit scores that are calibrated to
generate a probability of default. The Risk Decision Framework uses
a credit rating system to define the portfolio/new booking
segmentation, shape and decision criteria for the unsecured
consumer business segment.
AIRB models cover a substantial majority of our
exposures and are used in assessing risks at a customer and
portfolio level, setting strategy, and optimising our risk-return
decisions. The Model Risk Committee approves material internal
ratings-based risk measurement models. Prior to review and
approval, all internal ratings based models are validated in detail
by an independent model validation team. Reviews are also triggered
if the performance of a model deteriorates materially against
predetermined thresholds during the ongoing model performance
monitoring process, which takes place between the annual
validations.
Credit Concentration Risk
Credit Concentration Risk may arise from a
single large exposure to a counterparty or a group of connected
counterparties, or from multiple exposures across the portfolio
that are closely correlated. Large exposure Concentration Risk is
managed through concentration limits set for a counterparty or a
group of connected counterparties based on control and economic
dependence criteria. RA metrics are set at portfolio level and
monitored to control concentrations, where appropriate, by
industry, products, tenor, collateralisation level, top clients,
and exposure to holding companies. Single name credit concentration
thresholds are set by client group depending on credit grade, and
by customer segment. For concentrations that are material at a
Group level, breaches and potential breaches are monitored by the
respective governance committees and reported to the GRC and
BRC.
Credit impairment
ECL is determined for all financial assets that
are classified as amortised cost or fair value through other
comprehensive income. ECL is computed as an unbiased,
probability-weighted provision determined by evaluating a range of
plausible outcomes, the time value of money, and forward-looking
information such as critical global or country-specific
macroeconomic variables. For more detailed information on
macroeconomic data feeding into IFRS 9 ECL calculations, please
refer to the Risk profile section.
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At the time of origination or purchase of a
non-credit impaired financial asset (Stage 1), ECL represents cash
shortfalls arising from possible default events up to 12 months
into the future from the balance sheet date. ECL continues to be
determined on this basis until there is a significant increase in
the Credit Risk of the asset (Stage 2), in which case ECL is
recognised for default events that may occur over the lifetime of
the asset. If there is observed objective evidence of credit
impairment or default (Stage 3), ECL continues to be measured on a
lifetime basis. To provide the Board with oversight and assurance
that the quality of assets originated are aligned to the Group's
strategy, there is a RA metric to monitor Stage 1 and Stage 2 ECL
from assets originated in the past 12 months.
For CCIB, in line with the regulatory
guidelines, Stage 3 ECL is considered when an obligor is more than
90 days past due on any amount payable to the Group, or the
obligor(s) has symptoms of unlikeliness to pay its credit
obligations in full as they fall due. These credit-impaired
accounts are managed by SAG.
In CPBB, loans to individuals and small
businesses are considered credit-impaired as soon as any payment of
interest or principal is 90 days overdue or they meet other
objective evidence of impairment, such as bankruptcy, debt
restructuring, fraud, or death. Financial assets are written off,
in the amount that is determined to be irrecoverable, when they
meet conditions set such that empirical evidence suggests the
client is unlikely to meet their contractual obligations, or a loss
of principal is reasonably expected.
Estimating the amount and timing of future
recoveries involves significant judgement and considers the
assessment of matters such as future economic conditions and the
value of collateral, for which there may not be a readily
accessible market. The total amount of the Group's impairment
provision is inherently uncertain, being sensitive to changes in
economic and credit conditions across the regions in which the
Group operates. For further details on sensitivity analysis of ECL
under IFRS 9, please refer to the Risk profile section.
Traded Risk
The Group defines Traded Risk as the potential
for loss resulting from activities undertaken by the Group in
financial markets.
Risk Appetite Statement
The Group should control its financial markets
and activities to ensure that market and counterparty credit risk
losses do not cause material damage to the Group's
franchise.
Roles and responsibilities
The Traded RTF, which sets the roles and
responsibilities in respect of Traded Risk for the Group, is owned
by the Global Head, Traded Risk Management (TRM). The business,
acting as first line of defence, is responsible for the effective
management of risks within the scope of its direct organisational
responsibilities set by the Board.
TRM is the second line control function that
performs independent challenge, monitoring and oversight of the
Traded Risk management practices of the first line of defence,
predominantly Financial Markets and Treasury Markets.
Mitigation
The Traded RTF requires that Traded Risk limits
be defined at a level appropriate to ensure that the Group remains
within RA. All businesses incurring Traded Risk must comply with
the Traded RTF. The Traded Risk Policy sets the principles that
must be followed for the end-to-end traded risk management process,
including limit setting, risk capture and measurement, limit
monitoring and escalation, risk mitigation and stress testing.
Policies and standards ensure that these Traded Risk limits are
implemented. Policies are reviewed and approved by the Global Head,
TRM periodically to ensure their ongoing effectiveness.
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Governance committee oversight
At Board level, the BRC oversees the effective
management of Traded Risk. At the executive level, the GRC
delegates responsibilities to the CCIB Risk Committee to oversee
the Traded Risk profile of the Group. For subsidiaries, the
authority for setting Traded Risk limits is delegated from the
local board to the local risk committee, Country CRO and Traded
Risk managers. Meetings are held regularly, and the committees
monitor all material Traded Risk exposures, as well as key internal
developments and external trends, and ensure that appropriate
action is taken.
Decision-making authorities and
delegation
The Traded RTF is the formal mechanism which
delegates Traded Risk authorities cascading from the GCRO, as the
Senior Manager of the Traded Risk Type, to the Global Head, TRM who
further delegates authorities to named individuals.
Traded Risk authorities are reviewed at least
annually to ensure that they remain appropriate and to assess the
quality of decisions taken by the authorised person. Key
risk-taking decisions are made only by certain individuals with the
skills, judgement, and perspective to ensure that the Group's
control standards and risk-return objectives are met.
Market Risk
The Group uses a VaR model to measure the risk
of losses arising from future potential adverse movements in market
rates, prices, and volatilities. VaR is a quantitative measure of
Market Risk that applies recent historical market conditions to
estimate the potential future loss in market value that will not be
exceeded in a set time period at a set statistical confidence
level. VaR provides a consistent measure that can be applied across
trading businesses and products over time and can be set against
actual daily trading profit and loss outcomes.
For day-to-day risk management, VaR is
calculated as at the close of business, generally at UK time for
expected market movements over one business day and to a confidence
level of 97.5 per cent. Intra-day risk levels may vary from those
reported at the end of the day.
The Group applies two VaR
methodologies:
• Historical
simulation: this involves the revaluation of all existing positions
to reflect the effect of historically observed changes in Market
Risk factors on the valuation of the current portfolio. This
approach is applied for general Market Risk factors and the
majority of specific (credit spread) risk VaRs.
• Monte Carlo
simulation: this methodology is similar to historical simulation
but with considerably more input risk factor observations. These
are generated by random sampling techniques, but the results retain
the essential variability and correlations of historically observed
risk factor changes. This approach is applied for some of the
specific (credit spread) risk VaRs in relation to idiosyncratic
exposures in credit markets.
A one-year historical observation period is
applied in both methods.
As an input to regulatory capital, trading book
VaR is calculated for expected movements over 10 business days and
to a confidence level of 99 per cent. Some types of Market Risk are
not captured in the regulatory VaR measure, and these Risks not in
VaR are subject to capital add-ons.
An analysis of VaR results in 2023 is available
in the Risk profile section.
Counterparty Credit Risk
The Group uses a Potential Future Exposure (PFE)
model to measure the credit exposure arising from the positive
mark-to-market of traded products and future potential movements in
market rates, prices, and volatilities. PFE is a quantitative
measure of Counterparty Credit Risk that applies recent historical
market conditions to estimate the potential future credit exposure
that will not be exceeded in a set time period at a confidence
level of 97.5 per cent. PFE is calculated for expected market
movements over different time horizons based on the tenor of the
transactions.
The Group applies two PFE methodologies:
simulation based, which is predominantly used, and an add-on based
PFE methodology.
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Underwriting
The underwriting of securities and loans is in
scope of the RA set by the Group for Traded Risk. Additional limits
approved by the GCRO are set on the sectoral concentration, and the
maximum holding period. The Underwriting Committee, under the
authority of the GCRO, approves individual proposals to underwrite
new security issues and loans for our clients.
Monitoring
TRM monitors the overall portfolio risk and
ensures that it is within specified limits and therefore RA. Limits
are typically reviewed twice a year. Most of the Traded Risk
exposures are monitored daily against approved limits. Traded Risk
limits apply at all times unless separate intra-day limits have
been set. Limit excess approval decisions are based on an
assessment of the circumstances driving the excess and of the
proposed remediation plan. Limits and excesses can only be approved
by a Traded Risk manager with the appropriate delegated
authority.
Treasury Risk
The Group defines Treasury Risk as the potential
for insufficient capital, liquidity, or funding to support our
operations, the risk of reductions in earnings or value from
movements in interest rates impacting banking book items and the
potential for losses from a shortfall in the Group's pension
plans.
Risk Appetite Statement
The Group should maintain sufficient capital,
liquidity and funding to support its operations, and an interest
rate profile ensuring that the reductions in earnings or value from
movements in interest rates impacting banking book items does not
cause material damage to the Group's franchise. In addition, the
Group should ensure its pension plans are adequately
funded.
Roles and responsibilities
The Global Head, ERM is responsible for the RTF
for Treasury Risk under the ERMF.
The Group Treasurer is supported by teams in
Treasury and Finance to implement the Treasury RTF as the first
line of defence and is responsible for managing Treasury
Risk.
At Regional and Country level, Chief Executive
Officers (CEOs) supported by Regional and Country level Finance and
Treasury teams are responsible for managing Treasury Risk as the
first line of defence. Regional Treasury CROs and Country CROs for
Treasury Risk (except Pension Risk) and Head of Pensions (for
Pension Risk) are responsible for overseeing and challenging the
first line of defence.
Mitigation
The Group develops policies to address material
Treasury Risks and aims to maintain its risk profile within RA. In
order to do this, metrics are set against Capital Risk, Liquidity
and Funding Risk and IRRBB. Where appropriate, RA metrics are
cascaded down to regions and countries in the form of Limits and
Management Action Triggers.
Capital Risk
In order to manage Capital Risk, strategic
business, and capital plans (Corporate Plan) are drawn up covering
a five-year horizon which are approved by the Board annually. The
plan ensures that adequate levels of capital, including loss
absorbing capacity, and an efficient mix of the different
components of capital are maintained to support our strategy and
business plans.
Treasury is responsible for the ongoing
assessment of the demand for capital and the updating of the
Group's capital plan.
RA metrics including capital, leverage, Minimum
Requirement for own funds and Eligible Liability (MREL) and double
leverage are assessed within the Corporate Plan to ensure that the
strategy can be achieved within risk tolerances.
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Structural Foreign Exchange (FX) Risk
The Group's structural FX position results from
the Group's non-US dollar investment in the share capital and
reserves of subsidiaries and branches. The FX translation gains, or
losses, are recorded in the Group's translation reserves with a
direct impact on the Group's Common Equity Tier 1 ratio.
The Group contracts hedges to manage its
structural FX position in accordance with the RA, and as a result
the Group has taken net investment hedges to partially cover its
exposure to certain non-US dollar currencies to mitigate the FX
impact of such positions on its capital ratios.
Liquidity and Funding Risk
At Group, regional and country level we
implement various business-as-usual and stress risk metrics to
monitor and manage liquidity and funding risk. This ensures that
the Group maintains an adequate and well-diversified liquidity
buffer, as well as a stable funding base, and that it meets its
liquidity and funding regulatory requirements. The approach to
managing risks and the RA is assessed annually through the Internal
Liquidity Adequacy Assessment Process. A funding plan is also
developed for efficient liquidity projections to ensure that the
Group is adequately funded in the required currencies, to meet its
obligations and client funding needs. The funding plan is part of
the overall Corporate Plan process aligning to the capital
requirements.
Interest Rate Risk in the Banking
Book
This risk arises from differences in the
repricing profile, interest rate basis, and optionality of banking
book assets liabilities and off-balance sheet items. IRRBB
represents an economic and commercial risk to the Group and its
capital adequacy. The Group monitors IRRBB against the
RA.
Pension Risk
Pension Risk is the potential for loss due to
having to meet an actuarially assessed shortfall in the Group's
pension plans. Pension obligation risk to a firm arises from its
contractual or other liabilities to or with respect to an
occupational pension plan or other long-term benefit obligation.
For a funded plan it represents the risk that additional
contributions will need to be made because of a future shortfall in
the funding of the plan. Or, for unfunded obligations, it
represents the risk that the cost of meeting future benefit
payments is greater than currently anticipated. The Pension Risk
position against RA metric is reported to the GRC. This metric is
calculated as the total capital requirement (including both Pillar
1 and Pillar 2A capital) in respect of Pension Risk, expressed as a
number of basis points of RWA.
Recovery and Resolution Planning
In line with PRA requirements, the Group
maintains a Recovery Plan which is a live document to be used by
management in the event of stress in order to restore the Group to
a stable and sustainable position. The Recovery Plan includes a set
of recovery indicators, an escalation framework, and a set of
management actions capable of being implemented during a stress. A
Recovery Plan is also maintained within each major entity, and all
recovery plans are subject to periodic fire-drill
testing.
As the UK resolution authority, the BoE is
required to set a preferred resolution strategy for the Group. The
BoE's preferred resolution strategy is whole Group single point of
entry bail-in at the ultimate holding company level (Standard
Chartered PLC) and would be led by the BoE. In support of this
strategy, the Group has been developing a set of capabilities,
arrangements, and resources to achieve the required outcomes.
Following the BoE's first resolvability assessment and public
disclosure for major UK firms in 2022, the second Resolvability
Assessment Framework (RAF) cycle is under way. The Group submitted
its Resolvability Assessment Report to the BoE and PRA on 6 October
2023 and is due to publish its resolvability public disclosure in
June 2024.
Governance committee oversight
At the Board level, the BRC oversees the
effective management of Treasury Risk. At the executive level, the
GALCO ensures the effective management of risk throughout the Group
in support of the Group's strategy, guides the Group's strategy on
balance sheet optimisation and ensures that the Group operates
within the RA and other internal and external requirements relating
to Treasury Risk (except Pension Risk). The GRC and Regional Risk
Committees provide oversight for Pension Risk.
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Regional and country oversight resides with
regional and country Asset and Liability Committees. Regions and
countries must ensure that they remain in compliance with Group
Treasury policies and practices, as well as local regulatory
requirements.
Decision-making authorities and
delegation
The GCFO has responsibility for capital,
funding, and liquidity under the SMR. The GCRO has delegated the
RFO responsibilities associated with Treasury Risk to the Global
Head, ERM. The Global Head, ERM delegates second line of defence
oversight and challenge responsibilities to the Treasury CRO and
Country CROs for Capital Risk, Liquidity and Funding Risk and
IRRBB, and to Head of Pensions for Pension Risk.
Monitoring
On a day-to-day basis, Treasury Risk is managed
by Treasury, Finance and Country CEOs. The Group regularly reports
and monitors Treasury Risk inherent in its business activities and
those that arise from internal and external events.
Internal risk management reports covering the
balance sheet and the capital and liquidity position are presented
to the relevant country Asset and Liability Committee. The reports
contain key information on balance sheet trends, exposures against
RA and supporting risk measures which enable members to make
informed decisions around the overall management of the balance
sheet.
In addition, an independent Treasury CRO as part
of ERM reviews the prudency and effectiveness of Treasury Risk
management.
Pension Risk is actively managed by the Head of
Pensions and monitored by the Head of Country Risk, Scenario
Analysis, Insurable and Pension Risk. The Head of Pensions ensures
that accurate, complete, and timely updates on Pension Risk are
shared with the Head of Country Risk, Scenario Analysis and Pension
Risk, the Treasury CRO and the Global Head, ERM on a periodic
basis.
Operational and Technology Risk
The Group defines Operational and Technology
risk as the potential for loss resulting from inadequate or failed
internal processes, technology events, human error, or from the
impact of external events (including legal risks).
Risk Appetite Statement
The Group aims to control operational and
technology risks to ensure that operational losses (financial or
reputational), including any related to conduct of business
matters, do not cause material damage to the Group's
franchise.
Changes to Third Party Risk
With effect from January 2024, the Group has
removed the IRT classification and formally included Third Party
Risk as a sub risk under Operational and Technology Risk. Third
Party Risk is defined as the potential for loss or adverse impact
due to the failure to manage the onboarding, lifecycle and exit
strategy of a third party. The Third Party Risk Management Policy
and Standard, in conjunction with the respective PRT policies and
standards, holistically set out the Group's minimum controls
requirements for the identification, mitigation and management of
risks arising from the use of Third Parties.
Roles and responsibilities
The Operational and Technology RTF sets the
roles and responsibilities in respect of Operational and Technology
risk for the Group. The Operational and Technology RTF defines the
Group's Operational and Technology risk sub-types and sets
standards for the identification, control, monitoring and treatment
of risks. These standards are applicable across all PRTs and risk
sub-types in the Operational and Technology RTF. The list of risk
sub-types includes Execution Capability, Governance, Reporting and
Obligations, Legal Enforceability, and Operational Resilience
(including client service, change management, people management,
safety and security, and technology risk).
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The Operational and Technology RTF reinforces
clear accountability for managing risk throughout the Group and
delegates second line of defence responsibilities to identified
SMEs. For each risk sub-type, the subject matter expert sets
policies and standards for the organisation to comply with, and
provides guidance, oversight, and challenge over the activities of
the Group. They ensure that key risk decisions are only taken by
individuals with the requisite skills, judgement, and perspective
to ensure that the Group's risk-return objectives are
met.
Mitigation
The Operational and Technology RTF sets out the
Group's overall approach to the management of Operational and
Technology risk in line with the Group's Operational and Technology
RA. This is supported by the Risk and Control Self-Assessment
(RCSA) which defines roles and responsibilities for the
identification, control, and monitoring of risks (applicable to all
PRTs, risk sub-types and IRTs).
The RCSA is used to determine the design
strength and reliability of each process, and requires:
• the recording of
processes run by client segments, products, and functions into a
process universe;
• the identification of
potential failures in these processes and the related risks of such
failures;
• an assessment of the
impact of the identified risks based on a consistent
scale;
• the design and
monitoring of controls to mitigate prioritised risks;
and
• assessments of
residual risk and timely actions for elevated risks.
Risks that exceed the Group's Operational and
Technology RA require treatment plans to address underlying
causes.
Governance committee oversight
At Board level, the BRC oversees the effective
management of Operational and Technology risk. At the executive
level, the GRC is responsible for the governance and oversight of
Operational and Technology risk for the Group. The GRC, supported
by the GNFRC, monitors the Group's Operational and Technology RA
and relies on other key committees for the management of
Operational and Technology risk.
Regional business segments and functional
committees also provide governance oversight of their respective
processes and related Operational and Technology risk. In addition,
Country Non-Financial Risk Committees (CNFRCs) oversee the
management of Operational and Technology Risk at the country (or
entity) level. In smaller countries, the responsibilities of the
CNFRC may be exercised directly by the Country Risk Committee (for
branches) or Executive Risk Committee (for
subsidiaries).
Decision-making authorities and
delegation
The GCRO has delegated the RFO responsibilities
associated with the Operational and Technology RTF to the Global
Head of Risk, Functions and Operational Risk (GHRFOR).
The Operational and Technology RTF is the formal
mechanism through which the delegation of Operational and
Technology Risk authorities is made. The GHRFOR places reliance on
the respective SMEs for second line of defence oversight of the
relevant Operational and Technology risk sub-types through the
Operational and Technology RTF.
Monitoring
To deliver services to clients and to
participate in the financial services sector, the Group runs
processes which are exposed to Operational and Technology risks.
The Group prioritises and manages risks which are significant to
clients and to the financial services sectors. Control indicators
are regularly monitored to determine the Group's exposure to
residual risk.
The residual risk assessments and reporting of
events form the Group's Operational and Technology Risk profile.
The completeness of the Operational and Technology Risk profile
ensures appropriate prioritisation and timeliness of risk
decisions, including risk acceptances with treatment plans for
risks that exceed acceptable thresholds.
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The Board Risk Committee is informed on
adherence to Operational and Technology RA through metrics reported
for selected risks. These metrics are monitored, and escalation
thresholds are devised based on the materiality and significance of
the risk. These Operational and Technology RA metrics are
consolidated on a regular basis and reported at relevant Group
committees. This provides senior management with the relevant
information to inform their risk decisions.
Financial Crime Risk
The Group defines Financial Crime Risk as the
potential for legal or regulatory penalties, material financial
loss or reputational damage resulting from the failure to comply
with applicable laws and regulations relating to international
sanctions, anti-money laundering and anti-bribery and corruption,
and fraud.
Risk Appetite Statement
The Group has no appetite for breaches in laws
and regulations related to financial crime, recognising that whilst
incidents are unwanted, they cannot be entirely avoided.
Roles and responsibilities
The Group Head, CFCC has overall responsibility
for Financial Crime Risk and is responsible for the establishment
and maintenance of effective systems and controls to meet legal and
regulatory obligations in respect of Financial Crime Risk. The
Group Head, CFCC is the Group's Compliance and Money-Laundering
Reporting Officer and performs the Financial Conduct Authority
(FCA) controlled function and senior management function in
accordance with the requirements set out by the FCA, including
those set out in their handbook on systems and controls. As the
first line of defence, the business process owners have
responsibility for the application of policy controls and the
identification and measurement of risks relating to financial
crime. The business must communicate risks and any policy
non-compliance to the second line of defence for review and
approval following the model for delegation of
authority.
Mitigation
There are four Group policies in support of the
Financial Crime RTF:
• Group Anti-Bribery
and Corruption Policy
• Group Anti-Money
Laundering and Counter Terrorist Financing Policy
• Group Sanctions
Policy
• Group Fraud Risk
Management Policy
The Group operates risk-based assessments and
controls in support of its Financial Crime Risk programme,
including (but not limited to):
• Group Risk
Assessment: the Group monitors enterprise-wide Financial Crime
Risks through the CFCC Risk Assessment process consisting of
Financial Crime Risk and Compliance Risk assessments. The Financial
Crime Risk assessment is a Group-wide risk assessment undertaken
annually to assess the inherent Financial Crime Risk exposures and
the associated processes and controls by which these exposures are
mitigated.
• Financial Crime
Surveillance: risk-based systems and processes to prevent and
detect financial crime.
The strength of controls is tested and assessed
through the Group's Operational and Technology RTF, in addition to
oversight by CFCC Assurance.
Governance committee oversight
Financial Crime Risk within the Group is
governed by the GFCRC and the GNFRC for Fraud Risk.
The GFCRC is responsible for ensuring effective
oversight for operational risk relating to Financial Crime Risk.
Board Level oversight of Financial Crime risk is performed by the
Audit Committee and the BRC.
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Decision-making authorities and
delegation
The Financial Crime RTF is the formal mechanism
through which the delegation of Financial Crime Risk authorities is
made. The Group Head, CFCC is the RFO for Financial Crime Risk
under the Group's ERMF. Certain aspects of Financial Crime
Compliance, second line of defence oversight and challenge, are
delegated within the CFCC function. Approval frameworks are in
place to allow for risk-based decisions on client onboarding,
potential breaches of sanctions regulation or policy, situations of
potential money laundering (and terrorist financing), bribery and
corruption or internal and external fraud.
Monitoring
The Group monitors Financial Crime Risk
compliance against a set of RA metrics. These metrics are reviewed
periodically and reported regularly to the GFCRC, GNFRC, BRC, GRC,
and relevant Board committees.
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Compliance Risk
The Group defines Compliance Risk as the
potential for penalties or loss to the Group or for an adverse
impact to our clients, stakeholders or to the integrity of the
markets we operate in through a failure on our part to comply with
laws, or regulations.
Risk Appetite Statement
The Group has no appetite for breaches in laws
and regulations related to regulatory non-compliance; recognising
that whilst incidents are unwanted, they cannot be entirely
avoided.
Roles and responsibilities
The Group Head, CFCC as RFO for Compliance Risk
provides support to senior management on regulatory and compliance
matters by:
• providing
interpretation and advice on CFCC regulatory requirements and their
impact on the Group; and
• setting
enterprise-wide standards for management of compliance risks
through the establishment and maintenance of the Compliance
RTF.
The Group Head, CFCC also performs the FCA
controlled function and senior management function of Compliance
Risk oversight in accordance with the requirements set out by the
FCA.
All activities that the Group engages in must be
designed to comply with the applicable laws and regulations in the
countries in which we operate. The CFCC function provides second
line of defence oversight and challenge of the first line of
defence risk management activities that relate to Compliance Risk.
Where Compliance Risk arises, or could arise, from failure to
manage another PRT or sub-type, the Compliance RTF outlines that
the responsibility rests with the respective RFO or control
function to ensure that effective oversight and challenge of the
first line of defence can be provided by the appropriate second
line of defence function.
Each of the assigned second line of defence
functions have responsibilities, including monitoring relevant
regulatory developments from Non-Financial Services regulators at
both Group and country levels, policy development, implementation,
and validation as well as oversight and challenge of first line of
defence processes and controls. In addition, the remit of CFCC has
been further clarified in 2023 in relation to Compliance risk and
the boundary of responsibilities with other PRTs.
Mitigation
The CFCC function is responsible for the
establishment and maintenance of policies, standards and controls
to ensure continued legal and regulatory compliance, and the
mitigation of Compliance Risk. In this, the requirements of the
Operational and Technology RTF are followed to ensure a consistent
approach to the management of processes and controls.
The deployment of technological solutions to
improve efficiencies and simplify processes has continued in 2023.
These include launch of a new Regulatory Change Management System
for Group regulatory obligations management, and further
enhancement of the Ask Compliance platform.
Governance committee oversight
Both Compliance Risk and the risk of
non-compliance with laws and regulations resulting from failed
processes and controls are reported at the respective country,
business, product, function, Risk and CFCC Non-Financial Risk
Committees. Relevant matters, as required, are further escalated to
the GNFRC and GRC. At Board level, oversight of Compliance Risk is
primarily provided by the Audit Committee, and by the BRC for
relevant issues.
Whilst not a formal governance committee, the
CFCC Oversight Group provides oversight of CFCC risks including the
effective implementation of the Compliance RTF. The Regulatory
Change Oversight Forum provides visibility and oversight of
material and/or complex large-scale regulatory change emanating
from Financial Services regulators impacting Non-Financial Risks.
The CFCC Policy Council provides oversight, challenge and direction
to Compliance and FCC Policy Owners on material changes and
positions taken in CFCC-owned policies, including issues relating
to regulatory interpretation and Group's CFCC RA.
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Decision-making authorities and
delegation
The Compliance RTF is the formal mechanism
through which the delegation of Compliance Risk authorities is
made. The Group Head, CFCC has the authority to delegate second
line of defence responsibilities within the CFCC function to
relevant and suitably qualified individuals.
Monitoring
The monitoring of controls designed to mitigate
the risk of regulatory non-compliance in processes is governed in
line with the Operational and Technology RTF. The Group has a
monitoring and reporting process in place for Compliance Risk,
which includes escalation and reporting to Risk and CFCC
Non-Financial Risk Committee, GNFRC, GRC, BRC, and relevant Board
committees.
Information and Cyber Security (ICS)
Risk
The Group defines ICS Risk as the risk to the
Group's assets, operations, and individuals due to the potential
for unauthorised access, use, disclosure, disruption, modification,
or destruction of information assets
and/or information systems.
Risk Appetite Statement
The Group aims to mitigate and control ICS risks
to ensure that incidents do not cause the Bank material harm,
business disruption, financial loss or reputational damage -
recognising that whilst incidents are unwanted, they cannot be
entirely avoided.
Roles and responsibilities
The Group's ICS RTF defines the roles and
responsibilities of the first and second lines of defence in
managing and governing ICS Risk across the Group. It emphasises
business ownership and individual accountability.
The Group Chief Transformation, Technology &
Operations Officer (CTTO) has the first line of defence
responsibility for ICS Risk and is accountable for the Group's ICS
strategy. The Group Chief Information Security Officer (CISO) leads
the development and execution of the ICS strategy. The first line
of defence also manages all key ICS Risks, breaches and risk
treatment plans. ICS Risk profile, RA breaches and remediation
status are reported at Board and Executive committees, alongside
business, function and country governance committees.
The Group Chief Information Security Risk
Officer (CISRO) function within Group Risk is the second line of
defence and sets the framework, policy, standards, and methodology
for assessing, scoring, and prioritising ICS Risks across the
Group. The ICS Policy and standards are aligned to industry best
practice models including the National Institute of Standards and
Technology Cyber Security Framework and ISO 27001. This
function has the responsibility for governance, oversight, and
independent challenge of first line of defence's pursuit of the ICS
strategy. Group ICS Risk Framework Strategy remains the
responsibility of the ICS RFO (RFO), delegated from the GCRO to the
Group CISRO.
Mitigation
ICS Risk is managed through the ICS RTF,
comprising a risk assessment methodology and supporting policy,
standards, and methodologies. These are aligned to industry
recommended practice. We undertake an annual ICS Effectiveness
Review to evaluate ICS Risk management practices in alignment with
the ERMF.
Governance committee oversight
The BRC oversees the effective management of ICS
Risk. The GRC has delegated authority to the GNFRC to ensure
effective implementation of the ICS RTF. The GRC and GNFRC are
responsible for oversight of ICS Risk profile and RA breaches.
Sub-committees of the GNFRC have oversight of ICS Risk management
arising from the businesses, countries and functions.
Decision-making authorities and
delegation
The ICS RTF defines how the Group manages ICS
Risk. The Group CISRO delegates authority to designated individuals
through the ICS RTF, including at a business, function, region and
country level.
The Group CISO is responsible for implementing
ICS Risk Management within the Group, and to cascade ICS risk
management into the businesses, functions and countries to comply
with the ICS RTF, policy, and standards.
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86
Monitoring
Group CISO performs a threat-led risk assessment
to identify key threats, in-scope applications and key controls
required to ensure the Group remains within RA.
The ICS Risk profiles of all businesses,
functions and countries are consolidated to present a holistic
Group-level ICS Risk profile for ongoing monitoring. Mandatory ICS
learning, phishing exercises and role-specific training support
colleagues to monitor and manage this risk.
During these reviews, the status of each risk is
assessed against the Group's controls to identify any changes to
impact and likelihood, which affects the overall risk
rating.
Group CISO and Group CISRO monitor the ICS Risk
profile and ensure that breaches of RA are escalated to the
appropriate governance committee or authority levels for
remediation and tracking. A dedicated Group CISRO team supports
this work by executing offensive security testing exercises,
including vulnerability assessments and penetration tests, which
show a wider picture of the Group's risk profile, leading to better
visibility on potential 'in flight' risks. The Group also tracks
remediation of security matters identified by external reviews such
as the BoE CBEST Threat Intelligence-Led Assessment and the
Hong Kong Monetary Authority's (HKMA) Intelligence-led Cyber Attack
Simulation Testing (iCAST).
Reputational and Sustainability Risk
The Group defines Reputational and
Sustainability Risk as the potential for damage to the franchise
(such as loss of trust, earnings, or market capitalisation),
because of stakeholders taking a negative view of the Group through
actual or perceived actions or inactions, including a failure to
uphold responsible business conduct as we strive to do no
significant environmental and social harm through our client, third
party relationships or our own operations.
Risk Appetite Statement
The Group aims to protect the franchise from
material damage to its reputation by ensuring that any business
activity is satisfactorily assessed and managed with the
appropriate level of management and governance oversight. This
includes a potential failure to uphold responsible business conduct
in striving to do no significant environmental and social
harm.
Roles and responsibilities
The Global Head, ERM is responsible as RFO for
Reputational and Sustainability Risk under the Group's
ERMF.
Our Reputational and Sustainability RTF
allocates responsibilities in a manner consistent with the three
lines of defence model.
In the first line of defence, the Chief
Sustainability Officer (CSO) manages the overall Group
Sustainability strategy and engagements. A dedicated Sustainable
Finance solutions team is responsible for sustainable finance
products and frameworks to help identify green and sustainable
finance, and transition finance opportunities to aid our clients on
their sustainability journey. The CSO team works with businesses to
launch various sustainable finance products. Furthermore, the
Environmental and Social Risk Management (ESRM) team provides
dedicated advisory and challenge to businesses on the management of
environmental and social risks and impacts arising from the Group's
client relationships and transactions.
In the second line of defence, the
responsibility for Reputational and Sustainability Risk management
is delegated to the Group Environmental, Social, and Corporate
Governance (ESG) and Reputational Risk team, as well as CROs at
region, country and client-business levels. They constitute the
second line responsible to oversee and challenge the first line,
which resides with the CEOs, business heads, product heads and
function heads. The Group ESG and Reputational Risk team is
responsible for establishing RA, framework and policies for
managing Reputational and Sustainability risk, in line with
emerging regulatory expectations across our markets.
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87
Mitigation
In line with the principles of Responsible
Business Conduct and Do No Significant Harm, the Group deems
Reputational and Sustainability Risk to be driven by:
• negative shifts in
stakeholder perceptions, including shifts as a result of
greenwashing claims, due to decisions related to clients, products,
transactions, third parties and strategic coverage;
• potential material
harm or degradation to the natural environment (environmental)
through actions/inactions of the Group; and
• potential material
harm to individuals or communities (social) risks through
actions/inactions of the Group.
The Group's Reputational Risk policy sets out
the principal sources of Reputational Risk driven by negative
shifts in stakeholder perceptions as well as responsibilities,
control and oversight standards for identifying, assessing,
escalating and effectively managing Reputational Risk. The
assessment of risks associated with how individual client,
transaction, product and strategic coverage decisions may affect
perceptions of the organisation and its activities is based on
explicit principles including, but not limited to, human rights and
climate change. The assessment of stakeholder perception risk
considers a variety of factors. Whenever potential for stakeholder
concerns is identified, issues are subject to review and decision
by both first and second lines of defence.
The Group's Sustainability Risk policy sets out
the requirements and responsibilities for managing environmental
and social risks for the Group's clients, third parties and in our
own operations. This includes management of greenwashing risks
through the ongoing monitoring of Sustainable Finance products and
transactions and clients throughout their lifecycle, from labelling
to disclosures in line with emerging local and international
regulatory obligations.
• Clients are expected
to adhere to the minimum regulatory and compliance requirements,
including criteria from the Group's Position Statements to
sensitive sectors where environmental and social risks are
heightened. The Group also defines the approach to certain
specialist sectors where there are conflicting stakeholder
views.
• Third parties such as
suppliers must comply with the Group's Supplier Charter, which sets
out the Group's expectations on ethics, anti-bribery and
corruption, human rights, environmental, health and safety
standards, labour and protection of the environment. The Group is
committed to respecting universal human rights, and we assess our
clients and suppliers against various international principles, as
well as through our social safeguards.
• Within our
operations, the Group seeks to minimise its impact on the
environment and have targets to reduce energy, water and waste. We
are committed to becoming Net Zero in our own operations by
2025.
• We rely on our
frameworks to help the labelling of Sustainable Finance Use of
Proceeds products and transactions as well as the classification of
pureplay clients.
Reputational and Sustainability Risk policies
and standards are applicable to all Group entities. However, where
local regulators impose additional requirements, these are complied
with in addition to existing Group requirements.
Governance committee oversight
At Board level, the Culture and Sustainability
Committee provides oversight for our Sustainability strategy while
the BRC oversees Reputational and Sustainability Risk as part of
the ERMF. The GRC provides executive level committee oversight and
delegates the authority to ensure effective management of
Reputational and Sustainability Risk to the GRRRC.
The GRRRC's remit is to:
• Challenge, constrain
and, if required, stop business activities where Reputational and
Sustainability risks are not aligned with the Group's
RA;
• Make decisions on
Reputational and Sustainability Risk matters assessed as high or
very high based on the Group's Reputational and Sustainability Risk
Materiality Assessment Matrix, and matters escalated from the
regions or client businesses;
• Provide oversight of
material Reputational and Sustainability Risk and/or thematic
issues arising from the potential failure of other risk
types;
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88
• Identify TERs, as
part of a dynamic risk scanning process;
• Monitor existing or
new regulatory priorities.
The Sustainable Finance Governance Committee,
appointed by the GRRRC, provides leadership, governance, and
oversight for delivering the Group's sustainable finance offering.
This includes:
• Reviewing and
supporting the Group's frameworks for Green and Sustainable
Products, and Transition Finance for approval of GRRRC. These
frameworks set out the guidelines for approval of products and
transactions which carry the sustainable finance and/or transition
finance label;
• Decision-making
authority on the eligibility of a sustainable asset for any RWA
relief;
• Approving sustainable
finance and transition finance labels for products in addition to
regular product management and governance;
• Reviewing the
reputational risks arising from greenwashing claims related to
Sustainable Finance products and services.
The GNFRC has oversight of the control
environment and effective management of Reputational Risk incurred
when there are negative shifts in stakeholder perceptions of the
Group due to failure of other PRTs. The regional and
client-business risk committees provide oversight on the
Reputational and Sustainability Risk profile within their remit.
The CNFRC provides oversight of the Reputational and Sustainability
Risk profile at a country level.
Decision-making authorities and
delegation
The Global Head, ERM delegates risk acceptance
authorities for stakeholder perception risks to designated
individuals in the first line and second line or to committees such
as the GRRRC via risk authority matrices.
These risk authority matrices are tiered at
country, regional, business segment or Group levels and are
established for risks incurred in strategic coverage, clients,
products, or transactions. For environmental and social risks, the
ESRM team reviews and supports the risk assessments for clients and
transactions and escalates to the Group ESG and Reputational Risk
team as required.
Monitoring
Exposure to stakeholder perception risks arising
from transactions, clients, products and strategic coverage is
monitored through established triggers to prompt the right levels
of appropriate risk-based consideration and assessment by the first
line and escalations to the second line where necessary. Risk
acceptance decisions and thematic trends are also reviewed on a
periodic basis.
Exposure to Sustainability Risk is monitored
through triggers embedded within the first line of defence
processes. The Environmental and Social Risks are considered for
clients and transactions via the environmental and social risk
assessments and for vendors in our supply chain through the Modern
Slavery questionnaires.
Furthermore, monitoring and reporting on the RA
metrics ensures that there is appropriate oversight by the MT and
Board over performance and breaches of thresholds across key
metrics.
Model Risk
The Group defines Model Risk as potential loss
that may occur because of decisions or the risk of mis-estimation
that could be principally based on the output of models due to
errors in the development, implementation, or use of such
models.
Risk Appetite Statement
The Group has no appetite for material adverse
implications arising from misuse of models or errors in the
development or implementation of models; whilst accepting some
model uncertainty.
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89
Roles and responsibilities
The Global Head, ERM is the RFO for Model Risk
under the Group's ERMF. Responsibility for the oversight and
implementation of the Model RTF is delegated to the Global Head,
Model Risk Management.
The Model RTF sets out clear accountability and
roles for Model Risk management through the three lines of defence
model. First line of defence ownership of Model Risk resides with
Model Sponsors, who are business or function heads and assign a
Model Owner and provide oversight of Model Owner activities. Model
Owners are accountable for the model development process, represent
model users, are responsible for the overall model design process,
coordinate the submission of models for validation and approval,
and ensure appropriate implementation and use. Model Developers are
responsible for the development of models and are responsible for
documenting and testing the model in accordance with Policy
requirements, and for engaging with Model Users.
Second line of defence oversight is provided by
Model Risk Management, which comprises Group Model Validation (GMV)
to independently review and grade models, and the Model Risk Policy
and Governance team, which provides oversight of model risk
activities and reports to senior management via respective
committees.
The Group adopts an industry standard model
definition as specified in the Group Model Risk Policy, together
with a scope of applicability represented by defined model family
types as detailed within the Model Risk Framework. Model Owners are
accountable for ensuring that all models under their purview have
been independently validated by GMV. Models are validated before
use and then on an ongoing basis, with schedule determined by the
perceived level of model risk associated with the model, or more
frequently if there are specific regulatory
requirements.
The Model Risk Framework is cascaded to in-scope
countries by way of local addendum or local framework
documentation, along with specific responsibilities of the Country
Model RFO. In-scope countries are selected with reference to
regulatory capital requirements with credit risk (AIRB),
counterparty credit risk Internal Model Method (IMM), or market
risk Internal Model Approach (IMA) permissions for use of models
for regulatory capital calculations; and countries where regulators
have stipulated specific model risk requirements. Additional
criteria, including financial materiality, regulatory importance,
presence of important business services or critical economic
functions are also considered.
The main responsibilities of Country Model RFO
are to ensure model usage is correctly identified, a suitable local
governance process is established, and fundamental model risk
training is provided for respective country
stakeholders.
Based on respective levels of regulatory
expectations regarding Model Risk, a tiering approach is adopted to
provide appropriate risk-based levels of depth and rigour of the
associated requirements.
Mitigation
The Model Risk policy and standards define
requirements for model development and validation activities,
including regular model performance monitoring. Any model issues or
deficiencies identified through the validation process are
mitigated through model monitoring, model overlays and/or a model
redevelopment plan, which undergoes robust review, challenge, and
approval. Operational controls govern all Model Risk-related
processes, with regular risk assessments performed to assess
appropriateness and effectiveness of those controls, in line with
the Operational and Technology RTF, with remediation plans
implemented where necessary.
Governance committee oversight
At Board level, the BRC exercises oversight of
Model Risk within the Group. At the executive level, the GRC has
appointed the Model Risk Committee to ensure effective measurement
and management of Model Risk. Sub-committees such as the Credit
Model Assessment Committee, Traded Risk Model Assessment Committee
and Financial Crime Compliance Model Assessment Committee oversee
their respective in-scope models and escalate material Model Risks
to the Model Risk Committee. In parallel, business and
function-level risk committees provide governance oversight of the
models used in their respective processes.
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90
Decision-making authorities and
delegation
The Model RTF is the formal mechanism through
which the delegation of Model Risk authorities is made.
The Global Head, ERM delegates authorities to
designated individuals or Policy Owners through the Model RTF. The
second line of defence ownership for Model Risk at country level is
delegated to Country CROs at the applicable branches and
subsidiaries.
The Model Risk Committee is responsible for
approving models for use. Model approval authority is also
delegated to the Credit Model Assessment Committee, Traded Risk
Model Assessment Committee, Financial Crime Compliance Model
Assessment Committee, and individual designated model approvers for
less material models.
Monitoring
The Group monitors Model Risk via a set of RA
metrics. Adherence to Model RA and any threshold breaches are
reported to the BRC, GRC and Model Risk Committee. These metrics
and thresholds are reviewed twice per year to ensure that threshold
calibration remains appropriate, and the themes adequately cover
the current risks.
Models undergo regular monitoring based on their
level of perceived Model Risk, with monitoring results and breaches
presented to Model Risk Management and delegated model
approvers.
Model Risk Management produces Model Risk
reports covering the model landscape, which include performance
metrics, identified model issues and remediation plans. These are
presented for discussion at the Model Risk governance committees on
a regular basis.
Climate Risk (Oversight has moved to
Reputational and Sustainability Risk with effect from January
2024)
With effect from January 2024, the Group has
removed the IRT classification. Climate Risk is defined as the
potential for financial loss and non-financial detriments arising
from climate change and society's response to it. We are developing
methodologies to identify, measure and manage the physical and
transition risks that we are exposed to through our own operations,
our suppliers, our clients, and the markets we operate
in.
Risk Appetite Statement
The Group aims to measure and manage financial
and non-financial risks arising from climate change, and reduce
emissions related to our own activities and those related to the
financing of clients in alignment with the Paris
Agreement.
Roles and responsibilities
The GCRO has the ultimate second line of defence
and responsibility for Climate Risk, with support by the Global
Head, ERM who has day-today oversight and central responsibility
for second line of defence Climate Risk activities. As Climate Risk
is embedded into the relevant PRTs, second line of defence
responsibilities lie with those RFOs (at Group, regional and
country level), with SME support from the central Climate Risk
team.
Mitigation
We have completed c.4,100 Climate Risk
Assessments (CRAs) in 2023 (c.85 - 90 per cent of the CCIB
corporate portfolio limits), which measures transition risk of our
clients. Concentration of Black and Red rated clients remain within
proposed RA levels at 6 per cent. Linkages to Credit Underwriting
Principles have been finalised for four sectors (Oil and Gas
(O&G), Shipping, Commercial Real Estate (CRE) and Mining),
including improved climate-related analysis, portfolio-level caps
and additional data gathering measures. A key focus area going
forward is to embed Climate Risk and net zero targets into business
and credit decisions. To enable this, we have established a Net
Zero Climate Risk Working Forum to facilitate discussions on
account plans for high Climate Risk and net zero divergent clients.
As of September 2023, we have assessed physical risk for 79 per
cent and transition risk for 54 per cent of our CPBB
book.
The focus for Operational and Technology Risk
has been to assess physical risks for our properties and data
centres, as well as third parties. Concentration of top corporate
liquidity providers to high transition risk and low levels of
mitigation is being monitored.
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91
Governance committee oversight
Board level oversight is exercised through the
BRC, with regular updates on Climate Risk. At an executive level,
the GRC has appointed the Climate Risk Management Committee (CRMC),
which meets at least six times a year to oversee the implementation
of Climate Risk workplans and monitoring the Group's Climate Risk
profile.
In 2023, we have strengthened country and
regional governance oversight for the Climate Risk profile across
our key markets by cascading identified RA metrics, and rolling out
climate risk management information.
Decision-making authorities and
delegation
The Global Head, ERM is supported by a Climate
Risk team within the ERM function. The Global Head, ESG and
Reputational Risk is responsible for executing the delivery of the
Climate Risk workplan which will define decision-making authorities
and delegations across the Group.
Monitoring
The Climate RA Statement is approved and
reviewed annually by the Board, following the recommendation of the
BRC.
The Group has developed its first-generation
Climate Risk reporting and Board/MT Level RA metrics and these will
continue to be enhanced in 2024. Management information and RA
metrics are also being progressively rolled out at the regional and
country level. Management information is reviewed at a quarterly
frequency and any breaches in RA are reported to the GRC and
BRC.
Digital Assets Risk
With effect from January 2024, the Group has
removed the IRT classification. The Group recognises Digital Assets
(DA) as an asset class which is managed under the ERMF. DA Risk is
defined as the potential for regulatory penalties, financial loss
and/or reputational damage to the Group resulting from DA-related
activities arising from the Group's businesses across clients,
products, investments and projects.
Risk Appetite Statement
As DA Risk manifests through the various PRTs,
the individual RA statements for each PRT take account of the risks
specific to DAs.
Roles and responsibilities
Senior managers within the first line of defence
are responsible for the overall management of DA risks, initiatives
and exposures that may arise within their business
segments.
The GCRO has the second line of defence
responsibility for defining the Group's framework for managing
DA-related risks, through the Digital Assets Risk Management
Approach (DARMA). The GCRO is supported by the Global Head, ERM and
the Global Head, DA Risk Management, who have day-to-day
responsibility for second line of defence oversight of the DARMA.
As DA Risk management is embedded into the relevant PRTs, RFOs and
dedicated SMEs across the PRTs have second line of defence
responsibilities of DA Risks for their respective PRTs.
Mitigation
The Group deploys a DA Risk management policy
(DA Policy) to define the incremental risk management requirements
for DA-related activities under the DARMA. The respective PRTs then
include specific risk mitigation requirements within the relevant
processes, policies and standards for their PRTs. DA Risk
Assessments are conducted on certain higher-risk DA-related
projects and products. These risk assessments detail the specific
inherent risks, residual risks, controls and mitigants across the
PRTs, and are reviewed and supported by the respective businesses,
RFOs and DA SMEs.
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Governance committee oversight
Board level oversight is exercised through the
BRC, and DA Risk updates are provided to the Board and BRC, as
requested. At the executive level, the GRC oversees the risk
management of DA. The GCRO has also appointed a dedicated DA Risk
Committee (DRC) consisting of senior business representatives, RFOs
and DA SMEs across the Group. The DRC meets a minimum of four times
per year to review and assess the risk assessments related to DA
Projects and Products, discuss development and implementation of
the DARMA, and to provide structured governance around DA
Risk.
Decision-making authorities and
delegation
The Global Head, ERM is supported by a
centralised DA Risk team within the ERM Function and is responsible
for the design and maintenance of the DARMA. Decision-making
authorities and delegation are defined in the DA Policy, outlining
the incremental responsibilities and the embedding of risk
management within associated policies and risk
artefacts.
The businesses are responsible for
implementation of the DARMA and respective business governance
forums, PRT RFOs and DA SMEs utilise decision-making authorities
granted to them by their respective businesses, PRTs or in
individual capacities to assess and approve DA activities and
exposures that may give rise to risk.
DA Risk follows prescribed robust risk
management practices across the PRTs, with specific expertise
applied from DA experts. Risk management practices are informed by
the "Dear CEO" letters published by the PRA and the FCA in June
2018, with updated notices in June 2022. Further guidance from the
recent publication of the BCBS d545 on the prudential treatment of
crypto assets, which will be in effect from January 2025, has
refined the risk management approach. DA is a developing area which
will continue to mature and stabilise over time as the technology,
together with its use in financial services and associated
research, become more established.
Monitoring
DA Risks are monitored through the existing
Group RA metrics across the PRTs. In addition, specific DA Risk
Management Monitoring level metrics are reviewed and monitored by
the relevant individual PRTs. DA risk decisions relating to other
PRTs are taken within the authorities for the respective
PRT.
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93
Capital review
The Capital review provides an analysis of the
Group's capital and leverage position, and requirements.
Capital summary
The Group's capital, leverage and minimum
requirements for own funds and eligible liabilities (MREL) position
is managed within the Board-approved risk appetite. The Group is
well capitalised with low leverage and high levels of
loss-absorbing capacity.
|
2023
|
2022
|
CET1 capital
|
14.1%
|
14.0%
|
Tier 1 capital
|
16.3%
|
16.6%
|
Total capital
|
21.2%
|
21.7%
|
Leverage ratio
|
4.7%
|
4.8%
|
MREL ratio
|
33.3%
|
32.1%
|
Risk-weighted assets (RWA) $million
|
244,151
|
244,711
|
The Group's capital, leverage and MREL
positions were all above current requirements and Board-approved
risk appetite. For further detail see the Capital section in the
Standard Chartered PLC Pillar 3 Disclosures for FY 2023. The
Group's CET1 capital increased 10 basis points to 14.1 percent of
RWA since FY2022. Profits, gains from the aviation leasing sale,
movements in FVOCI and RWA optimisations were partly offset by
distributions (including ordinary share buybacks of $2.0 billion
during the year), impairments of the Group's investment in Bohai,
lower FX translation reserves and an increase in regulatory
deductions.
The PRA updated the Group's Pillar 2A
requirement during Q4 2023. As at 31 December 2023 the Group's
Pillar 2A was 3.8 percent of RWA, of which at least 2.1 per cent
must be held in CET1 capital. The Group's minimum CET1 capital
requirement was 10.5 per cent at 31 December 2023. The UK
countercyclical buffer increased to 2.0 per cent which impacts
Group CET1 minimum requirement by approximately 8 basis points from
July 2023.
The Group CET1 capital ratio at 31 December 2023
reflects the share buy-backs of $2 billion completed during the
year. The CET1 capital ratio also includes an accrual for the FY
2023 dividend. The Board has recommended a final dividend for FY
2023 of $560 million or 21 cents per share resulting in a full year
2023 dividend of 27 cents per share, a 50 percent increase on the
2022 dividend. In addition, the Board has announced a further share
buyback of $1 billion, the impact of this will reduce the Group's
CET1 capital by around 40 basis points in the first quarter of
2024.
The Group expects to manage CET1 capital
dynamically within our 13-14 per cent target range, in support of
our aim of delivering future sustainable shareholder
distributions.
The Group's MREL requirement as at 31 December
2023 was 27.4 per cent of RWA. This is composed of a minimum
requirement of 23.5 per cent of RWA and the Group's combined buffer
(comprising the capital conservation buffer, the G-SII buffer and
the countercyclical buffer). The Group's MREL ratio was 33.3 per
cent of RWA and 9.6 per cent of leverage exposure at 31 December
2023.
During 2023, the Group successfully raised $8.1
billion of MREL eligible securities from its holding company,
Standard Chartered PLC. Issuance was entirely in callable senior
debt.
The Group is a G-SII, with a 1.0 per cent G-SII
CET1 capital buffer. The Standard Chartered PLC G-SII disclosure is
published at: sc.com/en/investors/financial-results.
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94
Capital base1
(audited)
|
2023
$million
|
2022
$million
|
CET1 capital instruments and
reserves
|
|
|
Capital instruments and the related share
premium accounts
|
5,321
|
5,436
|
Of which: share premium accounts
|
3,989
|
3,989
|
Retained earnings2
|
24,930
|
25,154
|
Accumulated other comprehensive income (and
other reserves)
|
9,171
|
8,165
|
Non-controlling interests (amount allowed in
consolidated CET1)
|
217
|
189
|
Independently audited year-end
profits
|
3,542
|
2,988
|
Foreseeable dividends
|
(768)
|
(648)
|
CET1 capital before regulatory
adjustments
|
42,413
|
41,284
|
CET1 regulatory adjustments
|
|
|
Additional value adjustments (prudential
valuation adjustments)
|
(730)
|
(854)
|
Intangible assets (net of related tax
liability)
|
(6,128)
|
(5,802)
|
Deferred tax assets that rely on future
profitability (excludes those arising from temporary
differences)
|
(41)
|
(76)
|
Fair value reserves related to net losses on
cash flow hedges
|
(91)
|
564
|
Deduction of amounts resulting from the
calculation of excess expected loss
|
(754)
|
(684)
|
Net gains on liabilities at fair value resulting
from changes in own credit risk
|
(100)
|
63
|
Defined-benefit pension fund assets
|
(95)
|
(116)
|
Fair value gains arising from the institution's
own credit risk related to derivative liabilities
|
(116)
|
(90)
|
Exposure amounts which could qualify for risk
weighting of 1,250%
|
(44)
|
(103)
|
Other regulatory adjustments to CET1
capital3
|
-
|
(29)
|
Total regulatory adjustments to CET1
|
(8,099)
|
(7,127)
|
CET1 capital
|
34,314
|
34,157
|
Additional Tier 1 capital (AT1)
instruments
|
5,512
|
6,504
|
AT1 regulatory adjustments
|
(20)
|
(20)
|
Tier 1 capital
|
39,806
|
40,641
|
|
|
|
Tier 2 capital instruments
|
11,965
|
12,540
|
Tier 2 regulatory adjustments
|
(30)
|
(30)
|
Tier 2 capital
|
11,935
|
12,510
|
Total capital
|
51,741
|
53,151
|
Total risk-weighted assets
(unaudited)
|
244,151
|
244,711
|
1 Capital base is
prepared on the regulatory scope of consolidation
2 Retained earnings
includes IFRS9 capital relief (transitional) of nil (2022: $106
million)
3 Other regulatory
adjustments to CET1 capital includes Insufficient coverage for
non-performing exposures of nil (2022: $(29) million)
Page
95
Movement in total capital (audited)
|
2023
$million
|
2022
$million
|
CET1 at 1 January
|
34,157
|
38,362
|
Ordinary shares issued in the period and share
premium
|
-
|
-
|
Share buy-back
|
(2,000)
|
(1,258)
|
Profit for the period
|
3,542
|
2,988
|
Foreseeable dividends deducted from
CET1
|
(768)
|
(648)
|
Difference between dividends paid and
foreseeable dividends
|
(372)
|
(301)
|
Movement in goodwill and other intangible
assets
|
(326)
|
(1,410)
|
Foreign currency translation
differences
|
(477)
|
(1,892)
|
Non-controlling interests
|
28
|
(12)
|
Movement in eligible other comprehensive
income
|
464
|
(1,224)
|
Deferred tax assets that rely on future
profitability
|
35
|
74
|
Increase in excess expected loss
|
(70)
|
(104)
|
Additional value adjustments (prudential
valuation adjustment)
|
124
|
(189)
|
IFRS 9 transitional impact on regulatory
reserves including day one
|
(106)
|
(146)
|
Exposure amounts which could qualify for risk
weighting of 1,250%
|
59
|
(67)
|
Fair value gains arising from the institution's
own credit risk related to derivative liabilities
|
(26)
|
(30)
|
Others
|
50
|
14
|
CET1 at 31 December
|
34,314
|
34,157
|
|
|
|
AT1 at 1 January
|
6,484
|
6,791
|
Net issuances (redemptions)
|
(1,000)
|
241
|
Foreign currency translation difference and
others
|
8
|
9
|
Excess on AT1 grandfathered limit
(ineligible)
|
-
|
(557)
|
AT1 at 31 December
|
5,492
|
6,484
|
|
|
|
Tier 2 capital at 1 January
|
12,510
|
12,491
|
Regulatory amortisation
|
1,416
|
778
|
Net issuances (redemptions)
|
(2,160)
|
(1,098)
|
Foreign currency translation
difference
|
146
|
(337)
|
Tier 2 ineligible minority interest
|
19
|
102
|
Recognition of ineligible AT1
|
-
|
557
|
Others
|
4
|
17
|
Tier 2 capital at 31 December
|
11,935
|
12,510
|
Total capital at 31 December
|
51,741
|
53,151
|
The main movements in capital in the period
were:
• CET1 capital
increased by $0.2 billion as retained profits of $3.5 billion,
movement in FVOCI of $0.6bn were partly offset by share buy-backs
of $2.0 billion, distributions paid and foreseeable of $1.1
billion, foreign currency translation impact of $0.5 billion and an
increase in regulatory deductions and other movements of
$0.3bn.
• AT1 capital decreased
by $1.0 billion following the redemption of $1.0 billion of 7.75
per cent securities.
• Tier 2 capital
decreased by $0.6 billion due to the redemption of $2.2 billion of
Tier 2 during the year partly offset by the reversal of regulatory
amortisation and foreign currency translation impact.
Page
96
Risk-weighted assets by business
|
2023
|
Credit risk
$million
|
Operational risk
$million
|
Market risk
$million
|
Total risk
$million
|
Corporate, Commercial & Institutional
Banking
|
102,675
|
18,083
|
21,221
|
141,979
|
Consumer, Private & Business
Banking
|
42,559
|
8,783
|
-
|
51,342
|
Ventures
|
1,885
|
35
|
3
|
1,923
|
Central & Other items
|
44,304
|
960
|
3,643
|
48,907
|
Total risk-weighted assets
|
191,423
|
27,861
|
24,867
|
244,151
|
|
2022
|
Credit risk
$million
|
Operational risk
$million
|
Market risk
$million
|
Total risk
$million
|
Corporate, Commercial & Institutional
Banking
|
110,103
|
17,039
|
16,440
|
143,582
|
Consumer, Private & Business
Banking
|
42,091
|
8,639
|
-
|
50,730
|
Ventures
|
1,350
|
6
|
2
|
1,358
|
Central & Other items
|
43,311
|
1,493
|
4,237
|
49,041
|
Total risk-weighted assets
|
196,855
|
27,177
|
20,679
|
244,711
|
Risk-weighted assets by geographic
region
|
2023
$million
|
2022
$million
|
Asia
|
155,995
|
150,816
|
Africa & Middle East
|
38,393
|
40,716
|
Europe & Americas
|
46,106
|
50,174
|
Central & Other items
|
3,657
|
3,005
|
Total risk-weighted assets
|
244,151
|
244,711
|
Movement in risk-weighted assets
|
Credit risk
|
Operational risk
$million
|
Market risk
$million
|
Total risk
$million
|
Corporate, Commercial &
Institutional Banking
$million
|
Consumer, Private & Business
Banking
$million
|
Ventures
$million
|
Central & Other items
$million
|
Total
$million
|
At 31 December 2021
|
125,813
|
42,731
|
756
|
50,288
|
219,588
|
27,116
|
24,529
|
271,233
|
At 1 January 2022
|
125,813
|
42,731
|
756
|
50,288
|
219,588
|
27,116
|
24,529
|
271,233
|
Assets growth & mix
|
(13,213)
|
(985)
|
594
|
(10,033)
|
(23,637)
|
-
|
-
|
(23,637)
|
Asset quality
|
(4,258)
|
431
|
-
|
7,344
|
3,517
|
-
|
-
|
3,517
|
Risk-weighted assets efficiencies
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Model Updates
|
4,329
|
1,420
|
-
|
-
|
5,749
|
-
|
(1,000)
|
4,749
|
Methodology and policy changes
|
2,024
|
85
|
-
|
93
|
2,202
|
-
|
1,500
|
3,702
|
Acquisitions and disposals
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Foreign currency translation
|
(4,883)
|
(1,591)
|
-
|
(3,376)
|
(9,850)
|
-
|
-
|
(9,850)
|
Other, Including non-credit
risk movements
|
291
|
-
|
-
|
(1,005)
|
(714)
|
61
|
(4,350)
|
(5,003)
|
At 31 December 2022
|
110,103
|
42,091
|
1,350
|
43,311
|
196,855
|
27,177
|
20,679
|
244,711
|
Assets growth & mix
|
(4,424)
|
728
|
535
|
1,183
|
(1,978)
|
-
|
-
|
(1,978)
|
Asset quality
|
(391)
|
390
|
-
|
2,684
|
2,683
|
-
|
-
|
2,683
|
Risk-weighted assets efficiencies
|
-
|
-
|
-
|
(688)
|
(688)
|
-
|
-
|
(688)
|
Model Updates
|
(597)
|
(151)
|
-
|
(151)
|
(899)
|
-
|
500
|
(399)
|
Methodology and policy changes
|
-
|
(196)
|
-
|
-
|
(196)
|
-
|
(800)
|
(996)
|
Acquisitions and disposals
|
(1,630)
|
-
|
-
|
-
|
(1,630)
|
-
|
-
|
(1,630)
|
Foreign currency translation
|
(386)
|
(303)
|
-
|
(2,035)
|
(2,724)
|
-
|
-
|
(2,724)
|
Other, Including non-credit
risk movements
|
-
|
-
|
-
|
-
|
-
|
684
|
4,488
|
5,172
|
At 31 December 2023
|
102,675
|
42,559
|
1,885
|
44,304
|
191,423
|
27,861
|
24,867
|
244,151
|
Page
97
Movements in risk-weighted assets
RWA decreased by $0.6 billion, or 0.2 per cent
from 31 December 2022 to $244.2 billion. This was due to a decrease
in Credit Risk RWA of $5.4 billion, an increase in Market Risk RWA
of $4.2 billion and an increase in Operational Risk RWA of $0.7
billion.
Corporate, Commercial & Institutional
Banking
Credit Risk RWA decreased by $7.4 billion, or
6.7 per cent from 31 December 2022 to $102.7 billion mainly due
to:
• $4.4 billion decrease
from changes in asset growth & mix of which:
- $10.3 billion
decrease from optimisation actions including reduction in lower
returning portfolios
- $5.9 billion
increase from asset balance growth across the rest of the
portfolio
• $1.6 billion decrease
from sale of Aviation business
• $0.9 billion decrease
from industry-wide regulatory changes to align IRB model
performance
• $0.4 billion decrease
from foreign currency translation
• $0.4 billion decrease
from asset quality movements, reflecting client upgrades in Asia,
Europe & Americas, partially offset by sovereign downgrades in
Africa &
Middle East
• $0.3 billion increase
from model changes in Financial Markets and Lending
Consumer, Private & Business
Banking
Credit Risk RWA increased by $0.5 billion, or
1.1 per cent from 31 December 2022 to $42.6 billion mainly due
to:
• $0.7 billion increase
from changes in asset growth and mix, mainly from Asia
• $0.4 billion increase
due to deterioration in asset quality mainly in Asia
• $0.3 billion decrease
from foreign currency translation
• $0.2 billion decrease
from methodology change relating to an unsecured lending portfolio
in Africa & Middle East
• $0.1 billion decrease
from industry-wide regulatory changes to align IRB model
performance
Ventures
Ventures is comprised of Mox Bank Limited, Trust
Bank and SC Ventures. Credit Risk RWA increased by $0.5 billion, or
39.7 per cent from 31 December 2022 to $1.9 billion from asset
balance growth, mainly from SC Ventures.
Central & Other items
Central & Other items RWA mainly relate to
the Treasury Markets liquidity portfolio, equity investments and
current & deferred tax assets.
Credit Risk RWA increased by $1 billion, or 2.3
per cent from 31 December 2022 to $44.3 billion mainly due
to:
• $2.7 billion increase
due to deterioration in asset quality mainly from sovereign
downgrades in Africa & Middle East
• $1.2 billion increase
from changes in asset growth & mix
• $2.0 billion decrease
from foreign currency translation
• $0.7 billion decrease
from RWA efficiencies
• $0.2 billion decrease
from model changes in Treasury Markets
Page
98
Market Risk
Total Market Risk RWA increased by $4.2 billion,
or 20.3 per cent from 31 December 2022 to $24.9 billion due
to:
• $2.4 billion increase
in Standardised Approach (SA) RWA driven by higher Specific
Interest Rate Risk relating to the traded credit portfolio, offset
by lower net Structural FX positions
• $2.1 billion increase
in Internal Models Approach (IMA) RWA due to increased positions
and increased market volatility
• $0.5 billion increase
in IMA RWA due to introduction of a new VaR model to address the
rise in VaR backtesting exceptions in 2022
• $0.8 billion decrease
in IMA RWA due to reduction in the IMA multiplier with fewer VaR
backtesting exceptions in 2023 than in 2022
Operational Risk
Operational Risk RWA increased by $0.7 billion,
or 2.5 per cent from 31 December 2022 to $27.9 billion, mainly due
to a marginal increase in average income as measured over a rolling
three-year time horizon for certain products.
Leverage ratio
The Group's UK leverage ratio, which excludes
qualifying claims on central banks was 4.7 per cent, which is above
the current minimum requirement of 3.7 per cent. The leverage ratio
was 6 basis points lower than FY22. Tier1 Capital decreased by $0.8
billion as CET1 capital increased by $0.2 billion and was more than
offset by the redemption of $1 billion 7.75 per cent AT1
securities. Leverage exposure decreased by $7.2 billion benefiting
from an increase in deduction for central bank claims of $19.6
billion, a decrease in securities financing transactions and add-on
of $1.3 billion, partly offset by an increase in Other Assets of
$7.2 billion, Off-balance sheet items of $4.5 billion and
Derivatives of $2 billion.
Leverage ratio
|
2023
$million
|
2022
$million
|
Tier 1
capital
|
39,806
|
40,641
|
Derivative financial instruments
|
50,434
|
63,717
|
Derivative cash collateral
|
10,337
|
12,515
|
Securities financing transactions
(SFTs)
|
97,581
|
89,967
|
Loans and advances and other assets
|
664,492
|
653,723
|
Total on-balance sheet assets
|
822,844
|
819,922
|
Regulatory
consolidation adjustments1
|
(92,709)
|
(71,728)
|
Derivatives adjustments
|
|
|
Derivatives netting
|
(39,031)
|
(47,118)
|
Adjustments to cash collateral
|
(9,833)
|
(10,640)
|
Net written credit protection
|
1,359
|
548
|
Potential future exposure on
derivatives
|
42,184
|
35,824
|
Total
derivatives adjustments
|
(5,321)
|
(21,386)
|
Counterparty risk leverage exposure measure for
SFTs
|
6,639
|
15,553
|
Off-balance sheet items
|
123,572
|
119,049
|
Regulatory deductions from Tier 1
capital
|
(7,883)
|
(7,099)
|
Total exposure measure excluding claims on
central banks
|
847,142
|
854,311
|
Leverage ratio excluding claims on central
banks (%)
|
4.7%
|
4.8%
|
Average leverage exposure measure excluding
claims on central banks
|
853,968
|
864,605
|
Average leverage ratio excluding claims on
central banks (%)
|
4.6%
|
4.7%
|
Countercyclical leverage ratio
buffer
|
0.1%
|
0.1%
|
G-SII additional leverage ratio
buffer
|
0.4%
|
0.4%
|
1 Includes adjustment
for qualifying central bank claims and unsettled regular way
trades
Page
99
Statement of directors'
responsibilities
The directors are responsible for preparing the
Annual Report and the Group and Company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
Group and Company financial statements for each financial year.
Under that law:
• The Group
financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and International
Financial Reporting Standards as adopted by the European
Union;
• The Company
financial statements have been properly prepared in accordance with
UK-adopted International Accounting Standards as applied in
accordance with section 408 of the Companies Act 2006;
and
• The financial
statements have been prepared in accordance with the requirements
of the Companies Act 2006.
Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and Company and of their profit or loss for that period.
In preparing each of the Group and Company
financial statements, the directors are required to:
• Select suitable
accounting policies and then apply them consistently;
• Make judgements
and estimates that are reasonable, relevant and
reliable;
• State whether
they have been prepared in accordance with UK-adopted International
Accounting Standards and International Financial Reporting
Standards as adopted by the European Union;
• Assess the
Group and the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
• Use the going
concern basis of accounting unless they either intend to liquidate
the Group or the Company or to cease operations, or have no
realistic alternative but to do so
The directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company's transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that its financial statements comply with the Companies Act
2006. They are responsible for such internal control1 as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the
directors are also responsible for preparing a Strategic Report,
Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement that complies with that law and those
regulations.
The directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in the
UK governing the preparation and dissemination of financial
statements differ from legislation in other
jurisdictions.
Page
100
Responsibility statement of the directors in
respect of the annual financial report
We confirm that to the best of our
knowledge:
The financial statements, prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings included in
the consolidation taken as a whole; and
The Strategic report includes a fair review of
the development and performance of the business and the position of
the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the emerging risks
and uncertainties that they face
We consider the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
By order of the Board
Diego De Giorgi
Group Chief Financial Officer
23 February 2024
Page
101
Shareholder information
Important notices
Forward-looking statements
The information included in this document may
contain 'forward-looking statements' based upon current
expectations or beliefs as well as statements formulated with
assumptions about future events. Forward-looking statements
include, without limitation, projections, estimates, commitments,
plans, approaches, ambitions and targets (including, without
limitation, ESG commitments, ambitions and targets).
Forward-looking statements often use words such as 'may', 'could',
'will', 'expect', 'intend', 'estimate', 'anticipate', 'believe',
'plan', 'seek', 'aim', 'continue' or other words of similar meaning
to any of the foregoing. Forward-looking statements may also (or
additionally) be identified by the fact that they do not relate
only to historical or current facts.
By their very nature, forward-looking statements
are subject to known and unknown risks and uncertainties and other
factors that could cause actual results, and the Group's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements. Readers should not place reliance
on, and are cautioned about relying on, any forward-looking
statements.
There are several factors which could cause the
Group's actual results and its plans and objectives to differ
materially from those expressed or implied in forward-looking
statements. The factors include (but are not limited to): changes
in global, political, economic, business, competitive and market
forces or conditions, or in future exchange and interest rates;
changes in environmental, geopolitical, social or physical risks;
legal, regulatory and policy developments, including regulatory
measures addressing climate change and broader
sustainability-related issues; the development of standards and
interpretations, including evolving requirements and practices in
ESG reporting; the ability of the Group, together with governments
and other stakeholders to measure, manage, and mitigate the impacts
of climate change and broader sustainability-related issues
effectively; risks arising out of health crises and pandemics;
risks of cyber-attacks, data, information or security breaches or
technology failures involving the Group; changes in tax rates or
policy; future business combinations or dispositions; and other
factors specific to the Group, including those identified in this
Annual Report and financial statements of the Group. To the extent
that any forward-looking statements contained in this document are
based on past or current trends and/or activities of the Group,
they should not be taken as a representation that such trends or
activities will continue in the future.
No statement in this document is intended to be,
nor should be interpreted as, a profit forecast or to imply that
the earnings of the Group for the current year or future years will
necessarily match or exceed the historical or published earnings of
the Group. Each forward-looking statement speaks only as of the
date that it is made. Except as required by any applicable laws or
regulations, the Group expressly disclaims any obligation to revise
or update any forward-looking statement contained within this
document, regardless of whether those statements are affected as a
result of new information, future events or otherwise.
Please refer to this Annual Report and the
financial statements of the Group for a discussion of certain of
the risks and factors that could adversely impact the Group's
actual results, and cause its plans and objectives, to differ
materially from those expressed or implied in any forward-looking
statements.
Financial instruments
Nothing in this document shall constitute, in
any jurisdiction, an offer or solicitation to sell or purchase any
securities or other financial instruments, nor shall it constitute
a recommendation or advice in respect of any securities or other
financial instruments or any other matter.
Page
102
Basis of Preparation and Caution Regarding Data
Limitations
This section is specifically relevant to,
amongst others, the sustainability and climate models, calculations
and disclosures throughout this report.
The information contained in this document has
been prepared on the following basis:
i. certain information in
this document is unaudited;
ii. all information, positions and
statements set out in this document are subject to change without
notice;
iii. the information included in this
document does not constitute any investment, accounting, legal,
regulatory or tax advice or an invitation or recommendation to
enter into any transaction;
iv. the information included in this
document may have been prepared using models, methodologies and
data which are subject to certain limitations. These limitations
include: the limited availability of reliable data, data gaps, and
the nascent nature of the methodologies and technologies
underpinning this data; the limited standardisation of data (given,
amongst other things, limited international coordination on data
and methodology standards); and future uncertainty (due, amongst
other things, to changing projections relating to technological
development and global and regional laws, regulations and policies,
and the current inability to make use of strong historical
data);
v. models, external data and
methodologies used in information included in this document are or
could be subject to adjustment which is beyond our
control;
vi. any opinions and estimates should be
regarded as indicative, preliminary and for illustrative purposes
only. Expected and actual outcomes may differ from those set out in
this document (as explained in the "Forward-looking statements"
section above);
vii. some of the related information appearing
in this document may have been obtained from public and other
sources and, while the Group believes such information to be
reliable, it has not been independently verified by the Group and
no representation or warranty is made by the Group as to its
quality, completeness, accuracy, fitness for a particular purpose
or noninfringement of such information;
viii.
for the purposes of the information included in this document, a
number of key judgements and assumptions have been made. It is
possible that the assumptions drawn, and the judgement exercised
may subsequently turn out to be inaccurate. The judgements and data
presented in this document are not a substitute for judgements and
analysis made independently by the reader;
ix. any opinions or views of third
parties expressed in this document are those of the third parties
identified, and not of the Group, its affiliates, directors,
officers, employees or agents. By incorporating or referring to
opinions and views of third parties, the Group is not, in any way,
endorsing or supporting such opinions or views;
x. whilst the Group bears primary
responsibility for the information included in this document, it
does not accept responsibility for the external input provided by
any third parties for the purposes of developing the information
included in this document;
xi. the data contained in this document
reflects available information and estimates at the relevant
time;
xii. where the Group has used any methodology
or tools developed by a third party, the application of the
methodology or tools (or consequences of its application) shall not
be interpreted as conflicting with any legal or contractual
obligations and such legal or contractual obligations shall take
precedence over the application of the methodology or
tools;
xiii.
where the Group has used any underlying data provided or sourced by
a third party, the use of the data shall not be interpreted as
conflicting with any legal or contractual obligations and such
legal or contractual obligations shall take precedence over the use
of the data;
xiv.
this Important Notice is not limited in applicability to those
sections of the document where limitations to data, metrics and
methodologies are identified and where this Important Notice is
referenced. This Important Notice applies to the whole
document;
Page
103
xv. further development of reporting, standards
or other principles could impact the information included in this
document or any metrics, data and targets included in this document
(it being noted that ESG reporting and standards are subject to
rapid change and development); and
xvi.
while all reasonable care has been taken in preparing the
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