TIDM63AS

RNS Number : 0227Q

HSBC Bank plc

23 February 2021

 
Financial statements 
                                           Page 
Consolidated income statement               108 
                                           ---- 
Consolidated statement of comprehensive 
 income                                     109 
                                           ---- 
Consolidated balance sheet                  110 
                                           ---- 
Consolidated statement of cash 
 flows                                      111 
                                           ---- 
Consolidated statement of changes 
 in equity                                  112 
-----------------------------------------  ---- 
HSBC Bank plc balance sheet                 114 
-----------------------------------------  ---- 
HSBC Bank plc statement of cash 
 flows                                      115 
                                           ---- 
HSBC Bank plc statement of changes 
 in equity                                  116 
                                           ---- 
 
Notes on the financial 
 statements 
                                           ---- 
     Basis of preparation and 
1     significant accounting policies       118 
---  ------------------------------------  ---- 
2    Net fee income                         131 
---  ------------------------------------  ---- 
     Net income/(expense) from 
      financial instruments measured 
      at fair value through profit 
3     or loss                               132 
---  ------------------------------------  ---- 
4    Insurance business                     132 
---  ------------------------------------  ---- 
     Employee compensation and 
5     benefits                              133 
---  ------------------------------------  ---- 
6    Auditors' remuneration                 138 
---  ------------------------------------  ---- 
7    Tax                                    138 
---  ------------------------------------  ---- 
8    Dividends                              140 
---  ------------------------------------  ---- 
9    Segmental analysis                     141 
---  ------------------------------------  ---- 
10   Trading assets                         143 
---  ------------------------------------  ---- 
     Fair values of financial 
      instruments carried at fair 
11    value                                 143 
---  ------------------------------------  ---- 
     Fair values of financial 
      instruments not carried at 
12    fair value                            152 
---  ------------------------------------  ---- 
     Financial assets designated 
      and otherwise mandatorily 
      measured at fair value through 
13    profit or loss                        155 
---  ------------------------------------  ---- 
14   Derivatives                            155 
---  ------------------------------------  ---- 
15   Financial investments                  160 
---  ------------------------------------  ---- 
     Assets pledged, collateral 
16    received and assets transferred       161 
---  ------------------------------------  ---- 
17   Interests in associates                162 
---  ------------------------------------  ---- 
18   Investments in subsidiaries            162 
---  ------------------------------------  ---- 
19   Structured entities                    164 
---  ------------------------------------  ---- 
20   Goodwill and intangible assets         167 
---  ------------------------------------  ---- 
     Prepayments, accrued income 
21    and other assets                      168 
---  ------------------------------------  ---- 
22   Trading liabilities                    169 
---  ------------------------------------  ---- 
     Financial liabilities designated 
23    at fair value                         169 
---  ------------------------------------  ---- 
     Accruals, deferred income 
24    and other liabilities                 169 
---  ------------------------------------  ---- 
25   Provisions                             171 
---  ------------------------------------  ---- 
26   Subordinated liabilities               172 
---  ------------------------------------  ---- 
     Maturity analysis of assets, 
      liabilities and off-balance 
27    sheet commitments                     173 
---  ------------------------------------  ---- 
     Offsetting of financial assets 
28    and financial liabilities             175 
---  ------------------------------------  ---- 
     Called up share capital and 
29    other equity instruments              176 
---  ------------------------------------  ---- 
     Contingent liabilities, contractual 
30    commitments and guarantees            177 
---  ------------------------------------  ---- 
31   Finance lease receivables              178 
---  ------------------------------------  ---- 
     Legal proceedings and regulatory 
32    matters                               178 
---  ------------------------------------  ---- 
33   Related party transactions             183 
---  ------------------------------------  ---- 
     Events after the balance 
34    sheet date                            187 
---  ------------------------------------  ---- 
     HSBC Bank plc's subsidiaries, 
35    joint ventures and associates         187 
---  ------------------------------------  ---- 
 
 
Consolidated income statement 
for the year ended 31 December 
                                                                       2020       2019 
                                                            Notes*     GBPm       GBPm 
----------------------------------------------------------  ------  -------  --------- 
Net interest income                                                   1,898    1,483 
----------------------------------------------------------  ------  -------  ------- 
 
  *    interest income(1,2)                                           4,086    5,504 
----------------------------------------------------------  ------ 
- interest expense(3)                                               (2,188)  (4,021) 
----------------------------------------------------------  ------  -------  ------- 
Net fee income                                                2       1,400    1,344 
----------------------------------------------------------  ------  -------  ------- 
 
  *    fee income                                                     2,674    2,590 
----------------------------------------------------------  ------ 
 
  *    fee expense                                                  (1,274)  (1,246) 
----------------------------------------------------------  ------  -------  ------- 
Net income from financial instruments held for trading 
 or managed on a fair value basis                             3       1,758    2,055 
----------------------------------------------------------  ------  -------  ------- 
Net income/(expense) from assets and liabilities of 
 insurance businesses, including related derivatives, 
 measured at fair value through profit or loss                3         254    1,288 
----------------------------------------------------------  ------  -------  ------- 
Changes in fair value of designated debt and related 
 derivatives                                                  3          17      (8) 
----------------------------------------------------------  ------  -------  ------- 
Changes in fair value of other financial instruments 
 mandatorily measured at fair value through profit 
 or loss                                                      3         285      547 
----------------------------------------------------------  ------  -------  ------- 
Gains less losses from financial investments                             95       38 
----------------------------------------------------------  ------  -------  ------- 
Net insurance premium income                                  4       1,559    2,147 
----------------------------------------------------------  ------  -------  ------- 
Other operating income                                                  417      516 
----------------------------------------------------------  ------  -------  ------- 
Total operating income                                                7,683    9,410 
----------------------------------------------------------  ------  -------  ------- 
Net insurance claims and benefits paid and movement 
 in liabilities to policyholders                              4     (1,783)  (3,366) 
----------------------------------------------------------  ------  -------  ------- 
Net operating income before change in expected credit 
 losses and other credit impairment charges(4)                        5,900    6,044 
----------------------------------------------------------  ------  -------  ------- 
Change in expected credit losses and other credit 
 impairment charges                                                   (808)    (124) 
----------------------------------------------------------  ------  -------  ------- 
Net operating income                                                  5,092    5,920 
Total operating expenses                                            (6,705)  (6,782) 
----------------------------------------------------------  ------  -------  ------- 
- employee compensation and benefits                          5     (2,340)  (2,225) 
----------------------------------------------------------  ------ 
- general and administrative expenses                               (3,092)  (3,034) 
----------------------------------------------------------  ------ 
 
  *    depreciation and impairment of property, plant and 
       equipment                                                      (372)    (210) 
----------------------------------------------------------  ------ 
- amortisation and impairment of intangible assets            20      (901)    (161) 
----------------------------------------------------------  ------ 
- goodwill impairment                                         20          -  (1,152) 
Operating loss                                                      (1,613)    (862) 
----------------------------------------------------------  ------  -------  ------- 
Share of loss in associates and joint ventures                17        (1)     (10) 
----------------------------------------------------------  ------  -------  ------- 
Loss before tax                                                     (1,614)    (872) 
----------------------------------------------------------  ------  -------  ------- 
Tax credit/(expense)                                          7         136    (119) 
----------------------------------------------------------  ------  -------  ------- 
Loss for the year                                                   (1,478)    (991) 
----------------------------------------------------------  ------  -------  ------- 
Loss attributable to shareholders of the parent company             (1,488)  (1,013) 
----------------------------------------------------------  ------  -------  ------- 
Profit attributable to non-controlling interests                         10       22 
----------------------------------------------------------  ------  -------  ------- 
 
   *    For Notes on the financial statements, see page 118. 

1 Interest income includes GBP2,773m (2019: GBP4,027m) of interest recognised on financial assets measured at amortised cost; GBP657m (2019: GBP934m) of interest recognised on financial assets measured at fair value through other comprehensive income and GBP57m (2019: GBP41m) interest recognised on impaired financial assets.

2 Interest revenue calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost or fair value through other comprehensive income.

3 Interest expense includes GBP1,299m (2019: GBP2,917m) of interest on financial liabilities, excluding interest on financial liabilities held for trading or designated or otherwise mandatorily measured at fair value.

4 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as 'revenue'.

 
Consolidated statement of comprehensive income 
for the year ended 31 December 
                                                                2020       2019 
                                                                GBPm       GBPm 
-----------------------------------------------------------  -------  --------- 
Loss for the year                                            (1,478)    (991) 
-----------------------------------------------------------  -------  ------- 
Other comprehensive income/(expense) 
-----------------------------------------------------------  -------  --------- 
Items that will be reclassified subsequently to profit 
 or loss when specific conditions are met: 
-----------------------------------------------------------  -------  --------- 
Debt instruments at fair value through other comprehensive 
 income                                                          213      121 
-----------------------------------------------------------  -------  ------- 
- fair value gains                                               366      238 
----------------------------------------------------------- 
- fair value gains transferred to the income statement 
 on disposal                                                    (90)     (39) 
----------------------------------------------------------- 
- expected credit (recoveries)/losses recognised in 
 the income statement                                              8     (27) 
----------------------------------------------------------- 
- income taxes                                                  (71)     (51) 
-----------------------------------------------------------  -------  ------- 
Cash flow hedges                                                 118       65 
-----------------------------------------------------------  -------  ------- 
- fair value gains                                                86      214 
----------------------------------------------------------- 
- fair value losses/(gains) reclassified to the income 
 statement                                                        72    (127) 
----------------------------------------------------------- 
- income taxes                                                  (40)     (22) 
-----------------------------------------------------------  -------  ------- 
Exchange differences                                             467    (707) 
-----------------------------------------------------------  -------  ------- 
Items that will not be reclassified subsequently to 
 profit or loss: 
-----------------------------------------------------------  -------  --------- 
Remeasurement of defined benefit asset/liability                 (8)       12 
-----------------------------------------------------------  -------  ------- 
- before income taxes                                           (18)     (14) 
----------------------------------------------------------- 
- income taxes                                                    10       26 
-----------------------------------------------------------  -------  ------- 
Equity instruments designated at fair value through 
 other comprehensive income                                        2        2 
-----------------------------------------------------------  -------  ------- 
- fair value gains                                                 2        2 
----------------------------------------------------------- 
- income taxes                                                     -        - 
-----------------------------------------------------------  -------  ------- 
Changes in fair value of financial liabilities designated 
 at fair value upon initial recognition arising from 
 changes in own credit risk                                       67    (251) 
-----------------------------------------------------------  -------  ------- 
- fair value gains/(losses)                                       93    (386) 
----------------------------------------------------------- 
- income taxes                                                  (26)      135 
-----------------------------------------------------------  -------  ------- 
Other comprehensive income/(expense) for the year, net 
 of tax                                                          859    (758) 
-----------------------------------------------------------  -------  ------- 
Total comprehensive loss for the year                          (619)  (1,749) 
-----------------------------------------------------------  -------  ------- 
Attributable to: 
-----------------------------------------------------------  -------  --------- 
- shareholders of the parent company                           (653)  (1,745) 
----------------------------------------------------------- 
- non-controlling interests                                       34      (4) 
-----------------------------------------------------------  -------  ------- 
Total comprehensive loss for the year                          (619)  (1,749) 
-----------------------------------------------------------  -------  ------- 
 
 
Consolidated balance sheet 
at 31 December 
                                                                   2020       2019 
                                                        Notes*     GBPm       GBPm 
------------------------------------------------------  ------  -------  --------- 
Assets 
------------------------------------------------------  ------  -------  --------- 
Cash and balances at central banks                               85,092   51,816 
------------------------------------------------------  ------  -------  ------- 
Items in the course of collection from other banks                  243      707 
------------------------------------------------------  ------  -------  ------- 
Trading assets                                            10     86,976   98,249 
------------------------------------------------------  ------  -------  ------- 
Financial assets designated and otherwise mandatorily 
 measured at fair value through profit or loss            13     16,220   17,012 
------------------------------------------------------  ------  -------  ------- 
Derivatives                                               14    201,210  164,538 
------------------------------------------------------  ------  -------  ------- 
Loans and advances to banks                                      12,646   11,467 
------------------------------------------------------  ------  -------  ------- 
Loans and advances to customers                                 101,491  108,391 
------------------------------------------------------  ------  -------  ------- 
Reverse repurchase agreements - non-trading                      67,577   85,756 
------------------------------------------------------  ------  -------  ------- 
Financial investments                                     15     51,826   46,464 
------------------------------------------------------  ------  -------  ------- 
Prepayments, accrued income and other assets              21     55,565   48,939 
Current tax assets                                                  444      725 
------------------------------------------------------  ------  -------  ------- 
Interests in associates and joint ventures                17        497      437 
------------------------------------------------------  ------  -------  ------- 
Goodwill and intangible assets                            20        766    1,582 
------------------------------------------------------  ------  -------  ------- 
Deferred tax assets                                       7         597      408 
------------------------------------------------------  ------  -------  ------- 
Total assets                                                    681,150  636,491 
------------------------------------------------------  ------  -------  ------- 
Liabilities and equity 
------------------------------------------------------  ------  -------  --------- 
Liabilities 
                                                        ------  -------  --------- 
Deposits by banks                                                34,305   23,991 
------------------------------------------------------  ------  -------  ------- 
Customer accounts                                               195,184  177,236 
------------------------------------------------------  ------  -------  ------- 
Repurchase agreements - non-trading                              34,903   49,385 
------------------------------------------------------  ------  -------  ------- 
Items in the course of transmission to other banks                  290      403 
------------------------------------------------------  ------  -------  ------- 
Trading liabilities                                       22     44,229   48,026 
------------------------------------------------------  ------  -------  ------- 
Financial liabilities designated at fair value            23     40,792   41,642 
------------------------------------------------------  ------  -------  ------- 
Derivatives                                               14    199,232  161,083 
------------------------------------------------------  ------  -------  ------- 
Debt securities in issue                                         17,371   25,039 
------------------------------------------------------  ------  -------  ------- 
Accruals, deferred income and other liabilities           24     53,395   50,315 
Current tax liabilities                                             139      106 
------------------------------------------------------  ------  -------  ------- 
Liabilities under insurance contracts                     4      22,816   21,509 
------------------------------------------------------  ------  -------  ------- 
Provisions                                                25        861      540 
------------------------------------------------------  ------  -------  ------- 
Deferred tax liabilities                                  7          20       22 
------------------------------------------------------  ------  -------  ------- 
Subordinated liabilities                                  26     13,764   13,182 
------------------------------------------------------  ------  -------  ------- 
Total liabilities                                               657,301  612,479 
------------------------------------------------------  ------  -------  ------- 
Equity 
------------------------------------------------------  ------  -------  --------- 
Total shareholders' equity                                       23,666   23,503 
------------------------------------------------------  ------  -------  ------- 
- called up share capital                                 29        797      797 
- other equity instruments                                29      3,722    3,722 
------------------------------------------------------  ------ 
- other reserves                                                (4,682)  (5,465) 
------------------------------------------------------  ------ 
- retained earnings                                              23,829   24,449 
------------------------------------------------------  ------  -------  ------- 
Non-controlling interests                                           183      509 
------------------------------------------------------  ------  -------  ------- 
Total equity                                                     23,849   24,012 
------------------------------------------------------  ------  -------  ------- 
Total liabilities and equity                                    681,150  636,491 
------------------------------------------------------  ------  -------  ------- 
 
   *    For Notes on the financial statements, see page 118. 

The accompanying notes on pages 118 to 180, and the audited sections of the 'Report of the Directors' on pages 22 to 94 form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 22 February 2021 and signed on its behalf by:

J Fleurant

Director

 
Consolidated statement of cash flows 
for the year ended 31 December 
                                                                        2020        2019 
                                                                        GBPm        GBPm 
------------------------------------------------------------------  --------  ---------- 
Loss before tax                                                      (1,614)     (872) 
------------------------------------------------------------------  --------  -------- 
Adjustments for non-cash items 
------------------------------------------------------------------  --------  ---------- 
Depreciation, amortisation and impairment(1)                           1,273     1,523 
------------------------------------------------------------------  --------  -------- 
Net gain from investing activities                                      (99)      (59) 
------------------------------------------------------------------  --------  -------- 
Share of losses in associates and joint ventures                           1        10 
------------------------------------------------------------------  --------  -------- 
Change in expected credit losses gross of recoveries and 
 other credit impairment charges                                         810       130 
------------------------------------------------------------------  --------  -------- 
Provisions including pensions                                            424       231 
------------------------------------------------------------------  --------  -------- 
Share-based payment expense                                               78        88 
------------------------------------------------------------------  --------  -------- 
Other non-cash items included in loss before tax                         135      (19) 
------------------------------------------------------------------  --------  -------- 
Elimination of exchange differences(2)                               (2,527)     4,001 
------------------------------------------------------------------  --------  -------- 
Changes in operating assets and liabilities                           35,418   (1,840) 
------------------------------------------------------------------  --------  -------- 
 
  *    change in net trading securities and derivatives                8,070   (1,310) 
------------------------------------------------------------------ 
 
  *    change in loans and advances to banks and customers             6,780     3,441 
------------------------------------------------------------------ 
 
  *    change in reverse repurchase agreements - non-trading          16,084   (7,293) 
------------------------------------------------------------------ 
- change in financial assets designated and otherwise mandatorily 
 measured at fair value                                                  735       787 
------------------------------------------------------------------ 
 
  *    change in other assets                                        (7,513)  (12,074) 
------------------------------------------------------------------ 
 
  *    change in deposits by banks and customer accounts              28,262   (4,141) 
------------------------------------------------------------------ 
 
  *    change in repurchase agreements - non-trading                (14,482)     2,803 
------------------------------------------------------------------ 
 
  *    change in debt securities in issue                            (7,668)     2,318 
------------------------------------------------------------------ 
 
  *    change in financial liabilities designated at fair 
       value                                                           (402)     4,390 
------------------------------------------------------------------ 
 
  *    change in other liabilities                                     5,432     9,539 
------------------------------------------------------------------ 
 
  *    contributions paid to defined benefit plans                      (22)      (13) 
------------------------------------------------------------------ 
 
  *    tax paid                                                          142     (287) 
------------------------------------------------------------------  --------  -------- 
Net cash from operating activities                                    33,899     3,193 
------------------------------------------------------------------  --------  -------- 
 
  *    purchase of financial investments                            (21,037)  (26,200) 
------------------------------------------------------------------ 
 
  *    proceeds from the sale and maturity of financial 
       investments                                                    17,417    24,304 
------------------------------------------------------------------ 
 
  *    net cash flows from the purchase and sale of property, 
       plant and equipment                                              (70)      (58) 
------------------------------------------------------------------ 
 
  *    net investment in intangible assets                             (150)     (385) 
------------------------------------------------------------------ 
- net cash outflow from investment in associates and acquisition 
 of businesses and subsidiaries                                        (371)      (49) 
------------------------------------------------------------------ 
 
  *    net cash flow on disposal of subsidiaries, business, 
       associates and joint ventures                                      57         - 
------------------------------------------------------------------  --------  -------- 
Net cash from investing activities                                   (4,154)   (2,388) 
------------------------------------------------------------------  --------  -------- 
 
  *    issue of ordinary share capital and other equity 
       instruments                                                         -     1,319 
------------------------------------------------------------------ 
- redemption of preference shares and other equity instruments         (318)         - 
------------------------------------------------------------------ 
- subordinated loan capital issued                                         -     6,736 
------------------------------------------------------------------ 
- subordinated loan capital repaid(3)                                   (18)   (7,100) 
------------------------------------------------------------------ 
 
  *    dividends to the parent company                                 (263)   (2,985) 
------------------------------------------------------------------ 
- funds received from the parent company                               1,000         - 
------------------------------------------------------------------ 
- dividends paid to non-controlling interests                              -      (17) 
------------------------------------------------------------------  --------  -------- 
Net cash from financing activities                                       401   (2,047) 
------------------------------------------------------------------  --------  -------- 
Net increase/(decrease) in cash and cash equivalents                  30,146   (1,242) 
------------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 1 Jan                                    92,338    97,058 
------------------------------------------------------------------  --------  -------- 
Exchange difference in respect of cash and cash equivalents            2,820   (3,478) 
------------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 31 Dec(4)                               125,304    92,338 
------------------------------------------------------------------  --------  -------- 
Cash and cash equivalents comprise of 
------------------------------------------------------------------  --------  ---------- 
- cash and balances at central banks                                  85,092    51,816 
------------------------------------------------------------------  --------  -------- 
- items in the course of collection from other banks                     243       707 
------------------------------------------------------------------  --------  -------- 
- loans and advances to banks of one month or less                     8,676     6,889 
------------------------------------------------------------------  --------  -------- 
- reverse repurchase agreement with banks of one month 
 or less                                                              21,020    23,116 
------------------------------------------------------------------  --------  -------- 
- treasury bills, other bills and certificates of deposit 
 less than three months                                                  685       728 
------------------------------------------------------------------  --------  -------- 
- cash collateral and net settlement accounts                          9,878     9,485 
------------------------------------------------------------------  --------  -------- 
- less: items in the course of transmission to other banks             (290)     (403) 
------------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 31 Dec(4)                               125,304    92,338 
------------------------------------------------------------------  --------  -------- 
 

1 Included are the impacts of GBP994m impairment and write-offs related principally to our businesses in the UK and HSBC Continental Europe in 2020 and GBP1.2bn goodwill impairment in 2019.

2 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

3 Subordinated liabilities changes during the year are attributable to repayment of GBP(18)m (2019: GBP(7,100)m) of securities. Non-cash changes during the year included foreign exchanges gains/(losses) GBP351m (2019: GBP(281)m) and fair value gains GBP69m (2019: GBP82m).

4 At 31 December 2020, GBP11,828m (2019: GBP10,533m) was not available for use by the group, of which GBP2,460m (2019: GBP1,427m) related to mandatory deposits at central banks.

Interest received was GBP5,424m (2019: GBP7,569m), interest paid was GBP3,725m (2019: GBP5,804m) and dividends received were GBP423m (2019: GBP1,237m).

 
Consolidated statement of changes in equity 
for the year ended 31 December 
                                                                                                         Other reserves 
                                                                                            ----------------------------------------- 
                                                             Called 
                                                                up 
                                                              share                         Financial                           Group 
                                                            capital                            assets     Cash            reorganisa-     Total 
                                                                and        Other                   at     flow   Foreign         tion    share-         Non- 
                                                              share       equity  Retained      FVOCI  hedging  exchange      reserve  holders'  controlling      Total 
                                                            premium  instruments  earnings    reserve  reserve   reserve     (GRR)(5)    equity    interests     equity 
                                                               GBPm         GBPm      GBPm       GBPm     GBPm      GBPm         GBPm      GBPm         GBPm       GBPm 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  --------- 
At 1 Jan 2020                                                   797        3,722    24,449      1,089       40     1,098      (7,692)    23,503          509   24,012 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Loss for the year                                                 -            -   (1,488)          -        -         -            -   (1,488)           10  (1,478) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Other comprehensive 
 income/(expense) 
 (net of tax)                                                     -            -        56        216      118       445            -       835           24      859 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                       -            -         -        214        -         -            -       214          (1)      213 
---------------------------------------------------------- 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                 -            -         -          2        -         -            -         2            -        2 
---------------------------------------------------------- 
- cash flow hedges                                                -            -         -          -      118         -            -       118            -      118 
---------------------------------------------------------- 
 
  *    changes in fair value of financial liabilities 
       designated at fair value due to movement in own 
       credit risk(1)                                             -            -        67          -        -         -            -        67            -       67 
---------------------------------------------------------- 
 
  *    remeasurement of defined benefit asset/liability           -            -      (11)          -        -         -            -      (11)            3      (8) 
---------------------------------------------------------- 
 
  *    exchange differences                                       -            -         -          -        -       445            -       445           22      467 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Total comprehensive 
 income/(loss) for 
 the year                                                         -            -   (1,432)        216      118       445            -     (653)           34    (619) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Capital securities 
 issued during the 
 period                                                           -            -         -          -        -         -            -         -            -        - 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Dividends to the 
 parent company(2)                                                -            -     (263)          -        -         -            -     (263)            -    (263) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Net impact of equity-settled 
 share-based payments                                             -            -        11          -        -         -            -        11            -       11 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Capital contribution(3)                                           -            -     1,000          -        -         -            -     1,000            -    1,000 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Change in business 
 combinations and 
 other movements(4)                                               -                     64          4        -         -            -        68        (360)    (292) 
At 31 Dec 2020                                                  797        3,722    23,829      1,309      158     1,543      (7,692)    23,666          183   23,849 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
 

1 At 31 December 2020, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a loss of GBP189m. The cumulative change on 31 December 2019 was a loss of GBP346m.

2 The dividends to the parent company include GBP51m on preference shares and GBP212m paid as coupons on additional tier 1 instruments.

3 HSBC UK Holdings Ltd. injected GBP1bn of CET1 capital into HSBC Bank plc during March 2020 to improve the capital base of the group, impacted by Covid-19. There was no new issuance of share capital.

4 Additional shares were acquired in HSBC Trinkaus & Burkhardt AG in May 2020, increasing the group's interest from 80.67% to 99.33%.

5 The Group reorganisation reserve ('GRR') is an accounting reserve resulting from the ring-fencing implementation. The GRR does not form part of regulatory capital.

 
Consolidated statement of changes in equity (continued) 
for the year ended 31 December 
                                                                                                               Other reserves 
                                                                                                       ------------------------------ 
                                                             Called 
                                                                up 
                                                              share                         Financial                           Group 
                                                            capital                            assets     Cash            reorganisa-     Total 
                                                               and         Other                   at     flow   Foreign         tion    share-         Non- 
                                                              share       equity  Retained      FVOCI  hedging  exchange      reserve  holders'  controlling      Total 
                                                            premium  instruments  earnings    reserve  reserve   reserve        (GRR)    equity    interests     equity 
                                                               GBPm         GBPm      GBPm       GBPm     GBPm      GBPm         GBPm      GBPm         GBPm       GBPm 
At 1 Jan 2019                                                   797        2,403    28,649        969     (25)     1,777      (7,692)    26,878          531   27,409 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Loss for the year                                                 -            -   (1,013)          -        -         -            -   (1,013)           22    (991) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Other comprehensive 
 income/(expense) 
 (net of tax)                                                     -            -     (238)        120       65     (679)            -     (732)         (26)    (758) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                       -            -         -        118        -         -            -       118            3      121 
---------------------------------------------------------- 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                 -            -         -          2        -         -            -         2            -        2 
---------------------------------------------------------- 
- cash flow hedges                                                -            -         -          -       65         -            -        65            -       65 
---------------------------------------------------------- 
 
  *    changes in fair value of financial liabilities 
       designated at fair value due to movement in own 
       credit risk(1)                                             -            -     (251)          -        -         -            -     (251)            -    (251) 
---------------------------------------------------------- 
 
  *    remeasurement of defined benefit asset/liability           -            -        13          -        -         -            -        13          (1)       12 
---------------------------------------------------------- 
- exchange differences                                            -            -         -          -        -     (679)            -     (679)         (28)    (707) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Total comprehensive 
 income/(loss) for 
 the year                                                         -            -   (1,251)        120       65     (679)            -   (1,745)          (4)  (1,749) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Capital securities 
 issued during the 
 period(2)                                                        -        1,319         -          -        -         -            -     1,319            -    1,319 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Dividends to the 
 parent company(3)                                                -            -   (2,985)          -        -         -            -   (2,985)         (17)  (3,002) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Net impact of equity-settled 
 share-based payments                                             -            -        16          -        -         -            -        16            -       16 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Capital contribution                                              -            -                    -        -         -            -         -            -        - 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
Change in business 
 combinations and 
 other movements                                                  -                     20          -        -         -            -        20          (1)       19 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
At 31 Dec 2019                                                  797        3,722    24,449      1,089       40     1,098      (7,692)    23,503          509   24,012 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  -----------  --------  -----------  ------- 
 

1 At 31 December 2019, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a loss of GBP346m.

2 HSBC Bank plc issued three additional tier 1 capital instruments to HSBC UK Holdings Ltd of GBP175m in January 2019, GBP713m in November 2019 and GBP431m in December 2019.

3 The dividends to the parent company includes a GBP2,787m dividend paid, GBP51m on preference shares and GBP147m paid as coupons on additional tier 1 instruments.

 
HSBC Bank plc balance sheet 
at 31 December 
                                                                   2020       2019 
                                                        Notes*     GBPm       GBPm 
------------------------------------------------------  ------  -------  --------- 
Assets 
------------------------------------------------------  ------  -------  --------- 
Cash and balances at central banks                               48,777   30,149 
------------------------------------------------------  ------  -------  ------- 
Items in the course of collection from other banks                   37       44 
------------------------------------------------------  ------  -------  ------- 
Trading assets                                            10     73,035   83,285 
------------------------------------------------------  ------  -------  ------- 
Financial assets designated and otherwise mandatorily 
 measured at fair value through profit or loss            13      1,865    3,129 
------------------------------------------------------          -------  ------- 
Derivatives                                               14    182,066  152,496 
------------------------------------------------------  ------  -------  ------- 
Loans and advances to banks                                       8,063    9,522 
------------------------------------------------------  ------  -------  ------- 
Loans and advances to customers                                  43,241   49,926 
------------------------------------------------------  ------  -------  ------- 
Reverse repurchase agreements - non-trading                      50,137   50,736 
------------------------------------------------------  ------  -------  ------- 
Financial investments                                     15     30,969   26,561 
------------------------------------------------------  ------  -------  ------- 
Prepayments, accrued income and other assets              21     38,775   37,322 
------------------------------------------------------  ------  -------  ------- 
Current tax assets                                                  388      683 
------------------------------------------------------  ------  -------  ------- 
Investments in subsidiary undertakings                    18      6,458    6,025 
------------------------------------------------------  ------  -------  ------- 
Goodwill and intangible assets                            20         31      535 
------------------------------------------------------  ------  -------  ------- 
Deferred tax assets                                       7         549      327 
------------------------------------------------------  ------  -------  ------- 
Total assets                                                    484,391  450,740 
------------------------------------------------------  ------  -------  ------- 
Liabilities and equity 
------------------------------------------------------  ------  -------  --------- 
Liabilities 
------------------------------------------------------  ------  -------  --------- 
Deposits by banks                                                17,484   16,356 
------------------------------------------------------  ------  -------  ------- 
Customer accounts                                               119,974  109,040 
------------------------------------------------------  ------  -------  ------- 
Repurchase agreements - non-trading                              26,996   36,327 
------------------------------------------------------  ------  -------  ------- 
Items in the course of transmission to other banks                   14       44 
------------------------------------------------------  ------  -------  ------- 
Trading liabilities                                       22     26,673   27,014 
------------------------------------------------------  ------  -------  ------- 
Financial liabilities designated at fair value            23     24,687   24,663 
------------------------------------------------------  ------  -------  ------- 
Derivatives                                               14    181,032  149,607 
------------------------------------------------------  ------  -------  ------- 
Debt securities in issue                                         15,356   15,038 
------------------------------------------------------  ------  -------  ------- 
Accruals, deferred income and other liabilities           24     38,571   40,165 
------------------------------------------------------  ------  -------  ------- 
Current tax liabilities                                               9       19 
------------------------------------------------------  ------  ------- 
Provisions                                                25        413      308 
------------------------------------------------------  ------  -------  ------- 
Deferred tax liabilities                                  7           3        2 
------------------------------------------------------  ------  -------  ------- 
Subordinated liabilities                                  26     13,360   12,783 
------------------------------------------------------  ------  -------  ------- 
Total liabilities                                               464,572  431,366 
------------------------------------------------------  ------  -------  ------- 
Equity 
------------------------------------------------------  ------  -------  --------- 
Called up share capital                                   29        797      797 
------------------------------------------------------  ------  -------  ------- 
Other equity instruments                                  29      3,722    3,722 
------------------------------------------------------  ------  -------  ------- 
Other reserves                                                  (4,799)  (5,021) 
------------------------------------------------------  ------  -------  ------- 
Retained earnings                                                20,099   19,876 
------------------------------------------------------  ------  -------  ------- 
Total equity                                                     19,819   19,374 
------------------------------------------------------  ------  -------  ------- 
Total liabilities and equity                                    484,391  450,740 
------------------------------------------------------  ------  -------  ------- 
 
   *    For Notes on the financial statements, see page 118. 

Loss after tax for the year was GBP(644)m (2019: loss after tax GBP(3,064)m). 2019 loss includes the impairment of the bank's investment in HSBC Continental Europe (Refer Note 18). In Q1 2019, the activities of HSBC Bank plc's branches in Belgium, the Netherlands, Spain, Italy, Ireland, Luxembourg and Czech Republic were transferred to HSBC Continental Europe.

The accompanying notes on pages 118 to 180, and the audited sections of the 'Report of the Directors' on pages 22 to 94 form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 22 February 2021 and signed on its behalf by:

J Fleurant

Director

 
HSBC Bank plc statement of cash flows 
for the year ended 31 December 
                                                                     2020        2019 
                                                                     GBPm        GBPm 
--------------------------------------------------------------   --------  ---------- 
Loss before tax                                                     (936)   (3,070) 
---------------------------------------------------------------  --------  -------- 
Adjustments for non-cash items 
--------------------------------------------------------------   --------  ---------- 
Depreciation, amortisation and impairment(1)                          635       265 
---------------------------------------------------------------  --------  -------- 
Net (gain)/loss from investing activities(2)                         (67)     3,110 
---------------------------------------------------------------  --------  -------- 
Change in expected credit losses gross of recoveries 
 and other credit impairment charges                                  457         1 
---------------------------------------------------------------  --------  -------- 
Provisions including pensions                                         154        96 
---------------------------------------------------------------  --------  -------- 
Share-based payment expense                                            56        64 
---------------------------------------------------------------  --------  -------- 
Other non-cash items included in loss before tax                        8        46 
---------------------------------------------------------------  --------  -------- 
Elimination of exchange differences(3)                                108     1,584 
---------------------------------------------------------------  --------  -------- 
Changes in operating assets and liabilities                        27,197  (19,282) 
---------------------------------------------------------------  --------  -------- 
 
  *    change in net trading securities and derivatives            11,580   (4,801) 
--------------------------------------------------------------- 
 
  *    change in loans and advances to banks and customers          8,568   (1,801) 
--------------------------------------------------------------- 
 
  *    change in reverse repurchase agreements - non-trading        5,890   (1,004) 
--------------------------------------------------------------- 
 
  *    change in financial assets designated and otherwise 
       mandatorily measured at fair value                           1,264     2,616 
--------------------------------------------------------------- 
 
  *    change in other assets(4)                                  (3,771)   (9,073) 
--------------------------------------------------------------- 
 
  *    change in deposits by banks and customer accounts           12,062   (7,365) 
--------------------------------------------------------------- 
 
  *    change in repurchase agreements - non-trading              (9,331)       634 
--------------------------------------------------------------- 
 
  *    change in debt securities in issue                             318   (4,047) 
--------------------------------------------------------------- 
 
  *    change in financial liabilities designated at fair 
       value                                                          500     1,544 
--------------------------------------------------------------- 
 
  *    change in other liabilities                                   (71)     4,210 
--------------------------------------------------------------- 
 
  *    contributions paid to defined benefit plans                   (22)      (13) 
--------------------------------------------------------------- 
 
  *    tax paid                                                       210     (182) 
---------------------------------------------------------------  --------  -------- 
Net cash from operating activities                                 27,612  (17,186) 
---------------------------------------------------------------  --------  -------- 
 
  *    purchase of financial investments                         (13,882)  (18,878) 
--------------------------------------------------------------- 
 
  *    proceeds from the sale and maturity of financial 
       investments                                                 11,791    18,781 
--------------------------------------------------------------- 
 
  *    net cash flows from the purchase and sale of property, 
       plant and equipment                                            (9)      (24) 
--------------------------------------------------------------- 
 
  *    net investment in intangible assets                           (98)     (190) 
--------------------------------------------------------------- 
 
  *    net cash flow on disposal of subsidiaries, business, 
       associates and joint ventures                                    -      (17) 
---------------------------------------------------------------  --------  -------- 
Net cash from investing activities                                (2,198)     (328) 
---------------------------------------------------------------  --------  -------- 
- issue of ordinary share capital and other equity 
 instruments                                                            -     1,319 
 
  *    subordinated loan capital issued                                 -     6,740 
--------------------------------------------------------------- 
 
  *    subordinated loan capital repaid(5)                          (313)   (7,076) 
--------------------------------------------------------------- 
 
  *    funds received from the parent company                       1,000         - 
--------------------------------------------------------------- 
 
  *    dividends to the parent company                              (263)   (2,985) 
---------------------------------------------------------------  --------  -------- 
Net cash from financing activities                                    424   (2,002) 
---------------------------------------------------------------  --------  -------- 
Net increase/(decrease) in cash and cash equivalents               25,838  (19,516) 
---------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 1 Jan                                 51,235    72,296 
---------------------------------------------------------------  --------  -------- 
Exchange difference in respect of cash and cash 
 equivalents                                                          532   (1,545) 
---------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 31 Dec                                77,605    51,235 
---------------------------------------------------------------  --------  -------- 
Cash and cash equivalents comprise of: 
--------------------------------------------------------------   --------  ---------- 
- cash and balances at central banks                               48,777    30,149 
---------------------------------------------------------------  --------  -------- 
- items in the course of collection from other banks                   37        44 
---------------------------------------------------------------  --------  -------- 
- loans and advances to banks of one month or less                  5,338     4,549 
---------------------------------------------------------------  --------  -------- 
- reverse repurchase agreement with banks of one 
 month or less                                                     14,558     9,267 
---------------------------------------------------------------  --------  -------- 
- treasury bills, other bills and certificates of 
 deposit less than three months                                       279       346 
---------------------------------------------------------------  --------  -------- 
- cash collateral and net settlement accounts                       8,630     6,924 
---------------------------------------------------------------  --------  -------- 
- less: items in the course of transmission to other 
 banks                                                               (14)      (44) 
---------------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 31 Dec                                77,605    51,235 
---------------------------------------------------------------  --------  -------- 
 
   1   Included the impact of GBP531m impairment related to our business in the UK in 2020. 

2 2019 balances include the impairment of investment in HSBC Continental Europe subsidiary (refer Note 18).

3 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

   4   Includes additional investment in subsidiaries GBP443m (2019:GBP1,949m). 

5 Subordinated liabilities changes during the year are attributable to repayment GBP(313)m (2019: GBP(7,076)m) of securities. Non-cash changes during the year included foreign exchanges gains(losses) GBP329m (2019: GBP(259)m) and fair value gains GBP69m (2019: GBP82m).

Interest received was GBP3,211m (2019: GBP5,352m), interest paid was GBP2,539m (2019: GBP4,679m) and dividends received was GBP555m (2019: GBP1,197m).

 
HSBC Bank plc statement of changes in equity 
for the year ended 31 December 
                                                                                                           Other reserves 
                                                                                            -------------------------------------------- 
                                                             Called 
                                                                up 
                                                              share                         Financial 
                                                            capital                            assets     Cash                     Group 
                                                               and         Other                   at     flow   Foreign  reorganisation            Total 
                                                              share       equity  Retained      FVOCI  hedging  exchange         reserve    shareholders' 
                                                            premium  instruments  earnings    reserve  reserve   reserve      ('GRR')(5)           equity 
                                                               GBPm         GBPm      GBPm       GBPm     GBPm      GBPm            GBPm             GBPm 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  --------------- 
At 1 Jan 2020                                                   797        3,722    19,876        182     (32)        77         (5,248)         19,374 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Loss for the year                                                 -            -     (644)          -        -         -               -          (644) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Other comprehensive 
 income/(expense) (net 
 of tax)                                                          -            -       107        170       87      (28)               -            336 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                       -            -         -        168        -         -               -            168 
---------------------------------------------------------- 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                 -            -         -          2        -         -               -              2 
---------------------------------------------------------- 
- cash flow hedges                                                -            -         -          -       87         -               -             87 
---------------------------------------------------------- 
 
  *    changes in fair value of financial liabilities 
       designated at fair value due to movement in own 
       credit risk(1)                                             -            -        92          -        -         -               -             92 
---------------------------------------------------------- 
 
  *    remeasurement of defined benefit asset/liability           -            -        15          -        -         -               -             15 
---------------------------------------------------------- 
- exchange differences                                            -            -         -          -        -      (28)               -           (28) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Total comprehensive 
 income/(loss) for the 
 period                                                           -            -     (537)        170       87      (28)               -          (308) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Capital securities 
 issued during the period                                         -            -         -          -        -         -               -              - 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Dividends to the parent 
 company(2)                                                       -            -     (263)          -        -         -               -          (263) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Net impact of equity-settled 
 share-based payments                                             -            -        11          -        -         -               -             11 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Capital contribution(3)                                           -            -     1,000          -        -         -               -          1,000 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Change in business 
 combinations and other 
 movements(4)                                                     -            -        12        (1)        -       (6)               -              5 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
At 31 Dec 2020                                                  797        3,722    20,099        351       55        43         (5,248)         19,819 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
 

1 At 31 December 2020, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a loss of GBP76m. The cumulative change on 31 December 2019 was a loss of GBP227m.

2 The dividends to the parent company include GBP51m on preference shares and GBP212m paid as coupons on additional tier 1 instruments.

3 HSBC UK Holdings Ltd. injected GBP1bn of CET1 capital into HSBC Bank plc during March 2020 to improve the capital base of the group, impacted by Covid-19. There was no new issuance of share capital.

4 Additional shares were acquired in HSBC Trinkaus & Burkhardt AG in May 2020, increasing the group's interest from 80.67% to 99.33%.

5 The Group reorganisation reserve ('GRR') is an accounting reserve resulting from the ring-fencing implementation. The GRR does not form part of regulatory capital.

 
HSBC Bank plc statement of changes in equity (continued) 
for the year ended 31 December 
                                                                                                           Other reserves 
                                                                                            -------------------------------------------- 
                                                             Called 
                                                                 up 
                                                              share 
                                                            capital                         Financial     Cash                     Group 
                                                                and        Other               assets     flow   Foreign  reorganisation            Total 
                                                              share       equity  Retained   at FVOCI  hedging  exchange         reserve    shareholders' 
                                                            premium  instruments  earnings    reserve  reserve   reserve         ('GRR')           equity 
                                                               GBPm         GBPm      GBPm       GBPm     GBPm      GBPm            GBPm             GBPm 
1 January 2019                                                  797        2,403    26,033         77     (47)        80         (5,248)         24,095 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Loss for the year                                                 -            -   (3,064)          -        -         -               -        (3,064) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Other comprehensive 
 income/(expense) (net 
 of tax)                                                          -            -     (122)        105       15       (3)               -            (5) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                       -            -         -        105        -         -               -            105 
---------------------------------------------------------- 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                 -            -         -          -        -         -               -              - 
---------------------------------------------------------- 
 
  *    cash flow hedges                                           -            -         -          -       15         -               -             15 
---------------------------------------------------------- 
 
  *    changes in fair value of financial liabilities 
       designated at fair value due to movement in own 
       credit risk(1)                                             -            -     (148)          -        -         -               -          (148) 
---------------------------------------------------------- 
 
  *    remeasurement of defined benefit asset/liability           -            -        26          -        -         -               -             26 
---------------------------------------------------------- 
 
  *    exchange differences                                       -            -         -          -        -       (3)               -            (3) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Total comprehensive 
 income/(loss) for the 
 period                                                           -            -   (3,186)        105       15       (3)               -        (3,069) 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Capital securities 
 issued during the period(2)                                      -        1,319         -          -        -         -               -          1,319 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Dividends to the parent 
 company(3)                                                       -            -   (2,985)          -        -         -               -        (2,985) 
Net impact of equity-settled 
 share-based payments                                             -            -         -          -        -         -               -              - 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Capital contribution                                              -            -         -          -        -         -               -              - 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
Change in business 
 combinations and other 
 movements                                                        -            -        14          -        -         -               -             14 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
At 31 Dec 2019                                                  797        3,722    19,876        182     (32)        77         (5,248)         19,374 
----------------------------------------------------------  -------  -----------  --------  ---------  -------  --------  --------------  ------------- 
 

1 At 31 December 2019, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a loss of GBP227m.

2 HSBC Bank plc issued three additional tier 1 capital instruments to HSBC UK Holdings Ltd of GBP175m in January 2019, GBP713m in November 2019 and GBP431m in December 2019.

3 The dividends to the parent company includes a GBP2,787m dividend paid, GBP51m on preference shares and GBP147m paid as coupons on additional tier 1 instruments.

 
Notes on the Financial Statements 
 
 
1  Basis of preparation and significant accounting policies 
   -------------------------------------------------------- 
 
   1.1    Basis of preparation 
   (a)     Compliance with International Financial Reporting Standards 

The consolidated financial statements of the group and the separate financial statements of HSBC Bank plc comply with international accounting standards in conformity with the requirements of the Companies Act 2006 and have also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements are also prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board ('IASB'), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRSs as issued by the IASB for the periods presented. 'Interest Rate Benchmark Reform - Phase 2', which amends IFRS 9, IAS 39 'Financial Instruments', IFRS 7 'Financial Instruments,' IFRS 4 'Insurance Contracts' and IFRS 16 'Leases', was adopted for use in the UK and the EU in January 2021 and has been early adopted as set out below. Therefore, there were no unendorsed standards effective for the year ended 31 December 2020 affecting these consolidated and separate financial statements.

Standards adopted during the year ended 31 December 2020

Interest Rate Benchmark Reform - Phase 2

Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 issued in August 2020 represents the second phase of the IASB's project on the effects of interest rate benchmark reform, addressing issues affecting financial statements when changes are made to contractual cash flows and hedging relationships as a result of the reform.

Under these amendments, changes made to a financial instrument measured at other than fair value through profit or loss that are economically equivalent and required by interest rate benchmark reform, do not result in the derecognition or a change in the carrying amount of the financial instrument. Instead they require the effective interest rate to be updated to reflect the change in the interest rate benchmark. In addition, hedge accounting will not be discontinued solely because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria.

These amendments apply from 1 January 2021 with early adoption permitted. The group adopted the amendments from 1 January 2020 and made the additional disclosures as required by the amendments. Further information is included in Note 14 and in 'Financial instruments impacted by Ibor reform' on page 28.

Other changes

In addition, the group adopted a number of interpretations and amendments to standards, which had an insignificant effect on the consolidated financial statements of the group and the separate financial statements of HSBC Bank plc. Other than as noted above, accounting policies have been consistently applied.

   (b)     Future accounting developments 

Minor amendments to IFRSs

The IASB has not published any minor amendments effective from 1 January 2021 that are applicable to the group. However, the IASB has published a number of minor amendments to IFRSs that are effective from 1 January 2022 and 1 January 2023. The group expects they will have an insignificant effect, when adopted, on the consolidated financial statements of the group and the separate financial statements of HSBC Bank plc.

New IFRSs

IFRS 17 'Insurance Contracts'

IFRS 17 'Insurance Contracts' was issued in May 2017, with amendments to the standard issued in June 2020. The standard sets out the requirements that an entity should apply in accounting for insurance contracts it issues and reinsurance contracts it holds. Following the amendments, IFRS 17 is effective from 1 January 2023. The group is in the process of implementing IFRS 17. Industry practice and interpretation of the standard are still developing. Therefore, the likely numerical impact of its implementation remains uncertain. However, we have the following expectations as to the impact compared with the group's current accounting policy for insurance contracts, which is set out in policy 1.2(j) below:

-- Under IFRS 17, there will be no PVIF asset recognised; rather the estimated future profit will be included in the measurement of the insurance contract liability as the contractual service margin ('CSM') and gradually recognised in revenue as services are provided over the duration of the insurance contract. The PVIF asset will be eliminated to equity on transition, together with other adjustments to assets and liabilities to reflect IFRS 17 measurement requirements and any consequential amendments to financial assets in the scope of IFRS 9.

-- IFRS 17 requires increased use of current market values in the measurement of insurance liabilities. Depending on the measurement model, changes in market conditions for certain products (measured under the General Measurement Approach) are immediately recognised in profit or loss, while for other products (measured under the Variable Fee Approach) they will be included in the measurement of CSM.

-- In accordance with IFRS 17, directly attributable costs will be included in the results of insurance services as profit is recognised over the duration of insurance contracts. Costs that are not directly attributable remain in operating expenses. This will result in a reduction in operating expenses compared with the current accounting policy.

   (c)     Foreign currencies 

The functional currency of the bank is sterling, which is also the presentational currency of the consolidated financial statements of the group.

Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the balance sheet date except non-monetary assets and liabilities

measured at historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised.

In the consolidated financial statements, the assets and liabilities of branches, subsidiaries, joint ventures and associates whose functional currency is not sterling are translated into the group's presentation currency at the rate of exchange at the balance sheet date, while their results are translated into sterling at the average rates of exchange for the reporting period. Exchange differences arising are recognised in other comprehensive income. On disposal of a foreign operation, exchange differences previously recognised in other comprehensive income are reclassified to the income statement.

   (d)    Presentation of information 

Certain disclosures required by IFRSs have been included in the audited sections of this Annual Report and Accounts 2020 as follows:

-- disclosures concerning the nature and extent of risks relating to financial instruments and insurance contracts are included in the 'Report of the Directors: Risk' on pages 22 to 86;

-- the 'Own funds' disclosure included in the 'Report of the Directors: Capital Risk in 2020' on page 73; and

-- in publishing the parent company financial statements together with the group financial statements, the bank has taken advantage of the exemption in section 408(3) of the Companies Act 2006 not to present its individual income statement and related notes.

   (e)     Critical accounting estimates and judgements 

The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of items highlighted, as the 'critical accounting estimates and judgements' in section 1.2 below (including PVIF valuation for the first time), it is possible that the outcomes in the next financial year could differ from those on which management's estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes of these financial statements. Management's selection of the group's accounting policies that contain critical estimates and judgements reflects the materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.

   (f)      Segmental analysis 

HSBC Bank plc's chief operating decision maker is the group Chief Executive, supported by the group Executive Committee, and operating segments are reported in a manner consistent with the internal reporting provided to the group Chief Executive and the group Executive Committee.

Measurement of segmental assets, liabilities, income and expenses is in accordance with the bank's accounting policies. Segmental income and expenses include transfers between segments and these transfers are conducted at arm's length. Shared costs are included in segments on the basis of the actual recharges made.

The types of products and services from which each reportable segment derives its revenue are discussed in the 'Strategic Report - Products and services' on page 6.

   (g)     Going concern 

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios that reflect the increasing uncertainty that the global Covid-19 outbreak has had on the group's operations, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

   1.2    Summary of significant accounting policies 
   (a)     Consolidation and related policies 

Investments in subsidiaries

Where an entity is governed by voting rights, the group consolidates when it holds - directly or indirectly - the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities and whether power is held as agent or principal.

Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

The bank's investments in subsidiaries are stated at cost less impairment losses.

Critical accounting estimates and judgements

 
Investments in subsidiaries are tested for impairment when there is an 
 indication that the investment may be impaired, which involves estimations 
 of value in use reflecting management's best estimate of the future cash 
 flows of the investment and the rates used to discount these cash flows, 
 both of which are subject to uncertain factors as follows: 
 
 
 *    The accuracy of forecast cash flows is subject to a     *    The future cash flows of each investment are 
      high degree of uncertainty in volatile market                sensitive to the cash flows projected for the periods 
      conditions. Where such circumstances are determined          for which detailed forecasts are available and to 
      to exist, management re-tests for impairment more            assumptions regarding the long-term pattern of 
      frequently than once a year when indicators of               sustainable cash flows thereafter. Forecasts are 
      impairment exist. This ensures that the assumptions          compared with actual performance and verifiable 
      on which the cash flow forecasts are based continue          economic data, but they reflect management's view of 
      to reflect current market conditions and management's        future business prospects at the time of the 
      best estimate of future business prospects                   assessment 
 
 
                                                              *    The rates used to discount future expected cash flows 
                                                                   can have a significant effect on their valuation, and 
                                                                   are based on the costs of capital assigned to the 
                                                                   investment. The cost of capital percentage is 
                                                                   generally derived from a capital asset pricing model, 
                                                                   which incorporates inputs reflecting a number of 
                                                                   financial and economic variables, including the 
                                                                   risk-free interest rate in the country concerned and 
                                                                   a premium for the risk of the business being 
                                                                   evaluated. These variables are subject to 
                                                                   fluctuations in external market rates and economic 
                                                                   conditions beyond management's control 
 
 
                                                              *    Key assumptions used in estimating impairment in 
                                                                   subsidiaries are described in Note 18 
===========================================================  =========================================================== 
 

Goodwill

Goodwill is allocated to cash-generating units ('CGUs') for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill is monitored for internal management purposes. The group's CGUs are based on global businesses. Impairment testing is performed once a year, or whenever there is an indication of impairment, by comparing the recoverable amount of a CGU with its carrying amount.

Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within such a CGU. The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Goodwill was written off in 2019 in all cash generating units, as a result of the impairment testing that year. Therefore, there is no goodwill remaining in the group.

Group sponsored structured entities

The group is considered to sponsor another entity if, in addition to ongoing involvement with the entity, it had a key role in establishing that entity or in bringing together relevant counterparties so the transaction that is the purpose of the entity could occur. The group is generally not considered a sponsor if the only involvement with the entity is merely administrative.

Interests in associates and joint arrangements

Joint arrangements are investments in which the group, together with one or more parties, has joint control. Depending on the group's rights and obligations, the joint arrangement is classified as either a joint operation or a joint venture. The group classifies investments in entities over which it has significant influence, and those that are neither subsidiaries nor joint arrangements, as associates.

The group recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures are recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates are included in the consolidated financial statements of the group based on either financial statements made up to 31 December or pro-rated amounts adjusted for any material transactions or events occurring between the date the financial statements are available and

31 December.

Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired. Goodwill on acquisition of interests in joint ventures and associates is not tested separately for impairment, but is assessed as part of the carrying amount of the investment.

   (b)     Income and expense 

Operating income

Interest income and expense

Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value, are recognised in 'Interest income' and 'Interest expense' in the income statement using the effective interest method. However, as an exception to this, interest on debt instruments issued by the group for funding purposes that are designated under the fair value option to reduce an accounting mismatch and on derivatives managed in conjunction with those debt instruments is included in interest expense.

Interest on credit-impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Non-interest income and expense

The group generates fee income from services provided at a fixed price over time, such as account service and card fees, or when the group delivers a specific transaction at a point in time, such as broking services and import/export services. With the exception of certain fund management and performance fees, all other fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size of the customer portfolio and HSBC's performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee income is generally earned from short-term contracts with payment terms that do not include a significant financing component.

The group acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, the group acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.

The group recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer. Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement. Where the group offers a package of services that contains multiple non-distinct performance obligations, such as those included in account service packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance obligations, such as those including both account and insurance services, the corresponding transaction price is allocated to each performance obligation based on the estimated stand-alone selling prices.

Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and usually the date when shareholders approve the dividend for unlisted equity securities.

Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:

-- 'Net income from financial instruments held for trading or managed on a fair value basis': This comprises net trading income, which includes all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial instruments managed on a fair value basis, together with the related interest income, expense and dividends, excluding the effect of changes in the credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.

-- 'Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss': This includes interest income, interest expense and dividend income in respect of financial assets and liabilities measured at fair value through profit or loss; and those derivatives managed in conjunction with the above that can be separately identifiable from other trading derivatives.

-- 'Changes in fair value of designated debt instruments and related derivatives': Interest paid on the debt instruments and interest cash flows on related derivatives is presented in interest expense where doing so reduces and accounting mismatch.

-- 'Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss': This includes interest on instruments that fail the solely payments of principal and interest ('SPPI') test, see (d) below.

The accounting policies for insurance premium income are disclosed in Note 1.2(j).

   (c)     Valuation of financial instruments 

All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a valuation technique that uses only data from observable markets, the group recognises the difference as a trading gain or loss at inception (a 'day 1 gain or loss'). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the transaction either until the transaction matures or is closed out or the valuation inputs become observable.

The fair value of financial instruments is generally measured on an individual basis. However, in cases where the group manages a group of financial assets and liabilities according to its net market or credit risk exposure, the fair value of the group of financial instruments is measured on a net basis but the underlying financial assets and liabilities are presented separately in the financial statements, unless they satisfy the IFRS offsetting criteria. Financial instruments are classified into one of three fair value hierarchy levels, described in Note 11, 'Fair values of financial instruments carried at fair value'.

Critical accounting estimates and judgements

 
The majority of valuation techniques employ only observable market data. 
 However, certain financial instruments are classified on the basis of 
 valuation techniques that feature one or more significant market inputs 
 that are unobservable, and for them, the measurement of fair value is 
 more judgemental: 
 
 
 *    An instrument in its entirety is classified as valued   *    Details on the group's level 3 financial instruments 
      using significant unobservable inputs if, in the             and the sensitivity of their valuation to the effect 
      opinion of management, a significant proportion of           of applying reasonable possible alternative 
      the instrument's inception profit or greater than 5%         assumptions in determining their fair value are set 
      of the instrument's valuation is driven by                   out in Note 11 
      unobservable inputs 
 
 
 *    'Unobservable' in this context means that there is 
      little or no current market data available from which 
      to determine the price at which an arm's length 
      transaction would be likely to occur. It generally 
      does not mean that there is no data available at all 
      upon which to base a determination of fair value 
      (consensus pricing data may, for example, be used) 
===========================================================  ========================================================== 
 
   (d)     Financial instruments measured at amortised cost 

Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. The group accounts for regular way amortised cost financial instruments using trade date accounting. The carrying value of these financial assets at initial recognition includes any directly attributable transactions costs. If the initial fair value is lower than the cash amount advanced, such as in the case of some leveraged finance and syndicated lending activities, the difference is deferred and recognised over the life of the loan through the recognition of interest income.

The group may commit to underwriting loans on fixed contractual terms for specified periods of time. When the loan arising from the lending commitment is expected to be held for trading, the commitment to lend is recorded as a derivative. When the group intends to hold the loan, the loan commitment is included in the impairment calculations set out below.

Non-trading reverse repurchase, repurchase and similar agreements

When debt securities are sold subject to a commitment to repurchase them at a predetermined price ('repos'), they remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell ('reverse repos') are not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as interest and recognised in net interest income over the life of the agreement.

Contracts that are economically equivalent to reverse repo or repo agreements (such as sales or purchases of debt securities entered into together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with, reverse repo or repo agreements.

   (e)     Financial assets measured at fair value through other comprehensive income 

Financial assets held for a business model that is achieved by both collecting contractual cash flows and selling and which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at fair value through other comprehensive income ('FVOCI'). These comprise primarily debt securities. They are recognised on the trade date when HSBC enters into contractual arrangements to purchase and are normally derecognised when they are either sold or redeemed. They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses in other comprehensive income are recognised in the income statement as 'Gains less losses from financial instruments'. Financial assets measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.

(f) Equity securities measured at fair value with fair value movements presented in other comprehensive income

The equity securities for which fair value movements are shown in other comprehensive income are business facilitation and other similar investments where HSBC holds the investments other than to generate a capital return. Gains or losses on the derecognition of these equity securities are not transferred to profit or loss. Otherwise, equity securities are measured at fair value through profit or loss (except for dividend income, which is recognised in profit or loss).

   (g)     Financial instruments designated at fair value through profit or loss 

Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and are so designated irrevocably at inception:

   --    the use of the designation removes or significantly reduces an accounting mismatch; 

-- a group of financial assets and liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; and

   --    the financial liability contains one or more non-closely related embedded derivatives. 

Designated financial assets are recognised when HSBC enters into contracts with counterparties, which is generally on trade date, and are normally derecognised when the rights to the cash flows expire or are transferred. Designated financial liabilities are recognised when HSBC enters into contracts with counterparties, which is generally on settlement date, and are normally derecognised when extinguished. Subsequent changes in fair values are recognised in the income statement in 'Net income from financial instruments held for trading or managed on a fair value basis' or 'Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' except for the effect of changes in the liabilities' credit risk, which is presented in 'Other comprehensive income', unless that treatment would create or enlarge an accounting mismatch in profit or loss.

Under the above criterion, the main classes of financial instruments designated by HSBC are:

-- Debt instruments for funding purposes that are designated to reduce an accounting mismatch: The interest and/or foreign exchange exposure on certain fixed-rate debt securities issued has been matched with the interest and/or foreign exchange exposure on certain swaps as part of a documented risk management strategy.

-- Financial assets and financial liabilities under unit-linked and non-linked investment contracts: A contract under which HSBC does not accept significant insurance risk from another party is not classified as an insurance contract, other than investment contracts with discretionary participation features ('DPF'), but is accounted for as a financial liability. Customer liabilities under linked and certain non-linked investment contracts issued by insurance subsidiaries are determined based on the fair value of the assets held in the linked funds. If no fair value designation was made for the related assets, at least some of the assets would otherwise be measured at either fair value through other comprehensive income or amortised cost. The related financial assets and liabilities are managed and reported to management on a fair value basis. Designation at fair value of the financial assets and related liabilities allows changes in fair values to be recorded in the income statement and presented in the same line.

-- Financial liabilities that contain both deposit and derivative components: These financial liabilities are managed and their performance evaluated on a fair value basis.

   (h)    Derivatives 

Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices. Derivatives are recognised initially and are subsequently measured at fair value through profit or loss, with changes in fair value generally recorded in the income statement. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. This includes embedded derivatives in financial liabilities, which are bifurcated from the host contract when they meet the definition of a derivative on a stand-alone basis. Where the derivatives are managed with debt securities issued by HSBC that are designated at fair value, the contractual interest is shown in 'Interest expense' together with the interest payable on the issued debt.

Hedge accounting

When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge accounting relationships where the required criteria for documentation and hedge effectiveness are met. The group uses these derivatives or, where allowed, other non-derivative hedging instruments in fair value hedges, cash flow hedges or hedges of net investments in foreign operations as appropriate to the risk being hedged.

Fair value hedge

Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the cumulative adjustment to the carrying amount of the hedged item is amortised to the income statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income statement immediately.

Cash flow hedge

The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the income statement within 'Net trading income'. The accumulated gains and losses recognised in other comprehensive income are reclassified to the income statement in the same periods in which the hedged item affects profit or loss. When a hedge relationship is discontinued, or partially discontinued, any cumulative gain or loss recognised in other comprehensive income remains in equity until the forecast transaction is recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is immediately reclassified to the income statement.

Net investment hedge

Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. The effective portion of gains and losses on the hedging instrument is recognised in other comprehensive income and other gains and losses are recognised immediately in the income statement. Gains and losses previously recognised in other comprehensive income are reclassified to the income statement on the disposal, or part disposal, of the foreign operation.

Derivatives that do not qualify for hedge accounting

Non-qualifying hedges are derivatives entered into as economic hedges of assets and liabilities for which hedge accounting was not applied.

   (i)      Impairment of amortised cost and FVOCI financial assets 

Expected credit losses are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements, other financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee contracts. At initial recognition, allowance (or provision in the case of some loan commitments and financial guarantees) is required for ECL resulting from default events that are possible within the next 12 months, or less, where the remaining life is less than 12 months, ('12-month ECL'). In the event of a significant increase in credit risk, allowance (or provision) is required for ECL resulting from all possible default events over the expected life of the financial instrument ('lifetime ECL'). Financial assets where 12-month ECL is recognised are considered to be 'stage 1'; financial assets which are considered to have experienced a significant increase in credit risk are in 'stage 2'; and financial assets for which there is objective evidence of impairment so are considered to be in default or otherwise credit impaired are in 'stage 3'. Purchased or originated credit-impaired financial assets ('POCI') are treated differently as set out below.

Credit impaired (stage 3)

The group determines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether:

   --   contractual payments of either principal or interest are past due for more than 90 days; 

-- there are other indications that the borrower is unlikely to pay, such as when a concession has been granted to the borrower for economic or legal reasons relating to the borrower's financial condition; and

   --   the loan is otherwise considered to be in default. 

If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due, even where regulatory rules permit default to be defined based on 180 days past due. Therefore, the definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or otherwise credit impaired.

Interest income is recognised by applying the effective interest rate to the amortised cost amount, i.e. gross carrying amount less

ECL allowance.

Write-off

Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.

Renegotiation

Loans are identified as renegotiated and classified as credit impaired when we modify the contractual payment terms due to significant credit distress of the borrower. Renegotiated loans remain classified as credit impaired until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows and retain the designation of renegotiated until maturity or derecognition.

A loan that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms or if the terms of an existing agreement are modified such that the renegotiated loan is a substantially different financial instrument. Any new loans that arise following derecognition events in these circumstances are considered to be POCI and will continue to be disclosed as renegotiated loans.

Other than originated credit-impaired loans, all other modified loans could be transferred out of stage 3 if they no longer exhibit any evidence of being credit impaired and, in the case of renegotiated loans, there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows, over the minimum observation period, and there are no other indicators of impairment. These loans could be transferred to stage 1 or 2 based on the mechanism as described below by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms) and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms). Any amount written off as a result of the modification of contractual terms would not be reversed.

Loan modifications other than renegotiated loans

Loan modifications that are not identified as renegotiated are considered to be commercial restructuring. Where a commercial restructuring results in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC's rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The rights to cash flows are generally considered to have expired if the commercial restructure is at market rates and no payment-related concession has been provided. Mandatory and general offer loan modifications that are not borrower-specific, for example market-wide customer relief programmes, have not been classified as renegotiated loans and generally have not resulted in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL impairment policy.

Significant increase in credit risk (stage 2)

An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering the change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at initial recognition, taking into account reasonable and supportable information, including information about past events, current conditions and future economic conditions. The assessment is unbiased, probability-weighted, and to the extent relevant, uses forward-looking information consistent with that used in the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the borrower, and the geographical region. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a significant increase in credit risk and these criteria will differ for different types of lending, particularly between retail and wholesale. However, unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when 30 days past due. In addition, wholesale loans that are individually assessed, which are typically corporate and commercial customers, and included on a watch or worry list, are included in stage 2.

For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime probability of default ('PD'), which encompasses a wide range of information including the obligor's customer risk rating ('CRR'), macroeconomic condition forecasts and credit transition probabilities. For origination CRRs up to 3.3, significant increase in credit risk is measured by comparing the average PD for the remaining term estimated at origination with the equivalent estimation at reporting date. The quantitative measure of significance varies depending on the credit quality at origination as follows:

 
 
0.1-1.2  15bps 
-------  ----- 
2.1-3.3  30bps 
-------  ----- 
 

For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to relative changes in external market rates.

For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be approximated assuming through-the-cycle ('TTC') PDs and TTC migration probabilities, consistent with the instrument's underlying modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-based thresholds, as set out in the table below:

 
 
0.1      5 notches 
-------  --------- 
1.1-4.2  4 notches 
-------  --------- 
4.3-5.1  3 notches 
-------  --------- 
5.2-7.1  2 notches 
-------  --------- 
7.2-8.2  1 notch 
-------  --------- 
8.3      0 notch 
-------  --------- 
 

Further information about the 23-grade scale used for CRR can be found on page 33.

For certain portfolios of debt securities where external market ratings are available and credit ratings are not used in credit risk management, the debt securities will be in stage 2 if their credit risk increases to the extent they are no longer considered investment grade. Investment grade is where the financial instrument has a low risk of incurring losses, the structure has a strong capacity to meet

its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil their contractual cash flow obligations.

For retail portfolios, default risk is assessed using a reporting date 12-month PD derived from credit scores, which incorporates all available information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than

12 months and is considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogeneous portfolios, generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold identifies loans with a PD higher than would be expected from loans that are performing as originally expected, and higher than what would have been acceptable at origination. It therefore approximates a comparison of origination to reporting date PDs.

Unimpaired and without significant increase in credit risk (stage 1)

ECL resulting from default events that are possible within the next 12 months ('12-month ECL') are recognised for financial instruments that remain in stage 1.

Purchased or originated credit impaired

Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This population includes the recognition of a new financial instrument following a renegotiation where concessions have been granted for economic or contractual reasons relating to the borrower's financial difficulty that otherwise would not have been considered. The amount of change-in-lifetime ECL is recognised in profit or loss until the POCI is derecognised, even if the lifetime ECL are less than the amount of ECL included in the estimated cash flows on initial recognition.

Movement between stages

Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased since initial recognition based on the assessments described above. Except for renegotiated loans, financial instruments are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment as described above. Renegotiated loans that are not POCI will continue to be in stage 3 until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows, observed over a minimum one-year period and there are no other indicators of impairment. For loans that are assessed for impairment on a portfolio basis, the evidence typically comprises a history of payment performance against the original or revised terms, as appropriate to the circumstances. For loans that are assessed for impairment on an individual basis, all available evidence is assessed on a case-by-case basis.

Measurement of ECL

The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information that is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money.

In general, HSBC calculates ECL using three main components, a probability of default, a loss given default ('LGD') and the exposure at default ('EAD').

The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead. The 12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument respectively.

The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.

HSBC leverages the Basel II IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following table:

 
 
PD 
         *    Through the cycle (represents long-run average PD        *    Point in time (based on current conditions, adjusted 
              throughout a full economic cycle)                             to take into account estimates of future conditions 
                                                                            that will impact PD) 
 
         *    The definition of default includes a backstop of 90+ 
              days past due, although this has been modified to        *    Default backstop of 90+ days past due for all 
              180+ days past due for some portfolios, particularly          portfolios 
              UK and US mortgages 
-----  -----------------------------------------------------------  ------------------------------------------------------------ 
EAD 
          *    Cannot be lower than current balance                    *    Amortisation captured for term products 
-----  -----------------------------------------------------------  ------------------------------------------------------------ 
LGD 
          *    Downturn LGD (consistent losses expected to be         *    Expected LGD (based on estimate of loss given default 
               suffered during a severe but plausible economic             including the expected impact of future economic 
               downturn)                                                   conditions such as changes in value of collateral) 
 
 
          *    Regulatory floors may apply to mitigate risk of        *    No floors 
               underestimating downturn LGD due to lack of 
               historical data 
                                                                      *    Discounted using the original effective interest rate 
                                                                           of the loan 
          *    Discounted using cost of capital 
 
                                                                      *    Only costs associated with obtaining/selling 
          *    All collection costs included                               collateral included 
-----  -----------------------------------------------------------  ------------------------------------------------------------ 
Other 
                                                                       *    Discounted back from point of default to balance 
                                                                            sheet date 
-----  -----------------------------------------------------------  ------------------------------------------------------------ 
 

While 12-month PDs are recalibrated from Basel II models where possible, the lifetime PDs are determined by projecting the 12-month PD using a term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the CRR bands over its life.

The ECL for wholesale stage 3 is determined on an individual basis using a discounted cash flow ('DCF') methodology. The expected future cash flows are based on the credit risk officer's estimates as at the reporting date, reflecting reasonable and supportable assumptions and projections of future recoveries and expected future receipts of interest. Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral. The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under four different scenarios are probability-weighted by reference to the economic scenarios applied more generally by HSBC Group and the judgement of the credit risk officer in relation to the likelihood of the workout strategy succeeding or receivership being required. For less significant cases, the effect of different economic scenarios and work-out strategies is approximated and applied as an adjustment to the most likely outcome.

Period over which ECL is measured

Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it 12-month or lifetime ECL) is the maximum contractual period over which HSBC is exposed to credit risk. For wholesale overdrafts, credit risk management actions are taken no less frequently than on an annual basis and therefore this period is to the expected date of the next substantive credit review. The date of the substantive credit review also represents the initial recognition of the new facility.

However, where the financial instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn commitment does not serve to limit HSBC's exposure to credit risk to the contractual notice period, the contractual period does not determine the maximum period considered. Instead, ECL is measured over the period HSBC remains exposed to credit risk that is not mitigated by credit risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset component. As a result, the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.

Forward-looking economic inputs

HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of our view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected loss in most economic environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios or adjustments, to reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in 'Measurement uncertainty and sensitivity analysis of ECL estimates' on page 42.

Critical accounting estimates and judgements

 
The calculation of the group's ECL under IFRS 9 requires the group to 
 make a number of judgements, assumptions and estimates. The most significant 
 are set out below: 
====================================================================================================================== 
 
 
 *    Defining what is considered to be a significant        *    The sections marked as audited on pages 42 to 46, 
      increase in credit risk                                     'Measurement uncertainty and sensitivity analysis of 
                                                                  ECL estimates' set out the assumptions used in 
                                                                  determining ECL and provide an indication of the 
 *    Selecting and calibrating the PD, LGD and EAD models        sensitivity of the result to the application of 
,                                                                 different weightings being applied to different 
      which support the calculations, including making            economic assumptions 
      reasonable and supportable judgements about how 
      models react to current and future economic 
      conditions 
 
 
 *    Selecting model inputs and economic forecasts, 
      including determining whether sufficient and 
      appropriately weighted economic forecasts are 
      incorporated to calculate unbiased expected loss 
 
 
 *    Making management judgemental adjustments to account 
      for late breaking events, model and data limitations 
      and deficiencies, and expert credit judgements 
==========================================================  ========================================================== 
 
   (j)      Insurance contracts 

A contract is classified as an insurance contract where the group accepts significant insurance risk from another party by agreeing to compensate that party on the occurrence of a specified uncertain future event. An insurance contract may also transfer financial risk, but is accounted for as an insurance contract if the insurance risk is significant. In addition, the group issues investment contracts with discretionary participation features ('DPF') which are also accounted for as insurance contracts as required by IFRS 4 'Insurance Contracts'.

Net insurance premium income

Premiums for life insurance contracts are accounted for when receivable, except in unit-linked insurance contracts where premiums are accounted for when liabilities are established.

Reinsurance premiums are accounted for in the same accounting period as the premiums for the direct insurance contracts to which they relate.

Net insurance claims and benefits paid and movements in liabilities to policyholders

Gross insurance claims for life insurance contracts reflect the total cost of claims arising during the year, including claim handling costs and any policyholder bonuses allocated in anticipation of a bonus declaration.

Maturity claims are recognised when due for payment. Surrenders are recognised when paid or at an earlier date on which, following notification, the policy ceases to be included within the calculation of the related insurance liabilities. Death claims are recognised when notified.

Reinsurance recoveries are accounted for in the same period as the related claim.

Liabilities under insurance contracts

Liabilities under non-linked life insurance contracts are calculated by each life insurance operation based on local actuarial principles. Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, which is calculated by reference to the value of the relevant underlying funds or indices.

Future profit participation on insurance contracts with DPF

Where contracts provide discretionary profit participation benefits to policyholders, liabilities for these contracts include provisions for the future discretionary benefits to policyholders. These provisions reflect the actual performance of the investment portfolio to date and management's expectation of the future performance of the assets backing the contracts, as well as other experience factors such as mortality, lapses and operational efficiency, where appropriate. The benefits to policyholders may be determined by the contractual terms, regulation or past distribution policy.

Investment contracts with DPF

While investment contracts with DPF are financial instruments, they continue to be treated as insurance contracts as required by IFRS 4. The group therefore recognises the premiums for these contracts as revenue and recognises as an expense the resulting increase in the carrying amount of the liability.

In the case of net unrealised investment gains on these contracts, whose discretionary benefits principally reflect the actual performance of the investment portfolio, the corresponding increase in the liabilities is recognised in either the income statement or other comprehensive income, following the treatment of the unrealised gains on the relevant assets. In the case of net unrealised losses, a deferred participating asset is recognised only to the extent that its recoverability is highly probable. Movements in the liabilities arising from realised gains and losses on relevant assets are recognised in the income statement.

Present value of in-force long-term insurance business

The group recognises the value placed on insurance contracts, and investment contracts with DPF, that are classified as long-term and

in-force at the balance sheet date, as an asset. The asset represents the present value of the equity holders' interest in the issuing insurance companies' profits expected to emerge from these contracts written at the balance sheet date. The present value of

in-force long-term insurance business ('PVIF') is determined by discounting those expected future profits using appropriate assumptions in assessing factors such as future mortality, lapse rates and levels of expenses, and a risk discount rate that reflects the risk premium attributable to the respective contracts. The PVIF incorporates allowances for both non-market risk and the value of financial options and guarantees. The PVIF asset is presented gross of attributable tax in the balance sheet and movements in the PVIF asset are included in 'Other operating income' on a gross of tax basis.

Critical accounting estimates and judgements

 
The valuation of the PVIF is dependent on economic assumptions (e.g. 
 future investment returns) and non-economic assumptions (e.g. related 
 to policyholder behaviour or demographics). 
======================================================================================================================== 
 
 
 *    The PVIF asset represents the value of the equity       *    The assumptions are reassessed at each reporting date 
      holders' interest in the issuing insurance companies'        and changes in the estimates which affect the value 
      profits expected to emerge from these contracts              of PVIF, are reflected in the income statement. 
      written at the balance sheet date. It is determined          Sensitivities to market risk factors and non-economic 
      by discounting those expected future profits using           risk factors are included in sections marked as 
      appropriate assumptions in assessing factors such as         audited on pages 85 and 86 respectively. 
      future mortality, lapse rates and levels of expenses, 
      and a risk discount rate that reflects the risk 
      premium attributable to the respective contracts. The 
      PVIF incorporates allowances for both non-market risk 
      and the value of financial options and guarantees. 
===========================================================  =========================================================== 
 
   (k)     Employee compensation and benefits 

Share-based payments

The group enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the provision of their services. The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in respect of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement. Expenses are recognised when the employee starts to render service to which the award relates.

Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.

Post-employment benefit plans

The group operates a number of pension schemes including defined benefit, defined contribution and post-employment benefit schemes.

Payments to defined contribution schemes are charged as an expense as the employees render service.

Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.

Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets, after applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and reductions in future contributions to the plan.

The cost of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.

   (l)      Tax 

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement in which the related item appears.

Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years. The group provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities. Payments associated with any incremental base erosion and anti-abuse tax are reflected in tax expense in the period incurred.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods as the assets will be realised or the liabilities settled.

Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.

Critical accounting estimates and judgements

 
The recognition of deferred tax assets depends on judgements, particularly 
 with regard to the UK deferred tax assets of HBSC Bank plc. 
============================================================================ 
 
 
  *    Assessing the probability and sufficiency of future 
       taxable profits, taking into account the future 
       reversal of existing taxable temporary differences 
       and tax planning strategies including corporate 
       reorganisations 
========================================================================== 
 
   (m)    Provisions, contingent liabilities and guarantees 

Provisions

Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive obligation that has arisen as a result of past events and for which a reliable estimate can be made.

Critical accounting estimates and judgements

 
The recognition and measurement of provisions requires the group to make 
 a number of judgements, assumptions and estimates. The most significant 
 are 
 set out below: 
=========================================================================================================================== 
 
 
 *    Determining whether a present obligation exists.           *    Provisions for legal proceedings and regulatory 
      Professional advice is taken on the assessment of               matters remain very sensitive to the assumptions used 
      litigation and similar obligations                              in the estimate. There could be a wider range of 
                                                                      possible outcomes for any pending legal proceedings, 
                                                                      investigations or inquiries. As a result, it is often 
 *    Provisions for legal proceedings and regulatory                 not practicable to quantify a range of possible 
      matters typically require a higher degree of                    outcomes for individual matters. It is also not 
      judgement than other types of provisions. When                  practicable to meaningfully quantify ranges of 
      matters are at an early stage, accounting judgements            potential outcomes in aggregate for these types of 
      can be difficult because of the high degree of                  provisions because of the diverse nature and 
      uncertainty associated with determining whether a               circumstances of such matters and the wide range of 
      present obligation exists, and estimating the                   uncertainties involved 
      probability and amount of any outflows that may 
      arise. As matters progress, management and legal 
      advisers evaluate on an ongoing basis whether 
      provisions should be recognised, revising previous 
      estimates as appropriate. At more advanced stages, it 
      is typically easier to make estimates around a better 
      defined set of possible outcomes 
===========================================================  ============================================================== 
 

Contingent liabilities, contractual commitments and guarantees

Contingent liabilities

Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related to legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of settlement is remote.

Financial guarantee contracts

Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is generally the fee received or present value of the fee receivable.

The bank has issued financial guarantees and similar contracts to other group entities. The group elects to account for certain guarantees as insurance contracts in the bank's financial statements, in which case they are measured and recognised as insurance liabilities. This election is made on a contract by contract basis, and is irrevocable.

   (n)     Impairment of non-financial assets 

Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In addition, impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are considered to be the principal operating legal entities divided by global business.

Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of the fair value less costs of disposal or the value in use. The carrying amount of a CGU comprises the carrying value of its assets and liabilities, including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and consistent basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping of CGUs. The recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent and qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs.

When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the extent that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of their respective individual recoverable amount or nil. Impairment is not allocated to the financial assets in a CGU.

Impairment loss recognised in prior periods for non-financial assets is reversed when there has been a change in the estimate used to determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would not exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior periods.

 
2  Net fee income 
   -------------- 
 
 
Net fee income by global business 
                                                      2020 
                              ----------------------------------------------------- 
                                 Wealth                Global 
                                    and               Banking 
                               Personal  Commercial       and  Corporate 
                                Banking     Banking   Markets     Centre      Total 
                                   GBPm        GBPm      GBPm       GBPm       GBPm 
----------------------------  ---------  ----------  --------  ---------  --------- 
Account services                     39          89       111          -      239 
----------------------------  ---------  ----------  --------  ---------  ------- 
Funds under management              207          27       190          -      424 
----------------------------  ---------  ----------  --------  ---------  ------- 
Cards                                24          13         7          -       44 
----------------------------  ---------  ----------  --------  ---------  ------- 
Credit facilities                     6          74       170          -      250 
----------------------------  ---------  ----------  --------  ---------  ------- 
Broking income                       45          40       284          -      369 
----------------------------  ---------  ----------  --------  ---------  ------- 
Unit trusts                           3           -         -          -        3 
----------------------------  ---------  ----------  --------  ---------  ------- 
Imports/exports                       -          14        27          -       41 
----------------------------  ---------  ----------  --------  ---------  ------- 
Remittances                           9          23        28          2       62 
----------------------------  ---------  ----------  --------  ---------  ------- 
Underwriting                          4           6       350          -      360 
----------------------------  ---------  ----------  --------  ---------  ------- 
Global custody                       19          12       189          -      220 
----------------------------  ---------  ----------  --------  ---------  ------- 
Insurance agency commission          17           1         1          -       19 
----------------------------  ---------  ----------  --------  ---------  ------- 
Other                               230         108       837      (532)      643 
----------------------------  ---------  ----------  --------  ---------  ------- 
Fee income                          603         407     2,194      (530)    2,674 
----------------------------  ---------  ----------  --------  ---------  ------- 
Less: fee expense                 (245)        (51)   (1,504)        526  (1,274) 
----------------------------  ---------  ----------  --------  ---------  ------- 
Net fee income                      358         356       690        (4)    1,400 
----------------------------  ---------  ----------  --------  ---------  ------- 
 
 
                                               2019 
                               GBPm  GBPm     GBPm   GBPm       GBPm 
----------------------------  -----  ----  -------  -----  --------- 
Account services                 49    91      194      -      334 
----------------------------  -----  ----  -------  -----  ------- 
Funds under management          213    24      190      -      427 
----------------------------  -----  ----  -------  -----  ------- 
Cards                            24    18        5      -       47 
----------------------------  -----  ----  -------  -----  ------- 
Credit facilities                 7    91      203      -      301 
----------------------------  -----  ----  -------  -----  ------- 
Broking income                   43    26      220      -      289 
----------------------------  -----  ----  -------  -----  ------- 
Unit trusts                       6     -        -      -        6 
----------------------------  -----  ----  -------  -----  ------- 
Imports/exports                   -    14       37      -       51 
----------------------------  -----  ----  -------  -----  ------- 
Remittances                       9    26       39      -       74 
----------------------------  -----  ----  -------  -----  ------- 
Underwriting                      2     3      282      -      287 
----------------------------  -----  ----  -------  -----  ------- 
Global custody                   15     9       94      -      118 
----------------------------  -----  ----  -------  -----  ------- 
Insurance agency commission      19     1        -      -       20 
----------------------------  -----  ----  -------  -----  ------- 
Other                           238    88      869  (559)      636 
----------------------------  -----  ----  -------  -----  ------- 
Fee income                      625   391    2,133  (559)    2,590 
----------------------------  -----  ----  -------  -----  ------- 
Less: fee expense             (243)  (41)  (1,507)    545  (1,246) 
----------------------------  -----  ----  -------  -----  ------- 
Net fee income                  382   350      626   (14)    1,344 
----------------------------  -----  ----  -------  -----  ------- 
 

1 A change in reportable segments was made in 2020. Comparatives data have been re-presented accordingly. For further guidance, refer to Note 9: Segmental Analysis on page 139.

Net fee income includes GBP883m of fees earned on financial assets that are not at fair value through profit or loss (other than amounts included in determining the effective interest rate) (2019: GBP906m), GBP176m of fees payable on financial liabilities that are not at fair value through profit of loss (other than amounts included in determining the effective interest rate) (2019: GBP198m), GBP688m of fees earned on trust and other fiduciary activities (2019: GBP580m), and GBP68m of fees payable relating to trust and other fiduciary activities (2019: GBP53m).

 
3  Net income/(expense) from financial instruments measured at fair 
    value through profit or 
    loss 
   ---------------------------------------------------------------- 
 
 
                                                             2020       2019 
                                                             GBPm       GBPm 
----------------------------------------------------------  -----  --------- 
Net income/(expense) arising on: 
----------------------------------------------------------  -----  --------- 
Net Trading activities                                      1,948    4,054 
----------------------------------------------------------  -----  ------- 
Other instruments managed on a fair value basis             (190)  (1,999) 
----------------------------------------------------------  -----  ------- 
Net income from financial instruments held for trading 
 or managed on a fair value basis                           1,758    2,055 
----------------------------------------------------------  -----  ------- 
Financial assets held to meet liabilities under insurance 
 and investment contracts                                     290    1,364 
----------------------------------------------------------  -----  ------- 
Liabilities to customers under investment contracts          (36)     (76) 
----------------------------------------------------------  -----  ------- 
Net income/(expense) from assets and liabilities of 
 insurance businesses, including related derivatives, 
 measured at fair value through profit or loss                254    1,288 
----------------------------------------------------------  -----  ------- 
Derivatives managed in conjunction with the group's 
 issued debt securities                                       112      124 
----------------------------------------------------------  -----  ------- 
Other changes in fair value                                  (95)    (132) 
----------------------------------------------------------  -----  ------- 
Changes in fair value of designated debt and related 
 derivatives                                                   17      (8) 
----------------------------------------------------------  -----  ------- 
Changes in fair value of other financial instruments 
 mandatorily measured at fair value through profit 
 or loss                                                      285      547 
----------------------------------------------------------  -----  ------- 
Year ended 31 Dec                                           2,314    3,882 
----------------------------------------------------------  -----  ------- 
 
 
4  Insurance business 
   ------------------ 
 

.

 
Net insurance premium income 
                                                                  Investment 
                                       Non-linked  Linked life     contracts 
                                        insurance    insurance   with DPF(1)    Total 
                                             GBPm         GBPm          GBPm     GBPm 
-------------------------------------  ----------  -----------  ------------  ------- 
Gross insurance premium income                205          274         1,185  1,664 
-------------------------------------  ----------  -----------  ------------  ----- 
Reinsurers' share of gross insurance 
 premium income                             (100)          (5)             -  (105) 
-------------------------------------  ----------  -----------  ------------  ----- 
Year ended 31 Dec 2020                        105          269         1,185  1,559 
-------------------------------------  ----------  -----------  ------------  ----- 
 
Gross insurance premium income                231          245         1,772  2,248 
-------------------------------------  ----------  -----------  ------------  ----- 
Reinsurers' share of gross insurance 
 premium income                              (98)          (3)             -  (101) 
-------------------------------------  ----------  -----------  ------------  ----- 
Year ended 31 Dec 2019                        133          242         1,772  2,147 
-------------------------------------  ----------  -----------  ------------  ----- 
 
   1   Discretionary participation features. 
 
Net insurance claims and benefits paid and movement in liabilities to 
 policyholders 
                                                     Non-linked  Linked life    Investment 
                                                      insurance    insurance     contracts 
                                                                               with DPF(1)    Total 
                                                           GBPm         GBPm          GBPm     GBPm 
---------------------------------------------------  ----------  -----------  ------------  ------- 
Gross claims and benefits paid 
 and movement in liabilities                                143          300         1,404  1,847 
---------------------------------------------------  ----------  -----------  ------------  ----- 
- claims, benefits and surrenders 
 paid                                                       102           93         1,578  1,773 
--------------------------------------------------- 
- movement in liabilities                                    41          207         (174)     74 
---------------------------------------------------  ----------  -----------  ------------  ----- 
Reinsurers' share of claims and 
 benefits paid and movement in liabilities                 (64)            -             -   (64) 
---------------------------------------------------  ----------  -----------  ------------  ----- 
- claims, benefits and surrenders 
 paid                                                      (62)          (3)             -   (65) 
--------------------------------------------------- 
- movement in liabilities                                   (2)            3             -      1 
---------------------------------------------------  ----------  -----------  ------------  ----- 
Year ended 31 Dec 2020                                       79          300         1,404  1,783 
---------------------------------------------------  ----------  -----------  ------------  ----- 
 
Gross claims and benefits paid 
 and movement in liabilities                                105          363         2,957  3,425 
---------------------------------------------------  ----------  -----------  ------------  ----- 
- claims, benefits and surrenders 
 paid                                                       136           96         1,490  1,722 
--------------------------------------------------- 
- movement in liabilities                                  (31)          267         1,467  1,703 
---------------------------------------------------  ----------  -----------  ------------  ----- 
Reinsurers' share of claims and 
 benefits paid and movement in liabilities                 (56)          (3)             -   (59) 
---------------------------------------------------  ----------  -----------  ------------  ----- 
- claims, benefits and surrenders 
 paid                                                      (61)          (3)             -   (64) 
--------------------------------------------------- 
- movement in liabilities                                     5            -             -      5 
---------------------------------------------------  ----------  -----------  ------------  ----- 
Year ended 31 Dec 2019                                       49          360         2,957  3,366 
---------------------------------------------------  ----------  -----------  ------------  ----- 
 
   1   Discretionary participation features. 
 
Liabilities under insurance contracts 
                                                                      Investment 
                                           Non-linked  Linked life     contracts 
                                            insurance    insurance   with DPF(1)      Total 
                                                 GBPm         GBPm          GBPm       GBPm 
-----------------------------------------  ----------  -----------  ------------  --------- 
Gross liabilities under insurance 
 contracts at 1 Jan 2020                          576        1,295        19,638   21,509 
-----------------------------------------  ----------  -----------  ------------  ------- 
Claims and benefits paid                        (102)         (93)       (1,578)  (1,773) 
-----------------------------------------  ----------  -----------  ------------  ------- 
Increase in liabilities to policyholders          143          300         1,404    1,847 
-----------------------------------------  ----------  -----------  ------------  ------- 
Exchange differences and other 
 movements(2)                                    (23)           10         1,246    1,233 
-----------------------------------------  ----------  -----------  ------------  ------- 
Gross liabilities under insurance 
 contracts at 31 Dec 2020                         594        1,512        20,710   22,816 
-----------------------------------------  ----------  -----------  ------------  ------- 
Reinsurers' share of liabilities 
 under insurance contracts                      (118)         (47)             -    (165) 
-----------------------------------------  ----------  -----------  ------------  ------- 
Net liabilities under insurance 
 contracts at 31 Dec 2020                         476        1,465        20,710   22,651 
-----------------------------------------  ----------  -----------  ------------  ------- 
 
Gross liabilities under insurance 
 contracts at 1 Jan 2019                          616        1,042        18,999   20,657 
-----------------------------------------  ----------  -----------  ------------  ------- 
Claims and benefits paid                        (119)         (96)       (1,474)  (1,689) 
-----------------------------------------  ----------  -----------  ------------  ------- 
Increase in liabilities to policyholders         (30)          267         1,483    1,720 
-----------------------------------------  ----------  -----------  ------------  ------- 
Exchange differences and other 
 movements                                        109           82           630      821 
-----------------------------------------  ----------  -----------  ------------  ------- 
Gross liabilities under insurance 
 contracts at 31 Dec 2019                         576        1,295        19,638   21,509 
-----------------------------------------  ----------  -----------  ------------  ------- 
Reinsurers' share of liabilities 
 under insurance contracts                      (113)         (50)             -    (163) 
-----------------------------------------  ----------  -----------  ------------  ------- 
Net liabilities under insurance 
 contracts at 31 Dec 2019                         463        1,245        19,638   21,346 
-----------------------------------------  ----------  -----------  ------------  ------- 
 
   1   Discretionary participation features. 

2 'Exchange differences and other movements' includes movements in liabilities arising from net unrealised investment gains recognised in other comprehensive income.

The key factors contributing to the movement in liabilities to policyholders included movement in the market value of assets supporting policyholder liabilities, death claims, surrenders, lapses, new business, the declaration of bonuses and other amounts attributable to policyholders.

 
5  Employee compensation and benefits 
   ---------------------------------- 
 
 
                               2020     2019 
                               GBPm     GBPm 
----------------------------  -----  ------- 
Wages and salaries            1,917  1,752 
----------------------------  -----  ----- 
Social security costs           367    383 
----------------------------  -----  ----- 
Post-employment benefits(1)      56     90 
----------------------------  -----  ----- 
Year ended 31 Dec             2,340  2,225 
----------------------------  -----  ----- 
 

1 Includes GBP36m (2019: GBP48m) in employer contributions to the defined contribution pension plans.

 
Average number of persons employed by the group during the year 
                                                     2020         2019 
                                               ----------  ----------- 
Wealth and Personal Banking                         6,807      5,597 
---------------------------------------------  ----------  --------- 
Commercial Banking                                  3,396      2,507 
---------------------------------------------  ----------  --------- 
Global Banking and Markets                          7,605      4,844 
---------------------------------------------  ----------  --------- 
Corporate Centre                                       58      4,806 
---------------------------------------------  ----------  --------- 
Year ended 31 Dec(1,2)                             17,866     17,754 
---------------------------------------------  ----------  --------- 
 

1 A change in reportable segments was made in 2020. Comparatives data have been re-presented accordingly. For further guidance, refer to Note 9: Segmental Analysis on page 139.

2 For year 2020, average numbers of FTE in corporate centre are allocated in respective businesses to align our approach with the Group. The FTE allocation is on the basis of amounts charged to the respective global business.

Share-based payments

'Wages and salaries' includes the effect of share-based payments arrangements, of which GBP76m were equity settled (2019: GBP86m), as follows:

 
                                                     2020  2019 
                                                     GBPm  GBPm 
---------------------------------------------------  ----  ---- 
Restricted share awards                                77    86 
---------------------------------------------------  ----  ---- 
Savings-related and other share award option plans      2     2 
---------------------------------------------------  ----  ---- 
Year ended 31 Dec                                      79    88 
---------------------------------------------------  ----  ---- 
 

.

 
HSBC share awards 
 
Deferred share 
 awards (including        *    An assessment of performance over the relevant period 
 annual incentive              ending on 31 December is used to determine the amount 
 awards, LTI awards            of the award to be granted. 
 delivered shares) 
 and Group Performance 
 Share Plan ('GPSP')      *    Deferred awards generally require employees to remain 
                               in employment over the vesting period and are 
                               generally not subject to performance conditions after 
                               the grant date. An exception to these are the LTI 
                               awards, which are subject to performance conditions. 
 
 
                          *    Deferred share awards generally vest over a period of 
                               three, five or seven years. 
 
 
                          *    Vested shares may be subject to a retention 
                               requirement post-vesting. GPSP awards are retained 
                               until cessation of employment. 
 
 
                          *    Awards are subject to a malus provision prior to 
                               vesting. 
 
 
                          *    Awards granted to Material Risk Takers from 2015 
                               onwards are subject to clawback post-vesting. 
----------------------  ------------------------------------------------------------ 
International 
 Employee Share           *    The plan was first introduced in Hong Kong in 2013 
 Purchase Plan                 and now includes employees based in 27 jurisdictions. 
 ('ShareMatch') 
 
                          *    Shares are purchased in the market each quarter up to 
                               a maximum value of GBP750, or the equivalent in local 
                               currency. 
 
 
                          *    Matching awards are added at a ratio of one free 
                               share for every three purchased. 
 
 
                          *    Matching awards vest subject to continued employment 
                               and the retention of the purchased shares for a 
                               maximum period of two years and nine months. 
----------------------  ------------------------------------------------------------ 
 
 
Movement on HSBC share awards 
                                                          2020        2019 
                                                        Number      Number 
                                                        (000s)      (000s) 
----------------------------------------------------  --------  ---------- 
Restricted share awards outstanding at 1 Jan            24,578    23,395 
----------------------------------------------------  -------- 
Additions during the year(1)                            16,823    19,358 
----------------------------------------------------  --------  -------- 
Released in the year(1)                               (16,024)  (17,742) 
----------------------------------------------------  --------  -------- 
Forfeited in the year                                  (1,010)     (433) 
----------------------------------------------------  --------  -------- 
Restricted share awards outstanding at 31 Dec           24,367    24,578 
----------------------------------------------------  --------  -------- 
Weighted average fair value of awards granted (GBP)       5.58      5.99 
----------------------------------------------------  --------  -------- 
 

1 Includes a number of share option plans transferred from or to other subsidiaries of HSBC Holdings plc.

 
HSBC share option plans 
 
Savings-related 
 share option           *    From 2014, eligible employees for the UK plan can 
 plans ('Sharesave')         save up to GBP500 per month with the option to use 
                             the savings to acquire shares. 
 
 
                        *    These are generally exercisable within six months 
                             following either the third or fifth anniversary of 
                             the commencement of a three-year or five-year 
                             contract, respectively. 
 
 
                        *    The exercise price is set at a 20% (2019: 20%) 
                             discount to the market value immediately preceding 
                             the date of invitation. 
--------------------  --------------------------------------------------------- 
 

Calculation of fair values

The fair values of share options are calculated using a Black-Scholes model. The fair value of a share award is based on the share price at the date of the grant.

 
Movement on HSBC share option plans 
                                                          Savings-related 
                                                         share option plans 
                                                      ------------------------ 
                                                             Number    WAEP(1) 
                                                             (000s)        GBP 
----------------------------------------------------  -------------  --------- 
Outstanding at 1 Jan 2020                                     4,245     4.78 
----------------------------------------------------  -------------  ------- 
Granted during the year(2)                                    5,909     2.56 
----------------------------------------------------  -------------  ------- 
Exercised during the year                                     (107)     4.44 
----------------------------------------------------  -------------  ------- 
Expired during the year                                        (78)     4.65 
----------------------------------------------------  -------------  ------- 
Forfeited during the year                                   (2,763)     4.79 
----------------------------------------------------  -------------  ------- 
Outstanding at 31 Dec 2020                                    7,206     2.96 
----------------------------------------------------  -------------  ------- 
Weighted average remaining contractual life (years)            3.64 
----------------------------------------------------  -------------  --------- 
 
Outstanding at 1 Jan 2019                                     4,008     4.88 
----------------------------------------------------  -------------  ------- 
Granted during the year(2)                                    2,078     4.68 
----------------------------------------------------  -------------  ------- 
Exercised during the year                                     (801)     4.32 
----------------------------------------------------  -------------  ------- 
Expired during the year                                        (35)     4.17 
----------------------------------------------------  -------------  ------- 
Forfeited during the year                                   (1,005)     5.43 
----------------------------------------------------  -------------  ------- 
Outstanding at 31 Dec 2019                                    4,245     4.78 
----------------------------------------------------  -------------  ------- 
Weighted average remaining contractual life (years)            2.76 
----------------------------------------------------  -------------  --------- 
 
   1   Weighted average exercise price. 

2 Includes a number of share option plans transferred from or to other subsidiaries of HSBC Holdings plc.

Post-employment benefit plans

We operate a number of pension plans throughout Europe for our employees. Some are defined benefit plans, of which HSBC Trinkaus & Burkhardt Pension Scheme is the most prominent within the group. The pension risk section on page 72 contains details about policies and practices associated with the pensions plans.

The group's balance sheet includes the net surplus or deficit, being the difference between the fair value of plan assets and the discounted value of scheme liabilities at the balance sheet date for each plan. Surpluses are only recognised to the extent that they are recoverable through reduced contributions in the future, or through potential future refunds from the schemes. In assessing whether a surplus is recoverable, the group has considered its current right to obtain a future refund or a reduction in future contributions together with the rights of third parties such as trustees.

HSBC Trinkaus & Burkhardt Pension Scheme

The plan is a final salary scheme and is calculated based on the employee length of service multiplied by a predefined benefit accrual and earnings. The pension is paid when the benefit falls due and is a specified pension payment, lump-sum or combination thereof. The plan is overseen by an independent corporate trustee, who has a fiduciary responsibility for the operation of the plan. Its assets are held separately from the assets of the group.

The strategic aim of the investment is to achieve, as continuously as possible, an increase in value as possible over time. For this purpose, the fund invests mainly in government bonds, corporate bonds, investment funds and equities. It invests predominantly in developed regions. Overall, emphasis is placed on having a high degree of diversification.

The latest funding valuation of the plan at 31 December 2020 was carried out by Tim Voetmann and Hans-Peter Kieselmann, at Willis Towers Watson GmbH, who are Fellows of the German Association of Actuaries (DAV), using the projected unit credit method. The next funding valuation will have an effective date of 31 December 2021.

 
Net assets/(liabilities) recognised on the balance sheet in respect of 
 defined benefit plans 
                                                                           Present 
                                                                             value      Effect 
                                                          Fair value    of defined    of limit 
                                                             of plan       benefit     on plan 
                                                              assets   obligations   surpluses    Total 
                                                                GBPm          GBPm        GBPm     GBPm 
--------------------------------------------------------  ----------  ------------  ----------  ------- 
Defined benefit pension plans                                    693         (876)           -  (183) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Defined benefit healthcare plans                                   -          (75)           -   (75) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
At 31 Dec 2020                                                   693         (951)           -  (258) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Total employee benefit liabilities (within 
 'Accruals, deferred income and other liabilities')                                             (288) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Total employee benefit assets (within 
 'Prepayments, accrued income and other 
 assets')                                                                                          30 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
 
Defined benefit pension plans                                    580         (759)           -  (179) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Defined benefit healthcare plans                                   -          (74)           -   (74) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
At 31 Dec 2019                                                   580         (833)           -  (253) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Total employee benefit liabilities (within 
 'Accruals, deferred income and other liabilities')                                             (275) 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
Total employee benefit assets (within 
 'Prepayments, accrued income and other 
 assets')                                                                                          22 
--------------------------------------------------------  ----------  ------------  ----------  ----- 
 

Defined benefit pension plans

 
Net asset/(liability) under defined benefit pension plans 
                                                            Fair value of    Present value of 
                                                                plan          defined benefit    Net defined benefit 
                                                               assets           obligations       asset/(liability) 
                                                               HSBC               HSBC               HSBC 
                                                           Trinkaus           Trinkaus           Trinkaus 
                                                                  &                  &                  & 
                                                          Burkhardt          Burkhardt          Burkhardt 
                                                            Pension   Other    Pension   Other    Pension       Other 
                                                            Plan(2)   plans    Plan(2)   plans    Plan(2)       plans 
                                                               GBPm    GBPm       GBPm    GBPm       GBPm        GBPm 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  ---------- 
At 1 Jan 2020                                                   405     175      (434)   (325)       (29)     (150) 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
Service cost                                                      -       -       (12)     (1)       (12)       (1) 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
- current service cost                                                            (14)    (10)       (14)      (10) 
-------------------------------------------------------- 
- past service cost 
 and gains from settlements                                       -       -          2       9          2         9 
Net interest income/(cost) 
 on the net defined 
 benefit asset/(liability)                                        3      16        (4)    (16)        (1)         - 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
Remeasurement effects 
 recognised in other 
 comprehensive income                                           (3)      84       (20)    (79)       (23)         5 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
 
  *    return on plan assets (excluding interest income)        (3)      26          -       -        (3)        26 
-------------------------------------------------------- 
- actuarial gains/(losses)                                        -       -       (21)    (27)       (21)      (27) 
-------------------------------------------------------- 
- other changes                                                   -      58          1    (52)          1         6 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
Exchange differences                                             23       -       (24)     (9)        (1)       (9) 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
Benefits paid                                                     -    (39)         10      46         10         7 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
Other movements(1)                                                7      22        (5)     (3)          2        19 
At 31 Dec 2020                                                  435     258      (489)   (387)       (54)     (129) 
--------------------------------------------------------  ---------  ------  ---------  ------  ---------  -------- 
 
 
At 1 Jan 2019                                               329  167  (417)  (306)  (88)  (139) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Service cost                                                  -    -   (21)   (15)  (21)   (15) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
- current service cost                                                 (21)    (9)  (21)    (9) 
--------------------------------------------------------- 
- past service cost 
 and gains from settlements                                   -    -      -    (6)     -    (6) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Net interest income/(cost) 
 on the net defined 
 benefit asset/(liability)                                    9    3    (6)    (5)     3    (2) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Remeasurement effects 
 recognised in other 
 comprehensive income                                        18    4   (14)   (27)     4   (23) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
 
  *    return on plan assets (excluding interest income)     18    4      -      -    18      4 
--------------------------------------------------------- 
- actuarial gains/(losses)                                    -    -   (14)   (27)  (14)   (27) 
--------------------------------------------------------- 
- other changes                                               -    -      -      -     -      - 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Exchange differences                                       (20)  (8)     22     18     2     10 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Benefits paid                                                 -  (4)      9     12     9      8 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
Other movements(1)                                           69   13    (7)    (2)    62     11 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
At 31 Dec 2019                                              405  175  (434)  (325)  (29)  (150) 
---------------------------------------------------------  ----  ---  -----  -----  ----  ----- 
 

1 Other movements include contributions by the group, contributions by employees, administrative costs and tax paid by plan.

2 The HSBC Trinkaus & Burkhardt Pension Plan and its comparatives have been disclosed as it is considered to be a prominent plan within the group.

HSBC Trinkaus & Burkhardt AG does not expect to make contributions to the HSBC Trinkaus & Burkhardt Pension Plan during 2021. Benefits expected to be paid from the HSBC Trinkaus & Burkhardt Pension Plan to retirees over each of the next five years, and in aggregate for the five years thereafter, are as follows:

 
Benefits expected to be paid from plans 
                                     2021   2022   2023   2024   2025    2026-2030 
                                     GBPm   GBPm   GBPm   GBPm   GBPm         GBPm 
----------------------------------  -----  -----  -----  -----  -----  ----------- 
HSBC Trinkaus & Burkhardt Pension 
 Plan(1)                               10     10      9     10     12     62 
----------------------------------  -----  -----  -----  -----  -----  -----  ---- 
 
 

1 The duration of the defined benefit obligation is 18.2 years for the HSBC Trinkaus & Burkhardt Pension Plan under the disclosure assumptions adopted (2019: 18.1 years).

 
Fair value of plan assets by asset classes 
                                     31 Dec 2020                              31 Dec 2019 
                                                                ---------------------------------------- 
                                   Quoted   No quoted                      Quoted   No quoted 
                                   market      market                      market      market 
                                    price       price                       price       price 
                                in active   in active  Thereof          in active   in active    Thereof 
                        Value      market      market     HSBC  Value      market      market       HSBC 
                         GBPm        GBPm        GBPm     GBPm   GBPm        GBPm        GBPm       GBPm 
----------------------  -----  ----------  ----------  -------  -----  ----------  ----------  --------- 
HSBC Trinkaus 
 & Burkhardt Pension 
 Plan 
----------------------  -----  ----------  ----------  -------  -----  ----------  ----------  --------- 
Fair value of 
 plan assets              435         418          17        -    405         389          16      146 
----------------------  -----  ----------  ----------  -------  -----  ----------  ----------  ------- 
- equities                 19          19           -        -     26          26           -        - 
---------------------- 
- bonds                   109         109           -        -     97          97           -        - 
---------------------- 
- other                   307         290          17        -    282         266          16      146 
----------------------  -----  ----------  ----------  -------  -----  ----------  ----------  ------- 
 

Post-employment defined benefit plans' principal actuarial financial assumptions

The group determines the discount rates to be applied to its obligations in consultation with the plans' local actuaries, on the basis of current average yields of high quality (AA-rated or equivalent) debt instruments with maturities consistent with those of the defined benefit obligations.

 
Key actuarial assumptions 
                                                                   Rate 
                                                                     of 
                                                               increase         Rate 
                                         Discount  Inflation        for       of pay 
                                             rate       rate   pensions     increase 
                                                %          %          %            % 
---------------------------------------  --------  ---------  ---------  ----------- 
HSBC Trinkaus & Burkhardt Pension Plan 
---------------------------------------  --------  ---------  ---------  ----------- 
At 31 Dec 2020                               0.70       1.75       1.50       2.50 
---------------------------------------  --------  ---------  ---------  --------- 
At 31 Dec 2019                               1.05       1.75       1.50       2.50 
---------------------------------------  --------  ---------  ---------  --------- 
 
 
Mortality tables and average life expectancy at age 65 
                                                      Life expectancy       Life expectancy 
                                                        at age 65 for         at age 65 for 
                                         Mortality      a male member        a female member 
                                             table       currently:            currently: 
                                                        Aged 65  Aged 45    Aged 65    Aged 45 
                                      ------------  -----------  -------  ---------  --------- 
HSBC Trinkaus & Burkhardt Pension 
 Plan 
                                      ------------  -----------  -------  ---------  --------- 
At 31 Dec 2020                         RT 2018G(1)     20.3        23.1       23.8     26.0 
------------------------------------  ------------  -------      ------   --------   ------ 
At 31 Dec 2019                            RT 2018G         20.2     23.0       23.7       25.9 
------------------------------------  ------------  -----------  -------  ---------  --------- 
 
 

1 Heubeck tables: RT 2018G. It is generally accepted and used mortality tables for occupational pension plans in Germany taking into account future mortality improvements and lighter mortality for higher-paid pensioners.

 
The effect of changes in key assumptions 
                                                      HSBC Trinkaus & Burkhardt 
                                                        Pension Plan Obligation 
                                              ------------------------------------------ 
                                                  Financial impact    Financial impact 
                                                       of increase       of decrease 
                                                   2020       2019        2020      2019 
                                                   GBPm       GBPm        GBPm      GBPm 
--------------------------------------------  ---------  ---------  ----------  -------- 
Discount rate - increase/decrease of 0.25%         (15)       (13)          16      14 
--------------------------------------------  ---------  ---------  ----------  ------ 
Inflation rate - increase/decrease of 0.25%          16          9        (12)     (9) 
--------------------------------------------  ---------  ---------  ----------  ------ 
Pension payments and deferred pensions - 
 increase/decrease of 0.25%                          10          9        (10)     (9) 
--------------------------------------------  ---------  ---------  ----------  ------ 
Pay - increase/decrease of 0.25%                      4          4         (4)     (3) 
--------------------------------------------  ---------  ---------  ----------  ------ 
Change in mortality - increase of 1 year             19         14         N/A       N/A 
--------------------------------------------  ---------  ---------  ----------  -------- 
 

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this in unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Directors' emoluments

The aggregate emoluments of the Directors of the bank, computed in accordance with the Companies Act 2006 as amended by statutory instrument 2008 No.410, were:

 
                                        2020      2019 
                                      GBP000    GBP000 
------------------------------------  ------  -------- 
Fees(1)                                1,256   1,136 
------------------------------------  ------  ------ 
Salaries and other emoluments(2, 5)    2,321   1,958 
------------------------------------  ------  ------ 
Annual incentives(3)                     576     472 
------------------------------------  ------  ------ 
Long-term incentives(4)                  727     160 
------------------------------------  ------  ------ 
Year ended 31 Dec                      4,880   3,726 
------------------------------------  ------  ------ 
 
   1   Fees paid to non-executive Directors. 
   2   Salaries and other emoluments include Fixed Pay Allowances. 

3 Discretionary annual incentives for executive Directors are based on a combination of individual and corporate performance, and are determined by the Remuneration Committee of the bank's parent company, HSBC Holdings plc. Incentive awards made to executive directors are delivered in the form of cash and HSBC Holdings plc shares. The total amount shown is comprised of GBP288,050 (2019: GBP235,752) in cash and GBP288,050 (2019: GBP235,752) in Restricted Shares, which is the upfront portion of the annual incentive granted in respect of performance year 2020.

4 The amount shown is comprised of GBP428,822 (2019: GBP48,002) in deferred cash, GBP289,261 (2019: GBP64,097) in deferred Restricted Shares, and GBP8,826 (2019: GBP48,050) in shares under the Group Performance Share Plan ('GPSP'). These amounts relate to the portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in 2020. The total vesting period of deferred cash and share awards is no less than three years, with 33% of the award vesting on each of the first and second anniversaries of the date of the award, and the balance vesting on the third anniversary of the date of the award. The deferred share awards are subject to at least a six-month retention period upon vesting. GPSP awards are subject to a five-year vesting period and a retention requirement until cessation of employment upon vesting. Details of the Plans are contained within the Directors' Remuneration Report of HSBC Holdings plc. The cost of any awards subject to service conditions under the HSBC Share Plan 2011 are recognised through an annual charge based on the fair value of the awards, apportioned over the period of service to which the award relates.

5 In addition to the amounts set out above, a payment was also made to a Director relating to the compensation for loss of employment. As the payment related to a longer period of employment with the Group (and not specifically to the Directorship) it is not included in the tables. However, the amount paid that related (on a time apportioned basis) to the period of Directorship is GBP93,097.

No Director exercised share options over HSBC Holdings plc ordinary shares during the year.

Retirement benefits are accruing to one Director under a money purchase scheme in respect of Directors' qualifying services (2019: one Director).

In addition, there were payments during 2020 under unfunded retirement benefit agreements to former Directors of GBP785,548 (2019: GBP815,772), The provision at 31 December 2020 in respect of unfunded pension obligations to former Directors amounted to GBP10,245,741 (2019: GBP10,737,186).

Of these aggregate figures, the following amounts are attributable to the highest paid Director:

 
                                  2020      2019 
                                GBP000    GBP000 
------------------------------  ------  -------- 
Salaries and other emoluments    1,392   1,190 
------------------------------  ------  ------ 
Annual incentives(1)               417     260 
------------------------------  ------  ------ 
Long-term incentives(2)            677     105 
------------------------------  ------  ------ 
Year ended 31 Dec                2,486   1,555 
------------------------------  ------  ------ 
 

1 Awards made to the highest paid Director are delivered in the form of cash and HSBC Holdings plc shares. The amount shown is comprised of GBP208,736 (2019: GBP130,000) in cash and GBP208,736 (2019: GBP130,000) in Restricted Shares.

2 The amount shown is comprised of GBP402,567 (2019: GBP28,429) in deferred cash, GBP274,104 (2019: GBP28,459) in deferred Restricted Shares. These amounts relate to a portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in 2020. The total vesting period of deferred cash and share awards is no less than three years, with 33% of the award vesting on each of the first and second anniversaries of the date of the award, and the balance vesting on the third anniversary of the date of the award. The share awards are subject to a six-month retention period upon vesting.

Pension contributions totalling GBP19,298 were made by the bank in respect of services by the highest paid

Director during the year       (2019: GBPnil). 
 
6  Auditors' remuneration 
   ---------------------- 
 
 
                            2020  2019 
                            GBPm  GBPm 
--------------------------  ----  ---- 
Audit fees payable to PwC   11.3  10.5 
--------------------------  ----  ---- 
Other audit fees payable     0.4   0.4 
--------------------------  ----  ---- 
Year ended 31 Dec           11.7  10.9 
--------------------------  ----  ---- 
 
 
Fees payable by the group to PwC 
                                                 2020    2019 
                                                 GBPm    GBPm 
----------------------------------------------   ----  ------ 
Fees for HSBC Bank plc's statutory audit(1)       5.3   5.5 
-----------------------------------------------  ----  ---- 
Fees for other services provided to the group    13.1  11.6 
-----------------------------------------------  ----  ---- 
- audit of the group's subsidiaries(2)            6.0   5.0 
----------------------------------------------- 
- audit-related assurance services(3)             4.2   2.7 
----------------------------------------------- 
- other assurance services(4)                     2.9   3.9 
Year ended 31 Dec                                18.4  17.1 
-----------------------------------------------  ----  ---- 
 

1 Fees payable to PwC for the statutory audit of the consolidated financial statements of the group and the separate financial statements of HSBC Bank plc. They exclude amounts payable for the statutory audit of the bank's subsidiaries which have been included in 'Fees for other services provided to the group'.

   2   Including fees payable to PwC for the statutory audit of the bank's subsidiaries. 

3 Including services for assurance and other services that relate to statutory and regulatory filings, including comfort letters and interim reviews.

   4   Including other permitted services relating to advisory, corporate finance transactions, etc. 

Fees payable for non-audit services for HSBC Bank plc are not disclosed separately because such fees are disclosed on a consolidated basis for the group.

 
7  Tax 
   --- 
 
 
Tax expense 
                                                       2020     2019 
                                                       GBPm     GBPm 
----------------------------------------------------  -----  ------- 
Current tax                                             195  (103) 
----------------------------------------------------  -----  ----- 
- for this year                                         186   (75) 
---------------------------------------------------- 
- adjustments in respect of prior years                   9   (28) 
----------------------------------------------------  -----  ----- 
Deferred tax                                          (331)    222 
----------------------------------------------------  -----  ----- 
- origination and reversal of temporary differences   (350)     48 
---------------------------------------------------- 
- effect of changes in tax rates                       (15)      - 
---------------------------------------------------- 
- adjustments in respect of prior years                  34    174 
----------------------------------------------------  -----  ----- 
Year ended 31 Dec(1)                                  (136)    119 
----------------------------------------------------  -----  ----- 
 

1 In addition to amounts recorded in the income statement, a tax charge of GBP135m (2019: credit of GBP100m) was recorded directly to equity.

The group's profits are taxed at different rates depending on the country in which the profits arise. The key applicable corporate tax rates in 2020 include the UK and France. The UK tax rate applying to HSBC Bank plc and its banking subsidiaries was 27% (2019: 27%), comprising 19% corporation tax plus 8% surcharge on UK banking profits. The applicable tax rate in France was 32% (2019: 34%). The applicable tax rate in France reduced to 28% on 1 January 2021 and will reduce to 26% from 1 January 2022. Other overseas subsidiaries and overseas branches provided for taxation at the appropriate rates in the countries in which they operate.

Tax reconciliation

The tax charged to the income statement differs from the tax expense that would apply if all profits had been taxed at the UK corporation tax rate as follows:

 
                                            2020             2019 
                                          GBPm       %   GBPm         % 
-------------------------------------  -------  ------  -----  -------- 
Loss before tax                        (1,614)          (872) 
-------------------------------------  -------  ------  -----  -------- 
Tax expense 
-------------------------------------  -------  ------  -----  -------- 
UK corporation tax at 19.00% (2019: 
 19.00%)                                 (307)    19.0  (166)    19.0 
-------------------------------------  -------  ------  -----  ------ 
Items increasing the tax charge in 
 2020: 
-------------------------------------  -------  ------  -----  -------- 
Movements in unrecognised deferred 
 tax                                       321  (19.9)      -       - 
-------------------------------------  -------  ------  -----  ------ 
Impact of taxing overseas profits at 
 different rates                            49   (3.0)    (5)     0.5 
-------------------------------------  -------  ------  -----  ------ 
Adjustment in respect of prior years        45   (2.8)    146  (16.6) 
-------------------------------------  -------  ------  -----  ------ 
Permanent disallowables                     36   (2.2)     37   (4.3) 
-------------------------------------  -------  ------  -----  ------ 
Non-deductible customer compensation 
 expense                                     2   (0.1)    (6)     0.6 
-------------------------------------  -------  ------  -----  ------ 
Impairment of goodwill                       -       -    219  (25.1) 
-------------------------------------  -------  ------  -----  ------ 
Items decreasing the tax charge in 
 2020: 
-------------------------------------  -------  ------  -----  -------- 
8% surcharge on UK banking profits       (100)     6.2   (34)     3.9 
-------------------------------------  -------  ------  -----  ------ 
Local taxes and overseas withholding 
 taxes                                    (75)     4.6     16   (1.8) 
-------------------------------------  -------  ------  -----  ------ 
Non-taxable income and gains subject 
 to tax at a lower rate                   (55)     3.4   (94)    10.8 
-------------------------------------  -------  ------  -----  ------ 
Other                                     (26)     1.6     22   (2.4) 
-------------------------------------  -------  ------  -----  ------ 
Change in tax rates                       (26)     1.6   (16)     1.8 
Year ended 31 Dec                        (136)     8.4    119  (13.6) 
-------------------------------------  -------  ------  -----  ------ 
 

The effective tax rate for the year was 8.4% (2019: (13.6)%), reflecting a tax credit arising on a loss before tax. The largest adjusting item in 2020 is the movement in unrecognised deferred tax of GBP321m, which mainly relates to the write-off and ongoing non-recognition of a net deferred tax asset in France. Management does not consider there to be sufficient evidence of future taxable profits to support recognition of this net deferred tax asset. The effective tax rate for 2019 was distorted by non-recurring, non-deductible goodwill impairments.

Accounting for taxes involves some estimation because the tax law is uncertain and the application requires a degree of judgement, which authorities may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice where appropriate. We do not expect significant liabilities to arise in excess of the amounts provided. The current tax asset includes an estimate of tax recoverable from HMRC with regards to past dividends received from EU resident companies. The ultimate resolution of this matter involves litigation for which the outcome is uncertain.

 
Movement of deferred tax assets and liabilities 
                                          Property, 
                                    Loan      plant                  Goodwill    Relief 
                  Retirement  impairment        and        FVOCI          and   for tax  Other(1, 
                    benefits  provisions  equipment  investments  intangibles    losses        2)    Total 
The group               GBPm        GBPm       GBPm         GBPm         GBPm      GBPm      GBPm     GBPm 
---------------   ----------  ----------  ---------  -----------  -----------  --------  --------  ------- 
Assets                    82          41        172            -          142        82         2    521 
---------------- 
Liabilities                -         (6)        (6)        (123)            -         -         -  (135) 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
At 1 Jan 2020             82          35        166        (123)          142        82         2    386 
---------------- 
Income statement        (37)          22        (1)          (3)           15       351      (16)    331 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
Other 
 comprehensive 
 income                   18           -          -         (40)            -      (15)     (103)  (140) 
---------------- 
At 31 Dec 2020            63          57        165        (166)          157       418     (117)    577 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
Assets(3)                 63          66        171            -          157       418         -    875 
---------------- 
Liabilities(3)             -         (9)        (6)        (166)            -         -     (117)  (298) 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
 
Assets                    92          32        281            -          174        42         -    621 
---------------- 
Liabilities                -         (4)        (9)         (73)            -         -      (24)  (110) 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
At 1 Jan 2019             92          28        272         (73)          174        42      (24)    511 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
Income statement        (30)           7      (106)            -         (32)        41     (102)  (222) 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
Other 
 comprehensive 
 income                   20           -          -         (50)            -       (1)       128     97 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
At 31 Dec 2019            82          35        166        (123)          142        82         2    386 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
Assets(3)                 82          41        172            -          142        82         2    521 
---------------- 
Liabilities(3)             -         (6)        (6)        (123)            -         -         -  (135) 
----------------  ----------  ----------  ---------  -----------  -----------  --------  --------  ----- 
 

1 Other deferred tax assets and liabilities relate to share-based payments and cash flow hedges. Deferred tax recognised in respect of losses is shown separately in 2020. Comparatives are restated.

2 The deferred tax asset recognised in respect of losses mainly relates to the UK and US State tax losses of the New York branch of HSBC Bank plc; both are supported by future profit forecasts.

3 After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets GBP597m (2019: GBP408m); and deferred tax liabilities GBP20m (2019: GBP22m).

Management has assessed the likely availability of future taxable profits against which to recover the deferred tax assets of the Company and the Group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts of future business performance. Management is satisfied that although the Company and Group recorded a UK tax loss in the year which could not be recovered against profits of other entities within HSBC's UK tax group the aforementioned evidence is sufficient to support recognition of all UK deferred tax assets. Deferred tax assets in the UK are supported by future profit forecasts for the whole of HSBC's UK tax group. This includes a number of companies which are not part of the HSBC Bank plc group, in particular HSBC UK Bank plc and its subsidiaries.

 
Movement of deferred tax assets and liabilities 
                                    Property,                      Relief 
                       Retirement   plant and          Goodwill   for tax 
                         benefits   equipment   and intangibles    losses  Other(1,2)    Total 
The bank                     GBPm        GBPm              GBPm      GBPm        GBPm     GBPm 
---------------------  ----------  ----------  ----------------  --------  ----------  ------- 
Assets(2)                      23         151               145        53           -    372 
--------------------- 
Lliabilities(2)                 -           -                 -         -        (47)   (47) 
At 1 Jan 2020                  23         151               145        53        (47)    325 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Income statement             (10)          11                11       377        (41)    348 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Other comprehensive 
 income                         3           -                 -      (14)       (116)  (127) 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
At 31 Dec 2020                 16         162               156       416       (204)    546 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Assets(3)                      16         162               156       416           -    750 
--------------------- 
Liabilities(3)                  -           -                 -         -       (204)  (204) 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
 
Assets                         22         257               177        40           -    496 
--------------------- 
Liabilities                     -         (2)                 -         -        (49)   (51) 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
At 1 Jan 2019                  22         255               177        40        (49)    445 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Income statement             (25)       (104)              (32)        13        (74)  (222) 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Other comprehensive 
 income                        26           -                 -         -          76    102 
At 31 Dec 2019                 23         151               145        53        (47)    325 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
Assets(3)                      23         151               145        53           -    372 
--------------------- 
Liabilities(3)                  -           -                 -         -        (47)   (47) 
---------------------  ----------  ----------  ----------------  --------  ----------  ----- 
 

1 Deferred tax recognised in respect of losses is shown separately in 2020. Comparatives are restated.

2 Other deferred tax assets and liabilities relate to fair value of own debt, loan impairment allowances, share-based payments and cash flow hedges.

3 The deferred tax asset recognised in respect of losses mainly relates to US State tax losses of the New York branch of HSBC Bank plc and losses in the UK; both are supported by future profit forecasts.

4 After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets GBP549m (2019: GBP327m) and deferred tax liabilities GBP3m (2019: GBP2m).

Unrecognised deferred tax

The group

The amount of temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance sheet was GBP1,238m (2019: GBP695m). These amounts consist of unused tax losses, tax credits and temporary differences arising in the New York branch of HSBC Bank plc of GBP925m (2019: GBP675m) and in France of GBP294m (2019: GBPnil). Of the unrecognised losses, GBP88m expire within 10 years (2019: GBP234m), and the remainder expire after 10 years.

The bank

The amount of temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance sheet was GBP925m (2019: GBP675m). These amounts include unused tax losses, tax credits and temporary differences arising in the New York branch of HSBC Bank plc of GBP925m (2019: GBP675m). Of the unrecognised losses, GBP88m expire within 10 years (2019: GBP234m), and the remainder expire after 10 years.

There are no unrecognised deferred tax liabilities arising from the group's investments in subsidiaries and branches.

 
8  Dividends 
   --------- 
 
 
Dividends to the parent company 
                                                2020             2019 
                                            GBP per        GBP per 
                                              share  GBPm    share     GBPm 
------------------------------------------  -------  ----  -------  ------- 
Dividends paid on ordinary shares 
------------------------------------------  -------  ----  -------  ------- 
In respect of previous year: 
------------------------------------------  -------  ----  -------  ------- 
- second interim dividend                         -     -     0.51    406 
------------------------------------------  -------  ----  -------  ----- 
- first special dividend                          -     -     0.85    674 
------------------------------------------  -------  ----  -------  ----- 
In respect of current year: 
------------------------------------------  -------  ----  -------  ------- 
- first special dividend                          -     -     1.60  1,277 
------------------------------------------  -------  ----  -------  ----- 
- second special dividend                         -     -     0.54    430 
------------------------------------------  -------  ----  -------  ----- 
Total                                             -     -     3.50  2,787 
------------------------------------------  -------  ----  -------  ----- 
Dividends on preference shares classified 
 as equity 
------------------------------------------  -------  ----  -------  ------- 
Dividend on HSBC Bank plc non-cumulative 
 third dollar preference shares                1.47    51     1.47     51 
------------------------------------------  -------  ----  -------  ----- 
Total                                          1.47    51     1.47     51 
------------------------------------------  -------  ----  -------  ----- 
Total coupons on capital securities 
 classified as equity                                 212             147 
------------------------------------------  -------  ----  -------  ----- 
Dividends to parent                                   263           2,985 
------------------------------------------  -------  ----  -------  ----- 
 

.

No dividend was declared on the ordinary share capital in respect of 2020 (2019: GBP1,707m).

 
Total coupons on capital securities classified 
 as equity 
                                                                ----------  ---------- 
                                                                      2020        2019 
                                                    First call 
                                                          date        GBPm        GBPm 
--------------------------------------------------  ----------  ----------  ---------- 
Undated Subordinated additional Tier 1 instruments 
--------------------------------------------------  ----------  ----------  ---------- 
- EUR1,900m                                           Dec 2020         103       97 
--------------------------------------------------  ----------  ----------  ------- 
- EUR235m                                             Jan 2022          11       12 
--------------------------------------------------  ----------  ----------  ------- 
- EUR300m                                             Mar 2023          10       10 
--------------------------------------------------  ----------  ----------  ------- 
- GBP555m                                             Mar 2023          28       28 
--------------------------------------------------  ----------  ----------  ------- 
 - GBP500m                                            Nov 2024          24        - 
--------------------------------------------------  ----------  ----------  ------- 
 - EUR250m                                            Nov 2024           8        - 
--------------------------------------------------  ----------  ----------  ------- 
 - GBP431m                                            Dec 2024          20        - 
--------------------------------------------------  ----------  ----------  ------- 
- EUR200m                                             Jan 2025           8        - 
--------------------------------------------------  ----------  ----------  ------- 
                                                                    212         147 
--------------------------------------------------  ----------  -------     ------- 
 
 
 
9  Segmental analysis 
   ------------------ 
 

Basis of preparation

The Chief Executive, supported by the rest of the Executive Committee, is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the group's reportable segments. Business results are assessed by the CODM on the basis of adjusted performance that removes the effects of significant items from reported results. We therefore present a reconciliation between reported and adjusted results as required by IFRSs.

Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and functions to the extent that they can be meaningfully attributed to businesses and countries. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-group elimination items for the businesses are presented in Corporate Centre.

Change in reportable segments

Effective from the second quarter of 2020, we made the following realignments within our internal reporting to the Executive Committee and CODM:

-- We simplified our matrix organisational structure by combining Global Private Banking and Retail Banking and Wealth Management to form Wealth and Personal Banking.

-- We reallocated our reporting of Balance Sheet Management from Corporate Centre to the global businesses.

Comparative data have been re-presented accordingly.

Our businesses

HSBC provides a comprehensive range of banking and related financial services to its customers in its three global businesses. The products and services offered to customers are organised by these global businesses. Global businesses are our reportable segments under IFRS 8 'Operating Segments'.

Our operating model consists of three businesses and a Corporate Centre, all supported by HSBC Operations, HSBC Services and Technology, and 11 functions, of which risk, finance, compliance, legal, marketing and human resources are included.

By operating segment:

 
Adjusted profit before tax 
                                                                2020 
                                                                     Corporate 
                                                WPB    CMB      GBM     Centre      Total 
                                               GBPm   GBPm     GBPm       GBPm       GBPm 
Net operating income/(expense) before 
 change in expected credit losses and 
 other credit impairment charges(1)           1,035  1,133    3,973      (144)    5,997 
------------------------------------------  -------  -----  -------  ---------  ------- 
- external                                    1,061  1,193    4,468      (725)    5,997 
------------------------------------------ 
- inter-segment                                (26)   (60)    (495)        581        - 
------------------------------------------  -------  -----  -------  ---------  ------- 
- of which: net interest income/(expense)       664    686      601       (53)    1,898 
------------------------------------------  -------  -----  -------  ---------  ------- 
Change in expected credit losses and 
 other credit impairment charges               (39)  (322)    (451)          4    (808) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Net operating income/(expense)                  996    811    3,522      (140)    5,189 
------------------------------------------  -------  -----  -------  ---------  ------- 
Total operating expenses                    (1,128)  (659)  (3,499)       (86)  (5,372) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Operating profit/(loss)                       (132)    152       23      (226)    (183) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Share of loss in associates and joint 
 ventures                                         -      -        -        (1)      (1) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Adjusted profit/(loss) before tax             (132)    152       23      (227)    (184) 
------------------------------------------  -------  -----  -------  ---------  ------- 
                                                  %      %        %                     % 
------------------------------------------  -------  -----  -------  ---------  --------- 
Adjusted cost efficiency ratio                109.0   58.2     88.1                89.6 
------------------------------------------  -------  -----  -------  ---------  ------- 
 
                                                                2019 
Net operating income/(expense) before 
 change in expected credit losses and 
 other credit impairment charges(1)           1,357  1,212    3,773      (273)    6,069 
------------------------------------------  -------  -----  -------  ---------  ------- 
 
  *    external                               1,392  1,260    4,244      (827)    6,069 
------------------------------------------ 
 
  *    inter-segment                           (35)   (48)    (471)        554        - 
------------------------------------------  -------  -----  -------  ---------  ------- 
- of which: net interest income/(expense)       746    761      770      (794)    1,483 
------------------------------------------  -------  -----  -------  ---------  ------- 
Change in expected credit losses and 
 other credit impairment charges                (3)  (109)     (41)         29    (124) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Net operating income/(expense)                1,354  1,103    3,732      (244)    5,945 
------------------------------------------  -------  -----  -------  ---------  ------- 
Total operating expenses                    (1,077)  (646)  (3,531)       (78)  (5,332) 
Operating profit/(loss)                         277    457      201      (322)      613 
------------------------------------------  -------  -----  -------  ---------  ------- 
Share of profit in associates and joint 
 ventures                                         -      -        -       (10)     (10) 
------------------------------------------  -------  -----  -------  ---------  ------- 
Adjusted profit/(loss) before tax               277    457      201      (332)      603 
------------------------------------------  -------  -----  -------  ---------  ------- 
                                                  %      %        %                     % 
------------------------------------------  -------  -----  -------  ---------  --------- 
Adjusted cost efficiency ratio                 79.4   53.3     93.6                87.9 
------------------------------------------  -------  -----  -------  ---------  ------- 
 

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly.

External net operating income is attributed to countries on the basis of the location of the branch responsible for reporting the results or advancing the funds:

 
                                               2020     2019 
                                               GBPm     GBPm 
--------------------------------------------  -----  ------- 
External net operating income by country(1)   5,900  6,044 
--------------------------------------------  -----  ----- 
- United Kingdom                              2,914  2,987 
-------------------------------------------- 
- France                                      1,528  1,653 
-------------------------------------------- 
- Germany                                       814    710 
-------------------------------------------- 
- Other countries                               644    694 
--------------------------------------------  -----  ----- 
 
 
Adjusted results reconciliation 
                                                    2020                              2019 
                                                 Significant                      Significant 
                                       Adjusted        items  Reported  Adjusted        items    Reported 
                                           GBPm         GBPm      GBPm      GBPm         GBPm        GBPm 
-------------------------------------  --------  -----------  --------  --------  -----------  ---------- 
Revenue(1)                                5,997         (97)     5,900     6,069         (25)     6,044 
-------------------------------------  --------  -----------  --------  --------  -----------  -------- 
ECL                                       (808)            -     (808)     (124)            -     (124) 
-------------------------------------  --------  -----------  --------  --------  -----------  -------- 
Operating expenses                      (5,372)      (1,333)   (6,705)   (5,332)      (1,450)   (6,782) 
-------------------------------------  --------  -----------  --------  --------  -----------  -------- 
Share of (loss)/profit in associates 
 and joint ventures                         (1)            -       (1)      (10)            -      (10) 
-------------------------------------  --------  -----------  --------  --------  -----------  -------- 
(Loss)/profit before tax                  (184)      (1,430)   (1,614)       603      (1,475)     (872) 
-------------------------------------  --------  -----------  --------  --------  -----------  -------- 
 

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

 
Adjusted profit reconciliation 
                                                           2020       2019 
                                                           GBPm       GBPm 
------------------------------------------------------  -------  --------- 
Year ended 31 Dec 
------------------------------------------------------  -------  --------- 
Adjusted profit before tax                                (184)      603 
------------------------------------------------------  -------  ------- 
Significant items                                       (1,430)  (1,475) 
------------------------------------------------------  -------  ------- 
- UK customer redress programmes                              -      (1) 
------------------------------------------------------ 
- debit valuation adjustment on derivative contracts        (2)     (27) 
------------------------------------------------------ 
- fair value movement on non-qualifying hedges              (1)        3 
------------------------------------------------------ 
- cost of structural reform                                   -     (87) 
------------------------------------------------------ 
- restructuring and other related costs                   (773)    (204) 
------------------------------------------------------ 
- settlements and provisions in connection with legal 
 and regulatory matters                                     (9)      (7) 
------------------------------------------------------ 
- impairment of goodwill                                      -  (1,152) 
------------------------------------------------------ 
- impairment of other intangible assets                   (645)        - 
Reported (loss)/profit before tax                       (1,614)    (872) 
------------------------------------------------------  -------  ------- 
 
 
Balance sheet by business 
                                                           Corporate 
                                     WPB     CMB      GBM     Centre      Total 
                                    GBPm    GBPm     GBPm       GBPm       GBPm 
--------------------------------  ------  ------  -------  ---------  --------- 
31 Dec 2020 
--------------------------------  ------  ------  -------  ---------  --------- 
Loans and advances to customers   28,638  25,809   46,867        177  101,491 
--------------------------------  ------  ------  -------  ---------  ------- 
Customer accounts                 41,258  48,368  105,346        212  195,184 
--------------------------------  ------  ------  -------  ---------  ------- 
 
31 Dec 2019(1) 
--------------------------------  ------  ------  -------  ---------  --------- 
Loans and advances to customers   26,910  27,241   54,063        177  108,391 
--------------------------------  ------  ------  -------  ---------  ------- 
Customer accounts                 39,421  38,332   99,224        259  177,236 
--------------------------------  ------  ------  -------  ---------  ------- 
 

1 A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly.

 
10  Trading assets 
    -------------- 
 
 
                                       The group         The bank 
                                       2020    2019    2020      2019 
                                       GBPm    GBPm    GBPm      GBPm 
-----------------------------------  ------  ------  ------  -------- 
Treasury and other eligible bills     3,273   1,991   2,507     780 
-----------------------------------  ------  ------  ------  ------ 
Debt securities                      31,399  40,481  20,035  28,330 
-----------------------------------  ------  ------  ------  ------ 
Equity securities                    36,775  38,292  35,810  36,696 
-----------------------------------  ------  ------  ------  ------ 
Trading securities                   71,447  80,764  58,352  65,806 
-----------------------------------  ------  ------  ------  ------ 
Loans and advances to banks(1)        5,058   6,371   4,207   5,611 
-----------------------------------  ------  ------  ------  ------ 
Loans and advances to customers(1)   10,471  11,114  10,476  11,868 
-----------------------------------  ------  ------  ------  ------ 
At 31 Dec                            86,976  98,249  73,035  83,285 
-----------------------------------  ------  ------  ------  ------ 
 

1 Loans and advances to banks and customers include reverse repos, stock borrowing and other amounts.

 
11  Fair values of financial instruments carried at fair value 
    ---------------------------------------------------------- 
 

Control framework

Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk taker.

For all financial instruments where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price determination or validation is utilised. In inactive markets, the group will source alternative market information to validate the financial instrument's fair value, with greater weight given to information that is considered to be more relevant and reliable. The factors that are considered in this regard are, inter alia:

   --    the extent to which prices may be expected to represent genuine traded or tradable prices; 
   --    the degree of similarity between financial instruments; 
   --    the degree of consistency between different sources; 
   --    the process followed by the pricing provider to derive the data; 

-- the elapsed time between the date to which the market data relates and the balance sheet date; and

   --    the manner in which the data was sourced. 

For fair values determined using valuation models, the control framework may include, as applicable, development or validation by independent support functions of: (i) the logic within valuation models; (ii) the inputs to these models; (iii) any adjustments required outside the valuation models; and (iv) where possible, model outputs. Valuation models are subject to a process of due diligence and calibration before becoming operational and are calibrated against external market data on an ongoing basis.

Financial liabilities measured at fair value

In certain circumstances, the group records its own debt in issue at fair value, based on quoted prices in an active market for the specific instrument. When quoted market prices are unavailable, the own debt in issue is valued using valuation techniques, the inputs for which are based either on quoted prices in an inactive market for the instrument or are estimated by comparison with quoted prices in an active market for similar instruments. In both cases, the fair value includes the effect of applying the credit spread that is appropriate to the group's liabilities.

Structured notes issued and certain other hybrid instruments are included within trading liabilities and are measured at fair value. The spread applied to these instruments is derived from the spreads at which the group issues structured notes.

Fair value hierarchy

Fair values of financial assets and liabilities are determined according to the following hierarchy:

-- Level 1 - valuation technique using quoted market price: financial instruments with quoted prices for identical instruments in active markets that HSBC can access at the measurement date.

-- Level 2 - valuation technique using observable inputs: financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.

-- Level 3 - valuation technique with significant unobservable inputs: financial instruments valued using valuation techniques where one or more significant inputs are unobservable.

--

 
Financial instruments carried at fair value and bases of valuation 
                                                 2020                             2019(1) 
                                    -------------------------------  ---------------------------------- 
                                     Level    Level  Level    Total    Level    Level  Level      Total 
                                         1        2      3                 1        2      3 
The group                             GBPm     GBPm   GBPm     GBPm     GBPm     GBPm   GBPm       GBPm 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  --------- 
Recurring fair value measurements 
 at 31 Dec 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  --------- 
Assets 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  --------- 
                                                                      69,292 
                                                                      25,754 
                                                                       3,203 
Trading assets                      60,890   24,475  1,611   86,976   98,249   25,754  3,203   98,249 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
Financial assets designated 
 and otherwise mandatorily 
 measured at fair value 
 through profit or loss              5,658    7,095  3,467   16,220    4,972    8,303  3,737   17,012 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
Derivatives                          1,668  197,568  1,974  201,210      869  162,032  1,637  164,538 
----------------------------------                                   -------  -------  -----  ------- 
Financial investments               38,347   11,829  1,635   51,811   32,729   12,168  1,554   46,451 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
Liabilities 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  --------- 
Trading liabilities                 29,847   14,264    118   44,229   37,195   10,791     40   48,026 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
Financial liabilities 
 designated at fair value              928   38,714  1,150   40,792    7,222   33,477    943   41,642 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
Derivatives                          1,058  195,078  3,096  199,232      672  158,730  1,681  161,083 
----------------------------------  ------  -------  -----  -------  -------  -------  -----  ------- 
 
 
The bank 
------------------------------------------------------------------------------------------------------ 
Recurring fair value measurements 
 at 31 Dec 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  --------- 
Assets 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  --------- 
Trading assets                      49,650   21,802  1,583   73,035  56,229   23,858  3,198   83,285 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Financial assets designated 
 and otherwise mandatorily 
 measured at fair value 
 through profit or loss                327    1,227    311    1,865     279    2,326    524    3,129 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Derivatives                          1,168  178,866  2,032  182,066     685  150,152  1,659  152,496 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Financial investments               27,011    1,603    141   28,755  25,023    1,480     58   26,561 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Liabilities 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  --------- 
Trading liabilities                 13,681   12,889    103   26,673  17,393    9,594     27   27,014 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Financial liabilities 
 designated at fair value                -   24,036    651   24,687       -   23,980    683   24,663 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
Derivatives                            960  176,785  3,287  181,032     533  147,145  1,929  149,607 
----------------------------------  ------  -------  -----  -------  ------  -------  -----  ------- 
 

1 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology primarily for private debt and equity and real-estate investments during the period. The result of this is a total of GBP13.6bn moving from Level 1, and GBP11.4bn and GBP2.2bn into Levels 2 and 3 respectively. The change has impacted the disclosure for 'Financial investments' and 'Financial assets designated and otherwise mandatorily measured at fair value'.

 
Transfers between Level 1 and Level 2 fair values 
                                     Assets                                      Liabilities 
                                          Designated 
                                                 and 
                                           otherwise 
                                         mandatorily 
                                            measured 
                                       at fair value 
                                             through                             Designated 
                   Financial  Trading      profit or                    Trading     at fair 
                 investments   assets        loss(2)  Derivatives   liabilities       value    Derivatives 
                        GBPm     GBPm           GBPm         GBPm          GBPm        GBPm           GBPm 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ------------- 
At 31 Dec 2020 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ------------- 
Transfers from 
 Level 
 1 to Level 2            200      915              -            -            77       6,013            - 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ----------- 
Transfers from 
 Level 
 2 to Level 1          1,557    1,557             71            -           304           -             -- 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ------------- 
 
At 31 Dec 
2019(1) 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ------------- 
Transfers from 
 Level 
 1 to Level 2          2,055    1,336              -           18           194           -            - 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ----------- 
Transfers from 
 Level 
 2 to Level 1            546      552            141           85           106           -           90 
--------------  ------------  -------  -------------  -----------  ------------  ----------  ----------- 
 

1 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology.

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are normally attributable to observability of valuation inputs and price transparency. In the current year the majority of the transfer relates to the reclassification of certain positions where improved data is now available.

Fair value adjustments

Fair value adjustments are adopted when the group determines there are additional factors considered by market participants that are not incorporated within the valuation model. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement, such as when models are enhanced and fair value adjustments may no longer be required.

 
Global Banking and Markets fair value adjustments 
                                                   2020               2019 
                                                    Corporate           Corporate 
                                               GBM     Centre    GBM       Centre 
                                              GBPm       GBPm   GBPm         GBPm 
-------------------------------------------  -----  ---------  -----  ----------- 
Type of adjustment 
-------------------------------------------  -----  ---------  -----  ----------- 
Risk-related                                   647        16     663           12 
-------------------------------------------  -----  --------   -----  ----------- 
 
  *    bid-offer                               252         -     244       - 
------------------------------------------- 
 
  *    uncertainty                              60         1      58       - 
------------------------------------------- 
 
  *    credit valuation adjustment             211        15     192           12 
------------------------------------------- 
 
  *    debt valuation adjustment              (40)         -    (41)       - 
------------------------------------------- 
 
  *    funding fair value adjustment           151         -     191       - 
------------------------------------------- 
 
  *    other                                    13         -      19       - 
-------------------------------------------  -----  --------   -----  ------  --- 
Model-related                                   47         -      47       - 
-------------------------------------------  -----  --------   -----  ------  --- 
 
  *    model limitation                         44         -      45       - 
------------------------------------------- 
 
  *    other                                     3         -       2       - 
-------------------------------------------  -----  --------   -----  ------  --- 
Inception profit (Day 1 P&L reserves)           60         -      42       - 
-------------------------------------------  -----  --------   -----  ------  --- 
At 31 Dec                                      754        16     752           12 
-------------------------------------------  -----  --------   -----  ----------- 
 
 

Bid-offer

IFRS 13 'Fair value measurement' requires use of the price within the bid-offer spread that is most representative of fair value. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the extent to which bid-offer costs would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding the position.

Uncertainty

Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In these circumstances, an adjustment may be necessary to reflect the likelihood that market participants would adopt more conservative values for uncertain parameters and/or model assumptions than those used in the valuation model.

Credit and debit valuation adjustments

The CVA is an adjustment to the valuation of over-the-counter ('OTC') derivative contracts to reflect the possibility that the counterparty may default, and that the group may not receive the full market value of the transactions.

The DVA is an adjustment to the valuation of OTC derivative contracts to reflect the possibility that HSBC may default, and that it may not pay the full market value of the transactions.

HSBC calculates a separate CVA and DVA for each legal entity, and for each counterparty to which the entity has exposure. With the exception of central clearing parties, all third-party counterparties are included in the CVA and DVA calculations, and these adjustments are not netted across Group's entities.

HSBC calculates the CVA by applying the probability of default ('PD') of the counterparty, conditional on the non-default of HSBC, to HSBC's expected positive exposure to the counterparty and multiplying the result by the loss expected in the event of default.

Conversely, HSBC calculates the DVA by applying the PD of HSBC, conditional on the non-default of the counterparty, to the expected positive exposure of the counterparty to HSBC and multiplying the result by the proportional loss expected in the event of default. Both calculations are performed over the life of the potential exposure.

For most products, HSBC uses a simulation methodology, which incorporates a range of potential exposures over the life of the portfolio, to calculate the expected positive exposure to a counterparty. The simulation methodology includes credit mitigants, such as counterparty netting agreements and collateral agreements with the counterparty.

The methodologies do not, in general, account for 'wrong-way risk', which arises when the underlying value of the derivative prior to any CVA is positively correlated to the PD of the counterparty. When there is significant wrong-way risk, a trade-specific approach is applied to reflect this risk in the valuation.

Funding fair value adjustment

The FFVA is calculated by applying future market funding spreads to the expected future funding exposure of any uncollateralised component of the OTC derivative portfolio. The expected future funding exposure is calculated by a simulation methodology, where available, and is adjusted for events that may terminate the exposure, such as the default of HSBC or the counterparty. The FFVA and DVA are calculated independently.

Model limitation

Models used for portfolio valuation purposes may be based upon a simplified set of assumptions that do not capture all current and future material market characteristics. In these circumstances, model limitation adjustments are adopted.

Inception profit (Day 1 P&L reserves)

Inception profit adjustments are adopted when the fair value estimated by a valuation model is based on one or more significant unobservable inputs. The accounting for inception profit adjustments is discussed in Note 1.

Fair value valuation bases

 
Financial instruments measured at fair value using a valuation technique 
 with significant unobservable inputs - Level 3 
                                        Assets                                          Liabilities 
                                       Designated 
                                              and 
                                        otherwise 
                                      mandatorily 
                                         measured 
                                          at fair 
                                            value 
                                Held      through                            Held  Designated 
                 Financial       for    profit or                             for     at fair 
               Investments   trading         loss  Derivatives    Total   trading       value  Derivatives    Total 
The group             GBPm      GBPm         GBPm         GBPm     GBPm      GBPm        GBPm         GBPm     GBPm 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ------- 
Private 
 equity 
 including 
 strategic 
 investments            75         3        3,153            -    3,231         3           -            -      3 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Asset-backed 
 securities            847       372           18            -    1,237         -           -            -      - 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Structured 
 notes                   -         -            -            -        -        21       1,147            -  1,168 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Derivatives              -         -            -        1,974    1,974         -           -        3,095  3,095 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Other 
 portfolios            713     1,236          296            -    2,245        94           3            1     98 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
At 31 Dec 
 2020                1,635     1,611        3,467        1,974    8,687       118       1,150        3,096  4,364 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
 
Private 
 equity 
 including 
 strategic 
 investments            66         3        3,300            -    3,369         3           -            -      3 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Asset-backed 
 securities            578       694           21            -    1,293         -           -            -      - 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Structured 
 notes                   -         2            -            -        2        35         943            -    978 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Derivatives              -         -            -        1,637    1,637         -           -        1,677  1,677 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
Other 
 portfolios            910     2,504          416            -    3,830         2           -            4      6 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
At 31 Dec 
 2019 
 (1)                 1,554     3,203        3,737        1,637   10,131        40         943        1,681  2,664 
-------------  -----------  --------  -----------  -----------  -------  --------  ----------  -----------  ----- 
 

1 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology. The result of this is an increase of GBP2.2bn of assets in Level 3; private equity including strategic investments increased by GBP1.2bn and other portfolios by GBP1bn.

 
The bank 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ------- 
Private equity 
 including strategic 
 investments            56      -  300      -    356    -    -      -      - 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Asset-backed 
 securities             85    372    -      -    457    -    -      -      - 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Structured 
 notes                   -      -    -      -      -    9  651      -    660 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Derivatives              -      -    -  2,032  2,032    -    -  3,286  3,286 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Other portfolios         -  1,211   11      -  1,222   94    -      1     95 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
At 31 Dec 2020         141  1,583  311  2,032  4,067  103  651  3,287  4,041 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
 
Private equity 
 including strategic 
 investments            54      -  524      -    578    -    -      -      - 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Asset-backed 
 securities              4    693    -      -    697    -    -      -      - 
Structured 
 notes                   -      1    -      -      1   25  683      -    708 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Derivatives              -      -    -  1,659  1,659    -    -  1,919  1,919 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
Other portfolios         -  2,504    -      -  2,504    2    -     10     12 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
At 31 Dec 2019          58  3,198  524  1,659  5,439   27  683  1,929  2,639 
---------------------  ---  -----  ---  -----  -----  ---  ---  -----  ----- 
 

Level 3 instruments are present in both ongoing and legacy businesses. Loans held for securitisation, certain derivatives and predominantly all Level 3 Asset-backed securities are legacy positions. HSBC has the capability to hold these positions.

Private equity including strategic investments

The investment's fair value is estimated: on the basis of an analysis of the investee's financial position and results, risk profile, prospects and other factors; by reference to market valuations for similar entities quoted in an active market; the price at which similar companies have changed ownership; or from published net asset values ('NAVs') received. If necessary, adjustments are made to the NAV of funds to obtain the best estimate of fair value.

Asset-backed securities

While quoted market prices are generally used to determine the fair value of these securities, valuation models are used to substantiate the reliability of the limited market data available and to identify whether any adjustments to quoted market prices are required. For certain ABSs, such as residential mortgage-backed securities, the valuation uses an industry standard model with assumptions relating to prepayment speeds, default rates and loss severity based on collateral type, and performance, as appropriate. The valuations output is benchmarked for consistency against observable data for securities of a similar nature.

Structured notes

The fair value of Level 3 structured notes is derived from the fair value of the underlying debt security, and the fair value of the embedded derivative is determined as described in the paragraph below on derivatives. These structured notes comprise principally equity-linked notes, issued by HSBC, which provide the counterparty with a return linked to the performance of equity securities and other portfolios. Examples of the unobservable parameters include long-dated equity volatilities and correlations between equity prices, and interest and foreign exchange rates.

Derivatives

OTC derivative valuation models calculate the present value of expected future cash flows, based upon 'no-arbitrage' principles. For many vanilla derivative products, the modelling approaches used are standard across the industry. For more complex derivative products, there may be some differences in market practice. Inputs to valuation models are determined from observable market data, wherever possible, including prices available from exchanges, dealers, brokers or providers of consensus pricing. Certain inputs may not be observable in the market directly, but can be determined from observable prices through model calibration procedures or estimated from historical data or other sources.

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy

 
Movement in Level 3 financial instruments 
                                                                                  Assets                                   Liabilities 
                                                                                     Designated 
                                                                                           and 
                                                                                      otherwise 
                                                                                    mandatorily 
                                                                                       measured 
                                                                                        at fair 
                                                                                          value 
                                                                                        through                            Designated 
                                                                Financial  Trading       profit                   Trading     at fair 
                                                              Investments   assets      or loss  Derivatives  liabilities       value    Derivatives 
The group                                                            GBPm     GBPm         GBPm         GBPm         GBPm        GBPm           GBPm 
                                                              ----------- 
At 1 Jan 2020(1)                                                    1,554    3,203        3,737        1,637           40         943        1,681 
Total gains/(losses) 
 recognised in profit 
 or loss                                                               14        3           95        1,582          237          87        2,644 
 
  *    net income from financial instruments held for 
       trading or managed on a fair value basis                         -        3            -        1,582          237           -        2,644 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                             -        -           95            -            -          87            - 
 
  *    gains less losses from financial investments at fair 
       value through other comprehensive income                        14        -            -            -            -           -            - 
Total gains/(losses) 
 recognised in other comprehensive 
 income ('OCI')                                                        21       56         (12)           33            1          23            7 
- financial investments: 
 fair value gains/(losses)                                             58        -            2            -            -           -            - 
- exchange differences                                               (37)       56         (14)           33            1          23            7 
Purchases                                                             294      442        1,061            -           53           -            - 
New issuances                                                           -        -            -            -            5         575            - 
Sales                                                               (525)    (791)      (1,435)            -        (198)           -            - 
Settlements                                                         (116)    (868)         (79)      (1,138)         (20)       (525)      (1,080) 
Transfers out                                                        (61)  (1,336)         (61)        (358)          (7)       (265)        (437) 
Transfers in                                                          454      902          161          218            7         312          281 
At 31 Dec 2020                                                      1,635    1,611        3,467        1,974          118       1,150        3,096 
Unrealised gains/(losses) 
 recognised in profit 
 or loss relating to assets 
 and liabilities held 
 at 31 Dec 2020                                                         -     (24)           43          505          (1)        (73)        1,171 
 
  *    trading income/(expense) excluding net interest 
       income                                                           -     (24)                       505          (1)                    1,171 
 
  *    net income/(expense) from other financial instruments 
       designated at fair value                                                              43                                  (73) 
 
At 1 Jan 2019                                                       1,392    3,552        3,282        2,080           46         990        1,463 
Total gains/(losses) 
 recognised in profit 
 or loss                                                                4    (104)          264          189          (3)         111          587 
 
  *    net income from financial instruments held for 
       trading or managed on a fair value basis                         -    (104)            -          189          (3)           -          587 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                             4        -          264            -            -         111            - 
 
  *    gains less losses from financial investments at fair 
       value through other comprehensive income                         -        -            -            -            -           -            - 
Total gains/(losses) 
 recognised in other comprehensive 
 income ('OCI')                                                        13     (50)        (108)         (23)          (1)        (16)          (7) 
- financial investments: 
 fair value gains/(losses)                                             32        -            -            -            -           -            - 
- exchange differences                                               (19)     (50)        (108)         (23)          (1)        (16)          (7) 
Purchases                                                             323    1,468          739            -            5         123            - 
New issuances                                                           -      120            -            -            4         686            - 
Sales                                                                (43)    (499)        (178)            -          (7)       (149)            - 
Settlements                                                         (123)    (598)        (252)         (98)          (5)       (450)         (51) 
Transfers out                                                       (180)  (1,029)         (10)        (610)          (8)       (366)        (372) 
Transfers in                                                          168      343            -           99            9          14           61 
At 31 Dec 2019(1)                                                   1,554    3,203        3,737        1,637           40         943        1,681 
Unrealised gains/(losses) 
 recognised in profit 
 or loss relating to assets 
 and liabilities held 
 at 31 Dec 2019                                                         -     (17)          159          127            -           8          239 
 
  *    trading income/(expense) excluding net interest 
       income                                                           -     (17)            -          127            -           -          239 
 
  *    net income from other financial instruments 
       designated at fair value                                         -        -          159            -            -           8            - 
 

1 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology. The result of this is an increase of GBP2.2bn of assets in Level 3; financial investments increased by GBP0.9bn and Financial assets designated and otherwise mandatorily measured at fair value by GBP1.3bn.

 
Movement in Level 3 financial instruments (continued) 
                                                                                  Assets                                   Liabilities 
                                                                                     Designated 
                                                                                           and 
                                                                                      otherwise 
                                                                                    mandatorily 
                                                                                       measured 
                                                                                        at fair 
                                                                                          value 
                                                                                        through                            Designated 
                                                                Financial  Trading       profit                   Trading     at fair 
                                                              Investments   Assets      or loss  Derivatives  Liabilities       value    Derivatives 
The bank                                                             GBPm     GBPm         GBPm         GBPm         GBPm        GBPm           GBPm 
                                                                                                 -----------  -----------  ----------  ------------- 
At 1 Jan 2020                                                          58    3,198          524        1,659           27         683        1,929 
                                                                                                 -----------  -----------  ----------  ----------- 
Total gains/(losses) 
 recognised in profit 
 or loss                                                                2        5           44        2,076          235        (22)        2,749 
                                                                                                 -----------  -----------  ----------  ----------- 
 
  *    net income from financial instruments held for 
       trading or managed on a fair value basis                         -        5            -        2,076          235           -        2,749 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                             -        -           44            -            -        (22)            - 
 
  *    gains less losses from financial investments at fair 
       value through other comprehensive income                         2        -            -            -            -           -            - 
Total gains/(losses) 
 recognised in other 
 comprehensive income 
 ('OCI')(2)                                                           (4)       55            5            2            -           -            - 
 
- exchange differences                                                (4)       55            5            2            -           -            - 
                                                                                                 -----------  -----------  ----------  ----------- 
Purchases                                                               -      403          282            -           52           -            - 
                                                                                                 -----------  -----------  ----------  ----------- 
New issuances                                                           -        -            -            -            -         558            - 
                                                                                                 -----------  -----------  ----------  ----------- 
Sales                                                                   -    (749)        (542)            -        (198)           -            - 
                                                                                                 -----------  -----------  ----------  ----------- 
Settlements                                                           (6)    (849)            -      (1,551)         (13)       (536)      (1,254) 
                                                                                                 -----------  -----------  ----------  ----------- 
Transfers out                                                           -  (1,336)          (2)        (385)          (7)       (167)        (524) 
                                                                                                 -----------  -----------  ----------  ----------- 
Transfers in                                                           91      856            -          231            7         135          387 
                                                                                                 -----------  -----------  ----------  ----------- 
At 31 Dec 2020                                                        141    1,583          311        2,032          103         651        3,287 
                                                                                                 -----------  -----------  ----------  ----------- 
Unrealised gains/(losses) 
 recognised in profit 
 or loss relating to 
 assets and liabilities 
 held at 31 Dec 2020                                                    -     (24)           10          523          (1)        (10)        1,287 
 
  *    trading income/(expense) excluding net interest 
       income                                                           -     (24)                       523          (1)                    1,287 
 
  *    net income/(expense) from other financial instruments 
       designated at fair value                                                              10                                  (10) 
 
At 1 Jan 2019                                                          72    3,586          670        2,133           19         728        1,719 
                                                                                                 ----------- 
Entity transfer out 
 of the bank(1)                                                         -        -            -            -            -           -         (40) 
                                                                                                              -----------  ----------  ----------- 
Total gains/(losses) 
 recognised in profit 
 or loss                                                                -    (102)           92          188            3         105          679 
                                                                                                              -----------  ----------  ----------- 
 
  *    net income from financial instruments held for 
       trading or managed on a fair value basis                         -    (102)            -          188            3           -          679 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                             -        -           92            -            -         105            - 
 
  *    gains less losses from financial investments at fair 
       value through other comprehensive income                         -        -            -            -            -           -            - 
Total gains/(losses) 
 recognised in other 
 comprehensive income 
 ('OCI')(2)                                                             -     (49)         (24)            -            -           -            - 
- exchange differences                                                  -     (49)         (24)            -            -           -            - 
Purchases                                                               -    1,466           10            -            -           -            - 
                                                                                                              -----------  ----------  ----------- 
New issuances                                                           -      120            -            -            -         650            - 
                                                                                                              -----------  ----------  ----------- 
Sales                                                                 (3)    (499)          (2)            -            -           -            - 
                                                                                                              -----------  ----------  ----------- 
Settlements                                                           (9)    (638)        (222)        (141)            5       (470)        (113) 
                                                                                                              -----------  ----------  ----------- 
Transfers out                                                        (54)  (1,029)            -        (612)          (7)       (330)        (397) 
                                                                                                              -----------  ----------  ----------- 
Transfers in                                                           52      343            -           91            7           -           81 
                                                                                                              -----------  ----------  ----------- 
At 31 Dec 2019                                                         58    3,198          524        1,659           27         683        1,929 
 
Unrealised gains/(losses) 
 recognised in profit 
 or loss relating to 
 assets and liabilities 
 held at 31 Dec 2019                                                    -     (18)            -           38            -          23        (285) 
 
  *    trading income/(expense) excluding net interest 
       income                                                           -     (18)            -           38            -           -        (285) 
 
  *    net income from other financial instruments 
       designated at fair value                                         -        -            -            -            -          23            - 
 
 

1 Position transferred in the first quarter to the Spanish branch of HSBC Continental Europe (former HSBC France).

2 Included in 'financial investments: fair value gains/(losses)' in the current year and 'exchange differences' in the consolidated statement of comprehensive income.

Effect of changes in significant unobservable assumptions to reasonably possible alternatives

 
Sensitivity of Level 3 fair values to reasonably possible alternative 
 assumptions 
                                      2020                                           2019(2) 
                       Reflected                                       Reflected 
                           in                                              in 
                        profit or              Reflected                profit or               Reflected 
                          loss                   in OCI                   loss                    in OCI 
                                    Un-                     Un-                     Un-                       Un- 
                 Favourable  favourable  Favourable  favourable  Favourable  favourable  Favourable    favourable 
                    changes     changes     changes     changes     changes     changes     changes       changes 
The group              GBPm        GBPm        GBPm        GBPm        GBPm        GBPm        GBPm          GBPm 
                 ----------  ----------  ----------  ---------- 
Derivatives, 
 trading assets 
 and trading 
 liabilities(1)         161       (145)           -           -         140       (131)           -           - 
                 ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Designated and 
 otherwise 
 mandatorily 
 measured at 
 fair value 
 through profit 
 or loss                226       (226)           -           -         288       (211)           -           - 
                 ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Financial 
 investments             26        (26)          49        (49)          17        (17)          52        (55) 
                 ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
At 31 Dec               413       (397)          49        (49)         445       (359)          52        (55) 
                 ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 
The bank 
Derivatives, trading assets 
 and trading liabilities(1)   170  (154)   -     -  122  (113)  -  - 
                              ---  -----      ----  ---  -----   --- 
Designated and otherwise 
 mandatorily measured at 
 fair value through profit 
 or loss                       54   (54)   -     -   57   (55)  -  - 
                              ---  -----      ----  ---  -----   --- 
Financial investments           -      -  10  (10)    -      -  6(6) 
                              ---  -----      ----  ---  -----   --- 
At 31 Dec                     224  (208)  10  (10)  179  (168)  6(6) 
                              ---  -----      ----  ---  -----   --- 
 

1 Derivatives, trading assets and trading liabilities are presented as one category to reflect the manner in which these instruments are risk managed.

2 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology. The result of this is an increase in 'Financial investments reflected through OCI' and 'Financial assets designated and mandatorily measured at fair value reflected in profit or loss' of GBP35m and GBP75m respectively.

1

 
Sensitivity of Level 3 fair values to reasonably possible alternative 
 assumptions by instrument type 
                                       2020                                                 2019(1) 
                       Reflected                                             Reflected 
                           in                                                    in 
                       profit or                  Reflected                  profit or                   Reflected 
                          loss                      in OCI                      loss                       in OCI 
               Favourable  Un-favourable  Favourable  Un-favourable  Favourable  Un-favourable  Favourable    Un-favourable 
                  changes        changes     changes        changes     changes        changes     changes          changes 
                     GBPm           GBPm        GBPm           GBPm        GBPm           GBPm        GBPm             GBPm 
               ----------  -------------  ----------  ------------- 
Private 
 equity 
 including 
 strategic 
 investments          193          (195)           7            (7)         272          (195)           7            (7) 
               ----------  -------------  ----------  -------------  ----------  -------------  ----------  ------------- 
Asset-backed 
 securities            64           (40)           5            (4)          48           (25)           1              - 
               ----------  -------------  ----------  -------------  ----------  ------------- 
Structured 
 notes                 23           (23)           -              -           6            (6)           -              - 
               ----------  -------------  ----------  -------------  ----------  ------------- 
Derivatives            73           (70)           -              -          62           (63)           -              - 
               ----------  -------------  ----------  -------------  ----------  -------------  ----------  ------------- 
Other 
 portfolios            60           (69)          37           (38)          57           (70)          44           (48) 
               ----------  -------------  ----------  -------------  ----------  -------------  ----------  ------------- 
At Total              413          (397)          49           (49)         445          (359)          52           (55) 
               ----------  -------------  ----------  -------------  ----------  -------------  ----------  ------------- 
 

1 Balances from 2019 have been re-presented to disclose a consistent application of the levelling methodology. The result of this is an increase in financial investments reflected through OCI of GBP35m due to other portfolios GBP44m, Private equity including strategic investments GBP7m and Asset-backed securities GBP(16)m and increase in Financial assets designated and mandatorily measured at fair value reflected in profit or loss of GBP75m due to Private equity including strategic investments GBP53m, Asset-backed securities GBP16m and other portfolios GBP6m.

The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.

When the fair value of a financial instrument is affected by more than one unobservable assumption, the above table reflects the most favourable or the most unfavourable change from varying the assumptions individually.

Key unobservable inputs to Level 3 financial instruments

 
Quantitative information about significant unobservable inputs in Level 
 3 valuations 
                                   Fair value                                         2020           2019 
                                                                                     Full range     Full range 
                               Assets  Liabilities                                    of inputs      of inputs 
                                 GBPm         GBPm                           Key  Lower  Higher  Lower  Higher 
                                                        Valuation   unobservable 
                                                       techniques         inputs 
Private equity including 
 strategic 
 investments                    3,231            3      See below      See below    N/A     N/A    N/A     N/A 
 
Asset-backed securities         1,237            - 
 
                                                           Market 
- CLO/CDO(1)                       33            -          proxy     Bid quotes      -     100      -     100 
                                                           Market 
- Other ABSs                    1,204            -          proxy     Bid quotes      -     100      -      99 
Structured notes                    -        1,168 
 
                                                            Model 
                                                         - Option         Equity 
                                    -          700          model     Volatility     0%    115%     5%     90% 
                                                                          Equity 
- equity-linked notes                                                Correlation   (4)%     79%    31%     91% 
                                                            Model 
                                                         - Option           Fund 
- fund-linked notes                 -           84          model     Volatility     0%     21%     5%     21% 
                                                            Model 
                                                         - Option 
- FX-linked notes                   -            9          model  FX Volatility     0%     23%     4%     23% 
- other                             -          375 
 
Derivatives                     1,974        3,095 
 
- Interest rate derivatives: 
                                                            Model 
                                                     - Discounted       Constant 
                                                             cash     Prepayment 
securitisation swaps              209          518           flow           Rate     6%      6%     6%      7% 
                                                            Model 
                                                         - Option 
long-dated swaptions              387          271          model  IR Volatility     6%     28%     8%     22% 
other                             356          280 
- FX derivatives: 
                                                            Model 
                                                         - Option 
FX options                        410          411          model  FX Volatility     0%     43%     0%     25% 
- Equity derivatives: 
                                                            Model 
long-dated single stock                                  - Option         Equity 
 options                          326          515          model     Volatility     7%     70%     4%     89% 
other(2)                          229        1,044 
- Credit derivatives: 
other                              57           56 
 
Other portfolios                2,245           98 
 
                                                            Model 
                                                     - Discounted 
                                                             cash         Credit 
- structured certificates           -            -           flow     Volatility     -%      -%     4%      4% 
- other(3)                      2,245           98 
 
At 31 Dec                       8,687        4,364 
 
 
   1   Collateralised loan obligation/collateralised debt obligation. 
   2   Other Equity Derivatives consists mainly of Swaps and OTC Options. 

3 Other consists of various instruments including investment in funds, repurchase agreement and bonds.

Private equity including strategic investments

Given the bespoke nature of the analysis in respect of each holding, it is not practical to quote a range of key unobservable inputs.

Prepayment rates

Prepayment rates are a measure of the anticipated future speed at which a loan portfolio will be repaid in advance of the due date. They vary according to the nature of the loan portfolio and expectations of future market conditions, and may be estimated using a variety of evidence, such as prepayment rates implied from proxy observable security prices, current or historical prepayment rates and macroeconomic modelling.

Market proxy

Market proxy pricing may be used for an instrument when specific market pricing is not available, but there is evidence from instruments with common characteristics. In some cases, it might be possible to identify a specific proxy, but more generally evidence across a wider range of instruments will be used to understand the factors that influence current market pricing and the manner of that influence.

Volatility

Volatility is a measure of the anticipated future variability of a market price. It varies by underlying reference market price, and by strike and maturity of the option.

Certain volatilities, typically those of a longer-dated nature, are unobservable and estimated from observable data. The range of unobservable volatilities reflects the wide variation in volatility inputs by reference market price. The core range is significantly narrower than the full range because these examples with extreme volatilities occur relatively rarely within the HSBC portfolio.

Correlation

Correlation is a measure of the inter-relationship between two market prices, and is expressed as a number between minus one and one. It is used to value more complex instruments where the payout is dependent upon more than one market price. There is a wide range of instruments for which correlation is an input, and consequently a wide range of both same-asset correlations and cross-asset correlations is used. In general, the range of same-asset correlations will be narrower than the range of cross-asset correlations.

Unobservable correlations may be estimated based upon a range of evidence, including consensus pricing services, HSBC trade prices, proxy correlations and examination of historical price relationships. The range of unobservable correlations quoted in the table reflects the wide variation in correlation inputs by market price pair.

Credit spread

Credit spread is the premium over a benchmark interest rate required by the market to accept lower credit quality. In a discounted cash flow model, the credit spread increases the discount factors applied to future cash flows, thereby reducing the value of an asset. Credit spreads may be implied from market prices and may not be observable in more illiquid markets.

Inter-relationships between key unobservable inputs

Key unobservable inputs to Level 3 financial instruments may not be independent of each other. As described above, market variables may be correlated. This correlation typically reflects the manner in which different markets tend to react to macroeconomic or other events. Furthermore, the effect of changing market variables on the HSBC portfolio will depend on HSBC's net risk position in respect of each variable.

 
12  Fair values of financial instruments not carried at fair value 
 
 
 
Fair values of financial instruments not carried at fair value and bases 
 of valuation 
                                                                     Fair value 
                                                     Quoted                Significant 
                                                     market  Observable   unobservable 
                                         Carrying     price      inputs   inputs Level 
                                           amount   Level 1     Level 2              3       Total 
The group                                    GBPm      GBPm        GBPm           GBPm        GBPm 
At 31 Dec 2020 
Assets 
Loans and advances to 
 banks                                     12,646         -      12,649              -    12,649 
 
Loans and advances to 
 customers                                101,491         -           -        101,584   101,584 
 
Reverse repurchase agreements 
 - non-trading                             67,577         -      67,577              -    67,577 
 
Financial investments 
 - at amortised cost                           15         -           7              7        14 
 
Liabilities 
Deposits by banks                          34,305         -      34,249              -    34,249 
 
Customer accounts                         195,184         -     195,076            104   195,180 
 
Repurchase agreements 
 - non-trading                             34,903         -      34,903              -    34,903 
 
Debt securities in issue                   17,371         -      17,094            273    17,367 
 
Subordinated liabilities                   13,764         -      14,638              -    14,638 
 
 
At 31 Dec 2019 
Assets 
Loans and advances to 
 banks                                     11,467         -      11,459             18    11,477 
 
Loans and advances to 
 customers                                108,391         -           -        108,526   108,526 
 
Reverse repurchase agreements 
 - non-trading                             85,756         -      85,756              -    85,756 
 
Financial investments 
 - at amortised cost                           13         -           6              7        13 
 
Liabilities 
Deposits by banks                          23,991         -      23,978              -    23,978 
 
Customer accounts                         177,236         -     177,170            113   177,283 
 
Repurchase agreements 
 - non-trading                             49,385         -      49,385              -    49,385 
 
Debt securities in issue                   25,039         -      25,039              -    25,039 
 
Subordinated liabilities                   13,182         -      13,638              -    13,638 
 
 
 
Fair values of financial instruments not carried at fair value and bases 
 of valuation 
                                                                     Fair value 
                                                     Quoted                Significant 
                                                     market  Observable   unobservable 
                                         Carrying     price      inputs   inputs Level 
                                           amount   Level 1     Level 2              3       Total 
The bank                                     GBPm      GBPm        GBPm           GBPm        GBPm 
At 31 Dec 2020 
Assets 
Loans and advances to 
 banks                                      8,063         -       8,064              -     8,064 
 
Loans and advances to 
 customers                                 43,241         -           -         43,222    43,222 
 
Reverse repurchase agreements 
 - non-trading                             50,137         -      50,137              -    50,137 
 
Financial investments 
 - at amortised cost(1)                     2,214         -       2,246              -     2,246 
 
Liabilities 
Deposits by banks                          17,484         -      17,483              -    17,483 
 
Customer accounts                         119,974         -     119,974              -   119,974 
 
Repurchase agreements 
 - non-trading                             26,996         -      26,996              -    26,996 
 
Debt securities in issue                   15,356         -      15,356              -    15,356 
 
Subordinated liabilities                   13,360         -      14,160              -    14,160 
 
At 31 Dec 2019 
Assets 
Loans and advances to 
 banks                                      9,522         -       9,518              4     9,522 
 
Loans and advances to 
 customers                                 49,926         -           -         50,380    50,380 
 
Reverse repurchase agreements 
 - non-trading                             50,736         -      50,737              -    50,737 
 
Financial investments                           -         -           -              -         - 
 - at amortised cost 
 
Liabilities 
Deposits by banks                          16,356         -      16,356              -    16,356 
 
Customer accounts                         109,040         -     109,039              -   109,039 
 
Repurchase agreements 
 - non-trading                             36,327         -      36,327              -    36,327 
 
Debt securities in issue                   15,038         -      15,038              -    15,038 
 
Subordinated liabilities                   12,783         -      13,359              -    13,359 
 
 

1 It relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with Single Resolution Board requirements on Minimum Required Eligible Liabilities.

Other financial instruments not carried at fair value are typically short-term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value. They include cash and balances at central banks and items in the course of collection from and transmission to other banks, all of which are measured at amortised cost.

Valuation

Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It does not reflect the economic benefits and costs that HSBC expects to flow from an instrument's cash flow over its expected future life. Our valuation methodologies and assumptions in determining fair values for which no observable market prices are available may differ from those of other companies.

Loans and advances to banks and customers

To determine the fair value of loans and advances to banks and customers, loans are segregated, as far as possible, into portfolios of similar characteristics. Fair values are based on observable market transactions, when available. When they are unavailable, fair values are estimated using valuation models incorporating a range of input assumptions. These assumptions may include: value estimates from third-party brokers reflecting over-the-counter trading activity; forward-looking discounted cash flow models, taking account of expected customer prepayment rates, using assumptions that HSBC believes are consistent with those that would be used by market participants in valuing such loans; new business rates estimates for similar loans; and trading inputs from other market participants including observed primary and secondary trades. From time to time, we may engage a third-party valuation specialist to measure the fair value of a pool of loans.

The fair value of loans reflects expected credit losses at the balance sheet date and estimates of market participants' expectations of credit losses over the life of the loans, and the fair value effect of repricing between origination and the balance sheet date. For credit impaired loans, fair value is estimated by discounting the future cash flows over the time period they are expected to be recovered.

Financial investments

The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are determined using valuation techniques that incorporate the prices and future earnings streams of equivalent quoted securities.

Deposits by banks and customer accounts

The fair values of on-demand deposits are approximated by their carrying value. For deposits with longer-term maturities, fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining maturities.

Debt securities in issue and subordinated liabilities

Fair values are determined using quoted market prices at the balance sheet date where available, or by reference to quoted market prices for similar instruments. When quoted market prices are unavailable, these instruments are valued using valuation techniques, the inputs for which are derived from observable market data and, where relevant, from assumptions in respect of unobservable inputs.

Repurchase and reverse repurchase agreements - non-trading

Fair values approximate carrying amounts as balances are generally short dated.

 
13  Financial assets designated and otherwise mandatorily measured at 
     fair value through profit 
     or loss 
 
 
                                        The group                         The bank 
                                   2020            2019            2020             2019 
                                  Designated      Designated      Designated        Designated 
                               at fair value         at fair   at fair value     at fair value 
                               and otherwise       value and   and otherwise     and otherwise 
                                 mandatorily       otherwise     mandatorily       mandatorily 
                                    measured     mandatorily        measured          measured 
                               at fair value        measured   at fair value     at fair value 
                                               at fair value 
                                        GBPm            GBPm            GBPm              GBPm 
Securities                            14,620          14,313             398             716 
 
- debt securities                      2,918           2,867             116              86 
- equity securities                   11,702          11,446             282             630 
 
Loans and advances to banks 
 and customers                         1,285           2,456           1,152           2,170 
 
Other                                    315             243             315             243 
 
At 31 Dec                             16,220          17,012           1,865           3,129 
 
 
 
14  Derivatives 
    ----------- 
 
 
Notional contract amounts and fair values of derivatives by product contract 
 type 
                     Notional contract 
                           amount             Fair value - Assets          Fair value - Liabilities 
                        Trading  Hedging   Trading  Hedging     Total     Trading  Hedging        Total 
The group                  GBPm     GBPm      GBPm     GBPm      GBPm        GBPm     GBPm         GBPm 
                    -----------  -------  --------  -------  --------  ----------  -------  ----------- 
Foreign exchange      4,378,792    5,297    60,341      191    60,532    (59,990)     (41)   (60,031) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Interest rate         8,922,892   40,258   155,752      619   156,371   (151,623)    (488)  (152,111) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Equities                481,638        -    10,857        -    10,857    (12,598)        -   (12,598) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Credit                  198,306        -     1,874        -     1,874     (2,672)        -    (2,672) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Commodity and 
 other                   82,130        -     1,572        -     1,572     (1,816)        -    (1,816) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Offset (Note 28)                                             (29,996)                          29,996 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
At 31 Dec 2020       14,063,758   45,555   230,396      810   201,210   (228,699)    (529)  (199,232) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
 
Foreign exchange      4,671,667    5,377    48,994      240    49,234    (48,556)    (102)   (48,658) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Interest rate         9,192,428   39,928   120,867      476   121,343   (115,308)    (482)  (115,790) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Equities                816,306        -     7,397        -     7,397     (9,437)        -    (9,437) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Credit                  247,107        -     3,684        -     3,684     (4,322)        -    (4,322) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Commodity and 
 other                   61,974        -       974        -       974       (970)        -      (970) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
Offset (Note 28)                                             (18,094)                          18,094 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
At 31 Dec 2019       14,989,482   45,305   181,916      716   164,538   (178,593)    (584)  (161,083) 
                    -----------  -------  --------  -------  --------  ----------  -------  --------- 
 

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

Derivative asset and liability fair values increased during 2020, driven by yield curve movements and changes in foreign exchange rates.

 
                    Notional contract 
                          amount             Fair value - Assets          Fair value - Liabilities 
                       Trading  Hedging   Trading  Hedging     Total     Trading  Hedging        Total 
The bank                  GBPm     GBPm      GBPm     GBPm      GBPm        GBPm     GBPm         GBPm 
                   -----------  -------  --------  -------  --------  ----------  -------  ----------- 
Foreign exchange     4,329,503    5,059    58,925      178    59,103    (58,831)     (41)   (58,872) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Interest rate        7,019,211   25,135   132,021      691   132,712   (128,249)    (388)  (128,637) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Equities               467,114        -    10,441        -    10,441    (12,697)        -   (12,697) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Credit                 195,578        -     1,849        -     1,849     (2,621)        -    (2,621) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Commodity and 
 other                  81,513        -     1,561        -     1,561     (1,805)        -    (1,805) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Offset                                                      (23,600)                          23,600 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
At 31 Dec 2020      12,092,919   30,194   204,797      869   182,066   (204,203)    (429)  (181,032) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
 
Foreign exchange     4,642,626    5,366    48,485      240    48,725    (48,293)    (101)   (48,394) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Interest rate        7,258,834   24,350   105,187      543   105,730   (100,001)    (393)  (100,394) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Equities               802,676        -     7,270        -     7,270     (9,433)        -    (9,433) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Credit                 240,813        -     3,600        -     3,600     (4,219)        -    (4,219) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Commodity and 
 other                  62,013        -       975        -       975       (971)        -      (971) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
Offset                                                      (13,804)                          13,804 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
At 31 Dec 2019      13,006,962   29,716   165,517      783   152,496   (162,917)    (494)  (149,607) 
                   -----------  -------  --------  -------  --------  ----------  -------  --------- 
 

Use of derivatives

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

Trading derivatives

Most of the group's derivative transactions relate to sales and trading activities. Sales activities include the structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current or expected risks. Trading activities include market-making and risk management. Market-making entails quoting bid and offer prices to other market participants for the purpose of generating revenues based on spread and volume. Risk management activity is undertaken to manage the risk arising from client transactions, with the principal purpose of retaining client margin. Other derivatives classified as held for trading include non-qualifying hedging derivatives.

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

Derivatives valued using models with unobservable inputs

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

 
Unamortised balance of derivatives valued using models with significant 
 unobservable inputs 
                                                          The group     The bank 
                                                          2020  2019  2020    2019 
                                                          GBPm  GBPm  GBPm    GBPm 
-------------------------------------------------------  -----  ----  ----  ------ 
Unamortised balance at 1 Jan                                42    58    40    55 
                                                         -----  ----  ----  ---- 
Deferral on new transactions                               105    70   103    70 
                                                         -----  ----  ----  ---- 
Recognised in the income statement during 
 the year:                                                (88)  (85)  (87)  (85) 
                                                         -----  ----  ----  ---- 
- amortisation                                            (57)  (43)  (57)  (43) 
- subsequent to unobservable inputs becoming 
 observable                                                (2)     -   (2)     - 
- maturity, termination or offsetting derivative          (28)  (42)  (28)  (42) 
- risk hedged                                              (1)     -     -     - 
                                                                ----        ---- 
Exchange differences and other                               1   (1)     -     - 
                                                         -----  ----  ----  ---- 
Unamortised balance at 31 Dec(1)                            60    42    56    40 
                                                         -----  ----  ----  ---- 
 
   1   This amount is yet to be recognised in the consolidated income statement. 

1

Hedge accounting derivatives

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

Fair value hedges

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

 
Hedging instrument by hedged risk 
                                               Hedging instrument 
                                          Carrying amount 
                                                               Balance sheet         Change in 
The group          Notional amount(1)     Assets  Liabilities   presentation     fair value(2) 
Hedged risk                      GBPm       GBPm         GBPm                             GBPm 
Interest rate(3)               29,737        617        (488)    Derivatives           (364) 
 
At 31 Dec 2020                 29,737        617        (488)                          (364) 
 
 
 
Interest rate(3)   30,154  473  (479)  Derivatives  (173) 
                                       ----------- 
At 31 Dec 2019     30,154  473  (479)               (173) 
 
 

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

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

   3   The hedged risk 'interest rate' includes inflation risk. 
 
Hedged item by hedged risk 
                                          Hedged item                                     Ineffectiveness 
                                         Accumulated 
                                       fair value hedge 
                                          adjustments 
                                          included in 
               Carrying amount        carrying amount(2) 
                                                                              Change  Recognised 
                                                                             in fair   in profit 
The group      Assets  Liabilities     Assets  Liabilities                  value(1)    and loss 
                                                                                                        Profit 
Hedged                                                      Balance sheet                             and loss 
 risk            GBPm         GBPm       GBPm         GBPm   presentation       GBPm        GBPm  presentation 
                                                                                                    Net income 
                                                                                                          from 
                                                                                                     financial 
                                                                                                   instruments 
                                                                Financial                             held for 
                                                                   assets                              trading 
                                                            at fair value                           or managed 
                                                            through other                            on a fair 
Interest                                                    comprehensive                                value 
 rate(3)       20,295            -        588            -         income        409        (14)         basis 
                                                                Loans and 
                                                                 advances 
                    4            -          2            -       to banks          2 
                                                                Loans and 
                                                                 advances 
                1,327            -         23            -   to customers         15 
 
                                                                     Debt 
                                                               securities 
                    -          576          -          108       in issue          4 
            ---------  -----------  ---------  ----------- 
                                                             Subordinated 
                                                              liabilities 
                                                                      and 
                                                              deposits by 
                    -        6,483          -          248       banks(4)       (80) 
 
At 31 Dec 
 2020          21,626        7,059        613          356                       350        (14) 
            ---------  -----------  ---------  -----------                 --------- 
 
 
Hedged item by hedged risk (continued) 
                                          Hedged item                                     Ineffectiveness 
                                         Accumulated 
                                       fair value hedge 
                                          adjustments 
                                          included in 
               Carrying amount        carrying amount(2) 
                                                                              Change  Recognised 
                                                                             in fair   in profit 
The group      Assets  Liabilities     Assets  Liabilities                  value(1)    and loss 
                                                                                                        Profit 
Hedged                                                      Balance sheet                             and loss 
risk             GBPm         GBPm       GBPm         GBPm   presentation       GBPm        GBPm  presentation 
                                                                                                    Net income 
                                                                                                          from 
                                                                                                     financial 
                                                                                                   instruments 
                                                                Financial                             held for 
                                                                   assets                              trading 
                                                            at fair value                           or managed 
                                                            through other                            on a fair 
Interest                                                    comprehensive                                value 
 rate(3)       15,528            -        312            -         income        330         (1)         basis 
                                                                Loans and 
                                                                 advances 
                    2            -          2            -       to banks          2 
 
                                                                Loans and 
                                                                 advances 
                  926            -          5            -   to customers         15 
 
                                                                     Debt 
                                                               securities 
                    -          821          -          102       in issue        (9) 
 
                                                             Subordinated 
                                                              liabilities 
                                                                      and 
                                                              deposits by 
                    -        8,393          -           28       banks(4)      (165) 
 
At 31 Dec 
 2019          16,456        9,214        319          130                       173         (1) 
                                                                           --------- 
 

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

2 The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were GBP29m (2019: GBP(14)m) for 'Financial assets at fair value through other comprehensive income', is GBPnil (2019: GBP157m) for 'Deposits by banks' and GBP24m (2019: GBP26m) for 'Debt securities in issue'.

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

4 The notional amount of non-dynamic fair value hedges was GBP6,178m (2019: GBP8,177m) of which the weighted-average maturity is August 2024 and the weighted average swap rate is 0.82% (2019: 0.58%). GBP6,178m (2019: GBP5,970m) of these hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

 
Hedging instrument by hedged risk 
                                           Hedging instrument 
                                  Carrying amount 
The bank             Notional     Assets  Liabilities  Balance sheet         Change in 
                    amount(1)                           presentation     fair value(2) 
Hedged risk              GBPm       GBPm         GBPm                             GBPm 
Interest rate(3)       20,725        689        (387)    Derivatives           (280) 
 
At 31 Dec 2020         20,725        689        (387)                          (280) 
                   ----------  ---------  -----------                 -------------- 
 
 
Hedged risk          GBPm  GBPm   GBPm         GBPm     GBPm 
Interest rate(3)   18,906   540  (392)  Derivatives  (110) 
                   ------        -----               ----- 
At 31 Dec 2019     18.906   540  (392)               (110) 
                   ------        -----               ----- 
 

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

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

   3   The hedged risk 'interest rate' includes inflation risk. 
 
Hedged item by hedged risk 
                                          Hedged item                                     Ineffectiveness 
                                         Accumulated 
                                       fair value hedge 
                                          adjustments 
                                          included in 
               Carrying amount        carrying amount(2) 
                                                                              Change  Recognised 
                                                                             in fair   in profit 
The bank       Assets  Liabilities     Assets  Liabilities                  value(1)    and loss 
                                                                                                        Profit 
Hedged                                                      Balance sheet                             and loss 
 risk            GBPm         GBPm       GBPm         GBPm   presentation       GBPm        GBPm  presentation 
                                                                Financial 
                                                                   assets 
                                                            at fair value 
                                                            through other 
Interest                                                    comprehensive 
 rate(3)       13,711            -        438            -         income        344        (17) 
                                                                Loans and 
                                                                 advances 
                   37            -          -            -   to customers          - 
 
                                                                     Debt 
                                                               securities 
                    -          576          -          108       in issue          4 
            ---------  -----------  ---------  ----------- 
                                                                                                    Net income 
                                                                                                          from 
                                                                                                     financial 
                                                                                                   instruments 
                                                                                                      held for 
                                                                                                       trading 
                                                             Subordinated                           or managed 
                                                              liabilities                            on a fair 
                                                             and deposits                                value 
                    -        6,449          -          248    by banks(4)       (85)                     basis 
            ---------  -----------  ---------  ----------- 
At 31 Dec 
 2020          13,748        7,025        438          356                       263        (17) 
            ---------  -----------  ---------  -----------                 --------- 
 
 
Hedged item by hedged risk (continued) 
                                          Hedged item                                     Ineffectiveness 
                                         Accumulated 
                                       fair value hedge 
                                          adjustments 
                                          included in 
                                           carrying 
               Carrying amount             amount(2) 
                                                                                      Recognised 
                                                                              Change          in 
                                                                             in fair      profit 
The bank       Assets  Liabilities     Assets  Liabilities                  value(1)    and loss 
                                                                                                        Profit 
Hedged                                                      Balance sheet                             and loss 
 risk            GBPm         GBPm       GBPm         GBPm   presentation       GBPm        GBPm  presentation 
                                                                                                    Net income 
                                                                                                          from 
                                                                                                     financial 
                                                                                                   instruments 
                                                                Financial                             held for 
                                                                   assets                              trading 
                                                            at fair value                           or managed 
                                                            through other                            on a fair 
Interest                                                    comprehensive                                value 
 rate(3)       11,881            -        214            -         income        282         (3)         basis 
                                                                Loans and 
                                                                 advances 
                   60            -        (1)            -   to customers        (1) 
 
                                                                     Debt 
                                                               securities 
                    -          545          -          102       in issue        (9) 
            ---------  -----------  ---------  ----------- 
                                                             Subordinated 
                                                              liabilities 
                                                             and deposits 
                    -        6,149          -            -    by banks(4)      (165) 
            ---------  -----------  ---------  ----------- 
At 31 Dec 
 2019          11,941        6,694        213          102                       107         (3) 
            ---------  -----------  ---------  -----------                 ---------  ---------- 
 

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

2 The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were GBP29m (2019: GBP(14)m) for 'Financial assets at fair value through other comprehensive income', GBPnil (2019: GBP157m ) for 'Deposits by banks' and GBP24m (2019: GBP26m) for 'Debt securities in issue'.

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

4 The notional amount of non-dynamic fair value hedges was GBP6,178m (2019: GBP5,970m), of which the weighted-average maturity is August 2024 and the weighted average swap rate is 0.82% (2019: 0.85%) . Those hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

1

Cash flow hedges

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

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

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

 
Hedging instrument by hedged risk 
                                                                            Hedged 
                                Hedging instrument                            item      Ineffectiveness 
                                                     Balance 
                                                       sheet 
                           Carrying amount      presentation 
                                                                 Change     Change  Recognised 
              Notional                                          in fair    in fair   in profit 
             amount(1)     Assets  Liabilities                 value(2)   value(3)    and loss 
                                                                                                      Profit 
Hedged                                                                                              and loss 
risk              GBPm       GBPm         GBPm                     GBPm       GBPm        GBPm  presentation 
            ----------  ---------  -----------                ---------  ---------  ---------- 
                                                                                                  Net income 
                                                                                                        from 
                                                                                                   financial 
                                                                                                 instruments 
                                                                                                    held for 
                                                                                                     trading 
                                                                                                  or managed 
                                                                                                   on a fair 
Foreign                                                                                                value 
 exchange        5,286        191         (41)  Derivatives        (30)       (30)           -         basis 
Interest 
 rate           10,521          2            -                      117        115           2 
At 31 Dec 
 2020           15,807        193         (41)                       87         85           2 
            ----------  ---------  -----------                ---------  ---------  ---------- 
 
 
                                                                    Net income 
                                                                from financial 
                                                                   instruments 
                                                                      held for 
                                                                       trading 
                                                                    or managed 
                                                                     on a fair 
                                                                         value 
Foreign exchange    5,366  240  (101)  Derivatives  123  123  -          basis 
Interest 
 rate               9,774    3    (1)                92   92  - 
At 31 Dec 
 2019              15,140  243  (102)               215  215  - 
                   ------  ---  -----               ---  --- 
 

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

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

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

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

 
Reconciliation of equity and analysis of other comprehensive income by 
 risk type 
                                                                Interest      Foreign 
                                                                    rate     exchange 
                                                                    GBPm         GBPm 
Cash flow hedging reserve at 1 Jan 2020                               76       (36) 
--------------------------------------------------------------  --------  --------- 
Fair value losses                                                    115       (29) 
                                                                --------  --------- 
Fair value losses reclassified from cash flow hedge 
 reserve to income statement in respect of: 
                                                                --------  ----------- 
- hedged items that have affected profit or loss                     (4)         76 
Income taxes                                                        (40)          - 
 
Cash flow hedging reserve at 31 Dec 2020                             147         11 
--------------------------------------------------------------  --------  --------- 
 
 
Cash flow hedging reserve at 1 Jan 2019               (24)    (1) 
 
Fair value losses                                       92    123 
----------------------------------------------------  ----  ----- 
Fair value losses reclassified from cash flow hedge 
 reserve to income statement in respect of: 
----------------------------------------------------  ----  ------- 
- hedged items that have affected profit or loss        30  (158) 
---------------------------------------------------- 
Income taxes                                          (22)      - 
---------------------------------------------------- 
Cash flow hedging reserve at 31 Dec 2019                76   (36) 
----------------------------------------------------  ----  ----- 
 

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

The first set of amendments ('Phase 1') to IFRS 9 and IAS 39, published in September 2019 and endorsed in January 2020, primarily allows the assumption that interbank offered rates ('Ibors') are to continue unaltered for the purposes of forecasting hedged cash flows until such time as the uncertainty of transitioning to near risk free rates ('RFRs') is resolved. The second set of amendments ('Phase 2'), issued in August 2020 and endorsed in January 2021, allows the modification of hedge documentation to reflect the components of hedge relationships that have transitioned to RFRs on an economically equivalent basis as a direct result of the Ibor transition.

While, the application of Phase 1 amendments is mandatory for accounting periods starting on or after 1 January 2020, the Group chose to early adopt the Phase 2 amendments from the beginning of 2020. Significant judgement will be required in determining when Ibor transition uncertainty is resolved and therefore decide when Phase 1 amendments cease to apply and when some of the Phase 2 amendments can be applied.

The notional of the derivatives impacted by the Ibors reform but which are not used in designated hedge accounting relationship is disclosed on page 29 in the section 'Financial Instruments impacted by the Ibor reform'.

The group has cash flow and fair value hedge accounting relationships that are exposed to different Ibors, predominantly US Dollar Libor, Sterling Libor, and Euribor as well as overnight rates subject to the market-wide benchmarks reform, such as the European overnight Index Average rate ('Eonia'). Existing financial instruments (such as derivatives, loans and bonds) designated in relationships referencing these benchmarks are expected to transition to new RFRs in different ways and at different times. External progress on the transition to RFRs is being monitored, with the objective of ensuring a smooth transition for the group's hedge accounting relationships. The specific issues arising will vary with the details of each hedging relationship, but may arise due to the transition of existing products included in the designation, a change in expected volumes of products to be issued, a change in contractual terms of new products issued, or a combination of these factors. Some hedges may need to be de-designated and new relationships entered into, while others may survive the market-wide benchmarks reform.

The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the Balance Sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue', and 'Deposits by banks'.

The notional amounts of Interest Rate derivatives designated in hedge accounting relationships represent the extent of the risk exposure managed by the group that is expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 and Phase 2 amendments. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below.

 
Hedging instrument impacted by Ibor Reform 
                                           Hedging instrument 
                           Impacted by Ibor Reform 
                                                          NOT Impacted 
                                                               by Ibor      Notional 
                        EUR    GBP    USD  Other   Total        Reform     Amount(1) 
The group              GBPm   GBPm   GBPm   GBPm    GBPm          GBPm          GBPm 
Fair Value Hedges    12,822  1,855  1,908     60  16,645        13,092      29,737 
 
Cash Flow Hedges      6,111  1,552    183      -   7,846         2,675      10,521 
 
At 31 Dec 2020       18,933  3,407  2,091     60  24,491        15,767      40,258 
 
 
The bank               GBPm   GBPm   GBPm   GBPm    GBPm          GBPm          GBPm 
Fair Value Hedges     6,275  1,833  1,556     61   9,725        11,000      20,725 
 
Cash Flow Hedges          -  1,552    183      -   1,735         2,675       4,410 
 
At 31 Dec 2020        6,275  3,385  1,739     61  11,460        13,675      25,135 
 
 
Hedging instrument impacted by Ibor Reform (continued) 
                                           Hedging instrument 
                           Impacted by Ibor Reform 
                                                          NOT Impacted 
                                                               by Ibor      Notional 
                        EUR    GBP    USD  Other   Total        Reform     Amount(1) 
The group              GBPm   GBPm   GBPm   GBPm    GBPm          GBPm          GBPm 
Fair Value Hedges    16,180  1,916  2,350     45  20,491         9,663      30,154 
 
Cash Flow Hedges      4,330  2,777    867      -   7,974         1,800       9,774 
 
At 31 Dec 2019       20,510  4,693  3,217     45  28,465        11,463      39,928 
 
 
The bank               GBPm   GBPm   GBPm   GBPm    GBPm          GBPm          GBPm 
Fair Value Hedges     5,771  1,891  1,889     29   9,580         9,326      18,906 
 
Cash Flow Hedges          -  2,777    867      -   3,644         1,800       5,444 
 
At 31 Dec 2019        5,771  4,668  2,756     29  13,224        11,126      24,350 
 
 

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

During 2019, the main market event in scope of Ibor reform was the change to the calculation of the Eonia to be calculated as the Euro Short Term rate ('EURSTR') plus a fixed spread of 8.5 basis points. This event had no material impact to the valuation of components of designated hedge accounting relationships and there were no discontinuations of existing designated relationships. The main market events in scope of Ibor reform during 2020 were the changes applied by central clearing counterparties to remunerating EURO and US dollar collateral. While there was a minimal valuation impact to the derivatives in scope that are used for hedge accounting, these changes had no discontinuation impact to any of the designated relationships affected.

 
15  Financial investments 
 
 
Carrying amount of financial investments 
                                                The group         The bank 
                                                2020    2019    2020      2019 
                                                GBPm    GBPm    GBPm      GBPm 
                                              ------  ------  ------  -------- 
Financial investments measured 
 at fair value through other comprehensive 
 income                                       51,811  46,451  28,755  26,561 
                                              ------  ------  ------  ------ 
- treasury and other eligible bills            3,286   3,091   2,194   2,237 
- debt securities                             48,363  43,204  26,505  24,269 
- equity securities                               98      91      56      55 
- other instruments(1)                            64      65       -       - 
 
Debt instruments measured at amortised 
 cost                                             15      13   2,214       - 
                                              ------  ------  ------  ------ 
- treasury and other eligible bills                5       5       -       - 
- debt securities(2)                              10       8   2,214       - 
At 31 Dec                                     51,826  46,464  30,969  26,561 
 
 
   1   'Other instruments' are comprised of loans and advances. 

2 The GBP2.2bn of debt securities in the bank relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with Single Resolution Board requirements on Minimum Required Eligible Liabilities.

 
Equity instruments measured at fair value through other comprehensive 
 income 
                                                                           Instruments held 
                                                                              at year end 
                                                                                         Dividends 
                                                                         Fair value     recognised 
Type of equity instruments                                                     GBPm           GBPm 
------------------------------------------------------------------  ---------------  ------------- 
Business facilitation                                                            79            1 
------------------------------------------------------------------  ---------------  ----------- 
Investments required by central institutions                                     18            - 
------------------------------------------------------------------  ---------------  ----------- 
Others                                                                            1            - 
------------------------------------------------------------------  ---------------  ----------- 
At 31 Dec 2020                                                                   98            1 
------------------------------------------------------------------  ---------------  ----------- 
 
Business facilitation                                                            75            1 
------------------------------------------------------------------  ---------------  ----------- 
Investments required by central institutions                                     11            - 
------------------------------------------------------------------  ---------------  ----------- 
Others                                                                            5            - 
------------------------------------------------------------------  ---------------  ----------- 
At 31 Dec 2019                                                                   91            1 
------------------------------------------------------------------  ---------------  ----------- 
 
 
16  Assets pledged, collateral received and assets transferred 
    ---------------------------------------------------------- 
 

Assets pledged

 
Financial assets pledged as collateral 
                                                  The group         The bank 
                                                  2020    2019    2020      2019 
                                                  GBPm    GBPm    GBPm      GBPm 
---------------------------------------------  -------  ------  ------  -------- 
Treasury bills and other eligible securities     2,382   1,162   1,543       - 
---------------------------------------------  -------  ------  ------  ------ 
Loans and advances to customers                 20,597  13,997       -       - 
---------------------------------------------  -------  ------  ------  ------ 
Debt securities                                 24,069  25,491  14,432  19,586 
---------------------------------------------  -------  ------  ------  ------ 
Equity securities                               21,304  20,669  21,604  20,610 
---------------------------------------------  -------  ------  ------  ------ 
Other                                           39,319  33,541  28,142  25,671 
---------------------------------------------  -------  ------  ------  ------ 
Assets pledged at 31 Dec                       107,671  94,860  65,721  65,867 
---------------------------------------------  -------  ------  ------  ------ 
 
 
Financial assets pledged as collateral which the counterparty has the 
 right to sell or repledge 
                                         The group               The bank 
                                         2020       2019       2020         2019 
                                         GBPm       GBPm       GBPm         GBPm 
                                    ---------  ---------  ---------  ----------- 
Trading assets                         40,000     41,734     32,409     35,767 
                                    ---------  ---------  ---------  --------- 
Financial investments                   3,009        347      2,684        328 
                                    ---------  ---------  ---------  --------- 
At 31 Dec                              43,009     42,081     35,093     36,095 
                                    ---------  ---------  ---------  --------- 
 

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

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

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

Collateral received

The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and derivative margining, that the group is permitted to sell or repledge in the absence of default was GBP213,690m (2019: GBP239,032m) (the bank: 2020: GBP169,797m; 2019: GBP191,372m). The fair value of any such collateral sold or repledged was GBP154,486m (2019: GBP179,442m) (the bank: 2020: GBP117,505m; 2019: GBP140,786m).

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

Assets transferred

The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt securities held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending agreements, as well as swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be recognised in full and a related liability, reflecting the group's obligation to repurchase the assets for a fixed price at a future date is also recognised on the balance sheet. Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash collateral received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the duration of these transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty's recourse is not limited to the transferred assets.

 
Transferred financial assets not qualifying for full derecognition and 
 associated financial liabilities 
                                                         Carrying amount of: 
                                                     Transferred      Associated 
                                                          assets     liabilities 
The group                                                   GBPm            GBPm 
At 31 Dec 2020 
Repurchase agreements                                     14,232        14,264 
 
Securities lending agreements                             28,777            87 
 
 
At 31 Dec 2019 
Repurchase agreements                                     15,262        15,252 
 
Securities lending agreements                             26,821         4,329 
 
 
 
Transferred financial assets not qualifying for full derecognition and 
 associated financial liabilities 
                                                          Carrying amount of: 
                                                      Transferred      Associated 
                                                           assets     liabilities 
The bank                                                     GBPm            GBPm 
At 31 Dec 2020 
Repurchase agreements                                       5,315         5,315 
 
Securities lending agreements                              29,778            82 
 
 
At 31 Dec 2019 
Repurchase agreements                                       8,922         8,922 
 
Securities lending agreements                              27,174         4,293 
 
 
 
17  Interests in associates and joint ventures 
    ------------------------------------------ 
 

Principal associates of the group and the bank

Business Growth Fund Group plc ('BGF') is a principal associate of the group. BGF is an independent company, established in 2011 to provide investment to growing small to medium-sized British businesses. BGF is backed by five of the UK's main banking groups: Barclays, HSBC, Lloyds, RBS and Standard Chartered. At 31 December 2020, the group had a 24.58% interest in the equity capital of BGF. Share of profit/(loss) in BGF is GBP5m (2019: GBP(8)m) and carrying amount of interest in BGF is GBP471m (2019: GBP426m).

Interests in joint ventures

A list of all associates is set out on page 179.

 
18  Investments in subsidiaries 
    --------------------------- 
 
 
Main subsidiaries of HSBC Bank plc 
                                                          At 31 Dec 2020 
                                                                 HSBC Bank 
                                             Country of     plc's interest 
                                          incorporation          in equity 
                                        or registration            capital       Share class 
                                                                         % 
                                            England and 
HSBC Investment Bank Holdings Limited             Wales           100.00       GBP1 Ordinary 
 
                                            England and 
HSBC Asset Finance (UK) Limited                   Wales           100.00       GBP1 Ordinary 
 
                                            England and 
HSBC Life (UK) Limited                            Wales           100.00       GBP1 Ordinary 
 
HSBC Continental Europe(1)                       France            99.99        EUR5 Actions 
 
                                                                            Stückaktien 
HSBC Trinkaus & Burkhardt AG                    Germany            99.33        no par value 
 
HSBC Bank Malta p.l.c                             Malta            70.03    EUR0.30 Ordinary 
 
 
   1   HSBC France changed its name on 1 December 2020 to become HSBC Continental Europe. 

All the above prepare their financial statements up to 31 December. Details of all group subsidiaries, as required under Section 409 of the Companies Act 2006, are set out in Note 36. The principal countries of operation are the same as the countries of incorporation.

Impairment testing of investments in subsidiaries

At each reporting period end, HSBC Bank plc reviews investments in subsidiaries for indicators of impairment. An impairment is recognised when the carrying amount exceeds the recoverable amount for that investment.

The recoverable amount is the higher of the investment's fair value less costs of disposal and its value in use. The value in use is calculated by discounting management's cash flow projections for the investment.

-- The cash flow projections for each investment are based on the latest approved plans, which includes capital repayment projections and a long-term growth rate is used to extrapolate the cash flows in perpetuity.

-- The growth rate reflects inflation for the country within which the investment operates and is based on the long-term average growth rates.

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

An impairment of GBP3.2bn was recognised as a result of the impairment test performed in 2019 based on a discount rate of 9.25% and a growth rate of 1.54%, this related to an investment in HSBC Continental Europe. In 2020, an impairment test was performed and concluded that no further impairment is required to our investment in HSBC Continental Europe.

 
Impairment test results 
Investments         Carrying   Value in   Discount     Long-term        Headroom 
                      amount        use       rate   growth rate 
At 31 Dec               GBPm       GBPm          %             %            GBPm 
                   ---------  ---------  ---------  ------------  -------------- 
HSBC Continental 
 Europe                4,331      4,649       9.65          1.51        318 
                                                                             --- 
 
 

Sensitivities of key assumptions in calculating VIU

At 31 December 2020, the investment in HSBC Continental Europe (formally HSBC France) was sensitive to reasonably possible changes in the key assumptions supporting the recoverable amount.

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

The following table presents a summary of the key assumptions underlying the most sensitive inputs to the model for HSBC Continental Europe, the key risks attaching to each, and details of a reasonably possible change to assumptions where, in the opinion of management, these could result in an impairment.

 
Reasonably possible changes in key assumptions 
 
Investment 
HSBC         Cash flow 
Continental  projections    *    Level of interest rates and yield curves.                 *    Uncertain regulatory environment.                        *    Cash flow projections decrease by 10%. 
Europe 
 
                            *    Competitors' positions within the market.                 *    Customer remediation and regulatory actions. 
 
 
                            *    Level and change in unemployment rates. 
             Discount 
              rate          *    Discount rate used is a reasonable estimate of a          *    External evidence arises to suggest that the rate        *    Discount rate increases by 1%. 
                                 suitable market rate for the profile of the business.          used is not appropriate to the business. 
             Long-term 
              growth         *    Business growth will reflect inflation rates of the     *    Growth does not match inflation or there is a fall in    *    Real inflation does not occur or is not reflected in 
              rates               country the subsidiary conducts business in the long         inflation forecasts.                                          performance. 
                                  term. 
 
 
Sensitivity of VIU to reasonably possible changes in key assumptions 
 and changes to current assumptions to achieve nil headroom 
                                                        Increase/(decrease) 
--------------------               ---------- 
Investments              Carrying    Value in   Discount  Cash flows       Long-term 
                           amount         use       rate                 growth rate 
-------------------- 
At 31 Dec                    GBPm        GBPm        bps           %             bps 
--------------------               ----------  ---------  ----------  -------------- 
HSBC Continental 
 Europe                    4,331       4,649          64      (7.83)         (87) 
-------------------- 
 
 
 
19  Structured entities 
    ------------------- 
 

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

Consolidated structured entities

 
Total assets of the group's consolidated structured entities, split 
 by entity type 
                                                            Group 
                                                          managed 
                             Conduits  Securitisations      funds     Other         Total 
                                 GBPm             GBPm       GBPm      GBPm          GBPm 
At 31 Dec 2020                  5,023              423      2,166     2,798      10,410 
 
At 31 Dec 2019                  6,541              471      3,183     2,789      12,984 
 
 

Conduits

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

Securities investment conduits

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

-- At 31 December 2020, Solitaire, the group's principal SIC held GBP1.4bn of ABSs (2019: GBP1.6bn). It is currently funded entirely by commercial paper ('CP') issued to the group. At 31 December 2020, the group held GBP1.6bn of CP (2019: GBP2.4bn).

Multi-seller conduits

The group's multi-seller conduit was established to provide access to flexible market-based sources of finance for its clients. Currently, the group bears risk equal to transaction-specific facility offered to the multi-seller conduits, amounting to GBP6.5bn at 31 December 2020 (2019: GBP8.6bn). First loss protection is provided by the originator of the assets, and not by the group, through transaction-specific credit enhancements. A layer of secondary loss protection is provided by the group in the form of programme-wide enhancement facilities.

Securitisations

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

Group managed funds

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

Other

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

Unconsolidated structured entities

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

 
Nature and risks associated with the group's interests in unconsolidated 
 structured entities 
                                                                                      Non-group 
                                                                     Group managed      managed 
                                                 Securitisa-tions            funds        funds    Other     Total 
Total asset values of the entities (GBPm) 
                                               ------------------ 
0 - 400                                                       5               92        1,312       16     1,425 
                                               ---------------- 
400 - 1,500                                                   -               14          691        -       705 
                                               ---------------- 
1,500 - 4,000                                                 -                1          378        -       379 
                                               ---------------- 
4,000 - 20,000                                                -                -          293        -       293 
                                               ---------------- 
20,000+                                                       -                -           43        -        43 
                                               ---------------- 
Number of entities at 31 Dec 2020                             5              107        2,717       16     2,845 
                                               ---------------- 
 
                                                             GBPm             GBPm         GBPm     GBPm      GBPm 
Total assets in relation to the group's 
 interests in the unconsolidated structured 
 entities                                                   686            1,461        8,408      346    10,901 
                                               ---------------- 
- trading assets                                              -                -        2,367        -     2,367 
- financial assets designated and otherwise 
 mandatorily measured at fair value                           -            1,454        5,642        -     7,096 
- loans and advances to customers                           686                -            -      346     1,032 
- financial investments                                       -                7          399        -       406 
Total liabilities in relation to the 
 group's interests in the unconsolidated 
 structured entities                                          -                -            1        -         1 
                                               ---------------- 
Other off-balance sheet commitments                          40                1        1,450        -     1,491 
                                               ---------------- 
The group's maximum exposure at 31 Dec 
 2020                                                       726            1,462        9,857      346    12,391 
                                               ---------------- 
 
Total asset values of the entities (GBPm) 
                                               ------------------ 
0 - 400                                                       4               88          712       24       828 
                                               ----------------                                  -----    ------ 
400 - 1,500                                                   3               15          619        4       641 
                                               ----------------                                  -----    ------ 
1,500 - 4,000                                                 -                1          345        -       346 
                                               ----------------                                  -----    ------ 
4,000 - 20,000                                                -                -          253        -       253 
                                               ----------------                                  -----    ------ 
20,000+                                                       -                -           36        2        38 
                                               ----------------                                  -----    ------ 
Number of entities at 31 Dec 2019                             7              104        1,965       30     2,106 
                                               ----------------                                  -----    ------ 
 
                                                             GBPm             GBPm         GBPm     GBPm      GBPm 
Total assets in relation to the group's 
 interests in the unconsolidated structured 
 entities                                                 1,296            2,143        8,526    1,481    13,446 
                                               ----------------                                  -----    ------ 
- trading assets                                              -                -        2,687      952     3,639 
- financial assets designated at fair 
 value                                                        -            2,139        5,180       10     7,329 
- loans and advances to customers                         1,296                -          290      497     2,083 
- financial investments                                       -                4          369       22       395 
Total liabilities in relation to group's 
 interests in the unconsolidated structured 
 entities                                                     -                -            5        -         5 
                                               ----------------                                  -----    ------ 
Other off-balance sheet commitments                         156                -        1,552        -     1,708 
 
The group's maximum exposure at 31 Dec 
 2019                                                     1,452            2,143       10,073    1,481    15,149 
                                               ----------------                                  -----    ------ 
 

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

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

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

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

Securitisations

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

Group managed funds

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

Non-group managed funds

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

Other

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

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

Group sponsored structured entities

The amount of assets transferred to and income received from such sponsored entities during 2020 and 2019 was not significant.

 
20  Goodwill and intangible assets 
    ------------------------------ 
 
 
                                       The group     The bank 
                                      2020   2019   2020    2019 
                                      GBPm   GBPm   GBPm    GBPm 
------------------------------------  ----  -----  -----  ------ 
Goodwill                                 -      -     19    23 
------------------------------------  ----  -----  -----  ---- 
Present value of in-force long-term 
 insurance business                    647    715      -     - 
------------------------------------  ----  -----  -----  ---- 
Other intangible assets(1)             119    867     12   512 
------------------------------------  ----  -----  -----  ---- 
At 31 Dec                              766  1,582     31   535 
------------------------------------  ----  -----  -----  ---- 
 

1 Included within the group's other intangible assets is internally generated software with a net carrying value of GBP115m (2019: GBP776m). During the year, capitalisation of internally generated software was GBP150m (2019: GBP355m) and amortisation was GBP94m (2019: GBP137m). In 2020, purchased software assets of GBP73m were reclassified as internally generated software due to high efforts of customisation.

Other intangible assets

Impairment testing

We considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the impact of forecast profitability in some businesses, to be indicators of capitalised software impairment during the period. The impairment tests were performed by comparing the net carrying amount of capitalised software assets with their recoverable amounts. Recoverable amounts were determined by calculating an estimated VIU or fair value, as appropriate, for each underlying business that carries software assets. Our cash flow forecasts were updated for changes in the external outlook, although economic and geopolitical risks increase the inherent estimation uncertainty.

We recognised GBP802m of capitalised software impairment and write-off related principally to our businesses in the UK and France. This impairment reflected underperformance and deterioration in the future forecasts of these businesses, substantially relating to prior periods. Global business split of the impairments recognised is as below.

 
                      Impairments 
                    on intangible 
                           assets 
                             2020 
Global business              GBPm 
WPB                            39 
CMB                            34 
GB&M                          462 
Corporate Centre              267 
Total                         802 
 

Key assumptions in VIU calculation

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

-- Management's judgement in estimating future cash flows: We considered past business performance, the scale of the current impact from the Covid-19 outbreak on our operations, current market conditions and our macroeconomic outlook to estimate future earnings. As required by IFRSs, estimates of future cash flows exclude estimated cash inflows or outflows that are expected to arise from restructuring initiatives before an entity has a constructive obligation to carry out the plan, and would therefore have recognised a provision for restructuring costs. For some businesses, this means that the benefit of certain strategic actions are not included in this impairment assessment, including capital releases.

-- Long-term growth rates: The long-term growth rate is used to extrapolate the cash flows in perpetuity because of the long-term perspective of the businesses within the group.

-- Discount rates: Rates are based on a CAPM calculation considering market data for the businesses and geographies in which the group operates. Discount rates ranged from 8.5% to 9.7% to our businesses.

Future software capitalisation

We will continue to invest in digital capabilities to meet our strategic objectives. However, software capitalisation within businesses where impairment was identified will not resume until the performance outlook for each business indicates future profits are sufficient to support capitalisation. The cost of additional software investment in these businesses will be recognised as an operating expense until such time.

Present value of in-force long-term insurance business

When calculating the present value of in-force long-term ('PVIF') insurance business, expected cash flows are projected after adjusting for a variety of assumptions made by each insurance operation to reflect local market conditions and management's judgement of future trends and uncertainty in the underlying assumptions is reflected by applying margins (as opposed to a cost of capital methodology) including valuing the cost of policyholder options and guarantees using stochastic techniques.

Actuarial Control Committees of each key insurance entity meet on a quarterly basis to review and approve PVIF assumptions. All changes to non-economic assumptions, economic assumptions that are not observable and model methodology must be approved by the Actuarial Control Committee.

 
Movements in PVIF 
                                                        2020    2019 
                                                        GBPm    GBPm 
PVIF at 1 Jan                                            715   651 
                                                        ---- 
Change in PVIF of long-term insurance business          (95)    89 
                                                        ---- 
- value of new business written during the year           43    46 
- expected return(1)                                    (74)  (68) 
- assumption changes and experience variances(2) (see 
 below)                                                 (73)   114 
- other adjustments                                        9   (3) 
Exchange differences                                      27  (25) 
 
PVIF at 31 Dec                                           647   715 
                                                        ---- 
 

1 'Expected return' represents the unwinding of the discount rate and reversal of expected cash flows for the period.

2 Represents the effect of changes in assumptions on expected future profits and the difference between assumptions used in the previous PVIF calculation and actual experience observed during the year to the extent that this affects future profits. The loss of GBP(73)m (2019: gain of GBP114m) was driven mainly due to lower interest rates partly offset by positive impact from modelling changes.

1

Key assumptions used in the computation of PVIF for main life insurance operations

Economic assumptions are set in a way that is consistent with observable market values. The valuation of PVIF is sensitive to observed market movements and the impact of such changes is included in the sensitivities presented below.

 
                                           2020              2019 
                                        UK  France(1)    UK    France(1) 
                                         %          %     %            % 
                                      ----  --------- 
Weighted average risk-free rate       0.29       0.34  0.72       0.44 
                                      ----  ---------  ----  --------- 
Weighted average risk discount rate   0.29       1.34  1.22       1.27 
 
Expense inflation                     2.80       1.60  3.04       1.70 
                                      ----  ---------  ----  --------- 
 

1 For 2020, the calculation of France's PVIF assumes a risk discount rate of 1.34% (2019: 1.27%) plus a risk margin of GBP159m (2019: GBP98m).

Sensitivity to changes in economic assumptions

The group sets the risk discount rate applied to the PVIF calculation by starting from a risk-free rate curve and adding explicit allowances for risks not reflected in the best estimate cash flow modelling. Where the insurance operations provide options and guarantees to policyholders, the cost of these options and guarantees is accounted for as a deduction from the present value of in-force 'PVIF' asset, unless the cost of such guarantees is already allowed for as an explicit addition to liabilities under insurance contracts. See page 85 for further details of these guarantees and the impact of changes in economic assumptions on our insurance manufacturing subsidiaries.

Sensitivity to changes in non-economic assumptions

Policyholder liabilities and PVIF are determined by reference to non-economic assumptions including mortality and/or morbidity, lapse rates and expense rates. See page 86 for further details on the impact of changes in non-economic assumptions on our insurance manufacturing operations.

 
21  Prepayments, accrued income and other assets 
 
 
                                            The group         The bank 
                                            2020    2019    2020      2019 
                                            GBPm    GBPm    GBPm      GBPm 
                                          ------          ------ 
Prepayments and accrued income             1,308   1,604     537     873 
 
Settlement accounts                        7,138   6,611   5,153   6,066 
                                          ------  ------  ------  ------ 
Cash collateral and margin receivables    39,702  33,643  28,142  25,671 
                                          ------  ------  ------  ------ 
Assets held for sale                          90      13       -       - 
 
Bullion                                    3,597   2,921   3,593   2,919 
 
Endorsements and acceptances                  97      82      69      42 
 
Reinsurers' share of liabilities under 
 insurance contracts (Note 4)                165     163       -       - 
 
Employee benefit assets (Note 5)              30      22      29      22 
                                          ------  ------  ------  ------ 
Right-of-use assets                          390     643      59     416 
                                          ------  ------  ------  ------ 
Property, plant and equipment                899   1,091      12     105 
                                          ------  ------  ------  ------ 
Other accounts                             2,149   2,146   1,181   1,208 
 
At 31 Dec                                 55,565  48,939  38,775  37,322 
                                          ------  ------  ------  ------ 
 

Prepayments, accrued income and other assets include GBP50,027m (2019: GBP43,656m) of financial assets, the majority of which are measured at amortised cost.

Impairment testing

During 2020, we considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the impact on forecast profitability, to be an indicator of impairment. Impairment testing was performed, identifying the Value in Use ('VIU') of the Cash generating units ('CGU') to be below their net carrying value in France and the UK.

As a result, GBP193m of tangible asset were impaired, primarily Right of Use ('ROU') assets for leased office, commercial and retail branches and fixtures and fittings. The impairments reflect recent losses and deterioration in the future forecasts, substantially relating to prior periods. Refer to Note 20 Goodwill and intangible assets and Note 1.2(n) Summary of significant accounting policies - Impairment of non-financial assets.

 
Assets held for sale 
                                                 The group 
                                                 2020    2019 
                                                 GBPm    GBPm 
                                               ------  ------ 
Property, plant and equipment(1)                   86    13 
                                               ------  ---- 
Assets of disposal groups held for sale             4     - 
                                               ------  ---- 
Assets classified as held for sale at 31 Dec       90    13 
                                               ------  ---- 
 
   1   Includes HSBC Trinkaus & Burkhardt AG's one property as held for sale. 

1

 
22  Trading liabilities 
 
 
 
                                            The group         The bank 
                                            2020    2019    2020      2019 
                                            GBPm    GBPm    GBPm      GBPm 
                                          ------  ------  ------  -------- 
Deposits by banks(1)                       4,324   3,148   4,303   3,095 
                                          ------  ------  ------ 
Customer accounts(1)                       7,744   5,102   7,528   4,898 
                                          ------  ------  ------ 
Other debt securities in issue             1,156   1,042      21     102 
                                          ------  ------  ------ 
Other liabilities - net short positions 
 in securities                            31,005  38,734  14,821  18,919 
                                          ------  ------  ------ 
At 31 Dec                                 44,229  48,026  26,673  27,014 
                                          ------  ------  ------ 
 
   1   'Deposits by banks' and 'Customer accounts' include repos, stock lending and other amounts. 

1

 
23  Financial liabilities designated at fair value 
    ---------------------------------------------- 
 
 
                                               The group         The bank 
                                               2020    2019    2020      2019 
                                               GBPm    GBPm    GBPm      GBPm 
Deposits by banks and customer accounts       3,273     150   3,204      78 
                                             ------  ------  ------  ------ 
Liabilities to customers under investment 
 contracts                                      944     862       -       - 
                                             ------  ------  ------  ------ 
Debt securities in issue                     34,228  38,044  19,136  22,000 
                                             ------  ------  ------  ------ 
Subordinated liabilities (Note 26)            2,347   2,268   2,347   2,585 
                                             ------  ------  ------  ------ 
Preferred securities (Note 26)                    -     318       -       - 
                                             ------  ------  ------  ------ 
At 31 Dec                                    40,792  41,642  24,687  24,663 
                                             ------  ------  ------  ------ 
 

The group

The carrying amount of financial liabilities designated at fair value was GBP3,351m higher than the contractual amount at maturity

(2019: GBP1,771m higher). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of GBP189m (2019: loss of GBP346m).

The bank

The carrying amount of financial liabilities designated at fair value was GBP2,525m higher than the contractual amount at maturity (2019: GBP1,238m higher). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of GBP76m (2019: loss of GBP227m).

 
24  Accruals, deferred income and other liabilities 
    ----------------------------------------------- 
 
 
                                                   The group         The bank 
                                                   2020    2019    2020      2019 
                                                   GBPm    GBPm    GBPm      GBPm 
                                                 ------  ------  ------  -------- 
Accruals and deferred income                      1,566   2,033     826   1,046 
                                                 ------  ------  ------  ------ 
Settlement accounts                               4,900   5,295   4,451   4,655 
                                                 ------  ------  ------  ------ 
Cash collateral and margin payables              42,273  38,261  31,810  32,297 
                                                 ------  ------  ------  ------ 
Endorsements and acceptances                         89      74      70      42 
                                                 ------  ------  ------  ------ 
Employee benefit liabilities (Note 5)               288     275      75      85 
                                                 ------  ------  ------  ------ 
Amount due to investors in funds consolidated 
 by the group                                     1,051     928       -       - 
                                                 ------  ------  ------  ------ 
Share-based payment liability to HSBC 
 Holdings                                           104     126      76     103 
                                                 ------  ------  ------  ------ 
Lease liabilities                                   558     783      82     504 
 
Other liabilities                                 2,566   2,540   1,181   1,433 
                                                 ------  ------  ------  ------ 
At 31 Dec                                        53,395  50,315  38,571  40,165 
                                                 ------  ------  ------  ------ 
 

For the group, accruals, deferred income and other liabilities include GBP52,754m (2019: GBP48,907m), and for the bank GBP38,291m (2019: GBP39,379m) of financial liabilities, the majority of which are measured at amortised cost.

 
25  Provisions 
    ---------- 
 
 
                                                    Legal proceedings 
                                     Restructuring     and regulatory      Customer 
                                             costs            matters   remediation  Other provisions    Total 
The group                                     GBPm               GBPm          GBPm              GBPm     GBPm 
-----------------------------------  -------------  -----------------  ------------  ----------------  ------- 
Provisions (excluding contractual 
 commitments) 
-----------------------------------  -------------  -----------------  ------------  ----------------  ------- 
At 1 Jan 2020                                   94                211            29               104    438 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Additions                                      315                 68             5                66    454 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Amounts utilised                              (80)               (51)           (4)              (39)  (174) 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Unused amounts reversed                       (18)                (2)           (4)              (28)   (52) 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Exchange and other movements                   (2)                 11           (1)                 -      8 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
At 31 Dec 2020                                 309                237            25               103    674 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Contractual commitments(1) 
-----------------------------------  -------------  -----------------  ------------  ----------------  ------- 
At 1 Jan 2020                                                                                            102 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Net change in expected credit 
 loss provision and other movements                                                                       85 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
At 31 Dec 2020                                                                                           187 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
Total Provisions 
-----------------------------------  -------------  -----------------  ------------  ----------------  ------- 
At 31 Dec 2019                                                                                           540 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
At 31 Dec 2020                                                                                           861 
-----------------------------------  -------------  -----------------  ------------  ----------------  ----- 
 
 
Provisions (excluding contractual 
 commitments) 
                                            ----  ---  ---- 
At 1 Jan 2019                           31   231   35   121    418 
                                            ----  ---  ---- 
Additions                              113    37   10    87    247 
                                            ----  ---  ---- 
Amounts utilised                      (42)  (38)  (7)  (32)  (119) 
                                            ----  ---  ---- 
Unused amounts reversed                (1)   (5)  (9)  (40)   (55) 
                                            ----  ---  ---- 
Exchange and other movements           (7)  (14)    -  (32)   (53) 
                                            ----  ---  ---- 
At 31 Dec 2019                          94   211   29   104    438 
                                            ----  ---  ---- 
Contractual commitments(1) 
                                            ----  ---  ---- 
At 1 Jan 2019                                                  120 
Net change in expected credit 
 loss provision and other movements                           (18) 
 
At 31 Dec 2019                                                 102 
                                            ----  ---  ---- 
Total Provisions 
                                            ----  ---  ---- 
At 31 Dec 2018                                                 538 
                                            ----  ---  ---- 
At 31 Dec 2019                                                 540 
                                            ----  ---  ---- 
 

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

 
                                                    Legal proceedings 
                                     Restructuring     and regulatory      Customer 
                                             costs            matters   remediation  Other provisions    Total 
The bank                                      GBPm               GBPm          GBPm              GBPm     GBPm 
                                     -------------  -----------------  ------------ 
Provisions (excluding contractual 
 commitments) 
                                     -------------  -----------------  ------------ 
At 1 Jan 2020                                   41                173            20                36    270 
                                     -------------  -----------------  ------------ 
Additions                                       56                 63             2                39    160 
                                     -------------  -----------------  ------------ 
Amounts utilised                              (45)               (47)           (3)               (8)  (103) 
                                     -------------  -----------------  ------------ 
Unused amounts reversed                        (6)                  -           (1)              (15)   (22) 
                                     -------------  -----------------  ------------ 
Unwinding of discounts                           -                  -             -                 -      - 
                                     -------------  -----------------  ------------ 
Exchange and other movements                   (7)                  9           (1)                 -      1 
                                     -------------  -----------------  ------------ 
At 31 Dec 2020                                  39                198            17                52    306 
                                     -------------  -----------------  ------------ 
Contractual commitments(1) 
                                     -------------  -----------------  ------------ 
At 1 Jan 2020                                                                                             38 
 
Net change in expected credit 
 loss provision and other movements                                                                       69 
 
At 31 Dec 2020                                                                                           107 
 
Total Provisions 
At 31 Dec 2019                                                                                           308 
 
At 31 Dec 2020                                                                                           413 
 
 
 
                                                    Legal proceedings 
                                     Restructuring     and regulatory      Customer 
                                             costs            matters   remediation  Other provisions    Total 
The bank                                      GBPm               GBPm          GBPm              GBPm     GBPm 
Provisions (excluding contractual 
 commitments) 
At 1 Jan 2019                                    -                214            24                70    308 
 
Additions                                       69                  5             8                37    119 
 
Amounts utilised                              (27)               (33)           (6)              (11)   (77) 
 
Unused amounts reversed                        (1)                (4)           (6)              (27)   (38) 
 
Exchange and other movements                     -                (9)             -              (33)   (42) 
 
At 31 Dec 2019                                  41                173            20                36    270 
 
Contractual commitments(1) 
At 1 Jan 2019                                                                                             92 
Net change in expected credit 
 loss provision and other movements                                                                     (54) 
At 31 Dec 2019                                                                                            38 
 
Total Provisions 
At 31 Dec 2018                                                                                           400 
 
At 31 Dec 2019                                                                                           308 
 
 

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

Restructuring costs

These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during the year relate to formal restructuring plans made within the group. The majority of the restructuring costs recognised for 2020 relate to the transformation programme initiated by HSBC Continental Europe.

Legal proceedings and regulatory matters

Further details of legal proceedings and regulatory matters are set out in Note 32. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim), or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the actions of, regulatory or law enforcement agencies in connection with alleged wrongdoing.

 
26  Subordinated liabilities 
    ------------------------ 
 
 
Subordinated liabilities 
                                   The group         The bank 
                                   2020    2019    2020      2019 
                                   GBPm    GBPm    GBPm      GBPm 
At amortised cost                13,764  13,182  13,360  12,783 
 
- subordinated liabilities       13,064  12,482  13,360  12,783 
- preferred securities              700     700       -       - 
 
Designated at fair value (Note 
 23)                              2,347   2,586   2,347   2,585 
 
- subordinated liabilities        2,347   2,268   2,347   2,585 
- preferred securities                -     318       -       - 
 
At 31 Dec                        16,111  15,768  15,707  15,368 
 
 

Subordinated liabilities rank behind senior obligations and consist of capital instruments and other instruments. Capital instruments generally count towards the capital base of the group and may be called and redeemed by the group subject to prior notification to the PRA and, where relevant, the consent of the local banking regulator. If not redeemed at the first call date, coupons payable may step up or become floating rate based on interbank rates. On capital instruments other than floating rate notes, interest is payable at fixed rates of up to 7.65%.

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

 
Subordinated liabilities of the group 
                                                                   Carrying amount 
                                                                      2020       2019 
                                                                      GBPm       GBPm 
                                                                ----------  --------- 
Capital instruments 
                                                                ----------  --------- 
Additional tier 1 instruments guaranteed by the bank 
                                                                ----------  --------- 
           5.862% Non-cumulative Step-up Perpetual Preferred 
GBP300m     Securities(1)                                              -        318 
                                                                --------    ------- 
           5.844% Non-cumulative Step-up Perpetual Preferred 
GBP700m     Securities(2)                                            700        700 
                                                                --------    ------- 
Tier 2 instruments 
                                                                ----------  --------- 
$450m      Subordinated Floating Rate Notes 2021                     330        340 
                                                                --------    ------- 
$750m      3.43% Subordinated Loan 2022                              569        582 
                                                                --------    ------- 
$2,000m    3.5404% Subordinated Loan 2023                          1,534      1,513 
                                                                --------    ------- 
GBP300m    6.5% Subordinated Notes 2023                              300        300 
                                                                --------    ------- 
EUR1,500m  Floating Rate Subordinated Loan 2023                    1,347      1,273 
                                                                --------    ------- 
EUR2,000m  1.125% Subordinated Loan 2024                           1,856      1,698 
                                                                --------    ------- 
EUR1,500m  Floating Rate Subordinated Loan 2024                    1,347      1,273 
                                                                --------    ------- 
EUR2,000m  1.728% Subordinated Loan 2024                           1,836      1,698 
                                                                --------    ------- 
$300m      7.65% Subordinated Notes 2025                             220        227 
                                                                --------    ------- 
$750m      4.168% Subordinated Loan 2027                             633        609 
                                                                --------    ------- 
EUR1,250m  1.4648% Subordinated Loan 2027                          1,200      1,061 
                                                                --------    ------- 
EUR300m    Floating Rate Subordinated Loan 2027                      269        255 
                                                                --------    ------- 
GBP200m    Floating Rate Subordinated Loan 2028                      200        200 
                                                                --------    ------- 
EUR300m    Floating Rate Subordinated Loan 2028                      269        255 
                                                                --------    ------- 
EUR260m    Floating Rate Subordinated Loan 2029                      233        221 
                                                                --------    ------- 
           5.375% Callable Subordinated Step-up Notes 
GBP350m     2030(3)                                                  427        415 
                                                                --------    ------- 
GBP500m    5.375% Subordinated Notes 2033                            719        662 
                                                                --------    ------- 
GBP225m    6.25% Subordinated Notes 2041                             224        224 
                                                                --------    ------- 
GBP600m    4.75% Subordinated Notes 2046                             594        594 
                                                                --------    ------- 
$750m      Undated Floating Rate Primary Capital Notes               549        567 
                                                                --------    ------- 
$500m      Undated Floating Rate Primary Capital Notes               366        378 
                                                                --------    ------- 
$300m      Undated Floating Rate Primary Capital Notes               220 
            (Series 3)                                                          227 
                                                                --------    ------- 
Other Tier 2 instruments each less than GBP100m                      169        178 
At 31 Dec                                                         16,111     15,768 
                                                                --------    ------- 
 

1 In April 2020, the group repaid the 5.862% Non-cumulative Step-up Perpetual Preferred Securities.

   2   In November 2031, the distribution rate changes to six month sterling Libor plus 1.76%. 
   3   In November 2025, the interest rate changes to three month sterling Libor plus 1.50%. 

Footnotes 2 and 3 both relate to instruments that are redeemable at the option of the issuer on the date of the change in the distribution or interest rate, and on subsequent rate reset and payment dates in some cases, subject to prior consent of the PRA.

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

Contractual maturity of financial liabilities

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

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

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

 
Cash flows payable under financial liabilities by remaining contractual 
 maturities 
                                              Due over 
                                               1 month 
                                   Due not     but not  Due between  Due between 
                                 more than   more than        3 and        1 and  Due after 
                                   1 month    3 months    12 months      5 years    5 years    Total 
The group                             GBPm        GBPm         GBPm         GBPm       GBPm     GBPm 
------------------------------ 
Deposits by banks                   20,627         732          299       12,101        463   34,222 
------------------------------ 
Customer accounts                  186,178       5,769        2,936          231        109  195,223 
------------------------------ 
Repurchase agreements 
 - non-trading                      31,635       1,772        1,504           12          -   34,923 
------------------------------ 
Trading liabilities                 44,229           -            -            -          -   44,229 
------------------------------ 
Financial liabilities 
 designated at fair 
 value                               9,602       1,051        4,989       12,914     11,740   40,296 
------------------------------ 
Derivatives                        198,758          54          125          483        408  199,828 
------------------------------ 
Debt securities in 
 issue                               1,862       3,244       10,554        1,280        588   17,528 
------------------------------ 
Subordinated liabilities                94         397          231        9,357      5,503   15,582 
------------------------------ 
Other financial liabilities         50,107         349          444          384      1,178   52,462 
------------------------------ 
                                   543,092      13,368       21,082       36,762     19,989  634,293 
Loan and other credit-related 
 commitments                       147,303           -            -            -          -  147,303 
------------------------------ 
Financial guarantees(1)              3,969           -            -            -          -    3,969 
------------------------------ 
At 31 Dec 2020                     694,364      13,368       21,082       36,762     19,989  785,565 
 
Deposits by banks                   16,817       2,416        2,652        1,499        820   24,204 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Customer accounts                  167,623       5,299        4,090          304        112  177,428 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Repurchase agreements 
 - non-trading                      45,379       1,728        2,068          277          -   49,452 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Trading liabilities                 48,026           -            -            -          -   48,026 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Financial liabilities 
 designated at fair 
 value                               5,725         395        5,027       16,546     16,490   44,183 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Derivatives                        160,536          41          133          382        402  161,494 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Debt securities in 
 issue                               2,561       5,115       15,282        1,501        733   25,192 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Subordinated liabilities                88           -          278        9,036      5,726   15,128 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Other financial liabilities         46,153         456        1,507          596      1,321   50,033 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
                                   492,908      15,450       31,037       30,141     25,604  595,140 
                                ----------  ----------  -----------  -----------  ---------  ------- 
Loan and other credit-related 
 commitments                       128,905           -            -            -          -  128,905 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
Financial guarantees(1)              4,318           -            -            -          -    4,318 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
At 31 Dec 2019                     626,131      15,450       31,037       30,141     25,604  728,363 
------------------------------  ----------  ----------  -----------  -----------  ---------  ------- 
 
 
The bank 
------------------------------            -------- 
Deposits by banks                 16,376       707       205       204         -    17,492 
------------------------------            -------- 
Customer accounts                115,204     3,485     1,287         3         -   119,979 
------------------------------            -------- 
Repurchase agreements 
 - non-trading                    24,398     1,105     1,500        12         -    27,015 
------------------------------            -------- 
Trading liabilities               26,673        -          -         -         -    26,673 
------------------------------            ------- 
Financial liabilities 
 designated at fair 
 value                             9,414     1,007     2,962     4,497     5,515    23,395 
------------------------------            -------- 
Derivatives                      180,608        52       125       444       391   181,620 
------------------------------            -------- 
Debt securities in 
 issue                             1,060     3,238     9,629     1,046       417    15,390 
------------------------------            -------- 
Subordinated liabilities              14       397       191     9,086     5,478    15,166 
------------------------------            -------- 
Other financial liabilities       37,510       248       146        53        14    37,971 
------------------------------            -------- 
                                 411,257    10,239    16,045    15,345    11,815   464,701 
                                          -------- 
Loan and other credit-related 
 commitments                      46,340         -         -         -         -    46,340 
------------------------------            -------- 
Financial guarantees(1)            1,510         -         -         -         -     1,510 
------------------------------            -------- 
At 31 Dec 2020                   459,107    10,239    16,045    15,345    11,815   512,551 
 
Deposits by banks                 13,322     2,033       484       528        66    16,433 
------------------------------  --------  --------  --------  --------  --------  -------- 
Customer accounts                103,697     3,272     2,042        51         -   109,062 
------------------------------  --------  --------  --------  --------  --------  -------- 
Repurchase agreements 
 - non-trading                    32,507     1,549     2,065       277         -    36,398 
------------------------------  --------  --------  --------  --------  --------  -------- 
Trading liabilities               27,014         -         -         -         -    27,014 
------------------------------  --------  --------  --------  --------  --------  -------- 
Financial liabilities 
 designated at fair 
 value                             4,742       382     3,378     8,146     9,236    25,884 
------------------------------  --------  --------  --------  --------  --------  -------- 
Derivatives                      149,124        41       133       343       393   150,034 
------------------------------  --------  --------  --------  --------  --------  -------- 
Debt securities in 
 issue                               787     4,750     7,743     1,489       406    15,175 
------------------------------  --------  --------  --------  --------  --------  -------- 
Subordinated liabilities              88         -       219     9,141     5,870    15,318 
------------------------------  --------  --------  --------  --------  --------  -------- 
Other financial liabilities       39,227       394       255       303       170    40,349 
------------------------------  --------  --------  --------  --------  --------  -------- 
                                 370,508    12,421    16,319    20,278    16,141   435,667 
                                --------  --------  --------  --------  --------  -------- 
Loan and other credit-related 
 commitments                      44,087         -         -         -         -    44,087 
------------------------------  --------  --------  --------  --------  --------  -------- 
Financial guarantees(1)            3,695         -         -         -         -     3,695 
------------------------------  --------  --------  --------  --------  --------  -------- 
At 31 Dec 2019                   418,290    12,421    16,319    20,278    16,141   483,449 
------------------------------  --------  --------  --------  --------  --------  -------- 
 
 

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

Maturity analysis of financial assets and financial liabilities

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

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

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

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

Targeted Long-Term Refinancing Operation ('TLTRO')

In June 2020, HSBC Continental Europe repaid EUR2.6bn in TLTRO II funding and issued EUR10.6bn in TLTRO III funding. Borrowing rates for TLTRO III are at below-market rates as they are issued at, or below, the deposit facility rate. Borrowing rates in these operations can be as low as 50 basis points below the average interest rate on the deposit facility rate over the period 24 June 2020 to 23 June 2022, capped at -1%, and as low as the interest rate on the deposit facility during the rest of the life of the respective TLTRO III, if the entity's benchmark lending is maintained at a prescribed level over specific periods. During 2020, HSBC Continental Europe judged there to be reasonable assurance that the conditions attached to TLTRO III will be complied with and that the below-market rate foreseen in the first twelve months will be received. As such, TLTRO funding has been accounted for as a government grant. The below-market rate attached to lending to support the real economy is recognised in net interest income during the period.

 
Maturity analysis of financial assets and financial 
 liabilities 
                                           2020                              2019 
                                           Due after                        Due after 
                              Due within   more than           Due within   more than 
                                  1 year      1 year    Total      1 year      1 year      Total 
The group                           GBPm        GBPm     GBPm        GBPm        GBPm       GBPm 
                              ----------  ----------  -------  ----------  ----------  --------- 
Assets 
                              ----------  ----------  ------- 
Financial assets designated 
 or otherwise mandatorily 
 measured at fair value            1,631      14,589   16,220       2,651      14,361   17,012 
 
Loans and advances 
 to banks                         10,186       2,460   12,646       8,849       2,618   11,467 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Loans and advances 
 to customers                     47,863      53,628  101,491      52,408      55,983  108,391 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Reverse repurchase 
 agreement - non-trading          65,157       2,420   67,577      84,047       1,709   85,756 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Financial investments              8,984      42,842   51,826       7,113      39,351   46,464 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Other financial assets            49,744         274   50,018      43,281         367   43,648 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
At 31 Dec                        183,565     116,213  299,778     198,349     114,389  312,738 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Liabilities 
----------------------------                                   ----------  ----------  --------- 
Deposits by banks                 21,627      12,678   34,305      21,704       2,287   23,991 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Customer accounts                194,872         312  195,184     176,855         381  177,236 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Repurchase agreements 
 - non-trading                    34,891          12   34,903      49,116         269   49,385 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Financial liabilities 
 designated at fair 
 value                            17,109      23,683   40,792      11,826      29,816   41,642 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Debt securities in 
 issue                            15,620       1,751   17,371      22,843       2,196   25,039 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Other financial liabilities       50,955       1,704   52,659      47,723       1,841   49,564 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
Subordinated liabilities             445      13,319   13,764          93      13,089   13,182 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
At 31 Dec                        335,519      53,459  388,978     330,160      49,879  380,039 
----------------------------  ----------  ----------  -------  ----------  ----------  ------- 
 
 
The bank 
----------------------------  -------  ------  -------  -------  ------  --------- 
Assets 
----------------------------  -------  ------  -------  -------  ------  --------- 
Financial assets designated 
 or otherwise mandatorily 
 measured at fair value         1,455     410    1,865    2,413     716    3,129 
Loans and advances 
 to banks                       6,081   1,982    8,063    5,352   4,171    9,523 
----------------------------  -------  ------  -------  -------  ------  ------- 
Loans and advances 
 to customers                  31,051  12,190   43,241   35,076  14,850   49,926 
----------------------------  -------  ------  -------  -------  ------  ------- 
Reverse repurchase 
 agreement - non-trading       48,175   1,962   50,137   49,460   1,276   50,736 
----------------------------  -------  ------  -------  -------  ------  ------- 
Financial investments           5,617  25,352   30,969    4,269  22,292   26,561 
----------------------------  -------  ------  -------  -------  ------  ------- 
Other financial assets         34,753       1   34,754   33,483       1   33,484 
----------------------------  -------  ------  -------  -------  ------  ------- 
At 31 Dec                     127,132  41,897  169,029  130,053  43,306  173,359 
----------------------------  -------  ------  -------  -------  ------  ------- 
Liabilities 
----------------------------                            -------  ------  --------- 
Deposits by banks              17,284     200   17,484   15,804     552   16,356 
----------------------------  -------  ------  -------  -------  ------  ------- 
Customer accounts             119,971       3  119,974  108,990      50  109,040 
----------------------------  -------  ------  -------  -------  ------  ------- 
Repurchase agreements 
 - non-trading                 26,984      12   26,996   36,058     269   36,327 
----------------------------  -------  ------  -------  -------  ------  ------- 
Financial liabilities 
 designated at fair 
 value                         14,859   9,828   24,687    9,184  15,479   24,663 
----------------------------  -------  ------  -------  -------  ------  ------- 
Debt securities in 
 issue                         13,912   1,444   15,356   13,181   1,857   15,038 
----------------------------  -------  ------  -------  -------  ------  ------- 
Other financial liabilities    38,167      56   38,223   39,345     436   39,781 
----------------------------  -------  ------  -------  -------  ------  ------- 
Subordinated liabilities          330  13,030   13,360        -  12,783   12,783 
----------------------------  -------  ------  -------  -------  ------  ------- 
At 31 Dec                     231,507  24,573  256,080  222,562  31,426  253,988 
----------------------------  -------  ------  -------  -------  ------  ------- 
 
 
28  Offsetting of financial assets and financial liabilities 
    -------------------------------------------------------- 
 

The 'Amounts not set off in the balance sheet' include transactions where:

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

-- In the case of derivatives and reverse repurchase/repurchase, stock borrowing/lending and similar agreements, cash and non-cash collateral has been received/pledged.

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

 
                                 Amounts subject to enforceable netting 
                                              arrangements 
                                                       Amounts not set 
                                                      off in the balance 
                                                            sheet 
                                                                                                  Amounts 
                                                                                                      not 
                                        Net                                                       subject 
                                    amounts                                                            to 
                                     in the                                                   enforceable 
                  Gross    Amounts  balance    Financial    Non-cash        Cash     Net          netting 
                amounts     offset    sheet  instruments  collateral  collateral  amount  arrangements(5)      Total 
                   GBPm       GBPm     GBPm         GBPm        GBPm        GBPm    GBPm             GBPm       GBPm 
                                    ------- 
Financial 
assets 
                                    ------- 
Derivatives 
 (Note 
 14)(1)         229,891   (29,996)  199,895    (160,907)     (8,837)    (29,834)     317            1,315  201,210 
                -------                      ----------- 
Reverse 
repos, stock 
borrowing and 
similar 
agreements 
classified 
as(2) : 
- trading 
 assets          12,430      (531)   11,899        (519)    (11,380)           -       -              419   12,318 
                -------                      ----------- 
- non-trading 
 assets         128,246   (64,386)   63,860     (10,604)    (53,218)        (38)       -            3,735   67,595 
                -------                      ----------- 
Loans and 
 advances 
 to 
 customers(3)    17,312    (6,990)   10,322      (8,713)           -           -   1,609                1   10,323 
                -------                      ----------- 
At 31 Dec 2020  387,879  (101,903)  285,976    (180,743)    (73,435)    (29,872)   1,926            5,470  291,446 
                -------                      ----------- 
 
Derivatives 
 (Note 
 14)(1)         181,449   (18,094)  163,355    (119,222)     (9,344)    (34,543)     246            1,183  164,538 
                -------  ---------  -------  -----------                          ------  ---------------  ------- 
Reverse 
repos, stock 
borrowing and 
similar 
agreements 
classified 
as(2) : 
- trading 
 assets          13,558      (203)   13,355      (1,174)    (12,181)           -       -               96   13,451 
                -------  ---------                                                ------                   ------- 
- non-trading 
 assets         163,790   (79,963)   83,827     (21,848)    (61,832)       (147)       -            1,946   85,773 
                -------  ---------                                                ------                   ------- 
Loans and 
 advances 
 to 
 customers(3)    18,726    (6,334)   12,392     (10,066)           -           -   2,326                -   12,392 
                -------  ---------                                                ------                   ------- 
At 31 Dec 2019  377,523  (104,594)  272,929    (152,310)    (83,357)    (34,690)   2,572            3,225  276,154 
                -------  ---------                                                ------                   ------- 
 
Financial 
liabilities 
                                    ------- 
Derivatives 
 (Note 
 14)(1)         228,372   (29,996)  198,376    (160,907)    (14,652)    (22,521)     296              856  199,232 
                -------                      ----------- 
Repos, stock 
lending 
and similar 
agreements 
classified 
as(2) : 
- trading 
 liabilities     12,323      (531)   11,792        (519)    (11,273)           -       -                5   11,797 
                -------                      ----------- 
- non-trading 
 liabilities     99,289   (64,386)   34,903     (10,604)    (24,143)       (156)       -                -   34,903 
                -------                      ----------- 
Customer 
 accounts(4)     21,847    (6,990)   14,857      (8,713)           -           -   6,144                8   14,865 
                -------                      ----------- 
At 31 Dec 2020  361,831  (101,903)  259,928    (180,743)    (50,068)    (22,677)   6,440              869  260,797 
                -------                      ----------- 
 
Derivatives 
 (Note 
 14)(1)         178,466   (18,094)  160,372    (119,222)    (14,633)    (26,130)     387              711  161,083 
                -------  ---------  -------  -----------                          ------  ---------------  ------- 
Repos, stock 
lending 
and similar 
agreements 
classified 
as(2) : 
- trading 
 liabilities      8,013      (203)    7,810      (1,174)     (6,636)           -       -               36    7,846 
                -------  ---------                                                ------                   ------- 
- non-trading 
 liabilities    129,247   (79,963)   49,284     (21,848)    (27,167)       (269)       -              101   49,385 
                -------  ---------                                                ------                   ------- 
Customer 
 accounts(4)     20,032    (6,334)   13,698     (10,066)           -           -   3,632               19   13,717 
                -------  ---------                                                ------                   ------- 
At 31 Dec 2019  335,758  (104,594)  231,164    (152,310)    (48,436)    (26,399)   4,019              867  232,031 
                -------  ---------                                                ------                   ------- 
 

1 At 31 December 2020, the amount of cash margin received that had been offset against the gross derivatives assets was GBP4,866m (2019: GBP1,030m). The amount of cash margin paid that had been offset against the gross derivatives liabilities was GBP10,622m (2019: GBP5,213 m).

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

3 At 31 December 2020, the total amount of 'Loans and advances to customers' recognised on the balance sheet was GBP101,491m (2019: GBP108,391m) of which GBP10,322m (2019: GBP12,392m) was subject to offsetting.

4 At 31 December 2020, the total amount of 'Customer accounts' recognised on the balance sheet was GBP195,184m (2019: GBP177,236m) of which GBP14,857m (2019: GBP13,698m) was subject to offsetting.

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

1

 
29  Called up share capital and other equity instruments 
    ---------------------------------------------------- 
 

Issued and fully paid

 
HSBC Bank plc GBP1.00 ordinary shares 
                   2020                2019 
                  Number  GBPm       Number    GBPm 
             -----------  ----  -----------  ------ 
At 1 Jan     796,969,111   797  796,969,111   797 
             -----------  ----  -----------  ---- 
At 31 Dec    796,969,111   797  796,969,111   797 
             -----------  ----  -----------  ---- 
 
 
HSBC Bank plc $0.01 non-cumulative third dollar preference shares 
                                               2020                   2019 
                                           Number    GBP000      Number       GBP000 
                                       ----------  --------  ----------  ----------- 
At 1 Jan and 31 Dec                    35,000,000      172   35,000,000      172 
                                       ----------  -------   ----------  ------- 
 
 

The bank has no obligation to redeem the preference shares but may redeem them in part or in whole at any time, subject to prior notification to the Prudential Regulation Authority. Dividends on the preference shares in issue are paid annually at the sole and absolute discretion of the Board of Directors. The Board of Directors will not declare a dividend on the preference shares in issue if payment of the dividend would cause the bank not to meet the capital adequacy requirements of the Prudential Regulation Authority or the profit of the bank, available for distribution as dividends, is not sufficient to enable the bank to pay in full both dividends on the preference shares in issue and dividends on any other shares that are scheduled to be paid on the same date and have an equal right to dividends or if payment of the dividend is prohibited by the rights attached to any class of shares in the capital of the bank, excluding ordinary shares.

The preference shares in issue carry no rights to conversion into ordinary shares of the bank. Holders of the preference shares in issue will be able to attend any general meetings of shareholders of the bank and to vote on any resolution proposed to vary or abrogate any of the rights attaching to the preference shares or any resolution proposed to reduce the paid up capital of the preference shares. If the dividend payable on the preference shares in issue has not been paid in full for the most recent dividend period or any resolution is proposed for the winding-up of the bank or the sale of its entire business then, in such circumstances, holders of preference shares will be entitled to vote on all matters put to general meetings. In the case of unpaid dividends, the holders of preference shares in issue will be entitled to attend and vote at any general meetings until such time as dividends on the preference shares have been paid in full, or a sum set aside for such payment in full, in respect of one dividend period. All shares in issue are fully paid.

Other equity instruments

 
HSBC Bank plc additional tier 1 instruments 
                                                                   2020     2019 
                                                                   GBPm     GBPm 
            Undated Subordinated Resettable Additional Tier 
             1 instrument issued 2015 (Callable December 2020 
EUR1,900m    onwards)                                             1,388  1,388 
                                                                  -----  ----- 
EUR235m     Undated Subordinated Resettable Additional Tier         197 
             1 instrument issued 2016 (Callable January 2022 
             onwards)                                                      197 
                                                                  -----  ----- 
EUR300m     Undated Subordinated Resettable Additional Tier         263 
             1 instrument 2018 (Callable March 2023 onwards)               263 
                                                                  -----  ----- 
            Undated Subordinated Resettable Additional Tier 
GBP555m      1 instrument 2018 (Callable March 2023 onwards)        555    555 
                                                                  -----  ----- 
            Undated Subordinated Resettable Additional Tier 
GBP500m      1 instrument 2019 (Callable November 2024 onwards)     500    500 
                                                                  -----  ----- 
EUR250m     Undated Subordinated Resettable Additional Tier         213 
             1 instrument 2019 (Callable November 2024 onwards)            213 
                                                                  -----  ----- 
            Undated Subordinated Resettable Additional Tier 
GBP431m      1 instrument 2019 (Callable December 2024 onwards)     431    431 
                                                                  -----  ----- 
EUR200m     Undated Subordinated Resettable Additional Tier         175 
             1 instrument 2019 (Callable January 2025 onwards)             175 
                                                                  -----  ----- 
At 31 
 Dec                                                              3,722  3,722 
                                                                  -----  ----- 
 

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

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

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

 
30  Contingent liabilities, contractual commitments and guarantees 
    -------------------------------------------------------------- 
 
 
                                                        The group          The bank 
                                                        2020     2019    2020      2019 
                                                        GBPm     GBPm    GBPm      GBPm 
                                                     -------           ------ 
Guarantees and other contingent liabilities: 
- financial guarantees                                 3,969    4,318   1,510   3,695 
 
- performance and other guarantees                    14,282   15,186   7,156   7,554 
 
- other contingent liabilities                           458      609     376     526 
 
At 31 Dec                                             18,709   20,113   9,042  11,775 
 
Commitments:(1) 
- documentary credits and short-term trade-related 
 transactions                                          1,366    1,810     534     642 
 
- forward asset purchases and forward deposits 
 placed                                               42,793   37,998   4,747   2,906 
 
- standby facilities, credit lines and 
 other commitments to lend                           103,144   89,096  41,059  40,539 
 
At 31 Dec                                            147,303  128,904  46,340  44,087 
 
 

1 Includes GBP143,036m of commitments (2019: GBP121,447m), to which the impairment requirements in IFRS 9 are applied where the group has become party to an irrevocable commitment.

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

UK branches of HSBC overseas entities

In December 2017, HM Revenue & Customs ('HMRC') challenged the VAT status of certain UK branches of HSBC overseas entities.

HMRC has also issued notices of assessment covering the period from 1 October 2013 to 31 December 2017 totalling GBP262m, with

interest to be determined. No provision has been recognised in respect of these notices. In Q1 2019, HMRC reaffirmed its assessment

that the UK branches are ineligible to be members of the UK VAT group and, consequently, HSBC paid HMRC the sum of GBP262m and

filed appeals which remain pending. The payment of GBP262m is recorded as an asset on HSBC's balance sheet at 31 December 2020. Since January 2018, HSBC's returns have been prepared on the basis that the UK branches are not in the UK VAT group. In the event that HSBC's appeals are successful, HSBC will seek a refund of this VAT, of which GBP97m is estimated to be attributable to HSBC Bank plc.

Contingent liabilities arising from legal proceedings, regulatory and other matters against group companies are disclosed in Note 32.

Financial Services Compensation Scheme

The Financial Services Compensation Scheme ('FSCS') provides compensation to customers of financial services firms that have failed. The group could be liable to pay a proportion of any future amounts that the FSCS borrows from HM Treasury to the extent the industry levies imposed to date are not sufficient to cover the compensation due to customers in any future possible collapse. The ultimate FSCS levy to the industry as a result of a collapse cannot be estimated reliably. It is dependent on various uncertain factors including the potential recovery of assets by the FSCS, changes in the level of protected products (including deposits and investments) and the population of FSCS members at the time.

Guarantees

 
                                The group                                     The bank 
                        2020                  2019                  2020                   2019 
                              By the                By the                By the 
                               group                 group               bank in                  By the 
                           in favour             in favour                favour                 bank in 
                            of other              of other              of other                  favour 
                In favour       HSBC  In favour       HSBC  In favour       HSBC  In favour     of other 
                 of third      Group   of third      Group   of third      Group   of third   HSBC Group 
                  parties   entities    parties   entities    parties   entities    parties     entities 
                     GBPm       GBPm       GBPm       GBPm       GBPm       GBPm       GBPm         GBPm 
Financial 
 guarantees(1)      3,541        428      3,832        486        895        615      1,289      2,406 
 
Performance 
 and other 
 guarantees        13,091      1,191     14,129      1,057      6,088      1,068      6,634        920 
                                                            ---------             --------- 
Total              16,632      1,619     17,961      1,543      6,983      1,683      7,923      3,326 
 
 

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

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

 
31  Finance lease receivables 
    ------------------------- 
 

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

 
                                               2020                           2019 
                                       Total                         Total 
                                      future  Unearned              future  Unearned 
                                     minimum   finance  Present    minimum   finance    Present 
                                    payments    income    value   payments    income      Value 
                                        GBPm      GBPm     GBPm       GBPm      GBPm       GBPm 
                                                                            -------- 
Lease receivables: 
                                                                            -------- 
No later than one year                   270      (16)      254        392      (18)      374 
 
One to two years                         253      (17)      236        256      (19)      237 
 
Two to three years                       424      (15)      409        306      (17)      289 
 
Three to four years                      305      (15)      290        279      (15)      264 
 
Four to five years                       152       (9)      143        168      (13)      155 
 
Later than one year and no later 
 than five years                       1,134      (56)    1,078      1,009      (64)      945 
 
Later than five years                    770      (31)      739        840      (33)      807 
 
At 31 Dec                              2,174     (103)    2,071      2,241     (115)    2,126 
 
 
 
32  Legal proceedings and regulatory matters 
    ---------------------------------------- 
 

The group is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, the group considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 31 December 2020 (see Note 25). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Bernard L. Madoff Investment Securities LLC

Bernard L. Madoff ('Madoff') was arrested in December 2008 and later pleaded guilty to running a Ponzi scheme. His firm, Bernard L. Madoff Investment Securities LLC ('Madoff Securities'), is being liquidated in the US by a trustee (the 'Trustee').

Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Madoff Securities. Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff.

Based on information available to HSBC, the funds' actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud.

US litigation: The Trustee has brought lawsuits against various HSBC companies and others in the US Bankruptcy Court for the Southern District of New York (the 'US Bankruptcy Court'), seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or determined. HSBC and other parties to the actions have moved to dismiss the Trustee's claims. The US Bankruptcy Court granted HSBC's motion to dismiss with respect to certain of the Trustee's claims in November 2016. In February 2019, the US Court of Appeals for the Second Circuit (the 'Second Circuit Court of Appeals') reversed that dismissal. Following the US Supreme Court's denial of certiorari in June 2020, the cases were remanded to the US Bankruptcy Court, where they are now pending.

Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield Lambda Limited (together, 'Fairfield') (in liquidation since July 2009) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments. In December 2018, the US Bankruptcy Court issued an opinion, which ruled in favour of the defendants' motion to dismiss in respect of certain claims by the liquidators for Fairfield and granted a motion by the liquidators to file amended complaints. As a result of that opinion, all claims against one of the HSBC companies, and certain claims against the remaining HSBC defendants, were dismissed. In May 2019, the liquidators appealed certain issues from the US Bankruptcy Court to the US District Court for the Southern District of New York (the 'New York District Court') and, in January 2020, the liquidators filed amended complaints on the claims remaining in the US Bankruptcy Court. In March 2020, HSBC and other parties to the action moved to dismiss the amended complaints in the US Bankruptcy Court. In December 2020, the US Bankruptcy Court granted in part and denied in part the defendants' motion. This action remains pending in the US Bankruptcy Court and the New York District Court.

UK litigation: The Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or determined. The deadline for service of the claim has been extended to September 2021 for UK-based defendants and November 2021 for all other defendants.

Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in liquidation since April 2009) brought an action against HSBC Securities Services Luxembourg ('HSSL') and Bank of Bermuda (Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming damages and equitable compensation. The trial concluded in February 2017 and, in August 2017, the court dismissed all claims against the defendants. In September 2017, Primeo appealed to the Court of Appeal of the Cayman Islands and, in June 2019, the Court of Appeal of the Cayman Islands dismissed Primeo's appeal. In August 2019, Primeo filed a notice of appeal to the UK Privy Council, which has listed the first of two possible hearings for April 2021.

Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald') (in liquidation since July 2013) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities that Herald purportedly lost because of Madoff Securities' fraud, or money damages. The Luxembourg District Court dismissed Herald's securities restitution claim, but reserved Herald's cash restitution claim and its claim for money damages. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter is pending. In late 2018, Herald brought additional claims against HSSL and HSBC Bank plc before the Luxembourg District Court, seeking further restitution and damages.

In October 2009, Alpha Prime Fund Limited ('Alpha Prime') brought an action against HSSL before the Luxembourg District Court, seeking the restitution of securities, or the cash equivalent, or money damages. In December 2018, Alpha Prime brought additional claims before the Luxembourg District Court seeking damages against various HSBC companies. These matters are currently pending before the Luxembourg District Court.

In December 2014, Senator Fund SPC ('Senator') brought an action against HSSL before the Luxembourg District Court, seeking restitution of securities, or the cash equivalent, or money damages. In April 2015, Senator commenced a separate action against the Luxembourg branch of HSBC Bank plc asserting identical claims before the Luxembourg District Court. In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch before the Luxembourg District Court, seeking restitution of Senator's securities or money damages. These matters are currently pending before the Luxembourg District Court.

Ireland litigation: In November 2013, Defender Limited brought an action against HSBC Institutional Trust Services (Ireland) Limited ('HTIE') and others, based on allegations of breach of contract and claiming damages and indemnification for fund losses. The trial commenced in October 2018. In December 2018, the Irish High Court issued a judgment in HTIE's favour on a preliminary issue, holding that Defender Limited had no effective claim against HTIE. This judgment concluded the trial without further issues in dispute being heard. In February 2019, Defender Limited appealed the decision. In July 2020, the Irish Supreme Court ruled in part in favour of Defender Limited and returned the case to the High Court for further proceedings, which will resume in April 2021.

There are many factors that may affect the range of possible outcomes, and any resulting financial impact, of the various Madoff-related proceedings described above, including but not limited to the multiple jurisdictions in which the proceedings have been brought. Based upon the information currently available, management's estimate of the possible aggregate damages that might arise as a result of all claims in the various Madoff-related proceedings is up to or exceeding $500m, excluding costs and interest. Due to uncertainties and limitations of this estimate, any possible damages that might ultimately arise could differ significantly from this amount.

Anti-money laundering and sanctions-related matters

In December 2012, HSBC Holdings plc ('HSBC Holdings') entered into a number of agreements, including an undertaking with the UK Financial Services Authority (replaced with a Direction issued by the UK Financial Conduct Authority ('FCA') in 2013, and again in 2020) as well as a cease-and-desist order with the US Federal Reserve Board ('FRB'), both of which contained certain forward-looking anti-money laundering ('AML') and sanctions-related obligations. HSBC also agreed to retain an independent compliance monitor (who was, for FCA purposes, a 'Skilled Person' under section 166 of the Financial Services and Markets Act and, for FRB purposes, an 'Independent Consultant') to produce periodic assessments of the Group's AML and sanctions compliance programme. In 2020, HSBC's engagement with the independent compliance monitor, acting in his roles as both Skilled Person and Independent Consultant, concluded. The role of FCA Skilled Person was assigned to a new individual in the second quarter of 2020. Separately, a new FRB Independent Consultant will be appointed pursuant to the cease-and-desist order. The roles of each of the FCA Skilled Person and the FRB Independent Consultant are discussed on page 81.

The FCA is conducting an investigation into HSBC Bank plc's and HSBC UK Bank plc's compliance with UK money laundering regulations and financial crime systems and controls requirements. HSBC continues to cooperate with the FCA's investigation, which is at or nearing completion.

Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act. Currently, nine actions against HSBC Bank plc remain pending in federal courts in New York or the District of Columbia. In March and September 2019, the courts granted HSBC's motions to dismiss in two of these cases. The plaintiffs have appealed the decision in one of these cases. HSBC filed motions to dismiss in three further cases, with two of the motions granted in June 2020, and the third granted in November 2020. The four remaining actions are at a very early stage.

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

London interbank offered rates, European interbank offered rates and other benchmark interest rate investigations and litigation

Euro interest rate derivatives: In December 2016, the European Commission (the 'EC') issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives in early 2007. The EC imposed a fine on HSBC based on a one-month infringement. HSBC appealed the decision and, in September 2019, the General Court of the European Union (the 'General Court') issued a decision largely upholding the EC's findings on liability but annulling the fine. HSBC and the EC have both appealed the General Court's decision to the European Court of Justice.

US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US laws, including US antitrust and racketeering laws, the US Commodity Exchange Act ('US CEA') and state law. The lawsuits include individual and putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the New York District Court.

In 2017 and 2018, HSBC reached agreements with plaintiffs to resolve putative class actions brought on behalf of the following five groups of plaintiffs: persons who purchased US dollar Libor-indexed bonds; persons who purchased US dollar Libor-indexed exchange-traded instruments; US-based lending institutions that made or purchased US dollar Libor-indexed loans; persons who purchased US dollar Libor-indexed interest rate swaps and other instruments directly from the defendant banks and their affiliates; and persons who purchased US dollar Libor-indexed interest rate swaps and other instruments from certain financial institutions that are not the defendant banks or their affiliates. The New York District Court has granted final approval of each of the five referenced settlements. Additionally, a number of other US dollar Libor-related actions remain pending against HSBC in the New York District Court and the Second Circuit Court of Appeals.

Intercontinental Exchange ('ICE') Libor: Between January and March 2019, HSBC and other panel banks were named as defendants in three putative class actions filed in the New York District Court on behalf of persons and entities who purchased instruments paying interest indexed to US dollar ICE Libor from a panel bank. The complaints allege, among other things, misconduct related to the suppression of this benchmark rate in violation of US antitrust and state law. In July 2019, the three putative class actions were consolidated, and the plaintiffs filed a consolidated amended complaint. In March 2020, the court granted the defendants' joint motion to dismiss in its entirety. This matter is on appeal.

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

Foreign exchange-related investigations and litigation

Since at least 2014, the EC has been conducting an investigation into trading activities by a number of banks, including HSBC, in the foreign exchange spot market. HSBC is cooperating with this investigation.

In January 2021, HSBC Holdings exited its three-year deferred prosecution agreement with the Criminal Division of the US Department of Justice ('DoJ') (the 'FX DPA'), regarding fraudulent conduct in connection with two particular transactions in 2010 and 2011. HSBC Holdings entered into the FX DPA in January 2018, following the conclusion of the DoJ's investigation into HSBC's historical foreign exchange activities. Under the terms of the FX DPA, the DoJ is expected to file a motion to dismiss the charges deferred by the FX DPA in due course.

In June 2020, the Competition Commission of South Africa, having initially referred a complaint for proceedings before the South African Competition Tribunal in February 2017, filed a revised complaint against 28 financial institutions, including HSBC Bank plc, for alleged anti-competitive behaviour in the South African foreign exchange market. In August 2020, HSBC Bank plc filed an application to dismiss the revised complaint, which remains pending.

In late 2013 and early 2014, various HSBC companies and other banks were named as defendants in various putative class actions consolidated in the New York District Court. The consolidated complaint alleged, among other things, that the defendants conspired to manipulate the WM/Reuters foreign exchange benchmark rates. In September 2015, HSBC reached an agreement with the plaintiffs to resolve the consolidated action, and the court granted final approval of the settlement in August 2018.

In 2017, putative class action complaints making similar allegations on behalf of purported indirect purchasers of foreign exchange products were filed in New York and were subsequently consolidated in the New York District Court. In April 2020, HSBC reached an agreement with the plaintiffs to resolve the indirect purchaser action. In November 2020, the New York District Court granted final approval of the settlement.

In September 2018, various HSBC companies and other banks were named as defendants in two motions for certification of class actions filed in Israel alleging foreign exchange-related misconduct. In July 2019, the Tel Aviv Court allowed the plaintiffs to consolidate their claims and, in September 2019, the plaintiffs filed a motion for certification of the consolidated class action. In August 2020, HSBC Bank plc filed a motion to dismiss, which remains pending.

In November and December 2018, complaints alleging foreign exchange-related misconduct were filed in the New York District Court and the High Court of England and Wales against HSBC and other defendants by certain plaintiffs that opted out of the US class action settlement. In May 2020, the New York District Court granted in part and denied in part the defendants' motion to dismiss the US opt out actions. These matters remain at an early stage.

In February 2019, various HSBC companies were named as defendants in a claim issued in the High Court of England and Wales that alleges foreign exchange-related misconduct. This matter remains ongoing. It is possible that additional civil actions will be initiated against HSBC in relation to its historical foreign exchange activities.

As at 31 December 2020, the bank has recognised a provision for these and similar matters in the amount of GBP159m. There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters. Due to uncertainties and limitations of these estimates, the ultimate financial impact could differ significantly from the amount provided.

Precious metals fix-related litigation

Gold: Beginning in March 2014, numerous putative class actions were filed in the New York District Court and the US District Courts for the District of New Jersey and the Northern District of California, naming HSBC and other members of The London Gold Market Fixing Limited as defendants. The complaints allege that, from January 2004 to June 2013, the defendants conspired to manipulate the price of gold and gold derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. The actions were consolidated in the New York District Court. The defendants' motion to dismiss the consolidated action was granted in part and denied in part in October 2016. In June 2017, the court granted the plaintiffs leave to file a third amended complaint, naming a new defendant. In October 2020, HSBC reached a settlement in principle with the plaintiffs to resolve the consolidated action. The settlement remains subject to court approval.

Beginning in December 2015, numerous putative class actions under Canadian law were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs allege that, among other things, from January 2004 to March 2014, the defendants conspired to manipulate the price of gold and gold derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Silver: Beginning in July 2014, numerous putative class actions were filed in federal district courts in New York, naming HSBC and other members of The London Silver Market Fixing Limited as defendants. The complaints allege that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. The actions were consolidated in the New York District Court. The defendants' motion to dismiss the consolidated action was granted in part and denied in part in October 2016. In June 2017, the court granted the plaintiffs leave to file a third amended complaint, which names several new defendants. The court has denied the pre-existing defendants' request for leave to file a joint motion to dismiss, and discovery is proceeding.

In April 2016, two putative class actions under Canadian law were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs in both actions allege that, from January 1999 to August 2014, the defendants conspired to manipulate the price of silver and silver derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Platinum and palladium: Between late 2014 and early 2015, numerous putative class actions were filed in the New York District Court, naming HSBC and other members of The London Platinum and Palladium Fixing Company Limited as defendants. The complaints allege that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals ('PGM') and PGM-based financial products for their collective benefit in violation of US antitrust laws and the US CEA. In March 2017, the defendants' motion to dismiss the second amended consolidated complaint was granted in part and denied in part. In June 2017, the plaintiffs filed a third amended complaint. In March 2020, the court granted the defendants' motion to dismiss the third amended complaint but granted the plaintiffs leave to re-plead certain claims. The plaintiffs have filed an appeal.

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

Other regulatory investigations, reviews and litigation

HSBC Bank plc and/or certain of its affiliates are subject to a number of other investigations and reviews by various regulators and competition and law enforcement authorities, as well as litigation, in connection with various matters relating to the firm's businesses and operations, including:

-- an investigation by the FCA in connection with collections and recoveries operations in the UK;

-- an information request from the UK Competition and Markets Authority concerning the financial services sector; and

-- two group actions pending in the US courts and a claim issued in the High Court of England and Wales in connection with HSBC Bank plc's role as a correspondent bank to Stanford International Bank Ltd from 2003 to 2009.

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

 
33  Related party transactions 
 
 

The immediate parent company of the group is HSBC UK Holdings Limited and the ultimate parent company is HSBC Holdings plc, both of which are incorporated in England.

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

HSBC Holdings plc

8 Canada Square

London E14 5HQ

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

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

Key Management Personnel

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

A number of the bank's KMP are not Directors of the group, but are Directors or Group Executive Committee members of HSBC Holdings plc. The emoluments of these KMP are paid by other members of the Group who make no recharge to the bank. It is not possible to make a reasonable apportionment of their emoluments in respect of the bank. Accordingly, no emoluments in respect of these KMP are included in the following disclosure.

The tables below represent the compensation for Directors of the bank in exchange for services rendered to the bank for the period they served during the year.

 
Compensation of Key Management Personnel 
                                      2020      2019 
                                    GBP000    GBP000 
----------------------------------  ------  -------- 
Short-term employee benefits         3,865   3,330 
Other long-term employee benefits      429      48 
----------------------------------  ------  ------ 
Share-based payments                   586     348 
----------------------------------  ------  ------ 
Year ended 31 Dec                    4,899   3,726 
----------------------------------  ------  ------ 
 
 
Advances and credits, guarantees and deposit balances during the year 
 with Key Management Personnel 
                                                           2020                    2019 
                                                                 Highest                  Highest 
                                                                 amounts                  amounts 
                                                   Balance   outstanding  Balance     outstanding 
                                                        at        during       at          during 
                                                    31 Dec       year(2)   31 Dec            year 
                                                      GBPm          GBPm     GBPm            GBPm 
                                                   -------  ------------  -------  -------------- 
Key Management Personnel(1) 
                                                   -------  ------------  -------  -------------- 
Advances and credits                                  0.03           1.5      0.2           0.4 
                                                                          -------  ------------ 
Deposits                                                13            39        8            21 
                                                   -------  ------------  -------  ------------ 
 

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

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

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

In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the group with Directors of HSBC Bank plc are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the Companies Act, there is no requirement to disclose transactions with KMP of the bank's ultimate parent company, HSBC Holdings plc.

 
Transactions with Directors: advances, credits and guarantees (Companies 
 Act 2006) 
                                                               2020        2019 
                                                            Balance     Balance 
                                                                 at          at 
                                                             31 Dec      31 Dec 
                                                             GBP000      GBP000 
---------------------------------------------------------  -------- 
Directors 
--------------------------------------------------------- 
Loans                                                             -     150 
---------------------------------------------------------  -------- 
 
 

Other related parties

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

During the course of 2019 and 2020, there were no transactions and balances between KMP of the bank's ultimate parent company, who were not considered KMP of the bank, in respect of Advances and Credits, Guarantees and Deposits.

Transactions and balances during the year with associates and joint ventures

During the course of 2019 and 2020, there were no transactions and balances with associates and joint ventures, in respect of Loans, Deposits, Guarantees and commitments.

 
The group's transactions and balances during the year with HSBC Holdings 
 plc and subsidiaries of HSBC Holdings plc 
                                      2020                                       2019 
                                            Due to/from                                Due to/from 
                       Due to/from          subsidiaries         Due to/from           subsidiaries 
                       HSBC Holdings      of HSBC Holdings       HSBC Holdings       of HSBC Holdings 
                            plc                  plc                  plc                   plc 
                      Highest               Highest             Highest               Highest 
                      balance  Balance      balance  Balance    balance  Balance      balance    Balance 
                       during    at 31       during    at 31     during    at 31       during      at 31 
                     the year      Dec     the year      Dec   the year      Dec     the year        Dec 
                         GBPm     GBPm         GBPm     GBPm       GBPm     GBPm         GBPm       GBPm 
                    ---------                                                     ----------- 
Assets 
                    ---------                                 --------- 
Trading assets            170      108        1,664    1,154         98       75          676      302 
                    ---------                                 ---------           -----------  ------- 
Derivatives             2,261    2,002       33,785   20,980      1,685    1,447       24,696   18,130 
                    ---------                                 ---------           -----------  ------- 
Financial assets 
 designated 
 and otherwise 
 mandatorily 
 measured at fair 
 value 
 through profit or 
 loss                       7        7           29       28          8        7          198       27 
Loans and advances 
 to banks                   -        -        6,222    4,048          -        -        5,341    1,957 
                    ---------                                 ---------           -----------  ------- 
Loans and advances 
 to customers               -        -          505      435        406        -          612      400 
                    ---------                                 ---------           -----------  ------- 
Financial 
 investments              172      172            -        -        229      160            -        - 
                    ---------                                 ---------           -----------  ------- 
Reverse repurchase 
 agreements - 
 non-trading                -        -        4,638    1,137          -        -        6,303    4,638 
                    ---------                                 ---------           -----------  ------- 
Prepayments,accru 
 ed 
 income and other 
 assets                 2,228    1,431       10,821    4,250      1,810       23       10,914    5,402 
                    ---------                                 ---------           -----------  ------- 
Total related 
 party 
 assets at 31 Dec       4,838    3,720       57,664   32,032      4,236    1,712       48,740   30,856 
                    ---------                                 ---------           -----------  ------- 
Liabilities 
                                                              --------- 
Trading 
 liabilities              406      151          742       51        348      326        1,591      293 
                                                              ---------           -----------  ------- 
Financial 
 liabilities 
 designated at 
 fair 
 value                      -        -        1,307    1,201      1,241        -        1,310    1,191 
                    ---------                                 ---------           -----------  ------- 
Deposits by banks           -        -        4,961    2,534          -        -        7,373    2,928 
                    ---------                                 ---------           -----------  ------- 
Customer accounts       4,200    2,080        2,565    2,234      3,855    1,762        3,119    1,992 
                    ---------                                 ---------           -----------  ------- 
Derivatives             4,649    3,443       30,283   20,878      3,163    1,501       22,940   18,055 
                    ---------                                 ---------           -----------  ------- 
Subordinated 
 liabilities                -        -       10,756   10,421      6,060        -       10,509    9,787 
                    ---------                                 ---------           -----------  ------- 
Repurchase 
 agreements 
 - non-trading              -        -        8,738    1,028          -        -        4,279    4,279 
                    ---------                                 ---------           -----------  ------- 
Provisions, 
 accruals, 
 deferred income 
 and 
 other liabilities        103       74       10,719    3,097      1,766       73        9,968    4,342 
                    ---------                                                                  ------- 
Total related 
 party 
 liabilities at 31 
 Dec                    9,358    5,748       70,071   41,444     16,433    3,662       61,089   42,867 
                    ---------                                 ---------           -----------  ------- 
Guarantees and 
 commitments                -        -        2,438    1,762          -        -        7,774    1,802 
                    ---------                                 ---------  ------- 
 
 
                                                             Due to/from 
                                        Due to/from          subsidiaries 
                                        HSBC Holdings      of HSBC Holdings 
                                             plc                 plc 
                                            2020  2019       2020        2019 
                                            GBPm  GBPm       GBPm        GBPm 
                                      ----------        --------- 
Income statement 
------------------------------------  ----------  ----  ---------  ---------- 
Interest income                                5     9         55       142 
------------------------------------  ----------  ----  ---------  -------- 
Interest expense(1)                         (55)    84        256       329 
------------------------------------  ----------  ----  ---------  -------- 
Fee income                                    13    10         55        47 
------------------------------------  ----------  ----  ---------  -------- 
Fee expense                                    -     2        389       356 
------------------------------------  ----------  ----  ---------  -------- 
Trading income                                 -     -          2         8 
------------------------------------  ----------  ----  ---------  -------- 
Trading expense                                -     -          2        15 
------------------------------------  ----------  ----  ---------  -------- 
Other operating income                        30    69        365       322 
------------------------------------  ----------  ----  ---------  -------- 
General and administrative expenses          126    38      2,077     2,207 
------------------------------------  ----------  ----  ---------  -------- 
 

1 2020 negative balance relates to net impact of fixed-for-floating-interest-rate swaps which the group has entered into to manage the movements in market interest rates on certain fixed rate financial liabilities.

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

 
The bank's transactions and balances during the year with HSBC Bank plc 
 subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings plc 
                                       2020                                                   2019 
                 Due to/from                         Due to/from       Due to/from                          Due to/from 
                 subsidiaries                        subsidiaries      subsidiaries                         subsidiaries 
                    of HSBC        Due to/from          of HSBC           of HSBC        Due to/from           of HSBC 
                   Bank plc        HSBC Holdings       Holdings          Bank plc        HSBC Holdings        Holdings 
                 subsidiaries           plc               plc          subsidiaries           plc                plc 
               Highest           Highest           Highest           Highest           Highest           Highest 
               balance           balance           balance           balance  Balance  balance  Balance  balance    Balance 
                during  Balance   during  Balance   during  Balance   during       at   during       at   during         at 
                   the    at 31      the    at 31      the    at 31      the       31      the       31      the         31 
                  year      Dec     year      Dec     year      Dec     year      Dec     year      Dec     year        Dec 
                  GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm     GBPm       GBPm 
Assets 
Trading 
 assets            907      234      169      108    1,664    1,154    1,363      907       98       75      676      302 
 
Derivatives     19,139   15,309    2,261    2,002   31,986   19,829   30,022   13,839    1,685    1,447   23,229   17,134 
 
Financial 
 assets 
 designated 
 and 
 otherwise 
 mandatorily 
 measured at 
 fair 
 value 
 through 
 profit or 
 loss                -        -        -        -        -        -      197        -        -        -        -        - 
Loans and 
 advances 
 to banks        5,263    2,123        -        -    4,794    3,083    6,290    4,029        -        -    4,871    1,404 
 
Loans and 
 advances 
 to customers    8,198    6,446        -        -      395      322    7,771    6,969      406        -      586      353 
                                                                     -------  -------  -------  -------  -------  ------- 
Financial 
 investments     2,214    2,214        -        -        -        -      185        -        -        -        -        - 
                                                                     -------  -------  -------  -------  -------  ------- 
Reverse 
 repurchase 
 agreements - 
 non-trading     3,070      965        -        -    1,942      775    7,095    3,070        -        -    4,080    1,782 
                                                                     -------  -------  -------  -------  -------  ------- 
Prepayments, 
 accrued 
 income 
 and other 
 assets          4,769    2,986    2,228    1,430   10,063    4,136    5,217    2,405    1,807       21    9,828    5,301 
                                                                     -------  -------  -------  -------  -------  ------- 
Investments 
 in 
 subsidiary 
 undertakings    6,458    6,458        -        -        -        -    8,930    6,025        -        -        -        - 
                                                                     -------  -------  -------  -------  -------  ------- 
Total related 
 party assets 
 at 31 Dec      50,018   36,735    4,658    3,540   50,844   29,299   67,070   37,244    3,996    1,543   43,270   26,276 
Liabilities 
Trading 
 liabilities        10        1      406      151      742       51        3        -      348      326    1,591      293 
 
Financial 
 liabilities 
 designated 
 at 
 fair value        318        -        -        -    1,307    1,201      318      318    1,241        -    1,310    1,191 
Deposits by 
 banks           1,956    1,096        -        -    3,089    1,471    3,905    1,428        -        -    5,003    1,416 
                                                                     -------  -------  -------  -------  -------  ------- 
Customer 
 accounts        1,287    1,287    4,200    2,080    2,509    2,178      924      534    3,855    1,762    3,063    1,890 
                                                                     -------  -------  -------  -------  -------  ------- 
Derivatives     18,174   17,378    4,649    3,443   29,159   20,161   26,270   13,702    3,163    1,501   21,730   17,243 
                                                                     -------  -------  -------  -------  -------  ------- 
Subordinated 
 liabilities       700      700        -        -   10,519   10,187      701      700    5,827        -   10,272    9,566 
                                                                     -------  -------  -------  -------  -------  ------- 
Repurchase 
 agreements 
 - 
 non-trading     2,349      988        -        -    8,468    1,028    2,996    1,058        -        -    4,279    4,279 
 
Provisions, 
 accruals, 
 deferred 
 income 
 and other 
 liabilities     7,716    1,563       63       45    9,578    2,510    8,954    3,877    1,747       49    9,107    3,959 
 
Total related 
 party 
 liabilities 
 at 31 Dec      32,510   23,013    9,318    5,719   65,371   38,787   44,071   21,617   16,181    3,638   56,355   39,837 
Guarantees 
 and 
 commitments    11,011    4,974        -        -    1,427      893   17,029    8,749        -        -    6,604      923 
                                                                     -------  -------  -------  -------  -------  ------- 
 

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

Post-employment benefit plans

The HSBC Bank (UK) Pension Scheme (the 'Scheme') entered into swap transactions with the bank to manage the inflation and interest rate sensitivity of the liabilities. At 31 December 2020, the gross notional value of the swaps was GBP5,645m (2019: GBP7,464m), the swaps had a positive fair value of GBP713m to the bank (2019: positive fair value of GBP895m) and the bank had delivered collateral of GBP711m (2019: GBP904m) to the Scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market bid/offer spreads.

 
34  Events after the balance sheet date 
    ----------------------------------- 
 

On the 26 January 2021 the bank acquired the remaining 0.67% non-controlling interest in its subsidiary HSBC Trinkaus & Burkhardt AG, making it wholly-owned. This followed the bank's acquisition of an 18.6% non-controlling interest during 2020. Subsequently the shares of HSBC Trinkaus & Burkhardt AG have been delisted.

 
35  HSBC Bank plc's subsidiaries, joint ventures and associates 
    ----------------------------------------------------------- 
 

In accordance with section 409 of the Companies Act 2006 a list of HSBC Bank plc subsidiaries, joint ventures and associates, the registered office address and the effective percentage of equity owned at 31 December 2020 is disclosed below.

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

HSBC Bank plc's registered office address is:

HSBC Bank plc

8 Canada Square

London E14 5HQ

Subsidiaries

The undertakings below are consolidated by the group.

 
                                                % of share 
                                                class held 
                                              by immediate 
                                            parent company 
                                               (or by HSBC 
                                                      Bank 
                                                 plc where 
Subsidiaries                                  this varies)  Footnotes 
Assetfinance December 
 (H) Limited                              100.00               15 
---------------------------------------  -------            --------- 
Assetfinance December 
 (M) Limited (In Liquidation)             100.00               16 
---------------------------------------  -------            --------- 
Assetfinance December                                          2, 
 (P) Limited                              100.00                15 
---------------------------------------                     --------- 
Assetfinance December 
 (R) Limited                              100.00               15 
---------------------------------------                     --------- 
Assetfinance June (A) 
 Limited                                  100.00               15 
---------------------------------------                     --------- 
Assetfinance Limited                      100.00               15 
---------------------------------------                     --------- 
Assetfinance March 
 (B) Limited                              100.00               17 
---------------------------------------                     --------- 
Assetfinance March 
 (F) Limited                              100.00               15 
---------------------------------------                     --------- 
Assetfinance September 
 (F) Limited                              100.00               15 
---------------------------------------                     --------- 
Banco Nominees (Guernsey) 
 Limited                                  100.00               18 
--------------------------------------- 
Banco Nominees 2 (Guernsey) 
 Limited                                  100.00               18 
--------------------------------------- 
Beau Soleil Limited                                            0, 
 Partnership                                 n/a                19 
--------------------------------------- 
Billingsgate Nominees                                          2, 
 Limited (In Liquidation)                 100.00                15 
---------------------------------------                     --------- 
Canada Crescent Nominees                                       2, 
 (UK) Limited                             100.00                15 
---------------------------------------                     --------- 
CCF & Partners Asset 
 Management Limited                       100.00   (99.99)     15 
---------------------------------------                     --------- 
CCF Holding (LIBAN) 
 S.A.L. (In Liquidation)                   74.99               20 
---------------------------------------                     --------- 
Charterhouse Administrators 
 ( D.T.) Limited                          100.00   (99.99)     15 
--------------------------------------- 
Charterhouse Management 
 Services Limited                         100.00   (99.99)     15 
---------------------------------------           -------- 
Charterhouse Pensions                                          2, 
 Limited                                  100.00                15 
---------------------------------------                     --------- 
                                                               0, 
                                                                2, 
COIF Nominees Limited                        n/a                15 
---------------------------------------                     --------- 
Corsair IV Financial 
 Services Capital Partners-B, 
 LP                                          n/a               30 
---------------------------------------                     --------- 
                                                               4, 
Dem 9                                     100.00   (99.99)      21 
---------------------------------------                     --------- 
                                                               4, 
Dempar 1                                  100.00   (99.99)      21 
---------------------------------------                     --------- 
Equator Holdings Limited                                       2, 
 (In Liquidation)                         100.00                16 
---------------------------------------                     --------- 
Eton Corporate Services 
 Limited                                  100.00               18 
---------------------------------------                     --------- 
Flandres Contentieux 
 S.A.                                     100.00   (99.99)     21 
--------------------------------------- 
Foncière Elysées                100.00   (99.99)     21 
---------------------------------------                     --------- 
Griffin International 
 Limited                                  100.00               15 
---------------------------------------                     --------- 
Grundstuecksgesellschaft                                       0, 
 Trinkausstrasse Kommanditgesellschaft       n/a                23 
---------------------------------------                     --------- 
HSBC (BGF) Investments                                         2, 
 Limited                                  100.00                15 
---------------------------------------                     --------- 
HSBC Asset Finance                                             2, 
 (UK) Limited                             100.00                15 
---------------------------------------                     --------- 
HSBC Asset Finance 
 M.O.G. Holdings (UK)                                          2, 
 Limited                                  100.00                15 
---------------------------------------  -------            --------- 
HSBC Assurances Vie 
 (France)                                 100.00   (99.99)     24 
---------------------------------------                     --------- 
HSBC Bank (General                                             2, 
 Partner) Limited                         100.00                25 
---------------------------------------                     --------- 
                                                               0, 
HSBC Bank (RR) (Limited                                        13, 
 Liability Company)                          n/a                26 
---------------------------------------                     --------- 
HSBC Bank Armenia cjsc                     70.00               27 
---------------------------------------                     --------- 
HSBC Bank Capital Funding                                      0, 
 (Sterling 1) LP                             n/a                25 
---------------------------------------                     --------- 
HSBC Bank Capital Funding                                      0, 
 (Sterling 2) LP                             n/a                25 
---------------------------------------                     --------- 
HSBC Bank Malta p.l.c.                     70.03               28 
---------------------------------------                     --------- 
HSBC Bank Pension Trust                                        2, 
 (UK) Limited                             100.00                15 
---------------------------------------                     --------- 
HSBC City Funding Holdings                100.00               15 
---------------------------------------                     --------- 
HSBC Client Holdings                                           2, 
 Nominee (UK) Limited                     100.00                15 
---------------------------------------                     --------- 
HSBC Client Nominee                                            2, 
 (Jersey) Limited                         100.00                29 
---------------------------------------                     --------- 
HSBC Continental Europe                    99.99               21 
--------------------------------------- 
HSBC Corporate Trustee                                         2, 
 Company (UK) Limited                     100.00                15 
---------------------------------------                     --------- 
HSBC Custody Services 
 (Guernsey) Limited                       100.00               18 
HSBC Enterprise Investment 
 Company (UK) Limited                                          2, 
 (In Liquidation)                         100.00                16 
---------------------------------------  ------- 
HSBC Epargne Entreprise 
 (France)                                 100.00   (99.99)     24 
---------------------------------------                     --------- 
HSBC Equator (UK) Limited 
 (In Liquidation)                         100.00               16 
---------------------------------------                     --------- 
                                                               2, 
HSBC Equity (UK) Limited                  100.00                15 
---------------------------------------                     --------- 
HSBC Europe B.V.                          100.00               15 
---------------------------------------                     --------- 
HSBC Factoring (France)                   100.00   (99.99)     21 
---------------------------------------                     --------- 
HSBC Germany Holdings                                          2, 
 GmbH                                     100.00                23 
---------------------------------------                     --------- 
HSBC Global Asset Management 
 (Deutschland) GmbH                       100.00   (99.33)     23 
---------------------------------------           --------  --------- 
HSBC Global Asset Management 
 (France)                                 100.00   (99.99)     24 
---------------------------------------                     --------- 
 
 
                                             % of share 
                                             class held 
                                           by immediate 
                                         parent company 
                                            (or by HSBC 
                                                   Bank 
                                              plc where 
Subsidiaries                               this varies)  Footnotes 
HSBC Global Asset 
 Management (International)                                 2, 
 Limited (In Liquidation)              100.00                31 
                                                         --------- 
HSBC Global Asset 
 Management (Malta) 
 Limited                               100.00   (70.03)     32 
                                      -------  --------  --------- 
HSBC Global Asset 
 Management (Oesterreich)                                   6, 
 GmbH                                  100.00   (99.33)      33 
                                      -------  --------  --------- 
HSBC Global Asset 
 Management (Switzerland)                                   4, 
 AG                                    100.00   (99.66)      34 
                                      -------  --------  --------- 
HSBC Global Custody                                         2, 
 Nominee (UK) Limited                  100.00                15 
                                                         --------- 
HSBC Global Custody                                         1, 
 Proprietary Nominee                                         2, 
 (UK) Limited                          100.00                15 
                                      -------            --------- 
HSBC Global Shared 
 Services (India) Private                                   1, 
 Limited (In Liquidation)               99.99                35 
                                      -------            --------- 
HSBC Infrastructure 
 Limited                               100.00               15 
                                                         --------- 
HSBC INKA Investment-AG                                     14, 
 TGV                                   100.00   (99.33)      36 
                                                         --------- 
HSBC Insurance Services                                     2, 
 Holdings Limited                      100.00                15 
                                                         --------- 
HSBC Investment Bank                                        2, 
 Holdings Limited                      100.00                15 
                                                         --------- 
HSBC Issuer Services 
 Common Depositary                                          2, 
 Nominee (UK) Limited                  100.00                15 
                                      -------            --------- 
HSBC Issuer Services 
 Depositary Nominee                                         2, 
 (UK) Limited                          100.00                15 
                                      -------            --------- 
HSBC Leasing (France)                  100.00   (99.99)     21 
                                                         --------- 
                                                            2, 
HSBC Life (UK) Limited                 100.00                15 
                                                         --------- 
HSBC Life Assurance 
 (Malta) Limited                       100.00   (70.03)     32 
                                                         --------- 
                                                            2, 
HSBC LU Nominees Limited               100.00                15 
                                                         --------- 
HSBC Marking Name                                           2, 
 Nominee (UK) Limited                  100.00                15 
                                                         --------- 
HSBC Middle East Leasing                                    0, 
 Partnership                              n/a                37 
                                                         --------- 
HSBC Operational Services 
 GmbH                                   90.10   (89.49)     38 
                                                         --------- 
HSBC Overseas Nominee                                       2, 
 (UK) Limited                          100.00                15 
                                                         --------- 
HSBC PB Corporate 
 Services 1 Limited                    100.00               39 
                                                         --------- 
HSBC Pension Trust                                          2, 
 (Ireland) DAC                         100.00                40 
                                                         --------- 
HSBC PI Holdings (Mauritius) 
 Limited                               100.00               41 
                                                         --------- 
HSBC Preferential                                           2, 
 LP (UK)                               100.00                15 
                                                         --------- 
HSBC Private Banking 
 Nominee 3 (Jersey) 
 Limited                               100.00               39 
                                      -------            --------- 
HSBC Private Equity 
 Investments (UK) Limited              100.00               15 
                                                         --------- 
HSBC Property Funds 
 (Holding) Limited                     100.00               15 
                                                         --------- 
HSBC Real Estate Leasing 
 (France)                              100.00   (99.99)     21 
                                                         --------- 
HSBC REIM (France)                     100.00   (99.99)     24 
                                                         --------- 
HSBC Securities (Egypt) 
 S.A.E.                                100.00    (0.80)     42 
                                                         --------- 
HSBC Securities (South                                      2, 
 Africa) (Pty) Limited                 100.00                43 
                                                         --------- 
HSBC Securities Services 
 (Guernsey) Limited                    100.00     99.99     18 
                                                         --------- 
HSBC Securities Services 
 (Ireland) DAC                         100.00               40 
                                                         --------- 
HSBC Securities Services                                    2, 
 (Luxembourg) S.A.                     100.00                44 
                                                         --------- 
HSBC Securities Services 
 Holdings (Ireland) 
 DAC                                   100.00               40 
                                      -------            --------- 
HSBC Service Company 
 Germany GmbH                          100.00   (99.33)     45 
                                                         --------- 
HSBC Services (France)                 100.00   (99.99)     21 
                                                         --------- 
                                                            4, 
HSBC SFH (France)                      100.00   (99.99)      24 
                                                         --------- 
                                                            2, 
HSBC SFT (C.I.) Limited                100.00                18 
                                                         --------- 
HSBC Specialist Investments 
 Limited                               100.00               15 
                                                         --------- 
HSBC Transaction Services                                       6, 
 GmbH                                  100.00   (99.33)         46 
                                               -------- 
HSBC Trinkaus & Burkhardt 
 (International) S.A.                  100.00   (99.33)     44 
                                                         --------- 
HSBC Trinkaus & Burkhardt 
 AG                                     99.33               23 
                                                         --------- 
HSBC Trinkaus & Burkhardt 
 Gesellschaft fur Bankbeteiligungen 
 mbH                                   100.00   (99.33)     23 
                                      -------  --------  --------- 
HSBC Trinkaus Europa 
 Immobilien-Fonds Nr. 
 5 GmbH                                100.00   (99.33)     23 
                                      -------  --------  --------- 
HSBC Trinkaus Family                                        6, 
 Office GmbH                           100.00   (99.33)      23 
                                                         --------- 
HSBC Trinkaus Immobilien 
 Beteiligungs KG                       100.00   (99.33)     23 
                                                         --------- 
HSBC Trinkaus Real                                          6, 
 Estate GmbH                           100.00   (99.33)      23 
                                                         --------- 
HSBC Trustee (C.I.)                                         2, 
 Limited                               100.00                39 
                                                         --------- 
HSBC Trustee (Guernsey)                                     2, 
 Limited                               100.00                18 
                                                         --------- 
HSIL Investments Limited               100.00               15 
                                                         --------- 
Infrared NF China 
 Real Estate Investments 
 LP                                       n/a               22 
INKA Internationale 
 Kapitalanlagegesellschaft 
 mbH                                   100.00   (99.33)     46 
                                      -------  --------  --------- 
James Capel & Co.                                           2, 
 Limited                               100.00                15 
                                      ------- 
James Capel (Nominees)                                      2, 
 Limited                               100.00                15 
                                      ------- 
James Capel (Taiwan)                                        2, 
 Nominees Limited                      100.00                15 
 
Keyser Ullmann Limited                 100.00   (99.99)     15 
                                               -------- 
                                                            2, 
Midcorp Limited                        100.00                15 
 
Prudential Client 
 HSBC GIS Nominee (UK)                                      2, 
 Limited                               100.00                15 
                                      -------            --------- 
Republic Nominees                                           2, 
 Limited                               100.00                18 
 
                                                            1, 
RLUKREF Nominees (UK)                                        2, 
 One Limited                           100.00                15 
 
                                                            1, 
RLUKREF Nominees (UK)                                        2, 
 Two Limited                           100.00                15 
 
S.A.P.C. - Ufipro 
 Recouvrement                           99.99               21 
 
                                                            4, 
Saf Baiyun                             100.00   (99.99)      21 
 
                                                            4, 
Saf Guangzhou                          100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Ba                                    100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Er                                    100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Jiu                                   100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Liu                                   100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Qi                                    100.00   (99.99)      21 
 
Saf Zhu Jiang Shi                                           4, 
 Wu                                    100.00   (99.99)      21 
 
SCI HSBC Assurances 
 Immo                                  100.00   (99.99)     24 
 
SFM                                    100.00   (99.99)     21 
 
SFSS Nominees (Pty) 
 Limited                               100.00               43 
 
                                                            1, 
                                                            11, 
SNC Dorique                             99.99                49 
 
                                                            1, 
                                                            11, 
SNC Les Mercuriales                    100.00   (99.99)      21 
 
SNC Les Oliviers D'Antibes              60.00     59.99     24 
                                                            1, 
                                                            11, 
SNC Makala                             100.00   (99.99)      21 
 
SNCB/M6 - 2008 A                       100.00   (99.99)     21 
 
                                                            4, 
SNCB/M6-2007 A                         100.00   (99.99)      21 
 
                                                            4, 
SNCB/M6-2007 B                         100.00   (99.99)      21 
 
Société 
 Française et 
 Suisse                                100.00   (99.99)     21 
 
Somers Dublin DAC                      100.00   (99.99)     40 
 
Sopingest                              100.00   (99.99)     21 
 
South Yorkshire Light 
 Rail Limited                          100.00               15 
Swan National Limited                  100.00               15 
The Venture Catalysts                                       2, 
 Limited                               100.00                15 
Trinkaus Australien 
 Immobilien Fonds Nr. 
 1 Brisbane GmbH & 
 Co. KG                                100.00   (99.33)     23 
                                               --------  --------- 
Trinkaus Australien 
 Immobilien-Fonds Nr.                                       6, 
 1 Treuhand-GmbH                       100.00   (99.33)      23 
                                               --------  --------- 
Trinkaus Europa Immobilien-Fonds 
 Nr.3 Objekt Utrecht 
 Verwaltungs-GmbH                      100.00   (99.33)     23 
                                               --------  --------- 
Trinkaus Immobilien-Fonds                                   6, 
 Geschaeftsfuehrungs-GmbH              100.00   (99.33)      23 
                                               --------  --------- 
Trinkaus Immobilien-Fonds                                   6, 
 Verwaltungs-GmbH                      100.00   (99.33)      23 
 
Trinkaus Private Equity 
 Management GmbH                       100.00   (99.33)     23 
 
Trinkaus Private Equity                                     6, 
 Verwaltungs GmbH                      100.00   (99.33)      23 
 
Valeurs Mobilières 
 Elysées                          100.00   (99.99)     21 
 
 
 
 

Joint ventures

The undertakings below are joint ventures and equity accounted.

 
                                % of share 
                                class held 
                              by immediate 
                            parent company 
                                    (or by 
                                 HSBC Bank 
                                 plc where 
Joint Ventures                this varies)  Footnotes 
HCM Holdings Limited 
 (In Liquidation)                    50.99     16 
------------------------- 
The London Silver Market                       1, 
 Fixing Limited                        n/a      51 
------------------------- 
 

Associates

The undertakings below are associates and equity accounted.

 
                                        % of share 
                                        class held 
                                      by immediate 
                                    parent company 
                                       (or by HSBC 
                                          Bank plc 
                                        where this 
Associates                                 varies)  Footnotes 
BGF Group plc                                24.56     51 
--------------------------------- 
                                                       1, 
                                                        3, 
Bud Financial Limited                        10.82      52 
--------------------------------- 
Contour                                      10.80     47 
--------------------------------- 
CFAC Payment Scheme                                    3, 
 Limited                                     33.33      53 
--------------------------------- 
Chemi & Cotex (Rwanda)                                 1, 
 Limited                                     33.99      54 
--------------------------------- 
Chemi & Cotex Kenya                                    1, 
 Limited                                     33.99      55 
--------------------------------- 
Chemi and Cotex Industries 
 Limited                                     33.99     56 
--------------------------------- 
Euro Secured Notes 
 Issuer                                      16.66     57 
--------------------------------- 
Episode Six Ltd                               9.10     68 
--------------------------------- 
                                                       0, 
                                                        1, 
GIE GNIFI                                      n/a      58 
--------------------------------- 
Jeppe Star Limited                           33.99     59 
--------------------------------- 
Liquidity Match LLC                            n/a     66 
--------------------------------- 
London Precious Metals 
 Clearing Limited                            30.00     65 
--------------------------------- 
Novo Star Limited                            33.99     60 
--------------------------------- 
Quantexa Ltd                                 10.99     48 
--------------------------------- 
Services Epargne Enterprise                  14.18     61 
--------------------------------- 
SIMON Group LLC                                n/a     67 
--------------------------------- 
sino AG                                      24.77     62 
--------------------------------- 
Trade Information Network                    16.67     69 
--------------------------------- 
Trinkaus Europa Immobilien-Fonds 
 Nr. 7 Frankfurt Mertonviertel                         0, 
 KG                                            n/a      23 
---------------------------------                   --------- 
                                                       1, 
Vizolution Limited                           17.95      63 
--------------------------------- 
We Trade Innovation 
 Designated Activity                                   1, 
 Company                                      8.52      64 
---------------------------------                   --------- 
 
 
Footnotes 
    Where an entity is governed by 
     voting rights, HSBC consolidates 
     when it holds - directly or indirectly 
     - the necessary voting rights 
     to pass resolutions by the governing 
     body. In all other cases, the 
     assessment of control is more 
     complex and requires judgement 
     of other factors, including having 
     exposure to variability of returns, 
     power to direct relevant activities, 
     and whether power is held as an 
     agent or principal. HSBC's consolidation 
0    policy is described in Note 1.2(a) 
    Management has determined that 
     these undertakings are excluded 
     from consolidation in the Group 
     accounts as these entities do 
     not meet the definition of subsidiaries 
     in accordance with IFRSs. HSBC's 
     consolidation policy is described 
1    in Note 1.2(a). 
2   Directly held by HSBC Bank plc 
Description of shares 
3   Preference Shares 
4   Actions 
5   Redeemable Preference Shares 
6   GmbH Anteil 
7   Limited and Unlimited Liability 
     Shares 
8   Liquidating Share Class 
9   Nominal Shares 
10  Non-Participating Voting Shares 
11  Parts 
12  Registered Capital Shares 
13  Russian Limited Liability Company 
     Shares 
14  Stückaktien 
Registered offices 
15  8 Canada Square , London, United 
     Kingdom, E14 5HQ 
    Hill House, 1 Little New Street, 
16   London, United Kingdom, EC4A 3TR 
    5 Donegal Square South , Belfast, 
17   Northern Ireland, BT1 5JP 
    Arnold House St Julians Avenue, 
18   St Peter Port, Guernsey, GY1 3NF 
    HSBC Main Building 1 Queen's Road 
19   Central, Hong Kong 
    Solidere - Rue Saad Zaghloul Immeuble 
     - 170 Marfaa, PO Box 17 5476 Mar 
20   Michael 11042040, Beyrouth, Lebanon 
    38 avenue Kléber, Paris, 
21   France, 75116 
    Oak House Hirzel Street, St Peter 
22   Port, Guernsey, GY1 2NP 
    Königsallee 21/23 , Düsseldorf, 
23   Germany, 40212 
    Immeuble Coeur Défense 110, 
     Esplanade du Général 
     de Gaulle- La défense 4, 
24   Courbevoie, France, 92400 
    HSBC House Esplanade, St. Helier, 
25   Jersey, JE4 8UB 
    2 Paveletskaya square, building 
     2 , Moscow, Russian Federation, 
26   115054 
    66 Teryan street , Yerevan, Armenia, 
27   0009 
    116 Archbishop Street, Valletta, 
28   Malta 
    HSBC House Esplanade, St. Helier, 
29   Jersey, JE1 1HS 
    c/o Walkers Corporate Services 
     Limited,Walker House,87 Mary Street 
     George Town,Grand Cayman,KY1 - 
30   9005,Cayman Islands 
    HSBC House Esplanade, St. Helier, 
31   Jersey, JE4 8WP 
    80 Mill Street, Qormi, Malta, 
32   QRM 3101 
    Herrengasse 1-3 , Wien, Austria, 
33   1010 
34  26 Gartenstrasse, Zurich, Switzerland 
    52/60 M G Road, Fort, Mumbai, 
35   India, 400 001 
    Breite Str. 29/31, Düsseldorf, 
36   Germany, 40213 
    Unit 101 Level 1, Gate Village 
     Building No. 8 Dubai International 
     Financial Centre, Dubai, United 
37   Arab Emirates, PO BOX 506553 
    21-23 Yorckstraße, Düsseldorf, 
     Nordrhein-Westfalen, Germany, 
38   40476 
    HSBC House Esplanade, St. Helier, 
39   Jersey, JE1 1GT 
    1 Grand Canal Square Grand Canal 
40   Harbour, Dublin 2, D02 P820, Ireland 
    6th Floor HSBC Centre, Cybercity, 
41   Ebene, Mauritius, 72201 
    306 Corniche El Nil , Maadi, Egypt, 
42   11728 
    1 Mutual Place 107 Rivonia Road 
     , Sandton , Gauteng, South Africa, 
43   2196 
    16 Boulevard d'Avranches, Luxembourg, 
44   Luxembourg, 1160 
    Hansaallee 3, Düsseldorf, 
45   Germany, 40549 
    Yorckstraße 21 - 23 40476, 
46   Duesseldorf, Germany 
    50 Raffles Place, #32-01 Singapore 
47   Land Tower, Singapore, 048623 
    75 Park Lane, Croydon, Surrey, 
48   United Kingdom, CR9 1XS 
    43 rue de Paris , Saint Denis, 
49   France, 97400 
    c/o Hackwood Secretaries Limited 
     One Silk Street, London, United 
50   Kingdom, EC2Y 8HQ 
    13-15 York Buildings , London, 
51   United Kingdom, WC2N 6JU 
    First Floor The Bower, 207 Old 
     Street, England, United Kingdom, 
52   EC1V 9NR 
    65 Gresham Street, 6th Floor, 
     London , United Kingdom, EC2V 
53   7NQ 
54  BP 4978, Kigali, Rwanda 
    Plot LR No. 487 Dagoretti / Ruthimitu, 
     P.O. Box 14362, Nairobi, Kenya, 
55   00800 
56  Plot No. 89-90 Mbezi Industrial 
     Area Box 347, Dar es Salaam City, 
     Tanzania 
    3 avenue de l'Opera , Paris, France, 
57   75001 
    37 avenue Henri Lafleur , Nouméa, 
58   New Caledonia, BP K3 98849 
    c/o Trident Trust Company Trident 
     Chambers, PO Box 146, Tortola, 
59   British Virgin Islands 
    Jayla Place Wickhams Cay I, PO 
     Box 3190, Road Town, British Virgin 
60   Islands 
    32, rue du Champ de Tir , Nantes, 
61   France, 44300 
    Ernst-Schneider-Platz 1 , Duesseldorf, 
62   Germany, 40212 
    Office Block A, Bay Studios Business 
     Park, Fabian Way, Swansea, SA1 
63   8QB, Wales, United Kingdom 
    10 Earlsfort Terrace, Dublin, 
64   Ireland, D02 T380 
    1-2 Royal Exchange Buildings, 
     Royal Exchange, London, United 
65   Kingdom, EC3V 3LF 
    100 Town Square Place, Suite 201, 
66   Jersey City, NJ 07310, USA 
    125 W 25th St. New York, NY 10001, 
67   USA 
    9/F Amtel Bldg, 148 des Voeux 
68   Rd Central, Central, Hong Kong 
     3 More London Riverside, London, 
69    SE1 2AQ 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

ACSVXLBLFLLXBBE

(END) Dow Jones Newswires

February 23, 2021 04:13 ET (09:13 GMT)

Hsbc Bk 41 (LSE:63AS)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024 Plus de graphiques de la Bourse Hsbc Bk 41
Hsbc Bk 41 (LSE:63AS)
Graphique Historique de l'Action
De Juin 2023 à Juin 2024 Plus de graphiques de la Bourse Hsbc Bk 41