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HSBC Bank plc
Annual Report and Accounts 2022
Registered number - 00014259

Contents
| Page
Strategic Report |
Highlights | 3
Key themes of 2022 | 4
Key financial metrics | 5
About HSBC Group | 6
Purpose and strategy | 6
Our Global Businesses | 9
ESG Overview | 10
Key Performance Indicators | 14
Economic background and outlook | 15
Financial summary | 16
Risk overview | 24
Report of the Directors |
Risk | 26
Corporate Governance Report | 94
– Directors | 94
– Company Secretary | 95
– Board of Directors | 95
– Directors‘ emoluments | 96
– Board committees | 96
– Dividends | 99
– Internal control | 99
– Employees | 101
– Auditors | 102
– Articles of association, conflicts of interest and indemnification of directors | 102
– Statement on going concern | 103
– Statement of directors' responsibilities in respect of the financial statements | 104
Independent Auditors’ Report | 105
Financial Statements |
Financial statements | 113
Notes on the financial statements | 124

Presentation of Information

This document comprises the Annual Report and Accounts 2022
for HSBC Bank plc (‘the bank’ or 'the company') and its
subsidiaries (together ‘the group’). ’We’, ‘us’ and ‘our’ refer to
HSBC Bank plc together with its subsidiaries. It contains the
Strategic Report, the Report of the Directors, the Statement of
Directors’ Responsibilities and Financial Statements, together with
the Independent Auditors’ Report, as required by the UK
Companies Act 2006. References to ‘HSBC’, 'HSBC Group' or
‘Group’ within this document mean HSBC Holdings plc together
with its subsidiaries.
HSBC Bank plc is exempt from publishing information required by
The Capital Requirements Country-by-Country Reporting
Regulations 2013, as this information is published by its parent,
HSBC Holdings plc. This information is available on HSBC’s
website: www.hsbc.com.
Pillar 3 disclosures for the group are also available on
www.hsbc.com, under Investors.
Contents of the linked websites are not incorporated into this
document.
All narrative disclosures, tables and graphs within the Strategic
Report and Report of the Directors are unaudited unless otherwise
stated.
Our reporting currency is £ sterling.
Unless otherwise specified, all $ symbols represent US dollars.

Cautionary Statement Regarding Forward- Looking Statements

This Annual Report and Accounts 2022 contains certain forward-
looking statements with respect to the company’s financial
condition; results of operations and business, including the
strategic priorities; financial, investment and capital targets; and
the company’s ability to contribute to the Group’s Environmental,
social and governance (‘ESG’) targets, commitments and
ambitions described herein.
Statements that are not historical facts, including statements
about the company’s beliefs and expectations, are forward-looking
statements. Words such as ‘may’, ‘will’, ‘should’, ‘expects’,
‘targets’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’,
‘estimates’, ‘potential’ and ‘reasonably possible’, or the negative
thereof, other variations thereon or similar expressions are
intended to identify forward-looking statements. These statements
are based on current plans, information, data, estimates and
projections, and therefore undue reliance should not be placed on
them. Forward-looking statements speak only as of the date they
are made. The company makes no commitment to revise or
update any forward-looking statements to reflect events or
circumstances occurring or existing after the date of any forward-
looking statements. Written and/or oral forward-looking
statements may also be made in the periodic reports to the US
Securities and Exchange Commission, offering circulars and
prospectuses, press releases and other written materials, and in
oral statements made by the company’s Directors, officers or
employees to third parties, including financial analysts. Forward-
looking statements involve inherent risks and uncertainties.
Readers are cautioned that a number of factors could cause actual
results to differ, in some instances materially, from those
anticipated or implied in any forward-looking statement. These
include, but are not limited to:
•changes in general economic conditions in the markets in
which the company operates, such as new, continuing or
deepening recessions, prolonged inflationary pressures and
fluctuations in employment and creditworthy customers
beyond those factored into consensus forecasts (including,
without limitation, as a result of the Russia-Ukraine war and, to
a lesser extent, the Covid-19 pandemic); the Russia-Ukraine
war and the Covid-19 pandemic and their impact on global
economies and the markets where the company operates,
which could have a material adverse effect on (among other
things) the company’s financial condition, results of operations,
prospects, liquidity, capital position and credit ratings;
deviations from the market and economic assumptions that
form the basis for the company’s ECL measurements
(including, without limitation, as a result of the Russia-Ukraine
war, inflationary pressures and the Covid-19 pandemic);
changes in foreign exchange rates and interest rates; volatility
in equity markets; lack of liquidity in wholesale funding or
capital markets, which may affect the company’s ability to
meet its obligations under financing facilities or to fund new
loans, investments and businesses; geopolitical tensions or
diplomatic developments, both in Europe and in other regions
such as Asia, producing social instability or legal uncertainty,
such as the Russia-Ukraine war (including the continuation and
escalation thereof) and the related imposition of sanctions and
trade restrictions, the UK’s relationship with the EU, supply
chain restrictions and disruptions, sustained increases in
energy prices and key commodities and diplomatic tensions
between China and the US, extending to the UK and the EU,
alongside other potential areas of tension, which may adversely
affect the group by creating regulatory, reputational and market
risks; the efficacy of government, customer, and the company’s
and the Group’s actions in managing and mitigating ESG risks,
in particular climate risk, nature-related risks and human rights
risks, and in supporting the global transition to net zero carbon
emissions, each of which can impact the company both directly
and indirectly through its customers and which may result in
potential financial and non-financial impacts; illiquidity and

HSBC Bank plc Annual Report and Accounts 2022 | 1

downward price pressure in national real estate markets;
adverse changes in central banks’ policies with respect to the
provision of liquidity support to financial markets; heightened
market concerns over sovereign creditworthiness in over-
indebted countries; adverse changes in the funding status of
public or private defined benefit pensions; societal shifts in
customer financing and investment needs, including consumer
perception as to the continuing availability of credit; exposure
to counterparty risk, including third parties using us as a
conduit for illegal activities without the company’s knowledge;
the discontinuation of certain key Ibors and the development of
near risk-free benchmark rates, as well as the transition of
legacy Ibor contracts to near risk-free benchmark rates, which
exposes the company to material execution risks, including in
relation to the effectiveness of the Group’s Ibor remediation
strategy, and increases some financial and non-financial risks;
and price competition in the market segments that the
company serves;
•changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which
the company operates and the consequences thereof
(including, without limitation, actions taken as a result of the
impact of the Russia-Ukraine war on inflation and as a result of
the Covid-19 pandemic); initiatives to change the size, scope of
activities and interconnectedness of financial institutions in
connection with the implementation of stricter regulation of
financial institutions in key markets worldwide; revised capital
and liquidity benchmarks, which could serve to deleverage
bank balance sheets and lower returns available from the
current business model and portfolio mix; changes to tax laws
and tax rates applicable to the company, including the
imposition of levies or taxes designed to change business mix
and risk appetite; the practices, pricing or responsibilities of
financial institutions serving their consumer markets;
expropriation, nationalisation, confiscation of assets and
changes in legislation relating to foreign ownership; the UK’s
relationship with the EU, which continues to be characterised
by uncertainty and political disagreement, particularly with
respect to the regulation of financial services, despite the
signing of the Trade and Cooperation Agreement ('TCA')
between the UK and the EU; changes in UK macro-economic
and fiscal policy as a result of the change in UK government
leadership, which may result in fluctuations in the value of the
pound sterling; general changes in government policy that may
significantly influence investor decisions; the costs, effects and
outcomes of regulatory reviews, actions or litigation, including
any additional compliance requirements; and the effects of
competition in the markets where we operate, including
increased competition from non-bank financial services
companies; and
•factors specific to the company and the Group, including the
company’s success in adequately identifying the risks it faces,
such as the incidence of loan losses or delinquency, and
managing those risks (through account management, hedging
and other techniques); the company’s ability to achieve its
financial, investment, capital targets and the achievement of
the Group’s ESG targets, commitments and ambitions, which
may result in the company’s failure to achieve any of the
expected benefits of its strategic priorities; model limitations or
failure, including, without limitation, the impact that high
inflationary pressures, rising interest rates and the
consequences of the Covid-19 pandemic have had on the
performance and usage of financial models, which may require
the company to hold additional capital, incur losses and/or use
compensating controls, such as judgemental post-model
adjustments, to address model limitations; changes to the
judgements, estimates and assumptions the company bases its
financial statements on; changes in the company’s ability to
meet the requirements of regulatory stress tests; a reduction in
the credit ratings assigned to the company or any of its
subsidiaries, which could increase the cost or decrease the
availability of the company’s funding and affect its liquidity
position and net interest margin; changes to the reliability and
security of the company’s data management, data privacy,
information and technology infrastructure, including threats
from cyber-attacks, which may impact its ability to service
clients and may result in financial loss, business disruption and/
or loss of customer services and data; the accuracy and
effective use of data, including internal management
information that may not have been independently verified;
changes in insurance customer behaviour and insurance claim
rates; the company’s dependence on loan payments and
dividends from subsidiaries to meet its obligations; changes in
accounting standards, including the implementation of IFRS 17
‘Insurance Contracts’, which may have a material impact on
the way the company prepares its financial statements and
(with respect to IFRS 17) may negatively affect the profitability
of HSBC’s insurance business; changes in the company’s
ability to manage third-party, fraud and reputational risks
inherent in its operations; employee misconduct, which may
result in regulatory sanctions and/or reputational or financial
harm; changes in skill requirements, ways of working and
talent shortages, which may affect the company’s ability to
recruit and retain senior management and diverse and skilled
personnel; and changes in the company’s ability to develop
sustainable finance and climate-related products consistent
with the evolving expectations of its regulators, and the
company’s capacity to measure the climate impact from its
financing activity (including as a result of data limitations and
changes in methodologies), which may affect the Group’s
ability to achieve its climate ambition, targets and
commitments, and increase the risk of greenwashing. Effective
risk management depends on, among other things, the
company’s ability through stress testing and other techniques
to prepare for events that cannot be captured by the statistical
models it uses; the company’s success in addressing
operational, legal and regulatory, and litigation challenges; and
other risks and uncertainties we identify in ‘Top and emerging
risks’ on page 28 of the Annual Report and Accounts 2022.
Strategic Report | Highlights

HSBC Bank plc Annual Report and Accounts 2022 | 2

Highlights

For the year ended 31 December 2022

Reported (loss)/profit before tax (£m)

£(959)m
(2021: £1,023 m); (2020: £(1,614)m)

Reported revenue (£m)

£4,646m
(2021: £6,120 m); (2020: £5,900 m)

Reported risk-weighted assets at period end (£bn)

£114bn
(2021: £107 bn); (2020: £124 bn)
.

Adjusted profit/(loss) before tax (£m)

£1,724m
(2021: £1,577 m); (2020: £(184)m)

Total assets at period end (£bn)

£717bn
(2021: £597 bn); (2020: £681 bn)

Common equity tier 1 ratio at period end (%)

16.8%
(2021: 17.8%); (2020: 15.1%)

HSBC Bank plc Annual Report and Accounts 2022 | 3

Key themes of 2022

HSBC Bank plc continued to support the Group through progress
on our strategic aims, although challenges in the geopolitical and
economic environment remain.

Financial Performance

Our financial performance in 2022 reflected losses associated with
our restructuring initiatives, including impairments of businesses
which have been classified as held-for-sale. These items resulted
in a reported loss before tax. On an adjusted basis, profit before
tax increased due to the benefit of higher interest rates and a
strong performance in MSS. Costs decreased driven by the impact
of our transformation and cost-saving initiatives. Expected credit
losses returned to a charge for the year compared with a net
release in 2021. Read more on pages 16 to 22.

Strategic Transformation

We have continued to progress in our areas of strength and
simplify the group in order to streamline our operating model and
seek to improve returns. During the course of 2022, we continued
to prepare for the completion of the sale of our French retail
operations, announced the sale of our Greece branch operations
and entered into a sale agreement for our Russia business.
We remain focused on implementing our Intermediate Parent
Undertaking (‘IPU’), in line with European Union ('EU') Capital
Requirements Directive ('CRD'): HSBC Continental Europe ('HBCE')
acquired HSBC Trinkaus & Burkhardt GmbH (‘HSBC Germany’)
and HSBC Bank Malta ('HBMT'), and expect to acquire HSBC
Private Bank (Luxembourg) SA in the first half of 2023, subject to
receipt of pending regulatory approvals. More information can be
found on pages 6 and 7.

Climate Ambition

The Group is committed to a net zero future and recognises that
our planet urgently needs drastic and lasting action to protect our
communities, businesses and the natural environment from the
damaging effects of climate change.
The Group believe they can make the most significant impact by
working with its customers to support their transition to a net zero
global economy. Since 2020, HSBC Bank plc has supported our
customers' transition to net zero and helped build a sustainable
future by providing and facilitating $86.2bn of sustainable finance,
$18.9bn of sustainable investment and $0.1bn of sustainable
infrastructure, as defined in the Group’s Sustainable Finance Data
Dictionary 2022. This financing and investment contributes
towards the Group's ambition to provide and facilitate $750bn to
$1tn of sustainable financing and investment by 2030. The
$86.2bn of sustainable finance includes lending facilities provided
and capital markets facilitated transactions.
1 The detailed definitions of the contributing activities for sustainable
finance are available in the Group’s revised Sustainable Finance Data
Dictionary 2022. For the Group’s ESG Data Pack, Sustainable
Finance Data Dictionary and third-party limited assurance report, see
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-
reportingcentre
Strategic Report | Key themes of 2022 | Key financial metrics

4 | HSBC Bank plc Annual Report and Accounts 2022

Key financial metrics

| 2022 | 2021 | 2020
For the year (£m) |  |  |
(Loss)/profit before tax (reported basis) | (959) | 1,023 | (1,614)
Profit/(loss) before tax (adjusted basis)1 | 1,724 | 1,577 | (184)
Net operating income before change in expected credit losses and other credit impairment charges (reported basis)2 | 4,646 | 6,120 | 5,900
(Loss)/profit attributable to the parent company | (408) | 1,041 | (1,488)
At 31 December (£m) |  |  |
Total equity attributable to shareholders of the parent company | 23,875 | 23,584 | 23,666
Total assets | 717,353 | 596,611 | 681,150
Risk-weighted assets 3,8 | 114,171 | 106,703 | 124,353
Loans and advances to customers (net of impairment allowances) | 72,614 | 91,177 | 101,491
Customer accounts | 215,948 | 205,241 | 195,184
Capital ratios (%)3,8 |  |  |
Common equity tier 1 | 16.8 | 17.8 | 15.1
Tier 1 | 20.2 | 21.4 | 18.5
Total capital | 31.7 | 31.9 | 27.5
Leverage ratio (%)4,8 | 5.5 | 4.2 | 4.0
Performance, efficiency and other ratios (annualised %) |  |  |
Return on average ordinary shareholders’ equity 5 | (3.1) | 4.3 | (7.9)
Return on tangible equity (%)6 | 5.5 | 6.1 | (2.7)
Cost efficiency ratio (reported basis)7 | 115.2 | 89.2 | 113.6
Cost efficiency ratio (adjusted basis)7 | 70.9 | 80.9 | 89.6
Ratio of customer advances to customer accounts | 33.6 | 44.4 | 52.0

1 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 18 to 20.
2 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue.
3 Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements
Regulation in force at the time. These include the regulatory transitional arrangements for IFRS 9 'Financial Instruments', which are explained
further on page 80. References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the
UK's version of such regulation and/or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be
subsequently amended under UK law.
4 The leverage ratio is calculated using the end point definition of capital and the IFRS 9 regulatory transitional arrangements, in line with the UK
leverage rules that were implemented on 1 January 2022, and excludes central bank claims and cash pooling netting. Comparatives for 2021 are
reported based on the disclosure rules in force at that time, and include claims on central banks.
5 The return on average ordinary shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average
total shareholders’ equity.
6 The RoTE is calculated by adjusting reported profit attributable to ordinary shareholders by excluding movements in PVIF and significant items (net
of tax), divided by average tangible shareholders' equity excluding fair value of own debt, debit valuation adjustment (‘DVA’) and other
adjustments for the period. The calculation of this measure includes the UK bank levy incurred for the first time in 2021, which was previously paid
by the Group. Comparative data have not been re-presented.
7 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before change in expected credit
losses and other credit impairment charges (reported), while adjusted cost efficiency ratio is defined as total operating expenses (adjusted) divided
by net operating income before change in expected credit losses and other credit impairment charges (adjusted).
8 From 30 September 2022, investments in non-financial institution subsidiaries or participations have been measured on an equity accounting basis
in compliance with UK regulatory requirements. Comparatives for prior periods have been represented on a consistent basis with the current year.

HSBC Bank plc Annual Report and Accounts 2022 | 5

About HSBC Group

With assets of $3.0tn and operations in 62 countries and territories
at 31 December 2022, HSBC is one of the largest banking and
financial services organisations in the world. Approximately 39
million customers bank with the Group and the Group employs
around 219,000 full-time equivalent staff. The Group has around
182,000 shareholders in 128 countries and territories.

Purpose and strategy

HSBC's purpose and ambition

The Group's purpose is ‘Opening up a world of opportunity’ and
the Group's ambition is to be the preferred international financial
partner for the Group's clients.
HSBC values
HSBC values help define who we are as an organisation and are
key to our long-term success.
We value difference
Seeking out different perspectives.
We succeed together
Collaborating across boundaries.
We take responsibility
Holding ourselves accountable and taking the long view.
We get it done
Moving at pace and making things happen.
HSBC Group strategy
The Group is implementing its strategy at pace across the four
strategic pillars aligned to its purpose, values and ambition
announced in February 2021.
The Group's strategy centres on four key pillars: focus on our
areas of strength, digitise at scale to adapt our operating model for
the future; energise our organisation for growth and support the
transition to a net zero global economy.
F ocus on our strengths: in each of our global businesses, the
Group will focus on areas where we are strongest and have
opportunities to grow.
Digitise at scale: the Group will focus investments in areas such
as technology, to improve our customers’ experience while
ensuring security and resilience. These investments in technology
will also help drive down costs, including through automating our
middle and back offices and building solutions to free up office
footprint.
Energise for growth: the Group is moving to a leaner and
simpler organisation that is energised and fit for the future. The
Group aims to inspire a dynamic culture and champion inclusion
across the organisation, as well as help employees develop future
skills.
Transition to net zero: the Group's ambition is to support the
transition to a net zero global economy. The Group has set out an
ambitious plan to aim to become a net zero bank, to support
customers in their transition, and to unlock new climate solutions.
HSBC in Europe
Europe is an important part of the global economy, accounting for
roughly 40% of global trade and one-quarter of global Gross
Domestic Product (UNCTAD, IMF 2021). In addition, Europe is the
world’s top exporter of services and second largest exporter of
manufactured goods (UNCTAD, IMF 2021). HSBC Bank plc
facilitates trade within Europe and between Europe and other
jurisdictions where the HSBC Group has a presence.
With assets of £717bn at 31 December 2022, HSBC Bank plc is
one of Europe’s largest banking and financial services
organisations. We employ around 14,400 people across our
locations. HSBC Bank plc is responsible for HSBC’s European
business, apart from UK retail and most UK commercial banking
activity which, post ring-fencing, are managed by HSBC UK Bank
plc.
HSBC Bank plc operates as one integrated business with two main
hubs in London and Paris.
HSBC Bank plc is present in 20 markets 1. We are organised
around the principal operating units detailed below, which
represent the region to customers, regulators, employees and
other stakeholders.
The London hub consists of the UK non-ring fenced bank, which
provides overall governance and management for the Europe
region as a whole and is a global centre of excellence for
wholesale banking for the Group.
HBCE comprises our Paris hub, its EU branches (Belgium, Czech
Republic, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland,
Spain and Sweden), Germany and Malta. We are creating an
integrated Continental European bank anchored on Paris to better
serve our clients and simplify our organisation.
1 Full list of markets where HSBC Bank plc has a presence: Armenia,
Belgium, Channel Islands and Isle of Man, Czech Republic, France,
Germany, Greece, Ireland, Italy, Israel, Luxembourg, Malta,
Netherlands, Poland, Russia, South Africa, Spain, Sweden,
Switzerland and the UK.

HSBC Bank plc's strategy and progress on our 2022 commitments

Our ambition in Europe is to be the leading international wholesale
bank connecting East and West, with a complementary Wealth
business, an efficient operating model and a robust control
framework (see our global businesses on page 9).
HSBC Bank plc exists to open up a world of opportunity for our
customers by connecting them to international markets. Europe is
the largest trading region in the world and Asia is Europe’s biggest
and fastest growing external trading partner (UNCTAD, IMF 2021).
We are well positioned to capitalise on this opportunity and play a
pivotal role for the Group.
We expect Europe to continue to deliver change in 2023 to drive
our ambition, the majority of announced transformation has been
completed (see 'Focus on our strengths' for more information). In
parallel to completing our transformation work, we are
repositioning for growth and are well placed to seek to deliver
strong financial performance. Further detail can be found below.
In 2022, Europe faced significant inflationary pressure, resulting in
rapid central bank interest rate rises. We expect to continue
operating in a volatile environment. Further information as to how
we have and will continue to support and engage with our
stakeholders can be found on page 10.
Below we provide a progress update on our commitments and
strategic initiatives for 2022.
Focus on our strengths
Through our transformation programme we are building a leaner,
simpler bank with a sharper strategic focus. We have redesigned
our franchise around the needs of our international clients and
maintaining product and service capability where clients demand
them. We intend to be a market leader in sustainable financing
and assist the Group in meeting its climate ambition for net zero
operations and supply chain by 2030.
New regulation in the EU provides an opportunity to simplify our
structure. In response to the requirement for an IPU in line with EU
CRD V, HBCE acquired HSBC Germany and HBMT in the second
half of 2022, and expects to acquire HSBC Private Bank
(Luxembourg) SA in the first half of 2023. This remains subject to
regulatory approvals for which the process has now started.
During 2022, HBCE has continued to prepare for the completion of
the sale, of our French retail business which is expected in the
second half of 2023, subject to regulatory approval. Until
Strategic Report | About HSBC Group | Purpose and strategy

6 | HSBC Bank plc Annual Report and Accounts 2022

completion of the planned transaction, the business remains part
of, and will be managed by HBCE. Please see Note 34: Assets held
for sale and liabilities of disposal groups held for sale, for further
financial information on the transaction on page 186.
Following a strategic review of our business in Greece, an
agreement has been signed to sell HBCE’s branch operations in
Greece to Pancreta Bank SA. The transaction is subject to
regulatory approval and is expected to complete in the first half of
2023.
Following a strategic review of HSBC Europe BV (a wholly-owned
subsidiary of HSBC Bank plc), we have stopped taking on new
business and clients in our Russian operations. The value of
foreign currency customer deposits and RUB deposits is now
minimal. HSBC Europe BV has entered into an agreement to sell
its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability
Company), subject to regulatory and governmental approvals.
Such sale is currently expected to occur in the first half of 2023.
HSBC Group has implemented a new operating model for its
Private Banking activities, in which HSBC Private Bank
(Luxembourg) SA will become a central hub for HBCE’s Private
Banking clients. These clients will be served via a Paris branch of
HSBC Private Bank (Luxembourg) SA. This will enable us to
provide an enhanced product range to clients leveraging our
infrastructure in Luxembourg.
Digitise at scale
We continue to invest in the digitisation of our global businesses,
which is central to our strategy. Within Europe, Wealth and
Personal Banking (‘WPB’) is focused on enhancing our
engagement between clients and relationship managers, and
allowing clients to self-serve at a time that suits them. For
example, we further enhanced our digital portfolio and risk
analysis platform, which furthered Private Bank advisers' ability to
make suitable investment recommendations to clients using a
more holistic approach to risk management. For our Retail
customers, we have placed efforts into reducing paper waste in
connection with the bank statements, with 33,000 bank
statements viewed or downloaded in the Channel Islands. Looking
ahead, we will seek to deploy secure and private communications
via social media channels between clients and relationship
managers. We also plan to introduce new ESG-centred reporting.
We are committed to maintaining our core strength in Global
Payments Solutions ('GPS'), formerly known as Global Liquidity
and Cash Management ('GLCM'). In 2022, we successfully
delivered Real Time Payment capability in Luxembourg. GPS have
improved our offering for customers in HSBCnet by enabling new
features such as allowing customers to track and create recurring
SEPA payments. GPS also enhanced the Liquidity Management
Dashboard functionality, improving customers' ability to create
and manage cash flow forecasts. By December 2022, we had 288
customers using the dashboard.
Our strategy within Global Trade and Receivables Finance (‘GTRF’)
Europe is to help make trade easier, faster and safer, whilst
seeking to deliver sustainable and profitable growth. Throughout
2022, we enhanced our digital channel HSBCnet and strengthened
collaborations with third-party platforms. Examples of third-party
collaboration include Komgo, a bank-agnostic platform that
provides solutions to our customers to manage trade finance
needs, and Contour, a blockchain solution that fully digitises
letters of credit.
As at year end, 85% of trade transactions across Europe were
conducted digitally as we continue to see an increase in clients
adopting digital solutions.
For digital currencies and assets, we have made significant
progress in 2022 in building a strategic tokenisation platform
('HSBC Orion') in Global Banking and Markets. HSBC Orion
launched the world's first GBP tokenised bond in January 2023.
The platform allows natively digital bonds to be registered and
issued, fully supports both primary and secondary market trading
and is part of our ambition to widen the adoption of digital assets.
In Foreign Exchange we continue to enhance our electronic
trading infrastructure to provide improved risk management to our
clients. Our focus is to support customers' FX and cross-border
payment needs through improved pricing tools and e-trading.
Energise for growth
Empowering our organisation and energising our employees is
critical to Europe’s success and remains a key focus. We made
good progress against our people strategy including our diversity
and inclusion agenda and are committed to offering colleagues
the opportunities to develop their skills whilst building our talent
pipelines to support the achievement of our strategic priorities.
We are committed to increasing diverse representation in Europe,
especially at senior levels and in 2023 we aim to significantly
increase sponsorship and accountability for achieving our goals.
Our Diversity and Inclusion Council defines and drives specific
actions across our D&I strands, supported by our pan-European
Employee Resource Group 'Inclusive Europe'.
To support the Group's climate ambitions to become net zero in its
operations and supply chain by 2030, and align its financed
emissions to the Paris Agreement goal of net zero by 2050, the
Group launched the Sustainability Academy in 2022. The Academy
is available to all colleagues across the Group and serves as a
central point for colleagues to access learning plans and curated
resources, and develop practical skills. The Group have partnered
with some leading educational institutions such as Imperial
College Business School and will continue to update the academy
with new research and content related to ESG issues, including
those related to social and governance issues.
We have strengthened the training we provide to leaders to help
them support colleagues through the changing environment we
are facing. We have continued the executive development
programme for our most senior leaders, which focuses on the
shifting expectations of our enterprise wide leadership cadre,
embedding the clarity and alignment to achieve our goals and
tackling strategic change.
For our Managing Director population, we have taken into
consideration that leadership development will vary depending on
individual career experiences and tenure in role. Our executive
curriculum contains an array of programmes to meet varying
leadership development personas and topics focus on a range of
issues including critical skills areas such as influence, inclusion,
and Agile methodologies. During 2022, we launched two
Managing Director development programmes: 1) Shaping your
Leadership; to help new Managing Directors sharpen their focus
and define how they will ‘show-up’ as one of HSBC's most senior
leaders, 2) Shaping HSBC, which focuses on the experimentation
required to enhance the leadership skills that will drive
adaptability, innovation and unleash the talent of our people to
enable HSBC to thrive in a time of disruption and complexity.
We continue to focus on the development of people managers
who are key to shaping the experience of, and development of,
our colleagues. We have recently refreshed our core People
Manager Excellence curriculum which covers 40 skills structured
around four modules that are available in face-to-face and virtual
formats. The modules focus on: 1) Your Role; connecting
managers with HSBCs purpose and personal energetic leadership,
2) Your People; creating energy, commitment and high
performance within your team, 3) Your work; managing
productivity and delivering against outcomes, and 4) Your Team;
building high performing collaborative teams.
Complimentary digital learning pathways will also be made
available to support the development contained within the four
modules.

HSBC Bank plc Annual Report and Accounts 2022 | 7

Transition to net zero
Part of the Group’s ambition to be a net zero bank is to achieve net
zero carbon emissions in our operations and supply chain by 2030.
The Group has three elements to the strategy: reduce, replace and
remove. The Group plan to first focus on reducing carbon
emissions from consumption, and then replacing remaining
emissions with low-carbon alternatives in line with the Paris
Agreement. The Group plan to remove the remaining emissions
that cannot be reduced or replaced by procuring, in accordance
with prevailing regulatory requirements, high-quality offsets at a
later stage.
In October 2020, the Group announced an ambition to reduce its
energy consumption by 50% by 2030, against a 2019 baseline. In
2022, HSBC Bank plc implemented energy efficiency measures
and a strategic reduction of our office footprint, across our office
spaces and data centres.
These measures include:
•Embedding 100% renewable energy in our Germany offices;
•Further installation of LED lighting and optimisation of lighting
timing controls in France, Switzerland, Spain and Germany; and
•Improvements to heating, ventilation and air conditioning
systems throughout the HSBC Bank plc office portfolio to
reduce energy consumption and increase efficiency.
As part of the Group's ambition to achieve 100% renewable power
across our operations by 2030, HSBC Bank plc continue to look for
opportunities to procure green energy in each of our markets.
HSBC Bank plc is managing the gradual resumption of employee
travel in line with the Group's aim to halve travel emissions by
2030 compared with pre-pandemic levels.
For further information on the transition to net zero, please see the
ESG review in the Group’s Annual Reports and Accounts for the
year ended 31 December 2022.
Supporting our Customers
The Group understands that financial institutions have a critical
role to play in achieving the transition to a net zero global
economy. The most significant contribution we can make is by
mobilising finance to support our portfolio of customers in their
transition to decarbonise.
Since 2020, HSBC Bank plc has supported our customers'
transition to net zero and helped build a sustainable future by
providing and facilitating $86.2bn of sustainable finance, $18.9bn
of sustainable investment and $0.1bn of sustainable infrastructure,
as defined in the Group’s Sustainable Finance Data Dictionary
2022.
This financing and investment contributes towards the Group's
ambition to provide and facilitate $750bn to $1tn of sustainable
financing and investment by 2030. The $86.2bn of sustainable
finance includes lending facilities provided and capital markets
facilitated transactions.
Given the Group's global presence and relationships with our
customers across industries, the Group recognise the role it can
play in catalysing the global transition to net zero. The Group is
well positioned to finance the transition in developing and
emerging economies, mobilising capital to help enable sustainable
business models and an inclusive, just and resilient transition.
For example, in 2022, HBCE acted as a sustainability coordinator,
book runner and mandated lead arranger for a $150m
sustainability-linked revolving credit facility for company: Nordic
Semiconductor. The technology company which specialises in
designing ultra-low power performance wireless systems,
incorporated for the first time, sustainability-linked key
performance indicators and an ESG roadmap within its business to
help achieve their sustainability targets by 2030.
The breakdown of the Group’s sustainable finance and investment
progress is included in its ESG Data pack. The detailed definitions
of the contributing activities for sustainable finance are available in
the Group's Sustainable Finance Data Dictionary 2022. For the
Group's ESG Data Pack, Sustainable Finance Data Dictionary and
PwC Assurance Report, see www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
Unlocking New Climate Solutions
The Group understands the need to find new solutions to increase
the pace of change if the world is to achieve the Paris
Agreement's goal of net zero by 2050. Therefore, the Group is
working closely with a range of partners to accelerate investment
in natural resources, technology and sustainable infrastructure to
reduce emissions and help address climate change.
HSBC Group partnered with the World Resources Institute and
World Wildlife Fund ('WWF') in 2020 to launch its $100m
philanthropic programme, Climate Solutions Partnership, with the
aim to accelerate support for innovative solutions tackling climate
change. This five-year philanthropic initiative aims to identify and
remove barriers to scale for climate change solutions. As part of
this, in France, two projects are being delivered in partnership with
the French National Forestry Office and the Earthworm
Foundation. These projects aim to better enable CO2 capture,
preserve biodiversity and engage the community, helping to
support a net zero and sustainable future.
Strategic Report | Purpose and strategy | Our Global Businesses

8 | HSBC Bank plc Annual Report and Accounts 2022

Our Global Businesses

The Group manages its products and services through its three global businesses: Global Banking and Markets ('GBM'); Commercial
Banking ('CMB'); Wealth and Personal Banking ('WPB'); and the Corporate Centre (comprising: certain legacy assets, central stewardship
costs, and interests in our associates and joint ventures).

Business segments

Our operating model has the following material segments: a GBM business which is further split into three reportable segments: MSS,
GB and GBM Other (as defined below), CMB, WPB and a Corporate Centre. These segments are supported by Digital Business Services
and eleven global functions, including Risk, Finance, Compliance, Legal, Marketing and Human Resources.

Markets & Securities Services (‘MSS’) | Global Banking (‘GB’) | GBM Other | Commercial Banking (‘CMB’) | Wealth and Personal Banking ('WPB')
Markets & Securities Services is a products group that services customers of all Global Businesses and institutional clients across the financial sector globally. We offer clients a range of services and capabilities including trading, financing and securities services across asset classes and geographies, supported by dedicated sales and research teams. Our European teams play a key role in providing access to FX, commodities, Equities and Fixed Income offerings, bridging emerging and developed markets, and collaborating with other global businesses to provide clients across the Group with commoditised and bespoke solutions that seek to support their growth ambitions. | Global Banking delivers tailored financial solutions to corporate and institutional clients worldwide opening up opportunities through the strength of our global network and capabilities. We provide a comprehensive suite of services including capital markets, advisory, lending, trade services and global payments services. Our European teams take a client-centric approach bringing together relationship and product expertise to deliver financial solutions customised to suit our clients’ growth ambitions and financial objectives. We work closely with our business partners including MSS, WPB and CMB, to provide a range of tailored products and services that seek to meet the needs of international clients across the company. Global Banking Europe operates as an integral part of the global business and contributes significant revenues to other regions, particularly Asia, through our European client base, supporting the Europe ambition to be the leading international wholesale bank, partly by benefiting from the client network managed outside Europe. | GBM Other primarily comprises Principal Investments and GBM’s share of the Group’s Markets Treasury function. The Principal Investments portfolio is focused on delivering investments that align to the group’s strategy and seeks to deliver strong returns across a diversified portfolio. Our commitment to sustainable private equity funds contributes directly to the Group’s aim to provide and facilitate $750bn and $1tn of sustainable finance and investment by 2030. | We have a clear strategy to be the leading international corporate bank in Europe. We help connect our European customers to our international network of relationship managers and product specialists; supporting their growth ambitions and targets. Our products are designed to support clients in their international growth and range from term loans to region-wide treasury and trade solutions. We see the greatest opportunity to deliver and grow value for the Group by supporting European clients with international subsidiaries in Asia and other regions; our internal performance measures are aligned to this outcome. Commercial Banking is at the centre of creating revenue synergies within the Group: we collaborate closely with our Global Banking and Markets colleagues to provide expertise in capital finance and advisory solutions to support our Commercial Banking clients. Our trade teams within Commercial Banking also provide import and export finance solutions to Global Banking and Markets clients. We also support our clients to unlock efficiencies in their Treasury structures through our Global Payments Solutions team. As the European economy pivots to a net zero carbon economy, we are expanding our services and products to provide customers with innovative sustainable finance solutions and ensuring our relationship managers are positioned to support our clients’ transition to net zero. | In Europe, Wealth and Personal Banking serves customers with their financial needs through a number of business areas including Retail Banking, Private Banking, Wealth Management, Insurance and Asset Management. Our core retail proposition offers a full suite of products including personal banking, mortgages, loans, credit cards, savings, investments and insurance. Alongside this, WPB offers various propositions in certain markets, including Premier; as well as wealth solutions, financial planning and international services. In the Channel Islands and the Isle of Man, we serve local Islanders as well as international customers, the majority of whom are customers of HSBC in other markets, through our HSBC Expat proposition. Our Private Banking proposition serves high net worth and ultra- high net worth clients. Whilst these clients are based all over the world, booking centres are based in the Channel Islands and Isle of Man, France and Germany, which facilitate customers with a total relationship balance greater than $2m. The range of services available to private banking clients includes investment management, Private Wealth Solutions and bespoke lending such as lending against financial assets and residential mortgage financing for high-end properties. Private Banking hosts a ‘Next Generation’ programme of events to support our clients’ next generation in building and retaining the wealth within the family. The private bank offers this through its philanthropy advisory to our clients, which looks at business succession planning. We continue to focus on meeting the needs of our customers, the communities we serve, and our people, whilst working to build the bank of the future.
Adjusted profit/(loss) before tax by business segment
£472m | £486m | £(329)m | £785m | £577m
(2021: £(8)m); (2020: £20 m) | (2021: £589 m); (2020: £55 m) | (2021: £99 m); (2020: £(52)m) | (2021: £490 m); (2020: £152 m) | (2021: £323 m); (2020: £(132)m)

Our global businesses are presented on an adjusted basis, which is consistent with the way in which we assess the performance of our
global businesses.

HSBC Bank plc Annual Report and Accounts 2022 | 9

ESG Overview

We conduct our business to support the sustained success of our
customers, employees and other stakeholders.

Our approach

We are guided by the Group's purpose to open up a world of
opportunity for our colleagues, customers and communities. Our
purpose is underpinned by the Group's values: we value
difference; we succeed together; we take responsibility; and we
get it done. The Group's purpose and values help us to deliver our
strategy and unlock long-term value for our stakeholders.
As an international bank with significant breadth and scale, we
understand that our climate, economies, societies, supply chains
and people’s lives are interconnected.The Group recognise they
can play an important role in tackling ESG challenges. The Group
focuses its efforts on three areas: the transition to net zero,
building inclusion and resilience, and acting responsibly.
Fair outcomes
We are focused on running a strong and sustainable business that
puts the customer first, values good governance, and gives our
stakeholders confidence in how we do what we do. Our conduct
approach helps to guide us to do the right thing and to focus on
the impact we have for our customers and the financial markets in
which we operate. For further information on conduct, see page 6.
For further details on our purpose-led conduct approach
framework, see www.hsbc.com/who-we-are. Our section 172
statement, detailing our Directors’ responsibility to stakeholders,
can be found on page 12.
Our colleagues
We aspire to open up a world of opportunity for our colleagues
and build an inspiring, dynamic culture where the best talent want
to work.
We value difference and we continue to build an inclusive
workforce that is representative of the communities we serve. We
set and report on progress made against the Group-wide gender
and ethnic diversity goals.
Understanding the experience of colleagues is central to our
efforts. Through our employee Snapshot survey, we capture our
colleagues’ views on topics such as hybrid working and well-
being. In 2022, over 8,000 colleagues responded to the survey
across Europe, a participation rate of 54%. Developing the skills of
colleagues is critical to energising our organisation. We foster a
culture of learning through a range of resources that provide
colleagues with a breadth of educational materials and
development opportunities.
Our Climate ambition
The Group has set a climate ambition to become net zero in its
operations and its supply chain by 2030, and align its financed
emissions to the Paris Agreement goal of net zero by 2050. In
2022, the Group expanded coverage of sectors for on-balance
sheet financed emissions targets, recognising the challenge of
evolving methodologies and data limitations.
Transition to net zero represents one of the Group’s four strategic
pillars. At the core of it is an ambition to support our customers on
their transition to net zero, so that the greenhouse gas emissions
from our portfolio of clients reaches net zero by 2050. The
summary of the Group’s Transition to net zero disclosure can be
found on page 47 of the HSBC Holdings plc ESG review 2022.

Engaging with our stakeholders

Engaging with our stakeholders is core to being a responsible
business. To determine material topics that our stakeholders are
interested in, we conduct a number of activities throughout the
year, including engagements outlined in the table below.

Our stakeholders | How we engage | Material topics highlighted by the engagement
Customers | Our customers’ voices are heard through our interactions with them, surveys and by listening to their complaints | Customer advocacy
Employees | Our colleagues’ voices are heard through our employee Snapshot survey, Exchange meetings, and our ‘speak-up’ channels, including our global whistleblowing platform, HSBC Confidential | Employee training Diversity and inclusion Employee engagement
Investors | Our ordinary shares are held by our parent HSBC Holdings plc, however external parties invest in our bond issuance. We engage with these investors via our investor relations programme which enables investor queries alongside a broader programme of management meetings and market engagement | Strategic progress ESG policies Risk management
Communities | We welcome dialogue with external stakeholders, including non- governmental organisations (‘NGOs’) and other civil societies groups. We engage directly on specific issues and by taking part in external forums and working groups | Financial Inclusion and Community Investment
Regulators and governments | We proactively engage with regulators and governments to facilitate strong relationships via virtual and in-person meetings, responses to consultations individually and jointly via the industry bodies | Anti-bribery and Corruption
Suppliers | Our ethical and environmental code of conduct for suppliers of goods and services sets out how we intend to engage with our suppliers on ethical and environmental performance | Supply Chain Management Human Rights

Supporting our stakeholders facing a rising cost
of living
We know that many of our customers are facing increasing cost of
living pressures from higher inflation, and we are committed to
helping them. Colleagues across our global businesses have been
contacting our customers to provide them with access to support.

Our ESG metrics and targets

The Group has established targets that guide how we do business,
including how we operate and how we serve our customers.
These include targets designed to help us achieve our
environmental and social sustainability goals.
They also help us to improve employee advocacy, the diversity of
senior leadership and strengthen our market conduct.
The targets for these measures are linked to the pillars of our ESG
strategy: transitioning to net zero, building inclusion and resilience,
and acting responsibly.
To help us achieve our ESG ambitions, a number of measures are
included in the annual incentive scorecards of the Europe Chief
Executive and Executive Committee members.
Below we set out how we have made progress against the ESG-
related ambitions and targets.
Strategic Report | ESG Overview

10 | HSBC Bank plc Annual Report and Accounts 2022

Environmental – Transition to net zero
One of the Group’s strategic pillars is to support the transition to a
net zero global economy. The Group’s ambition is to align its
financed emissions to the Paris Agreement goal to achieve net
zero by 2050. The Paris Agreement aims to limit the rise in global
temperatures to well below 2°C, preferably to 1.5°C, above pre-
industrial levels.
The transition to net zero is one of the biggest challenges for our
generation. Success will require governments, customers and
finance providers to work together. The Group’s global footprint
means that many of its clients operate in high-emitting sectors and
regions that face the greatest challenge in reducing emissions.
This means that the Group’s transition will be challenging but is an
opportunity to make an impact.
The Group recognises that to achieve its climate ambition it needs
to be transparent on the opportunities, challenges, related risks
and progress it makes. To deliver on the ambition requires
enhanced processes and controls, and new sources of data. The
Group continues to invest in climate resources and skills, and
develop its business management process to integrate climate
impacts. Until systems, processes, controls and governance are
enhanced, certain aspects of the Group’s reporting will rely on
manual sourcing and categorisation of data. In 2023, the Group
will continue to expand its disclosures. Reporting will need to
evolve to keep pace with market developments.
At the end of 2022, H SBC Bank plc achieved 63% cumulative
reduction in absolute operational greenhouse gas emissions
compared to a 2019 baseline in France, Germany, Switzerland and
Malta. HSBC Bank plc continues to work to support the Group's
ambition to achieve net zero in its own operations and supply
chain by 2030.
Since 2020, HSBC Bank plc has supported our customers'
transition to net zero and helped build a sustainable future by
providing and facilitating $86.2bn of sustainable finance, $18.9bn
of sustainable investment and $0.1bn of sustainable infrastructure,
as defined in the Group’s Sustainable Finance Data Dictionary
2022. This financing and investment contributes towards the
Group's ambition to provide and facilitate $750bn to $1tn of
sustainable financing and investment by 2030. The $86.2bn of
sustainable finance includes lending facilities provided and capital
markets facilitated transactions.
We continue to engage with our clients on their transition plans
and to provide them with financing solutions to support their
sustainability goals.
For further information regarding the Group’s environmental
footprint, please visit https://www.hsbc.com/who-we-are/our-
climate-strategy/becoming-a-net-zero-bank.
Social – Build inclusion and resilience
•Our Snapshot employee engagement 1 score was 47% as at the
end of 2022, an increase of 1% compared to 2021;
•Our ethnic diversity goal 2 for 2022 was to increase black
heritage colleagues in senior leadership roles in the UK to 2.2%.
We exceeded this target and reached 2.4%; and
•In 2022, we reached 24.6% senior leadership 3 roles held by
women up from 23.8% in 2021.
Governance – Acting responsibly
96%4 of HSBC Bank plc staff completed conduct training in 2022,
which covers Conduct and Regulatory Compliance topics
including: market abuse, conflicts of interest and treating
customers fairly.
1 Employee engagement index is our headline measure of how
employees feel about HSBC. HSBC Bank plc’s score is low compared
to the Group, key contributors are ongoing transformation and the
challenging external environment in Europe. However, we are seeing
year on year improvements and will continue to embed a positive
and inclusive culture where our colleagues can thrive.
2 Our 2022 ethnicity goal of 2.2% includes UK RFB and NRFB.
3 Senior leadership is classified as those at band 3 and above in the
Group's global career band structure. Our 2022 gender diversity
target of 26.4% is cascaded by Group and inclusive of our operations
in Bermuda; we reached 25.1% by end of 2022 at the regional level.
We missed our 2022 target, our focus on improving gender balance
in senior leadership across Europe remains a priority for HSBC Bank
plc executive committee for 2023.
4 The completion rate shown relates to the 2021/22 ‘Taking
Responsibility’ Compliance training module which is categorised as
‘required’ learning for Global employees. Unlike with mandatory
training, a formal target is not established for ‘required’ learning
modules and non-completion is performance managed.

Responsible Business Culture

We have the responsibility to protect our customers, our
communities and the integrity of the financial system. In this
section, we outline our requirements under the Non-Financial
Reporting Directive.
Environmental matters
More information about the Group's assessment of climate risk
can be found in the HSBC Holdings plc Annual Report and
Accounts 2022.
Employee matters
We are opening up a world of opportunity for our colleagues
through building an inclusive organisation that values difference,
takes responsibility and seeks different perspectives for the overall
benefit of our customers.
We promote an environment where our colleagues can expect to
be treated with dignity and respect. We are an organisation that
acts where we find behaviours that fall short. Our index measuring
colleagues’ confidence in speaking up is at 67% in 2022.
At times our colleagues may need to speak up about behaviours in
the workplace. We encourage colleagues to speak to their line
manager in the first instance, and our annual employee Snapshot
survey showed 82% feel comfortable doing so. We recognise that
at times people may not feel comfortable speaking up through the
usual channels. HSBC Confidential is our global whistleblowing
channel, allowing our colleagues past and present to raise
concerns confidentially and, if preferred, anonymously (subject to
local laws).
We aspire to be an organisation that is representative of the
communities which we serve. To achieve this, we set goals that
will build sustainable lasting change. We are focused on
increasing women and black heritage colleagues in senior
leadership roles and whilst we have made good progress, we
know there is more to be done.
To support our ambition, we encourage our colleagues to self-
identify their ethnicity data where legally permissible. At a
European level, we are limited in our collection of ethnicity data
and can only report in: UK, Channel Islands and the Isle of Man
('CIIOM'), and South Africa. However, we are continuing to drive
open dialogue and action to strengthen our employee networks
and improved our diversity data where possible.
Communities
The Group has a long-standing commitment to help support the
communities in which it operates. Through charitable partnerships
and volunteering opportunities, our people share their skills and
create a positive impact on society. The Group's global reach is its
unique strength and bringing together diverse people, ideas and
perspectives, helps us open up opportunities and build a more
inclusive world.
In 2022, HSBC Bank plc continued to work with our charity
partners across Europe to promote employability and financial
capabilities in disadvantaged communities, and respond to local
needs:
–HBCE partnered with charities Cresus and Adie to deliver
programmes that enhance financial capability and
entrepreneurship amongst disadvantaged individuals in their
respective communities.

HSBC Bank plc Annual Report and Accounts 2022 | 11

–HBMT supported local disadvantaged young people through its
charitable partnership with the Prince's Trust Foundation and
the 'Prince's Trust International Achieve programme' to develop
employable skills.
In 2022, HSBC Bank plc collectively donated £1.8m to charitable
programmes and was further supported by our employees'
contribution of 1,540 volunteer hours in various community
activities and projects during work time.
Human rights
Our commitment to respecting human rights, principally as they
apply to our employees, our suppliers and through our financial
services lending, is set out in our Statement on Human Rights.
This statement, along with our statements under the UK’s Modern
Slavery Act, is available on www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
Anti-corruption and anti-bribery
We are committed to high standards of ethical behaviour and
operate a zero-tolerance approach to bribery and corruption. We
consider such activity to be unethical and contrary to good
corporate governance.
HSBC requires compliance with all applicable anti-bribery and
corruption ('AB&C') laws in all markets and jurisdictions in which
we operate. These include the UK Bribery Act and France’s ’Sapin
II’ law. We have a global AB&C policy, which gives practical effect
to these laws and regulations, but also requires compliance with
the spirit of laws and regulations to demonstrate our commitment
to ethical behaviours and conduct as part of our environmental,
social and corporate governance.
The global AB&C policy sets out the key principles and minimum
control requirements that enable HSBC to mitigate bribery and
corruption risk. Mandatory AB&C training is provided to all staff,
with additional targeted training tailored to the roles of individuals.
HSBC carries out regular risk assessments, monitoring and testing
of its AB&C programme and maintains clear whistleblowing
policies and processes to ensure that individuals can confidentially
report concerns.
Non-Financial Information Statement
Disclosures required pursuant to the Companies, Partnerships and
Groups (Accounts and Non-Financial Reporting) Regulations 2016
can be found on the following pages:

Environmental matters (including the impact of the company’s business on the environment) | Page 11
The company’s employees | Pages 10 to 13 and 101 to 102
Social matters | Page 11
Respect for human rights | Page 12
Anti-corruption and anti-bribery matters | Page 12
Business model | Page 9
Principal risks | Page 24

HSBC creates value by providing products and services to meet
our customers' needs. We aim to do so in a way that fits
seamlessly into their lives. This helps us to build long-lasting
relationships with our customers. HSBC maintains trust by striving
to protect our customers’ data and information, and delivering fair
outcomes for them and if things go wrong, we need to address
complaints in a timely manner.
Operating with high standards of conduct is central to our long-
term success and underpins our ability to serve our customers.
Our Conduct Framework guides activities to strengthen our
business and increases our understanding of how the decisions
we make affect customers and other stakeholders. Details on our
Conduct Framework are available at www.hsbc.com/Conduct.

Section 172 statement

This section, from pages 12 to 13 forms our section 172 statement
and addresses the requirements of the Companies (Miscellaneous
Reporting) Regulations 2018. It describes how the Directors have
performed their duty to promote the success of the bank,
including how they have considered and engaged with
stakeholders and, in particular, how they have taken account of
the matters set out in section 172(1)(a) to (f) of the Companies Act
2006 (the 'Act').
The Board considered a range of factors when making decisions
and is supported in the discharge of its responsibilities by:
a.an induction programme and ongoing training for Directors to
provide an understanding of our business and financial
performance and prospects;
b.management processes which help ensure that proposals
presented to Board and committee meetings for decision
include information relevant to determine the action that would
most likely promote the success of the bank and involve
engagement with stakeholders where relevant, to support
appropriate decision making; and
c.agenda planning for Board and committee meetings to provide
sufficient time for the consideration and discussion of key
matters.
Stakeholder Engagement
The Board understands the importance of effective engagement
with its stakeholders and is committed to open and constructive
dialogue. Engagement with stakeholders takes place at the
holding company level and at the operational level. On certain
issues, the Board may engage directly with stakeholders. The
outcomes from such stakeholder engagement feeds into Board
discussions and decision making. This approach allows the Board
to better understand the impact of the bank's actions on its
stakeholders and respond to the challenges facing the bank. The
relevance of each stakeholder group varies depending on the
specific decision being taken by the Board. Not every decision the
Board makes will necessarily result in a positive outcome for all
stakeholders.
As a result of both its direct stakeholder interactions and the
reporting and information on stakeholder engagement it receives
about its six key stakeholders, namely customers, employees,
shareholders and investors, regulators and governments,
suppliers, and communities, the Board seeks to understand, and
have regard to, the interests and priorities of these stakeholders.
The two examples provided below of principal discussions and
decisions taken by the Board in 2022 show how the Directors and
Board respectively discharged their individual and collective
responsibility for promoting the long-term success of the bank and
took different stakeholder considerations into account in reaching
a decision or forming a view.
For further details regarding the role of the Board and the way in
which it makes decisions, including key activities during 2022,
please see page 95 to 96.
Customers
As one of Europe’s largest banking and financial services
organisations our corporate and institutional customers are at the
core of the bank's business model: without customers there would
be no bank. We have a clear vision to be the leading international
wholesale bank in Europe, complemented by a targeted wealth
and personal banking business. The Board strives to ensure it has
a broad understanding of customers, their needs and challenges,
and to give full consideration to these when its approval is sought
on matters such as material acquisitions, disposals, investments,
large scale change or transformation programmes.
Throughout 2022, geopolitical and economic uncertainty has given
our customers additional challenges and senior management have
engaged directly with customers to better understand their issues
and difficulties and how the bank can respond to them. During this
period, the Board has been provided with customer feedback and
key performance indicators, such as net promoter scores,
customer complaints, customer on-boarding times and
satisfaction survey results. The Board schedule also included
Commercial Banking, Wealth and Personal Banking, Global
Banking and Markets deep dive strategy sessions which
incorporated discussions on customer interactions, customer
surveys, complaints feedback and product developments to meet
customers’ needs.
Strategic Report | ESG Overview

12 | HSBC Bank plc Annual Report and Accounts 2022

Employee (Workforce Engagement)
Employees are critical to the success of the bank, its sustainability
and long-term future. Understanding employee sentiment and
how we are addressing feedback is a key area of Board focus.
During the year, the Board received regular updates from senior
management on the progression of our people priorities covering
various employee-focused initiatives across culture, leadership,
talent, skills, inclusion, wellbeing and colleague experience.
Further information on people priorities can be found under
Employee at page 101-102.
Feedback from employees is gathered via various mechanisms
including surveys, exchange meetings and 'speak up' channels
and reported to the Board. The Board is presented bi-annually with
a culture dashboard which has been developed to track progress
in embedding a positive and inclusive culture across the business.
Board focus on employees was heightened due to the ongoing
transformation programme and the need for continuing
consideration of the impact on employees when making Board
decisions.
The Board remained committed to building active communication
and feedback channels with employees across the region in 2022.
During the year, three cohorts were specifically targeted given
their importance to the bank’s strategy and their role in building a
robust leadership pipeline. These included: i) Executive Committee
member’s direct reports, ii) Subsidiary Board members, and iii)
Flagship Talent programme including participants from
Accelerating Female Leaders, Explore, and Accelerating into
Leadership programmes. Further details of the bank’s engagement
with employees can be found on pages 10 to 11 and 101 to 102.
Shareholders and Investors
The bank is a wholly owned subsidiary of HSBC Holdings plc and,
as such, the Board took into account the implications of its
decisions with regard to its shareholder, HSBC Holdings plc, and
its debt security investors. Examples of how it fulfilled this include:
•the Board Chair and Committee Chairs engaged with Group
counterparts and attended Group forums and Group committee
meetings, together with Executive Directors, to engage on
common issues and strategic priorities;
•Board review and approval of HSBC Bank plc specific
components of Group programmes; and
•Board consideration of the strength of the balance sheet to
ensure that the ability to pay principal or interest on its debt
securities was not at risk.
Regulators and Governments
During the year, Directors met regularly with regulators both in the
UK and Europe. It is central to the success of the bank that it has
constructive relationships with regulators and governments and
that there is a mutual understanding on expectations and
challenges given their impact on customers, the business model
and the bank’s strategy.
The Board receives regular updates on how HSBC interacts with
regulators globally and at the European level. Understanding
regulators’ views and priorities in this way shapes and influences
Board discussions and decision making.
Suppliers
Suppliers are critical to supporting the infrastructure and
operations of the business and we work with suppliers to ensure
mutually beneficial relationships. Examples of Board engagement
with suppliers during 2022 include:
•the Chief Operating Officer’s regular reports on third-party
supplier matters covering key suppliers’ operational resilience
and how we work with suppliers to mitigate impact to our
customers; and
•oversight of progress of implementing contractual changes
with third party suppliers to adopt new Standard Contractual
Clauses to meet 'Schrems II decision' data requirements.
Communities
The bank has legal, regulatory and social responsibilities to the
communities in which it operates and the environment and is
conscious of the need to manage the societal and environmental
impact of its business when making decisions. During the year the
Board received regular updates on matters spanning human rights
and environmental and climate issues.
Principal Decisions
Set out below are some of the principal decisions made by the
Board during 2022. In each case, in taking such decisions, the
Directors exercised their statutory duties under section 172(1) (a)-
(f) of the Companies Act 2006.
Liability Management Exercise – Tender Offer
A key regulatory responsibility of the Board is to periodically
assess the bank’s capital and liquidity position and associated
risks in a structured way, while also considering management
proposals in support of the bank’s financial strength and capital
efficiency.
Mindful of the bank’s continued focus on balance sheet
optimisation, and broader regulatory expectations, management
undertook an exercise to review potential liability management
actions relating to its issued debt securities.
The review resulted in a formal proposal being brought to the
Board, recommending the bank make an invitation to holders of
certain legacy debt securities to tender any and all of such debt
securities for purchase by the bank for cash, subject to certain
conditions being satisfied.
Prior to approval, the Board constructively challenged and
engaged with senior management to consider the capital and
liquidity impact on the bank’s balance sheet. As part of its
considerations, the Board took in to account the impact of the
project on the bank’s key stakeholders, in particular its investors in
such instruments and its obligations to, and relationship with, its
regulators. In considering stakeholders, the Board also considered
its minimum requirements for own funds and eligible liabilities and
how the legacy securities were treated from a regulatory capital
perspective.
In reaching its decision, the Board acknowledged the rationale for
the proposal in the context of seeking to further enhance
efficiencies in the bank’s capital structure. The Board also
acknowledged the Bank of England’s (‘BoE’) resolvability
assessment of major UK banks, which welcomed action being
taken, where it is appropriate and proportionate to do so, to
reduce the stock of legacy capital securities issued from non-
resolution entities to holders outside the group. Having taken all of
these and other factors into account, and subject to market and
economic conditions, the Board approved the proposed tender
offer in respect of the chosen legacy securities, which was
subsequently announced on 14 November 2022.
European Transformation – Malta Transfer
For a number of years, management have considered the most
appropriate organisational structure within Continental Europe to
help execute the bank’s Europe transformation strategy. In
addition to this review, management acknowledged the need for
banking entities to comply with the requirement under the CRD V
to establish an EU IPU structure by the end of 2023. The review
included a formal proposal being brought to the Board in October
2022, recommending the sale of HSBC Europe BV’s entire
shareholding in HBMT to the group’s EU IPU, HBCE.
Prior to approval, the Board reviewed and assessed options
presented by management to achieve compliance with the CRD V
requirements. The Board constructively engaged with
management to consider the financial and regulatory implications
and the likely consequence of the proposal on the bank’s key
stakeholders, as appropriate. Mindful of longer-term
consequences of decisions and the impact on operations, as well
as HBMT’s local listing, the Board also carefully considered the
approach to valuation and purchaser protections for the
transaction.

HSBC Bank plc Annual Report and Accounts 2022 | 13

In reaching its decision, the Board acknowledged the rationale for
the recommendation in the context of regulatory expectations and
that HBCE had also provided its in-principle approval for the
recommendation. Having taken these factors into consideration,
including an assessment of the financial merits and risks, investor
and regulatory engagement, the Board agreed to proceed with the
proposal, as subsequently completed on 30 November 2022.

Tax

Our approach to tax
We are committed to applying both the letter and the spirit of the
law in all territories where we operate, and have adopted the UK
Code of Practice for the Taxation of Banks. As a consequence, we
seek to pay our fair share of tax in the countries in which we
operate. We continue to strengthen our processes to help ensure
our banking services are not associated with any arrangements
known or suspected to facilitate tax evasion.
HSBC continues to apply global initiatives to improve tax
transparency such as:
•the US Foreign Account Tax Compliance Act (‘FATCA’);
•the Organisation for Economic Co-operation and Development
('OECD') Standard for Automatic Exchange of Financial
Account Information (also known as the Common Reporting
Standard);
•the CRD IV Country by Country Reporting;
•the OECD Base Erosion and Profit Shifting (‘BEPS’) initiative;
and
•the UK legislation on the corporate criminal offence (‘CCO’) of
failing to prevent the facilitation of tax evasion.
We do not expect the BEPS or similar initiatives adopted by
national governments to adversely impact our results.

Key Performance Indicators

The Board of Directors tracks the group’s progress in
implementing its strategy with a range of financial and non-
financial measures or key performance indicators (‘KPIs’). Progress
is assessed by comparison with the group strategic priorities,
operating plan targets and historical performance. The group
reviews its KPIs regularly in light of its strategic objectives and
may adopt new or refined measures to better align the KPIs to
HSBC’s strategy and strategic priorities.

Financial KPIs

| 2022 | 2021 | 2020
(Loss)/profit before tax (reported) (£m) | (959) | 1,023 | (1,614)
Profit/(loss) before tax (adjusted) (£m) | 1,724 | 1,577 | (184)
Cost efficiency ratio (reported) (%) | 115.2 | 89.2 | 113.6
Cost efficiency ratio (adjusted) (%) | 70.9 | 80.9 | 89.6
Return on tangible equity (%) | 5.5 | 6.1 | (2.7)
Common equity tier 1 capital ratio (%) | 16.8 | 17.8 | 15.1

Profit/(loss) before tax (reported/adjusted): Reported profit/
(loss) before tax is the profit/(loss) as reported under IFRS.
Adjusted profit/(loss) before tax adjusts the reported profit/(loss)
for the effect of significant items as detailed on pages 18 to 19.
Reported loss before tax in 2022 was £(959)m compared with a
profit before tax of £1,023m in 2021. This was primarily driven by
lower reported revenue, which reflected an impairment on the
planned disposal of our retail banking operations in France and
losses associated with the planned sale of our operations in Russia
and Greece. Expected credit losses and other credit impairment
charges ('ECL') were a net charge, largely reflecting stage 3
charges in Global Banking and CMB. This compared with a net
release in 2021 primarily related to Covid-19 related allowances
built up in 2020. Reported operating expenses were lower
primarily driven by lower variable pay and the impact of our
transformation cost-saving initiatives partly offset by higher
restructuring and other related costs.
Share of profit/(loss) from associates recognised a loss of £30m
compared with a gain of £191m in 2021.
Adjusted profit before tax was £1,7 24m, up £146m compared
with £1,577m in 2021. This was driven by a strong revenue
performance and lower operating expenses, partly offset by higher
ECL. The increase in revenue was largely driven by higher net
interest income in all of our global businesses, mainly due to
interest rate rises. Revenue in Markets and Securities Services
('MSS') was also strong, mainly in Global Foreign Exchange and
Equities. This was driven by increased client activity due to
elevated market volatility and the macroeconomic impacts from
rising inflation and increasing interest rates, and reflecting robust
risk management. This was partly offset by lower valuation gains
in Principal Investments ('PI') compared with 2021.
Operating expenses decreased, driven by lower performance
related pay and the impact of our transformation cost-saving
initiatives.
Reported cost efficiency ratio was 26.0 percentage points
higher compared with 2021 driven by lower revenue partly offset
by lower operating expenses. Reported revenue decreased by
24.1% and operating expenses decreased by 2.0%, mainly driven
by the factors mentioned above.
Adjusted cost efficiency ratio improved by 10.0 percentage
points from 2021, reflecting higher revenue and lower costs.
Revenue increased by 7.1%, due to higher net interest income
driven by the high interest rate environment and higher trading
revenue in MSS. Operating expenses decreased by 6.1%, mainly
driven by factors mentioned above.
Return on tangible equity (‘RoTE’) is computed by adjusting
reported profit attributable to ordinary shareholders by excluding
movements in PVIF and significant items (net of tax), divided by
average tangible shareholders' equity excluding fair value of own
debt, debit valuation adjustment (‘DVA’) and other adjustments for
the period. The adjustment to reported results and reported equity
excludes amounts attributable to non-controlling interests.
We provide RoTE as a way of assessing our performance, which is
closely aligned to our capital positions.
CET1 capital ratio represents the ratio of common equity tier 1
capital to total risk-weighted assets ('RWA'). CET1 capital is the
highest quality form of capital comprising shareholders’ equity and
related non-controlling interests less regulatory deductions and
adjustments.
The group seeks to maintain a strong capital base to support the
development of its business and meet regulatory capital
requirements at all times.
The CET1 capital ratio of 16.8% in 2022 decreased by 1.0% from
2021, mainly due to an increase in RWAs.

Non-financial KPIs

We monitor a range of non-financial KPIs focusing on customers,
people, culture and values, including customer service
satisfaction, employee engagement and diversity and
sustainability.
For details on customer service and satisfaction please refer
below; for the remaining non-financial KPIs, refer to the Non-
financial reporting section on page 11 and Corporate Governance
section on pages 94 to 102.
Customer service, awards and satisfaction
MSS
Our customers are at the heart of what we do and we are
committed to delivering services and capabilities that meet their
needs and help them fulfil their ambitions.
In 2022, we won numerous awards and consistently ranked highly
with our European clients, including winning Currency Manager of
the Year at the European Pension Awards, Best Prime Broker –
Emerging Markets at the HFM European Services Awards (for the
10th consecutive year), ranking number one for ‘UK Research’,
‘UK Overall Broker’ and ‘Emerging EMEA Equity Research, Sales
Strategic Report | ESG Overview | Key performance indicators | Economic background and outlook

14 | HSBC Bank plc Annual Report and Accounts 2022

and Corporate Access’ in the Institutional Investor 2022 Survey
and also ranking number one for ‘UK Fund Accounting and
Administration provider’, ‘Top 200 Asset Managers’ and ‘Rest of
the World’ in the R&M Investor Services Survey for Europe.
These accolades, coupled with multiple milestones and
achievements in sustainable finance, demonstrate our leading
capabilities to support clients locally and connect them to markets
and expertise in the East, as well the key role Europe plays in
supporting the Group’s strategic priorities.
GB
Within Global Banking Europe we remain committed to providing
excellent customer experience and continue to strive towards
improving our proposition to meet client needs.
In 2022, HSBC received industry recognition across a number of
product capabilities offered to our Global Banking clients including
being recognised as number one Best Services for Trade Finance
in Western Europe by Euromoney in their Trade Finance Survey
and number one for Cash Management in the UK in the 2022
Euromoney Market Leaders survey.
Aligned with our purpose of opening up opportunities for our
clients, HSBC also won six bond awards from Environmental
Finance in 2022. These awards also highlight the continued
strength and differentiation of our Sustainability capabilities
globally as well as the role we play in Europe helping our clients
transition to net zero.
CMB
Customer experience and satisfaction are priorities for Commercial
Banking in Europe. We measure a number of operational metrics
on customer service levels and gather direct customer feedback to
ensure our solutions and channels remain relevant and fit for our
customers’ digital needs today. Our centralised booking model in
Paris for our pan-European customers enables us to regionally
cover and manage customers through a consistent and
streamlined level of service.
This also ensures our Relationship Managers can support and
cover customers using a common toolkit. Looking ahead, we will
continue to measure how we deploy resources to our customers
looking to expand and grow internationally, whilst also supporting
them with their transition plans to achieve net zero.
WPB
Enhancing customer experience and improving satisfaction
remains integral to our strategy. This is monitored through a
number of customer satisfaction metrics covering branch, contact
centre and digital channels. One example is iNPS ('Interactions Net
Promoter Score') which measures interactions with our customers.
In 2022 Channel Islands and Isle of Man ('CIIOM') Islands iNPS
scored 14 against a target of 15 for mobile and 46 against a target
of 50 for Premier Relationship Managers. The Expat proposition
scored 24 against a target of 6 for Online, and Premier
Relationship Managers scored 55 against a target of 46. We
recognise the importance of customer feedback and continue to
enhance our insights to gain a better understanding of our clients
to provide a more personalised and relevant service.
Digital continues to be a principal area of investment; enhancing
customer experience, reducing processing costs and driving the
sustainability agenda. We are on track to transition 30% of
cheques (up to the value of £500) away from the branch to mobile,
improving customer service with 2,500 cheques deposited to date.
Private Banking remains committed to enhancing our digital
capabilities and offering, with improved internal platforms and
software to support the delivery of excellent client service. Within
Switzerland, Luxembourg and Channel Islands service
improvements have been delivered within the E-Banking platform
including client access to on-demand statements.
We recognise that enhancing customer satisfaction is an evolving
process and are committed to ensure our investments and focus
are prioritised to achieve this.

Economic background and outlook

UK

Falling real incomes are driving the UK's
economic slowdown
UK consumer price inflation remains very high. In January 2023,
the annual inflation rate fell to 10.1%, the third consecutive
monthly fall. While inflation may have peaked at 11.1% in October,
cost pressures are still high and inflation could remain close to
10% through Q1 2023 before decreasing further. Thanks partly to
falls in wholesale energy prices, the BoE forecasts that headline
inflation could fall below 4% by Q4 2023.
Underlying inflation pressures could prove more persistent. In
December 2022, UK services inflation hit its highest rate since
1992, though it fell back in January 2023. The UK labour market
continues to be characterised by a constrained supply of workers,
across sectors and skill levels, which could also add to core
inflation pressure. The unemployment rate was close to multi-
decade lows at 3.7% in the three months ended December 31,
2022. Wage growth, while strong, has not kept pace with inflation.
Total nominal average weekly earnings were up 5.9% year-on-year
in the three months ended December 31, 2022, while real pay on
the same basis fell by 3.1%.
The real-terms income squeeze contributed to a fall in GDP of
0.2% quarter-on-quarter in Q3 2022, though an extra Bank Holiday
for the Queen’s funeral may also have played a role. However,
GDP was flat in Q4 2022, meaning the UK economy narrowly
avoided slipping into technical recession. Even so, the underlying
growth picture still looks challenging.
The BoE has raised Bank Rate at each policy meeting since
December 2021, taking it to 4.0% in February 2023. This has
already started to weigh on the housing market, with benchmark
price indices showing falls in October and November 2022. In
early February 2023, market prices implied that UK Bank Rate
would peak at over 4.5% in mid-2023 with cuts expected to begin
from Q4 2023.

Eurozone

Headline inflation falling and growth slowing
The eurozone economy was resilient through the second half of
2022. GDP grew 0.3% quarter on quarter in Q3, with a strong
contribution from household spending despite high inflation.
Preliminary data showed that the eurozone economy expanded
again in Q4 2022, with GDP rising 0.1% quarter on quarter. The
modest expansion means the eurozone also avoided slipping in to
recession in 2022. With household savings rates still high, this
resilience partly reflects government support measures.
Eurozone inflation remains high, even though it is estimated to
have already reached its peak, having hit an all-time high of 10.6%
in October 2022 and falling to 8.5% in the preliminary estimate for
January 2023.
These elevated rates of inflation will weigh on real-terms incomes
and, in turn, household spending. As the recent falls in wholesale
energy prices start to feed through to consumers, headline
inflation should fall further during the course of 2023. Declines in
core inflation have been less pronounced, with core inflation of
5.2% in January 2023.
The ongoing inflationary squeeze on real-terms incomes means
that a mild eurozone recession still seems likely, even though
indicators of economic activity in early 2023 were resilient. The
depth of any recession should be backstopped by a supportive
labour market, not least because in Europe many firms can make
use of government-backed short-time working schemes.

HSBC Bank plc Annual Report and Accounts 2022 | 15

Financial summary

Use of alternative performance measures

Our reported results are prepared in accordance with International
Financial Reporting Standards ('IFRSs'), as detailed in the Financial
Statements starting on page 113.
In measuring our performance, we supplement our IFRS figures
with non-IFRS measures, which constitute alternative performance
measures under European Securities and Markets Authority
guidance and non-GAAP financial measures defined and
presented in accordance with US Securities and Exchange
Commission rules and regulations. These measures include those
derived from our reported results in order to eliminate factors that
distort year-on-year comparisons. The ‘adjusted performance’
measure used throughout this report is described below. All
alternative performance measures are described and reconciled to
the closest reported financial measure when used.
Adjusted performance
Adjusted performance is computed by adjusting reported results
for the year-on-year effects of significant items that distort year-
on-year comparisons.
We use ‘significant items’ to describe collectively the group of
individual adjustments excluded from reported results when
arriving at adjusted performance. These items are ones that
management and investors would ordinarily identify and consider
separately when assessing performance to understand better the
underlying trends in the business. We consider adjusted
performance provides useful information for investors by aligning
inter nal and external reporting, identifying and quantifying items
management believes to be significant and providing insight into
how management assesses year-on-year performance.

Summary consolidated income statement for the year ended
| 2022 | 2021 | 2020
| £m | £m | £m
Net interest income | 1,904 | 1,754 | 1,898
Net fee income | 1,261 | 1,413 | 1,400
Net income from financial instruments measured at fair value | 1,751 | 3,432 | 2,314
Gains less losses from financial investments | (60) | 60 | 95
Net insurance premium income | 1,787 | 1,906 | 1,559
Losses/gains recognised on Assets held for sale | (1,947) | 67 | —
Other operating income | 356 | 527 | 417
Total operating income 1 | 5,052 | 9,159 | 7,683
Net insurance claims, benefits paid and movement in liabilities to policyholders | (406) | (3,039) | (1,783)
Net operating income before change in expected credit losses and other credit impairment charges 2 | 4,646 | 6,120 | 5,900
Change in expected credit losses and other credit impairment charges | (222) | 174 | (808)
Net operating income | 4,424 | 6,294 | 5,092
Total operating expenses excluding impairment of goodwill and other intangible assets 1 | (5,365) | (5,416) | (5,903)
Impairment of goodwill and other intangible assets | 12 | (46) | (802)
Operating (loss)/profit | (929) | 832 | (1,613)
Share of (loss)/profit in associates and joint ventures | (30) | 191 | (1)
(Loss)/profit before tax | (959) | 1,023 | (1,614)
Tax credit | 561 | 23 | 136
(Loss)/profit for the year | (398) | 1,046 | (1,478)
(Loss)/profit attributable to the parent company | (408) | 1,041 | (1,488)
Profit attributable to non-controlling interests | 10 | 5 | 10

1 Total operating income and expense include significant items as detailed on pages 16 to 19.
2 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue.

Reported performance

Reported loss before tax was £(959)m, compared with a profit
before tax in 2021 of £1,023m, a decrease of £1,982m. The
reported loss in 2022 included impairments of £1,947m, mainly
due to the reclassification of our retail banking operations in
France to held for sale, and net ECL charges compared with a net
release in 2021. This was partly offset by a reduction in operating
expenses.
Reported revenue was £1,474m lower, largely reflecting
impairments on the planned disposals of our retail banking
operations in France, and our operations in Russia and Greece in
2022. Revenue also decreased in GBM Other mainly driven by
lower favourable valuation gains in PI and a net loss of £91m from
the buy-back of legacy securities to optimise the bank’s future
funding costs.
This decrease was partly offset by a strong performance in
Markets and Securities Services ('MSS') and higher revenue from
interest rate rises, notably in Global Payments Solutions ('GPS') in
Global Banking and CMB. During 3Q22, we renamed our Global
Liquidity and Cash Management ('GLCM') business to Global
Payments Solutions as we reshape our payments proposition into
a technology-enabled, globally connected payments franchise, to
better support our clients‘ needs and facilitate commerce.
In WPB, revenue grew supported by higher interest rates and
higher revenue in insurance manufacturing driven by assumption
updates, primarily reflecting favourable investment assumptions
on asset management rebates for unit-linked investments and
profit-sharing levels.
Reported o perating expenses decreased, mainly driven by lower
performance-related pay and the impact of our transformation
cost-saving initiatives. This was partly offset by higher
restructuring and other related costs.
In addition, there was also a loss compared with a gain in 2021
recognised from our share of profit/(loss) from associates.
Net interest income (‘NII’) increased by £150m or 9% compared
with the prior year. This included higher net interest expense in
Corporate Centre (up by £565m compared with 2021) associated
with funding of our Markets business in MSS generating trading
income. Excluding this, NII was up by £694m mainly in CMB
(£277m) and Global Banking (£335m) driven by the higher interest
rate environment, notably in GPS.
Net fee income decreased by £152m or 11% compared with the
prior year, notably in Global Debt Markets in MSS and Global
Banking, driven by lower underwriting fees as market activity fell
Strategic Report | Financial summary

16 | HSBC Bank plc Annual Report and Accounts 2022

due to the effect of the Russia-Ukraine war and wider
macroeconomic uncertainties. This compared with a strong 2021
when corporates raised finance as initial Covid-19 restrictions
were eased. This reduction was partly offset by higher income in
GPS, as volumes grew and we delivered on our strategic
initiatives.
Net income from financial instruments measured at fair
value decreased by £1,681m or 49%, primarily in WPB. This
decrease was driven by lower returns on financial assets
supporting insurance contracts where the policyholder is subject
to part or all of the investment risk.
This adverse movement resulted in a corresponding movement in
liabilities to policyholders, reflecting the extent to which
policyholders participate in the investment performance of the
associated assets. The offsetting movements are recorded in net
insurance claims and benefits paid and movement in liabilities to
policyholders.
The decrease in WPB was partly offset by higher revenue in MSS,
mainly reflecting strong client activity and robust risk
management, notably in Global Foreign Exchange, due to elevated
market volatility resulting from the Russia-Ukraine war and
macroeconomic impacts from rising inflation and increasing
interest rates. Revenue also benefited from favourable fair value
movements in preference shares holdings in VISA in CMB and
WPB.
Gains less losses from financial investments decreased by
£120m, mainly driven by losses on the disposal of bonds held at
fair value through other comprehensive income ('FVOCI') in
Markets Treasury. This compared with gains in the prior year.
Net insurance premium income decreased by £119m or 6%, in
WPB, from insurance manufacturing revenue driven by lower new
business volumes.
Losses/gains recognised on Assets held for sale of
£(1,947m) mainly driven by an impairment on the planned
disposals of the retail banking operations in France £1,711m,
branch operations in Russia of £212m and Greece of £87m in
2022. This compared with a gain of £65m from sale of a property
in Germany in 2021.
Net insurance claims, benefits paid and movement in
liabilities to policyholders decreased by £2,633m or 87% in the
insurance business in WPB. The decrease was driven by lower
returns on financial assets supporting contracts where the
policyholder is subject to part or all of the investment risks.
The losses recognised on the financial assets measured at fair
value through profit and loss that are held to support these
insurance contract liabilities are reported in 'Net income from
financial instruments designated at fair value'.
Other operating income decreased by £171m or 32%, mainly in
GBM Other due to lower intercompany recharge recoveries from
other entities in the Group, with an offsetting decrease in
operating expenses. This was partly offset by higher revenue in
insurance manufacturing in WPB driven by assumption updates.
Changes in expected credit losses and other credit
impairment charges (‘ECL’) were a charge of £222m in 2022,
compared with a release of £174m in 2021. The charge in 2022
was mainly driven by higher stage 3 charges in Global Banking
and in CMB reflecting heightened levels of uncertainty and
inflationary pressures. This compared with a net release of stage 1
and stage 2 allowances in 2021 primarily relating to Covid-19
related allowances built up in 2020.
Total operating expenses excluding impairment of goodwill
and other intangible assets decreased by £51m or 1%, mainly
driven by lower variable pay and the impact of continued cost
discipline as well as lower intercompany costs recharges. This was
partly offset by an increase of £137m in restructuring and other
related costs.
Impairment of goodwill and other intangible assets was a
release of £12m compared with an impairment charge on non-
financial assets of £(46)m in 2021.
Share of (loss)/profit in associates and joint ventures was a
loss of £30m compared with a profit of £191m in 2021 due to the
recovery in asset valuations. The loss in 2022 included a £24m
true-up of prior year valuations in the underlying investments of an
associate.
Tax credit of £561m was £538m higher compared with 2021. The
effective tax rate of 58.5% for 2022 was driven by underlying
losses before tax, non-recurring items including recognition of
previously unrecognised deferred tax assets in France and a tax
credit of £105m from movement in provisions for uncertain tax
positions.
The tax credit in 2021 of £23m included favourable non-recurring
items in respect of tax rate changes, prior period adjustments and
the recognition of previously unrecognised deferred tax assets in
France.

HSBC Bank plc Annual Report and Accounts 2022 | 17

Adjusted performance

Significant revenue items by business segment – (gains)/losses for the year ended
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
31 Dec 2022 |  |  |  |  |  |  |
Reported revenue | 2,446 | 1,571 | (108) | 1,433 | (80) | (616) | 4,646
Significant revenue items | (33) | — | 100 | (1) | 1,572 | 498 | 2,136
– fair value movements on financial instruments 1 | (35) | — | (6) | (1) | — | (1) | (43)
– restructuring and other related costs 2 | 2 | — | 106 | — | — | 126 | 234
– European restructurings | — | — | — | — | 1,572 | 373 | 1,945
Adjusted revenue | 2,413 | 1,571 | (8) | 1,432 | 1,492 | (118) | 6,782
31 Dec 2021 |  |  |  |  |  |  |
Reported revenue | 2,043 | 1,367 | 310 | 1,096 | 1,276 | 28 | 6,120
Significant revenue items | 12 | — | 269 | (1) | (1) | (69) | 210
– fair value movements on financial instruments 1 | 12 | — | (5) | (1) | (1) | — | 5
– restructuring and other related costs 2 | — | — | 274 | — | — | (69) | 205
Adjusted revenue | 2,055 | 1,367 | 579 | 1,095 | 1,275 | (41) | 6,330
31 Dec 2020 |  |  |  |  |  |  |
Reported revenue | 1,966 | 1,381 | 437 | 1,132 | 1,035 | (51) | 5,900
Significant revenue items | 2 | — | 187 | 1 | — | (93) | 97
– fair value movements on financial instruments 1 | 2 | — | 2 | 1 | — | (2) | 3
– restructuring and other related costs 2 | — | — | 185 | — | — | (91) | 94
Adjusted revenue | 1,968 | 1,381 | 624 | 1,133 | 1,035 | (144) | 5,997

1 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
2 Includes losses associated with the RWA reduction commitments.

Significant cost items by business segment – (recoveries)/charges for the year ended
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
31 Dec 2022 |  |  |  |  |  |  |
Reported operating expenses | (1,940) | (932) | (402) | (663) | (917) | (499) | (5,353)
Significant cost items | — | — | 84 | 70 | 9 | 384 | 547
– restructuring and other related costs | — | — | 68 | 61 | 2 | 327 | 458
– European restructurings | — | — | 16 | 9 | 7 | 57 | 89
Adjusted operating expenses | (1,940) | (932) | (318) | (593) | (908) | (115) | (4,806)
31 Dec 2021 |  |  |  |  |  |  |
Reported operating expenses | (2,064) | (918) | (588) | (611) | (981) | (300) | (5,462)
Significant cost items | — | — | 103 | (1) | 6 | 236 | 344
– restructuring and other related costs | — | — | 103 | (1) | 6 | 213 | 321
– European restructurings | — | — | — | — | — | 23 | 23
Adjusted operating expenses | (2,064) | (918) | (485) | (612) | (975) | (64) | (5,118)
31 Dec 2020 |  |  |  |  |  |  |
Reported operating expenses | (1,950) | (878) | (1,351) | (773) | (1,169) | (584) | (6,705)
Significant cost items | 1 | — | 679 | 114 | 41 | 498 | 1,333
– restructuring and other related costs | — | — | 218 | 79 | 5 | 377 | 679
– European restructurings | — | — | — | — | — | — | —
– settlements and provisions in connection with legal and regulatory | 1 | — | — | — | — | 8 | 9
– impairment of other intangible assets | — | — | 461 | 35 | 36 | 113 | 645
Adjusted operating expenses | (1,949) | (878) | (672) | (659) | (1,128) | (86) | (5,372)

Strategic Report | Financial summary

18 | HSBC Bank plc Annual Report and Accounts 2022

Net impact on profit/(loss) before tax by business segment
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
31 Dec 2022 |  |  |  |  |  |  |
Reported profit/(loss) before tax | 505 | 486 | (513) | 716 | (1,004) | (1,149) | (959)
Net impact on reported profit and loss | (33) | — | 184 | 69 | 1,581 | 882 | 2,683
– Significant revenue items | (33) | — | 100 | (1) | 1,572 | 498 | 2,136
– Significant cost items | — | — | 84 | 70 | 9 | 384 | 547
Adjusted profit/(loss) before tax | 472 | 486 | (329) | 785 | 577 | (267) | 1,724
31 Dec 2021
Reported profit/(loss) before tax | (20) | 589 | (273) | 492 | 318 | (83) | 1,023
Net impact on reported profit and loss | 12 | — | 372 | (2) | 5 | 167 | 554
– Significant revenue items | 12 | — | 269 | (1) | (1) | (69) | 210
– Significant cost items | — | — | 103 | (1) | 6 | 236 | 344
Adjusted profit/(loss) before tax | (8) | 589 | 99 | 490 | 323 | 84 | 1,577
31 Dec 2020
Reported profit/(loss) before tax | 17 | 55 | (918) | 37 | (173) | (632) | (1,614)
Net impact on reported profit and loss | 3 | — | 866 | 115 | 41 | 405 | 1,430
– Significant revenue items | 2 | — | 187 | 1 | — | (93) | 97
– Significant cost items | 1 | — | 679 | 114 | 41 | 498 | 1,333
Adjusted profit/(loss) before tax | 20 | 55 | (52) | 152 | (132) | (227) | (184)

Adjusted performance
Adjusted profit before tax was £1,724m, up £147m or 9%
compared with 2021. This reflected higher revenue and lower
operating expenses partly offset by higher ECL and a loss in our
share of profit in associates and joint ventures compared with a
gain in 2021.
Adjusted revenue increased by £452m or 7% compared with
2021. This increase was primarily in Global Payments Solutions
(‘GPS’) within Global Banking and CMB, driven by the positive
impact of interest rate rises and balance sheet growth. In MSS,
strong revenue performance, notably in Global Foreign Exchange,
Securities Services and Equities, was driven by strong client
activity and robust risk management. Revenue also increased in
WPB reflecting higher net interest income driven by rising interest
rates and higher revenue in insurance manufacturing driven by
assumption updates.
This increase was partly offset by a reduction in GBM Other,
mainly driven by lower favourable valuation gains in PIs and a net
loss from the buy-back of legacy securities to optimise the bank’s
future funding costs.
Adjusted ECL were a net charge of £222m compared with a net
credit of £174m in 2021. In 2022, the net charge was mainly
driven higher stage 3 charges in Global Banking and CMB. This
compared with a net release of stage 1 and stage 2 allowances in
2021 reflecting an improved economic outlook and stabilisation of
credit risk.
Adjusted operating expenses decreased by £312m or 6%,
mainly reflecting the impact of our transformation cost-saving
initiatives and lower performance-related pay. In addition, there
was a lower UK bank levy charge, which included a credit of £44m
relating to 2021 charges, and lower VAT costs in France due to an
update in the VAT recovery rate and the recognition of a recovery
of VAT paid in 2021.
Share of (loss)/profit in associates and joint ventures was a
loss of £30m compared with a profit of £191m in 2021. The loss in
2022 included a £24m true-up of prior year valuations in the
underlying investments of the Business Growth Fund ('BGF').
Markets and Securities Services
Adjusted profit before tax was £472m compared with a loss before
tax of £(8)m in 2021. This was driven by strong revenue
performance and lower operating expenses.
Adjusted revenue increased by £358m or 17%, mainly in Global
Foreign Exchange (up by £305m). This was driven by increased
client activity due to elevated market volatility and the
macroeconomic impacts from rising inflation, increasing interest
rates and a strengthening of the US dollar, resulting in a strong
trading performance. Revenue also increased in Securities
Services (up £72m) driven by higher interest rates and transaction
volumes. In Equities, revenue was higher by £32m as 2022
included a one-off gain on disposal of an associate of £61m
following a merger event. This increase was partly offset lower
client activity as a result of inflation concerns and lack of investor
appetite in 2022.
In Securities Financing, revenue was down by £49m, mainly due
to margin compression in repurchase agreements (‘repos’). This
reflected volatility due to the macro-economic environment,
including central bank policies on interest rates. By contrast,
revenue was up in Prime Finance driven by growth in client
franchise revenue, up 10%, despite challenging market conditions.
Revenue also decreased in Global Debt Markets (down by £23m),
mainly driven by lower primary issuances and reduced client
activity due to challenging market conditions.
Adjusted operating expenses decreased by £124m or 6%,
largely driven by a decrease in performance-related pay and the
impact of our transformation cost-saving initiatives; partly offset
by the impact of higher inflation.
Global Banking
Adjusted profit before tax was £486m, a decrease of £103m or
17% compared with 2021. This was largely driven by higher ECL,
partly offset by higher revenue.
Adjusted revenue increased by £204m or 15%, mainly in GPS
(up by £389m) driven by margin growth reflecting the rising global
interest rate environment and strategic initiatives to grow fee
income. In contrast, Capital Markets and Advisory revenue
decreased by £124m, in line with the reduced market fee pool and
adverse valuation movements on leveraged loans.
Adjusted ECL were a net charge of £153m compared with a net
credit of £139m in 2021. The net charge in 2022 was mainly driven
by higher stage 3 charges, notably in non-bank financial
institutions and real estate sectors. This compared with a net
release of stage 1 and stage 2 allowances in 2021 primarily
relating to Covid-19 related allowances built up in 2020.
Adjusted operating expenses were £14m or 2% higher
compared with 2021, reflecting the impact of higher inflation and
strategic investments, partly offset by the impact of our ongoing
cost discipline.
Global Banking and Markets Other
Adjusted loss before tax was £(329)m, compared with a profit
before tax of £99m in 2021. This was largely driven by l ower
revenue, partly offset by lower operating expenses.

HSBC Bank plc Annual Report and Accounts 2022 | 19

Adjusted revenue decreased by £587m, mainly in PIs driven by
lower valuation gains of £209m compared with 2021. Revenue
also decreased driven by a net loss from the buy-back of legacy
securities to optimise the bank’s future funding costs, and also
lower intercompany recoveries of costs from other entities in the
Group. There was also a decrease in revenue allocated from
Markets Treasury.
Adjusted operating expenses decreased by £167m or 35%
compared with 2021, reflecting the move of certain GBM costs
from the bank to other entities in the Group (offset by lower
intercompany recoveries in revenue). The decrease in operating
expenses was also driven by lower UK Bank levy in 2022, which
included a credit relating to 2021 charges.
Commercial Banking
CMB performed strongly in 2022 as we continued to implement
our strategy to focus on serving our international customers.
Adjusted profit before tax was £785m, up by £295m compared
with 2021. This was mainly driven by higher revenue and lower
operating expenses, partly offset by ECL charges.
Adjusted revenue increased by £337m or 31% compared with
2021. This was primarily in GPS (up by £294m) driven by the
higher interest rate environment and growth in average deposit
balances. There was also an increase in collaboration revenue
from MSS products (up £36m), notably Global Foreign Exchange.
Additionally, revenue also benefited from favourable fair value
movements in our holding of preference shares in VISA and an
increase in revenue from Markets Treasury.
This was partly offset by a decrease in Credit and Lending revenue
of £43m, in part due to an increase in the cost of funds.
Adjusted ECL were a net charge of £54m compared with a net
release of £7m in 2021. The net charge in 2022 was largely driven
by stage 3 charges in France and Germany, partly offset by a
release of stage 1 and stage 2 allowances. This compared with a
net release in 2021 of Covid-19-related allowances previously built
up in 2020.
Adjusted operating expenses decreased by £19m or 3%, driven
by continued cost discipline on discretionary spend and
through hiring efficiencies, as well as from the impact of our cost-
saving initiatives. The decrease was also driven by an update in
the VAT recovery rate and the recognition of a recovery of VAT
paid in 2021 in France.
Wealth and Personal Banking ('WPB')
Adjusted profit before tax of £577m, up £254m compared with
2021. This was primarily due to higher revenue and lower
operating expenses, partly offset by higher ECL.
Adjusted revenue increased by £217m or 17%, mainly CIIOM
from deposits (up £147m) due to the higher interest rate
environment and growth in average balances. Revenue also
increased in insurance manufacturing (up by £58m) due to
assumptions changes and experience variances, primarily
reflecting favourable investment assumptions on asset
management rebates for unit-linked investments and profit-
sharing levels. There were also favourable fair value movements in
our holding of preference shares in VISA of £33m.
Adjusted ECL were a net charge of £7m compared with a net
release of £23m in 2021. The net charge in 2022 mainly reflected a
more normalised level of charges including provisions relating to a
deterioration in the forward economic outlook due to heightened
levels of uncertainty and inflationary pressures. The net release in
2021 was from Covid-19-related allowances previously built up in
2020.
Adjusted operating expenses decreased by £67m or 7%. This
was driven by the benefits of our cost-saving initiatives and a
reduction due to the increase in the VAT recovery rate and the
recognition of a recovery of VAT paid in 2021 in France.
Corporate Centre
Adjusted loss before tax of £267m compared with a profit before
tax of £84m in 2021. This was mainly driven by a loss in
associates and joint ventures compared with a gain in the first half
of 2021, as well as lower revenue.
Adjusted revenue was lower by £77m, mainly driven by the non-
recurrence of a fair value gain of £32m in 2021 from a long-
standing investment in a Germany-based brokerage company.
There was also lower valuation gains of £12m in Legacy Credit
portfolios.
Adjusted ECL were £5m higher compared with 2021, mainly
driven by losses in Legacy Credit.
Adjusted operating expenses increased by £51m, largely driven
by higher margin on recharges from UK ServCo and higher
intercompany recharges from entities in the Group.
Shares of (loss)/profit in associates and joint ventures was a
loss of £28m, of which £24m was due to a true-up of prior year
valuations in the underlying investments of the BGF. This
compared with a profit of £191m in 2021 due to the recovery in
asset valuations.

Dividends

The consolidated reported profit for the year attributable to the
shareholders of the bank was £(408)m.
A special dividend was declared/paid on CET1 capital in 2022.
Further information about the results is given in the consolidated income
statement on page 114.
Strategic Report | Financial summary

20 | HSBC Bank plc Annual Report and Accounts 2022

Review of business position

Summary consolidated balance sheet at 31 Dec
| 2022 | 2021
| £m | £m
Total assets | 717,353 | 596,611
– cash and balances at central banks | 131,433 | 108,482
– trading assets | 79,878 | 83,706
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 15,881 | 18,649
– derivatives | 225,238 | 141,221
– loans and advances to banks | 17,109 | 10,784
– loans and advances to customers | 72,614 | 91,177
– reverse repurchase agreements – non-trading | 53,949 | 54,448
– financial investments | 32,604 | 41,300
– assets held for sale | 21,214 | 9
– other assets | 67,433 | 46,835
Total liabilities | 693,337 | 572,896
– deposits by banks | 20,836 | 32,188
– customer accounts | 215,948 | 205,241
– repurchase agreements – non-trading | 32,901 | 27,259
– trading liabilities | 41,265 | 46,433
– financial liabilities designated at fair value | 27,287 | 33,608
– derivatives | 218,867 | 139,368
– debt securities in issue | 7,268 | 9,428
– liabilities of disposal groups held for sale | 24,711 | —
– liabilities under insurance contracts | 19,987 | 22,264
– other liabilities | 84,267 | 57,107
Total equity | 24,016 | 23,715
Total shareholders’ equity | 23,875 | 23,584
Non-controlling interests | 141 | 131

Total reported assets were 20.2% higher than at 31 December
2021. The group maintained a strong and liquid balance sheet with
the ratio of customer advances to customer accounts decreasing
to 33.6% from 44.4% as at 31 December 2021 driven by
reclassification of French retail loans following the announcement
of the sale to assets held for sale as well as ongoing loan book
optimisation efforts.
Assets
Cash and balances at central banks increased by 21.2% as a result
of increased customer deposits and decreased balances in reverse
repos and advances to customers.
Trading assets and financial assets designated at fair value slightly
reduced due to a reduction in Prime business and GDM activities
on the basis of market conditions in 2022.
Derivative assets increased by 59.5% due to market movements in
interest rates and FX rates.
Non-trading reverse repos decreased by 0.9% primarily due to
changes in market conditions.
Financial investments decreased by 21.1% as a result of
optimisation strategy.
Liabilities
Customer accounts increased by 5.2%, which is consistent with
our funding strategy to grow customer deposits and increase
stable funding.
Total of trading liabilities and financial liabilities designated at fair
value balances has decreased by 14.4%.
Debt securities in issue decreased by 22.9% in line with the
funding strategy.
Non-trading repos increased by 20.7% as a result of market
activities.
Derivative liabilities increased by 57.0%. This is in line with
derivative assets as the underlying risk is broadly matched.
Equity
Total shareholder's equity remained broadly unchanged as
compared to 2021.

HSBC Bank plc Annual Report and Accounts 2022 | 21

Net interest margin

Net interest margin is calculated by dividing net interest income as
reported in the income statement by the average balance of
interest-earning assets. Average balances are based on daily
averages of the group’s activities.

Net interest income
| 2022 | 2021 | 2020
| £m | £m | £m
Interest income | 6,535 | 3,149 | 4,086
Interest expense | (4,631) | (1,395) | (2,188)
Net interest income | 1,904 | 1,754 | 1,898
Average interest-earning assets | 372,159 | 354,324 | 369,617
| % | % | %
Gross interest yield 1 | 1.53 | 0.51 | 0.74
Less: gross interest payable 1 | (1.23) | (0.01) | (0.27)
Net interest spread 2 | 0.30 | 0.50 | 0.47
Net interest margin 3 | 0.51 | 0.50 | 0.51

1 Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Gross interest payable is the average
annualised interest cost as a percentage of average interest-bearing liabilities.
2 Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and
the average annualised interest rate payable on average interest-bearing liabilities.
3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.

Summary of interest income by asset type
| 2022 | 2021 | 2020
| Average balance | Interest income | Yield 1 | Average balance | Interest income | Yield 1 | Average balance | Interest income | Yield 1
| £m | £m | % | £m | £m | % | £m | £m | %
Short term funds and loans and advances to banks | 144,826 | 1,115 | 0.77 | 119,025 | (221) | (0.19) | 90,841 | (113) | (0.12)
Loans and advances to customers | 91,882 | 2,177 | 2.37 | 99,151 | 1,585 | 1.60 | 116,518 | 2,058 | 1.77
Reverse repurchase agreements – non-trading | 56,144 | 1,099 | 1.96 | 57,630 | (132) | (0.23) | 68,573 | 22 | 0.03
Financial investments | 37,949 | 633 | 1.67 | 45,142 | 497 | 1.10 | 51,335 | 652 | 1.27
Other interest-earning assets | 41,358 | 686 | 1.66 | 33,376 | 67 | 0.20 | 42,350 | 118 | 0.28
Total interest-earning assets | 372,159 | 5,710 | 1.53 | 354,324 | 1,796 | 0.51 | 369,617 | 2,737 | 0.74

1 Interest yield calculations include negative interest on assets recognised as interest expense in the income statement.

Summary of interest expense by type of liability and equity
| 2022 | 2021 | 2020
| Average balance | Interest expense | Cost 1 | Average balance | Interest expense | Cost 1 | Average balance | Interest expense | Cost 1
| £m | £m | % | £m | £m | % | £m | £m | %
Deposits by banks | 31,930 | 55 | 0.17 | 32,891 | (186) | (0.57) | 28,812 | (60) | (0.21)
Customer accounts | 164,681 | 1,742 | 1.06 | 150,048 | 95 | 0.06 | 143,807 | 321 | 0.22
Repurchase agreements – non-trading | 31,898 | 680 | 2.13 | 32,916 | (192) | (0.58) | 38,829 | (129) | (0.33)
Debt securities in issue – non-trading | 29,385 | 589 | 2.00 | 38,727 | 258 | 0.67 | 52,781 | 546 | 1.03
Other interest-bearing liabilities | 50,301 | 739 | 1.47 | 36,811 | 68 | 0.18 | 47,384 | 160 | 0.34
Total interest-bearing liabilities | 308,195 | 3,805 | 1.23 | 291,393 | 43 | 0.01 | 311,613 | 838 | 0.27

1 Interest payable calculations include negative interest on liabilities recognised as interest income in the income statement.
Strategic Report | Financial summary

22 | HSBC Bank plc Annual Report and Accounts 2022

Reconciliation of alternative performance measures

Return on average ordinary shareholders’ equity
and return on average tangible equity
Return on average ordinary shareholders’ equity (‘RoE’) is
computed by taking profit attributable to the ordinary shareholders
of the parent company (‘reported results’), divided by average
ordinary shareholders’ equity (‘reported equity’) for the period. The
adjustment to reported results and reported equity excludes
amounts attributable to non-controlling interests and holders of
preference shares and other equity instruments.
Return on average tangible equity (‘RoTE’) is computed by
adjusting reported results for the movements in the present value
of in-force long-term insurance business (‘PVIF’) and for
impairment of goodwill and other intangible assets (net of tax),
divided by average reported equity adjusted for goodwill,
intangibles and PVIF for the period.
RoTE excluding significant items is annualised profit attributable to
ordinary shareholders, excluding changes in PVIF, significant
items and bank levy (net of tax), divided by average tangible
shareholders’ equity excluding fair value of own debt, DVA and
other adjustments for the period.
We provide RoTE ratio in addition to RoE as a way of assessing
our performance, which is closely aligned to our capital position.

Return on average ordinary shareholders’ equity and return on average tangible equity
| Year ended
| 31 Dec | 31 Dec | 31 Dec
| 2022 | 2021 | 2020
| £m | £m | £m
Profit |  |  |
Profit attributable to the ordinary shareholders of the parent company | (611) | 847 | (1,643)
Decrease/(increase) in PVIF (net of tax) | (105) | (149) | 59
Profit attributable to the ordinary shareholders, excluding other intangible assets impairment and PVIF | (716) | 698 | (1,584)
Significant items (net of tax) | 1,753 | 468 | 1,050
Profit attributable to the ordinary shareholders, excluding PVIF and significant items | 1,037 | 1,166 | (534)
Equity |  |  |
Average total shareholders’ equity | 23,550 | 23,629 | 24,457
Effect of average preference shares and other equity instruments | (3,888) | (3,722) | (3,722)
Average ordinary shareholders’ equity | 19,662 | 19,907 | 20,735
Effect of PVIF (net of tax) | (727) | (553) | (464)
Significant items and other adjustments (net of tax) | (240) | (92) | (733)
Average tangible equity excluding PVIF, significant items and other adjustments | 18,695 | 19,262 | 19,538
Ratio |  |  |
Return on average ordinary shareholders’ equity (annualised) | (3.1) | 4.3 | (7.9)
Return on average tangible equity (annualised) | (3.8) | 3.6 | (8.1)
Adjusted Return on average tangible equity (annualised) | 5.5 | 6.1 | (2.7)

HSBC Bank plc Annual Report and Accounts 2022 | 23

Risk overview

The group continuously identifies, assesses, manages and
monitors risks. This process, which is informed by its risk factors
and the results of its stress testing programme, gives rise to the
classification of certain financial and non-financial risks. Changes
in the assessment of these risks may result in adjustments to the
group’s business strategy and, potentially, its risk appetite.
Our banking risks include credit risk, treasury risk, market risk,
climate risk, resilience risk, regulatory compliance risk, financial
crime and fraud risk and model risk. We also incur insurance risk.
In addition to these banking risks, we have identified top and
emerging risks with the potential to have a material impact on our
financial results, our reputation and the sustainability of our long-
term business model.
The exposure to our risks and risk management of these are
explained in more detail in the Risk section of the Report of the
Directors on pages 26 to 93.
We have reviewed our list of top and emerging risks and changed
the title of 'Regulatory focus on conduct of business' risk to
'Evolving regulatory environment' risk to reflect the broad
regulatory agenda, including conduct. Credit risk has been added
to reflect the current economic environment.

Risk |  | Description
Externally driven
Geopolitical and macroeconomic risk | p | Our operations and portfolios are exposed to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. Heightened geopolitical tensions including the ongoing Russia-Ukraine war, alongside the economic impacts that continue to result from the Covid-19 pandemic, have also disrupted supply chains globally. These events and rising inflation in the European region have created a marked economic slowdown which will affect our customers and our business.
Credit risk | ● | We regularly undertake detailed reviews of our portfolios and proactively manage credit facilities to customers and sectors likely to come under stress as a result of current macroeconomic and geopolitical events including the Russia-Ukraine war and the recessionary pressures across Europe. Particular emphasis has been maintained on the Real Estate, Construction and Contracting, Retail and Leverage portfolios. We have increased the frequency and depth of our monitoring activities with stress tests and other sectoral reviews performed to identify portfolios or customers who are likely to experience financial difficulty through the slowdown in economic activity.
Cyber threat and unauthorised access to systems | u | We face a risk of service disruption from external and internal malicious activity. In response to the recent geopolitical events, we have further strengthened our monitoring approach. We operate a continuous improvement programme to protect our technology operations, and to counter a fast evolving cyber threat environment.
Evolving regulatory environment risk | u | The compliance risk environment remains complex, given heightened geopolitical tensions and consequent macroeconomic impacts. There remains increased regulatory focus on operational and cyber resilience, economic impacts (including on customers), crypto-asset-related risks and sanctions, and wider anti-money laundering controls. These, alongside an increased focus on how financial services organisations demonstrate active management of and compliance with regulatory obligations and wider expectations, may result in change requirements across the group in the short to medium term. We continue to monitor regulatory and wider industry developments closely and engage with regulators as appropriate.
Financial crime and fraud risk | p | We continue to support our customers against a backdrop of complex geopolitical, socio-economic and technological challenges, including the Russia-Ukraine war. We are monitoring the impacts of the Russia-Ukraine war on the group, and using our sanctions compliance capabilities to respond to evolving sanctions regulations, noting the challenges that arise in implementing the unprecedented volume and diverse set of sanctions and trade restrictions.
Ibor transition | q | We remain exposed to regulatory compliance, legal and resilience risks as contracts transition away from demising Ibor benchmarks to new reference rates. As a result, we continue to consider the fairness of client outcomes, our compliance with regulatory expectations and the operation of our systems and processes. The key risks are diminishing in line with our process implementation as we have transitioned all but a small number of contracts in demised Ibors, and are well progressed in transitioning contracts in remaining demising Ibors, specifically US dollar Libor.
Environmental, social and governance risk | p | We are subject to ESG risks relating to climate change, greenwashing, nature and human rights. This risk has increased owing to the pace and volume of regulatory developments globally and stakeholders placing more emphasis on financial institutions’ actions and investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in financial and non-financial risks for the group, including adverse reputational consequences.

Strategic Report | Risk overview

24 | HSBC Bank plc Annual Report and Accounts 2022

Risk |  | Description
Internally driven
People risk | p | We monitor workforce capacity and capability requirements in line with our published growth strategy, in conjunction with risks related to employment relations practices, culture, and conduct. People risk has heightened in 2022 compared to 2021, mainly resulting from the many transformation and restructuring activities concomitantly happening in the region. The main risk drivers the region is exposed to are capacity and capability risks associated with talent attraction and retention, coupled with the effects of the current geopolitical tensions on our employees and markets' economies. Strong oversight continues to be maintained over people risks arising from change activity. Measures are being rolled out to support our people while transitioning to new business models as well as with challenges resulting from the current heightened inflationary pressures.
IT systems infrastructure and operational resilience | p | We continue to monitor and improve our IT systems and network resilience, both on our premises and on the Cloud to minimise service disruption and improve customer experience. To support the business strategy, we strengthened our end to end management, build and deployment controls and system monitoring capabilities. We are seeing increased demand on customer support centres and our business operations as a result of the current economic environment and there is additional focus on our operational resilience. We continue to seek to reduce the complexity of our technology estate and consolidate our core banking systems onto a single strategic platform.
Execution risk | p | Failure to effectively prioritise, manage and/or deliver transformation within the group impacts our ability to achieve our strategic objectives. Given the scale, complexity and pace of strategic change within the group, we must monitor, manage and oversee change execution risk to make sure our change portfolio and initiatives continue to deliver the right outcomes for our customers, people, regulators, investors and communities.
Model risk | u | Evolving regulatory requirements are driving material changes to the way model risk is managed across the banking industry, with particular focus on capital models. New technologies such as machine learning are driving changes to the model landscape, and the group’s strategic focus on climate risk requires the development of new methods that will effectively model climate- related factors and activities. A key area of focus is ensuring our standards, processes and controls are adequate to identify, measure and manage the resulting model risks. New Bank of England guidance on model risk management will require greater focus on the management of model risks across the bank.
Data risk | p | We use data to serve our customers and run our operations, often in real-time within digital experiences and processes. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could be impacted. We need to ensure that data is kept confidential, and that we comply with the growing number of laws and increasing expectations from regulators concerning data privacy controls and the cross-border movement of data.
Third party risk | u | We procure services and goods from a range of third parties. It is critical that we have appropriate risk management policies and processes over the selection and governance of third parties. This includes third parties’ supply networks, particularly for key activities that could affect our operational resilience. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations.

● | New risk introduced in 2022
p | Risk has heightened during 2022
u | Risk remains at the same level as 2021
q | Risk has decreased during 2022

On behalf of the Board
David Watts
Director
20 February 2023
Registered number 00014259

HSBC Bank plc Annual Report and Accounts 2022 | 25

Risk |
| Page
Our approach to risk | 26
Our risk appetite | 26
Risk management | 27
Key developments and risk profile | 27
Top and emerging risks | 28
Externally driven | 28
Internally driven | 32
Our material banking and insurance risks | 34
Credit risk | 36
Treasury risk | 75
Market risk | 84
Climate risk | 86
Resilience risk | 87
Regulatory compliance risk | 87
Financial crime risk | 88
Model risk | 89
Insurance manufacturing operations risk Overview | 90

.

Our approach to risk

Our risk appetite
We recognise the importance of a strong risk culture, which refers
to our shared attitudes, values and standards that shape
behaviours related to risk awareness, risk taking and risk
management. All our people are responsible for the management
of risk, with the ultimate accountability residing with the Board.
We seek to build our business for the long term by balancing
social, environmental and economic considerations in the
decisions we make. Our strategic priorities are underpinned by our
endeavour to operate in a sustainable way. This helps us to carry
out our social responsibility and manage the risk profile of the
business. We are committed to managing and mitigating climate-
related risks, both physical and transition, and continue to
incorporate consideration of these into how we manage and
oversee risks internally and with our customers.
The following principles guide the group’s overarching appetite for
risk and determine how our businesses and risks are managed.
Financial position
•Strong capital position, defined by regulatory and internal
ratios.
•Liquidity and funding management for each entity on a stand-
alone basis.
Operating model
•Ambition to generate returns in line with our risk appetite and
strong risk management capability.
•Ambition to deliver sustainable earnings and appropriate
returns for shareholders.
Business practice
•Zero tolerance for knowingly engaging in any business, activity
or association where foreseeable reputational risk or damage
has not been considered and/or mitigated.
•No appetite for deliberately or knowingly causing detriment to
consumers arising from our products and services or incurring
a breach of the letter or spirit of regulatory requirements.
•No appetite for inappropriate market conduct by a member of
staff or by any group business.
Enterprise-wide application
Our risk appetite encapsulates the consideration of financial and
non-financial risks. We define financial risk as the risk of a
financial loss as a result of business activities. We actively take
these types of risks to maximise shareholder value and profits.
Non-financial risk is defined as the risk to achieving our strategy or
objectives as a result of inadequate or failed internal processes,
people and systems, or from external events.
Our Risk Management Framework
An established risk governance framework and ownership
structure ensures oversight of, and accountability for, the effective
management of risk within the group. HSBC's Risk Management
Framework ('RMF') fosters the continuous monitoring of the risk
environment and an integrated evaluation of risks and their
interactions. Integral to the RMF are risk appetite, stress testing
and the identification of emerging risks.
Our Risk Committee focuses on risk governance and ensures a
forward-looking view of risks and their mitigation. The Risk
Committee is a committee of the Board and has responsibility for
oversight and advice to the Board on, amongst other things, the
bank’s risk appetite, tolerance and strategy, systems of risk
management, internal control and compliance. Additionally,
members of the Risk Committee attend meetings of the bank’s
Nomination, Remuneration and Governance Committee at which
the alignment of the reward structures to risk appetite is
considered.
In carrying out its responsibilities, the Risk Committee is closely
supported by the Chief Risk Officer, the Chief Financial Officer, the
Head of Internal Audit and the Head of Compliance, together with
other business functions on risks within their respective areas of
responsibility.
Responsibility for managing both financial and non-financial risk
lies with our people. They are required to manage the risks of the
business and operational activities for which they are responsible.
We maintain oversight of our risks through our various specialist
Risk Stewards, as well as the accountability held by the Chief Risk
Officer.
Non-financial risk includes some of the most material risks HSBC
faces, such as cyber-attacks, poor customer outcomes and loss of
data and the current geopolitical risks. Actively managing non-
financial risks is crucial to serving our customers effectively and
having a positive impact on society. During 2022 we continued to
strengthen the control environment and our approach to the
management of non-financial risks, as is broadly set out in our
Risk Management Framework. The management of non-financial
risk focuses on governance and risk appetite, providing a single
view of the non-financial risks that matter most, and associated
controls. It incorporates a risk management system designed to
enable the active management of non-financial risk. Our ongoing
focus is on simplifying our approach to non-financial risk
management, while driving more effective oversight and better
end-to-end identification and management of non-financial risks.
This is overseen by the Operational and Resilience Risk function,
headed by the group Head of Operational and Resilience Risk.
Three lines of defence
All our people are responsible for identifying and managing risk
within the scope of their roles. Roles are defined using the three
lines of defence model, which takes into account our business and
functional structures.
To create a robust control environment to manage risks, we use
an activity-based three lines of defence model, whereby the
activity a member of staff undertakes drives which line they reside
within. This model delineates management accountabilities and
responsibilities for risk management and the control environment.
The model underpins our approach to risk management by
clarifying responsibility, encouraging collaboration and enabling
efficient coordination of risk and control activities. The three lines
are summarised below:
•The first line of defence owns the risks and is responsible
for identifying, recording, reporting and managing them in line
with risk appetite, and ensuring that the right controls and
assessments are in place to mitigate them.
•The second line of defence challenges the first line of defence
on effective risk management, and provides advice and
guidance in relation to the risk.
Report of the Directors | Risk

26 | HSBC Bank plc Annual Report and Accounts 2022

•The third line of defence is our Internal Audit function, which
provides independent assurance that the group’s risk
management approach and processes are designed and
operating effectively.
Risk appetite
We formally articulate our risk appetite through our risk appetite
statement ('RAS'), which is approved by the Board on the
recommendation of the Risk Committee. Setting out our risk
appetite ensures that planned business activities provide an
appropriate balance of return for the risk we are taking, and that
we agree a suitable level of risk for our strategy. In this way, risk
appetite informs our financial planning process and helps senior
management to allocate capital to business activities, services and
products.
The RAS consists of qualitative statements and quantitative
metrics, covering financial and non-financial risks. It is
fundamental to the development of business line strategies,
strategic and business planning and senior management balanced
scorecards. Performance against the RAS is reported to the Risk
Management Meeting ('RMM') so that any actual performance
that falls outside the approved risk appetite is discussed and
appropriate mitigating actions are determined. This reporting
allows risks to be promptly identified and mitigated, and informs
risk-adjusted remuneration to drive a strong risk culture.
.

Risk management

Stress testing
Stress testing is an important tool that is used by banks, as part of
their internal risk management, and regulators to assess
vulnerabilities in individual banks and/or the financial banking
sector under hypothetical adverse scenarios. The results of stress
testing are used to assess banks’ resilience to a range of adverse
shocks and to assess their capital adequacy.
HSBC Bank plc is subject to regulatory stress testing in several
jurisdictions. These requirements are increasing in frequency and
granularity. They include the programmes of the BoE, Prudential
Regulation Authority (‘PRA’) and the European Banking Authority
(‘EBA’). Assessment by regulators is on both a quantitative and
qualitative basis, the latter focusing on our portfolio quality, data
provision, stress testing capability and capital planning processes.
A number of internal macroeconomic and event-driven scenarios
specific to the European region were considered and reported to
senior management during the course of the year. The selection of
stress scenarios is based upon the output of our top and emerging
risks identified and our risk appetite. The results help the Board
and senior management to set our risk appetite and confirm the
strength of our strategic and financial plans. Our risk appetite is
set at a level that enables the group to withstand future stress
impacts.
The macroeconomic internal stress tests, conducted throughout
2022, considered combinations of various potential impacts as
identified in our top and emerging risks, in particular the impact of
the Russia-Ukraine war, geopolitical tensions and trade wars, and
operational risk.
In Q4 2022, the Group participated in the BoE Annual Cyclical
Scenario ('ACS') stress testing exercise. The ACS focused on
higher global interest rates in the face of a series of global cost
shocks and high and persistent global inflation. Unemployment,
also increased sharply. The impact of traded risk shocks was
included, linked to a financial market scenario consistent with the
content and calibration of the macroeconomic scenario.
This stress scenario was more severe than the Global Financial
Crisis for both the UK and the world.
The scenario reflected the impact of weaker household real
income growth, lower confidence and tighter financial conditions
resulting in severe domestic and global recessions.
The BoE will publish the results in summer 2023.
In response to regulatory requirements and internal drivers,
separately to the stress tests already mentioned, we are
developing our capabilities to model the impact of climate risk on
our bank, specifically physical and transition risk.
In 2022, we have considered four bespoke scenarios that were
designed to articulate our view of the range of potential outcomes
for global climate change. In our climate scenario analysis, we
consider, separately: transition risk arising from the process of
moving to a net zero economy, including changes in policy,
technology, consumer behaviour and stakeholder perception,
which will each impact borrowers’ operating income, financing
requirements and asset values; and physical risk arising from the
increased frequency and severity of weather events, such as
hurricanes and floods, or chronic shifts in weather patterns, which
will each impact property values, repair costs and lead to business
interruptions.
These scenarios, which reflect different levels of physical and
transition risk and are varied by severity and probability, were: the
Net Zero scenario, which aligns with the Group net zero strategy
and is consistent with the Paris Agreement; the Current
Commitments scenario, which assumes that climate action is
limited to the current governmental commitments and pledges;
the Downside Transition Risk scenario, which assumes that
climate action is delayed until 2030; and the Downside Physical
Risk scenario, which assumes climate action is limited to current
governmental policies.
We consider our Current Commitments scenario as the most likely
scenario to transpire over the next five years. Under the Current
Commitments scenario, we expect moderate levels of losses
relating to transition risks. However, the rise in global warming will
lead to increasing levels of physical risk losses in later years.
Based on this scenario the potential impact on expected credit
losses is not considered material over the next five years, as the
impacts of climate risk will emerge later in the following decades.

Key developments and risk profile

Key developments in 2022
We actively managed the risks related to the Russia-Ukraine war
and broader macroeconomic and geopolitical uncertainties, as
well as other key risks described in this section.
In addition, we enhanced our risk management in the following
areas:
•We have continued to improve our risk governance decision
making, particularly with regard to the governance of treasury
risk to ensure senior executives have appropriate oversight and
visibility of macroeconomic trends around inflation and interest
rates.
•We enhanced our enterprise risk reporting processes to place a
greater focus on our emerging risks, including by capturing the
materiality, oversight and individual monitoring of these risks.
•We have further strengthened our third-party risk policy and
processes to improve control and oversight of our material third
parties that are key to maintaining our operational resilience,
and to meet new and evolving regulatory requirements.
•We have continued to embed, the governance and oversight
around model adjustments, related processes for IFRS 9
models and financial reporting processes.
•Through our climate risk programme we have continued to
embed climate considerations throughout the firm, including
updating the scope of our programme to cover all risk types,
expanding the scope of climate related training and developing
new climate risk metrics to monitor and manage exposures.
•We continued to improve the effectiveness of our financial
crime controls, deploying advanced analytics capabilities into
our markets. We are refreshing our financial crime policies,
ensuring they remain up-to-date and address changing and
emerging risks. We continue to monitor regulatory changes.

HSBC Bank plc Annual Report and Accounts 2022 | 27

Top and emerging risks

We use a top and emerging risks process to provide a forward-
looking view of issues with the potential to threaten the execution
of our strategy or operations over the medium to long term.
We proactively assess the internal and external risk environment,
as well as review the themes identified across the European region
and the group's businesses, for any risks that may require
escalation. We update our top and emerging risks as necessary.
Our current top and emerging risks are as follows.
Externally driven
Geopolitical and macroeconomic risk
The Russia-Ukraine war has had far-reaching geopolitical and
economic implications. The group is monitoring the impacts of the
war and continues to respond to the further economic sanctions
and trade restrictions that have been imposed on Russia in
response. In particular, significant sanctions and trade restrictions
against Russia have been put in place by the US, the UK and the
EU, as well as other countries. Such sanctions and restrictions
have specifically targeted certain Russian government officials,
politically exposed persons, business people, Russian oil imports,
energy products, financial institutions and other major Russian
companies, as well as more generally applicable investment,
export, and import bans and restrictions. In response to such
sanctions and trade restrictions, as well as asset flight, Russia has
implemented certain countermeasures. Further sanctions, trade
restrictions and Russian counter sanctions may adversely affect
the group, its customers and the markets in which we operate by
creating regulatory, reputational and market risks.
Our business in Russia principally serves multinational corporate
clients headquartered in other countries, is not accepting new
business or customers, and is consequently on a declining trend.
Following a strategic review, HSBC Europe BV (a wholly-owned
subsidiary of HSBC Bank plc) has entered into an agreement to
sell its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability
Company), subject to regulatory and governmental approvals.
Global commodity markets have been significantly impacted by
the Russia-Ukraine war and localised Covid-19 outbreaks, leading
to continued supply chain disruptions. This has resulted in
European product shortages and increased prices for both energy
and non-energy commodities, such as food. Despite falls in
wholesale energy prices in late 2022 and early 2023, which may
provide relief, ongoing pass-through of input price rises means we
do not expect underlying inflationary pressures to ease
significantly in the near term. These issues have exacerbated
inflation across the region. Prolonged spells of relatively mild
seasonal weather, and diversification of fuel services have
nevertheless helped Europe to substantially reduce risks of energy
rationing over the winter months.
Rising global inflation has prompted the ECB to tighten monetary
policy. The combined pressure of inflation and interest rate rises
may lead to pressures on customers and their ability to repay debt.
The ECB has increased its benchmark rate by 300bps since July
2022. Further interest rate increases by the ECB are anticipated in
light of inflation forecasts. Investors appear less willing to tolerate
expansionary fiscal policies in the context of high debt ratios. An
economic slowdown, possibly a recession in parts of the EU and
the UK, could slow the pace of tightening in our major markets.
However, should interest rates need to rise beyond what is
currently expected, a realignment of market expectations could
cause turbulence in financial asset prices.
Second order impacts from the Russia-Ukraine war and other
geopolitical events remain uncertain and may lead to significant
credit losses on specific exposures, which may not be fully
captured in our ECL estimates. Higher inflationary concerns and
interest rate expectations across the region are also having an
impact on ECL. In line with existing practice we have continued to
carry out enhanced monitoring of model outputs and the use of
model overlays, including management adjustments based on the
expert judgement of senior credit risk managers to reflect current
market inflation and interest rate conditions where they have not
been incorporated in the underlying macroeconomic scenarios.
Inflation and rising interest rates have been considered both
directly in certain models, and assessed via adjustments where
not directly considered.
Whilst many of the government programmes implemented during
the Covid-19 pandemic to support businesses and individuals have
ceased, these have impacted the level of credit losses, which in
turn may have impacted the longer-term reliability of loss and
capital models.
Negotiations between the UK and the EU over the operation of the
Northern Ireland Protocol are continuing. While there are signs
that differences may be diminishing, failure to reach agreement
could have implications for the future operation of the EU-UK TCA.
In June 2022, the UK government published proposed legislation
that seeks to amend the Protocol in a number of respects. In
response, the EU launched infringement procedures against the
UK, and is evaluating the UK response, received in September
2022. If the proposed legislation were to pass, and infringement
procedures progressed, it could further complicate the terms of
trade between the UK and the EU and potentially prevent progress
in other areas such as financial services. We are monitoring the
situation closely, including the potential impacts on our
customers.
Our business could also be adversely affected by economic or
political developments in regions of the world outside Europe. This
reflects our extensive business links, through members of the
Group and other entities, in Asia and elsewhere. Tensions between
China and the US, extending to the UK, the EU, India and other
countries, and political developments in Hong Kong and Taiwan,
may adversely affect the group.
The US, the UK, the EU and other countries have imposed various
sanctions and trade restrictions on China. In response to foreign
sanctions and trade restrictions, China has also announced
sanctions, trade restrictions and laws that could impact the group
and its customers.
High Covid-19 vaccination rates and acquired population immunity
in 2022 across the European region have reduced the public health
risks and the need for restrictions. New Covid-19 variants and sub-
variants pose a continuing risk and could result in the European
governments reintroducing restrictions, potentially impacting our
personal and business customers.
Our Central macroeconomic scenario, which has the highest
probability weighting in our IFRS 9 ‘Financial Instruments’
calculations of ECL, assumes low growth and a higher inflation
environment. However, due to the rapidly changing economic
conditions, the potential for forecast dispersion and volatility
remain high, impacting the degree of accuracy and certainty of our
Central scenario forecast. The level of volatility depends on various
factors, including but not limited to: commodity price increases,
supply chain constraints and the monetary policy response to
inflation. There is also uncertainty with respect to the relationship
between the economic drivers and the historical loss experience,
which has required adjustments to modelled ECLs in cases where
we determined that the model was unable to capture the material
underlying risks. For further details of our Central and other
scenarios, see ‘Measurement uncertainty and sensitivity analysis
of ECL estimates’ on page 48.
Mitigating actions
•We closely monitor geopolitical and economic developments
including the impacts of the Russia-Ukraine war and undertake
scenario analysis and stress testing where appropriate. This
helps us to take portfolio actions where necessary, including
seeking to ensure enhanced monitoring and amending our risk
appetite.
•We continue to monitor the EU’s relationship with the UK, and
assess the potential impact on our people, operations and
portfolios.
•We continue to monitor our risk profile closely in the context of
the current geopolitical and macroeconomic situation, and
given the significant uncertainties, additional mitigating actions
may be required.
Report of the Directors | Risk

28 | HSBC Bank plc Annual Report and Accounts 2022

Credit risk
Credit risk has increased driven chiefly by the impacts and
uncertainty caused by the current geopolitical and macroeconomic
environment. Economic prospects and therefore the outlook for
credit risk across our key markets will be driven by a number of
factors including how inflationary pressures are managed across
the EU and the UK, and whether a global recession develops,
exacerbated by the ongoing Russia-Ukraine war.
Mitigating actions
•Reviews of key credit portfolios are undertaken regularly to
seek to ensure that individual customer or portfolio risks are
understood and our management of the level of facilities
offered through the economic downturn is appropriate.
•We continue to monitor high risk wholesale industry sectors
closely and in 2022 we undertook specific reviews of portfolios
showing vulnerability such as Real Estate, Retail, Construction
and Contracting and Wholesale Trade.
•Detailed performance monitoring is reviewed on a monthly
basis, which includes early warning indicators and a view of
concentration risks. Portfolio limits and exposures are re-
assessed and reductions implemented where appropriate.
•We stress test portfolios of particular concern to identify
sensitivity to loss under a range of scenarios, with management
actions being taken to seek to rebalance exposures and to
manage risk appetite where necessary.
Cyber threat and unauthorised access to systems
Together with other organisations, we continue to operate in an
increasingly hostile cyber threat environment. These threats
include potential unauthorised access to customer accounts,
attacks on our systems or those of our third-party suppliers and
require ongoing investment in business and technical controls to
defend against them.
Mitigating actions
•We continuously evaluate threat levels for the most prevalent
cyber-attack types and their potential outcomes. To further
protect the group and our customers and help ensure the safe
expansion of our business lines, we continue to strengthen our
controls to reduce the likelihood and impact of advanced
malware, data leakage, exposure through third parties and
security vulnerabilities.
•We seek to enhance our cybersecurity capabilities, including
Cloud security, identity and access management, metrics and
data analytics, and third-party security reviews. An important
part of our defence strategy is ensuring our colleagues remain
aware of cybersecurity issues and know how to report
incidents.
•We report and review cyber risk and control effectiveness at
executive and non-executive Board level. We also report it
across our businesses and functions to help ensure appropriate
visibility and governance of the risk and its mitigating actions.
•We participate globally in industry bodies and working groups
to collaborate on tactics employed by cyber-crime groups and
to collaborate in defending, detecting and preventing cyber-
attacks on financial organisations.
Evolving regulatory environment risk
We aim to keep abreast of the emerging regulatory compliance
and conduct agenda, which currently includes, but is not limited
to: ESG matters; ensuring good customer outcomes; addressing
customer vulnerabilities due to cost of living pressures; regulatory
compliance; regulatory reporting; employee compliance, including
use of e-communication channels; and the proposed reforms to
the UK financial services sector, known as the Edinburgh Reforms.
We monitor regulatory developments closely and engage with
regulators, as appropriate, to help ensure new regulatory
requirements are implemented effectively and in a timely way.
The competitive landscape in which the group operates may be
impacted by future regulatory changes and government
intervention.
Mitigating actions
•We monitor for regulatory developments to understand the
evolving regulatory landscape and seek to respond with
changes in a timely way.
•We continue to support work that is focussed on the
implementation of UK Consumer Duty requirements.
•We engage with governments and regulators to make a
contribution to regulations and to try and ensure that new
requirements are considered properly and can be implemented
effectively. We hold regular meetings with relevant authorities
to discuss strategic contingency plans, including those arising
from geopolitical issues.
•Our simplified conduct approach has been embedded to align
to our purpose and values, in particular the value ‘we take
responsibility’.
Financial crime and fraud risk
Financial institutions remain under considerable regulatory
scrutiny regarding their ability to detect and prevent financial
crime, which continues to evolve. Challenges include managing
conflicting laws and approaches to legal and regulatory regimes,
and implementing the unprecedented volume and diverse set of
sanctions, notably as a result of the Russia-Ukraine war.
Amid rising inflation and increasing cost of living pressures, we
face increasing regulatory expectations with respect to increases
in internal and external fraud and the abuse of vulnerable
customers for financial crime.
The digitisation of financial services continues to have an impact
on the payments ecosystem, with an increasing number of market
entrants and payment mechanisms, not all of which are subject to
the same level of regulatory scrutiny or regulations as financial
institutions. This presents ongoing challenges in terms of
maintaining required levels of payment transparency, notably
where financial institutions serve as intermediaries. Developments
around digital assets and currencies have continued at pace, with
an increasing regulatory and enforcement focus on the financial
crimes linked to these types of assets.
Expectations with respect to the intersection of ESG issues and
financial crime as our organisation, customers and suppliers
transition to net zero, continue to increase, focussed on potential
‘greenwashing,’ human rights issues and environmental crimes.
We also continue to face increasing challenges presented by
national data privacy requirements, which may affect our ability to
manage financial crime risks holistically and effectively.
Mitigating actions
•We continue to manage sanctions and trade restrictions
through the use of, and enhancements to, our existing controls.
•We continue to develop our fraud controls, and invest in
capabilities to fight financial crime through the application of
advanced analytics and artificial intelligence.
•We are looking at the impact of a rapidly changing payments
ecosystem, as well as risks associated with direct and indirect
exposure to digital assets and currencies, in an effort to ensure
our financial crime controls remain appropriate.
•We are assessing our existing policies and control framework
so that developments relating to the ESG space are considered
and the risks mitigated.
•We engage with regulators, policymakers and relevant
international bodies, seeking to address data privacy
challenges through international standards, guidance and
legislation.

HSBC Bank plc Annual Report and Accounts 2022 | 29

Ibor transition
Interbank offered rates (‘Ibors’) have previously been used
extensively to set interest rates on different types of financial
transactions and for valuation purposes, risk measurement and
performance benchmarking.
Following the UK’s Financial Conduct Authority (‘FCA’)
announcement in July 2017 that it would no longer continue to
persuade or require panel banks to submit rates for the London
interbank offered rate (‘Libor’) after 2021, we have been actively
working to transition legacy contracts from Ibors to products
linked to near risk-free replacement rates (‘RFRs’) or alternative
reference rates.
The publication of sterling, Swiss franc, euro and Japanese yen
Libor interest rate benchmarks, as well as Euro Overnight Index
Average (‘Eonia’), ceased from the end of 2021. The group’s Ibor
transition programme, which is tasked with the development of
RFR products and the transition of legacy Ibor products, has
continued to support the transition of a limited number of
remaining contracts in sterling and Japanese yen Libor, which
were published using a ‘synthetic’ interest rate methodology
during 2022. The remaining ‘tough legacy’ sterling contracts have
required protracted client discussions where contracts are
complex or restructuring of facilities is required. Following the
cessation of publication of ‘synthetic’ Japanese yen Libor after
31 December 2022, and the announcements by the FCA, in
September and November 2022, that ‘synthetic’ sterling Libor
rates will cease to be published on 31 March 2023 for one and six-
month sterling Libor, or 31 March 2024 for three-month sterling
Libor, we have or are prepared to transition or remediate the
remaining few contracts outstanding as at 31 December 2022 in
advance of those cessation dates.
For the cessation of the publication of US dollar Libor from
30 June 2023, we have implemented the majority of required
processes, technology and RFR product capabilities throughout
the group in preparation for upcoming market events and continue
to transition outstanding legacy contracts through the first half of
2023. We continue to make steady progress with the transition of
the outstanding legacy committed lending facilities. Transition of
our derivatives portfolio is progressing well with most clients
reliant on industry mechanisms to transition to RFRs. For the
limited number of bilateral derivatives trades where an alternative
transition path is required client engagement is continuing. For
certain products and contracts, including bonds and syndicated
loans, we remain reliant on the continued support of agents and
third parties, but we continue to progress those contracts
requiring transition. We continue to monitor contracts that may be
potentially more challenging to transition and may need to rely
upon legislative solutions. Additionally, following the FCA’s
consultation in November 2022 proposing that US dollar Libor is
to be published using a ‘synthetic’ methodology for a defined
period, we will continue to work with our clients to support them
through the transition of their products if transition is not
completed by 30 June 2023.
We remain mindful of the various factors that have an impact on
the Ibor remediation strategy for our regulatory capital
instruments, including, but not limited to, timescales for cessation
of relevant Ibor rates.
We remain committed in seeking to remediate or mitigate relevant
risks relating to Ibor-demise, as appropriate, on our outstanding
regulatory capital instruments before the relevant calculation
dates, which may occur post-cessation of the relevant Ibor rate or
rates.
For US dollar Libor and other demising Ibors, we continue to be
exposed to, and actively monitor, risks including:
•Regulatory compliance and conduct risks, as the transition of
legacy contracts to RFRs or alternative rates, or sales of
products referencing RFRs, may not deliver fair client
outcomes;
•Resilience and operational risks, as changes to manual and
automated processes, made in support of new RFR
methodologies, and the transition of large volumes of Ibor
contracts may lead to operational issues;
•Legal risk, as issues arising from the use of legislative solutions
and from legacy contracts that the group is unable to transition
may result in unintended or unfavourable outcomes for clients
and market participants, which could potentially increase the
risk of disputes;
•Model risk, as there is a risk that changes to our models, to
replace Ibor-related data, adversely affect the accuracy of
model outputs; and
•Market risk, because as a result of differences in Libor and RFR
interest rates, we are exposed to basis risk resulting from the
asymmetric adoption of rates across assets, liabilities and
products.
While the level of risk is diminishing in line with our process
implementation and continued transition of contracts, we will
continue to monitor these risks through the remainder of the
transition of legacy contracts. Throughout 2023, we continue to be
committed to engaging with our clients and investors to seek to
complete an orderly transition of contracts that reference the
remaining demising Ibors.
Mitigating actions
•The group Ibor transition programme, which is overseen by the
group Chief Risk Officer, will continue to deliver IT and
operational processes to meet its objectives.
•We carry out extensive training, communication and client
engagement to facilitate appropriate selection of new rates and
products.
•We have dedicated teams in place to support the transition.
•We have actively transitioned legacy contracts and ceased
entering into new contracts based on demised or demising
Ibors, other than those allowed under regulatory exemptions,
and implemented associated monitoring and controls.
•We assess, monitor and dynamically manage risks arising from
Ibor transition, and implement specific mitigating controls
when required.
•We continue to actively engage with regulatory and industry
bodies to mitigate risks relating to ‘tough legacy’ contracts.
Report of the Directors | Risk

30 | HSBC Bank plc Annual Report and Accounts 2022

Financial instruments impacted by Ibor reforms
Interest Rate Benchmark Reform Phase 2, the amendments to
IFRS's issued in August 2020, represents the second phase of the
IASB’s project on the effects of interest rate benchmark reform.
The amendments address issues affecting financial statements
when changes are made to contractual cash flows and hedging
relationships.
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.
(Audited)

| Financial instruments yet to transition to alternative benchmarks, by main benchmark 3
| USD Libor | GBP Libor | Others 1
At 31 Dec 2022 | £m | £m | £m
Non-derivative financial assets 2 |  |  |
Loans and advances to customers | 4,350 | 83 | 18
Financial investments | 1,072 | — | —
Others | 554 | 35 | —
Total non-derivative financial assets | 5,976 | 118 | 18
Non-derivative financial liabilities |  |  |
Subordinated liabilities | 1,287 | — | —
Others | 560 | — | —
Total non-derivative financial liabilities | 1,847 | — | —
Derivative notional contract amount |  |  |
Foreign exchange | 6,754 | — | —
Interest rate | 1,636,679 | 56 | 2,031
Others | — | — | 487
Total derivative notional contract amount | 1,643,433 | 56 | 2,518

At 31 Dec 2021 |  |  |
Non-derivative financial assets 2 |  |  |
Loans and advances to customers | 5,999 | 2,562 | 26
Financial investments | 1,171 | 140 | —
Others | 693 | 499 | —
Total non-derivative financial assets | 7,863 | 3,201 | 26
Non-derivative financial liabilities 2 |  |  | 0
Subordinated liabilities | 1,145 | — | —
Others | 479 | 181 | —
Total non-derivative financial liabilities | 1,624 | 181 | —
Derivative notional contract amount |  |  | 0
Foreign exchange | 8,288 | 1,568 | 1,080
Interest rate | 1,567,577 | 215,377 | 77,738
Total derivative notional contract amount | 1,575,865 | 216,945 | 78,818

1 Comprises financial instruments referencing other significant benchmark rates yet to transition to alternative benchmarks (euro Libor, Swiss franc
Libor, Eonia, SOR, THBFIX, MIFOR and Sibor). Announcements were made by regulators during 2022 on the cessation of the Canadian dollar
offered rate (‘CDOR’), and Mexican Interbank equilibrium interest rate (‘TIIE’), which will eventually transition to the Canadian overnight repo rate
average (‘CORRA’), and a new Mexican overnight fall-back rate, respectively. Therefore, CDOR, and TIIE are also included in Others during the
current period.
2 Gross carrying amount excluding allowances for expected credit losses.
The amounts in the above table relate to the group's main
operating entities where we have material exposures impacted by
Ibor reform, including in the United Kingdom, France and
Germany. The amounts provide an indication of the extent of the
group’s exposure to the Ibor benchmarks that are due to be
replaced. Amounts are in respect of financial instruments that:
•contractually reference an interest rate benchmark that is
planned to transition to an alternative benchmark;
•have a contractual maturity date beyond the date by which the
reference interest rate benchmark is expected to cease; and
•are recognised on the group’s consolidated balanc e sheet.
Environmental, social and governance ('ESG') risk
We are subject to financial and non-financial risks associated with
ESG related matters. Our current areas of focus are climate risk,
nature-related risks and human rights risks. These can impact us
both directly and indirectly through our business activities and
relationships.
Focus on climate-related risk in particular increased over 2022,
owing to the importance, pace and volume of policy development
and regulatory changes on climate risk management, stress
testing and scenario analysis and disclosures. Climate change can
have an impact across HSBC’s risk taxonomy through both
transition risk, arising from the move to a low-carbon economy,
such as through policy, regulatory and technological changes, and
physical risk impacts due to increasing severity and/or frequency
of severe weather or other climatic events, such as rising sea
levels and flooding, which could affect our ability to conduct our
day-to-day operations.
Our most material risks in terms of managing climate risk relate to
corporate financing within our banking portfolio. We continue to
explore and test methodologies for quantifying how climate risks
could impact the individual credit profiles of our clients across
various sectors.
Our credit risk policy further embeds climate risk considerations
into our corporate credit decisions. We are also developing and
rolling out a climate risk assessment, also known as the client
Transition Engagement Questionnaire, to corporate clients to help
determine the level of transition risk exposure which may affect
our credit decisioning and helping to ensure that the transition
plans are consistent with HSBC Group’s targets and
commitments.

HSBC Bank plc Annual Report and Accounts 2022 | 31

We also delivered training to select colleagues in the Risk function
to raise awareness of how climate risk is likely to impact certain
high transition risk sectors and the associated credit risk
considerations.
In addition to financial risks arising in our corporate banking
portfolio, we could also face increased reputational, legal and
regulatory risks as we make progress towards the HSBC Group's
net zero ambition, with stakeholders likely to place greater focus
on our actions, such as the development of climate-related
policies, the HSBC Group’s and our disclosures and financing and
investment decisions relating to the HSBC Group’s ambition.
We will face additional risks if we are perceived to mislead
stakeholders regarding our climate strategy, the climate impact of
a product or service, or regarding the commitments of our
customers. Climate risk may also impact on model risk, as the
uncertain impacts of climate change and data and methodology
limitations present challenges to creating reliable and accurate
model outputs.
We face reporting risk in relation to our climate disclosures, as any
data, methodologies and standards we have used may evolve over
time in line with market practice, regulation or owing to
developments in climate science. While emissions reporting has
improved over time, data remains of limited quality and
consistency. The use of inconsistent or incomplete data and
models could result in suboptimal decision making. Any changes
could result in revisions to our internal frameworks and reported
data, and could mean that reported figures are not reconcilable or
comparable year on year. We may also have to re-evaluate our
progress towards the HSBC Group’s climate-related targets in
future and this could result in reputational, legal and regulatory
risks.
There is increasing evidence that a number of nature-related risks
beyond climate change, which include risks that can be
represented more broadly by impact and dependence on nature,
can and will have significant economic impact. These risks arise
when the provision of natural services, such as water availability,
air quality, and soil quality, is compromised by overpopulation,
urban development, natural habitat and ecosystem loss,
ecosystem degradation arising from economic activity and other
environmental stresses beyond climate change. They can show
themselves in various ways, including through macroeconomic,
market, credit, reputational, legal and regulatory risks, for both
HSBC and our customers. We continue to engage with investors,
regulators and customers on nature-related risks to evolve our
approach and understand best practice risk mitigation.
Regulation and disclosure requirements in relation to human
rights, and to modern slavery in particular, are increasing.
Businesses are expected to be transparent about their efforts to
identify and respond to the risk of negative human rights impacts
arising from their business activities and relationships.
Mitigating actions
•Our product design, management and governance processes
have been adapted to help ensure that climate risk factors are
effectively and consistently considered. We also aim to
enhance our approach to greenwashing risk management.
•We have established a climate risk appetite which helps
support the oversight and management of the risks from
climate change and supports the business on helping to deliver
the HSBC Group’s climate ambition in a safe and sustainable
way. The metrics implemented include exposure to high risk
transition sectors in our wholesale portfolio. We continue to
review our risk appetite to try and ensure that it captures the
most material climate risks and develop appropriate metrics to
measure and monitor these risks.
•We have enhanced and expanded the use of a client Transition
Engagement Questionnaire to better understand our exposure
to the highest transition risk sectors and we continue to engage
with our customers to understand and help support their
transition away from high carbon activities.
•We implement HSBC Group’s sustainability risk policies as part
of its broader reputational risk framework. We focus our
policies on sensitive sectors which may have a high adverse
impact on people or on the environment and in which we have
a significant number of customers. In December 2022, the
HSBC Group announced an updated policy covering the
broader energy system including upstream oil and gas, oil and
gas power generation, coal, hydrogen, renewables and
hydropower, nuclear, biomass and energy from waste. In
addition, the HSBC Group also expanded on its thermal coal
phase-out policy in which the HSBC Group committed not to
provide new finance or advisory services for the specific
purpose of the conversion of existing coal-to-gas fired power
plants or new metallurgical coal mines. We intend to use our
relationships to partner with corporate customers to help them
transition to cleaner and safer energy alternatives.
•In 2021, the HSBC Group joined several industry working
groups dedicated to helping assess, and manage, nature-
related risks, such as the Taskforce on Nature-related Financial
Disclosure (‘TNFD’). We will use these outputs to help assess
the availability of internal nature related data, and identify
opportunities to enhance our capabilities further.
•In 2022, building on an earlier review which had identified
modern slavery and discrimination as priority human rights
issues, the HSBC Group conducted a comprehensive review to
refresh our salient human rights issues, which are the human
rights at risk of the most severe negative impact through our
business activities and relationships. The review identified five
salient human rights issues, including the right to decent work
and the right to equality and freedom from discrimination,
amongst others. The HSBC Group incorporated additional
human rights elements into its existing procurement processes
and supplier code of conduct, we are applying the approach
being developed by HSBC Group to inform our own
management of this risk.
•Climate stress tests and scenarios are being used to further
improve our understanding of our risk exposures for use in risk
management and business decision making.
For further details on our approach to climate risk management,
see ‘Climate risk’ on page 86.
Internally driven
People risk
Our success in delivering our strategic priorities and managing the
regulatory and legislative environment proactively depends on the
development and retention of our leadership and high-performing
employees.
The ability to continue to attract, develop and retain talent is
primarily impacted by a competitive labour market across the EU
and the UK, coupled with heightened inflationary pressures. While
challenges resulting from transformation continued in 2022, these
are expected to reduce as we progress with programme
execution. The current people risk outlook is expected to remain
heightened for the first half of 2023.
Mitigating actions
•We seek to promote a diverse and inclusive workforce and
provide active support across a wide range of health and
wellbeing activities. We continue to build our speak up culture
through active campaigns.
•We monitor people risks that have arisen from organisational
restructuring. Talent attraction and retention actions are rolled
out; focus and emphasis on our strategy, values and purpose
are maintained; and improved capacity and enhanced workload
management through demand planning review and
strengthening are applied.
•We aim to have robust plans in place, driven by senior
management, to help mitigate the effect of external factors that
may impact our employment practices. Political, legislative, and
regulatory challenges are closely monitored to try and minimise
the impact on the attraction and retention of talent and key
performers.
Report of the Directors | Risk

32 | HSBC Bank plc Annual Report and Accounts 2022

•We carefully monitor the impact of the rising cost of living
across the region. Our fixed pay principles consider the impact
of inflation on our employees across the region recognising the
pay pressure that exists and the related people risk impact.
•We deploy a Future Skills Curriculum to all employees through
the HSBC University to help provide skills that will enable
employees and HSBC to be successful in the future.
•We continue to develop succession plans for key management
roles, with actions agreed and reviewed on a regular basis by
the group's Executive Committee.
IT systems infrastructure and operational resilience
We operate an extensive and complex technology landscape,
which must remain resilient in order to support customers, the
group and markets where we operate. Risks arise where
technology is not understood, maintained, or developed
appropriately. We remain committed to investing in the reliability
and resilience of our IT systems and critical services. The group
does so in order to protect its customers, affiliates and
counterparties, and to help ensure they do not receive disruption
to services that could result in reputational, legal and regulatory
consequences. Increased pressure has been seen on our business
operations and customer support centres as our people, processes
and systems have responded to meet the current economic
environment.
The group's strategy includes simplification of our technology
estate to reduce complexity and costs; this includes consolidation
of our core banking systems onto a single strategic platform. The
target state will leverage existing and known technology, and will
be simpler and easier to maintain. However, as with any strategic
transformation programme risks associated with implementation
must be managed continuously.
Mitigating actions
•We continue to invest in transforming how software solutions
are developed, delivered and maintained. We invest both to
improve system resilience and to test service continuity. We
continue to ensure security is built into our software
development life cycle and to seek to improve our testing
processes and tools.
•We continue to upgrade our IT systems, simplify our service
provision and replace older IT infrastructure and applications.
•We manage implementation risks arising from the
simplification of our technology estate continuously via
oversight of these risks at all levels of the programme and
reporting up to our Risk Committee.
Execution risk
In order to deliver our strategic objectives and meet mandatory
regulatory requirements, it is important for the group to maintain a
strong focus on execution risk. This requires robust management
of significant resource-intensive and time-sensitive programmes
that are due to execute in 2023. Risks arising from the magnitude
and complexity of change planned in 2023 may include regulatory
censure, reputational damage and/or financial losses. Current
major initiatives include managing the operational implications of
the planned disposal of our retail banking operations in France,
large transformation programmes including the simplification and
integration of our IT systems and other restructuring programmes
across Europe.
Mitigating actions
•Change execution risk was added to our risk taxonomy and
control library in 2022, so that the risk can be defined,
assessed, managed, reported and overseen in the same way as
the group's other material risks.
•Our prioritisation and governance processes for significant
programmes are monitored by the HSBC Bank plc and Group‘s
Executive Committees.
•We continue to work to strengthen our change management
practices in order to try and deliver sustainable change,
increased adoption of agile ways of working, and a more
consistent standard of delivery. For HSBC Bank plc, this
includes strengthening the embedding of an improved Group-
wide change framework which sets out the mandatory
principles and standards to be adhered to when leading and
delivering change.
Model risk
Model risk arises whenever business decision making includes
reliance on models. We use models in both financial and non-
financial contexts and in a range of business applications such as
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting.
Assessing model performance is a continuous undertaking.
Models can need redevelopment as market conditions change.
Significant increases in global inflation and interest rates have
impacted the reliability and accuracy of both credit risk and traded
risk models.
We continued to prioritise the redevelopment of internal ratings-
based (‘IRB’), internal model approach (‘IMA’) and internal model
methods (‘IMM’) models, as part of the IRB repair and Basel III
programmes with a key focus on enhancing the quality of data
used as model inputs. A number of these models have been
submitted to the PRA and the European Central Bank (‘ECB’) for
feedback and approval is in progress.
Some IMM models have been approved for use and feedback has
been received for some IRB models. Climate risk modelling is a
key focus as our commitment to sustainability has become a
critical part of the group’s strategy.
Mitigating actions
•We have continued to embed the enhanced monitoring, review
and challenge of expected loss model performance through our
Model Risk Management function as part of a broader quarterly
process to determine loss levels. The Model Risk Management
team aims to provide strong and effective review and challenge
of any future redevelopment of these models.
•Model Risk Management works closely with our lines of
business to ensure that our models meet regulatory
requirements as well as risk management, pricing, liquidity and
capital management needs. Internal Audit provides assurance
over the risk management framework for models.
•Additional assurance work is performed by the model risk
governance teams, which act as second lines of defence. The
teams test whether controls implemented by model users
comply with model risk policy and if model risk standards are
adequate.
•Models using advanced machine learning techniques are
validated and monitored to try and ensure that model risks
arising from the usage of those algorithms have adequate
oversight and review.
•A framework to manage the range of risks that are generated
by these advanced techniques is being developed to try and
capture the multi-disciplinary nature of these risks.
Data risk
We use multiple systems and growing quantities of data to
support our customers. Risk arises if data is incorrect, unavailable,
misused, or unprotected. We need to meet external regulatory
obligations and laws that cover data, such as the Basel Committee
on Banking Supervision’s 239 guidelines and the General Data
Protection Regulation (‘GDPR’).
Mitigating actions
•Through our global data management framework, we monitor
the quality, availability and security of data that supports our
customers and internal processes. We work towards resolving
any identified data issues in a timely manner.
•We have made improvements to our data policies. We are
implementing an updated control framework to enhance the
end-to-end management of data risk.
•We aim to protect customer data through our data privacy
framework, which establishes practices, design principles and
guidelines that enable us to demonstrate compliance with data
privacy laws and regulations.

HSBC Bank plc Annual Report and Accounts 2022 | 33

•We seek to continue to modernise our data and analytics
infrastructure through investments in Cloud technology, data
visualisation, machine learning and artificial intelligence.
•We educate our employees on data risk and data management.
We delivered regular mandatory training on how to protect and
manage data appropriately.
Third Party risk
We use third parties to provide a range of goods and services.
Risks arising from the use of third-party providers and their supply
chain may be harder to identify.
It is critical that we ensure we have appropriate risk management
policies, processes and practices over the selection, governance
and oversight of third parties and their supply chain, particularly
for key activities that could affect our operational resilience.
Any deficiency in the management of risks associated with our
third parties could affect our ability to support our customers and
meet regulatory expectations.
Mitigating actions
•We have enhanced our control framework for the use of third-
party providers to seek to ensure risks associated with these
arrangements are understood and managed effectively by our
businesses and functions across the group.
•We continue to enhance the effective management of our intra-
group arrangements as we have for external third-party
arrangements using the same control standards.
•We are implementing the changes required by new regulations
as set by our regulators.

Our material banking and insurance risks

The material risk types associated with our banking and insurance manufacturing operations are described in the following tables.

Description of risks – banking operations
Risks | Arising from | Measurement, monitoring and management of risk
Credit risk (see page 36) |
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. | Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives. | Credit risk is: •measured as the amount that could be lost if a customer or counterparty fails to make repayments; •monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and •managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance for risk managers.
Treasury risk (see page 75) |
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post employment benefits to staff and their dependants. | Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment. | Treasury risk is: •measured through appetites set as target and minimum ratios; •monitored and projected against appetites and using stress and scenario testing; and •managed through control of resources in conjunction with risk profiles and cashflows.
Market risk (see page 84) |
The risk that movements in market factors such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices will reduce our income or the value of our portfolios. | Exposure to market risk is separated into two portfolios: •trading portfolios; and •non-trading portfolios. Market risk exposures arising from our insurance operations are discussed on page 90. | Market risk is: •measured using sensitivities, value at risk (‘VaR’) and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; •monitored using VaR, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and •managed using risk limits approved by the risk management meeting (‘RMM’) and the RMM in various global businesses.

Report of the Directors | Risk

34 | HSBC Bank plc Annual Report and Accounts 2022

Description of risks – banking operations (continued)
Risks | Arising from | Measurement, monitoring and management of risk
Climate risk (see page 86) |
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy. | Climate risk can materialise through: •physical risk, which arises from the increased frequency and severity of weather events; •transition risk, which arises from the process of moving to a low-carbon economy; and •greenwashing risk, which arises from the act of knowingly or unknowingly misleading stakeholders regarding our strategy relating to climate, the climate impact/benefit of a product or service, or the climate commitments or performance of our customers. | Climate risk is: •measured using a variety of risk appetite metrics and Key Management Indicators, which assess the impact of climate risk across the risk taxonomy; •monitored using stress testing; and •managed through adherence to risk appetite thresholds and via specific policies.
Resilience risk (see page 87) |
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates, and counterparties as a result of sustained and significant operational disruption. | Resilience risk arises from failures or inadequacies in processes, people, systems or external events. These may be driven by rapid technological innovation, changing behaviours of our consumers, cyber-threats and attacks, cross border dependencies, and third party relationships. | Resilience risk is: •measured through a range of metrics with defined maximum acceptable impact tolerances, and against our agreed risk appetite. •monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and •managed by continuous monitoring and thematic reviews.
Regulatory compliance risk (see page 87) |
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards. | Regulatory compliance risk arises from the failure to observe the letter and spirit of relevant laws, codes, rules, regulations and standards of good practice. This could result in poor market or customer outcomes leading to fines, penalties and reputational damage to our business. | Regulatory compliance risk is: •measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; •monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and •managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Financial crime risk (see page 88)
Financial crime risk is the risk of knowingly or unknowingly helping parties to commit or to further potentially illegal activity through HSBC, including money laundering, fraud, bribery and corruption, tax evasion, sanctions breaches, and terrorist and proliferation financing. | Financial crime risk arises from day-to-day banking operations involving customers, third parties and employees. | Financial crime risk is: •measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our regulatory compliance teams; •monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and •managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Model risk (see page 89)
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used. | Model risk arises in both financial and non- financial contexts whenever business decision making includes reliance on models. | Model risk is: •measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; •monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; and •managed by creating and communicating appropriate policies, procedures and guidance, training colleagues in their application, and supervising their adoption to ensure operational effectiveness.

HSBC Bank plc Annual Report and Accounts 2022 | 35

Our insurance manufacturing subsidiaries are regulated separately
from our banking operations. Risks in our insurance entities are
managed using methodologies and processes that are subject to
Group oversight. Our insurance operations are also subject to
some of the same risks as our banking operations, and these are
covered by the Group’s risk management processes. There are
though specific risks inherent to the insurance operations as noted
below.

Description of risks – insurance manufacturing operations
Risks | Arising from | Measurement, monitoring and management of risk
Financial risk (see page 90) |
For insurance entities, Financial risk includes the risk of not being able to effectively match liabilities arising under insurance contracts with appropriate investments and that the expected sharing of financial performance with policyholders under certain contracts is not possible. | Exposure to financial risks arises from: •market risk affecting the fair values of financial assets or their future cash flows; •credit risk; and •liquidity risk of entities not being able to make payments to policyholders as they fall due. | Financial risk is: •measured (i) for credit risk, in terms of economic capital and the amount that could be lost if a counterparty fails to make repayments; (ii) for market risk, in terms of economic capital, internal metrics and fluctuations in key financial variables; and (iii) for liquidity risk, in terms of internal metrics, including stressed operational cash flow projections; •monitored through a framework of approved limits and delegated authorities; and •managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance. This includes using product design and asset liability matching and bonus rates.
Insurance risk (see page 90) |
The risk that, over time, the cost of the contract, including claims and benefits may exceed the total amount of premiums and investment income received. | The cost of claims and benefits can be influenced by many factors, including mortality and morbidity experience, as well as lapse and surrender rates. | Insurance risk is: •measured in terms of life insurance liabilities and economic capital allocated to insurance underwriting risk; •monitored though a framework of approved limits and delegated authorities; and •managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance. This includes using product design, underwriting, reinsurance and claims-handling procedures.

Credit risk

Credit risk is the risk of financial loss if a customer or counterparty
fails to meet an obligation under a contract. Credit risk arises
principally from direct lending, trade finance and leasing business,
but also from certain other products, such as guarantees and
derivatives.
Credit risk management
Key developments in 2022
There were no material changes to the policies and practices for
the management of credit risk in 2022. We continued to apply the
requirements of IFRS 9 ‘Financial Instruments’ within the Credit
Risk sub-function. For certain retail portfolios we enhanced the
significant increase in credit risk (‘SICR’) approach to capture
relative movements in probability of default ('PD') since
origination.
For our retail portfolios, we adopted the EBA ‘Guidelines on the
application of definition of default’ during 2022 and, for our
wholesale portfolios, these guidelines were adopted during 2021.
Adoption of these guidelines did not have a material impact on our
portfolios and comparative disclosures have not been restated.
We actively managed the risks related to macroeconomic
uncertainties, including inflation, fiscal and monetary policy, the
Russia-Ukraine war, broader geopolitical uncertainties, the
continued risks resulting from the Covid-19 pandemic.
For further details, see ‘Top and emerging risks’ on page 28.
Governance and structure
We have established group-wide credit risk management and
related IFRS 9 processes. We continue to actively assess the
impact of economic developments in key markets on specific
customers, customer segments or portfolios. As credit conditions
change, we take mitigating action, including the revision of risk
appetites or limits and tenors, as appropriate. In addition, we
continue to evaluate the terms under which we provide credit
facilities within the context of individual customer requirements,
the quality of the relationship, local regulatory requirements,
market practices and our local market position.
Credit risk sub-function
(Audited)
Credit approval authorities are delegated by the Board to the Chief
Executive together with the authority to sub-delegate them. The
Credit risk sub-function in Risk is responsible for the key policies
and processes for managing credit risk, which include formulating
credit policies and risk rating frameworks, guiding the appetite for
credit risk exposures, undertaking independent reviews and
objective assessment of credit risk, and monitoring performance
and management of portfolios.
The principal objectives of our credit risk management are:
•to maintain across the group a strong culture of responsible
lending and a robust risk policy and control framework;
•to both partner and challenge global businesses in defining,
implementing and continually re-evaluating our risk appetite
under actual and scenario conditions; and
•to ensure there is independent, expert scrutiny of credit risks,
their costs and mitigation.
Key risk management process
IFRS 9 ‘Financial Instruments’ process
The IFRS 9 process comprises three main areas: modelling and
data; implementation; and governance.
Modelling, data and forward economic guidance
The Group has established IFRS 9 modelling and data processes in
various geographies, which are subject to internal model risk
governance including independent review of significant model
developments.
We have a centralised process for generating unbiased and
independent global economic scenarios. Scenarios are subject to a
process of review and challenge by a dedicated team, as well as
regional groupings. Each quarter, the scenarios and probability
weights are reviewed and checked for consistency with the
economic conjuncture and current economic and financial risks.
These are subject to final review and approval by senior
management in a Forward Economic Guidance Global Business
Impairment Committee.
Report of the Directors | Risk

36 | HSBC Bank plc Annual Report and Accounts 2022

Implementation
A centralised impairment engine performs the ECL calculation
using data, which is subject to a number of validation checks and
enhancements, from a variety of client, finance and risk systems.
Where possible, these checks and processes are performed in a
globally consistent and centralised manner.
Governance
Management review forums are established in order to review and
approve the impairment results. Regional management review
forums have representatives from Credit Risk and Finance.
Required members of the forums are the heads of Wholesale
Credit, Market Risk, and Wealth and Personal Banking Risk, as
well as the global business Chief Financial Officers and the Chief
Accounting Officer.
Concentration of exposure
(Audited)
Concentrations of credit risk arise when a number of
counterparties or exposures have comparable economic
characteristics, or are engaged in similar activities or operate in
the same geographical areas/industry sectors, so that their
collective ability to meet contractual obligations is uniformly
affected by changes in economic, political or other conditions. The
group uses a number of controls and measures to minimise undue
concentration of exposure in the group’s portfolios across
industry, country and customer groups. These include portfolio
and counterparty limits, approval and review controls, and stress
testing.
Credit quality of financial instruments
(Audited)
Our risk rating system facilitates the internal ratings-based
approach under the Basel framework adopted by the Group to
support the calculation of our minimum credit regulatory capital
requirement. The five credit quality classifications each
encompass a range of granular internal credit rating grades
assigned to wholesale and retail lending businesses, and the
external ratings attributed by external agencies to debt securities.
For debt securities and certain other financial instruments, external
ratings have been aligned to the five quality classifications based
upon the mapping of related Customer Risk Rating (‘CRR’) to
external credit rating.
Wholesale lending
The CRR 10-grade scale summarises a more granular underlying
23-grade scale of obligor PD. All corporate customers are rated
using the 10- or 23-grade scale, depending on the degree of
sophistication of the Basel approach adopted for the exposure.
Each CRR band is associated with an external rating grade by
reference to long-run default rates for that grade, represented by
the average of issuer-weighted historical default rates. This
mapping between internal and external ratings is indicative and
may vary over time.
Retail lending
Retail lending credit quality is based on a 12-month point-in-time
probability-weighted PD.

Credit quality classification
| Sovereign debt securities and bills | Other debt securities and bills | Wholesale lending and derivatives | Retail lending
| External credit rating | External credit rating | Internal credit rating | 12-month probability of default % | Internal credit rating | 12 month probability- weighted PD %
Quality classification 1,2 |  |  |  |  |  |
Strong | BBB and above | A- and above | CRR1 to CRR2 1 | 0 – 0.169 | Band 1 and 2 | 0.000 – 0.500
Good | BBB- to BB | BBB+ to BBB- | CRR3 | 0.170 – 0.740 | Band 3 | 0.501 – 1.500
Satisfactory | BB- to B and unrated | BB+ to B and unrated | CRR4 to CRR5 | 0.741 – 4.914 | Band 4 and 5 | 1.501 – 20.000
Sub-standard | B- to C | B- to C | CRR6 to CRR8 | 4.915 – 99.999 | Band 6 | 20.001 – 99.999
Credit impaired | Default | Default | CRR9 to CRR10 | 100 | Band 7 | 100

1 Customer risk rating (‘CRR’).
2 12-month point-in-time probability-weighted PD.

Quality classification definitions •‘Strong’ exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of expected loss. •‘Good’ exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk. •‘Satisfactory’ exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. •‘Sub-standard’ exposures require varying degrees of special attention and default risk is of greater concern. •‘Credit-impaired’ exposures have been assessed as described in Note 1.2(i) on the Financial Statements.

Forborne loans and advances
(Audited)
Forbearance measures consist of concessions towards an obligor
that is experiencing or about to experience difficulties in meeting
its financial commitments.
We continue to class loans as forborne when we modify the
contractual payment terms due to having significant concerns
about the borrowers’ ability to meet contractual payments when
they were due.
In 2022, we expanded our definition of forborne to capture non-
payment-related concessions, such as covenant waivers. For our
wholesale portfolio, we began identifying non-payment-related
concessions in 2021 when our internal policies were changed. For
our retail portfolios, we began identifying them during 2022.
The comparative disclosures have been presented under the prior
definition of forborne for the wholesale and retail portfolios.
For details of our policy on derecognised renegotiated loans, see
Note 1.2(i) on the financial statements.
Credit quality of forborne loans
For wholesale lending, where payment related forbearance
measures result in a diminished financial obligation or if there are
other indicators of impairment, the loan will be classified as credit
impaired if it is not already so classified. All facilities with a
customer, including loans that have not been modified, are
considered credit impaired following the identification of a
payment-related forborne loan. For retail lending, where a material
payment-related concession has been granted, the loan will be
classified as credit impaired.

HSBC Bank plc Annual Report and Accounts 2022 | 37

In isolation, non-payment forbearance measures may not result in
the loan being classified as credit impaired unless combined with
other indicators of credit impairment. These are classed as
performing forborne loans for both wholesale and retail lending.
Wholesale and retail lending forborne loans are classified as credit
impaired 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. Any forborne loans not considered
credit impaired will remain forborne for a minimum of two years
from the date that credit impairment no longer applies. For
wholesale and retail lending, any forbearance measures granted
on a loan already classed as forborne results in customer being
classed as credit impaired.
Forborne loans and recognition of expected credit losses
(Audited)
Forborne loans expected credit loss assessments reflect the higher
rates of losses typically experienced with these types of loans
such that they are in stage 2 and stage 3. The higher rates are
more pronounced in unsecured retail lending requiring further
segmentation. For wholesale lending, forborne loans are typically
assessed individually. Credit risk ratings are intrinsic to the
impairment assessments. The individual impairment assessment
takes into account the higher risk of the future non-payment
inherent in forborne loans.
Impairment assessment
(Audited)
For details of our impairment policies on loans and advances and
financial investments see Note 1.2(i) on the financial statements.
Write-off of loans and advances
(Audited)
For details of our accounting policy on the write-off of loans and
advances, see Note 1.2(i) on the financial statements.
Unsecured personal facilities, including credit cards, are generally
written off at between 150 and 210 days past due. The standard
period runs until the end of the month in which the account
becomes 180 days contractually delinquent. However, in
exceptional circumstances to achieve a fair customer outcome,
and in line with regulatory expectations, they may be extended
further.
For secured facilities, write-off should occur upon repossession of
collateral, receipt of proceeds via settlement, or determination that
recovery of the collateral will not be pursued.
Any secured assets maintained on the balance sheet beyond 60
months of consecutive delinquency-driven default require
additional monitoring and review to assess the prospect of
recovery.
There are exceptions in a few countries and territories where local
regulation or legislation constrain earlier write-off, or where the
realisation of collateral for secured real estate lending takes more
time. Write-off, either partially or in full, may be earlier when there
is no reasonable expectation of further recovery, for example, in
the event of a bankruptcy or equivalent legal proceedings.
Collection procedures may continue after write-off.
Credit risk in 2022
At 31 December 2022, gross loans and advances to customers
and banks of £91bn decreased by £12bn, compared with
31 December 2021. This included favourable foreign exchange
movements of £3bn and a £22bn decrease due to a
reclassification of businesses to assets held for sale, including our
retail banking operations in France.
The reclassification of assets held for sale resulted in a decrease of
loans and advances to customers, of which £2bn pertaining to
wholesale and £19bn to personal banking. For loans and advances
to banks, the reclassification resulted in a decrease of £1bn.
Excluding foreign exchange movements and the reclassification of
assets held for sale, there was £1bn decrease in personal loans
and advances, offset by £1bn increase in wholesale loans and
advances to customers. Loans and advances to banks increased
by £7bn.
At 31 December 2022, the allowance for ECL excluding foreign
exchange movements and the reclassification of assets held for
sale, in relation to loans and advances to customers increased by
£50m from 31 December 2021.
This was attributable to:
•a £46m increase in wholesale loans and advances to
customers, of which £44m was driven by stages 1 and 2; and
•a £4m increase in personal loans and advances to customers,
of which £7m was driven by stages 1 and 2.
Stage 3 balances at 31 December 2022 remained broadly stable
compared with 31 December 2021.
The ECL charge for 2022 was £222m, inclusive of recoveries.
Inflation, recession and high interest rates combined with an
unstable geopolitical environment and the effects of a global
supply chain disruption have contributed to elevated degrees of
uncertainty during the year. At 31 December 2022, as a result of
this uncertainty, additional stage 1 and 2 allowances have been
recorded.
Report of the Directors | Risk

38 | HSBC Bank plc Annual Report and Accounts 2022

Summary of credit risk
The following disclosure presents the gross carrying/nominal
amount of financial instruments to which the impairment
requirements in IFRS9 are applied and the associated allowance
for ECL. The allowance for ECL increased from £1,240m at
31 December 2021 to £1,370m at 31 December 2022.
The allowance for ECL at 31 December 2022 comprised of
£1,283m (2021: £1,168m) in respect of assets held at amortised
cost, £87m (2021: £72m) in respect of loans and other credit
related commitments, and financial guarantees, and £24m (2021:
£19m) in respect of debt instruments measured at FVOCI.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited) |  |  |  |
| 31 Dec 2022 | 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL 1 | Gross carrying/ nominal amount | Allowance for ECL 1
The group | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 73,717 | (1,103) | 92,331 | (1,154)
– personal | 6,013 | (55) | 25,394 | (163)
– corporate and commercial | 55,004 | (937) | 56,087 | (964)
– non-bank financial institutions | 12,700 | (111) | 10,850 | (27)
Loans and advances to banks at amortised cost | 17,152 | (43) | 10,789 | (5)
Other financial assets measured at amortised cost | 269,755 | (137) | 202,137 | (9)
– cash and balances at central banks | 131,434 | (1) | 108,482 | —
– items in the course of collection from other banks | 2,285 | — | 346 | —
– Hong Kong Government certificates of indebtedness | — | — | — | —
– reverse repurchase agreements – non trading | 53,949 | — | 54,448 | —
– financial investments | 3,248 | — | 10 | —
– other assets 2 | 55,634 | (3) | 38,851 | (9)
– assets held for sale 6 | 23,205 | (133) | — | —
Total gross carrying amount on balance sheet | 360,624 | (1,283) | 305,257 | (1,168)
Loans and other credit related commitments | 126,457 | (67) | 115,695 | (55)
– personal | 2,116 | — | 2,269 | (1)
– corporate and commercial | 68,441 | (62) | 63,352 | (48)
– financial | 55,900 | (5) | 50,074 | (6)
Financial guarantees 3 | 5,327 | (20) | 11,054 | (17)
– personal | 23 | — | 26 | —
– corporate and commercial | 3,415 | (19) | 9,894 | (16)
– financial | 1,889 | (1) | 1,134 | (1)
Total nominal amount off balance sheet 4 | 131,784 | (87) | 126,749 | (72)
| 492,408 | (1,370) | 432,006 | (1,240)
| Fair value | Memorandum allowance for ECL 5 | Fair value | Memorandum allowance for ECL 5
| £m | £m | £m | £m
Debt instruments measured at fair value through other comprehensive income ('FVOCI') | 29,248 | (24) | 41,188 | (19)

1 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.
2 Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other
assets’ as presented within the consolidated balance sheet on page 116 includes both financial and non-financial assets, including cash collateral
and settlement accounts.
3 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
6 For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 186.

HSBC Bank plc Annual Report and Accounts 2022 | 39

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied (continued)
(Audited) |  |  |  |
| 31 Dec 2022 | 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL 1 | Gross carrying/ nominal amount | Allowance for ECL 1
The bank | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 37,370 | (378) | 34,286 | (350)
– personal | 3,584 | (12) | 3,680 | (6)
– corporate and commercial | 22,456 | (247) | 21,182 | (308)
– non-bank financial institutions | 11,330 | (119) | 9,424 | (36)
Loans and advances to banks at amortised cost | 14,529 | (43) | 6,782 | (4)
Other financial assets measured at amortised cost | 169,321 | (3) | 135,033 | (1)
– cash and balances at central banks | 78,442 | (1) | 63,008 | —
– items in the course of collection from other banks | 1,863 | — | 211 | —
– reverse repurchase agreements-non trading | 43,055 | — | 39,708 | —
– financial investments | 6,378 | — | 3,337 | —
– other assets 2 | 39,583 | (2) | 28,769 | (1)
Total gross carrying amount on balance sheet | 221,220 | (424) | 176,101 | (355)
Loans and other credit related commitments | 35,692 | (31) | 31,255 | (29)
– personal | 886 | — | 589 | —
– corporate and commercial | 18,900 | (28) | 19,175 | (26)
– financial | 15,906 | (3) | 11,491 | (3)
Financial guarantees 3 | 1,363 | (12) | 1,270 | (7)
– personal | 3 | — | 3 | —
– corporate and commercial | 827 | (11) | 527 | (6)
– financial | 533 | (1) | 740 | (1)
Total nominal amount off balance sheet 4 | 37,055 | (43) | 32,525 | (36)
| 258,275 | (467) | 208,626 | (391)
| Fair value | Memorandum allowance for ECL 5 | Fair value | Memorandum allowance for ECL 5
| £m | £m | £m | £m
Debt instruments measured at FVOCI | 12,206 | (4) | 23,152 | (4)

1 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.
2 Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other
assets’ as presented within the consolidated balance sheet on page 116 includes both financial and non-financial assets, including cash collateral
and settlement accounts.
3 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
The following table provides an overview of the group’s and
bank's credit risk by stage and industry, and the associated ECL
coverage. The financial assets recorded in each stage have the
following characteristics:
•Stage 1: These financial assets are unimpaired and without
significant increase in credit risk on which a 12-month
allowance for ECL is recognised.
•Stage 2: A significant increase in credit risk has been
experienced since initial recognition on which a lifetime ECL is
recognised.
•Stage 3: There is objective evidence of impairment, and are
therefore considered to be in default or otherwise credit-
impaired on which a lifetime ECL is recognised.
•Purchased or originated credit-impaired ('POCI'): Financial
assets that are purchased or originated at a deep discount that
reflects the incurred credit losses on which a lifetime ECL is
recognised.
Report of the Directors | Risk

40 | HSBC Bank plc Annual Report and Accounts 2022

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2022
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 63,673 | 7,817 | 2,224 | 3 | 73,717 | (51) | (145) | (907) | — | (1,103) | 0.1 | 1.9 | 40.8 | — | 1.5
– personal | 5,293 | 615 | 105 | — | 6,013 | (9) | (15) | (31) | — | (55) | 0.2 | 2.4 | 29.5 | — | 0.9
– corporate and commercial | 46,671 | 6,479 | 1,851 | 3 | 55,004 | (40) | (123) | (774) | — | (937) | 0.1 | 1.9 | 41.8 | — | 1.7
– non-bank financial institutions | 11,709 | 723 | 268 | — | 12,700 | (2) | (7) | (102) | — | (111) | — | 1.0 | 38.1 | — | 0.9
Loans and advances to banks at amortised cost | 16,673 | 414 | 65 | — | 17,152 | (6) | (21) | (16) | — | (43) | — | 5.1 | 24.6 | — | 0.3
Other financial assets measured at amortised cost | 267,770 | 1,662 | 323 | — | 269,755 | (14) | (17) | (106) | — | (137) | — | 1.0 | 32.8 | — | 0.1
Loan and other credit-related commitments | 116,994 | 9,300 | 163 | — | 126,457 | (13) | (32) | (22) | — | (67) | — | 0.3 | 13.5 | — | 0.1
– personal | 2,004 | 107 | 5 | — | 2,116 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 60,659 | 7,625 | 157 | — | 68,441 | (12) | (28) | (22) | — | (62) | — | 0.4 | 14.0 | — | 0.1
– financial | 54,331 | 1,568 | 1 | — | 55,900 | (1) | (4) | — | — | (5) | — | 0.3 | — | — | —
Financial guarantees 1 | 4,715 | 528 | 84 | — | 5,327 | (1) | (2) | (17) | — | (20) | — | 0.4 | 20.2 | — | 0.4
– personal | 20 | 2 | 1 | — | 23 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 2,946 | 387 | 82 | — | 3,415 | (1) | (1) | (17) | — | (19) | — | 0.3 | 20.7 | — | 0.6
– financial | 1,749 | 139 | 1 | — | 1,889 | — | (1) | — | — | (1) | — | 0.7 | — | — | 0.1
At 31 Dec 2022 | 469,825 | 19,721 | 2,859 | 3 | 492,408 | (85) | (217) | (1,068) | — | (1,370) | — | 1.1 | 37.4 | — | 0.3

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
3 Purchased or originated credit-impaired (‘POCI’).
Unless identified at an earlier stage, all financial assets are
deemed to have suffered a significant increase in credit risk when
they are 30 days past due (‘DPD’) and are transferred from stage 1
to stage 2. The following disclosure presents the ageing of stage 2
financial assets by those less than 30 days and greater than 30
DPD and therefore presents those financial assets classified as
stage 2 due to ageing (30 DPD) and those identified at an earlier
stage (less than 30 DPD).

Stage 2 days past due analysis at 31 December 2022
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The group | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost: | 7,817 | 93 | 331 | (145) | (2) | (2) | 1.9 | 2.2 | 0.6
– personal | 615 | 43 | 9 | (15) | (2) | (1) | 2.4 | 4.7 | 11.1
– corporate and commercial | 6,479 | 50 | 296 | (123) | — | (1) | 1.9 | — | 0.3
– non-bank financial institutions | 723 | — | 26 | (7) | — | — | 1.0 | — | —
Loans and advances to banks at amortised cost | 414 | — | 8 | (21) | — | — | 5.1 | — | —
Other financial assets measured at amortised cost | 1,662 | 25 | 12 | (17) | — | (2) | 1.0 | — | 16.7

1 Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.

HSBC Bank plc Annual Report and Accounts 2022 | 41

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2021 (continued)
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 80,730 | 9,121 | 2,478 | 2 | 92,331 | (86) | (158) | (908) | (2) | (1,154) | 0.1 | 1.7 | 36.6 | 100.0 | 1.2
– personal | 24,255 | 686 | 453 | — | 25,394 | (22) | (16) | (125) | — | (163) | 0.1 | 2.3 | 27.6 | — | 0.6
– corporate and commercial | 46,237 | 8,066 | 1,782 | 2 | 56,087 | (58) | (137) | (767) | (2) | (964) | 0.1 | 1.7 | 43.0 | 100.0 | 1.7
– non-bank financial institutions | 10,238 | 369 | 243 | — | 10,850 | (6) | (5) | (16) | — | (27) | 0.1 | 1.4 | 6.6 | — | 0.2
Loans and advances to banks at amortised cost | 10,750 | 39 | — | — | 10,789 | (4) | (1) | — | — | (5) | — | 2.6 | — | — | —
Other financial assets measured at amortised cost | 202,048 | 47 | 42 | — | 202,137 | — | — | (9) | — | (9) | — | — | 21.4 | — | —
Loan and other credit- related commitments | 107,922 | 7,571 | 202 | — | 115,695 | (25) | (22) | (8) | — | (55) | — | 0.3 | 4.0 | — | —
– personal | 2,152 | 114 | 3 | — | 2,269 | (1) | — | — | — | (1) | — | — | — | — | —
– corporate and commercial | 56,325 | 6,829 | 198 | — | 63,352 | (20) | (20) | (8) | — | (48) | — | 0.3 | 4.0 | — | 0.1
– financial | 49,445 | 628 | 1 | — | 50,074 | (4) | (2) | — | — | (6) | — | 0.3 | — | — | —
Financial guarantees 1 | 10,215 | 740 | 99 | — | 11,054 | (3) | (7) | (7) | — | (17) | — | 0.9 | 7.1 | — | 0.2
– personal | 23 | 2 | 1 | — | 26 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 9,257 | 540 | 97 | — | 9,894 | (2) | (7) | (7) | — | (16) | — | 1.3 | 7.2 | — | 0.2
– financial | 935 | 198 | 1 | — | 1,134 | (1) | — | — | — | (1) | 0.1 | — | — | — | 0.1
At 31 Dec 2021 | 411,665 | 17,518 | 2,821 | 2 | 432,006 | (118) | (188) | (932) | (2) | (1,240) | — | 1.1 | 33.0 | 100.0 | 0.3

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
3 Purchased or originated credit-impaired (‘POCI’).

Stage 2 days past due analysis at 31 December 2021 (continued)
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The group | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost | 9,121 | 56 | 237 | (158) | (1) | (1) | 1.7 | 1.8 | 0.4
– personal | 686 | 49 | 29 | (16) | (1) | (1) | 2.3 | 2.0 | 3.4
– corporate and commercial | 8,066 | 7 | 199 | (137) | — | — | 1.7 | 0.0 | —
– non-bank financial institutions | 369 | — | 9 | (5) | — | — | 1.4 | — | —
Loans and advances to banks at amortised cost | 39 | — | — | (1) | — | — | 2.6 | — | —
Other financial assets measured at amortised cost | 47 | — | — | — | — | — | — | — | —

1 Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.
Report of the Directors | Risk

42 | HSBC Bank plc Annual Report and Accounts 2022

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2022
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 33,919 | 2,576 | 875 | — | 37,370 | (19) | (35) | (324) | — | (378) | 0.1 | 1.4 | 37.0 | — | 1.0
– personal | 3,090 | 482 | 12 | — | 3,584 | (2) | (7) | (3) | — | (12) | 0.1 | 1.5 | 25.0 | — | 0.3
– corporate and commercial | 20,314 | 1,547 | 595 | — | 22,456 | (16) | (27) | (204) | — | (247) | 0.1 | 1.7 | 34.3 | — | 1.1
– non-bank financial institutions | 10,515 | 547 | 268 | — | 11,330 | (1) | (1) | (117) | — | (119) | — | 0.2 | 43.7 | — | 1.1
Loans and advances to banks at amortised cost | 14,299 | 165 | 65 | — | 14,529 | (5) | (22) | (16) | — | (43) | — | 13.3 | 24.6 | — | 0.3
Other financial assets measured at amortised cost | 169,276 | 24 | 21 | — | 169,321 | (2) | (1) | — | — | (3) | — | 4.2 | — | — | —
Loan and other credit-related commitments | 32,427 | 3,225 | 40 | — | 35,692 | (9) | (15) | (7) | — | (31) | — | 0.5 | 17.5 | — | 0.1
– personal | 874 | 10 | 2 | — | 886 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 16,565 | 2,297 | 38 | — | 18,900 | (8) | (13) | (7) | — | (28) | — | 0.6 | 18.4 | — | 0.1
– financial | 14,988 | 918 | — | — | 15,906 | (1) | (2) | — | — | (3) | — | 0.2 | — | — | —
Financial guarantees 1 | 1,194 | 133 | 36 | — | 1,363 | — | (1) | (11) | — | (12) | — | 0.8 | 30.6 | — | 0.9
– personal | 2 | 1 | — | — | 3 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 775 | 17 | 35 | — | 827 | — | — | (11) | — | (11) | — | — | 31.4 | — | 1.3
– financial | 417 | 115 | 1 | — | 533 | — | (1) | — | — | (1) | — | 0.9 | — | — | 0.2
At 31 Dec 2022 | 251,115 | 6,123 | 1,037 | — | 258,275 | (35) | (74) | (358) | — | (467) | — | 1.2 | 34.5 | — | 0.2

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
3 Purchased or originated credit-impaired (‘POCI’).

Stage 2 days past due analysis at 31 December 2022
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The bank | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost: | 2,576 | 26 | 6 | (35) | (1) | (1) | 1.4 | 3.8 | 16.7
– personal | 482 | 26 | 6 | (7) | (1) | (1) | 1.5 | 3.8 | 16.7
– corporate and commercial | 1,547 | — | — | (27) | — | — | 1.7 | — | —
– non-bank financial institutions | 547 | — | — | (1) | — | — | 0.2 | — | —
Loans and advances to banks at amortised cost | 165 | — | — | (22) | — | — | 13.3 | — | —
Other financial assets measured at amortised cost | 24 | — | — | (1) | (1) | — | 4.2 | — | —

1 Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.

HSBC Bank plc Annual Report and Accounts 2022 | 43

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2021 (continued)
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 3 | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 30,105 | 3,197 | 984 | — | 34,286 | (33) | (47) | (270) | — | (350) | 0.1 | 1.5 | 27.4 | — | 1.0
– personal | 3,544 | 88 | 48 | — | 3,680 | (1) | (2) | (3) | — | (6) | — | 2.3 | 6.3 | — | 0.2
– corporate and commercial | 17,608 | 2,893 | 681 | — | 21,182 | (28) | (45) | (235) | — | (308) | 0.2 | 1.6 | 34.5 | — | 1.5
– non-bank financial institutions | 8,953 | 216 | 255 | — | 9,424 | (4) | — | (32) | — | (36) | — | — | 12.5 | — | 0.4
Loans and advances to banks at amortised cost | 6,775 | 7 | — | — | 6,782 | (3) | (1) | — | — | (4) | — | 14.3 | — | — | 0.1
Other financial assets measured at amortised cost | 134,984 | 21 | 28 | — | 135,033 | — | — | (1) | — | (1) | — | — | 3.6 | — | —
Loan and other credit-related commitments | 28,911 | 2,301 | 43 | — | 31,255 | (15) | (11) | (3) | — | (29) | 0.1 | 0.5 | 7.0 | — | 0.1
– personal | 585 | 2 | 2 | — | 589 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 17,010 | 2,124 | 41 | — | 19,175 | (12) | (11) | (3) | — | (26) | 0.1 | 0.5 | 7.3 | — | 0.1
– financial | 11,316 | 175 | — | — | 11,491 | (3) | — | — | — | (3) | — | — | — | — | —
Financial guarantees 1 | 1,060 | 150 | 60 | — | 1,270 | (1) | — | (6) | — | (7) | 0.1 | — | 10.0 | — | 0.6
– personal | 2 | 1 | — | — | 3 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 437 | 31 | 59 | — | 527 | — | — | (6) | — | (6) | — | — | 10.2 | — | 1.1
– financial | 621 | 118 | 1 | — | 740 | (1) | — | — | — | (1) | 0.2 | — | — | — | 0.1
At 31 Dec 2021 | 201,835 | 5,676 | 1,115 | — | 208,626 | (52) | (59) | (280) | — | (391) | — | 1.0 | 25.1 | — | 0.2

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
3 Purchased or originated credit-impaired (‘POCI’).

Stage 2 days past due analysis at 31 December 2021 (continued)
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1 | 30 and > DPD 1 | Stage 2 | 1 to 29 DPD 1 | 30 and > DPD 1 | Stage 2 | 1 to 29 DPD 1 | 30 and > DPD 1
The bank | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost: | 3,197 | 19 | 6 | (47) | (1) | — | 1.5 | 5.3 | —
– Personal | 88 | 19 | 6 | (2) | (1) | — | 2.3 | 5.3 | —
– Corporate and commercial | 2,893 | — | — | (45) | — | — | 1.6 | — | —
– Non-bank financial institutions | 216 | — | — | — | — | — | — | — | —
Loans and advances to banks at amortised cost | 7 | — | — | (1) | — | — | 14.3 | — | —
Other financial assets measured at amortised cost | 21 | — | — | — | — | — | — | — | —

1 Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.
Stage 2 decomposition as at 31 December 2022
The following disclosure presents the stage 2 decomposition of
gross carrying amount and allowances for ECL for loans and
advances to customers. It also sets out the reasons why an
exposure is classified as stage 2 and therefore presented as a
significant increase in credit risk at 31 December 2022.
The quantitative classification shows gross carrying values and
allowances for ECL for which the applicable reporting date PD
measure exceeds defined quantitative thresholds for retail and
wholesale exposures.
The qualitative classification primarily accounts for credit risk
rating (‘CRR’) deterioration, watch-and-worry and retail
management judgemental adjustments.
For further details on our approach to the assessment of
significant increase in credit risk, see 'Summary of significant
accounting policies' on page 126.
Report of the Directors | Risk

44 | HSBC Bank plc Annual Report and Accounts 2022

Loans and advances to customers at 31 December 2022 1
| Gross carrying amount | Allowance for ECL | ECL Coverage % Total
| Personal | Corporate and commercial | Non-bank financial institutions | Total | Personal | Corporate and commercial | Non-bank financial institutions | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | %
Quantitative | 557 | 3,310 | 379 | 4,246 | (12) | (71) | (2) | (85) | 2.0
Qualitative | 56 | 2,874 | 319 | 3,249 | (3) | (51) | (5) | (59) | 1.8
30 DPD backstop 2 | 2 | 295 | 25 | 322 | — | (1) | — | (1) | 0.3
Total stage 2 | 615 | 6,479 | 723 | 7,817 | (15) | (123) | (7) | (145) | 1.9
The bank |  |  |  |  |  |  |  |  |
Quantitative | 456 | 1,109 | 314 | 1,879 | (6) | (13) | (1) | (20) | 1.1
Qualitative | 26 | 438 | 233 | 697 | (1) | (14) | — | (15) | 2.2
30 DPD backstop 2 | — | — | — | — | — | — | — | — | —
Total stage 2 | 482 | 1,547 | 547 | 2,576 | (7) | (27) | (1) | (35) | 1.4

1 Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross
exposure and ECL have been assigned in order of categories presented.
2 Days past due (‘DPD’).

Loans and advances to customers at 31 December 2021 1
| Gross carrying amount | Allowance for ECL | ECL Coverage % Total
| Personal | Corporate and commercial | Non-bank financial institutions | Total | Personal | Corporate and commercial | Non-bank financial institutions | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | %
Quantitative | 561 | 3,611 | 162 | 4,334 | (13) | (41) | (1) | (55) | 1.3
Qualitative | 102 | 4,260 | 198 | 4,560 | (2) | (96) | (4) | (102) | 2.2
30 DPD backstop 2 | 23 | 195 | 9 | 227 | (1) | — | — | (1) | 0.4
Total stage 2 | 686 | 8,066 | 369 | 9,121 | (16) | (137) | (5) | (158) | 1.7
The bank |  |  |  |  |  |  |  |  |
Quantitative | 26 | 1,731 | 95 | 1,852 | (2) | (9) | — | (11) | 0.6
Qualitative | 62 | 1,162 | 121 | 1,345 | — | (36) | — | (36) | 2.7
30 DPD backstop 2 | — | — | — | — | — | — | — | — | —
Total stage 2 | 88 | 2,893 | 216 | 3,197 | (2) | (45) | — | (47) | 1.5

1 Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross
exposure and ECL have been assigned in order of categories presented.
2 Days past due (‘DPD’).
Assets held for sale
(Audited)
During 2022, gross loans and advances and related impairment
allowances were reclassified from ‘loans and advances to
customers’ and ‘loans and advances to banks’ to ‘assets held for
sale’ in the balance sheet.
At 31 December 2022, the most material balances held for sale
came from our retail banking operations France.
Disclosures relating to assets held for sale are provided in the
following credit risk tables, primarily where the disclosure is
relevant to the measurement of these financial assets:
•Maximum exposure to credit risk (page 47);
•Distribution of financial instruments by credit quality at
31 December (page 57);
Although there was a reclassification on the balance sheet, there
was no separate income statement reclassification. As a result,
charges for loan impairment losses shown in the credit risk
disclosures include loan impairment charges relating to financial
assets classified as ‘assets held for sale’.
Loans and other credit-related commitments and financial
guarantees, as reported in credit disclosures, also include
exposures and allowances relating to financial assets classified as
‘assets held for sale’.

Loans and advances to customers and banks measured at amortised cost
(Audited) |  |
| Total gross loans and advances | Impairment allowances on loans and advances
| £m | £m
As reported | 90,869 | (1,146)
Reported in ‘Assets held for sale’ | 21,325 | (131)
At 31 Dec 2022 | 112,194 | (1,277)

At 31 December 2022, gross loans and advances of our retail
banking operations in France were £21bn, and the related
impairment allowance for ECL was £0.1bn.
Lending balances held for sale continue to be measured at
amortised cost less allowances for impairment and, therefore,
such carrying amounts may differ from fair value.
These lending balances are part of associated disposal groups that
are measured in their entirety at the lower of carrying amount and
fair value less costs to sell. Any difference between the carrying
amount of these assets and their sales price is part of the overall
gain or loss on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at 31 December
2022 of loans and advances to banks and customers classified as held for
sale, see note 34.

HSBC Bank plc Annual Report and Accounts 2022 | 45

Gross loans and impairment allowances on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited) |  |  |
| Retail banking operations in France | Other 1 | Total
Gross Loans | £m | £m | £m
Loans and advances to customers at amortised cost: | 20,852 | 342 | 21,194
Personal | 18,835 | 253 | 19,088
Corporate and Commercial | 1,975 | 89 | 2,064
Non-bank financial institutions | 42 | — | 42
Loans and advances to banks at amortised cost | — | 131 | 131
At 31 Dec 2022 | 20,852 | 473 | 21,325
Impairment allowance |  |  |
Loans and advances to customers at amortised cost: | (76) | (51) | (127)
Personal | (73) | (38) | (111)
Corporate and Commercial | (3) | (13) | (16)
Non-bank financial institutions | — | — | —
Loans and advances to banks at amortised cost | — | (4) | (4)
At 31 Dec 2022 | (76) | (55) | (131)

1 Comprising assets held for sale relating to the planned sale of our branch operations in Greece and of our business in Russia.
The table below analyses the amount of ECL (charges)/releases arising from assets held for sale. The charges during the period primarily
relate to the retail banking operations in France.

Changes in expected credit losses and other credit impairment
(Audited) |  |
| 2022 | 2021
| £m | £m
ECL charges arising from: |  |
– Asset held for sale | 4 | —
– Asset not held for sale | 218 | —
At 31 Dec | 222 | —

Credit exposure
Maximum exposure to credit risk
(Audited)
This section provides information on balance sheet items and their
offsets as well as loan and other credit-related commitments. The
offset on derivatives remains in line with the movements
in maximum exposure amounts.

‘Maximum exposure to credit risk’ table The following table presents our maximum exposure before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). The table excludes financial instruments whose carrying amount best represents the net exposure to credit risk and it excludes equity securities as they are not subject to credit risk. For the financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount; for financial guarantees and other guarantees granted, it is the maximum amount that we would have to pay if the guarantees were called upon. For loan commitments and other credit-related commitments, it is generally the full amount of the committed facilities. The offset in the table relates to amounts where there is a legally enforceable right of offset in the event of counterparty default and where, as a result, there is a net exposure for credit risk purposes. However, as there is no intention to settle these balances on a net basis under normal circumstances, they do not qualify for net presentation for accounting purposes. No offset has been applied to off-balance sheet collateral. In the case of derivatives the offset column also includes collateral received in cash and other financial assets.

Other credit risk mitigants
While not disclosed as an offset in the following ‘Maximum
exposure to credit risk’ table, other arrangements are in place
which reduce our maximum exposure to credit risk. These include
a charge over collateral on borrowers’ specific assets such as
residential properties, collateral held in the form of financial
instruments that are not held on balance sheet and short positions
in securities. In addition, for financial assets held as part of linked
insurance/investment contracts the credit risk is predominantly
borne by the policyholder. See Note 28 on the financial statements
for further details of collateral in respect of certain loans and
advances and derivatives.
Collateral available to mitigate credit risk is disclosed in the
'Collateral and other credit enhancement' section on page 69.
Report of the Directors | Risk

46 | HSBC Bank plc Annual Report and Accounts 2022

Maximum exposure to credit risk |  |  |
(Audited) | 2022 | 2021
| Maximum exposure | Offset | Net | Maximum exposure | Offset | Net
The group | £m | £m | £m | £m | £m | £m
Loans and advances to customers held at amortised cost | 72,614 | (8,149) | 64,465 | 91,177 | (7,057) | 84,120
– personal | 5,958 | (1) | 5,957 | 25,231 | — | 25,231
– corporate and commercial | 54,067 | (7,269) | 46,798 | 55,123 | (6,228) | 48,895
– non-bank financial institutions | 12,589 | (879) | 11,710 | 10,823 | (829) | 9,994
Loans and advances to banks at amortised cost | 17,109 | (145) | 16,964 | 10,784 | (88) | 10,696
Other financial assets held at amortised cost | 268,023 | (10,882) | 257,141 | 202,455 | (10,239) | 192,216
– cash and balances at central banks | 131,433 | — | 131,433 | 108,482 | — | 108,482
– items in the course of collection from other banks | 2,285 | — | 2,285 | 346 | — | 346
– reverse repurchase agreements – non trading | 53,949 | (10,882) | 43,067 | 54,448 | (10,239) | 44,209
– financial investments | 3,248 | — | 3,248 | 10 | — | 10
– asset held for sale | 21,214 | — | 21,214 |  |  |
– other assets | 55,894 | — | 55,894 | 39,169 | — | 39,169
Derivatives | 225,238 | (224,444) | 794 | 141,221 | (139,668) | 1,553
Total on balance sheet exposure to credit risk | 582,984 | (243,620) | 339,364 | 445,637 | (157,052) | 288,585
Total off-balance sheet | 150,270 | — | 150,270 | 146,261 | — | 146,261
– financial and other guarantees 1 | 22,425 | — | 22,425 | 26,840 | — | 26,840
– loan and other credit-related commitments | 127,845 | — | 127,845 | 119,421 | — | 119,421
At 31 Dec | 733,254 | (243,620) | 489,634 | 591,898 | (157,052) | 434,846

The bank |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 36,992 | (8,132) | 28,860 | 33,936 | (7,047) | 26,889
– personal | 3,572 | — | 3,572 | 3,674 | — | 3,674
– corporate and commercial | 22,209 | (7,264) | 14,945 | 20,874 | (6,224) | 14,650
– non-bank financial institutions | 11,211 | (868) | 10,343 | 9,388 | (823) | 8,565
Loans and advances to banks at amortised cost | 14,486 | — | 14,486 | 6,778 | — | 6,778
Other financial assets held at amortised cost | 169,367 | (10,427) | 158,940 | 135,109 | (9,045) | 126,064
– cash and balances at central banks | 78,441 | — | 78,441 | 63,008 | — | 63,008
– items in the course of collection from other banks | 1,863 | — | 1,863 | 211 | — | 211
– reverse repurchase agreements – non trading | 43,055 | (10,427) | 32,628 | 39,708 | (9,045) | 30,663
– financial investments | 6,378 | — | 6,378 | 3,337 | — | 3,337
– other assets | 39,630 | — | 39,630 | 28,845 | — | 28,845
Derivatives | 196,714 | (196,505) | 209 | 125,787 | (123,964) | 1,823
Total on balance sheet exposure to credit risk | 417,559 | (215,064) | 202,495 | 301,610 | (140,056) | 161,554
Total off-balance sheet | 44,673 | — | 44,673 | 41,034 | — | 41,034
– financial and other guarantees 1 | 8,231 | — | 8,231 | 8,592 | — | 8,592
– loan and other credit-related commitments | 36,442 | — | 36,442 | 32,442 | — | 32,442
At 31 Dec | 462,232 | (215,064) | 247,168 | 342,644 | (140,056) | 202,588

1‘Financial and other guarantees’ represents 'Financial guarantees' and 'Performance and other guarantees' as disclosed in Note 30, net of ECL.
Concentration of exposure
We have a number of businesses with a broad range of products.
We operate in a number of markets with the majority of our
exposures in UK and France.
For an analysis of:
•financial investments, see Note 15 on the financial statements;
•trading assets, see Note 10 on the financial statements;
•derivatives, see page 72 and Note 14 on the financial
statements; and
•loans and advances by industry sector and by the location
of the principal operations of the lending subsidiary or by the
location of the lending branch, see page 67 for wholesale
lending and page 72 for personal lending.
Credit deterioration of financial instruments
(Audited)
A summary of our current policies and practices regarding the identification,
treatment and measurement of stage 1, stage 2 and stage 3 (credit impaired)
and POCI financial instruments can be found in Note 1.2 on the financial
statements.

Measurement uncertainty and sensitivity analysis of ECL estimates

(Audited)
The recognition and measurement of ECL involves the use of
significant judgement and estimation. We form multiple economic
scenarios based on economic forecasts, apply these assumptions
to credit risk models to estimate future credit losses, and
probability-weight the results to determine an unbiased ECL
estimate. Management judgemental adjustments are used to
address late-breaking events, data and model limitations, model
deficiencies and expert credit judgements.
Amid a deterioration in the economic and geopolitical
environment, management judgements and estimates continued
to be subject to a high degree of uncertainty in relation to
assessing economic scenarios for impairment allowances in 2022.
Inflation, economic contraction and high interest rates combined
with an unstable geopolitical environment and the effects of global
supply chain disruptions have contributed to elevated levels of
uncertainty during the year.
At 31 December 2022, as a result of this uncertainty, additional
stage 1 and 2 impairment allowances were recognised.
Management continued to reflect a degree of caution both in the
selection of economic scenarios and their weightings, and in the
use of management judgemental adjustments, described in more
detail below.

HSBC Bank plc Annual Report and Accounts 2022 | 47

At 31 December 2022, there was a reduction in management
judgemental adjustments compared with 31 December 2021.
Adjustments related to Covid-19 and for sector-specific risks were
reduced as scenarios and modelled outcomes better reflected the
key risks at 31 December 2022.
Methodology
Four economic scenarios are used to capture the current
economic environment and to articulate management’s view of
the range of potential outcomes. Scenarios produced to calculate
ECL are aligned to HSBC’s top and emerging risks.
Three of the scenarios are drawn from consensus forecasts and
distributional estimates. The Central scenario is deemed the ‘most
likely’ scenario, and usually attracts the largest probability
weighting, while the outer scenarios represent the tails of the
distribution, which are less likely to occur. The Central scenario is
created using the average of a panel of external forecasters.
Consensus Upside and Downside scenarios are created with
reference to distributions for select markets that capture
forecasters’ views of the entire range of outcomes. In the later
years of the scenarios, projections revert to long-term consensus
trend expectations. In the consensus outer scenarios, reversion to
trend expectations is done mechanically with reference to
historically observed quarterly changes in the values of
macroeconomic variables.
The fourth scenario, Downside 2, is designed to represent
management’s view of severe downside risks. It is a globally
consistent narrative-driven scenario that explores more extreme
economic outcomes than those captured by the consensus
scenarios. In this scenario, variables do not, by design, revert to
long-term trend expectations. They may instead explore alternative
states of equilibrium, where economic activity moves permanently
away from past trends. The consensus Downside and the
consensus Upside scenarios are each constructed to be consistent
with a 10% probability. The Downside 2 is constructed with a 5%
probability. The Central scenario is assigned the remaining 75%.
This weighting scheme is deemed appropriate for the unbiased
estimation of ECL in most circumstances. However, management
may depart from this probability-based scenario weighting
approach when the economic outlook is determined to be
particularly uncertain and risks are elevated.
In light of ongoing risks, management deviated from this
probability weighting in the fourth quarter of 2022, and assigned
additional weight to outer scenarios.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC with reference to external forecasts specifically
for the purpose of calculating ECL.
Economic forecasts remain subject to a high degree of
uncertainty. Upside and Downside scenarios are constructed so
that they encompass the potential crystallisation of a number of
key macro-financial risks.
At the end of 2022, risks to the economic outlook included the
persistence of inflation and its consequences on monetary policy.
Rapid changes to public policy also increased forecast uncertainty.
In Europe, risks relating to energy pricing and supply security
remain significant. Geopolitical risks also remain significant and
include the possibility of a prolonged and escalating Russia-
Ukraine war, continued disagreements between the US and other
countries with China over a range of economic and strategic
issues, and the evolution of the UK’s relationship with the EU.
Economic forecasts for our main markets deteriorated in the fourth
quarter as GDP growth slowed. In Europe high inflation and rising
interest rates have reduced real household incomes and raised
business costs, dampening consumption and investment and
lowering growth expectations. The effects of higher interest rate
expectations and lower growth are evident in asset price
expectations, with house prices forecasts, in particular,
significantly lower.
The scenarios used to calculate ECL in the Annual Report and
Accounts 2022 are described below.
The consensus Central scenario
HSBC’s Central scenario reflects a low growth and higher inflation
environment across many of our key markets. The scenario
features an initial period of below-trend GDP growth in most of
our main markets as higher inflation and tighter monetary policy
causes a squeeze on business margins and households’ real
disposable income. Growth returns to its long term expected trend
in later years as central banks bring inflation back to target.
Our Central scenario assumes that inflation peaked in most of our
key markets at the end of 2022 but remains high through 2023
before moderating as energy prices stabilise and supply chain
disruptions abate. Central banks are expected to keep raising
interest rates until midway through 2023. Inflation is forecast to
revert to target in most markets, by early 2024.
Global GDP is expected to grow by 1.6% in 2023 in the Central
scenario and the average rate of global GDP growth is 2.5% over
the five-year forecast period. This is below the average growth
rate over the five-year period prior to the onset of the pandemic.
The key features of our Central scenario are:
•Economic activity in European and North American markets
continues to weaken. Most major economies are forecast to
grow in 2023, but at very low rates. Hong Kong and mainland
China are expected to see a recovery in economic activity from
2023 as Covid-19 related restrictions are lifted.
•In most markets, unemployment rises moderately from historic
lows as economic activity slows. Labour markets remain fairly
tight across our key markets.
•Inflation is expected to remain elevated across many of our key
markets driven by energy and food prices. Inflation is
subsequently expected to converge back towards central banks
target rate over the next two years of the forecast.
•Policy interest rates in key markets will continue to rise in the
near term but at a slower pace. Interest rates will stay elevated
but start to ease as inflation returns to target.
•The West Texas Intermediate oil price is forecast to average
$72 per barrel over the projection period.
The Central scenario was first created with forecasts available in
November, and reviewed continuously until late December.
Probability weights assigned to the Central scenario are 60% for
UK and France.
The following table describes key macroeconomic variables and
the probabilities assigned in the consensus Central scenario.
Report of the Directors | Risk

48 | HSBC Bank plc Annual Report and Accounts 2022

Central scenario 2023–2027
| UK | France
| % | %
GDP growth rate |  |
2023: Annual average growth rate | (0.8) | 0.2
2024: Annual average growth rate | 1.3 | 1.6
2025: Annual average growth rate | 1.7 | 1.5
5-year average | 1.1 | 1.2
Unemployment rate |  |
2023: Annual average rate | 4.4 | 7.6
2024: Annual average rate | 4.6 | 7.5
2025: Annual average rate | 4.3 | 7.3
5-year average | 4.3 | 7.3
House price growth |  |
2023: Annual average growth rate | 0.2 | 1.8
2024: Annual average growth rate | (3.8) | 2.0
2025: Annual average growth rate | 0.7 | 3.1
5-year average | 0.4 | 2.8
Inflation rate |  |
2023: Annual average rate | 6.9 | 4.6
2024: Annual average rate | 2.5 | 2.0
2025: Annual average rate | 2.1 | 1.8
5-year average | 3.1 | 2.4
Probability | 60.0 | 60.0

The graphs compare the respective Central scenario at the year
end 2021 with current economic expectations at the end of 2022.
GDP growth: Comparison
UK
Note: Real GDP shown as year-on-year percentage change.
France
Note: Real GDP shown as year-on-year percentage change.
The consensus Upside scenario
Compared with the Central scenario, the consensus Upside
scenario features stronger economic activity in the near term,
before converging to long-run trend expectations. It also
incorporates a faster fall in the rate of inflation than incorporated
in the Central scenario.
The scenario is consistent with a number of key upside risk
themes. These include faster resolution of supply chain issues; a
rapid conclusion to the Russia-Ukraine war; de-escalation of
tensions between the US and China; relaxation of Covid-19
policies in Asia; and improved relations between the UK and the
EU.
The following table describes key macroeconomic variables and
the probabilities assigned in the consensus Upside scenario.

Consensus Upside scenario 'best outcome'
| UK | France
| % |  | % |
GDP growth rate | 4.4 | (4Q24) | 3.1 | (1Q24)
Unemployment rate | 3.5 | (4Q23) | 6.5 | (4Q24)
House price growth | 4.2 | (1Q23) | 3.7 | (1Q23)
Inflation rate | 0.7 | (1Q24) | 0.8 | (4Q23)
Probability | 5 | 5

Note: Extreme point in the consensus Upside is ‘best outcome’ in the
scenario, for example the highest GDP growth and the lowest
unemployment rate, in the first two years of the scenario. The date on
which the extreme is reached is indicated in parenthesis. For inflation,
lower inflation is interpreted as the ‘best’ outcome.
Downside scenarios
Downside scenarios explore the intensification and crystallisation
of a number of key economic and financial risks.
High inflation and the tighter monetary policy response have
become key concerns for global growth. In the downside
scenarios, supply chain disruptions intensify, exacerbated by an
escalation in the spread of Covid-19 and rising geopolitical
tensions drive inflation higher.
There also remains a risk that energy and food prices rise further
due to the Russia-Ukraine war, increasing pressure on household
budgets and firms' costs.
The possibility of inflation expectations becoming detached from
central bank targets also remains a risk. A wage-price spiral
triggered by higher inflation and pandemic related labour supply
shortages across could put sustained upward pressure on wages,
aggravating cost pressures and the squeeze on household real
incomes and corporate margins. In turn, it raises the risk of a more
forceful policy response from central banks, a steeper trajectory
for interest rates and ultimately, deep economic recession.
The risks relating to Covid-19 are centred on the emergence of a
new variant with greater vaccine resistance that necessitates a
stringent public health policy. In Asia, with the reopening of China
in December, management of Covid-19 remains a key source of
uncertainty, with the rapid spread of the virus posing a heightened
risk of a new variant emerging.
The geopolitical environment also presents risks, including:
• a prolonged Russia-Ukraine war with escalation beyond
Ukraine’s borders;
• the deterioration of the trading relationship between the UK
and the EU over the Northern Ireland Protocol; and
• continued differences between the US and other countries with
China, which could affect sentiment and restrict global
economic activity.
The consensus Downside scenario
In the consensus Downside scenario, economic activity is
considerably weaker compared with the Central scenario. In this
scenario, GDP growth weakens below the Central scenario,
unemployment rates rise and asset prices fall.

HSBC Bank plc Annual Report and Accounts 2022 | 49

The scenario features a temporary supply side shock that keeps
inflation higher than the baseline, before the effects of weaker
demand begin to dominate leading to a fall in commodity prices
and to lower inflation.
The following table describes key macroeconomic variables and
the probabilities assigned in the consensus Downside scenario.

Consensus Downside scenario 'worst outcome'
| UK | France
| % |  | % |
GDP growth rate | (3.5) | (3Q23) | (1.4) | (3Q23)
Unemployment rate | 5.8 | (2Q24) | 8.8 | (4Q23)
House price growth | (10.1) | (2Q24) | (0.6) | (4Q23)
Inflation rate (min) | (0.4) | (4Q24) | 0.3 | (4Q24)
Inflation rate (max) | 10.8 | (1Q23) | 7.2 | (1Q23)
Probability | 25 | 25

Note: Extreme point in the consensus Downside is ‘worst outcome’ in
the scenario, for example lowest GDP growth and the highest
unemployment rate, in the first two years of the scenario. The date on
which the extreme is reached is indicated in parenthesis. Due to the
nature of the shock to inflation in the downside scenarios, both the
lowest and the highest point is shown in the tables.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management's view of the tail of the economic
distribution. It incorporates the crystallisation of a number of risks
simultaneously, including further escalation of the Russia-Ukraine
war, worsening of supply chain disruptions and the emergence of
a vaccine-resistant Covid-19 variant that necessitates a stringent
public health policy response globally.
This scenario features an initial supply-side shock that pushes up
inflation and interest rates higher. This impulse is expected to
prove short lived as a large downside demand pressure causes
commodity prices to correct sharply and global price inflation to
fall as a severe and prolonged recession takes hold.
The following table describes key macroeconomic variables and
the probabilities assigned in the Downside 2 scenario.

Downside 2 scenario 'worst outcome'
| UK | France
| % |  | % |
GDP growth rate | (6.9) | (3Q23) | (6.8) | (4Q23)
Unemployment rate | 8.7 | (2Q24) | 10.3 | (4Q24)
House price growth | (22.9) | (2Q24) | (6.4) | (2Q24)
Inflation rate (min) | (2.3) | (2Q24) | (2.5) | (2Q24)
Inflation rate (max) | 13.5 | (2Q23) | 10.4 | (2Q23)
Probability | 10 | 10

Note: Extreme point in the Downside 2 is ‘worst outcome’ in the
scenario, for example lowest GDP growth and the highest
unemployment rate, in the first two years of the scenario. The date on
which the extreme is reached is indicated in parenthesis. Due to the
nature of the shock to inflation in the downside scenarios, both the
lowest and the highest point is shown in the tables.
Scenario weighting
In reviewing the economic conjuncture, the level of uncertainty
and risk, management has considered both global and country-
specific factors. This has led management to assign scenario
probabilities that are tailored to its view of uncertainty in individual
markets.
Key consideration around uncertainty attached to the Central
scenario projections focused on:
• the progression of the Covid-19 pandemic in Asian countries
and announcement of removal of Covid-19 measures and travel
restrictions in mainland China and Hong Kong;
• further tightening of monetary policy and impact on borrowing
costs in interest rate sensitive sectors, such as housing;
•the risks to gas supply security in Europe and subsequent
impact on inflation and commodity prices and growth; and
•the ongoing risks to global supply chains.
In the UK, the surge in price inflation and a squeeze on household
real incomes have led to strong monetary policy responses from
central bank. Higher interest rates have increased recession risks
and the prospects for outright decline in house prices.
The UK faces additional challenges from the rise in energy prices
and accompanying deterioration in the terms of trade. For the UK,
the consensus Upside and Central scenarios had a combined
weighting of 65%.
In France, uncertainties around the outlook remain elevated due to
high inflation and Europe’s exposure to the Russia-Ukraine war
through the economic costs incurred from the imposition of
sanctions, trade disruption and energy dependence on Russia. The
consensus Upside and Central scenarios had a combined
weighting of 65%.
The following graphs show the historical and forecasted GDP
growth rate for the various economic scenarios in UK and France.
UK
France
Critical accounting estimates and judgements
The calculation of ECL under IFRS 9 involves significant
judgements, assumptions and estimates. The level of estimation
uncertainty and judgement has remained elevated since
31 December 2021, including judgements relating to:
•the selection and weighting of economic scenarios, given
rapidly changing economic conditions and a wide dispersion of
economic forecasts. There is judgement in making assumptions
about the effects of inflation and interest, global growth, supply
chain disruption; and
•estimating the economic effects of those scenarios on ECL,
particularly as the historical relationship between
macroeconomic variables and defaults might not reflect the
dynamics of current macroeconomic conditions.
How economic scenarios are reflected in ECL
calculations
Models are used to reflect economic scenarios on ECL estimates.
As described above, modelled assumptions and linkages based on
historical information could not alone produce relevant information
under the conditions experienced in 2022, and management
judgemental adjustments were still required to support modelled
outcomes.
Report of the Directors | Risk

50 | HSBC Bank plc Annual Report and Accounts 2022

We have developed globally consistent methodologies for the
application of forward economic guidance into the calculation of
ECL for wholesale and retail credit risk.
These standard approaches are described below, followed by the
management judgemental adjustments made, including those to
reflect the circumstances experienced in 2022.
For our wholesale portfolios, a global methodology is used for the
estimation of the term structure of probability of default (‘PD’) and
loss given default (‘LGD’). For PDs, we consider the correlation of
forward economic guidance to default rates for a particular
industry in a country. For LGD calculations, we consider the
correlation of forward economic guidance to collateral values and
realisation rates for a particular country and industry. PDs and
LGDs are estimated for the entire term structure of each
instrument.
For impaired loans, LGD estimates take into account independent
recovery valuations provided by external consultants where
available or internal forecasts corresponding to anticipated
economic conditions and individual company conditions. In
estimating the ECL on impaired loans that are individually
considered not to be significant, we incorporate forward economic
guidance proportionate to the probability-weighted outcome and
the Central scenario outcome of the performing population.
For our retail portfolios, the impact of economic scenarios on PD is
modelled at a portfolio level. Historical relationships between
observed default rates and macroeconomic variables are
integrated into IFRS 9 ECL estimates by using economic response
models. The impact of these scenarios on PD is modelled over a
period equal to the remaining maturity of the underlying asset or
assets. The impact on LGD is modelled for mortgage portfolios by
forecasting future loan-to-value (‘LTV’) profiles for the remaining
maturity of the asset by using national level forecasts of the house
price index and applying the corresponding LGD expectation.
These models are based largely on historical observations and
correlations with default rates. Management judgemental
adjustments are described below.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments
are short-term increases or decreases to the ECL at either a
customer, segment or portfolio level to account for late-breaking
events, model and data limitations and deficiencies, and expert
credit judgement applied following management review and
challenge.
This includes refining model inputs and outputs and using
adjustments to ECL based on management judgement and higher-
level quantitative analysis for impacts that are difficult to model.
The effects of management judgemental adjustments are
considered for balances and ECL when determining whether or
not a significant increase in credit risk has occurred and are
attributed or allocated to a stage as appropriate. This is in
accordance with the internal adjustments framework.
Management judgemental adjustments are reviewed under the
governance process for IFRS 9 (as detailed in the section ‘Credit
risk management’ on page 36). Review and challenge focuses on
the rationale and quantum of the adjustments with a further
review carried out by the second line of defence where significant.
For some management judgemental adjustments, internal
frameworks establish the conditions under which these
adjustments should no longer be required and as such are
considered as part of the governance process. This internal
governance process allows management judgemental
adjustments to be reviewed regularly and, where possible, to
reduce the reliance on these through model recalibration or
redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to
evolve with the economic environment and as new risks emerge.
Management judgemental adjustments made in estimating the
scenario-weighted reported ECL at 31 December 2022 are set out
in the following table.

Management judgemental adjustments to ECL at 31 December 2022 1
| Retail | Wholesale | Total
| £m | £m | £m
Banks, sovereigns, government entities and low-risk counterparties | (16) | (2) | (18)
Corporate lending adjustments | — | (100) | (100)
Retail lending Inflation-related adjustments | 8 | — | 8
Other macroeconomic-related adjustments | 3 | — | 3
Pandemic-related economic recovery adjustments | — | — | —
Other retail lending adjustments | 7 | — | 7
Total | 2 | (102) | (100)

Management judgemental adjustments to ECL at 31 December 2021
| Retail | Wholesale | Total
| £m | £m | £m
Low-risk counterparties (banks,sovereigns and government entities) | — | (4) | (4)
Corporate lending adjustments | — | 31 | 31
Retail lending probability of default adjustments | — | — | —
Retail model default timing adjustments | — | — | —
Macroeconomic-related adjustments | 17 | — | 17
Pandemic-related economic recovery adjustments | 3 | — | 3
Other retail lending adjustments | — | — | —
Total | 20 | 27 | 47

1 Management judgemental adjustments presented in the table reflect
increases or (decreases) to ECL, respectively.
Management judgemental adjustments at 31 December 2022
were a decrease to ECL of £102m for the wholesale portfolio and
an increase to ECL of £2m fo r the retail portfolio.
During 2022, management judgemental adjustments reflected an
evolving macroeconomic outlook and the relationship of the
modelled ECL to this outlook and to late-breaking and sector-
specific risks.
At 31 December 2022, wholesale management judgemental
adjustments were an ECL decrease of £102m (31 December 2021:
£27m increase).
•Adjustments relating to low credit-risk exposures decreased
ECL by £2m at 31 December 2022 (31 December 2021: £4m
decrease). The adjustments mainly relate to standard, monthly
adjustments for bank and sovereign exposures secured by
Export Credit Agency guarantees; the benefit from which is not
recognised in the inbound data. The reduction in ECL for these
exposures was mostly offset by a management overlay on a
Russian Bank exposure due to sanctions. Total net adjustments
are broadly flat in comparison to 31 December 2021.
•Adjustments to corporate exposures decreased ECL by £100m
at 31 December 2022 (31 December 2021: £31m increase). The
adjustments mainly relate to standard, monthly adjustments for
corporate exposures secured by Export Credit Agency
guarantees and government Covid-19 guarantees; the benefit
from which is not recognised in the inbound data. The
reduction in ECL for these exposures has been partially offset
by management overlays to reflect increased risk on an
individual exposure in France and increased risk on certain sub-
sectors within France. In comparison to December 2021, the
level of management overlay has significantly reduced as
modelled results increasingly reflect the macroeconomic
environment and portfolio risk, resulting in a net underlay
rather than overlay.

HSBC Bank plc Annual Report and Accounts 2022 | 51

At 31 December 2022, retail management judgemental
adjustments were an ECL increase of £2m (31 December 2021:
£20m increase).
•Retail lending inflation-related adjustments increased ECL by
£8m (31 December 2021: nil). These adjustments addressed
where increasing inflation and interest rates results in
affordability risks which were not fully captured by the
modelled output.
•Other macroeconomic-related adjustments increased ECL by
£3m (31 December 2021: £17m increase). These adjustments
were primarily in relation to country-specific risks related to
future macroeconomic conditions.
•Banks, sovereigns, government entities and low-risk
counterparties adjustments decreased ECL by £16m
(31 December 2021: nil). These adjustments related to the re-
alignment of PD between reporting and origination date for
certain parts of the portfolio.
•Other retail lending adjustments increased ECL by £7m
(31 December 2021: nil), reflecting all other data, model and
management judgemental adjustments.
•Pandemic-related economic recovery adjustments were
removed during 2022 as scenarios stabilised.
Economic scenarios sensitivity analysis of ECL
estimates
Management considered the sensitivity of the ECL outcome
against the economic forecasts as part of the ECL governance
process by recalculating the ECL under each scenario described
above for selected portfolios, applying a 100% weighting to each
scenario in turn. The weighting is reflected in both the
determination of a significant increase in credit risk and the
measurement of the resulting ECL.
The ECL calculated for the Upside and Downside scenarios should
not be taken to represent the upper and lower limits of possible
ECL outcomes. The impact of defaults that might occur in the
future under different economic scenarios is captured by
recalculating ECL for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in
numbers representing more severe risk scenarios when assigned a
100% weighting.
For wholesale credit risk exposures, the sensitivity analysis
excludes ECL and financial instruments related to defaulted (stage
3) obligors. It is generally impracticable to separate the effect of
macroeconomic factors in individual assessments of obligors in
default. The measurement of stage 3 ECL is relatively more
sensitive to credit factors specific to the obligor than future
economic scenarios, and loans to defaulted obligors are a small
portion of the overall wholesale lending exposure, even if
representing the majority of the allowance for ECL. Therefore, the
sensitivity analysis to macroeconomic scenarios does not capture
the residual estimation risk arising from wholesale stage 3
exposures. Due to the range and specificity of the credit factors to
which the ECL is sensitive, it is not possible to provide a
meaningful alternative sensitivity analysis for a consistent set of
risks across all defaulted obligors.
For retail credit risk exposures, the sensitivity analysis includes
ECL for loans and advances to customers related to defaulted
obligors. This is because the retail ECL for secured mortgage
portfolios including loans in all stages is sensitive to
macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%
weighted results. These exclude portfolios held by the insurance
business and small portfolios, and as such cannot be directly
compared with personal and wholesale lending presented in other
credit risk tables. Additionally, in both the wholesale and retail
analysis, the comparative period results for Downside 2 scenarios
are also not directly comparable with the current period, because
they reflect different risk profiles relative to the consensus
scenarios for the period end.
The wholesale and retail sensitivity analysis is stated inclusive of
management judgmental adjustments, as appropriate to each
scenario.
Wholesale analysis

IFRS 9 ECL sensitivity to future economic conditions 1,2,3
| UK | France
| £m | £m
ECL of loans and advances to customers at 31 December 2022 |  |
Reported ECL | 84 | 94
Consensus scenarios |  |
Central scenario | 64 | 87
Upside scenario | 51 | 77
Downside scenario | 91 | 104
Downside 2 scenario | 271 | 124
Gross carrying amount 2 | 143,037 | 148,417

IFRS 9 ECL sensitivity to future economic conditions
| UK | France
| £m | £m
ECL of loans and advances to customers at 31 December 2021 |  |
Reported ECL | 104 | 98
Consensus scenarios |  |
Central scenario | 90 | 89
Upside scenario | 71 | 78
Downside scenario | 109 | 120
Downside 2 scenario | 189 | 138
Gross carrying amount 2 | 142,450 | 120,955

1 ECL sensitivity includes off-balance sheet financial instruments that
are subject to significant measurement uncertainty.
2 Includes low credit-risk financial instruments such as debt
instruments at FVOCI, which have high carrying amounts but low
ECL under all the above scenarios.
3 Excludes defaulted obligors. For a detailed breakdown of performing
and non-performing wholesale portfolio exposures, see page 67.
Retail analysis

IFRS 9 ECL sensitivity to future economic conditions 1
| UK | France 2
| £m | £m
ECL of loans and advances to customers at 31 December 2022 |  |
Reported ECL | 7 | 87
Consensus scenarios |  |
Central scenario | 6 | 86
Upside scenario | 6 | 84
Downside scenario | 7 | 88
Downside 2 scenario | 12 | 92
Gross carrying amount | 2,037 | 18,987

IFRS 9 ECL sensitivity to future economic conditions 1
| UK | France
| £m | £m
ECL of loans and advances to customers at 31 December 2021 |  |
Reported ECL | 5 | 91
Consensus scenarios |  |
Central scenario | 4 | 91
Upside scenario | 4 | 91
Downside scenario | 5 | 92
Downside 2 scenario | 10 | 93
Gross carrying amount | 2,007 | 18,295

1 ECL sensitivities exclude portfolios utilising less complex modelling
approaches.
2 Includes balances and ECL which have been reclassified from ‘loans
and advances to customers’ to ‘assets held for sale’ in the balance
sheet. This also includes any balances and ECL which continue to be
reported as personal lending in ‘loans and advances to customers’
that are in accordance with the basis of inclusion for Retail sensitivity
analysis.
Report of the Directors | Risk

52 | HSBC Bank plc Annual Report and Accounts 2022

Reconciliation of changes in gross carrying/
nominal amount and allowances for loans and
advances to banks and customers including loan
commitments and financial guarantees
The following disclosure provides a reconciliation by stage of the
group’s gross carrying/nominal amount and allowances for loans
and advances to banks and customers, including loan
commitments and financial guarantees. Movements are calculated
on a quarterly basis and therefore fully capture stage movements
between quarters. If movements were calculated on a year-to-date
basis they would only reflect the opening and closing position of
the financial instrument.
The transfers of financial instruments represent the impact of
stage transfers upon the gross carrying/nominal amount and
associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the
underlying customer risk rating (‘CRR’)/probability of default (‘PD’)
movements of the financial instruments transferring stage. This is
captured, along with other credit quality movements in the
‘changes in risk parameters – credit quality’ line item.
Changes in ‘New financial assets originated or purchased’, ‘Assets
derecognised (including final repayments)’ and ‘Changes to risk
parameters – further lending/repayments’ represent the impact
from volume movements within the group’s lending portfolio.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 179,612 | (118) | 17,471 | (188) | 2,779 | (923) | 2 | (2) | 199,864 | (1,231)
Transfers of financial instruments | (14,449) | (26) | 13,625 | 59 | 824 | (33) | — | — | — | —
– transfers from stage 1 to stage 2 | (25,027) | 15 | 25,027 | (15) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 10,847 | (42) | (10,847) | 42 | — | — | — | — | — | —
– transfers to stage 3 | (340) | 2 | (600) | 35 | 940 | (37) | — | — | — | —
– transfers from stage 3 | 71 | (1) | 45 | (3) | (116) | 4 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 29 | — | (24) | — | (10) | — | — | — | (5)
New financial assets originated or purchased | 47,763 | (30) | — | — | — | — | — | — | 47,763 | (30)
Asset derecognised (including final repayments) | (27,882) | 4 | (2,625) | 13 | (442) | 110 | — | — | (30,949) | 127
Changes to risk parameters – further lending/repayments | (9,969) | 33 | (8,645) | 16 | (261) | (20) | 1 | — | (18,874) | 29
Changes to risk parameters – credit quality | — | 32 | — | (101) | — | (318) | — | 2 | — | (385)
Changes to model used for ECL calculation | — | 4 | — | 10 | — | — | — | — | — | 14
Assets written off | — | — | — | — | (165) | 165 | — | — | (165) | 165
Credit related modifications that resulted in derecognition | — | — | — | — | (1) | 1 | — | — | (1) | 1
Foreign exchange | 5,764 | (3) | 744 | (11) | 88 | (34) | — | — | 6,596 | (48)
Others 2,3 | (12,468) | 4 | (2,511) | 26 | (286) | 100 | — | — | (15,265) | 130
At 31 Dec 2022 | 168,371 | (71) | 18,059 | (200) | 2,536 | (962) | 3 | — | 188,969 | (1,233)
ECL income statement change for the period |  | 72 |  | (86) |  | (238) |  | 2 |  | (250)
Recoveries |  |  |  |  |  |  |  |  |  | 2
Others |  |  |  |  |  |  |  |  |  | 28
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (220)

HSBC Bank plc Annual Report and Accounts 2022 | 53

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| At 31 Dec 2022 | 12 months ended 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL | ECL release/ (charge)
| £m | £m | £m
As above | 188,969 | (1,233) | (220)
Other financial assets measured at amortised cost | 269,755 | (137) | (3)
Non-trading reverse purchase agreement commitments | 33,684 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | 6
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 492,408 | (1,370) | (217)
Debt instruments measured at FVOCI | 29,248 | (24) | (5)
Total allowance for ECL/total income statement ECL change for the period | N/A | (1,394) | (222)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2022, these amounted to
£4bn and were classified as stage 1 with no ECL.
3 Total includes £21bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale and a
corresponding allowance for ECL of £131m reflecting business disposals as disclosed in Note 34 ‘Assets held for sale and liabilities of disposal
groups held for sale’ on page 186.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2021 | 184,715 | (180) | 31,726 | (378) | 3,352 | (1,050) | 40 | (12) | 219,833 | (1,620)
Transfers of financial instruments: | 5,245 | (66) | (5,617) | 90 | 372 | (24) | — | — | — | —
– transfers from stage 1 to stage 2 | (8,431) | 14 | 8,431 | (14) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 13,714 | (78) | (13,714) | 78 | — | — | — | — | — | —
– transfers to stage 3 | (93) | — | (401) | 28 | 494 | (28) | — | — | — | —
– transfers from stage 3 | 55 | (2) | 67 | (2) | (122) | 4 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 43 | — | (22) | — | (5) | — | — | — | 16
New financial assets originated or purchased | 72,348 | (55) | — | — | — | — | — | — | 72,348 | (55)
Asset derecognised (including final repayments) | (57,098) | 6 | (3,481) | 32 | (454) | 95 | (3) | 2 | (61,036) | 135
Changes to risk parameters – further lending/repayments | (16,766) | 76 | (3,927) | 62 | (213) | 40 | (29) | 2 | (20,935) | 180
Changes to risk parameters – credit quality | — | 54 | — | 7 | — | (176) | — | — | — | (115)
Changes to model used for ECL calculation | — | 2 | — | 9 | — | — | — | — | — | 11
Assets written off | — | — | — | — | (152) | 152 | (5) | 5 | (157) | 157
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | (7,512) | 2 | (1,060) | 10 | (126) | 46 | (1) | 1 | (8,699) | 59
Others 2 | (1,320) | — | (170) | 2 | — | (1) | — | — | (1,490) | 1
At 31 Dec 2021 | 179,612 | (118) | 17,471 | (188) | 2,779 | (923) | 2 | (2) | 199,864 | (1,231)
ECL Income statement change for the period |  | 126 |  | 88 |  | (46) |  | 4 |  | 172
Recoveries |  |  |  |  |  |  |  |  |  | 3
Others |  |  |  |  |  |  |  |  |  | (23)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 152

Report of the Directors | Risk

54 | HSBC Bank plc Annual Report and Accounts 2022

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| At 31 Dec 2021 | 12 months ended 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL | ECL release /(charge)
| £m | £m | £m
As above | 199,864 | (1,231) | 152
Other financial assets measured at amortised cost | 202,137 | (9) | (1)
Non-trading reverse purchase agreement commitments | 30,005 | — | —
Performance and other guarantees not considered for IFRS 9 | 0 | 0 | 18
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 432,006 | (1,240) | 169
Debt instruments measured at FVOCI | 41,188 | (19) | 5
Total allowance for ECL/total income statement ECL change for the period | N/A | (1,259) | 174

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2021, these amounted to
£(1)bn and were classified as stage 1 with no ECL.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 65,710 | (56) | 5,657 | (58) | 1,088 | (276) | (1) | — | 72,454 | (390)
Transfers of financial instruments | (959) | (3) | 774 | 21 | 185 | (18) | — | — | — | —
– transfers from stage 1 to stage 2 | (6,499) | 6 | 6,499 | (6) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 5,554 | (9) | (5,554) | 9 | — | — | — | — | — | —
– transfers to stage 3 | (53) | — | (172) | 18 | 225 | (18) | — | — | — | —
– transfers from stage 3 | 39 | — | 1 | — | (40) | — | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 6 | — | (11) | — | — | — | — | — | (5)
New financial assets originated or purchased | 11,825 | (15) | — | — | — | — | — | — | 11,825 | (15)
Asset derecognised (including final repayments) | (6,459) | 1 | (272) | 2 | (21) | 2 | — | — | (6,752) | 5
Changes to risk parameters – further lending/repayments | 2,162 | 11 | (79) | 14 | (182) | 5 | — | — | 1,901 | 30
Changes to risk parameters – credit quality | — | 17 | — | (48) | — | (131) | — | — | — | (162)
Changes to model used for ECL calculation | — | 7 | — | 10 | — | — | — | — | — | 17
Assets written off | — | — | — | — | (62) | 62 | — | — | (62) | 62
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | 210 | — | 19 | (3) | 8 | (2) | 1 | — | 238 | (5)
Others 2 | 6,034 | (1) | — | — | — | — | — | — | 6,034 | (1)
At 31 Dec 2022 | 78,523 | (33) | 6,099 | (73) | 1,016 | (358) | — | — | 85,638 | (464)
ECL income statement change for the period |  | 27 |  | (33) |  | (124) |  | — |  | (130)
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | 18
Total ECL income change for the period |  |  |  |  |  |  |  |  |  | (112)

HSBC Bank plc Annual Report and Accounts 2022 | 55

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
| At 31 Dec 2022 | 12 months ended 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL | ECL release/ (charge)
| £m | £m | £m
As above | 85,638 | (464) | (112)
Other financial assets measured at amortised cost | 169,321 | (3) | (1)
Non-trading reverse purchase agreement commitments | 3,316 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | 1
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 258,275 | (467) | (112)
Debt instruments measured at FVOCI | 12,206 | (4) | 2
Total allowance for ECL/total income statement ECL change for the period | n/a | (471) | (110)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2022, these amounted to
£3bn and were classified as stage 1 with no ECL.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| Non-credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance/ for ECL | Gross carrying/ nominal amount | Allowance/ for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
1 Jan 2021 | 78,422 | (121) | 14,161 | (213) | 1,395 | (363) | 2 | (2) | 93,980 | (699)
Transfers of financial instruments: | 4,795 | (27) | (4,840) | 39 | 45 | (12) | — | — | — | —
– transfers from stage 1 to stage 2 | (2,261) | 3 | 2,261 | (3) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 7,043 | (29) | (7,043) | 29 | — | — | — | — | — | —
– transfers to stage 3 | — | — | (59) | 13 | 59 | (13) | — | — | — | —
– transfers from stage 3 | 13 | (1) | 1 | — | (14) | 1 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 13 | — | (1) | — | (1) | — | — | — | 11
New financial assets originated or purchased | 11,532 | (31) | — | — | — | — | — | — | 11,532 | (31)
Asset derecognised (including final repayments) | (11,861) | 2 | (1,836) | 17 | (80) | 4 | (2) | 1 | (13,779) | 24
Changes to risk parameters – further lending/repayments | (13,051) | 58 | (1,813) | 32 | (190) | 4 | — | — | (15,054) | 94
Changes to risk parameters – credit quality | — | 48 | — | 59 | — | 13 | — | — | — | 120
Changes to model used for ECL calculation | — | 2 | — | 9 | — | — | — | — | — | 11
Assets written off | — | — | — | — | (78) | 78 | (1) | 1 | (79) | 79
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | (76) | — | (15) | — | (4) | 1 | — | — | (95) | 1
Others 2 | (4,051) | — | — | — | — | — | — | — | (4,051) | —
At 31 Dec 2021 | 65,710 | (56) | 5,657 | (58) | 1,088 | (276) | (1) | — | 72,454 | (390)
ECL income statement change for the period |  | 92 |  | 116 |  | 20 |  | 1 |  | 229
Recoveries |  |  |  |  |  |  |  |  |  | 1
Others |  |  |  |  |  |  |  |  |  | (23)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 207

Report of the Directors | Risk

56 | HSBC Bank plc Annual Report and Accounts 2022

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
| At 31 Dec 2021 | 12 months ended 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL | ECL release/ (charge)
| £m | £m | £m
As above | 72,454 | (390) | 207
Other financial assets measured at amortised cost | 135,033 | (1) | 1
Non-trading reverse purchase agreement commitments | 1,139 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | 4
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 208,626 | (391) | 212
Debt instruments measured at FVOCI | 23,152 | (4) | 5
Total allowance for ECL/total income statement ECL change for the period | n/a | (395) | 217

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2021, these amounted to
£(4)bn and were classified as stage 1 with no ECL.
Credit quality
Credit quality of financial instruments
(Audited)
We assess the credit quality of all financial instruments that are
subject to credit risk. The credit quality of financial instruments is
a point-in-time assessment of the probability of default (‘PD’),
whereas stages 1 and 2 are determined based on relative
deterioration of credit quality since initial recognition.
Accordingly, for non-credit-impaired financial instruments, there is
no direct relationship between the credit quality assessment and
stages 1 and 2, though typically the lower credit quality bands
exhibit a higher proportion in stage 2.
The five credit quality classifications provided below each
encompass a range of granular internal credit rating grades
assigned to wholesale and personal lending businesses and the
external ratings attributed by external agencies to debt securities,
as shown in the table on page 37.

Distribution of financial instruments by credit quality at 31 December 2022
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 27,997 | 19,618 | 19,612 | 4,263 | 2,227 | 73,717 | (1,103) | 72,614
– personal | 2,019 | 2,928 | 858 | 103 | 105 | 6,013 | (55) | 5,958
– corporate and commercial | 19,352 | 13,393 | 16,496 | 3,910 | 1,853 | 55,004 | (937) | 54,067
– non-bank financial institutions | 6,626 | 3,297 | 2,258 | 250 | 269 | 12,700 | (111) | 12,589
Loans and advances to banks held at amortised cost | 14,637 | 790 | 1,634 | 26 | 65 | 17,152 | (43) | 17,109
Cash and balances at central banks | 131,379 | — | 55 | — | — | 131,434 | (1) | 131,433
Items in the course of collection from other banks | 2,281 | — | 4 | — | — | 2,285 | — | 2,285
Reverse repurchase agreements – non-trading | 43,777 | 7,953 | 2,219 | — | — | 53,949 | — | 53,949
Financial investments | 3,028 | — | 220 | — | — | 3,248 | — | 3,248
Assets held for sale | 19,419 | 1,598 | 1,773 | 124 | 291 | 23,205 | (133) | 23,072
Prepayments, accrued income and other assets | 53,972 | 708 | 896 | 26 | 32 | 55,634 | (3) | 55,631
– endorsements and acceptances | 208 | 4 | 25 | — | 6 | 243 | — | 243
– accrued income and other | 53,764 | 704 | 871 | 26 | 26 | 55,391 | (3) | 55,388
Debt instruments measured at fair value through other comprehensive income 1 | 28,248 | 2,471 | 626 | 105 | — | 31,450 | (24) | 31,426
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 26,961 | 4,323 | 9,966 | 298 | — | 41,548 | — | 41,548
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 1,945 | 331 | 669 | 1 | — | 2,946 | — | 2,946
Derivatives | 199,167 | 21,128 | 4,886 | 29 | 28 | 225,238 | — | 225,238
Assets held for sale | 107 | — | — | — | — | 107 | — | 107
Total gross carrying amount on balance sheet | 552,918 | 58,920 | 42,560 | 4,872 | 2,643 | 661,913 | (1,307) | 660,606

HSBC Bank plc Annual Report and Accounts 2022 | 57

Distribution of financial instruments by credit quality at 31 December 2022 (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Percentage of total credit quality | 84% | 9% | 6% | 1% | —% | 100% |  |
Loans and other credit-related commitments | 82,801 | 23,578 | 17,523 | 2,392 | 163 | 126,457 | (67) | 126,390
Loan and other credit related commitments for loans and advances to customers | 48,627 | 23,501 | 17,422 | 2,390 | 163 | 92,103 | (66) | 92,037
Loan and other credit-related commitments for loans and advances to banks | 34,174 | 77 | 101 | 2 | — | 34,354 | (1) | 34,353
Financial guarantees | 2,924 | 1,171 | 995 | 153 | 84 | 5,327 | (20) | 5,307
In-scope: Irrevocable loan commitments and financial guarantees | 85,725 | 24,749 | 18,518 | 2,545 | 247 | 131,784 | (87) | 131,697
Loans and other credit-related commitments | 1,168 | 183 | 90 | 14 | 1 | 1,456 | — | 1,456
Performance and other guarantees | 9,791 | 3,583 | 3,074 | 599 | 89 | 17,136 | (18) | 17,118
Out-of-scope: Revocable loan commitments and non-financial guarantees | 10,959 | 3,766 | 3,164 | 613 | 90 | 18,592 | (18) | 18,574

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.

Distribution of financial instruments by credit quality at 31 December 2021 (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 41,339 | 20,531 | 23,469 | 4,512 | 2,480 | 92,331 | (1,154) | 91,177
– personal | 18,956 | 4,136 | 1,793 | 56 | 453 | 25,394 | (163) | 25,231
– corporate and commercial | 16,533 | 13,867 | 19,597 | 4,305 | 1,785 | 56,087 | (964) | 55,123
– non-bank financial institutions | 5,850 | 2,528 | 2,079 | 151 | 242 | 10,850 | (27) | 10,823
Loans and advances to banks held at amortised cost | 8,649 | 320 | 1,815 | 5 | — | 10,789 | (5) | 10,784
Cash and balances at central banks | 108,133 | 198 | 151 | — | — | 108,482 | — | 108,482
Items in the course of collection from other banks | 343 | — | 3 | — | — | 346 | — | 346
Reverse repurchase agreements – non-trading | 47,071 | 6,355 | 1,022 | — | — | 54,448 | — | 54,448
Financial investments | 2 | — | 8 | — | — | 10 | — | 10
Assets held for sale | — | — | — | — | — | — | — | —
Prepayments, accrued income and other assets | 36,558 | 666 | 1,574 | 11 | 42 | 38,851 | (9) | 38,842
– endorsements and acceptances | 105 | 61 | 23 | — | 7 | 196 | — | 196
– accrued income and other | 36,453 | 605 | 1,551 | 11 | 35 | 38,655 | (9) | 38,646
Debt instruments measured at fair value through other comprehensive income 1 | 36,410 | 1,899 | 1,406 | 118 | — | 39,833 | (19) | 39,814
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 28,110 | 5,331 | 8,985 | 350 | — | 42,776 | — | 42,776
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 2,246 | 304 | 2,644 | 3 | — | 5,197 | — | 5,197
Derivatives | 111,471 | 25,487 | 4,054 | 207 | 2 | 141,221 | — | 141,221
Assets held for sale |  |  |  |  |  |  |  |
Total gross carrying amount on balance sheet | 420,332 | 61,091 | 45,131 | 5,206 | 2,524 | 534,284 | (1,187) | 533,097
Percentage of total credit quality | 78.7% | 11.4% | 8.4% | 1.0% | 0.5% | 100.0% |  |
Loans and other credit-related commitments | 71,741 | 21,860 | 20,018 | 1,874 | 202 | 115,695 | (55) | 115,640
Financial guarantees | 8,412 | 1,088 | 1,245 | 210 | 99 | 11,054 | (17) | 11,037
In-scope: Irrevocable loan commitments and financial guarantees | 80,153 | 22,948 | 21,263 | 2,084 | 301 | 126,749 | (72) | 126,677
Loans and other credit-related commitments | 2,134 | 1,114 | 432 | 94 | 7 | 3,781 | — | 3,781
Performance and other guarantees | 7,738 | 4,359 | 3,130 | 490 | 116 | 15,833 | (31) | 15,802
Out-of-scope: Revocable loan commitments and non-financial guarantees | 9,872 | 5,473 | 3,562 | 584 | 123 | 19,614 | (31) | 19,583

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.
Report of the Directors | Risk

58 | HSBC Bank plc Annual Report and Accounts 2022

Distribution of financial instruments by credit quality at 31 December 2022
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 21,601 | 9,291 | 4,838 | 765 | 875 | 37,370 | (378) | 36,992
– personal | 1,837 | 927 | 797 | 10 | 13 | 3,584 | (12) | 3,572
– corporate and commercial | 12,018 | 6,001 | 3,230 | 613 | 594 | 22,456 | (247) | 22,209
– non-bank financial institutions | 7,746 | 2,363 | 811 | 142 | 268 | 11,330 | (119) | 11,211
Loans and advances to banks held at amortised cost | 13,764 | 512 | 163 | 25 | 65 | 14,529 | (43) | 14,486
Cash and balances at central banks | 78,442 | — | — | — | — | 78,442 | (1) | 78,441
Items in the course of collection from other banks | 1,863 | — | — | — | — | 1,863 | — | 1,863
Reverse repurchase agreements – non-trading | 33,159 | 7,763 | 2,133 | — | — | 43,055 | — | 43,055
Financial investments | 6,190 | — | 188 | — | — | 6,378 | — | 6,378
Prepayments, accrued income and other assets | 39,376 | 95 | 81 | 10 | 21 | 39,583 | (2) | 39,581
– endorsements and acceptances | 205 | 4 | 3 | — | 6 | 218 | — | 218
– accrued income and other | 39,171 | 91 | 78 | 10 | 15 | 39,365 | (2) | 39,363
Debt instruments measured at fair value through other comprehensive income 1 | 12,827 | 64 | 307 | — | — | 13,198 | (4) | 13,194
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 18,479 | 4,226 | 9,213 | 298 | — | 32,216 | — | 32,216
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 149 | 214 | 651 | 1 | — | 1,015 | — | 1,015
Derivatives | 174,548 | 18,118 | 4,031 | 17 | — | 196,714 | — | 196,714
Total gross carrying amount on balance sheet | 400,398 | 40,283 | 21,605 | 1,116 | 961 | 464,363 | (428) | 463,935
Percentage of total credit quality | 86.2% | 8.7% | 4.7% | 0.2% | 0.2% | 100.0% |  |
Loans and other credit-related commitments | 25,143 | 6,577 | 3,200 | 732 | 40 | 35,692 | (31) | 35,661
Financial guarantees | 729 | 205 | 388 | 5 | 36 | 1,363 | (12) | 1,351
In-scope: Irrevocable loan commitments and financial guarantees | 25,872 | 6,782 | 3,588 | 737 | 76 | 37,055 | (43) | 37,012
Loans and other credit-related commitments | 493 | 183 | 91 | 14 | 1 | 782 | — | 782
Performance and other guarantees | 5,338 | 1,083 | 417 | 42 | 6 | 6,886 | (7) | 6,879
Out-of-scope: Revocable loan commitments and non-financial guarantees | 5,831 | 1,266 | 508 | 56 | 7 | 7,668 | (7) | 7,661

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.

HSBC Bank plc Annual Report and Accounts 2022 | 59

Distribution of financial instruments by credit quality at 31 December 2021 (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 16,993 | 9,038 | 6,467 | 804 | 984 | 34,286 | (350) | 33,936
– personal | 1,909 | 850 | 860 | 13 | 48 | 3,680 | (6) | 3,674
– corporate and commercial | 8,120 | 6,649 | 5,003 | 729 | 681 | 21,182 | (308) | 20,874
– non-bank financial institutions | 6,964 | 1,539 | 604 | 62 | 255 | 9,424 | (36) | 9,388
Loans and advances to banks held at amortised cost | 6,427 | 166 | 187 | 2 | — | 6,782 | (4) | 6,778
Cash and balances at central banks | 63,008 | — | — | — | — | 63,008 | — | 63,008
Items in the course of collection from other banks | 211 | — | — | — | — | 211 | — | 211
Reverse repurchase agreements – non-trading | 32,877 | 5,916 | 915 | — | — | 39,708 | — | 39,708
Financial investments | 3,337 | — | — | — | — | 3,337 | — | 3,337
Prepayments, accrued income and other assets | 28,524 | 121 | 94 | 2 | 28 | 28,769 | (1) | 28,768
– endorsements and acceptances | 90 | 61 | 13 | — | 7 | 171 | — | 171
– accrued income and other | 28,434 | 60 | 81 | 2 | 21 | 28,598 | (1) | 28,597
Debt instruments measured at fair value through other comprehensive income 1 | 21,748 | 64 | 1,039 | — | — | 22,851 | (4) | 22,847
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 18,318 | 5,082 | 8,470 | 350 | — | 32,220 | — | 32,220
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 138 | — | 2,504 | 2 | — | 2,644 | — | 2,644
Derivatives | 98,698 | 24,160 | 2,854 | 75 | — | 125,787 | — | 125,787
Total gross carrying amount on balance sheet | 290,279 | 44,547 | 22,530 | 1,235 | 1,012 | 359,603 | (359) | 359,244
Percentage of total credit quality | 80.7% | 12.4% | 6.3% | 0.3% | 0.3% | 100.0% |  |
Loans and other credit-related commitments | 20,446 | 6,663 | 3,651 | 452 | 43 | 31,255 | (29) | 31,226
Financial guarantees | 630 | 89 | 471 | 20 | 60 | 1,270 | (7) | 1,263
In-scope: Irrevocable loan commitments and financial guarantees | 21,076 | 6,752 | 4,122 | 472 | 103 | 32,525 | (36) | 32,489
Loans and other credit-related commitments | 620 | 383 | 126 | 86 | 1 | 1,216 | — | 1,216
Performance and other guarantees | 4,846 | 1,939 | 480 | 56 | 13 | 7,334 | (7) | 7,327
Out-of-scope: Revocable loan commitments and non-financial guarantees | 5,466 | 2,322 | 606 | 142 | 14 | 8,550 | (7) | 8,543

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.
Report of the Directors | Risk

60 | HSBC Bank plc Annual Report and Accounts 2022

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage distribution
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 27,997 | 19,618 | 19,612 | 4,263 | 2,227 | 73,717 | (1,103) | 72,614
– stage 1 | 27,183 | 18,885 | 16,313 | 1,292 | — | 63,673 | (51) | 63,622
– stage 2 | 814 | 733 | 3,299 | 2,971 | — | 7,817 | (145) | 7,672
– stage 3 | — | — | — | — | 2,224 | 2,224 | (907) | 1,317
– POCI | — | — | — | — | 3 | 3 | — | 3
Loans and advances to banks at amortised cost | 14,637 | 790 | 1,634 | 26 | 65 | 17,152 | (43) | 17,109
– stage 1 | 14,502 | 565 | 1,605 | 1 | — | 16,673 | (6) | 16,667
– stage 2 | 135 | 225 | 29 | 25 | — | 414 | (21) | 393
– stage 3 | — | — | — | — | 65 | 65 | (16) | 49
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 253,856 | 10,259 | 5,167 | 150 | 323 | 269,755 | (137) | 269,618
– stage 1 | 253,577 | 9,893 | 4,272 | 28 | — | 267,770 | (14) | 267,756
– stage 2 | 279 | 366 | 895 | 122 | — | 1,662 | (17) | 1,645
– stage 3 | — | — | — | — | 323 | 323 | (106) | 217
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 82,801 | 23,578 | 17,523 | 2,392 | 163 | 126,457 | (67) | 126,390
– stage 1 | 79,931 | 21,530 | 14,570 | 963 | — | 116,994 | (13) | 116,981
– stage 2 | 2,870 | 2,048 | 2,953 | 1,429 | — | 9,300 | (32) | 9,268
– stage 3 | — | — | — | — | 163 | 163 | (22) | 141
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 2,924 | 1,171 | 995 | 153 | 84 | 5,327 | (20) | 5,307
– stage 1 | 2,895 | 1,058 | 727 | 35 | — | 4,715 | (1) | 4,714
– stage 2 | 29 | 113 | 268 | 118 | — | 528 | (2) | 526
– stage 3 | — | — | — | — | 84 | 84 | (17) | 67
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 382,215 | 55,416 | 44,931 | 6,984 | 2,862 | 492,408 | (1,370) | 491,038
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 28,047 | 2,384 | 547 | — | — | 30,978 | (10) | 30,968
– stage 2 | 201 | 87 | 79 | 105 | — | 472 | (14) | 458
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 28,248 | 2,471 | 626 | 105 | — | 31,450 | (24) | 31,426

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.

HSBC Bank plc Annual Report and Accounts 2022 | 61

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage distribution (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 41,339 | 20,531 | 23,469 | 4,512 | 2,480 | 92,331 | (1,154) | 91,177
– stage 1 | 40,831 | 19,376 | 19,077 | 1,446 | — | 80,730 | (86) | 80,644
– stage 2 | 508 | 1,155 | 4,392 | 3,066 | — | 9,121 | (158) | 8,963
– stage 3 | — | — | — | — | 2,478 | 2,478 | (908) | 1,570
– POCI | — | — | — | — | 2 | 2 | (2) | —
Loans and advances to banks at amortised cost | 8,649 | 320 | 1,815 | 5 | — | 10,789 | (5) | 10,784
– stage 1 | 8,620 | 311 | 1,814 | 5 | — | 10,750 | (4) | 10,746
– stage 2 | 29 | 9 | 1 | — | — | 39 | (1) | 38
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 192,107 | 7,219 | 2,758 | 11 | 42 | 202,137 | (9) | 202,128
– stage 1 | 192,105 | 7,214 | 2,727 | 2 | — | 202,048 | — | 202,048
– stage 2 | 2 | 5 | 31 | 9 | — | 47 | — | 47
– stage 3 | — | — | — | — | 42 | 42 | (9) | 33
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 71,741 | 21,860 | 20,018 | 1,874 | 202 | 115,695 | (55) | 115,640
– stage 1 | 71,074 | 19,960 | 16,337 | 551 | — | 107,922 | (25) | 107,897
– stage 2 | 667 | 1,900 | 3,681 | 1,323 | — | 7,571 | (22) | 7,549
– stage 3 | — | — | — | — | 202 | 202 | (8) | 194
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 8,412 | 1,088 | 1,245 | 210 | 99 | 11,054 | (17) | 11,037
– stage 1 | 8,340 | 951 | 849 | 75 | — | 10,215 | (3) | 10,212
– stage 2 | 72 | 137 | 396 | 135 | — | 740 | (7) | 733
– stage 3 | — | — | — | — | 99 | 99 | (7) | 92
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2021 | 322,248 | 51,018 | 49,305 | 6,612 | 2,823 | 432,006 | (1,240) | 430,766
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 36,005 | 1,825 | 1,292 | — | — | 39,122 | (10) | 39,112
– stage 2 | 405 | 74 | 114 | 118 | — | 711 | (9) | 702
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2021 | 36,410 | 1,899 | 1,406 | 118 | — | 39,833 | (19) | 39,814

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.
Report of the Directors | Risk

62 | HSBC Bank plc Annual Report and Accounts 2022

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage distribution (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 21,601 | 9,291 | 4,838 | 765 | 875 | 37,370 | (378) | 36,992
– stage 1 | 20,937 | 9,032 | 3,849 | 101 | — | 33,919 | (19) | 33,900
– stage 2 | 664 | 259 | 989 | 664 | — | 2,576 | (35) | 2,541
– stage 3 | — | — | — | — | 875 | 875 | (324) | 551
– POCI | — | — | — | — | — | — | — | —
Loans and advances to banks at amortised cost | 13,764 | 512 | 163 | 25 | 65 | 14,529 | (43) | 14,486
– stage 1 | 13,663 | 502 | 134 | — | — | 14,299 | (5) | 14,294
– stage 2 | 101 | 10 | 29 | 25 | — | 165 | (22) | 143
– stage 3 | — | — | — | — | 65 | 65 | (16) | 49
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 159,030 | 7,858 | 2,402 | 10 | 21 | 169,321 | (3) | 169,318
– stage 1 | 159,026 | 7,857 | 2,393 | — | — | 169,276 | (2) | 169,274
– stage 2 | 4 | 1 | 9 | 10 | — | 24 | (1) | 23
– stage 3 | — | — | — | — | 21 | 21 | — | 21
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 25,143 | 6,577 | 3,200 | 732 | 40 | 35,692 | (31) | 35,661
– stage 1 | 24,007 | 5,971 | 2,329 | 120 | — | 32,427 | (9) | 32,418
– stage 2 | 1,136 | 606 | 871 | 612 | — | 3,225 | (15) | 3,210
– stage 3 | — | — | — | — | 40 | 40 | (7) | 33
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 729 | 205 | 388 | 5 | 36 | 1,363 | (12) | 1,351
– stage 1 | 729 | 200 | 265 | — | — | 1,194 | — | 1,194
– stage 2 | — | 5 | 123 | 5 | — | 133 | (1) | 132
– stage 3 | — | — | — | — | 36 | 36 | (11) | 25
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 220,267 | 24,443 | 10,991 | 1,537 | 1,037 | 258,275 | (467) | 257,808
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 12,827 | 64 | 302 | — | — | 13,193 | (1) | 13,192
– stage 2 | — | — | 5 | — | — | 5 | (3) | 2
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 12,827 | 64 | 307 | — | — | 13,198 | (4) | 13,194

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.

HSBC Bank plc Annual Report and Accounts 2022 | 63

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage distribution (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 16,993 | 9,038 | 6,467 | 804 | 984 | 34,286 | (350) | 33,936
– stage 1 | 16,757 | 8,305 | 4,964 | 79 | — | 30,105 | (33) | 30,072
– stage 2 | 236 | 733 | 1,503 | 725 | — | 3,197 | (47) | 3,150
– stage 3 | — | — | — | — | 984 | 984 | (270) | 714
– POCI | — | — | — | — | — | — | — | —
Loans and advances to banks at amortised cost | 6,427 | 166 | 187 | 2 | — | 6,782 | (4) | 6,778
– stage 1 | 6,427 | 160 | 186 | 2 | — | 6,775 | (3) | 6,772
– stage 2 | — | 6 | 1 | — | — | 7 | (1) | 6
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 127,957 | 6,037 | 1,009 | 2 | 28 | 135,033 | (1) | 135,032
– stage 1 | 127,956 | 6,037 | 991 | — | — | 134,984 | — | 134,984
– stage 2 | 1 | — | 18 | 2 | — | 21 | — | 21
– stage 3 | — | — | — | — | 28 | 28 | (1) | 27
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 20,446 | 6,663 | 3,651 | 452 | 43 | 31,255 | (29) | 31,226
– stage 1 | 20,307 | 6,469 | 2,135 | — | — | 28,911 | (15) | 28,896
– stage 2 | 139 | 194 | 1,516 | 452 | — | 2,301 | (11) | 2,290
– stage 3 | — | — | — | — | 43 | 43 | (3) | 40
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 630 | 89 | 471 | 20 | 60 | 1,270 | (7) | 1,263
– stage 1 | 630 | 89 | 324 | 17 | — | 1,060 | (1) | 1,059
– stage 2 | — | — | 147 | 3 | — | 150 | — | 150
– stage 3 | — | — | — | — | 60 | 60 | (6) | 54
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2021 | 172,453 | 21,993 | 11,785 | 1,280 | 1,115 | 208,626 | (391) | 208,235
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 21,748 | 64 | 1,035 | — | — | 22,847 | (2) | 22,845
– stage 2 | — | — | 4 | — | — | 4 | (2) | 2
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2021 | 21,748 | 64 | 1,039 | — | — | 22,851 | (4) | 22,847

1 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.
Credit‑impaired loans
(Audited)
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 that 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 which are considered defaulted or
otherwise credit-impaired.
Report of the Directors | Risk

64 | HSBC Bank plc Annual Report and Accounts 2022

Forbearance
The following table shows the gross carrying amounts of the
group’s holdings of forborne loans and advances to customers by
industry sector and by stages.
A summary of our current policies and practices for forbearance is set out in
'Credit risk management' on page 37.

Forborne loans and advances to customers at amortised costs by stage allocation
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m
Gross carrying amount |  |  |  |  |
Personal | — | 29 | 32 | — | 61
– first lien residential mortgages | — | 24 | 27 | — | 51
– other personal lending which is secured | — | 3 | 4 | — | 7
– credit cards | — | 1 | — | — | 1
– other personal lending which is unsecured | — | 1 | 1 | — | 2
Wholesale | — | 1,816 | 726 | — | 2,542
– corporate and commercial | — | 1,804 | 722 | — | 2,526
– non-bank financial institutions | — | 12 | 4 | — | 16
At 31 Dec 2022 | — | 1,845 | 758 | — | 2,603
Allowance for ECL |  |  |  |  |
Personal | — | (2) | (4) | — | (6)
– first lien residential mortgages | — | (2) | (4) | — | (6)
– other personal lending which is secured | — | — | — | — | —
– credit cards | — | — | — | — | —
– other personal lending which is unsecured | — | — | — | — | —
Wholesale | — | (25) | (252) | — | (277)
– corporate and commercial | — | (24) | (252) | — | (276)
– non-bank financial institutions | — | (1) | — | — | (1)
At 31 Dec 2022 | — | (27) | (256) | — | (283)

The group |  |  |  |  |
Gross carrying amount |  |  |  |  |
Personal | — | — | 132 | — | 132
– first lien residential mortgages | — | — | 96 | — | 96
– other personal lending | — | — | 36 | — | 36
Wholesale | 49 | 192 | 706 | 2 | 949
– corporate and commercial | 49 | 192 | 702 | 2 | 945
– non-bank financial institutions | — | — | 4 | — | 4
At 31 Dec 2021 1 | 49 | 192 | 838 | 2 | 1,081
Allowance for ECL |  |  |  |  |
Personal | — | — | (15) | — | (15)
– first lien residential mortgages | — | — | (11) | — | (11)
– other personal lending | — | — | (4) | — | (4)
Wholesale | (1) | (5) | (218) | (2) | (226)
– corporate and commercial | (1) | (5) | (218) | (2) | (226)
– non-bank financial institutions | — | — | — | — | —
At 31 Dec 2021 1 | (1) | (5) | (233) | (2) | (241)

1 Forborne exposures and allowances for ECL at 31 December 2021 have not been restated and agreed with the policies and disclosures presented
in the Annual Report and Accounts 2021.
Following the adoption of the EBA ‘Guidelines on the application of definition of default’, retail and wholesale loans are identified as
forborne and classified as either performing or non-performing when we modify the contractual terms due to financial difficulty of the
borrower. At 31 December 2022, we reported £1,845m (31 December 2021: £241m) of performing forborne loans. The increase of
£1,604m was mainly driven by the inclusion of non-payment-related concessions in the forbearance assessment since 1 January 2022.

HSBC Bank plc Annual Report and Accounts 2022 | 65

Forborne loans and advances to customers at amortised costs by stage allocation (continued)
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
The bank | £m | £m | £m | £m | £m
Gross carrying amount |  |  |  |  |
Personal | — | 1 | 7 | — | 8
– first lien residential mortgages | — | — | 6 | — | 6
– credit cards | — | 1 | — | — | 1
– other personal lending which is unsecured | — | — | 1 | — | 1
Wholesale | — | 106 | 364 | — | 470
– corporate and commercial | — | 106 | 364 | — | 470
At 31 Dec 2022 | — | 107 | 371 | — | 478
Allowance for ECL |  |  |  |  |
Personal | — | — | (1) | — | (1)
– first lien residential mortgages | — | — | (1) | — | (1)
– credit cards | — | — | — | — | —
– other personal lending which is unsecured | — | — | — | — | —
Wholesale | — | (1) | (158) | — | (159)
– corporate and commercial | — | (1) | (158) | — | (159)
At 31 Dec 2022 | — | (1) | (159) | — | (160)

The bank |  |  |  |  |
Gross carrying amount |  |  |  |  |
Personal | — | — | 3 | — | 3
– first lien residential mortgages | — | — | 2 | — | 2
– other personal lending | — | — | 1 | — | 1
Wholesale | 40 | 158 | 431 | — | 629
– corporate and commercial | 40 | 158 | 431 | — | 629
At 31 Dec 2021 1 | 40 | 158 | 434 | — | 632
Allowance for ECL |  |  |  |  |
Personal | — | — | — | — | —
– first lien residential mortgages | — | — | — | — | —
– other personal lending | — | — | — | — | —
Wholesale | (1) | (2) | (124) | — | (127)
– corporate and commercial | (1) | (2) | (124) | — | (127)
At 31 Dec 2021 1 | (1) | (2) | (124) | — | (127)

1 Forborne exposures and allowances for ECL at 31 December 2021 have not been restated and agreed with the policies and disclosures presented
in the Annual Report and Accounts 2021.
Report of the Directors | Risk

66 | HSBC Bank plc Annual Report and Accounts 2022

Wholesale lending
This section provides further details on the countries and
industries comprising wholesale loans and advances to customers
and banks. Industry granularity is also provided by stage with
geographical data presented for loans and advances to customers
and banks, loans and other credit-related commitments and
financial guarantees.

Total wholesale lending for loans and advances to banks and customers by stage distribution
| Gross carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 46,671 | 6,479 | 1,851 | 3 | 55,004 | (40) | (123) | (774) | — | (937)
– agriculture, forestry and fishing | 166 | 20 | 29 | — | 215 | — | (1) | (12) | — | (13)
– mining and quarrying | 943 | 1 | — | — | 944 | (2) | — | — | — | (2)
– manufacture | 9,963 | 1,228 | 317 | 2 | 11,510 | (7) | (13) | (78) | — | (98)
– electricity, gas, steam and air- conditioning supply | 1,838 | 165 | 78 | — | 2,081 | (1) | (1) | (6) | — | (8)
– water supply, sewerage, waste management and remediation | 208 | 6 | 5 | — | 219 | — | — | (4) | — | (4)
– construction | 571 | 107 | 47 | — | 725 | (1) | (3) | (14) | — | (18)
– wholesale and retail trade, repair of motor vehicles and motorcycles | 8,397 | 645 | 178 | 1 | 9,221 | (4) | (6) | (114) | — | (124)
– transportation and storage | 2,980 | 1,418 | 157 | — | 4,555 | (6) | (13) | (56) | — | (75)
– accommodation and food | 668 | 209 | 46 | — | 923 | (2) | (5) | (11) | — | (18)
– publishing, audiovisual and broadcasting | 3,292 | 90 | 36 | — | 3,418 | (2) | (1) | (14) | — | (17)
– real estate | 3,955 | 784 | 199 | — | 4,938 | (5) | (16) | (124) | — | (145)
– professional, scientific and technical activities | 2,568 | 564 | 211 | — | 3,343 | (2) | (12) | (95) | — | (109)
– administrative and support services | 8,177 | 957 | 312 | — | 9,446 | (7) | (38) | (173) | — | (218)
– public administration and defence, compulsory social security | 33 | — | — | — | 33 | — | — | — | — | —
– education | 30 | 4 | 3 | — | 37 | — | — | (1) | — | (1)
– health and care | 153 | 25 | 88 | — | 266 | — | (1) | (49) | — | (50)
– arts, entertainment and recreation | 86 | 70 | 5 | — | 161 | — | (2) | (2) | — | (4)
– other services | 1,330 | 38 | 76 | — | 1,444 | (1) | — | (19) | — | (20)
– activities of households | 3 | — | — | — | 3 | — | — | — | — | —
– extra-territorial organisations and bodies activities | 39 | — | — | — | 39 | — | — | — | — | —
– government | 1,255 | 137 | 64 | — | 1,456 | — | — | (2) | — | (2)
– asset-backed securities | 16 | 11 | — | — | 27 | — | (11) | — | — | (11)
Non-bank financial institutions | 11,709 | 723 | 268 | — | 12,700 | (2) | (7) | (102) | — | (111)
Loans and advances to banks | 16,673 | 414 | 65 | — | 17,152 | (6) | (21) | (16) | — | (43)
At 31 Dec 2022 | 75,053 | 7,616 | 2,184 | 3 | 84,856 | (48) | (151) | (892) | — | (1,091)
By country |  |  |  |  |  |  |  |  |  |
UK | 36,885 | 2,187 | 825 | — | 39,897 | (15) | (47) | (309) | — | (371)
France | 25,940 | 3,331 | 850 | 2 | 30,123 | (16) | (67) | (435) | — | (518)
Germany | 5,197 | 1,155 | 313 | — | 6,665 | — | (21) | (107) | — | (128)
Other countries | 7,031 | 943 | 196 | 1 | 8,171 | (17) | (16) | (41) | — | (74)
At 31 Dec 2022 | 75,053 | 7,616 | 2,184 | 3 | 84,856 | (48) | (151) | (892) | — | (1,091)

Total wholesale lending for loans and other credit-related commitments and financial guarantees 1 by stage distribution
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 63,605 | 8,012 | 239 | — | 71,856 | (13) | (29) | (39) | — | (81)
Financial | 56,080 | 1,707 | 2 | — | 57,789 | (1) | (5) | — | — | (6)
At 31 Dec 2022 | 119,685 | 9,719 | 241 | — | 129,645 | (14) | (34) | (39) | — | (87)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 119,685 | 9,719 | 241 | — | 129,645 | (14) | (34) | (39) | — | (87)
– of which: UK | 29,090 | 3,665 | 59 | — | 32,814 | (9) | (17) | (7) | — | (33)
– of which: France | 75,886 | 2,796 | 38 | — | 78,720 | (2) | (5) | (14) | — | (21)
– of which: Germany | 10,748 | 2,749 | 100 | — | 13,597 | (1) | (11) | — | — | (12)

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

HSBC Bank plc Annual Report and Accounts 2022 | 67

Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
| Gross carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 46,237 | 8,066 | 1,782 | 2 | 56,087 | (58) | (137) | (767) | (2) | (964)
– agriculture, forestry and fishing | 157 | 7 | 7 | — | 171 | — | — | (5) | — | (5)
– mining and quarrying | 1,207 | 86 | 58 | — | 1,351 | (1) | (1) | (5) | — | (7)
– manufacture | 7,327 | 1,624 | 281 | 2 | 9,234 | (8) | (14) | (72) | (2) | (96)
– electricity, gas, steam and air- conditioning supply | 2,891 | 49 | 30 | — | 2,970 | (3) | (1) | (4) | — | (8)
– water supply, sewerage, waste management and remediation | 215 | — | 4 | — | 219 | — | — | (4) | — | (4)
– construction | 641 | 116 | 97 | — | 854 | (2) | (2) | (40) | — | (44)
– wholesale and retail trade, repair of motor vehicles and motorcycles | 7,743 | 889 | 192 | — | 8,824 | (4) | (8) | (132) | — | (144)
– transportation and storage | 3,254 | 1,570 | 205 | — | 5,029 | (9) | (20) | (56) | — | (85)
– accommodation and food | 831 | 409 | 80 | — | 1,320 | (4) | (10) | (20) | — | (34)
– publishing, audiovisual and broadcasting | 2,390 | 81 | 50 | — | 2,521 | (2) | (2) | (12) | — | (16)
– real estate | 4,849 | 891 | 280 | — | 6,020 | (9) | (32) | (159) | — | (200)
– professional, scientific and technical activities | 2,522 | 669 | 221 | — | 3,412 | (3) | (8) | (60) | — | (71)
– administrative and support services | 8,765 | 1,204 | 178 | — | 10,147 | (9) | (21) | (161) | — | (191)
– public administration and defence, compulsory social security | 376 | 180 | — | — | 556 | — | — | — | — | —
– education | 22 | 5 | 3 | — | 30 | — | (1) | (1) | — | (2)
– health and care | 473 | 47 | 6 | — | 526 | (1) | (4) | (5) | — | (10)
– arts, entertainment and recreation | 104 | 116 | 5 | — | 225 | — | (3) | (3) | — | (6)
– other services | 1,427 | 66 | 85 | — | 1,578 | (3) | (2) | (28) | — | (33)
– activities of households | — | 2 | — | — | 2 | — | — | — | — | —
– government | 1,027 | 45 | — | — | 1,072 | — | — | — | — | —
– asset-backed securities | 16 | 10 | — | — | 26 | — | (8) | — | — | (8)
Non-bank financial institutions | 10,238 | 369 | 243 | — | 10,850 | (6) | (5) | (16) | — | (27)
Loans and advances to banks | 10,750 | 39 | — | — | 10,789 | (4) | (1) | — | — | (5)
At 31 Dec 2021 | 67,225 | 8,474 | 2,025 | 2 | 77,726 | (68) | (143) | (783) | (2) | (996)
By country |  |  |  |  |  |  |  |  |  |
UK | 27,765 | 3,001 | 832 | — | 31,598 | (34) | (43) | (233) | — | (310)
France | 29,287 | 3,492 | 572 | 1 | 33,352 | (27) | (62) | (396) | (1) | (486)
Germany | 4,628 | 1,175 | 328 | — | 6,131 | — | (17) | (73) | — | (90)
Other countries | 5,545 | 806 | 293 | 1 | 6,645 | (7) | (21) | (81) | (1) | (110)
At 31 Dec 2021 | 67,225 | 8,474 | 2,025 | 2 | 77,726 | (68) | (143) | (783) | (2) | (996)

.

Total wholesale lending for loans and other credit-related commitments and financial guarantees 1 by stage distribution (continued)
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 65,582 | 7,369 | 295 | — | 73,246 | (22) | (27) | (15) | — | (64)
Financial | 50,380 | 826 | 2 | — | 51,208 | (5) | (2) | — | — | (7)
At 31 Dec 2021 | 115,962 | 8,195 | 297 | — | 124,454 | (27) | (29) | (15) | — | (71)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 115,962 | 8,195 | 297 | — | 124,454 | (27) | (29) | (15) | — | (71)
– of which: UK | 25,662 | 2,910 | 87 | — | 28,659 | (16) | (11) | (3) | — | (30)
– of which: France | 77,664 | 1,273 | 37 | — | 78,974 | (3) | (3) | (4) | — | (10)
– of which: Germany | 10,113 | 3,693 | 127 | — | 13,933 | (4) | (8) | (1) | — | (13)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
Report of the Directors | Risk

68 | HSBC Bank plc Annual Report and Accounts 2022

Collateral and other credit enhancement
(Audited)
Although collateral can be an important mitigant of credit risk, it is
the group’s practice to lend on the basis of the customer’s ability
to meet their obligations out of cash flow resources rather than
placing primary reliance on collateral and other credit risk
enhancements. Depending on the customer’s standing and the
type of product, facilities may be provided without any collateral
or other credit enhancements. For other lending, a charge over
collateral is obtained and considered in determining the credit
decision and pricing. In the event of default, the group may utilise
the collateral as a source of repayment.
Depending on its form, collateral can have a significant financial
effect in mitigating our exposure to credit risk. Where there is
sufficient collateral, an expected credit loss is not recognised. This
is the case for reverse repos and for certain loans and advances to
customers where the loan to value (‘LTV’) is very low.
Mitigants may include a charge on borrowers’ specific assets,
such as real estate or financial instruments. Other credit risk
mitigants include short positions in securities and financial assets
held as part of linked insurance/investment contracts where the
risk is predominantly borne by the policyholder. Additionally, risk
may be managed by employing other types of collateral and credit
risk enhancements, such as second charges, other liens and
unsupported guarantees. Guarantees are normally taken from
corporates and export credit agencies. Corporates would normally
provide guarantees as part of a parent/subsidiary relationship and
span a number of credit grades. The export credit agencies will
normally be investment grade.
Certain credit mitigants are used strategically in portfolio
management activities. While single name concentrations arise in
portfolios managed by Global Banking and Commercial Banking, it
is only in Global Banking that their size requires the use of
portfolio level credit mitigants. Across Global Banking, risk limits
and utilisations, maturity profiles and risk quality are monitored
and managed proactively. This process is key to the setting of risk
appetite for these larger, more complex, geographically distributed
customer groups. While the principal form of risk management
continues to be at the point of exposure origination, through the
lending decision-making process, Global Banking also utilises loan
sales and credit default swap (‘CDS’) hedges to manage
concentrations and reduce risk. These transactions are the
responsibility of a dedicated Global Banking portfolio management
team. Hedging activity is carried out within agreed credit
parameters, and is subject to market risk limits and a robust
governance structure. Where applicable, CDSs are entered into
directly with a central clearing house counterparty.
Otherwise our exposure to CDS protection providers is diversified
among mainly banking counterparties with strong credit ratings.
CDS mitigants are held at portfolio level and are not included in
the expected loss calculations. CDS mitigants are not reported in
the following tables.
Collateral on loans and advances
The following tables include off-balance sheet loan commitments,
primarily undrawn credit lines.
The collateral measured in the following tables consists of charges
over cash and marketable financial instruments. The values in the
tables represent the expected market value on an open market
basis. No adjustment has been made to the collateral for any
expected costs of recovery. Marketable securities are measured at
their fair value.
Other types of collateral such as unsupported guarantees and
floating charges over the assets of a customer’s business are not
measured in the following tables. While such mitigants have value,
often providing rights in insolvency, their assignable value is not
sufficiently certain and they are therefore assigned no value for
disclosure purposes.
The LTV ratios presented are calculated by directly associating
loans and advances with the collateral that individually and
uniquely supports each facility. When collateral assets are shared
by multiple loans and advances, whether specifically or, more
generally, by way of an all monies charge, the collateral value is
pro-rated across the loans and advances protected by the
collateral.
For credit-impaired loans, the collateral values cannot be directly
compared with impairment allowances recognised. The LTV
figures use open market values with no adjustments. Impairment
allowances are calculated on a different basis, by considering
other cash flows and adjusting collateral values for costs of
realising collateral as explained further on page 129.
Other corporate, commercial and financial (non-bank) loans
and advances
Other corporate, commercial and financial (non-bank) loans are
analysed separately in the following table, which focuses on the
countries containing the majority of our loans and advances
balances. For financing activities in other corporate and
commercial lending, collateral value is not strongly correlated to
principal repayment performance.
Collateral values are generally refreshed when an obligor’s general
credit performance deteriorates and we have to assess the likely
performance of secondary sources of repayment should it prove
necessary to rely on them.

HSBC Bank plc Annual Report and Accounts 2022 | 69

Wholesale lending – corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries by stage (excluding commercial real estate)
(Audited)
|  |  | of which:
| Total | UK | France | Germany
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
The group | £m | % | £m | % | £m | % | £m | %
Stage 1 |  |  |  |  |  |  |  |
Not collateralised | 117,166 | — | 46,080 | — | 53,960 | — | 11,577 | —
Fully collateralised | 10,444 | 0.1 | 6,300 | 0.1 | 2,146 | — | 809 | —
LTV ratio: |  |  |  |  |  |  |  |
– less than 50% | 2,456 | 0.2 | 1,643 | 0.2 | 491 | — | — | —
– 51% to 75% | 3,321 | 0.1 | 2,161 | — | 1,050 | — | — | —
– 76% to 90% | 354 | — | 234 | — | 36 | — | — | —
– 91% to 100% | 4,313 | — | 2,262 | — | 569 | — | 809 | —
Partially collateralised (A): | 4,542 | 0.1 | 169 | — | 3,797 | 0.1 | — | —
– collateral value on A | 3,664 |  | 77 |  | 3,128 |  | — |
Total | 132,152 | — | 52,549 | — | 59,903 | — | 12,386 | —
Stage 2 |  |  |  |  |  |  |  |
Not collateralised | 13,074 | 0.9 | 4,219 | 0.8 | 4,581 | 1.0 | 3,269 | 0.9
Fully collateralised | 1,132 | 1.5 | 327 | 1.2 | 239 | 1.7 | 228 | 0.9
LTV ratio: |  |  |  |  |  |  |  |
– less than 50% | 515 | 1.7 | 224 | 0.4 | 122 | 0.8 | — | —
– 51% to 75% | 272 | 1.5 | 84 | 3.6 | 69 | 1.4 | — | —
– 76% to 90% | 4 | — | 2 | — | 1 | — | — | —
– 91% to 100% | 341 | 1.2 | 17 | — | 47 | 4.3 | 228 | 0.9
Partially collateralised (B): | 509 | 1.4 | 23 | — | 472 | 1.5 | — | —
– collateral value on B | 426 |  | 13 |  | 405 |  | — |
Total | 14,715 | 1.0 | 4,569 | 0.8 | 5,292 | 1.1 | 3,497 | 0.9
Stage 3 |  |  |  |  |  |  |  |
Not collateralised | 1,795 | 40.3 | 673 | 31.2 | 668 | 57.9 | 348 | 28.7
Fully collateralised | 80 | 26.3 | 10 | 10.0 | 12 | 33.3 | 24 | 29.2
LTV ratio: |  |  |  |  |  |  |  |
– less than 50% | 26 | 23.1 | 2 | — | 7 | 28.6 | — | —
– 51% to 75% | 6 | 33.3 | 3 | 33.3 | 2 | 50.0 | — | —
– 76% to 90% | 11 | 36.4 | 2 | — | 1 | — | — | —
– 91% to 100% | 37 | 21.6 | 3 | — | 2 | 50.0 | 24 | 29.2
Partially collateralised (C): | 172 | 23.8 | 11 | 27.3 | 159 | 23.3 | — | —
– collateral value on C | 125 |  | 3 |  | 122 |  | — |
Total | 2,047 | 38.4 | 694 | 30.8 | 839 | 51.0 | 372 | 28.8
POCI |  |  |  |  |  |  |  |
Not collateralised | 2 | — | — | — | 2 | — | — | —
Fully collateralised | — | — | — | — | — | — | — | —
LTV ratio: |  |  |  |  |  |  |  |
– less than 50% | — | — | — | — | — | — | — | —
– 51% to 75% | — | — | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | — | — | —
– 91% to 100% | — | — | — | — | — | — | — | —
Partially collateralised (D): | — | — | — | — | — | — | — | —
– collateral value on D | — |  | — |  | — |  | — |
Total | 2 | — | — | — | 2 | — | — | —
At 31 Dec 2022 | 148,916 | 0.7 | 57,812 | 0.5 | 66,036 | 0.8 | 16,255 | 0.9

Report of the Directors | Risk

70 | HSBC Bank plc Annual Report and Accounts 2022

Wholesale lending – corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries by stage (excluding commercial real estate) (continued)
(Audited)
|  |  | of which:
| Total | UK | France | Germany
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
The group | £m | % | £m | % | £m | % | £m | %
Stage 1 |  |  |  |  |  |  |  |
Not collateralised | 109,435 | 0.1 | 40,298 | 0.1 | 52,583 | — | 11,479 | —
Fully collateralised | 10,399 | 0.1 | 6,133 | 0.1 | 2,221 | 0.1 | 708 | —
LTV ratio: |
– less than 50% | 2,450 | 0.2 | 1,649 | 0.1 | 587 | — | — | —
– 51% to 75% | 3,543 | 0.1 | 2,124 | 0.0 | 989 | 0.1 | — | —
– 76% to 90% | 801 | 0.1 | 446 | 0.0 | 349 | — | — | —
– 91% to 100% | 3,605 | — | 1,914 | — | 296 | — | 708 | —
Partially collateralised (A): | 3,424 | 0.1 | 85 | — | 3,248 | 0.1 | — | —
– collateral value on A | 2,661 |  | 51 |  | 2,555 |  | — |
Total | 123,258 | 0.1 | 46,516 | 0.1 | 58,052 | — | 12,187 | —
Stage 2 |  |  |  |  |  |  |  |
Not collateralised | 11,024 | 0.9 | 4,365 | 0.9 | 1,890 | 1.5 | 3,942 | 0.6
Fully collateralised | 1,675 | 1.1 | 608 | 0.8 | 639.4 | 1.1 | 243 | 0.4
LTV ratio: |
– less than 50% | 689 | 1.7 | 217 | 1.4 | 350 | 1.1 | — | —
– 51% to 75% | 253 | 0.8 | 217 | 0.9 | 34 | 2.9 | — | —
– 76% to 90% | 271 | 0.4 | 165 | 0.0 | 106 | 0.9 | — | —
– 91% to 100% | 462 | 0.9 | 9 | — | 149 | 1.3 | 243 | 0.4
Partially collateralised (B): | 1,573.2 | 0.9 | 4 | 0.0 | 1,567 | 0.9 | — | —
– collateral value on B | 1,408 |  | 3 |  | 1,404 |  | — |
Total | 14,272 | 0.9 | 4,977 | 0.9 | 4,096.4 | 1.2 | 4,185 | 0.5
Stage 3 |  |  |  |  |  |  |  |
Not collateralised | 1,598 | 37.2 | 669 | 25.1 | 378 | 86.0 | 393 | 17.8
Fully collateralised | 148 | 16.2 | 77 | 7.8 | 10 | 50.0 | 24 | 16.7
LTV ratio: |
– less than 50% | 76 | 18.4 | 41 | 7.3 | 6 | 50.0 | — | —
– 51% to 75% | 22 | 13.6 | 19 | 10.5 | 2 | 50.0 | — | —
– 76% to 90% | 18 | 5.6 | 17 | — | 1 | — | — | —
– 91% to 100% | 32 | 15.6 | — | — | 1 | 100.0 | 24 | 16.7
Partially collateralised (C): | 216 | 27.3 | 35 | 17.1 | 165 | 27.3 | — | —
– collateral value on C | 152 |  | 22 |  | 123 |  | — |
Total | 1,962 | 34.6 | 781 | 23.0 | 553 | 67.8 | 417 | 17.7
POCI |  |  |  |  |  |  |  |
Not collateralised | — | — | — | — | — | — | — | —
Fully collateralised | — | — | — | — | — | — | — | —
LTV ratio: |
– less than 50% | — | — | — | — | — | — | — | —
– 51% to 75% | — | — | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | — | — | —
– 91% to 100% | — | — | — | — | — | — | — | —
Partially collateralised (D): | 2 | 100.0 | — | — | 2 | 100.0 | — | —
– collateral value on D | 2 |  | — |  | 2 |  | — |
Total | 2 | 100.0 | — | — | 2 | 100.0 | — | —
At 31 Dec 2021 | 139,494 | 0.6 | 52,274 | 0.5 | 62,703 | 0.7 | 16,789 | 0.6

.
Other credit risk exposures
In addition to collateralised lending, other credit enhancements are
employed and methods used to mitigate credit risk arising from
financial assets. These are described in more detail below:
•Some securities issued by governments, banks and other
financial institutions benefit from additional credit
enhancement provided by government guarantees that cover
the assets;
•Debt securities issued by banks and financial institutions
include asset-backed securities ('ABSs') and similar instruments
which are supported by underlying pools of financial assets.
Credit risk associated with ABSs is reduced through the
purchase of credit default swap (‘CDS’) protection;
•Trading loan and advances mainly pledged against cash
collaterals are posted to satisfy margin requirements. There is
limited credit risk on trading loans and advances since in the
event of default of the counterparty these would be set off
against the related liability. Reverse repos and stock
borrowings are by their nature collateralised.
Collateral accepted as security that the group is permitted to sell or repledge
under these arrangements is described on page 165 of the financial
statements.
•The group’s maximum exposure to credit risk includes financial
guarantees and similar contracts granted; as well as loan and
other credit-related commitments. Depending on the terms of
the arrangement, we may use additional credit mitigation if a
guarantee is called upon or a loan commitment is drawn and
subsequently defaults.
For further information on these arrangements, see Note 30 on the financial
statements.

HSBC Bank plc Annual Report and Accounts 2022 | 71

Derivatives
We participate in transactions exposing us to counterparty credit
risk. Counterparty credit risk is the risk of financial loss if the
counterparty to a transaction defaults before satisfactorily settling
it. It arises principally from over-the-counter (‘OTC’) derivatives
and securities financing transactions and is calculated in both the
trading and non-trading books. Transactions vary in value by
reference to market factors such as interest rates, exchange rates
or asset prices.
The counterparty risk from derivative transactions is taken into
account when reporting the fair value of derivative positions. The
adjustment to the fair value is known as the credit value
adjustment (‘CVA’).
The International Swaps and Derivatives Association (‘ISDA’)
master agreement is our preferred agreement for documenting
derivatives activity. It is common, and our preferred practice, for
the parties involved in a derivative transaction to execute a credit
support annex (‘CSA’) in conjunction with the ISDA master
agreement. Under a CSA, collateral is passed between the parties
to mitigate the counterparty risk inherent in outstanding positions.
The majority of our CSAs are with financial institutional clients.
We manage the counterparty exposure on our OTC derivative
contracts by using collateral agreements with counterparties and
netting agreements. Currently, we do not actively manage our
general OTC derivative counterparty exposure in the credit
markets, although we may manage individual exposures in certain
circumstances.
We place strict policy restrictions on collateral types and as a
consequence the types of collateral received and pledged are, by
value, highly liquid and of a strong quality, being predominantly
cash.
Where a collateral type is required to be approved outside the
collateral policy, approval is required from a committee of senior
representatives from Markets, Legal and Risk.
See Note 28 on the financial statements for details regarding legally
enforceable right of offset in the event of counterparty default and collateral
received in respect of derivatives.
Personal lending
This section provides further details on the countries and products
comprising personal loans and advances to customers.
Further product granularity is also provided by stage, with
geographical data presented for loans and advances to customers,
loan and other credit-related commitments, and financial
guarantees.

Total personal lending for loans and advances to customers at amortised costs by stage distribution
| Gross Carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
By portfolio |  |  |  |  |  |  |  |
First lien residential mortgages | 4,155 | 511 | 81 | 4,747 | (7) | (7) | (22) | (36)
– of which: interest only (including offset) | 878 | 53 | 30 | 961 | — | (1) | (12) | (13)
– affordability including ARMs | 353 | 6 | — | 359 | (1) | (1) | — | (2)
Other personal lending | 1,138 | 104 | 24 | 1,266 | (2) | (8) | (9) | (19)
– guaranteed loans in respect of residential property | — | — | — | — | — | — | — | —
– Other personal lending which is secured | 982 | 70 | 9 | 1,061 | (1) | (4) | (2) | (7)
– credit cards | 61 | 23 | 7 | 91 | — | (2) | — | (2)
– Other personal lending which is unsecured | 95 | 11 | 8 | 114 | (1) | (2) | (7) | (10)
At 31 Dec 2022 | 5,293 | 615 | 105 | 6,013 | (9) | (15) | (31) | (55)
By geography |  |  |  |  |  |  |  |
UK 1 | 3,090 | 482 | 13 | 3,585 | (2) | (9) | (3) | (14)
France | 50 | 3 | 36 | 89 | — | — | (17) | (17)
Germany | 163 | 32 | — | 195 | — | — | — | —
Other countries | 1,990 | 98 | 56 | 2,144 | (7) | (6) | (11) | (24)
At 31 Dec 2022 | 5,293 | 615 | 105 | 6,013 | (9) | (15) | (31) | (55)

Total personal lending for loans and other credit-related commitments and financial guarantees 2 by stage distribution
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
UK | 875 | 11 | 2 | 888 | — | — | — | —
France | 637 | 32 | 3 | 672 | — | — | — | —
Germany | 155 | 57 | — | 212 | — | — | — | —
Other countries | 357 | 9 | 1 | 367 | — | — | — | —
At 31 Dec 2022 | 2,024 | 109 | 6 | 2,139 | — | — | — | —

1 Includes primarily first lien residential mortgages in Channel Islands and Isle of Man.
2 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
Report of the Directors | Risk

72 | HSBC Bank plc Annual Report and Accounts 2022

Total personal lending for loans and advances to customers at amortised costs by stage distribution (continued)
| Gross carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
By portfolio |  |  |  |  |  |  |  |
First lien residential mortgages | 6,723 | 173 | 234 | 7,130 | (11) | (5) | (65) | (81)
– of which: interest only (including offset) | 3,134 | 115 | 94 | 3,343 | (1) | (2) | (27) | (30)
– affordability including ARMs | 451 | 2 | 6 | 459 | (3) | — | (1) | (4)
Other personal lending | 17,532 | 513 | 219 | 18,264 | (11) | (11) | (60) | (82)
– guaranteed loans in respect of residential property | 14,387 | 332 | 38 | 14,757 | (5) | (2) | (1) | (8)
– Other personal lending which is secured | 2,535 | 136 | 100 | 2,771 | (3) | (4) | (24) | (31)
– credit cards | 318 | 22 | 11 | 351 | (1) | (2) | (1) | (4)
– Other personal lending which is unsecured | 292 | 23 | 70 | 385 | (2) | (3) | (34) | (39)
At 31 Dec 2021 | 24,255 | 686 | 453 | 25,394 | (22) | (16) | (125) | (163)
By geography |  |  |  |  |  |  |  |
UK 1 | 3,543 | 88 | 49 | 3,680 | (1) | (3) | (3) | (7)
France | 18,500 | 497 | 239 | 19,236 | (10) | (10) | (75) | (95)
Germany | 161 | 47 | — | 208 | — | — | — | —
Other countries | 2,051 | 54 | 165 | 2,270 | (11) | (3) | (47) | (61)
At 31 Dec 2021 | 24,255 | 686 | 453 | 25,394 | (22) | (16) | (125) | (163)

Total personal lending for loans and other credit-related commitments and financial guarantees 2 by stage distribution (continued)
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
UK | 586 | 3 | 2 | 591 | — | — | — | —
France | 1,076 | 20 | 2 | 1,098 | — | — | — | —
Germany | 136 | 85 | — | 221 | — | — | — | —
Other countries | 377 | 8 | — | 385 | (1) | — | — | (1)
At 31 Dec 2021 | 2,175 | 116 | 4 | 2,295 | (1) | — | — | (1)

1 Includes primarily first lien residential mortgages in Channel Islands and Isle of Man.
2 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
Collateral on loans and advances
The following table provides a quantification of the value of fixed
charges we hold over specific assets where we have a history of
enforcing, and are able to enforce, collateral in satisfying a debt in
the event of the borrower failing to meet its contractual
obligations, and where the collateral is cash or can be realised by
sale in an established market.
The collateral valuation excludes any adjustment for obtaining and
selling the collateral and in particular loans shown as collateralised
or partially collateralised may also benefit from other forms of
credit mitigants.

HSBC Bank plc Annual Report and Accounts 2022 | 73

Personal lending: residential mortgage loans including loan commitments by level of collateral for key countries
(Audited)
|  |  | of which:
| Total | UK | France
| Gross exposure | ECL coverage | Gross exposure | ECL coverage | Gross exposure | ECL coverage
The group | £m | % | £m | % | £m | %
Stage 1 |  |  |  |  |  |
Fully collateralised | 4,340 | 0.1 | 2,376 | — | 3 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 2,199 | 0.1 | 1,255 | — | 3 | —
– 51% to 60% | 744 | 0.1 | 429 | — | — | —
– 61% to 70% | 738 | 0.3 | 420 | 0.2 | — | —
– 71% to 80% | 442 | 0.2 | 198 | — | — | —
– 81% to 90% | 202 | — | 63 | — | — | —
– 91% to 100% | 15 | — | 11 | — | — | —
Partially collateralised (A): | 50 | — | 11 | — | — | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 4 | — | 3 | — | — | —
– 111% to 120% | 3 | — | 1 | — | — | —
– greater than 120% | 43 | — | 7 | — | — | —
– collateral value on A | 10 |  | 6 |  | — |
Total | 4,390 | 0.1 | 2,387 | — | 3 | —
Stage 2 |  |  |  |  |  |
Fully collateralised | 510 | 1.4 | 428 | 0.5 | — | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 203 | 1.5 | 151 | 0.7 | — | —
– 51% to 60% | 105 | 1.9 | 90 | 1.1 | — | —
– 61% to 70% | 91 | 1.1 | 83 | — | — | —
– 71% to 80% | 66 | 1.5 | 60 | — | — | —
– 81% to 90% | 39 | — | 38 | — | — | —
– 91% to 100% | 6 | — | 6 | — | — | —
Partially collateralised (B): | 1 | — | 1 | — | — | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 1 | — | 1 | — | — | —
– 111% to 120% | — | — | — | — | — | —
– greater than 120% | — | — | — | — | — | —
– collateral value on B | 1 |  | 1 |  | — |
Total | 511 | 1.4 | 429 | 0.5 | — | —
Stage 3 |  |  |  |  |  |
Fully collateralised | 65 | 16.9 | 10 | 10.0 | 7 | 14.3
LTV ratio: |  |  |  |  |  |
– less than 50% | 46 | 13.0 | 9 | 11.1 | — | —
– 51% to 60% | 5 | 20.0 | 1 | — | — | —
– 61% to 70% | 9 | 22.2 | — | — | 6 | —
– 71% to 80% | 3 | 33.3 | — | — | — | —
– 81% to 90% | 1 | — | — | — | — | —
– 91% to 100% | 1 | 100.0 | — | — | 1 | 100.0
Partially collateralised (C): | 16 | 68.8 | — | — | 16 | 62.5
LTV ratio: |  |  |  |  |  |
– 101% to 110% | — | — | — | — | — | —
– 111% to 120% | — | — | — | — | — | —
– greater than 120% | 16 | 68.8 | — | — | 16 | 62.5
– collateral value on C | — |  | — |  | — |
Total | 81 | 27.2 | 10 | 10.0 | 23 | 47.8
At 31 Dec 2022 | 4,982 | 0.7 | 2,826 | 0.1 | 26 | 42.3

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74 | HSBC Bank plc Annual Report and Accounts 2022

Personal lending: residential mortgage loans including loan commitments by level of collateral for key countries (continued)
(Audited)
|  |  | of which:
| Total | UK | France
| Gross exposure | ECL coverage | Gross exposure | ECL coverage | Gross exposure | ECL coverage
The group | £m | % | £m | % | £m | %
Stage 1 |  |  |  |  |  |
Fully collateralised | 6,915 | 0.2 | 2,789 | — | 2,088 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 3,400 | 0.1 | 1,308 | — | 1,110 | 0.1
– 51% to 60% | 1,274 | 0.2 | 540 | — | 431 | —
– 61% to 70% | 1,074 | 0.2 | 452 | — | 296 | —
– 71% to 80% | 776 | 0.3 | 358 | — | 177 | —
– 81% to 90% | 345 | 0.3 | 113 | — | 48 | —
– 91% to 100% | 46 | — | 18 | — | 26 | —
Partially collateralised (A): | 90 | — | 11 | — | 50 | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 18 | — | 2 | — | 12 | —
– 111% to 120% | 9 | — | 1 | — | 5 | —
– greater than 120% | 63 | — | 8 | — | 33 | —
– collateral value on A | 63 |  | 4 |  | 50 |
Total | 7,005 | 0.2 | 2,800 | — | 2,138 | —
Stage 2 |  |  |  |  |  |
Fully collateralised | 169 | 3.0 | 46 | — | 83 | 1.2
LTV ratio: |  |  |  |  |  |
– less than 50% | 91 | 2.2 | 18 | — | 48 | 2.1
– 51% to 60% | 25 | 4.0 | 6 | — | 13 | —
– 61% to 70% | 34 | 2.9 | 17 | — | 12 | —
– 71% to 80% | 15 | 6.7 | 5 | — | 7 | —
– 81% to 90% | 3 | — | — | — | 2 | —
– 91% to 100% | 1 | — | — | — | 1 | —
Partially collateralised (B): | 5 | — | — | — | 2 | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 1 | — | — | — | — | —
– 111% to 120% | 1 | — | — | — | — | —
– greater than 120% | 3 | — | — | — | 2 | —
– collateral value on B | 4 |  | — |  | 3 |
Total | 174 | 2.9 | 46 | — | 85 | 1.2
Stage 3 |  |  |  |  |  |
Fully collateralised | 204 | 24.5 | 9 | 11.1 | 62 | 21.0
LTV ratio: |  |  |  |  |  |
– less than 50% | 94 | 12.8 | 6 | 16.7 | 24 | 20.8
– 51% to 60% | 31 | 19.4 | 3 | — | 8 | 25.0
– 61% to 70% | 34 | 23.5 | — | — | 19 | 10.5
– 71% to 80% | 13 | 38.5 | — | — | 3 | 33.3
– 81% to 90% | 14 | 42.9 | — | — | 4 | 25.0
– 91% to 100% | 18 | 72.2 | — | — | 4 | 50.0
Partially collateralised (C): | 30 | 53.3 | — | — | 24 | 58.3
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 2 | 50.0 | — | — | 2 | 50.0
– 111% to 120% | 2 | 50.0 | — | — | 2 | 50.0
– greater than 120% | 26 | 53.8 | — | — | 20 | 60.0
– collateral value on C | 6 |  | — |  | 6 |
Total | 234 | 28.2 | 9 | 11.1 | 86 | 31.4
At 31 Dec 2021 | 7,413 | 1.1 | 2,855 | — | 2,309 | 1.3

Treasury risk

Overview
Treasury risk is the risk of having insufficient capital, liquidity or
funding resources to meet financial obligations and satisfy
regulatory requirements, as well as the risk to our earnings or
capital due to structural and transactional foreign exchange
exposures and changes in market interest rates, together with
pension and insurance risk.
Treasury risk arises from changes to the respective resources and
risk profiles driven by customer behaviour, management decisions
or the external environment.
Approach and policy
(Audited)
Our objective in the management of treasury risk is to maintain
appropriate levels of capital, liquidity, funding, foreign exchange
and market risk to support our business strategy, and meet our
regulatory and stress testing-related requirements.
Our approach to treasury management is driven by our strategic
and organisational requirements, taking into account the
regulatory, economic and commercial environment. We aim to
maintain a strong capital and liquidity base to support the risks
inherent in our business and invest in accordance with our
strategy, meeting both consolidated and local regulatory
requirements at all times.

HSBC Bank plc Annual Report and Accounts 2022 | 75

Our policy is underpinned by our risk management framework.
The risk management framework incorporates a number of
measures aligned to our assessment of risks for both internal and
regulatory purposes. These risks include credit, market,
operational, pensions, structural and transactional foreign
exchange risk, and interest rate risk in the banking book.
For further details, refer to our Pillar 3 Disclosures at 31 December
2022.
Treasury risk management
Key developments in 2022
•Our CET1 ratio decreased from 17.8% at 31 December 2021 to
16.8% at 31 December 2022. This included a 1.6 percentage
point impact from the disposal of the retail banking operations
in France and a 1.2 percentage point impact from RWA growth
due to implementation of new regulations, increased volatility
in the market and the impact of FX movements. Share
issuance, profits and other movements added 1.8 percentage
points to the ratio.
•The Group Board approved a new interest rate risk in the
banking book (‘IRRBB’) strategy in September, with the
objective of increasing our stabilisation of NII, with
consideration given to any capital or other constraints, and then
adopting a managed approach based on interest rates and
outlook.
•We took steps to reduce the duration risk of our Treasury hold-
to-collect-and-sell portfolio, which is accounted for at FVOCI
primarily to reduce the capital impact from rising interest rates.
This risk reduction lowered the hold-to-collect-and-sell stressed
value at risk (‘SVaR’) exposure of this portfolio from 532m at
the end of 2021 to 353m at the end of 2022.
•We implemented a new hold-to-collect business model to
better reflect our management strategy to stabilise NII. This
portfolio of High Quality Liquid Assets ('HQLA') will form a
greater part of our liquid asset buffer going forward, as well as
being a hedge to our structural interest rate risk.
•We enhanced the monitoring and forecasting of our capital
positions as a result of the Russia-Ukraine war, although there
were no material capital or liquidity direct impacts from the
increased uncertainty on the forward economic outlook. There
was also limited direct impact on our pension plans, as the
most material plans had little or no direct investments in Russia
or Ukraine.
•Work continued over 2022 to implement and improve de-
risking strategies for our pension plans with a particular focus
on asset de-risking in Germany. In light of the increased market
volatility we have reviewed the investment strategies of our
pension plans to ensure that they remain appropriate and the
pension plans continue to cope with future volatility.
•The cost of living has continued to increase throughout Europe
over 2022 and there are a number of pension risks arising from
this issue. The main areas where this impacts pensions are
across investment strategy, actuarial factors, pension increases
and members' behaviours. We have worked with the fiduciaries
of the pension plan to ensure impact to plans and members is
understood and monitored.
•HBCE signed a framework agreement with Promontoria MMB
SAS (‘My Money Group’) and its subsidiary Banque des
Caraïbes SA, for the sale of its retail banking business in
France. The sale, which is subject to regulatory approvals, is
anticipated to complete in the second half of 2023. The impact
of classifying the disposal group as held for sale resulted in a
1.6 percentage point reduction in the group‘s CET1 ratio, which
will be partly offset by the reduction in RWAs upon closing.
•The Group performed its inaugural resolvability self-assessment
to meet the BoE requirements, which came into effect on
1 January 2022. This was incorporated into the BoE publication
of their findings from the first assessment of the resolvability of
the eight major UK firms as part of the Resolvability
Assessment Framework.
Governance and structure
The Chief Risk Officer is the accountable risk steward for all
treasury risks. The Chief Financial Officer is the risk owner for
treasury risks with the exception of pension risk which is co-
owned together with the regional heads of Performance &
Reward.
Capital, liquidity, interest rate risk in the banking book and non-
trading book foreign exchange risk are the responsibility of the
Executive Committee and the Risk Committee. The Treasury
function actively manages these risks on an on-going basis,
supported by the Asset and Liability Management Committee
(‘ALCO’), overseen by Treasury Risk Management and the Risk
Management Meeting (‘RMM’).
Pension risk is overseen by the Pension Risk Management
Meeting.
Capital, liquidity and funding risk management
processes
Assessment and risk appetite
Our capital management policy is supported by a global capital
management framework. The framework sets out approach to
determining key capital risk appetites including CET1, total capital,
minimum requirements for own funds and eligible liabilities
(‘MREL’), and leverage ratio. Our Internal Capital Adequacy
Assessment process ('ICAAP') is an assessment of the group’s
capital position, outlining both regulatory and internal capital
resources and requirements resulting from our business model,
strategy, risk profile and management, performance and planning,
risks to capital, and the implications of stress testing. Our
assessment of capital adequacy is driven by an assessment of
risks. These risks include credit, market, operational, pensions,
insurance, structural foreign exchange, and interest rate risk in the
banking book. Climate risk is also considered as part of the ICAAP,
and we are continuing to develop our approach. The ICAAP
supports the determination of our capital risk appetite and target
ratios, as well as enables the assessment and determination of
capital requirements by regulators. Subsidiaries prepare ICAAPs in
line with global guidance, while considering their local regulatory
regimes to determine their own risk appetites and ratios.
We aim to ensure that management has oversight of our liquidity
and funding risks at group and entity level through robust
governance, in line with our risk management framework. We
manage liquidity and funding risk at an operating entity level in
accordance with globally consistent policies, procedures and
reporting standards. This ensures that obligations can be met in a
timely manner, in the jurisdiction where they fall due.
Operating entities are required to meet internal minimum
requirements and any applicable regulatory requirements at all
times. These requirements are assessed through our internal
liquidity adequacy assessment process (‘ILAAP’), which ensures
that operating entities have robust strategies, policies, processes
and systems for the identification, measurement, management
and monitoring of liquidity risk over an appropriate set of time
horizons, including intra-day. The ILAAP informs the validation of
risk tolerance and the setting of risk appetite. It also assesses the
capability to manage liquidity and funding effectively. These
metrics are set and managed locally but are subject to robust
global review and challenge to ensure consistency of approach
and application of the Group’s policies and controls.
Planning and performance
Capital and risk-weighted asset (‘RWA’) plans form part of the
annual financial resource plan that is approved by the Board.
Capital and RWA forecasts are submitted to the ALCO on a
monthly basis, and capital and RWAs are monitored and managed
against the plan.
Through our internal governance processes, we seek to strengthen
discipline over our investment and capital allocation decisions, and
to ensure that returns on investment meet management’s
objectives. Our strategy is to allocate capital to businesses and
entities to support growth objectives where returns above internal
hurdle levels have been identified and in order to meet their
Report of the Directors | Risk

76 | HSBC Bank plc Annual Report and Accounts 2022

regulatory and economic capital needs. We evaluate and manage
business returns by using a RoTE measure.
Funding and liquidity plans also form part of the financial resource
plan that is approved by the Board. The Board-level appetite
measures are the LCR and net stable funding ratio (‘NSFR’),
together with an internal liquidity metric. In addition, we use a
wider set of measures to manage an appropriate funding and
liquidity profile, including legal entity depositor concentration
limits, intra-day liquidity, forward-looking funding assessments
and other key measures.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified
that have the potential to affect our RWAs, capital and/or liquidity
position. We closely monitor future regulatory changes and
continue to evaluate the impact of these upon our capital and
liquidity requirements, particularly those related to the UK’s
implementation of the outstanding measures to be implemented
from the Basel III reforms (‘Basel 3.1‘).
Regulatory developments
Our capital adequacy ratios have been affected by regulatory
developments in 2022, including changes to internal-ratings based
(’IRB’) modelling requirements and the UK’s implementation of the
revisions to the Capital Requirements Regulation and Directive
(’CRR II’). The PRA’s final rules on NSFR were implemented and
have been reflected in disclosures since the first quarter of 2022.
With effect from 1 January 2023 IFRS 17 Insurance Contracts
comes into force. We expect this to reduce the group’s CET1 ratio
by 0.3 percentage points because we value our insurance
subsidiaries under the equity method in our capital adequacy
reporting. Also from the same date, the group will be subject to a
binding minimum leverage ratio, set according to PRA rules.
Future changes to our ratios will occur with the implementation of
Basel 3.1. The PRA published its consultation on the
implementation of Basel 3.1 in the UK during the last quarter of
2022, with a proposed implementation date of 1 January 2025.
The proposal includes five-year transitional provisions for certain
elements of the reform.
Regulatory reporting processes and controls
The quality of regulatory reporting remains a key priority for
management and regulators. We are progressing with a
comprehensive programme to strengthen our processes, improve
consistency and enhance controls across our prudential regulatory
reporting, focussing on PRA requirements initially. We
commissioned a number of independent external reviews, some at
the request of our regulators, including one on our credit risk RWA
reporting process, which concluded in December 2022. These
reviews have so far resulted in improvements in the accuracy of
reported RWAs and LCR in accordance with policies, which have
been reflected in our year-end regulatory reported ratios. Our
prudential regulatory reporting programme is being phased over a
number of years, prioritising RWA, capital and liquidity reporting in
the early stages of the programme. While this programme
continues, there may be further impacts on some of our regulatory
ratios, such as the CET1, LCR and NSFR, as we implement
recommended changes and continue to enhance our controls
across the process.
Stress testing and recovery planning
The group uses stress testing to inform management of the capital
and liquidity needed to withstand internal and external shocks,
including a global economic downturn or a systems failure. Stress
testing results are also used to inform risk mitigation actions,
allocation of financial resources, and recovery and resolution
planning, as well as to re-evaluate business plans where analysis
shows capital, liquidity and/or returns do not meet their target.
In addition to a range of internal stress tests, we are subject to
supervisory stress testing in many jurisdictions. These include the
programmes of the BoE, the EBA and the ECB. The results of
regulatory stress testing and our internal stress tests are used
when assessing our internal capital and liquidity requirements
through the ICAAP and ILAAP. The outcomes of stress testing
exercises carried out by the PRA and other regulators feed into the
setting of regulatory minimum ratios and buffers.
We maintain recovery plans for the group and material entities,
which set out potential options management could take in a range
of stress scenarios that could result in a breach of capital or
liquidity buffers. The recovery plan sets out the framework and
governance arrangements to support restoring us to a stable and
viable position, and so lowering the probability of failure from
either idiosyncratic company-specific stress or systemic market-
wide issues. Our material entities’ recovery plans provide detailed
actions that management would consider taking in a stress
scenario should their positions deteriorate and threaten to breach
risk appetite and regulatory minimum levels. This is to help ensure
that entities can stabilise their financial position and recover from
financial losses in a stress environment.
The group also has capabilities, resources and arrangements in
place to address the unlikely event that we might not be
recoverable and would therefore need to be resolved by
regulators. We have contributed to the Group's inaugural
resolvability assessment framework (‘RAF’) self-assessment during
2021 to meet the BoE’s requirements, which came into effect on
1 January 2022.
Overall, our recovery and resolution planning helps safeguard the
Group’s financial and operational stability. The Group is committed
to further developing its recovery and resolution capabilities,
including in relation to the BoE’s resolvability assessment
framework.
Measurement of interest rate risk in the banking book
Interest rate risk in the banking book is the risk of an adverse
impact to earnings or capital due to changes in market interest
rates. It is generated by our non-traded assets and liabilities,
specifically loans, deposits and financial instruments that are not
held for trading intent or held to hedge positions held with trading
intent. Interest rate risk that can be economically hedged may be
transferred to the Markets Treasury business. Hedging is generally
executed through interest rate derivatives or fixed-rate
government bonds. Any interest rate risk that Markets Treasury
cannot economically hedge is not transferred and will remain
within the global business where the risks originate.
The following measures are used by Treasury to monitor and
control interest rate risk in the banking book including:
•Net Interest Income ('NII') sensitivity;
•Economic Value of Equity ('EVE') Sensitivity; and
•Non-Trading Value at Risk ('VaR').
Net interest income sensitivity
A principal part of our management of non-traded interest rate risk
is to monitor the sensitivity of expected Net Interest Income (NII)
under varying interest rate scenarios (simulation modelling), where
all other economic variables are held constant. This monitoring is
undertaken at an entity level. HSBC Bank plc calculates both one-
year and five-year NII sensitivities across a range of interest rate
scenarios.
NII sensitivity figures represent the effect of pro forma movements
in projected yield curves based on a static balance sheet size and
structure. The exception to this is where the size of the balances or
repricing is deemed interest rate sensitive, for example, early
prepayment of mortgages. These sensitivity calculations do not
incorporate actions that would be taken by Markets Treasury or in
the business that originates the risk to mitigate the effect of
interest rate movements.

HSBC Bank plc Annual Report and Accounts 2022 | 77

The NII sensitivity calculations assume that interest rates of all
maturities move by the same amount in the ‘up-shock’ scenario.
The sensitivity calculations in the ‘down-shock’ scenarios reflect
no floors to the shocked market rates.
However, customer product-specific interest rate floors are
recognised where applicable.
Economic value of equity sensitivity
EVE represents the present value of the future banking book cash
flows that could be distributed to equity holders under a managed
run-off scenario. This equates to the current book value of equity
plus the present value of future NII in this scenario. EVE can be
used to assess the economic capital required to support interest
rate risk in the banking book. An EVE sensitivity represents the
expected movement in EVE due to pre-specified interest rate
shocks, where all other economic variables are held constant.
Operating entities are required to monitor EVE sensitivities as a
percentage of capital resources.
Non-trading Value at Risk
Non-trading portfolios comprise positions that primarily arise from
the interest rate management of our retail and commercial
banking assets and liabilities, financial investments measured at
FVOCI, debt instruments measured at amortised cost, and
exposures arising from our insurance operations.
The following table summarises the main business areas where
non-trading market risks reside, and the market risk measures
used to monitor and limit exposures.

Risk types | Non-trading risk
•Interest rates •Credit spreads
Risk measure | Value at risk | Sensitivity | Stress testing

Non-trading portfolios
Value at risk of the non-trading portfolios
(Audited)
Non-trading VaR includes the interest rate risk in the banking book
transferred to and managed by Markets Treasury and the
exposures generated by the portfolio of HQLA held by Markets
Treasury to meet liquidity requirements.
The non-trading VaR reduced materially during 2022 from £29.4m
to end the year at £18.6m and was predominately driven by
interest rate risk. The volatile market conditions driven by
geopolitical events and concerns around high inflation led the
Markets Treasury business to materially reduce the holdings of
outright and asset swapped UK and US Government bonds. The
rationale for the execution was to firstly protect the value of the
Held to Collect and Sale portfolio and secondly to reduce the
entities sensitivity to the increase of interest rates. There was a
spike in the VaR during September due to a recalibration of the
VaR model to incorporate the market volatility, however the
Markets Treasury business took further action to reduce their
Interest Rate sensitivity following change in the UK fiscal stance
and increase in uncertainty leading the bond market to sell off
sharply and bond yields rise to multi year highs. The daily levels of
total non-trading VaR over the last year are set out in the graph
below.

Daily VaR (non-trading portfolios), 99% 1 day (£m)

Report of the Directors | Risk

78 | HSBC Bank plc Annual Report and Accounts 2022

The group’s non-trading VaR for the year is shown in the table below.

Non-trading VaR, 99% 1 day
(Audited)
| Interest rate ('IR') | Credit spread ('CS') | Portfolio diversification 1 | Total 2
| £m | £m | £m | £m
Balance at 31 Dec 2022 | 17.1 | 7.2 | (5.6) | 18.6
Average | 26.3 | 6.7 | (5.0) | 28.0
Maximum | 39.7 | 11.9 | — | 40.9
Minimum | 16.3 | 4.2 | — | 17.8
Balance at 31 Dec 2021 | 28.7 | 9.0 | (8.4) | 29.4
Average | 26.6 | 10.0 | (5.6) | 31.0
Maximum | 34.6 | 12.7 | — | 37.8
Minimum | 18.0 | 7.2 | — | 22.5

1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange,
together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A
negative number represents the benefit of portfolio diversification. As the maximum occurs on different days for different risk types, it is not
meaningful to calculate a portfolio diversification benefit for this measure.
2 The total VaR is non-additive across risk types due to diversification effect.
Other Risk
Non-trading book foreign exchange exposures are outlined below.
Structural foreign exchange exposures
Structural foreign exchange exposures represent net assets or
capital investments in subsidiaries, branches, joint arrangement or
associates, together with any associated hedges, the functional
currencies of which are currencies other than pound sterling.
An entity’s functional currency is that of the primary economic
environment in which the entity operates. We use the pound
sterling as our presentation currency in our consolidated financial
statements because sterling forms the major currency in which we
transact and fund our business. Exchange rate differences on
structural exposures are recognised in other comprehensive
income (‘OCI’).
The structural foreign exchange exposures are managed within
limits such that the capital ratios and the capital ratios of
individual banking subsidiaries are largely protected from the
effect of changes in exchange rates. We may hedge certain
structural foreign exchange positions, either at entity level, or by
relying on hedges held in other group entities, subject to approved
limits.
Transaction foreign exchange exposures
Transactional foreign exchange risk arises primarily from day-to-
day transactions in the banking book generating profit and loss or
FVOCI reserves in a currency other than the reporting currency of
the operating entity. Transactional foreign exchange exposure
generated through profit and loss is periodically transferred to
Markets and Securities Services and managed within limits with
the exception of limited residual foreign exchange exposure
arising from timing differences or for other reasons. Transactional
foreign exchange exposure generated through OCI reserves is
managed by the Markets Treasury business within agreed
appetite.
Pension risk management processes
HSBC provides future pension benefits on a defined contribution
basis from many of its European operations. However, there
remain future defined benefit pensions provided in the region.
Pension plans are run by local fiduciaries in line with local
legislative requirements. The largest pension plan is the HSBC
Trinkaus & Burkhardt Pension Scheme which is regulated by the
German Company Benefits Act (Gesetz zur Verbesserung der
betrieblichen Altersversorgung – Betriebsrentengesetz – BetrAVG).
In defined contribution pension plans, the contributions that HSBC
is required to make are known, while the ultimate pension benefit
will vary, typically with investment returns achieved by investment
choices made by the employee.
While the market risk to HSBC of defined contribution plans is
low, it is still exposed to operational and reputational risk.
In defined benefit pension plans, the level of pension benefit is
known. Therefore, the level of contributions required by HSBC will
vary due to a number of risks, including:
•investments delivering a return below that required to provide
the projected plan benefits;
•the prevailing economic environment leading to corporate
failures, thus triggering write-downs in asset values (both
equity and debt);
•a change in either interest rates or inflation, causing an
increase in the value of the plan liabilities; and
•plan members living longer than expected (known as
longevity risk).
Pension risk is assessed using an economic capital model that
takes into account potential variations in these factors.
The impact of these variations on both pension assets and pension
liabilities is assessed using a one-in-200-year stress test. Scenario
analysis and other stress tests are also used to support pension
risk management.
To fund the benefits associated with defined benefit plans,
sponsoring group companies, and in some instances employees,
make regular contributions in accordance with advice from
actuaries and in consultation with the plan’s fiduciaries where
relevant. These contributions are normally set to ensure that there
are sufficient funds to meet the cost of the accruing benefits for
the future service of active members. However, higher
contributions are required when plan assets are considered
insufficient to cover the existing pension liabilities. Contribution
rates are typically revised annually or once every three years,
depending on the plan.
The defined benefit plans invest contributions in a range of
investments designed to limit the risk of assets failing to meet a
plan’s liabilities. Any changes in expected returns from the
investments may also change future contribution requirements. In
pursuit of these long-term objectives, an overall target allocation
of the defined benefit plan assets between asset classes is
established. In addition, each permitted asset class has its own
benchmarks, such as stock market or property valuation indices or
liability characteristics. The benchmarks are reviewed at least once
every three to five years and more frequently if required by local
legislation or circumstances. The process generally involves an
extensive asset and liability review.

HSBC Bank plc Annual Report and Accounts 2022 | 79

Capital risk in 2022
Capital overview

Capital adequacy metrics
| At
| 31 Dec | 31 Dec
| 2022 | 2021
Risk-weighted assets ('RWAs') (£m) |  |
Credit risk | 68,821 | 69,929
Counterparty credit risk | 17,981 | 16,434
Market risk | 15,822 | 9,828
Operational risk | 11,547 | 10,512
Total RWAs | 114,171 | 106,703
Capital on a transitional basis (£m) |  |
Common equity tier 1 ('CET1') capital | 19,184 | 18,963
Tier 1 capital | 23,077 | 22,825
Total capital | 36,187 | 33,992
Capital ratios on a transitional basis (%) |  |
Common equity tier 1 | 16.8 | 17.8
Total tier 1 | 20.2 | 21.4
Total capital ratio | 31.7 | 31.9
Leverage ratio (transitional) 2 |  |
Tier 1 capital (£m) | 23,077 | 22,825
Total leverage ratio exposure measure (£m) | 417,587 | 536,518
Leverage ratio (%) | 5.5 | 4.3
Leverage ratio (fully phased-in) 2 |  |
Tier 1 capital (£m) | 23,077 | 22,652
Total leverage ratio exposure measure (£m) | 417,587 | 536,518
Leverage ratio (%) | 5.5 | 4.2

References to EU regulations and directives (including technical
standards) should, as applicable, be read as references to the UK's
version of such regulation and/or directive, as onshored into UK
law under the European Union (Withdrawal) Act 2018, and as may
be subsequently amended under UK law.
Capital figures and ratios in the table above are calculated in
accordance with the revised Capital Requirements Regulation and
Directive, as implemented (‘CRR II’). Leverage ratios are calculated
using the end point definition of capital and the IFRS 9 regulatory
transitional arrangements.
Regulatory transitional arrangements for IFRS 9
‘Financial Instruments’
We have adopted the regulatory transitional arrangements in
CRR II for IFRS 9, including paragraph four of article 473a. Our
capital and ratios are presented under these arrangements
throughout the table above. Without their application, our CET1
ratio would be 16.8%.
The IFRS 9 regulatory transitional arrangements allow banks to
add back to their capital base a proportion of the impact that IFRS
9 has upon their loan loss allowances during the first five years of
use. The impact is defined as:
•the increase in loan loss allowances on day one of IFRS 9
adoption; and
•any subsequent increase in expected credit losses (‘ECL’) in the
non-credit-impaired book thereafter.
Any add-back must be tax-effected and accompanied by a
recalculation of exposure and RWAs. The impact is calculated
separately for portfolios using the standardised (‘STD’) and internal
ratings based (‘IRB’) approaches. For IRB portfolios, there is no
add-back to capital unless loan loss allowances exceed regulatory
12-month expected losses.
In the current period, the add-back to the capital base amounted
to £24m under the STD approach with tax impacts of £5m which
resulted in a net add-back of £19m.
Own funds

Own funds disclosure
(Audited) |
|  | At
|  | 31 Dec | 31 Dec
|  | 2022 | 2021
Ref* |  | £m | £m
| Common equity tier 1 (‘CET1’) capital: instruments and reserves |  |
1 | Capital instruments and the related share premium accounts | 1,217 | 797
| – ordinary shares | 1,217 | 797
2 | Retained earnings 1,2 | 16,177 | 15,511
3 | Accumulated other comprehensive income (and other reserves)1,2 | 4,010 | 2,931
5 | Minority interests (amount allowed in consolidated CET1) | 72 | 57
5a | Independently reviewed interim net profits net of any foreseeable charge or dividend 3 | (1,459) | 625
6 | Common equity tier 1 capital before regulatory adjustments 2 | 20,017 | 19,921
28 | Total regulatory adjustments to common equity tier 1 | (833) | (958)
29 | Common equity tier 1 capital 2 | 19,184 | 18,963
36 | Additional tier 1 capital before regulatory adjustments | 3,942 | 3,906
43 | Total regulatory adjustments to additional tier 1 capital | (49) | (44)
44 | Additional tier 1 capital | 3,893 | 3,862
45 | Tier 1 capital 2 | 23,077 | 22,825
51 | Tier 2 capital before regulatory adjustments | 13,559 | 11,591
57 | Total regulatory adjustments to tier 2 capital | (449) | (424)
58 | Tier 2 capital | 13,110 | 11,167
59 | Total capital 2 | 36,187 | 33,992

*The references identify the lines prescribed in the European Banking Authority template, which are applicable and where there is a value.
1 These disclosures are based on updated rules implemented from 1 January 2022 including the PRA’s disclosure templates and instructions which
came into force at that time. The presentation of comparatives has been amended only for CRR II grandfathered instruments to align to the
updated template’s rows and instructions.
2 From 30 September 2022, investments in non-financial institution subsidiaries or participations have been measured on an equity accounting basis
in compliance with UK regulatory requirements. Comparatives for prior periods have been represented on a consistent basis with the current year.
3 This row includes losses that have been recognised and deducted as they arose and were therefore not subject to an independent review.
Report of the Directors | Risk

80 | HSBC Bank plc Annual Report and Accounts 2022

At 31 December 2022, our common equity tier 1 ('CET1') capital
ratio decreased to 16.8% from 17.8% at 31 December 2021. The
key drivers of the fall in our CET1 ratio were:
•a 1.6 percentage point impact from the expected loss on
reclassification of our retail banking operations in France to
held for sale;
•a 1.2 percentage point impact from RWA growth due to
implementation of new regulations and increased volatility in
the market and due to impact of FX movement
Share issuance, profits and other movements added 1.8
percentage points to the CET1 ratio.
Throughout 2022, we complied with the PRA's regulatory capital
adequacy requirements, including those relating to stress testing.
Risk-weighted assets

RWA movement by key driver
| Total RWAs
| £m
RWAs at 1 Jan 2022 | 106,703
Asset size | 3,531
Asset quality | 296
Model updates | (2,804)
Methodology and policy | (937)
Foreign exchange movement | 7,382
Total RWA movement | 7,468
RWAs at 31 Dec 2022 | 114,171

RWAs increased by £7.5 bn during the year, including an increase
of £7.4 bn due to foreign currency translation differences.
Asset size
Asset size increased by £3.5bn driven by an increase in Market
Risk RWA by £4.5bn mainly attributable to heightened market risk
volatility, and an increase in transactional and structural foreign
exchange exposure. This was partially offset by £0.7bn decrease in
Credit Risk RWAs due to other balance sheet movements.
Asset quality
Credit Risk increased marginally by £0.3bn due to portfolio mix
changes.
Model updates
The £2.8bn decrease in RWAs was mainly driven by the
implementation of new models for retail credit risk and equity
prices (in market risk).
Methodology and policy
The £0.9bn decrease in RWA is mainly driven by synthetic
securitization and by risk parameter refinements, partially offset by
increases due to implementation of CRR II rules.
Leverage ratio
Our leverage ratio is 5.5% at 31 December 2022, up from 4.2% at
31 December 2021. The improvement was primarily due to the
exclusion of central bank claims and cash pooling netting
following the implementation of the PRA UK leverage ratio
framework from 1 January 2022 and a rise in tier 1 capital.
Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market
discipline and aims to make financial services firms more
transparent by requiring publication of wide-ranging information
on their risks, capital and management. Our Pillar 3 Disclosures at
31 December 2022 is published on our website, www.hsbc.com/
investors.
Structural foreign exchange exposures
The group’s structural foreign currency exposure is represented by
the net assets or capital investments in subsidiaries, branches,
joint arrangements or associates, the functional currencies of
which are currencies other than the sterling.
For our policies and procedures for managing structural foreign exchange
exposures, see page 79 of the ‘Risk management’ section.

Net structural foreign exchange exposures
| 2022 | 2021
| £m | £m
Currency of structural exposure |  |
Euro | 10,007 | 8,068
US Dollars | 1,062 | 1,470
South African Rand | 287 | 285
Israeli New Shekel | 85 | 169
Others, each less than £150m | 305 | 319
At 31 Dec | 11,746 | 10,311

HSBC Bank plc Annual Report and Accounts 2022 | 81

Liquidity and funding risk in 2022
Liquidity coverage ratio
The LCR aims to ensure that a bank has sufficient unencumbered
HQLA to meet its liquidity needs in a 30-calendar-day liquidity
stress scenario. HQLA consist of cash or assets that can be
converted into cash at little or no loss of value in markets.
At 31 December 2022, all the group’s principal operating entities
were within the LCR risk tolerance level established by the Board
and applicable under the LFRF.
The following table displays the individual LCR levels for HSBC
Bank plc's principal operating entities on the European
Commission Delegated Regulation basis.

Operating entities’ LCRs 1,2,3
|  | At
|  | 31 Dec | 31 Dec
|  | 2022 | 2021
|  | % | %
HSBC Bank plc |  | 143 | 142
HSBC Continental Europe |  | 150 | 142

In addition to the regulatory metric, the group manages liquidity
via 'internal liquidity metric', which is being used to monitor and
manage liquidity risk via a low-point measure across a 270-day
horizon, taking into account recovery capacity.
Net stable funding ratio
The Net Stable Funding Ratio (‘NSFR’) requires institutions to
maintain sufficient stable funding relative to required stable
funding, and reflects a bank’s long-term funding profile (funding
with a term of more than a year).
At 31 December 2022, all the group’s principal operating entities
were within the NSFR risk tolerance level established by the Board
and applicable under the LFRF.

Operating entities’ NSFRs 1,2
|  | At
|  | 31 Dec | 31 Dec
|  | 2022 | 2021
|  | % | %
HSBC Bank plc |  | 115 | 115
HSBC Continental Europe |  | 140 | 130

Depositor concentration and term funding maturity
concentration
The LCR and NSFR metrics assume a stressed outflow based on a
portfolio of depositors within each depositor segment. To ensure
the validity of these assumptions in the sense that the deposit
base is sufficient diversified, the depositor concentration is
monitored on an ongoing basis.
In addition to this, operating entities monitor the term funding
maturity concentration metric to ensure they are not overly
exposed to term funding concentration of wholesale market
counterparts by the current maturity profile in any defined period.
Liquid assets of the group’s principal operating entities
The table below shows the unweighted liquidity value of assets
categorised as liquid, which is used for the purposes of calculating
the LCR metric. This reflects the stock of unencumbered liquid
assets at the reporting date, using the regulatory definition of
liquid assets.

Operating entities' liquid assets 1,2,3 |
| At Estimated liquidity value | At Estimated liquidity value
| 31 Dec 2022 | 31 Dec 2021
| £m | £m
HSBC Bank plc |  |
Level 1 | 93,500 | 88,423
Level 2a | 5,726 | 3,195
Level 2b | 3,270 | 3,473
HSBC Continental Europe |  |
Level 1 | 74,852 | 39,159
Level 2a | 781 | 450
Level 2b | 173 | 142

1 The LCR and NSFR ratios presented in this table are based on average value. The LCR is the average of the preceding 12 months. The NSFR is the
average of preceding quarters. Prior period numbers have been restated for consistency.
2 In response to the requirement for an IPU in line with EU Capital Requirements Directive ('CRD V'), HBCE completed the change of control
transactions for HSBC Germany ('HTDE') and HSBC Malta ('HBMT') on 30 November 2022. The average for LCR and NSFR includes the impact of
inclusion of two entities for Nov-22 and Dec-22.
3 In December 2022, a strategic data enhancement was implemented which resulted in a reclassification of some securities. This reclassification
drove a reduction in total High Quality Liquid Assets and corresponding LCR as of 31 December 2022. Prior period numbers have been restated
for consistency.
Report of the Directors | Risk

82 | HSBC Bank plc Annual Report and Accounts 2022

Sources of funding
Our primary sources of funding are customer current accounts,
repo and wholesale securities.
The following ‘Funding sources and uses’ table provides a
consolidated view of how our balance sheet is funded, and should
be read in light of the LFRF, which requires operating entities to
manage liquidity and funding risk on a stand-alone basis.
The table analyses our consolidated balance sheet according to
the assets that primarily arise from operating activities and the
sources of funding primarily supporting these activities. Assets
and liabilities that do not arise from operating activities are
presented at other balance sheet lines. In 2022, the level of
customer accounts continued to exceed the level of loans and
advances to customers. The positive funding gap was
predominantly deployed in liquid assets, cash and balances with
central banks and financial investments, as required by the LFRF.

Funding sources and uses for the group
| 2022 | 2021 |  |  | 2022 | 2021
| £m | £m |  |  | £m | £m
Sources |  |  |  | Uses |  |
Customer accounts | 215,948 | 205,241 |  | Loans and advances to customers | 72,614 | 91,177
Deposits by banks | 20,836 | 32,188 |  | Loans and advances to banks | 17,109 | 10,784
Repurchase agreements – non-trading | 32,901 | 27,259 |  | Reverse repurchase agreements – non-trading | 53,949 | 54,448
Debt securities in issue | 7,268 | 9,428 |  | Cash collateral, margin and settlement accounts | 51,858 | 34,907
Cash collateral, margin and settlement accounts | 60,385 | 37,076 |  | Assets held for sale | 21,214 | 9
Liabilities of disposal groups held for sale | 24,711 | — |  | Trading assets | 79,878 | 83,706
Subordinated liabilities | 14,528 | 12,488 |  | – reverse repos | 8,729 | 8,626
Financial liabilities designated at fair value | 27,287 | 33,608 |  | – stock borrowing | 5,627 | 6,498
Liabilities under insurance contracts | 19,987 | 22,264 |  | – other trading assets | 65,522 | 71,862
Trading liabilities | 41,265 | 46,433 |  | Financial investments | 32,604 | 41,300
– repos | 8,213 | 7,663 |  | Cash and balances with central banks | 131,433 | 108,482
– stock lending | 1,773 | 1,637 |  | Other balance sheet assets | 256,694 | 171,798
– other trading liabilities | 31,279 | 37,133 |  | At 31 Dec | 717,353 | 596,611
Total equity | 24,016 | 23,715 |  |  |  |
Other balance sheet liabilities | 228,221 | 146,911 |  |  |  |
At 31 Dec | 717,353 | 596,611 |  |  |  |

Contingent liquidity risk arising from committed lending
facilities
The group provides customers with committed facilities such as
standby facilities to corporate customers and committed backstop
lines to conduits sponsored by the group. All of the undrawn
commitments provided to conduits or external customers are
accounted for in the LCR and NSFR in line with the applicable
regulations.
This ensures that under a stress scenario any additional outflow
generated by increased utilisation of these committed facilities by
either customers or the group’s sponsored conduits is
appropriately reflected in our liquidity and funding position.
In relation to commitments to customers, the table below shows
the level of undrawn commitments outstanding in terms of the five
largest single facilities and the largest market sector.

The group’s contractual exposures at 31 December monitored under the contingent liquidity risk limit structure
| 2022 | 2021
| £bn | £bn
Commitments to conduits |  |
Multi-seller conduits 1 |  |
– total lines | 3.7 | 4.2
– largest individual lines | 0.2 | 0.2
Securities investment conduits – total lines | 1.3 | 1.3
Commitments to customers |  |
– five largest 2 | 3.7 | 10.4
– largest market sector 3 | 13.3 | 7.7

1 Exposures relate to the Regency multi-seller conduit. This vehicle provides funding to group customers by issuing debt secured by a diversified
pool of customer-originated assets.
2 Represents the undrawn balance for the five largest committed liquidity facilities provided to customers, other than those facilities to conduits.
3 Represents the undrawn balance for the total of all committed liquidity facilities provided to the largest market sector, other than those facilities to
conduits.
Asset encumbrance and collateral management
An asset is defined as encumbered if it has been pledged as
collateral against an existing liability and, as a result, is no longer
available to the group to secure funding, satisfy collateral needs or
be sold to reduce the funding requirement. Collateral is managed
on an operating entity basis consistent with the approach to
managing liquidity and funding. Available collateral held in an
operating entity is managed as a single consistent collateral pool
from which each operating entity will seek to optimise the use of
the available collateral. The objective of this disclosure is to
facilitate an understanding of available and unrestricted assets
that could be used to support potential future funding and
collateral needs. The disclosure is not designed to identify assets
which would be available to meet the claims of creditors or to
predict assets that would be available to creditors in the event of a
resolution or bankruptcy.

HSBC Bank plc Annual Report and Accounts 2022 | 83

Summary of assets available to support potential future funding and collateral needs (on- and off-balance sheet)
| 2022 | 2021
| £m | £m
Total on-balance sheet assets at 31 Dec | 717,353 | 596,611
Less: |  |
– reverse repo/stock borrowing receivables and derivative assets | (293,543) | (207,513)
– other assets that cannot be pledged as collateral | (51,974) | (48,350)
Total on-balance sheet assets that can support funding and collateral needs at 31 Dec | 371,836 | 340,748
Add: off-balance sheet assets |  |
– fair value of collateral received in relation to reverse repo/stock borrowing/derivatives that is available to sell or repledge | 180,233 | 202,794
Total assets that can support future funding and collateral needs | 552,069 | 543,542
Less: |  |
– on-balance sheet assets pledged | (98,124) | (93,513)
– re-pledging of off-balance sheet collateral received in relation to reverse repo/stock borrowing/derivatives | (136,777) | (151,378)
Assets available to support funding and collateral needs at 31 Dec | 317,168 | 298,651

Market risk

Overview
Market risk is the risk that movements in market factors, including
foreign exchange rates and commodity prices, interest rates,
credit spreads and equity prices will reduce the group’s income or
the value of its portfolios.
Exposure to market risk is separated into two portfolios.
Trading portfolios comprise positions arising from market-making
and warehousing of customer-derived positions.
Non-trading portfolios including Markets Treasury comprise
positions that primarily arise from the interest rate management of
the group’s retail and commercial banking assets and liabilities,
financial investments designated as held-to-collect-and-sale
(‘HTCS’), and exposures arising from the group’s insurance
operations.
Key developments in 2022
There were no material changes to our policies and practices for
the management of market risk in 2022.
Market risk governance
(Audited)
The following diagram summarises the main business areas where
trading market risks reside, and the market risk measures used to
monitor and limit exposures.

Risk types | Trading risk
•Foreign exchange and commodities •Interest rates •Credit spreads •Equities
Risk measure | Value at risk | Sensitivity | Stress testing

Where appropriate, we apply similar risk management policies and
measurement techniques to trading portfolios. Our objective is to
manage and control market risk exposures to optimise return on
risk while maintaining a market profile consistent with our
established risk appetite.
Market risk is managed and controlled through limits approved by
the group Chief Risk Officer. These limits are allocated across
business lines and to the group and its subsidiaries. The majority
of HSBC’s total VaR and almost all trading VaR reside in GBM.
Each major operating entity has an independent market risk
management and control sub-function, which is responsible for
measuring, monitoring and reporting market risk exposures
against limits on a daily basis. The Traded Risk function enforces
the controls around trading in permissible instruments approved
for each site as well as following completion of the new product
approval process. Traded Risk also restricts trading in the more
complex derivative products to offices with appropriate levels of
product expertise and robust control systems.
Market risk measures
Monitoring and limiting market risk exposures
Our objective is to manage and control market risk exposures
while maintaining a market profile consistent with the group’s risk
appetite.
We use a range of tools to monitor and limit market risk exposures
including sensitivity analysis, VaR, and stress testing
Sensitivity analysis
Sensitivity analysis measures the impact of individual market
factor movements on specific instruments or portfolios, including
interest rates, foreign exchange rates, credit spreads and equity
prices, such as the effect of a one basis point change in yield. We
use sensitivity measures to monitor the market risk positions
within each risk type. Sensitivity limits are set for portfolios,
products and risk types, with the depth of the market being one of
the principal factors in determining the level of limits set.
Value at risk
VaR is a technique that estimates the potential losses on risk
positions as a result of movements in market rates and prices over
a specified time horizon and to a given level of confidence. The
use of VaR is integrated into market risk management and is
calculated for all trading positions regardless of how the group
capitalises those exposures. Where there is not an approved
internal model, the group uses the appropriate local rules to
capitalise exposures.
The VaR model for trading portfolios are predominantly based on
historical simulation. The VaR is calculated at a 99% confidence
level for a one-day holding period. Where we do not calculate VaR
explicitly, we use alternative tools like Stress Testing.
The VaR models derive plausible future scenarios from past series
of recorded market rates and prices, taking into account inter-
relationships between different markets and rates such as interest
rates and foreign exchange rates. The models also incorporate the
effect of option features on the underlying exposures.
The historical simulation models used incorporates the following
features:
•Historical market rates and prices are calculated with reference
to foreign exchange rates and commodity prices, interest rates,
equity prices and the associated volatilities;
•Potential market movements utilised for VaR are calculated
with reference to data from the past two years; and
•VaR measures are calculated to a 99% confidence level and use
a one-day holding period.
The nature of the VaR models means that an increase in observed
market volatility will most likely lead to an increase in VaR without
any changes in the underlying positions.
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VaR model limitations
Although a valuable guide to risk, VaR should always be viewed in
the context of its limitations. For example:
•the use of historical data as a proxy for estimating future events
may not encompass all potential events, particularly those
which are extreme in nature;
•the use of a holding period assumes that all positions can be
liquidated or the risks offset during that period. This may not
fully reflect the market risk arising at times of severe illiquidity,
when the holding period may be insufficient to liquidate or
hedge all positions fully;
•the use of a 99% confidence level by definition does not take
into account losses that might occur beyond this level of
confidence; and
•VaR is calculated on the basis of exposures outstanding at the
close of business and therefore does not necessarily reflect
intra-day exposures.
Risk not in VaR framework
Other basis risks which are not completely covered in VaR are
complemented by our risk not in VaR (‘RNIV’) calculations, and are
integrated into our capital framework.
Risk factors are reviewed on a regular basis and either
incorporated directly in the VaR models, where possible, or
quantified through the VaR-based RNIV approach or a stress test
approach within the RNIV framework. The outcome of the VaR-
based RNIV is included in the VaR calculation; a stressed VaR
RNIV is also computed for the risk factors considered in the VaR-
based RNIV approach.
Stress-type RNIVs include a deal contingent derivatives capital
charge to capture risk for these transactions and a de-peg risk
measure to capture risk to pegged and heavily managed
currencies.
Stress testing
Stress testing is an important procedure that is integrated into our
market risk management tool to evaluate the potential impact on
portfolio values of more extreme, although plausible, events or
movements in a set of financial variables. In such scenarios, losses
can be much greater than those predicted by VaR modelling.
Stress testing is implemented at legal entity, regional and overall
Group levels. A standard set of scenarios is utilised consistently
across all regions within the HSBC Group. Scenarios are tailored to
capture the relevant events or market movements at each level.
The risk appetite around potential stress losses for the group is set
and monitored against referral limits.
Market risk reverse stress tests are undertaken on the premise that
there is a fixed loss. The stress testing process identifies which
scenarios lead to this loss. The rationale behind the reverse stress
test is to understand scenarios which are beyond normal business
settings that could have contagion and systemic implications.
Stressed VaR and stress testing, together with reverse stress
testing and the management of gap risk, provide management
with insights regarding the ‘tail risk’ beyond VaR for which the
group's appetite is limited.
Trading portfolios
Back-testing
We routinely validate the accuracy of our VaR models by back-
testing the VaR metric against both actual and hypothetical profit
and loss. Hypothetical profit and loss excludes non-modelled items
such as fees, commissions and revenue of intra-day transactions.
The hypothetical profit and loss reflects the profit and loss that
would be realised if positions were held constant from the end of
one trading day to the end of the next. This measure of profit and
loss does not align with how risk is dynamically hedged, and is not
therefore necessarily indicative of the actual performance of the
business.
The number of back-testing exceptions is used to gauge how well
the models are performing. We consider enhanced internal
monitoring of a VaR model if more than five profit exceptions or
more than five loss exceptions occur in a 250-day period.
We back-test our VaR at set levels of our group entity hierarchy.
Defined benefit pension plans
Market risk also arises within the Bank’s defined benefit pension
plans to the extent that the obligations of the plans are not fully
matched by assets with determinable cash flows. Refer to the
Pension risk management processes section on page 79 for
additional information.
Market risk in 2022
The volatility in financial markets was elevated in 2022 driven by
high inflation and the geopolitical risk around Ukraine. During the
first half of the year, Russia-Ukraine war led supply chain
disruptions increasing energy and food prices. The Zero-Covid
policy in China added to the supply chain disruptions. Central
Banks around the world (both from Developed and Emerging
markets) aggressively started raising policy rates to tame the
surging inflation. The US and Europe imposed multiple sanctions
on Russia leading to large sell off of the Russian assets. The global
equity markets sold off and IPO dried off. The fixed income prices
fell responding to increasing rates. The USD index rallied with JPY,
EUR and GBP depreciating. The Credit market sold off with new
issuances drying up. European markets also underperformed as
Russia retaliated by cutting of gas supply to Europe. US and
European governments aggressively intervened in the energy
market by releasing Oil from strategic reserve driving Oil prices
down. Supply chain disruption also eased leading to Inflation
coming down in second half of 2022. However, volatility in
financial markets remained elevated particularly in the UK as the
cost of living crisis intensified. In addition, a change in the UK
fiscal stance in late September 2022 led to the pound sterling
reaching record lows and to significant turmoil in the market for
long-dated UK government bonds, which was exacerbated by
rapid deleveraging of liability-driven investment funds used by
pension schemes.
Trading portfolios
Value at risk of the trading portfolios
(Audited)
The Trading VaR predominantly resides within Market Securities
Services where it was £31.2m as at 31 December 2022, compared
with £19m at 31 December 2021. The Total Trading VaR peaked at
£60m in September owing to the sensitivity of the trading book to
interest rate moves, coupled with a large volatility in the rates
market. When the central banks started to intervene beginning of
Q4, the market volatility started to ease; as a result, the Trading
VaR decreased and remained fairly stable over the last three
months of the year, ranging between £31.2m and £38.15m.

HSBC Bank plc Annual Report and Accounts 2022 | 85

Daily VaR (trading portfolios), 99% 1 day (£m)

.
The group’s trading VaR for the year is shown in the table below.

Trading VaR, 99% 1 day
(Audited)
| Foreign exchange ('FX') and commodity | Interest rate ('IR') | Equity ('EQ') | Credit Spread ('CS') | Portfolio Diversification 1 | Total 2
| £m | £m | £m | £m | £m | £m
Balance at 31 Dec 2022 | 7.5 | 26.4 | 13.6 | 8.6 | (24.9) | 31.2
Average | 10.0 | 15.3 | 11.7 | 13.0 | (22.8) | 27.2
Maximum | 21.5 | 49.2 | 17.1 | 22.9 | — | 60.0
Minimum | 3.3 | 8.2 | 6.8 | 7.0 | — | 14.2
Balance at 31 Dec 2021 | 4.5 | 10.0 | 10.5 | 14.9 | (20.9) | 19.0
Average | 7.1 | 12.8 | 10.2 | 12.6 | (20.4) | 22.3
Maximum | 19.3 | 26.7 | 14.9 | 16.7 | — | 31.9
Minimum | 3.7 | 9.3 | 6.3 | 9.2 | — | 17.3

1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange,
together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A
negative number represents the benefit of portfolio diversification. As the maximum occurs on different days for different risk types, it is not
meaningful to calculate a portfolio diversification benefit for this measure.
2 The total VaR is non-additive across risk types due to diversification effect and it includes VaR RNIV.
Back-testing
HSBC Bank plc experienced 11 back testing exceptions against
the Hypothetical P&L and 9 back testing exceptions against the
Actual P&L. The hypothetical back testing exceptions were driven
by losses from defensive positioning in rates, equity, credit and FX
exposures on days when markets rallied.
In addition, there were two actual back testing exceptions driven
by one off changes in reserves (such as month end adjustment)
and two actual back testing exceptions driven by losses from the
unwinding of a large trade.

Climate Risk

Overview
Climate risks have the potential to cause both financial and non-
financial impacts for HSBC Bank plc. Financial impacts could
materialise, for example, through greater transactional losses and/
or increased capital requirements. Non-financial impacts could
materialise if our own assets or operations are impacted by
extreme weather or chronic changes in weather patterns, or as a
result of business decisions to help achieve the HSBC Group’s
climate ambition.
We remain aligned to the HSBC Group climate ambition to align
HSBC Group’s own operations and supply chain to net zero by
2030, and the financed emissions from the HSBC Group’s portfolio
of customers to net zero by 2050. The HSBC Group announced in
March 2022 that it intends to publish a climate transition plan in
2023, and committed to a science-aligned phase-down of fossil
fuel finance, and a review of its wider financing and investment
policies critical to achieving net zero by 2050. This follows the
HSBC Group’s thermal coal phase out policy, which was
announced in 2021.
Key developments in 2022
•HSBC Bank plc's risk appetite statement is approved by the
Board and includes the measures we intend to take to enable
the delivery of our climate ambition and meet our
commitments.
•Through our dedicated climate risk programme, we have
continued to embed climate considerations throughout the
firm, including updating the scope of our programme to cover
all risk types, expanding the scope of climate related training
and developing new climate risk metrics to monitor and
manage exposures as well as publishing a new greenwashing
risk management framework.
•We have enhanced and expanded the use of a client Transition
Engagement Questionnaire to better understand our exposure
to the highest transition risk sectors and we continue to engage
with our customers to understand and support their transition
away from high carbon activities.
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86 | HSBC Bank plc Annual Report and Accounts 2022

Governance and structure
The group's Board takes overall responsibility for our ESG strategy,
overseeing executive management in developing the approach,
execution and associated reporting.
We continue to aim to deepen our understanding of the drivers of
climate risk as well as aim to manage our exposure. A dedicated
Climate Risk Oversight Forum is responsible for shaping and
overseeing our approach and providing support in managing
climate risk.
The group's Risk Management Meeting and Risk Committee
receive regular updates on our climate risk profile and progress of
our climate risk programme.
Key risk management processes
We are integrating climate risk into the policies, processes and
controls across many areas of our organisation, and we will
continue to update these as our climate risk management
capabilities mature over time. We continue to enhance our climate
risk scoring tool, which will enable us to assess our customers’
exposures to climate risk.

Resilience Risk

Overview
Resilience risk is the risk that we are unable to provide critical
services to our customers, affiliates and counterparties as a result
of sustained and significant operational disruption. Resilience risk
arises from failures or inadequacies in processes, people, systems
or external events.
Key developments in 2022
The Operational and Resilience Risk sub-function seeks to provide
robust Risk Steward oversight of the management of risk by our
businesses, functions and legal entities. This includes effective and
timely independent challenge and expert advice. During the year,
we carried out a number of initiatives to seek to keep pace with
geopolitical, regulatory and technology changes and to strengthen
the management of resilience risk:
•We focus on understanding of our risk and control
environment, by updating our risk taxonomy and control
libraries, and refreshing risk and control assessments.
•We implemented heightened monitoring and reporting of
cyber, third party, business continuity and payment/sanctions
risks resulting from the Russia-Ukraine war and enhanced
controls and key processes where needed.
•We provide analysis and reporting of non-financial risks
providing easy to access risk and control information and
metrics that enable management to focus on non-financial risks
in their decision-making and appetite setting.
•We aimed to further strengthen our non-financial risk
governance and senior leadership and improved our coverage
and Risk Steward oversight, for data privacy and change
execution.
Governance and structure
The Operational and Resilience Risk target operating model
provides a globally consistent approach, which allows us to define
a group view across resilience risks, strengthening our risk
management oversight while operating effectively as part of a
simplified non-financial risk structure. We view resilience risk
across nine sub-risk types related to: failure to manage third
parties; technology and cybersecurity; transaction processing;
failure to protect people and places from physical malevolent acts;
business interruption and incident risk; data risk; change execution
risk; building unavailability; and workplace safety.
Risk appetite and key escalations for resilience risk are reported to
our Risk Management Meeting (chaired by the HSBC Bank plc
Chief Risk Officer) and to our Risk Committee.
Key risk management process
Operational resilience is our ability to anticipate, prevent, adapt,
respond to, recover and learn from operational disruption while
minimising customer and market impact. Resilience is determined
by assessing whether we are able to continue to provide our most
important services, within an agreed level. This is achieved via
day-to-day oversight, periodic and ongoing assurance, such as
deep dive review and controls testing, which may result in
challenges being raised to the business by Risk Stewards. Further
challenge is also raised in the form of quarterly Risk Steward
opinion papers to formal governance. We accept we will not be
able to prevent all disruption but we prioritise investment to
continually improve the response and recovery strategies for our
most important business services.
Business operations continuity
We continue to monitor the situation in Russia and Ukraine, and
remain ready to take measures to help ensure business continuity,
should the situation require. There has been no significant impact
to our services in nearby markets where the group operates.
Publications from the UK Government, EU Commission and the
National Grid, amongst others, advised on potential plans for
power cuts and energy restrictions across the UK and Continental
Europe during the winter period. In light of potential disruption,
businesses and functions in these markets are reviewing existing
plans and responses to minimise the impact.

Regulatory compliance risk

Overview
Regulatory compliance risk is the risk associated with breaching
our duty to clients and other counterparties, inappropriate market
conduct and breaching related financial services regulatory
standards. Regulatory compliance risk arises from the failure to
observe relevant laws, codes, rules and regulations and can
manifest itself in poor market or customer outcomes and lead to
fines, penalties and reputational damage to our business.
Key developments in 2022
The dedicated programme to embed our updated purpose-led
conduct approach has concluded. Work to map applicable
regulations to our risks and controls continues in 2023 alongside
adoption of new tooling to support enterprise-wide horizon
scanning for new regulatory obligations and to manage our
regulatory reporting inventories. Climate risk has been integrated
into regulatory compliance policies and processes, with
enhancements being made to the Product Governance Framework
and controls in order to ensure the effective consideration of
Climate, and in particular Greenwashing, risks.
A major change initiative that begun in 2022 was the introduction
of the UK Consumer Duty (which will begin to be implemented in
July 2023) and measures resulting from ongoing thematic reviews
into the workings of the retail, small to medium enterprises
(‘SME’) and wholesale banking sectors and the provision of
financial advice to consumers in the UK particularly. A number of
the issues arising from this work have been exacerbated by the
cost of living crisis affecting the UK and the EU, and we may see
further regulatory intervention as a result, in particular to protect
vulnerable customers.
Governance and structure
The structure of the Compliance function is substantively
unchanged and the Group Regulatory Conduct capability and
Group Financial Crime capability both continue to work closely
with the regional Chief Compliance Officers and their respective
teams to help them identify and manage regulatory and financial
crime compliance risks across the Group. They also work together
and with all relevant stakeholders to ensure we achieve good
conduct outcomes and provide enterprise-wide support on the
Compliance risk agenda in collaboration with the Group’s Risk
function.

HSBC Bank plc Annual Report and Accounts 2022 | 87

Key risk management processes
The Europe Regulatory Conduct function is engaged in setting
policies, standards and risk appetite to guide the management of
regulatory compliance. It also devises clear frameworks and
support processes to mitigate regulatory compliance risks. The
capability provides oversight, review and challenge to the Country
Chief Compliance Officers and their teams to help them identify,
assess and mitigate regulatory compliance risks, where required.
The regulatory compliance risk policies are regularly reviewed.
Policies and procedures require the prompt identification and
escalation of any actual or potential regulatory breach. Relevant
reportable events are escalated to the HSBC Bank plc RMM and to
the Group Risk Committee, as appropriate.
Conduct of business
Our conduct approach aims to guide us to do the right thing and
to focus on the impact we have on our customers and the financial
markets in which we operate. It complements our purpose and
values and – together with more formal policies and the tools we
have to do our jobs – provides a clear path to achieving our
purpose and delivering our strategy. For further information on our
Purpose-led Conduct Approach, see www.hsbc.com/who-we-are/
esg-and-responsible-business/our-conduct
Regulators and governments
We proactively engage with regulators and governments to
facilitate strong relationships through virtual and in-person
meetings and by responding to consultations individually and
jointly via industry bodies.

Financial crime risk

Overview
Financial crime risk is the risk that HSBC’s products and services
will be exploited for criminal activity. This includes fraud, bribery
and corruption, tax evasion, sanctions and export control
violations, money laundering, terrorist financing and proliferation
financing. Financial crime risk arises from day-to-day banking
operations involving customers, third parties and employees.
Key developments in 2022
We regularly review the effectiveness of our financial crime risk
management framework, which includes consideration of the
complex and dynamic nature of sanctions compliance risk. In
2022, we adapted our policies, procedures and controls to respond
to the unprecedented volume and diverse set of sanctions and
trade restrictions imposed against Russia following its invasion of
Ukraine.
We also continued to make progress with several key financial
crime risk management initiatives, including:
• We enhanced our screening and non-screening controls to aid
the identification of potential sanctions risk related to Russia, as
well as risk arising from export control restrictions.
• We deployed a key component of our intelligence-led, dynamic
risk assessment capabilities for customer account monitoring in
our Non-Ring Fenced Bank for CMB and in our Jersey market
for domestic customers in retail and wholesale, while building
toward other markets in Europe. Global Social Network
Analysis was deployed in December for correspondent banking
in the UK, bringing a broader, more holistic review of potential
financial crime risk.
• We reconfigured our transaction screening capability in
readiness for the global change to payment systems formatting
under ISO20022 requirements, and enhanced transaction
screening capabilities by implementing automated alert
discounting.
• We strengthened the first party lending fraud framework,
reviewed and published an updated fraud policy and associated
control library, and continued to develop fraud detection tools.
Governance and Structure
The structure of the Financial Crime function remained
substantively unchanged in 2022, although we continued to
review the effectiveness of our governance framework to manage
financial crime risk. The Regional Head of Financial Crime and
HSBC Bank plc Money Laundering Reporting Officer continues to
report to the EMEA Head of Compliance, while the HSBC Bank plc
Risk Management Meeting retains oversight of matters relating to
money laundering, fraud, bribery and corruption, tax evasion,
sanctions and export control breaches, terrorist financing and
proliferation financing.
Key risk management processes
We will not tolerate knowingly conducting business with
individuals or entities believed to be engaged in criminal activity.
We require everybody in HSBC to play their role in maintaining
effective systems and controls to prevent and detect financial
crime. Where we believe we have identified suspected criminal
activity or vulnerabilities in our control framework, we will take
appropriate mitigating action.
We manage financial crime risk because it is the right thing to do
to protect our customers, shareholders, staff, the communities in
which we operate, as well as the integrity of the financial system
on which we all rely. We operate in a highly regulated industry in
which these same policy goals are codified in law and regulation.
We are committed to complying with the law and regulation of all
the markets in which we operate in HSBC Bank plc and applying a
consistently high financial crime standard. In cases where material
differences exist between the law and regulation of these markets,
our policy adopts the highest standard while acknowledging the
primacy of local law.
We continue to assess the effectiveness of our end-to-end
financial crime risk management framework, and invest in
enhancing our operational control capabilities and technology
solutions to deter and detect criminal activity. We have simplified
our framework by streamlining and de-duplicating policy
requirements. We also strengthened our financial crime risk
taxonomy and control libraries and our investigative and
monitoring capabilities through technology deployments. We
developed more targeted metrics, and have also enhanced our
governance and reporting.
We are committed to working in partnership with the wider
industry and the public sector in managing financial crime risk,
protecting the integrity of the financial system and the
communities we serve. We participate in numerous public-private
partnerships and information-sharing initiatives around the Europe
region, including holding leadership positions in many. In 2022,
our focus remained on measures to improve information sharing,
including typologies of financial crime and highlighting key tools in
the fight against it. Within the European Police agency, Europol,
we maintained a presence, and lent our expertise to working
groups, as well as advocacy teams focused on how financial crime
risk management frameworks can deliver more effective outcomes
in detecting and deterring criminal activity, including tackling
evolving criminal behaviour such as fraud. We continued our
engagement in the Joint Money Laundering Intelligence Task
Force in the UK, particularly on sanctions matters.
ESG disclosures
We have continued our efforts to combat financial crime and
reduce its impact on our organisation, customers and the
communities that we serve. Financial crime includes fraud, bribery
and corruption, tax evasion, sanctions and export control
violations, money laundering, terrorist financing and proliferation
financing.
We are committed to acting with integrity and have built a strong
financial crime risk management framework across all global
businesses and all countries and territories in which we operate.
The financial crime risk framework, which is overseen by the
HSBC Bank plc Board, is supported by our financial crime policies
that are designed to enable adherence to applicable laws and
regulations globally.
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88 | HSBC Bank plc Annual Report and Accounts 2022

Annual mandatory training is provided to all colleagues, with
additional targeted training tailored to certain individuals. We carry
out regular risk assessments, identifying where we need to
respond to evolving financial crime threats, as well as monitor and
test our financial crime risk management programme.
We continue to invest in new technology, including through the
deployment of a capability to monitor correspondent banking
activity, the enhancements to our fraud monitoring capability and
our trade screening controls, and the application of machine
learning to improve the accuracy and timeliness of our detection
capabilities. We are confident our adoption of these new
technologies will continue to enhance our ability to respond
quickly to unusual activity and be more granular in our risk
assessments. This will help us to protect our customers,
shareholders, staff, the communities in which we operate and the
integrity of the financial system on which we all rely, while
providing actionable information to government authorities
through our reporting.
Our anti-bribery and corruption policy
Our global AB&C policy requires that all activity must be:
conducted without intent to bribe or corrupt; reasonable and
transparent; considered to not be lavish nor disproportionate to
the professional relationship; appropriately documented with
business rationale; and authorised at an appropriate level of
seniority. There were no concluded, nor live active, legal cases
regarding bribery or corruption brought against HSBC or its
employees in 2022. Our global AB&C policy requires that we
identify and mitigate the risk of our customers and third parties
committing bribery or corruption. We utilise anti-money
laundering controls, including customer due diligence and
transaction monitoring, to identify and mitigate the risk that our
customers are involved in bribery or corruption. We perform a
bribery risk assessment on all third parties, and impose risk-based
controls on the third parties that expose us to bribery or corruption
risk.
Skilled Person & Independent Consultant
In August 2022, the Board of Governors of the Federal Reserve
System terminated its 2012 cease-and-desist order, with
immediate effect. This order was the final remaining regulatory
enforcement action that HSBC had entered into in 2012. In June
2021, the UK Financial Conduct Authority had already determined
that no further Skilled Person work was required under section
166 of the Financial Services and Markets Act. The Group Risk
Committee retains oversight of matters relating to financial crime,
including any remaining remedial activity not yet completed as
part of previous recommendations.
In December 2022, the 3-year DPA our Swiss private bank entered
into with the DOJ was dismissed. This dismissal confirms that our
Swiss private bank complied in all material terms with the DPA
obligations by establishing or enhancing the relevant governance,
controls, training and internal assurance reviews and allows the
private banking business in Switzerland to move forward while
maintaining the robust control environment put in place to combat
tax evasion in the future.

Model risk

Overview
Model risk is the risk of inappropriate or incorrect business
decisions arising from the use of models that have been
inadequately designed, implemented or used, or from models that
do not perform in line with expectations and predictions.
Model risk arises in both financial and non-financial contexts
whenever business decision making includes reliance on models.
Key developments in 2022
We managed the risks related to the Russia-Ukraine war and
broader macroeconomic and geopolitical uncertainties, as well as
the continued risks resulting from the Covid-19 pandemic and
other key risks described in this section.
In addition, we enhanced our risk management in the following
areas:
•In response to regulatory capital charges, we redeveloped,
validated and submitted to the PRA and ECB our models for the
internal ratings-based (‘IRB’) approach for credit risk, internal
model method (‘IMM’) for counterparty credit risk and internal
model approach (‘IMA’) for market risk. These new models
have been built to enhanced standards using improved data as
a result of investment in processes and systems. We have
continued to improve our risk governance decision making,
particularly regarding the governance of treasury risk to ensure
senior executives have appropriate oversight and visibility of
macroeconomic trends around inflation and interest rates.
•We redeveloped and validated models impacted by changes to
alternative rate setting mechanisms due to the Ibor transition.
•We embedded the changes made to our control framework for
our financial reporting processes to address the control
weaknesses that emerged as a result of significant increases in
adjustments and overlays that were applied to compensate for
the impact of the Covid-19 pandemic on models.
•Our businesses and functions continue to be more involved in
the development and management of models, and hiring
colleagues who have strong model risk skills. They also put an
enhanced focus on key model risk drivers such as data quality
and model methodology.
•We enhanced the reporting that supports the model risk
appetite measures, to support our businesses and functions in
managing model risk more efficiently.
•We continued to support businesses in the programme of work
related to climate risk and models using advanced analytics
and machine learning, which have become critical areas of
focus that will grow in importance in 2023 and beyond. We
also added further qualified specialist skills to the model risk
teams to manage the increased model risk in these areas.
•We continued the transformation of the Model Risk
Management team, with further enhancements to the
independent model validation processes, including new
systems and working practices. Key senior hires were made
during the year to lead the business areas and regions to
strengthen oversight and expertise within the function.
Governance and structure
The group's Model Risk Committee is chaired by our Chief Risk
Officer and provides oversight of model risk. The committee
includes senior leaders and risk owners across the lines of
business and Risk and focuses on model-related concerns and key
model risk metrics.
Key risk management processes
We use a variety of modelling approaches, including regression,
simulation, sampling, machine learning and judgmental
scorecards for a range of business applications. These activities
include customer selection, product pricing, financial crime
transaction monitoring, creditworthiness evaluation and financial
reporting. HSBC Bank plc responsibility for managing model risk is
delegated from the group's RMM to the group's Model Risk
Committee, which is chaired by the group's Chief Risk Officer. This
committee regularly reviews our model risk management policies
and procedures, and requires the first line of defence to
demonstrate comprehensive and effective controls based on a
library of model risk controls provided by Model Risk
Management.
Model Risk Management also reports on model risk to senior
management on a regular basis through the use of risk
management information, risk appetite metrics and top and
emerging risks.
We regularly review the effectiveness of these processes,
including the model oversight committee structure, to help ensure
appropriate understanding and ownership of model risk is
embedded in the businesses and functions.

HSBC Bank plc Annual Report and Accounts 2022 | 89

Insurance manufacturing operations risk Overview

The key risks for our insurance manufacturing operations are
market risks, in particular interest rate and equity, credit risks and
insurance underwriting risks. These have a direct impact on the
financial results and capital positions of the insurance operations.
Liquidity risk, whilst significant in other parts of the bank, is
relatively minor for our insurance operations.
HSBC’s insurance business
We sell insurance products through a range of channels including
our branches, insurance salesforces, direct channels and third-
party distributors. The majority of sales are through an integrated
bancassurance model that provides insurance products principally
for customers with whom we have a banking relationship,
although the proportion of sales though digital is increasing.
The insurance products we manufacture, the majority of sales are
of savings, universal life and protection contracts.
We choose to manufacture these insurance products in HSBC
subsidiaries based on an assessment of operational scale and risk
appetite. Manufacturing insurance allows us to retain the risks and
rewards associated with writing insurance contracts by keeping
part of the underwriting profit and investment income within the
Group.
Where we do not have the risk appetite or operational scale to be
an effective insurance manufacturer, we engage with a small
number of leading external insurance companies in order to
provide insurance products to our customers. These arrangements
are generally structured with our exclusive strategic partners and
earn the group a combination of commissions, fees and a share of
profits. We distribute insurance products in all of our geographical
regions.
Insurance products are sold through all global businesses, but
predominantly by WPB and CMB through our branches and direct
channels.
Insurance manufacturing operations risk
management
Key developments in 2022
The insurance manufacturing subsidiaries follow the Group’s risk
management framework. In addition, there are specific policies
and practices relating to the risk management of insurance
contracts. There has been continued market volatility observed
over 2022 across interest rates, equity markets and foreign
exchange rates. This has been predominantly driven by
geopolitical factors and wider inflationary concerns.
One area of key risk management focus over 2022 was the
implementation of the new accounting standard, IFRS17 Insurance
Contracts. Given the fundamental nature of the impact of the
accounting standard on insurance accounting, this presents
additional financial reporting and model risks for the Bank.
Governance
Insurance manufacturing risks are managed to a defined risk
appetite, which is aligned to the bank’s risk appetite and risk
management framework, including the three lines of defence
model. For details on the governance framework, see page 26. The
Group Insurance Risk Management Meeting oversees the control
framework globally and is accountable to the WPB Risk
Management Meeting on risk matters relating to the insurance
business.
The monitoring of the risks within the insurance operations is
carried out by Insurance Risk teams. The Bank’s risk stewardship
functions support the Insurance Risk teams in their respective
areas of expertise.
Stress and scenario testing
Stress testing forms a key part of the risk management framework
for the insurance business. We participate in local and Group-wide
regulatory stress tests, including, as may be required from time to
time, the Bank of England stress test of the banking system,
HSBC's Group Internal Stresses, and individual country insurance
regulatory stress tests. The results of these stress tests and the
adequacy of management action plans to mitigate these risks are
considered in the HSBC Bank plc ICAAP and the entities’
regulatory Own Risk and Solvency Assessments ('ORSAs').
Management and mitigation of key risk types
Market risk
All our insurance manufacturing subsidiaries have market risk
mandates and limits that specify the investment instruments in
which they are permitted to invest and the maximum quantum of
market risk that they may retain. They manage market risk by
using, among others, some or all of the techniques listed below,
depending on the nature of the contracts written:
•We are able to adjust bonus rates to manage the liabilities to
policyholders for products with discretionary participating
features (‘DPF’). The effect is that a significant portion of the
market risk is borne by the policyholder.
•We use asset and liability matching where asset portfolios are
structured to support projected liability cash flows. The Group
manages its assets using an approach that considers asset
quality, diversification, cash flow matching, liquidity, volatility
and target investment return. We use models to assess the
effect of a range of future scenarios on the values of financial
assets and associated liabilities, and ALCOs employ the
outcomes in determining how best to structure asset holdings
to support liabilities.
•We use derivatives to protect against adverse market
movements.
•We design new products to mitigate market risk, such as
changing the investment return sharing portion between
policyholders and the shareholder.
Credit risk
Our insurance manufacturing subsidiaries also have credit risk
mandates and limits within which they are permitted to operate,
which consider the credit risk exposure, quality and performance
of their investment portfolios. Our assessment of the
creditworthiness of issuers and counterparties is based primarily
upon internationally recognised credit ratings and other publicly
available information.
Stress testing is performed on investment credit exposures using
credit spread sensitivities and default probabilities.
We use a number of tools to manage and monitor credit risk.
These include a credit report containing a watch-list of
investments with current credit concerns, primarily investments
that may be at risk of future impairment or where high
concentrations to counterparties are present in the investment
portfolio. Sensitivities to credit spread risk are assessed and
monitored regularly.
Capital and liquidity risk
Capital risk for our insurance manufacturing subsidiaries is
assessed in the group’s ICAAP based on their financial capacity to
support the risks to which they are exposed. Capital adequacy is
assessed on both the group’s economic capital basis, and the
relevant local insurance regulatory basis.
Risk appetite buffers are set to ensure that the operations are able
to remain solvent, allowing for business-as-usual volatility and
extreme but plausible stress events. In certain cases, entities use
reinsurance to manage capital risk. Liquidity risk is relatively minor
for the insurance business. It is managed by cash flow matching
and maintaining sufficient cash resources, investing in high credit-
quality investments with deep and liquid markets, monitoring
investment concentrations and restricting them where
appropriate, and establishing committed contingency borrowing
facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity
risk reports and an annual review of the liquidity risks to which
they are exposed.
Report of the Directors | Risk

90 | HSBC Bank plc Annual Report and Accounts 2022

Insurance underwriting risk
Our insurance manufacturing subsidiaries primarily use the
following frameworks and processes to manage and mitigate
insurance underwriting risks:
•a formal approval process for launching new products or
making changes to products;
•a product pricing and profitability framework which requires
initial and ongoing assessment of the adequacy of premiums
charged on new insurance contracts to meet the risks
associated with them;
•a framework for customer underwriting;
•reinsurance which cedes risks to third party reinsurers to keep
risks within risk appetite thresholds to third party reinsurer
thereby limiting our exposure; and
•oversight of expense and reserving risks by entity Financial
Reporting Committees.
Insurance manufacturing operations risk in 2022
Measurement
The following table shows the composition of assets and liabilities by contract type.

Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
| With DPF | Unit- linked | Other contracts 1 | Shareholder assets and liabilities | Total
| £m | £m | £m | £m | £m
Financial assets | 17,029 | 2,888 | 191 | 2,593 | 22,701
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 9,171 | 2,880 | 80 | 1,033 | 13,164
– derivatives | 232 | — | — | 11 | 243
– financial investments – at amortised cost | 298 | — | — | 20 | 318
– financial investments – at fair value through other comprehensive income | 6,332 | — | 107 | 1,452 | 7,891
– other financial assets 2 | 996 | 8 | 4 | 77 | 1,085
Reinsurance assets | — | 40 | 112 | — | 152
PVIF 3 | — | — | — | 1,076 | 1,076
Other assets and investment properties | 725 | 1 | 1 | 68 | 795
Total assets at 31 Dec 2022 | 17,754 | 2,929 | 304 | 3,737 | 24,724
Liabilities under investment contracts designated at fair value | — | 948 | — | — | 948
Liabilities under insurance contracts | 17,624 | 2,062 | 301 | — | 19,987
Deferred tax 4 | 129 | 5 | — | 106 | 240
Other liabilities | — | — | — | 1,796 | 1,796
Total liabilities at 31 Dec 2022 | 17,753 | 3,015 | 301 | 1,902 | 22,971
Total equity at 31 Dec 2022 | — | — | — | 1,753 | 1,753
Total liabilities and equity at 31 Dec 2022 | 17,753 | 3,015 | 301 | 3,655 | 24,724

Financial assets | 19,384 | 2,924 | 254 | 2,704 | 25,266
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 9,876 | 2,859 | 89 | 1,236 | 14,060
– derivatives | 47 | — | — | 1 | 48
– financial investments – at amortised cost | 815 | — | — | 42 | 857
– financial investments – at fair value through other comprehensive income | 7,490 | — | 104 | 1,327 | 8,921
– other financial assets 2 | 1,156 | 65 | 61 | 98 | 1,380
Reinsurance assets | — | 53 | 104 | — | 157
PVIF 3 | — | — | — | 811 | 811
Other assets and investment properties | 748 | 1 | — | 59 | 808
Total assets at 31 Dec 2021 | 20,132 | 2,978 | 358 | 3,574 | 27,042
Liabilities under investment contracts designated at fair value | — | 1,031 | — | — | 1,031
Liabilities under insurance contracts | 19,998 | 1,938 | 328 | — | 22,264
Deferred tax 4 | 133 | 6 | — | 46 | 185
Other liabilities | — | — | — | 2,003 | 2,003
Total liabilities at 31 Dec 2021 | 20,131 | 2,975 | 328 | 2,049 | 25,483
Total equity at 31 Dec 2021 | — | — | — | 1,559 | 1,559
Total liabilities and equity at 31 Dec 2021 | 20,131 | 2,975 | 328 | 3,608 | 27,042

1‘Other contracts’ includes term assurance and credit life insurance.
2 Comprise mainly loans and advances to banks, cash and intercompany balances with other non-insurance legal entities.
3 Present value of in-force long-term insurance business.
4'Deferred tax’ includes the deferred tax liabilities arising on recognition of PVIF.

HSBC Bank plc Annual Report and Accounts 2022 | 91

Key risk types
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting the
bank’s capital or profit. Market factors include interest rates,
equity and growth assets and foreign exchange rates. Lapse risk
exposure on products with premium financing has increased over
the year as rising interest rates have led to an increase in the cost
of financing for customers.
Our exposure varies depending on the type of contract issued. Our
most significant life insurance products are investment contracts
with discretionary participating features (‘DPF’) issued in France.
These products typically include some form of capital guarantee or
guaranteed return on the sums invested by the policyholders, to
which discretionary bonuses are added if allowed by the overall
performance of the funds. These funds are primarily invested in
fixed interest assets with a proportion allocated to other asset
classes, to provide customers with the potential for enhanced
returns.
DPF products expose the bank to the risk of variation in asset
returns, which will impact our participation in the investment
performance. In addition, in some scenarios the asset returns can
become insufficient to cover the policyholders’ financial
guarantees, in which case the shortfall has to be met by the bank.
Amounts are held against the cost of such guarantees. The cost of
such guarantees is accounted for as a deduction from the present
value of in-force 'PVIF' asset, unless the cost of such guarantees is
already explicitly allowed for within the insurance contracts
liabilities. The table below shows the total reserve held for the cost
of guarantees, the range of investment returns on assets
supporting these products and the implied investment return that
would enable the business to meet the guarantees. The cost of
guarantees decreased to £100m (2021: £299m) primarily due to
increases in interest rates and unfavourable equity performances
in France. For unit-linked contracts, market risk is substantially
borne by the policyholder, but some market risk exposure typically
remains as fees earned are related to the market value of the
linked assets.

Financial return guarantees
(Audited)
| 2022 | 2021
| Investment returns implied by guarantee | Long-term investment returns on relevant portfolios | Cost of guarantees | Investment returns implied by guarantee | Long-term investment returns on relevant portfolios | Cost of guarantees
| % | % | £m | % | % | £m
Capital | — | 1.6 - 2.0 | 18 | — | 0.8 - 2.0 | 127
Nominal annual return | 2.6 | 2.0 | 49 | 2.6 | 2.2 | 92
Nominal annual return | 4.5 | 2.0 | 33 | 4.5 | 2.2 | 80
At 31 Dec |  |  | 100 |  |  | 299

Sensitivities
The following table illustrates the effects of selected interest rate
and equity price scenarios on our profit for the year and the total
equity of our insurance manufacturing subsidiaries.
Where appropriate, the effects of the sensitivity tests on profit
after tax and equity incorporate the impact of the stress on the
PVIF. Due in part to the impact of the cost of guarantees and
hedging strategies which may be in place, the relationship
between the profit and total equity and the risk factors is non-
linear. Therefore, the results disclosed should not be extrapolated
to measure sensitivities to different levels of stress.
For the same reason, the impact of the stress is not necessarily
symmetrical on the upside and downside.
The sensitivities are stated before allowance for management
actions which may mitigate the effect of changes in the market
environment. The sensitivities presented allow for adverse
changes in policyholder behaviour that may arise in response to
changes in market rates. The differences between the impacts on
profit after tax and equity are driven by the changes in value of the
bonds measured at FVOCI, which are only accounted for in equity.

Sensitivity of the group’s insurance manufacturing subsidiaries to market risk factors
(Audited)
|  | 2022 | 2021
|  | Effect on profit after tax | Effect on total equity | Effect on profit after tax | Effect on total equity
|  | £m | £m | £m | £m
+100 basis point parallel shift in yield curves |  | 34 | 12 | 119 | 96
-100 basis point parallel shift in yield curves |  | (48) | (22) | (229) | (203)
10% increase in equity prices |  | 65 | 65 | 46 | 46
10% decrease in equity prices |  | (66) | (66) | (49) | (49)

Credit risk
(Audited)
Description and exposure
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet their obligation under a contract. It arises in two main
areas for our insurance manufacturers:
•risk associated with credit spread volatility and default by debt
security counterparties after investing premiums to generate a
return for policyholders and shareholders; and
•risk of default by reinsurance counterparties and non-
reimbursement for claims made after ceding insurance risk.
The amounts outstanding at the balance sheet date in respect of
these items are shown in the table on page 91. The credit quality
of the reinsurers’ share of liabilities under insurance contracts is
assessed as ‘satisfactory’ or higher as defined on page 37, with
100% of the exposure being neither past due nor impaired. Credit
risk on assets supporting unit-linked liabilities is predominantly
borne by the policyholder; therefore our exposure is primarily
related to liabilities under non-linked insurance and investment
contracts and shareholders’ funds.
The credit quality of these financial assets is included in the table
on page 57.
Report of the Directors | Risk

92 | HSBC Bank plc Annual Report and Accounts 2022

Liquidity risk
(Audited)
Description and exposure
Liquidity risk is the risk that an insurance operation, though
solvent, either does not have sufficient financial resources
available to meet its obligations when they fall due, or can secure
them only at excessive cost. Liquidity risk may be able to shared
with policyholders for products with DPF.
The following table shows the expected undiscounted cash flows
for insurance contract liabilities at 31 December 2022.
The profile of the expected maturity of insurance contracts at
31 December 2022 remained comparable with 2021.
The remaining contractual maturity of investment contract
liabilities is included within ‘Financial liabilities designated at fair
value’ in Note 27.

Expected maturity of insurance contract liabilities
(Audited)
| Expected cash flows (undiscounted)
| Within 1 year | 1-5 years | 5-15 years | Over 15 years | Total
| £m | £m | £m | £m | £m
Unit-linked | 147 | 368 | 818 | 1,433 | 2,766
With DPF and Other contracts | 1,132 | 4,645 | 8,555 | 11,886 | 26,218
At 31 Dec 2022 | 1,279 | 5,013 | 9,373 | 13,319 | 28,984
Unit-linked | 230 | 565 | 927 | 926 | 2,648
With DPF and Other contracts | 1,341 | 5,102 | 7,318 | 6,415 | 20,176
At 31 Dec 2021 | 1,571 | 5,667 | 8,245 | 7,341 | 22,824

.
Insurance underwriting risk
Description and exposure
Insurance underwriting risk is the risk of loss through adverse
experience, in either timing or amount, of insurance underwriting
parameters (non-economic assumptions). These parameters
include mortality, morbidity, longevity, lapse and expense rates.
The principal risk we face is that, over time, the cost of
the contract, including claims and benefits, may exceed the total
amount of premiums and investment income received.
The table on page 91 analyses our insurance manufacturing
exposures by type of contract.
The insurance risk profile and related exposures remain largely
consistent with those observed at 31 December 2021.
Sensitivities
The table below shows the sensitivity of profit and total equity to
reasonably possible changes in non-economic assumptions across
all our insurance manufacturing subsidiaries.
Mortality and morbidity risk is typically associated with
life insurance contracts. The effect on profit of an increase in
mortality or morbidity depends on the type of business being
written.
Sensitivity to lapse rates depends on the type of contracts being
written. An increase in lapse rates typically has a negative effect
on profit due to the loss of future income on the lapsed policies.
However, some contract lapses have a positive effect on profit due
to the existence of policy surrender charges. We are most
sensitive to a change in lapse rates in France.
Expense rate risk is the exposure to a change in the allocated cost
of administering insurance contracts. To the extent that increased
expenses cannot be passed on to policyholders, an increase in
expense rates will have a negative effect on our profits. This risk is
generally greatest for smaller entities.

Sensitivity analysis
(Audited)
| 2022 | 2021
| £m | £m
Effect on profit after tax and total equity at 31 Dec |  |
10% increase in mortality and/or morbidity rates | (24) | (20)
10% decrease in mortality and/or morbidity rates | 25 | 19
10% increase in lapse rates | (33) | (19)
10% decrease in lapse rates | 35 | 20
10% increase in expense rates | (28) | (40)
10% decrease in expense rates | 28 | 40

HSBC Bank plc Annual Report and Accounts 2022 | 93

Corporate Governance Report

The statement of corporate governance practices set out on pages
94 to 102, together with the information incorporated by
reference, constitutes the Corporate Governance Report of the
bank. The following disclosures, read together with those in the
Strategic Report, including the section 172 statement on pages 12
and 14 and reporting on employee engagement on pages 10 to 13
describe how the Board has discharged its responsibilities relating
to section 172 of the Companies Act 2006 (the 'Act'), as well as
the requirements under the Companies (Miscellaneous Reporting)
Regulations 2018 (the 'Reporting Regulations').
Engagement with employees, suppliers, customers and other key
stakeholders:

Stakeholder | Page | Section
Customers | Page 12 | How we do business
| Page 12 | section 172 statement
Employees | Page 12 | How we do business
| Pages 12 and 13 | section 172 statement
| Pages 101 to 101 | Corporate Governance statement
Communities | Pages 11 | How we do business
Regulators and governments | Page 13 | How we do business
| Page 12 | section 172 statement
Suppliers | Page 13 | How we do business
| Page 12 | section 172 statement

The bank, together with the wider Group, is committed to high
standards of corporate governance. The Group has a
comprehensive range of principles, policies and procedures
influenced by the UK Corporate Governance Code with
requirements in respect of Board independence, composition and
effectiveness to ensure that the Group is well managed, with
appropriate oversight and control. During the year, the bank
adhered to these corporate governance principles, policies and
procedures, as applicable.

Board of Directors

As at 31 December 2022, the Board comprised 10 Directors
including the Chair, non-executive Directors, and two executive
Directors, being the Chief Executive Officer and the Chief Financial
Officer. All Directors are subject to election or re-election at each
Annual General Meeting's ('AGM') of the bank. The Directors
serving at 31 December 2022 are set out below.

Directors

Stephen O'Connor (61)
Chair of the Board
Chair of the Nomination, Remuneration & Governance
Committee
Appointed to the Board: May 2018. Chair of the Board since
August 2018.
Stephen is a non-executive Director and Vice Chair of HBCE,
Chairman of Quantile Group Limited and its subsidiary Quantile
Technologies Limited, and a Director of the London Stock
Exchange plc. He is also a non-executive Director of the Financial
Markets Standards Board. He has more than 25 years’ investment
banking experience in London and New York.
Former appointments include: Senior Independent Director,
Chairman of the Risk Committee and member of both the Audit
and Nomination Committees of the London Stock Exchange
Group; Chairman of the International Swaps and Derivatives
Association; and Managing Director and a member of the Fixed
Income Management Committee at Morgan Stanley.
Colin Bell (55)
Executive Director and Chief Executive Officer
Chair of the Executive Committee
Appointed to the Board and as Chief Executive Officer:
February 2021.
Colin Bell joined HSBC in July 2016 and most recently held the
role of Group Chief Compliance Officer until February 2021. He is a
member of the Supervisory Board, and Remuneration, Nomination
and Mediation Committees of HSBC Trinkaus & Burkhardt GmbH.
Before joining HSBC, Colin worked at UBS, where he was Global
Head of Compliance and Operational Risk Control. He has more
than 10 years of experience in managing risk and financial crime,
following 16 years in the British Army.
During his time in the Army, he held a variety of command and
staff appointments, including operational tours of Iraq and
Northern Ireland, time in the Ministry of Defence, a NATO
appointment and completion of the Advanced Command and Staff
Course.
David Watts (56)
Executive Director an d Chief Financial Office r
Member of the Executive Committee
Appointed to the Board and as Chief Financial Officer:
December 2021.
David is a Member of the Supervisory Board of HSBC Trinkaus &
Burkhardt GmbH. He joined the HSBC Group in 1994 and was
previously a Director and Chief Financial Officer of HSBC UK Bank
plc.
Former HSBC Group roles include: Chief Financial Officer and
Head of Finance for HSBC Bank plc; Chief Financial Officer for
Global Commercial Banking; Chief Financial Officer for the Middle
East and North Africa, Chief Financial Officer for Group HSBC
Technology and Operations; Chief Financial Officer for Global
Banking; Head of Financial Control for Global Banking & Markets
HSBC Securities (USA) Inc; Head of Group Cost and Investment
Reporting & Analysis; and Manager Treasury Services, France.
Patrick Clackson (58)
Independent non-executive Director
Member of the Audit Committee
Appointed to the Boar d: September 2022.
Former appointments include: Chief Financial Officer, Chief
Operations Officer and Chief Executive Officer at Barclays Capital
(now Barclays CIB). He also held several non-executive positions
whilst with Barclays, BarCap as Head of Business Transformation
and Structural Reform, as well as EMEA Chief Executive Officer,
Chief Operations Officer, Chief Financial Officer and Head of Risk.
Between 1986-1996 he was employed in the audit and financial
services advisory teams of PwC, London.
Norma Dove-Edwin (57)
Independent non-executive Director
Member of the Transformation, Operational Resilience and
Technology Committee
Appointed to the Board: October 2021.
Norma is as Chief Information Offic er of ESO at N ational Grid Plc.
She is also a non-executive Director of Pod Point Group Holdings
plc.
Former appointments include: Group Chief Data and Information
Officer at Places for People and a number of positions at British
American Tobacco Plc including as Head of Global Data Services.
Report of the Directors | Corporate Governance Report

94 | HSBC Bank plc Annual Report and Accounts 2022

Yukiko Omura (67)
Independent non-executive Director
Member of the Audit Committee
Appointed to the Board: May 2018.
Yukiko is the senior independent non-executive Director of The
Private Infrastructure Development Group Limited (‘PIDG’). She
also serves as a non-executive Director of Assured Guaranty Ltd,
and a member of the Supervisory Board of Nishimoto HD Co. Ltd.
She has more than 35 years’ international professional experience
in both the public and private financial sectors, performing senior
roles for JP Morgan, Lehman Brothers, UBS and Dresdner Bank.
Yukiko is the Consumer Duty Champion for the Board and helps
support the Chair and Chief Executive Officer by encouraging
regular dialogue at the Board level on how the Bank is embedding
Consumer Duty and focusing on customer outcomes.
Former appointments include: Chair of GuarantCo Limited, a
subsidiary of PIDG; Under-Secretary General and COO/Vice
President of the International Fund for Agricultural Development;
and Executive Vice President and CEO of the Multilateral
Investment Guarantee Agency of the World Bank Group.
Juliet Ellis (56)
Independent non-executive Director
Chair of the Transformation, Operational Resilience and Technology
Committee, member of the Risk Committee and the Nomination,
Remuneration & Governance Committee
Appointed to the Board: January 2021.
Former appointments include: Dual role as European Head of
Operations and Global Head of Shared Services and Banking
Operations and other senior management positions at Morgan
Stanley. Prior to 2007 she performed senior roles within Goldman
Sachs International.
Dr Eric Strutz (58)
Independent non-executive Director
Chair of the Risk Committee and member of the Nomination,
Remuneration & Governance Committee and Transformation,
Operational Resilience and Technology Committee
Appointed to the Board: October 2016.
Eric is a member of the Supervisory Board and Risk Committee
and Chair of the Audit Committee of HSBC Trinkaus & Burkhardt
GmbH. He is also a director of the HBCE and Chair of the HBCE
Risk Committee and member of the HBCE Audit Committee. Other
appointments include Chair of the Audit Committee of Global Blue
Group Holding AG, and a member of the Advisory Board and
Chairman of the Audit & Risk Committee of Luxembourg
Investment Company 261 Sarl.
Former appointments include: Vice Chairman and Lead
Independent Director of Partners Group Holding AG, where he also
Chaired the Risk and Audit Committee; Chief Financial Officer of
Commerzbank Group; Partner and Director of the Boston
Consulting Group; and non-executive Director of Mediobanca
Banca di Credito Finanziario SpA.
John Trueman
Deputy Chairman and non-executive Director
Member of the Audit Committee, the Risk Committee and the
Nomination, Remuneration & Governance Committee
Appointed to the Board: September 2004. Deputy Chairman
since December 2013.
Former appointments include: Chairman and member of the Risk
Committee of HSBC Global Asset Management Limited and
Deputy Chairman of S.G. Warburg & Co Ltd.
Andrew Wright (62)
Chair of the Audit Committee and member of the Risk Committee
and Nomination, Remuneration & Governance Committee
Appointed to the Board: May 2018.
Andrew is a member of the Supervisory Board and Audit
Committee and Chair of the Risk Committee of HSBC Trinkaus &
Burkhardt GmbH.
Former appointments include: Treasurer to the Prince of Wales
and the Duchess of Cornwall, a role he held from May 2012 until
June 2019; Global Chief Financial Officer for the Investment Bank
at UBS AG; Chief Financial Officer, Europe and the Middle East at
Lehman Brothers; and Chief Financial Officer for the Private Client
and Asset Management Division at Deutsche Bank.

Board Changes during 2022 and following the year-end

Mary Marsh retired as a Director at the conclusion of the bank’s
AGM held on 17 May 2022.
Norma Dove-Edwin was appointed as a member of the
Transformation, Operational Resilience and Technology
Committee with effect from 1 June 2022.
Juliet Ellis was appointed as a member of the Nomination,
Remuneration & Governance Committee with effect from 1 August
2022.
Patrick Clackson was appointed as a non-executive Director and
member of the Audit Committee with effect from 1 September
2022.
John Trueman retired from the Board as a Director with effect
from 31 December 2022.
Lewis O’Donald will join the Board as an independent non-
executive Director and member of the Risk Committee with effect
from 23 February 2023.

Company Secretary

The responsibilities of the Company Secretary include ensuring
good governance practices at Board level and effective
information flows within the Board and its committees and
between senior management and the non-executive Directors.
Alison Campbell was Company Secretary of the bank until
31 December 2022 and Philip Miller was appointed as Company
Secretary from 1 January 2023.

Board of Directors

Key responsibilities
The Board, led by the Chair, is responsible amongst other matters
for:
(i) promoting the long-term success of the bank and delivering
sustainable value to shareholders and other stakeholders;
(ii) entrepreneurial leadership of the bank within a framework of
prudent and effective controls which enables risks to be assessed
and managed;
(iii) setting the bank's strategy and risk appetite statement,
including monitoring the bank's risk profile;
(iv) establishing and monitoring the effectiveness of procedures for
maintenance of a sound system of control and risk management,
and compliance with statutory and regulatory obligations; and
(v) approving the capital and operating plans and material
transactions on the recommendation of management.
The role of the non-executive Directors is to support the
development of proposals on strategy, hold management to
account and ensure the executive Directors are discharging their
responsibilities properly by promoting a culture that encourages
constructive challenge. Non-executive Directors also review the
performance of management in meeting agreed goals and

HSBC Bank plc Annual Report and Accounts 2022 | 95

objectives. The Chair regularly meets with the non-executive
Directors without executive Directors in attendance after Board
meetings, and otherwise, as necessary.
Operation of the Board
During 2022, the Board was required to meet at least four times;
seven additional meetings were scheduled to help facilitate,
amongst other things, the execution of the bank’s transformation
strategy, the bank’s SEC Registration. The Board agenda is agreed
with the Chair, working closely with the Company Secretary, in
advance of scheduled meetings. The agenda is informed by
forward-looking planning and additional emerging matters that
require Board oversight or approval.
The Chief Risk Officer, General Counsel, and Company Secretary
are regular attendees at Board meetings, and other senior
executives attend to contribute their subject matter expertise and
insight, as required.
Board activities during 2022
During 2022, the areas of focus for the Board included in the
implementation of approved strategy and execution of the bank’s
transformation programme across the region, supporting senior
management and overseeing performance, risk and capital. The
Board considered performance against financial and other
strategic objectives, key business challenges, emerging risks,
business development and relationships with the bank’s key
stakeholders.
'Deep dives' on key aspects of the bank's business were also
conducted to consider the performance and strategy of targeted
businesses and countries. Throughout the year, the Board received
regular updates from management including the implementation
of regulatory programmes, technology, operations and resilience,
as well as people, culture and talent.
In addition, several information and development sessions were
facilitated during the year on specific areas of interest including
with respect to Recovery and Resolution Planning, technology,
and ESG-related matters.
During the year the Board also approved financial, capital, liquidity
and funding plans put forward b y management and monitored the
implementation of plans. Further information on the principal
decisions made by the Board during 2022 is located in the section
172 statement on pages 12 to 14.

Directors’ emoluments

Details of the emoluments of the Directors of the bank for 2022,
disclosed in accordance with the Act, are shown in Note 5
‘Employee compensation and benefits’.
Non-executive Directors do not have service contracts and are
engaged through letters of appointment. There are no obligations
in the non-executive Directors’ letters of appointment that could
give rise to payments other than fees due or payments for loss of
office.

Board committees

The Board delegates oversight of certain audit, risk, remuneration,
nomination and governance matters to its committees. With the
exception of the Executive Committee which is chaired by the
Chief Executive Officer, each Board committee is chaired by a non-
executive Board member and has a remit to cover specific topics
in accordance with their respective terms of reference approved
by the Board. Only non-executive Directors are members of Board
committees. The Chair of each non-executive Board Committee
reports to the Board on the activities of the Committee since the
previous Board meeting.
Board and Committee effectiveness and
performance
The Board understands the importance of, and benefits that derive
from regular reviews of the effectiveness of the Board and its
committees. An effectiveness review was facilitated by the bank’s
Company Secretary in 2022 which included a series of interviews
with the Directors. F eedback was provided on a number of areas,
including the Board’s composition and skills, stakeholder
engagement, the cadence and logistics of Board meetings,
management reporting, Director induction and training, Director
and management engagement and debate, and Board priorities for
2022-23. Outcomes and recommendations were reported to the
Board and an action plan was produced. Work has progressed
during 2022 to address these recommendations.
An annual review of the terms of reference for the Board and its
committees was facilitated by the Corporate Governance and
Secretariat function. This concluded that the Board and its
committees had complied with their respective terms of reference
during 2022. Executive Directors are also subject to performance
evaluation which helps to determine the level of variable pay they
receive each year. At the date of this report, the following are the
principal Committees of the Board:
Audit Committee
Key Responsibilities
The Audit Committee is accountable to the Board and has non-
executive responsibility for oversight of financial reporting related
matters, internal controls over financial reporting and
implementation of the group policies and procedures for capturing
and responding to whistleblower concerns.
The committee's key responsibilities include:
(i) monitoring and assessing the integrity of the financial
statements, formal announcements and supplementary regulatory
information in relation to the bank's financial performance;
(ii) reviewing, as applicable, compliance with accounting
standards, listing rules, and other requirements in relation to
financial reporting;
(iii) reviewing and monitoring the relationship with the external
auditor; and
(iv) overseeing the work of Internal Audit and monitoring and
assessing the effectiveness, performance, resourcing,
independence and standing of the function.
The committee has responsibility for the oversight of the bank’s
whistleblowing arrangements, and receives regular updates on
matters relating to the whistleblowing arrangements that are in
place.
Committee activities during 2022
In addition to significant accounting judgements, key matters
considered by the committee during the year were regulatory
reporting and control enhancements, disposal groups, IFRS 17
implementation, the development of climate-related disclosure,
the bank’s financial resources and capital, transformation of the
Finance function, the independence, fees and performance of the
external auditor, PwC UK, and updates on key issues identified by
Internal Audit related to the bank and its subsidiaries.
During the year, the committee dedicated time in overseeing
management’s preparation for the Bank’s registration with the
U.S. Securities and Exchange Commission (‘SEC’) and wider
programme preparation to achieve compliance with the U.S.
Sarbanes-Oxley Act of 2002 ('SOX').
The committee also received updates from the Chairs of the audit
committees of key subsidiaries of the Bank, updates from the
external auditor on the progress and findings of their audit, and bi
annual updates on the tax position of the bank and its subsidiaries.
Operation of the Committee
The committee held seven scheduled meetings during the year
and held separate meetings with each of the Chief Finance Officer,
the Chief Risk Officer, the Head of Internal Audit and
representatives of the external auditor without management
present. An additional meeting was convened in May 2022 to
review the bank’s draft SEC registration statement and relevant
documentation prior to the Board’s approval.
The committee meets regularly with the bank’s senior financial
and Internal Audit management and the external auditors to
consider, among other matters, the bank’s financial reporting, the
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96 | HSBC Bank plc Annual Report and Accounts 2022

nature and scope of audit reviews, the effectiveness of the
systems of internal control relating to financial reporting and the
monitoring of the Finance function transformation programme.
The Chief Financial Officer, Financial Controller, Chief Risk Officer,
Head of Internal Audit, and Company Secretary are standing
attendees and regularly attend committee meetings to contribute
their subject matter expertise and insight. Other members of
senior management routinely attended meetings of the
committee. The external auditor attended all meetings.
During 2022, the committee continued to actively engage with the
bank’s key subsidiaries and key subsidiary audit committees, with
regular reporting throughout the year.
The key subsidiary audit committee chairs attended and
participated in the April Audit Committee meeting to consider
important HSBC-wide and regional specific matters.
The Chair of the committee regularly meets with the Chair of the
Group Audit Committee ('GAC') to help maintain connectivity with
the Group and develop deeper understanding on judgements
around key matters. Further, from time to time the Chair is invited
to attend meetings of the GAC on relevant topics.
The Chair of the GAC also attended a committee meeting in
November 2022. The committee comprises three independent
non-executive Directors. The current members are Andrew Wright
(Chair), Yukiko Omura, and Patrick Clackson.

Significant accounting judgements and related matters considered by the Audit Committee ('AC') for the year ended 31 December 2022 included:
Key area | Action taken
Interim and annual reporting | The AC considered key matters in relation to interim and annual reporting, including changes to segmental reporting and US filings 20-F and 6-K following the bank’s registration at the SEC.
Disposals | The AC considered the financial and accounting impacts of the planned disposals of the retail banking business in France, the Greece branch operations and the bank in Russia. In particular, the AC considered judgements related to the timing of recognition of assets as held-for-sale, the re-measurement of those assets and losses arising, which has a significant impact in the year ended 31 December 2022.
Expected credit loss ('ECL') | The AC considered key judgements in relation to ECL, in particular multiple economic scenarios and post-model adjustments due to economic uncertainty and the Russia-Ukraine war.
Valuation of financial instruments | The AC considered key valuation metrics and judgements involved in the determination of the fair value of financial instruments. The AC also considered management’s analysis of exit losses upon the novation of certain derivative portfolios and the determination that there was insufficient evidence to support the introduction of fair value adjustments in respect of these.
Going concern | The AC considered a wide range of information relating to present and potential conditions, including projections for profitability, cash flows, liquidity and capital.
Impairment of investment in subsidiaries | The AC reviewed management's periodic assessment of impairment of investments in subsidiaries and paid particular attention to the sensitivities to cash flow projections and long-term growth rate and discount rate assumptions. Management assessed that there had been a partial reversal of impairment of the bank's investment in HBCE in the year ended 31 December 2022, with due regard to the planned sale of the retail banking business in France.
Appropriateness of provisioning for legal proceedings and regulatory matters | The AC received reports from management on the recognition and measurement of provisions and contingent liabilities for legal proceedings and regulatory matters, including investigations by regulators and competition and law-enforcement authorities.
Regulatory reporting | The AC reviewed management’s efforts to strengthen and simplify the end-to-end operating and control model, including independent external reviews of key aspects of regulatory reporting.
IBOR transition | The AC considered the implications of benchmark interest rate reform, including the recognition and measurement of financial instruments and related disclosures.
Controls | The AC considered the financial control environment on an ongoing basis through the year, reviewing and challenging remediation actions undertaken and enhancements made. This included confirmation of mitigating controls where programmes of work had not fully completed by the year end. Areas of particular focus in 2022 have been Model Risk Governance, controls over use of external market data, accounting and tax implications of Merger and Acquisition ('M&A') transactions, general ledger substantiation and Financial Statement Disclosures.
Tax | The AC reviewed management’s judgements on the recognition and measurement of deferred tax assets and liabilities, in particular those arising from the planned sale of retail banking activities in France, and the accounting and disclosure of retrospective VAT assessments issued by HMRC.
Environmental, Social and Governance (‘ESG’) Reporting | The AC considered regulatory developments in ESG Reporting, in particular at 31 December 2022 for bank subsidiaries in the European Union.
IFRS 17 implementation | The AC reviewed accounting policy judgements in relation to the retrospective implementation of IFRS 17 Insurance Contracts on 1 January 2023, and preparation of transitional disclosure.
Restructuring provisions | The AC considered key judgements in relation to restructuring provisions, mainly relating to transformation in Continental Europe and Germany.

Risk Committee
Key Responsibilities
The Risk Committee is accountable to the Board and has overall
non-executive responsibility for oversight of risk-related matters
and the risks impacting the bank.
The committee's key responsibilities include:
(i) advising the Board on risk appetite and risk tolerance related
matters;
(ii) reviewing and recommending key regulatory submissions to
the Board;
(iii) overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks and reviewing the
effectiveness of the bank's conduct framework;
(iv) reviewing, challenging and satisfying itself that the bank's
stress testing framework, governance and internal controls are
robust; and
(v) reviewing the effectiveness of the bank's risk management
framework and internal control systems (other than internal
financial controls overseen by the Audit Committee).

HSBC Bank plc Annual Report and Accounts 2022 | 97

Committee activities during 2022
Key matters considered by the committee during the year included
the bank’s approach to the financial and non-financial risks in the
context of capital and liquidity, retail, wholesale credit and market
risks including, financial crime and fraud, geopolitical, operational,
people and climate-related risks.
The committee also reviewed and challenged management on key
regulatory processes, including the bank’s internal capital
adequacy assessment process ('ICAAP') and the internal liquidity
adequacy assessment process ('ILAAP'), recovery and resolution
plans, the outcome of stress tests (including annual cyclical
scenario, cyber and solvency) undertaken during the year, and the
bank’s capital liquidity and funding plans.
Deep dives on key aspects of the bank’s business were conducted
to consider specific climate risk related matters including the
bank’s thermal coal phase-out policy.
The committee worked closely with the Transformation,
Operational Resilience and Technology Committee during the year
to ensure appropriate alignment in the review and discussion on
operational resilience and technology risk-related matters.
Operation of the Committee
The committee held eight scheduled meetings during the year. The
Chief Risk Officer, Chief Financial Officer and Head of Internal
Audit are standing attendees and regularly attend committee
meetings to contribute their subject matter expertise and insight.
The Chair and members of the committee also hold private
meetings with the Chief Risk Officer, following quarterly scheduled
meetings.
The committee reviews and challenges current and forward-
looking risk issues, and the regional senior business leaders are
regularly invited to participate at committee meetings, working
together with functional and regional leaders across all three lines
of defence.
The Chair and members of the committee meet regularly with the
bank’s senior financial, risk, internal audit and compliance
management and the external auditors to consider and discuss,
among other matters, specific risk matters and priorities, risk
reports and internal audit reports and the effectiveness of
compliance activities. The Chair meets regularly with the
committee secretary to ensure the committee meets its
governance responsibilities.
During 2022 the committee continued to actively engage with the
bank’s key subsidiaries and key subsidiary risk committees, with
regular reporting from the respective Chairs throughout the year.
The Chair of the committee attended several Group-led meetings
to help promote connectivity, escalation and cascade of important
topics. The committee comprises a majority of independent
non-executive Directors.
The current members are Eric Strutz (Chair), Juliet Ellis and
Andrew Wright.
Transformation, Operational Resilience and
Technology Committee
Key Responsibilities
The Transformation, Operational Resilience and Technology
Committee was established to assist the Board and Risk
Committee with their respective responsibilities in relation to the
bank's transformation strategy, operational resilience, as well as
the governance and oversight of technology. During the year, on
recommendation of the Board, the Group Nomination & Corporate
Governance Committee approved the continuation of the
committee to continue necessary engagement allowing a more
detailed oversight of the matters within its remit.
The committee's key responsibilities include:
(i) reviewing progress of the transformation strategy and the steps
management have taken to manage risk, and to monitor progress
against set objectives;
(ii) reviewing the effectiveness of governance frameworks to set
and oversee the internal control environment in relation to
technology;
(iii) reviewing regional technology strategy, ensuring it is aligned
with the adopted business strategies of the bank; and
(iv) overseeing and challenging management on execution of
operational resilience objectives and deliverables.
Committee activities during 2022
Key matters considered by the committee during the year included
review and oversight of Information Technology (‘IT’) and Cloud
strategies and governance, the bank’s operating systems,
operational resilience and technology infrastructure, including
operational resilience of critical IT and other business services,
information and cyber security risks, and major IT change
programmes. The committee also reviewed and challenged
management on the progress and associated risks with respect of
the transformation strategy, including transformation governance,
key change programmes and initiatives underway, including those
related to outsourced technology services and meeting regulatory
requirements and expectations.
Operation of the Committee
The committee held seven scheduled meetings during 2022.
The Board Chair, Chief Operating Officer, Chief Information
Officer, Chief Risk Officer, Head of Internal Audit, and Head of
Strategy and Planning, Chief of Staff (Europe CEO), are standing
attendees and regularly attend Committee meetings to contribute
their subject matter expertise and insight.
The current members are Juliet Ellis (Chair), Norma Dove-Edwin,
and Eric Strutz.
Nomination, Remuneration & Governance
Committee
Key Responsibilities
The Nomination, Remuneration & Governance Committee has
responsibility for:
(i) leading the process for Board appointments and for identifying
and nominating, for the approval of the Board, candidates for
appointment to the Board and its committees;
(ii) the endorsement of the appointment of individuals to certain
Board and management positions of the bank's subsidiaries,
including proposed fees payable to non-executive Directors on
subsidiary boards;
(iii) reviewing the implementation and appropriateness of the
Group’s director remuneration policy and the remuneration of the
bank’s senior executives, including the identification of the
Material Risk Taker population for the purposes of the CRD;
(iv) reviewing and developing the corporate governance
framework on behalf of the Board and ensuring it is consistent
with best corporate governance standards and practices while
remaining appropriate to the size, complexity and strategy of the
bank; and
(v) overseeing compliance with the HSBC Group Subsidiary
Accountability Framework ('SAF').
Further information in relation to HSBC’s approach to
remuneration for group employees is available in the Director’s
remuneration report on pages 276-278 of HSBC’s Annual Report
and Accounts 2022 available on https://www.hsbc.com/investors/
results-and-announcements/annual-report.
Committee activities during 2022
As a UK regulated subsidiary of HSBC Holdings plc, the bank has
both internal and external responsibilities for succession planning.
During the year the committee undertook a review of its
succession plan and the Board and Board Committee's
composition in keeping with best practice and applicable policies,
including SAF.
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98 | HSBC Bank plc Annual Report and Accounts 2022

As part of its review, the committee identified opportunities to
further strengthen the skills and experience required for the Board.
The committee commenced a search process to identify a new
non-executive Director for appointment to the Board with a
successful recommendation to the Board for approval secured in
the appointment of Patrick Clackson. Further information in
relation to Board and committee changes throughout the year can
be found on page 95.
Additionally, the committee reviewed and approved an updated
Board Continuity Plan (‘BCP’) which is in place to cover any
unexpected or temporary absence of non-executive Directors who
hold SMF responsibilities in relation to the Bank.
In overseeing compliance with SAF, the committee reviewed of
the Board composition and succession planning for all of the
bank's material subsidiaries.
Other activities during the year included, the review of key
remuneration matters for the bank and its subsidiaries in the
context of HSBC’s remuneration framework, including variable
and fixed pay allocations, aligned with the bank's risk appetite,
and in keeping with the bank's strategy, culture and values, and
long-term interests of the bank.
The committee reviewed the annual pay review outcomes across
the region and received regular updates on relevant subsidiary and
regulatory matters.
Operation of the Committee
The committee held seven scheduled meetings during 2022, with
additional meetings arranged to consider specific matters.
The Head of HR and Head of Performance & Reward attend
committee meetings on a regular basis to contribute their subject
matter expertise and insight. Other senior executives attend
periodically for specific items considered by the committee.
The committee comprises four non-executive Directors. The
current members are: Stephen O'Connor (Chair), Juliet Ellis, Eric
Strutz, and Andrew Wright.
Executive Committee
The Executive Committee is a committee of the Board and has
overall executive responsibility, under formal delegation, for the
management and day-to-day running of the bank. The Committee
is accountable to the Board for overseeing the execution of the
bank’s strategy.
The purpose of the Committee is to support the Chief Executive
Officer of the bank in the performance of their duties and exercise
of their powers, authorities and discretions in relation to the
management of the bank and its subsidiaries. The committee
meets on a regular basis and is chaired by the Chief Executive
Officer.
During 2022, in addition to its day-to-day oversight of the bank's
operations, the committee reviewed business plans in light of
geopolitical and macroeconomic developments in keeping with
the Bank’s approved Risk Framework and Risk Appetite prior to
formal recommendation to the Board for approval. The committee
remained focused on the Bank’s strategic transformation and
corporate restructuring across Europe, including the country exit
of Russia, sale of branch operations in Greece and retail banking
operations in France and the regulatory requirement to establish
an IPU following the UK’s departure from the European Union. The
committee is responsible for oversight of the performance across
the bank's lines of business, review of the bank’s financial
performance, cost management, and preparing the bank’s forward
looking Financial Resource Plan. The committee received updates
on regulatory remediation programmes and regulatory
engagement themes across the region.

Dividends

Information about dividends paid during the year is provided on
page 20 of the Strategic Report and in Note 8 to the financial
statements.

Internal control

The Board is responsible for the establishment and operation of
effective procedures for the maintenance of a sound system of
internal control and risk management, adequate accounting, and
compliance with statutory and regulatory obligations. The Board
determine the aggregate level and types of risks the bank is willing
to take in achieving its strategic objectives.
To meet this requirement and to discharge its obligations under
the FCA Handbook and the PRA Handbook, procedures have been
designed for safeguarding assets against unauthorised use or
disposal, for maintaining proper accounting records, and for
ensuring the reliability and usefulness of financial information used
within the business or for publication.
These procedures provide reasonable assurance against material
misstatement, errors, losses or fraud. They are designed to provide
effective internal control within the group and accord with the
F inancial Reporting Council's guidance for Directors issued in
2014 (and subsequent relevant publications), internal control and
related financial and business reporting. The procedures have
been in place throughout the year and up to 20 February 2023, the
date of approval of this Annual Report and Accounts 2022.
The key risk management and internal control procedures include
the following:
•Global principles: The HSBC Group's Global Principles set an
overarching standard for all other policies and procedures and
are fundamental to the Group’s risk management structure.
They inform and connect our purpose, values, strategy and risk
management principles, guiding us to do the right thing and
treat our customers and our colleagues fairly at all times.
•Risk management framework ('RMF'): The RMF supports
our Global Principles. It outlines the key principles and practices
that we employ in managing material risks. It applies to all
categories of risk and supports a consistent approach in
identifying, assessing, managing and reporting the risks we
accept and incur in our activities.
•Delegation of authority within limits set by the Board:
Subject to certain matters reserved for the Board, the Chief
Executive Officer has been delegated authority limits and
powers within which to manage the day-to-day affairs of the
bank, including the right to sub-delegate those limits and
powers. Each relevant executive has authority within which to
manage the day-to-day affairs of the business or function for
which he or she is accountable. Those individuals are required
to maintain a clear and appropriate apportionment of
significant responsibilities and to oversee the establishment
and maintenance of systems of control that are appropriate to
their business or function. Authorities to enter into credit and
market risk exposures are delegated with limits to line
management of group companies. However, credit proposals
with specified higher-risk characteristics require the
concurrence of the appropriate global function. Credit and
market risks are measured and reported at subsidiary company
level and aggregated for risk concentration analysis on a group-
wide basis.

HSBC Bank plc Annual Report and Accounts 2022 | 99

•Risk identification and monitoring: Systems and
procedures are in place to identify, assess, control and monitor
the material risk types facing the group as set out in the RMF.
The group‘s risk measurement and reporting systems are
designed to help ensure that material risks are captured with all
the attributes necessary to support well-founded decisions, that
those attributes are accurately assessed and that information is
delivered in a timely manner for those risks to be successfully
managed and mitigated.
•Changes in market conditions/practices: Processes are in
place to identify new risks arising from changes in market
conditions/practices or customer behaviours, which could
expose the group to heightened risk of loss or reputational
damage. The group employs a top and emerging risks
framework, which contains an aggregate of all current and
forward-looking risks and enables it to take action that either
prevents them materialising or limits their impact.
•Responsibility for risk management: All employees are
responsible for identifying and managing risk within the scope
of their role as part of the three lines of defence model. This is
an activity-based model to delineate management
accountabilities and responsibilities for risk management and
the control environment. The second line of defence sets the
policy and guidelines for managing specific areas, provides
advice and guidance in relation to the risk, and challenges the
first line of defence (the risk owners) on effective risk
management.
•The Board has delegated to the Audit Committee oversight for
the implementation of the group’s policies and procedures for
capturing and responding to whistleblower concerns, ensuring
confidentiality, protection and fair treatment of whistleblowers,
and receiving reports arising from the operation of those
policies as well as ensuring arrangements are in place for
independent investigation.
•Strategic plans: Strategic plans are prepared for global
businesses, global functions and geographical regions within
the framework of the HSBC Group’s overall strategy. The bank
also prepares and adopts a Financial Resource Plan, which is
informed by detailed analysis of risk appetite, describing the
types and quantum of risk that the bank is prepared to take in
executing its strategy and sets out the key business initiatives
and the likely financial effects of those initiatives.
•The effectiveness of the group’s system of risk management
and internal control is reviewed regularly by the Board, the Risk
Committee and the Audit Committee.
•During 2022, the group continued to focus on operational
resilience and invest in the non-financial risk infrastructure.
There was a particular focus on material and emerging risks
with progress made enhancing the end-to-end risk and control
assessment process. The Risk Committee, supported by the
TRT, and the Audit Committee received confirmation that
executive management continued to take efforts to effect the
necessary actions to remedy any failings or weaknesses
identified through the operation of the group's framework of
controls.
Internal control over financial reporting
The key risk management and internal control procedures over
financial reporting include the following:
•Entity level controls ('ELC'): The primary mechanism through
which comfort over risk management and internal control
systems is achieved, is through assessments of the
effectiveness of controls to manage risk, and the reporting of
risk and control issues on a regular basis through the various
risk management and risk governance forums. ELCs are a
defined suite of internal controls that have a pervasive influence
over the entity as a whole.
They include controls related to the control environment, such
as the bank's values and ethics, the promotion of effective risk
management and the overarching governance exercised by the
Board and its non-executive committees. The design and
operational effectiveness of ELCs are assessed annually as part
of the assessment of the effectiveness of internal controls over
financial reporting. If issues are significant to the group, they
are notified to the Risk Committee, and also to the Audit
Committee if concerning financial reporting matters.
•Process level transactional controls: Key process level
controls that mitigate risk of financial misstatement are
identified, recorded and monitored in accordance with the risk
framework. This includes the identification and assessment of
relevant control issues against which action plans are tracked
through to remediation. Further details on the group’s approach
to risk management can be found on page 26. The Audit
Committee has continued to receive regular updates on HSBC’s
ongoing activities for improving the effective oversight of end-
to-end business processes and management continues to
identify opportunities for enhancing key controls, such as
through the use of automation technologies.
•External Reporting Forum: The External Reporting Forum
reviews financial reporting disclosures to be made by the bank
for accuracy and completeness. The integrity of disclosures is
underpinned by structures and processes within the group's
Finance and Risk functions that support rigorous analytical
review of financial reporting and the maintenance of proper
accounting records.
•Disclosure Committee: Chaired by the Chief Financial Officer,
the committee supports the discharge of the bank’s obligations
under relevant legislation and regulation including the
European Union’s Market Abuse Regulation ('EU MAR'), as
amended by the Market Abuse (Amendment) (EU Exit)
Regulations 2019, the New York Stock Exchange’s Listed
Company Manual, U.S. Securities law and the rules and
regulations of the SEC, and also any other listing and disclosure
rules of the markets and exchanges on which the bank’s
financial instruments are listed, including any other
requirements that shall apply from time to time.
•Financial reporting: The group’s financial reporting process is
controlled using documented accounting policies and reporting
formats, supported by detailed instructions and guidance on
reporting requirements, issued to all reporting entities within
the group in advance of each reporting period end. The
submission of financial information from each reporting entity
is supported by a certification by the responsible financial
officer and analytical review procedures at subsidiary and
group levels.
•Subsidiary certifications: Certifications are provided to the
Audit Committee and the Risk Committee (full and half yearly)
and to the Nomination, Remuneration and Governance
Committee (annually) from the audit, risk and remuneration
committees of key material subsidiary companies confirming
amongst other things that:
–Audit – the financial statements of the subsidiary have been
prepared in accordance with group policies, present fairly
the state of affairs of the subsidiary and are prepared on a
going concern basis;
–Risk – the risk committee of the subsidiary has carried out
its oversight activities consistent with and in alignment to
the RMF; and
–Remuneration – the remuneration committee of the
subsidiary has discharged its obligations in overseeing the
implementation and operation of HSBC’s Group
Remuneration Policy.
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100 | HSBC Bank plc Annual Report and Accounts 2022

Employees

Health and safety
We are committed to providing a safe and healthy working
environment for everyone. We have adopted global policies,
mandatory procedures, and incident and information reporting
systems across the organisation that reflect our core values and
are aligned to international standards. Our global health and safety
performance is subject to ongoing monitoring and assurance.
Our Chief Operating Officers have overall responsibility for
engendering a positive health and safety culture and ensuring that
global policies, procedures and systems are put into practice
locally. They also have responsibility for ensuring all local legal
requirements are met.
We delivered a range of programmes in 2022 to help us
understand and manage our health and safety risks:
•We continued to provide enhancements to our workplaces to
minimise the risks of Covid-19, including enhancing cleaning,
improved ventilation and social distancing measures
•We updated our advice and risk assessment methodology on
working from home, providing more awareness and best
practices on good ergonomics and wellbeing to be adopted as
we transitioned to new ways of working upon return to the
office
•We delivered health and safety training and awareness to
employees and contractors ensuring roles and responsibilities
were clear and understood, especially in higher risk
environments
•We completed the annual safety inspection on all of our
buildings, to ensure we were meeting our standards and
continuously improving our safety performance
•We continued to focus on enhancing the safety culture in our
supply chain through our SAFER Together programme,
covering the five key elements of best practice safety culture,
including speaking up about safety, and recognising excellence
•Our Safety Climate Survey continued to show high results and
recognised that we encourage suggestions on how to improve
health and safety and have good processes in place to
communicate health and safety messages
•Our Eat Well Live Well programme continued to be rolled out,
notably in France and Germany, educating and informing our
colleagues on how to make healthy food and drink choices. We
enhanced the programme to provide digital educational and
information resources, including a suite of videos and recipe
ideas and to provide healthy vending options.
•Protection of our colleagues and operations is of critical
importance and we have effective controls in place to protect
our people from natural disasters (i.e. storms and earthquakes).
In 2022, there were 38 named storms that passed over 1,667 of
our buildings, resulting in 0 injuries or material business impact.

Employee health and safety
| 2022 | 2021 | 2020
Number of workplace fatalities | — | — | —
Number of major injuries to employees 1 | — | 2 | 3
All injury rate per 100,000 employees | 49 | 35 | 130

1 Fractures, dislocation, concussion, hospitalisation, unconsciousness.
Diversity and Inclusion
Our purpose, ‘Opening up a world of opportunity’, explains why
we exist as an organisation and is the foundation of our diversity
and inclusion strategy. Promoting diversity and fostering inclusion
contributes to our ‘energise for growth’ priority. By valuing
difference, we can make use of the unique expertise, capabilities,
breadth and perspectives of our colleagues to the benefit of our
customers. To achieve progress, we are focused on specific
region-wide priorities for which we hold senior executives
accountable. We are pleased to report on key progress made in
2022:
Achievements
•We have set up a HSBC Bank plc Diversity and Inclusion
Council, chaired by the HSBC Bank plc CEO and consisting of
the European Executive Committee to reinforce our
commitments, engage more closely with our Employee
Resources Groups and track progress and accountability.
•Throughout 2022, we arranged multiple events and
conferences to support our colleagues across our European
countries, including ethnicity conferences attended by over 600
colleagues, 6 disability awareness events and six ethnicity
exchanges in French and English.
•We have continued supporting colleagues through our ERGs;
we now have 47 ERGs in 20 markets across six diversity
strands.
•We have created D&I objectives for European people
managers.
•Focus on developing our middle management female
colleagues through our flagship programmes 'uGrow' and
'Accelerated Female Leaders'.
•We have a black heritage action plan in place to support our
ethnicity goals, including a Black Heritage Sponsorship
Programme being run in Global Banking and Markets.
•3000+ hours spent on Inclusion Learning across the region
•47.9% of employees in the UK, Channels Islands and Isle of
Man and South Africa have declared their ethnicity in our 'HR
Direct' system
Gender diversity statistics
Our overall female representation is improving and we are
committed to building a strong pipeline of female talent to
improve gender balance in senior leadership across Europe. By the
end of 2022, we had reached 24.6% and are committed to doing
more going forward.
Female representation by management level:
All grades – 51.9%
GCB 6-8 Clerical grades – 65.1%
GCB 4-5 Management – 43.7%
GCB 0-3 Senior management – 24.6%
Employment of people with a disability
We strongly believe in providing equal opportunities for all
employees. The employment of people with a disability is included
in this commitment. The recruitment, training, development and
promotion of people with a disability are based on the aptitudes
and abilities of the individual. Should employees become disabled
during their employments with us, efforts are made to continue
their employment. Where necessary, we will provide appropriate
training, facilities and reasonable equipment. For example, we
recently established a telephone platform for instant sign
translation for our deaf colleagues in France where the sign
language translators exchange sign language by video.
A number of countries have dedicated teams to ensure that
barriers to work are removed for colleagues. Our Employee
Resource Groups ('ERG'), supported by HR and business
leadership are doing an important job of breaking down barriers.
They offer a space for discussion between those with a disability
and their allies for exchanges of inclusive best practices.
Continuous work is done to ensure individual support is provided
to make home office adjustments.
Learning and talent development
We aim to build a dynamic environment where our colleagues can
develop skills and undertake experiences that help them fulfil their
potential. Our approach helps us to meet our strategic priorities
and support our colleagues’ career goals.

HSBC Bank plc Annual Report and Accounts 2022 | 101

We expect all colleagues, regardless of their contract type, to
complete global mandatory training each year. This training plays
a critical role in shaping our culture, ensuring a focus on the issues
that are fundamental to our work – such as sustainability, financial
crime risk, and our intolerance of bullying and harassment. New
joiners attend our Global Discovery programme designed to build
their knowledge of the organisation and engage them with our
purpose, values and strategy.
HSBC University remains our home for skills development with
access to face to face training and an extensive catalogue of
digital content from partners such as LinkedIn Learning, Harvard
Business Review podcast and Microsoft Learn. Powered by
Degreed, our HSBC University platform provides tailored content
aligned to employees chosen skills and development areas. Our
Leadership development partners include Imperial College and
London Business Schools who we work with on topics of strategic
importance. For example, we launched the HSBC University
Sustainability Academy in October 2022 providing a wealth of
knowledge articles and structured learning pathways to grow
awareness of climate and wider social sustainability matters that
HSBC and its employees can play a role in resolving.
My HSBC Career Portal is also available to all our employees
which offers career development information and resources to
help colleagues manage the various stages of their career, from
joining through to career progression. However, we also recognise
that most development happens while our colleagues work,
through regular coaching, feedback, and performance
management and we will extend the use of the HSBC Talent
Marketplace platform in Europe in 2023 (the platform is already
live in the UK). This will connect our employees to ‘on the job’
development opportunities across the HSBC Group, by means of
matching individuals existing skills and career aspirations to live
projects within the Group. HSBC Europe will also be able to call
upon talent that exists across the Group, to supplement its own
personnel, in the development of local initiatives and projects.
Employee relations
We consult with and, where appropriate, negotiate with employee
representative bodies where we have them. We also aim to
maintain well-developed communications and consultation
programmes with all employee representative bodies and there
have been no material disruptions to our operations from labour
disputes during the past five years.

Disclosure of information to auditors

The directors are not aware that there is any relevant audit
information (as defined in the Companies Act 2006) of which the
bank’s auditors are unaware and processes are in place to ensure
that the bank’s auditors are aware of any relevant audit
information.

Auditors

PricewaterhouseCoopers LLP (‘PwC’) are the external auditors to
the bank. PwC has expressed its willingness to continue in office
and the Board recommends that PwC be re-appointed as the
bank’s auditors. A resolution proposing the re-appointment of
PwC as the bank’s auditors, and giving authority to the Audit
Committee to determine its remuneration, will be submitted to the
forthcoming AGM.

Branches

HSBC Bank plc provides a wide range of banking and financial
services through 20 markets. HSBC Bank plc is simplifying its
operating model to one integrated business supporting a
wholesale banking hub for the EU in Paris and a wholesale
banking hub for we stern markets in London. Further information
on the bank’s branches are located in ‘HSBC in Europe’ on page 6.
Disclosures required pursuant to the Large and
Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 as updated by
Companies (Miscellaneous Reporting) Regulations
2018 can be found on the following pages:

Engagement with employees (Sch.7 Para 11 and 11A 2008/2018 Regs), s172 Statement) | Pages 12 and 13
Engagement with suppliers, customers and others in a business relationship with the bank (Sch.7 Para 11B 2008 Regs) | Pages 12 and 13
Policy concerning the employment of disabled persons (Sch.7 Para 10 2008 Regs) | Page 101
Financial Instruments (Sch.7 Para 6 2008 Regs) | Pages 36 to 75
Hedge accounting policy (Sch.7 Para 6 2008 Regs) | Note 14, Pages 159 to 164

Articles of Association, Conflicts of interest and indemnification of Directors

The bank's Articles of Association gives the Board authority to
approve Directors’ conflicts and potential conflicts of interest. The
Board has adopted policies and procedures for the approval of
Directors’ conflicts or potential conflicts of interest. On
appointment, new Directors are advised of the process for dealing
with conflicts and a review of those conflicts that have been
authorised, and the terms of those authorisations, is routinely
undertaken by the Board.
The Articles of Association of the bank contain a qualifying third-
party indemnity provision, which entitles Directors and other
officers to be indemnified out of the assets of the bank against
claims from third parties in respect of certain liabilities. HSBC
Group has granted, by way of deed poll, indemnities to the
Directors, including former Directors who retired during the year,
against certain liabilities arising in connection with their position
as a Director of any Group company, including the bank and its
subsidiaries. Directors are indemnified to the maximum extent
permitted by law.
The indemnities that constitute a 'qualifying third-party indemnity
provision', as defined by section 234 of the Companies Act 2006,
remained in force for the whole of the financial year (or, in the
case of Directors appointed during 2022, from the date of their
appointment). The deed poll is available for inspection at the
registered office of HSBC Holdings plc.
Additionally, Directors have the benefit of Directors’ and Officers’
liability insurance. Qualifying pension scheme indemnities have
also been granted to the Trustees of the Group's pension schemes,
which were in force for the whole of the financial year and remain
in force as at the date of this report.

Research and Development

In the ordinary course, the lines of business develop new products
and services.

Events after the Balance Sheet Date

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

102 | HSBC Bank plc Annual Report and Accounts 2022

Statement on going concern

The Directors consider it appropriate to prepare the financial statements on the going concern basis. In making their going concern
assessment, the Directors have considered a wide range of detailed information relating to present and potential conditions, including
profitability, cash flows, capital requirements and capital resources.
Further information relevant to the assessment is provided in the Strategic Report and the Report of the Directors, in particular:
•a description of the group’s strategic direction;
•a summary of the group's financial performance and a review of performance by business;
•the group’s approach to capital management and its capital position; and
•the top and emerging risks facing the group, as appraised by the Directors, along with details of the group's approach to mitigating
those risks and its approach to risk management in general.
In addition, the objectives, policies and processes for managing credit, liquidity and market risk are set out in the ‘Report of the Directors:
Risk’.
The Report of the Directors comprising pages 26 to 102 was approved by the Board on 20 February 2023 and is signed on its behalf:
By order of the Board
David Watts
Director
HSBC Bank plc
20 February 2023
Registered number 00014259

HSBC Bank plc Annual Report and Accounts 2022 | 103

Statement of directors' responsibilities in respect of the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared
the group and the company financial statements in accordance with UK-adopted international accounting standards. In preparing the
group and company financial statements, the directors have also elected to comply with International Financial Reporting Standards
issued by the International Accounting Standards Board (IFRSs as issued by IASB).
The group and company have also prepared financial statements in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements,
the directors are required to:
•select suitable accounting policies and then apply them consistently;
•state whether applicable UK-adopted international accounting standards, international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRSs issued by IASB have been followed, subject to any
material departures disclosed and explained in the financial statements;
•make judgements and accounting estimates that are reasonable and prudent; and
•prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will
continue in business.
The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and
company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable
them to ensure that the financial statements comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are listed in Corporate Governance Report confirm that, to the best of their knowledge:
•the group and company financial statements, which have been prepared in accordance with UK-adopted international accounting
standards, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union and IFRSs issued by IASB, give a true and fair view of the assets, liabilities and financial position of the group and company,
and of the loss of the group; and
•the Strategic Report includes a fair review of the development and performance of the business and the position of the group and
company, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
David Watts
Director
HSBC Bank plc
20 February 2023
Registered number 00014259
Statement of Directors' Responsibilities

104 | HSBC Bank plc Annual Report and Accounts 2022

Independent auditors’ report to the members of HSBC Bank plc

Report on the audit of the financial statements

Opinion
In our opinion, HSBC Bank plc’s group financial statements and company financial statements (the 'financial statements'):
•give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2022 and of the group’s loss and
the group’s and company’s cash flows for the year then ended;
•have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the
provisions of the Companies Act 2006; and
•have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2022 (the 'Annual Report'), which comprise:
•the consolidated balance sheet as at 31 December 2022;
•the consolidated income statement and consolidated statement of comprehensive income for the year then ended;
•the consolidated statement of cash flows for the year then ended;
•the consolidated statement of changes in equity for the year then ended;
•the HSBC Bank plc balance sheet as at 31 December 2022;
•the HSBC Bank plc statement of cash flows for the year then ended;
•the HSBC Bank plc statement of changes in equity for the year then ended; and
•the notes to the financial statements, which include a description of the significant accounting policies.
Certain notes to the financial statements have been presented elsewhere in the Annual Report, rather than in the notes to the financial
statements. These are cross-referenced from the financial statements and are identified as ‘(Audited)’. The relevant disclosures are
included in the Risk review section on pages 26 to 93.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international
accounting standards, have also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union.
In our opinion, the group and company financial statements have been properly prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international
accounting standards, have also applied international financial reporting standards ('IFRSs') as issued by the International Accounting
Standards Board ('IASB').
In our opinion, the group and company financial statements have been properly prepared in accordance with IFRSs as issued by the
IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)'), International Standards on Auditing
issued by the International Auditing and Assurance Standards Board ('ISAs') and applicable law. Our responsibilities under ISAs (UK) and
ISAs are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and the International
Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics
Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by either the FRC’s Ethical Standard or Article 5(1)
of Regulation (EU) No 537/2014 were not provided.
Other than those disclosed in note 6, we have provided no non-audit services to the company or its controlled undertakings in the period
under audit.

HSBC Bank plc Annual Report and Accounts 2022 | 105

Our audit approach
Overview
Audit scope
We performed audits of the complete financial information of two components, namely the UK non-ring-fenced bank and HSBC
Continental Europe ('HBCE'). For five further components, specific audit procedures were performed over selected significant account
balances and financial statement note disclosures.
Key audit matters
•Expected credit losses (‘ECL’) impairment of loans and advances (group and company)
•Held for sale accounting (group)
•Recognition of deferred tax assets (group); and
•Impairment of investment in subsidiaries (company)
Materiality
•Overall group materiality: £230 million (2021: £218 million) based on 1% of Tier 1 capital.
•Overall company materiality: £133 million (2021: £140 million) based on 1% of Tier 1 capital.
•Performance materiality: £172 million (2021: £164 million) (group) and £99 million (2021: £105 million) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Held for sale accounting (group) is a new key audit matter this year. Valuation of financial instruments (group and company), which was
a key audit matter last year, is no longer included because the risk is reduced due to a reduction in the size of the level 3 asset backed
securities portfolio, resulting in a lower risk of material misstatement. Otherwise, the key audit matters below are consistent with last
year.
Expected credit losses – Impairment of loans and advances (group and company)

Nature of the key audit matter
Determining expected credit losses (‘ECL’) involves management judgement and is subject to a high degree of estimation uncertainty. Management makes various assumptions when estimating ECL. The significant assumptions that we focused on in our audit included those with greater levels of management judgement and for which variations had the most significant impact on ECL. These included assumptions made in determining forward looking economic scenarios and their probability weightings (specifically the central and downside scenarios given these have the most material impact on ECL) and estimating expected cash flows and collateral valuations to assess the ECL of credit impaired wholesale exposures. The level of estimation uncertainty and judgement has remained high during 2022 as a result of the uncertain macroeconomic and geopolitical environment, high levels of inflation and a rising global interest rate environment. This leads to uncertainty around judgements made in determining the severity and probability weighting of macroeconomic variable forecasts across the different economic scenarios used in ECL models, and in the estimation of expected cash flows and collateral valuations on credit impaired stage 3 exposures. Management makes other assumptions which are less judgemental or for which variations have a less significant impact on ECL. These assumptions include: •The methodologies used in quantitative scorecards for determining customer risk ratings (‘CRRs’); •Model methodologies themselves; and •Quantitative and qualitative criteria used to assess significant increases in credit risk.

Matters discussed with the Audit Committee
We held discussions with the Audit Committee covering governance and controls over ECL. We discussed a number of areas including: •The severity of macroeconomic scenarios, and their related probability weightings; •The valuation of credit impaired exposures, with focus on assumptions made in the recoverability of significant wholesale exposures; and •The disclosures made in relation to ECL.

Independent Auditors’ Report

106 | HSBC Bank plc Annual Report and Accounts 2022

How our audit addressed the Key Audit Matter
We assessed the design and effectiveness of governance and controls over the estimation of ECL. We observed management’s review and challenge in governance forums for (1) the determination of macroeconomic scenarios and their probability weightings and (2) the assessment of ECL for Wholesale exposures, including the assessment of ECL calculated on the largest credit-impaired stage 3 exposures. We also tested controls over: •The input of critical data into source systems and the flow and transformation of critical data from source systems to impairment models and management judgemental adjustments; •Credit reviews that determine CRRs for wholesale customers; •Independent model validation and monitoring; •The calculation and approval of management judgemental adjustments to modelled outcomes; •The identification of credit-impairment triggers; and •The calculation and approval of significant individual impairments relating to the largest wholesale credit-impaired exposures. We involved our economic experts in assessing the significant assumptions made in determining the severity and probability weighting of macroeconomic forecasts. These assessments considered the sensitivity of ECL to variations in the severity and probability weighting of macroeconomic forecasts. We involved our modelling experts in assessing the appropriateness of the significant assumptions and methodologies used for models and independently re- performed the calculations for a sample of those models. We further considered whether the judgements made in selecting the significant assumptions would give rise to indicators of possible management bias. In addition, we performed substantive testing over: •the compliance of ECL methodologies and assumptions with the requirements of IFRS 9; •the appropriateness and application of the quantitative and qualitative criteria used to assess significant increases in credit risk; •a sample of critical data used in the year end ECL calculation; •a sample of CRRs applied to wholesale exposures; and •a sample of calculations made in estimating expected cash flows for certain credit-impaired wholesale exposures. We evaluated and tested the Credit Risk disclosures made in the financial statements.

Relevant references in the Annual Report and Accounts 2022
•Measurement uncertainty and sensitivity analysis of ECL estimates, page 47. •Audit Committee Report, page 97. •Credit risk, page 36. •Note 1.2(i) Impairment of amortised cost and FVOCI financial assets, page 129.

Recognition of deferred tax assets (group)

Nature of the key audit matter
Recognition of deferred tax assets ('DTAs') relies on an assessment of the availability and timing of future deferred tax liabilities and taxable profits against which to recognise accumulated tax losses. Management judgement is required when assessing whether a deferred tax asset should be recognised, particularly when an entity has a history of recent losses and convincing evidence of future taxable profits is required. Judgements include assumptions regarding the forecast cash flows, determination of risk adjustments to such cash flows and the timing of the reversal of temporary differences. Management performed an assessment of the recoverability of deferred tax assets at 31 December 2022 and an additional deferred tax asset of £288 million has been recorded in HBCE.

Matters discussed with the Audit Committee
We discussed with the audit committee the key judgements made by management in assessing the recoverability of DTAs. We also discussed the appropriateness of the disclosures made in the annual report.

How our audit addressed the Key Audit Matter
We tested the design and operating effectiveness of controls over deferred tax asset recognition. With the support of our tax specialists we assessed the viability of management’s plans to recover deferred tax assets. We tested key inputs into the deferred tax recognition model, including forecast cash flows to approved plans and their consistency with other judgements. We challenged management on their methodology and underlying assumptions in arriving at their judgements, including in relation to availability of convincing other evidence of future taxable profits and determination of risk adjustments applied to those forecast taxable profits. In assessing these judgements we considered the historic taxable profits and losses and the evidence provided to support the judgement that the criteria for recognition had been reached. We challenged the achievability of management's forecast taxable profits, considering the achievement of historic forecasts and assessing the sensitivity of forecasts to reasonable variations in significant assumptions. We also evaluated assumptions made over the future reversal of deferred tax assets and liabilities. We evaluated and tested the disclosures made in the financial statements

Relevant references in the Annual Report and Accounts 2022
•Audit Committee Report, page 97. •Note 1.2(l) Tax, page 133 •Note 7: Tax, page 143

HSBC Bank plc Annual Report and Accounts 2022 | 107

Held for sale accounting (group)

Nature of the key audit matter
The group has agreements to sell a number of businesses as part of executing its strategy. This has resulted in £21.2 billion of assets and £24.7 billion of liabilities being classified as held for sale as at 31 December 2022, in relation to businesses in France, Russia and Greece. In addition to the assets and liabilities classified as held for sale, a pre-tax loss of £1.7 billion has also been recognised in 2022 in relation to the sale of the business in France. For the assets and liabilities to be classified as held for sale, the sale needs to be considered highly probable and expected to complete within 12 months of the date of classification. We focused our audit on the areas with greater levels of management judgement relating to the highly probable assessment including the expected timing of completion, the appropriateness of disclosures relating to the highly probable assessment and the loss recognised in relation to the sale of business in France.

Matters discussed with the Audit Committee
We discussed with the Audit Committee the judgements made by management in determining if the highly probable threshold were met as at 31 December 2022. We also discussed the appropriateness of the disclosure made in the Annual Report which explained how management had concluded that transactions met the highly probable threshold as at 31 December 2022.

How our audit addressed the Key Audit Matter
We tested governance and controls in place over the management process to determine if the highly probable threshold had been met on assets and liabilities classified as held for sale. We assessed the key judgments made by management to determine whether the highly probable threshold was met as at 31 December 2022, including their assessment of remaining actions to complete the transaction, any regulatory requirements that need to be met, and the likelihood and expected timing of the transactions being approved by relevant regulators and shareholders. We also tested the completeness and accuracy of the assets and liabilities that were classified as held for sale and the loss on sale recognised in relation to the French business. We evaluated and tested the disclosures made in the Annual Report in relation to assets and liabilities classified as held for sale.

Relevant references in the Annual Report and Accounts 2022
•Audit Committee Report, page 97. •Note 1.2(o): Critical accounting estimates and judgements, page 134. •Note 34: Assets held for sale and liabilities of disposal groups held for sale, page 186.

Impairment of investment in subsidiaries (company)

Nature of the key audit matter
Management reviewed investments in subsidiaries for indicators of impairment or reversal of impairment previously recorded as at 31 December 2022. Where indicators were identified management estimated the recoverable amount using a value in use (‘VIU’) model. Management’s assessment resulted in a partial reversal of an impairment charge of £2 billion in relation to the investment in HBCE. This resulted in investment in subsidiaries of £10.6 billion at 31 December 2022. The methodology used to estimate the recoverable amount is dependent on various assumptions, both short term and long term in nature. These assumptions, which are subject to estimation uncertainty, are derived from a combination of management’s judgement, experts engaged by management and market data. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which variations had the most significant impact on the recoverable amount. Specifically, these included forecast cash flows for 2023 to 2027, regulatory capital requirements, long term growth rates and discount rates.

Matters discussed with the Audit Committee
We discussed the partial reversal of the impairment charge for HBCE, the appropriateness of methodologies used and significant assumptions with the audit committee, giving consideration to the macroeconomic outlook and HSBC’s strategy. We considered reasonable possible alternatives for significant assumptions.

How our audit addressed the Key Audit Matter
We tested controls in place over significant assumptions and the model used to determine the recoverable amounts. We assessed the appropriateness of the methodology used, and tested the mathematical accuracy of the calculations, to estimate the recoverable amounts. In respect of the significant assumptions, our testing included the following: •Challenging the achievability of management’s business plan and the prospects for HSBC’s businesses, as well as considering the achievement of historic forecasts; •Obtaining and evaluating evidence relating to significant assumptions, from a combination of historic experience and external market and other financial information; •Assessing whether the cash flows included in the model were in accordance with the relevant accounting standard; •Assessing the sensitivity of the VIU to reasonable variations in significant assumptions, both individually and in aggregate; and •Determining a reasonable range for the discount rate used within the model, with the assistance of our valuation experts, and comparing it to the discount rate used by management. We evaluated and tested the disclosures made in the financial statements in relation to investment in subsidiaries.

Relevant references in the Annual Report and Accounts 2022
•Audit Committee Report, page 97. •Note 1.2(a) Consolidation and related policies, page 126. •Note 18: Investment in subsidiaries, page 166.

Independent Auditors’ Report

108 | HSBC Bank plc Annual Report and Accounts 2022

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as
a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in
which they operate.
The risks that HSBC faces are diverse, with the interdependencies between them being numerous and complex. In performing our risk
assessment we engaged with a number of stakeholders to ensure we appropriately understood and considered these risks and their
interrelationships. This included stakeholders within HSBC and our own experts within PwC. This engagement covered external factors
across the geopolitical, macroeconomic and regulatory and accounting landscape, the impact of climate change risk as well as the
internal environment at HSBC, driven by strategy and transformation.
We evaluated and challenged management's assessment of the impact of climate change risk including their conclusion that there is no
material impact on the financial statements. In making this evaluation we considered management’s use of stress testing and scenario
analysis to arrive at the conclusion that there is no material impact on the financial statements. We considered management's
assessment on the areas in the financial statements most likely to be impacted by climate risk, including: the impact on ECL on loans and
advances to customers, for both physical and transition risk; the forecast cash flows from management’s five year business plan and
long term growth rates used in estimating recoverable amounts as part of impairment assessments of investments in subsidiaries; the
impact of climate related terms on the solely payments of principal and interest test for classification and measurement of loans and
advances to customers; and climate risks relating to contingent liabilities as HSBC faces increased reputational, legal and regulatory risk
as it progresses towards its climate ambition.
Using our risk assessment, we tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and
controls, and the industry in which they operate.
HSBC Bank plc is structured into five divisions being Markets & Securities Services, Global Banking, GBM Other, Commercial Banking
and Wealth and Personal Banking, which are supported by a Corporate Centre. The divisions operate across a number of operations,
subsidiary entities and branches (‘components’) throughout Europe. Within the group’s main consolidation and financial reporting
system, the consolidated financial statements are an aggregation of the components. Each component submits their financial
information to the group in the form of a consolidation pack.
In establishing the overall approach to the group and company audit, we scoped using the balances included in the consolidation pack.
We determined the type of work that needed to be performed over the components by us, as the group engagement team, or auditors
within PwC UK and from other PwC network firms operating under our instruction (‘component auditors’).
As a result of our scoping, for the group we determined that audits of the complete financial information of the UK non-ring-fenced bank
('UK NRFB') and HBCE were necessary, owing to their financial significance. We instructed component auditors, PwC UK and PwC
France to perform the audits of these components. Our interactions with component auditors included regular communication
throughout the audit, including the issuance of instructions, a review of working papers relating to the key audit matters and formal
clearance meetings. The group audit engagement partner was also the partner on the audit of the UK NRFB significant component.
We then considered the significance of other components in relation to primary statement account balances and note disclosures. In
doing this we also considered the presence of any significant audit risks and other qualitative factors (including history of misstatements
through fraud or error). For five components, specific audit procedures were performed over selected significant account balances. For
the remainder, the risk of material misstatement was mitigated through group audit procedures including testing of entity level controls
and group and company level analytical review procedures.
Certain group-level account balances were audited by the group engagement team.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

| Financial statements – group | Financial statements – company
Overall materiality | £230 million (2021: £218 million). | £133 million (2021: £140 million).
How we determined it | 1% of Tier 1 capital | 1% of Tier 1 capital
Rationale for benchmark applied | Tier 1 capital is used as a benchmark as it is considered to be a key driver of HSBC Bank plc's decision making process and has been a primary focus for regulators. | Tier 1 capital is used as a benchmark as it is considered to be a key driver of HSBC Bank plc's decision making process and has been a primary focus for regulators.

Tier 1 capital was also used as the benchmark in the prior year. The basis for determining materiality was re-evaluated and we considered
other benchmarks, such as profit before tax. Tier 1 capital is a common benchmark for wholly owned banking subsidiaries, because of
the focus on financial stability. Tier 1 capital was determined to continue to be an appropriate benchmark given the importance of this
metric to the HSBC Bank plc decision making process and to principal users of the financial statements, including the ultimate holding
company HSBC Holdings plc.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range
of materiality allocated across components was £8 million to £230 million. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £172 million (2021: £164 million) for the group
financial statements and £99 million (2021: £105 million)for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

HSBC Bank plc Annual Report and Accounts 2022 | 109

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £11 million (group
audit) (2021: £11 million) and £6 million (company audit) (2021: £7 million) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern basis of
accounting included:
•Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including both internal risks
(i.e., strategy execution) and external risks (i.e., macroeconomic conditions).
•Understanding and evaluating the group and company’s financial forecasts and stress testing of liquidity and regulatory capital,
including the severity of the stress scenarios that were used.
•Understanding and evaluating credit agency ratings and actions.
•Reading and evaluating the adequacy of the disclosures made in the financial statements in relation to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group's and the company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the
company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required
to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters
as described below.
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Report of the
Directors for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and Report of the Directors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities in respect of the financial statements, the directors are responsible
for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to Financial Conduct Authority's ('FCA') regulations, the Prudential Regulation Authority's ('PRA') regulations, UK tax legislation
and equivalent local laws and regulations applicable to other countries in which the company operates, and we considered the extent to
which non-compliance might have a material effect on the financial statements.
Independent Auditors’ Report

110 | HSBC Bank plc Annual Report and Accounts 2022

We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or
reduce costs, creation of fictitious transactions to hide losses or to improve financial performance, and management bias in accounting
estimates. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate
audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component
auditors included:
•Review of correspondence with and reports to the regulators, including the PRA and FCA;
•Review of reporting to the Audit Committee and Risk Committee in respect of compliance and legal matters;
•Review of a sample of legal correspondence with legal advisors;
•Enquiries of management and review of internal audit reports in so far as they related to the financial statements;
•Obtaining legal confirmations from legal advisors relating to material litigation and compliance matters;
•Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to
the determination of fair value for certain financial instruments, the determination of expected credit losses, impairment assessments
of investments in subsidiaries and recognition of deferred tax assets;
•Obtaining confirmations from third parties to confirm the existence of a sample of transactions and balances; and
•Identifying and testing journal entries meeting specific fraud criteria, including those posted with certain descriptions, posted and
approved by the same individual, backdated journals or posted by infrequent and unexpected users.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements in accordance with ISAs (UK) is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the
audit. We also:
•Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s and company’s internal control.
•Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
•Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and
company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the group to cease to continue as a going concern.
•Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group
and company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group and company audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.

HSBC Bank plc Annual Report and Accounts 2022 | 111

Other required reporting

Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•we have not obtained all the information and explanations we require for our audit; or
•adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from
branches not visited by us; or
•certain disclosures of directors’ remuneration specified by law are not made; or
•the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 31 March 2015 to audit the financial
statements for the year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement is
eight years, covering the years ended 31 December 2015 to 31 December 2022.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part
of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance
with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial
report has been prepared using the single electronic format specified in the ESEF RTS.
Lawrence Wilkinson
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
20 February 2023
Independent Auditors’ Report

112 | HSBC Bank plc Annual Report and Accounts 2022

Financial statements |
| Page
Consolidated income statement | 114
Consolidated statement of comprehensive income | 115
Consolidated balance sheet | 116
Consolidated statement of cash flows | 117
Consolidated statement of changes in equity | 118
HSBC Bank plc balance sheet | 120
HSBC Bank plc statement of cash flows | 121
HSBC Bank plc statement of changes in equity | 122
Notes on the financial statements |
1 | Basis of preparation and significant accounting policies | 124
2 | Net fee income | 135
3 | Net income from financial instruments measured at fair value through profit or loss | 136
4 | Insurance business | 136
5 | Employee compensation and benefits | 137
6 | Auditors’ remuneration | 143
7 | Tax | 143
8 | Dividends | 147
9 | Segmental analysis | 147
10 | Trading assets | 149
11 | Fair values of financial instruments carried at fair value | 149
12 | Fair values of financial instruments not carried at fair value | 157
13 | Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 159
14 | Derivatives | 159
15 | Financial investments | 164
16 | Assets pledged, collateral received and assets transferred | 165
17 | Interests in associates and joint ventures | 166
18 | Investments in subsidiaries | 166
19 | Structured entities | 167
20 | Goodwill and intangible assets | 169
21 | Prepayments, accrued income and other assets | 170
22 | Trading liabilities | 170
23 | Financial liabilities designated at fair value | 171
24 | Accruals, deferred income and other liabilities | 171
25 | Provisions | 172
26 | Subordinated liabilities | 173
27 | Maturity analysis of assets, liabilities and off-balance sheet commitments | 175
28 | Offsetting of financial assets and financial liabilities | 177
29 | Called up share capital and other equity instruments | 178
30 | Contingent liabilities, contractual commitments, guarantees and contingent assets | 180
31 | Finance lease receivables | 181
32 | Legal proceedings and regulatory matters | 181
33 | Related party transactions | 183
34 | Assets held for sale and liabilities of disposal groups held for sale | 186
35 | Events after the balance sheet date | 187
36 | HSBC Bank plc’s subsidiaries, joint ventures and associates | 187

HSBC Bank plc Annual Report and Accounts 2022 | 113

Consolidated income statement |
for the year ended 31 December |
|  | 2022 | 2021 | 2020
| Notes* | £m | £m | £m
Net interest income |  | 1,904 | 1,754 | 1,898
– interest income 1,2 |  | 6,535 | 3,149 | 4,086
– interest expense 3 |  | (4,631) | (1,395) | (2,188)
Net fee income | 2 | 1,261 | 1,413 | 1,400
– fee income |  | 2,606 | 2,706 | 2,674
– fee expense |  | (1,345) | (1,293) | (1,274)
Net income from financial instruments held for trading or managed on a fair value basis | 3 | 2,875 | 1,733 | 1,758
Net (expense)/ income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | 3 | (1,369) | 1,214 | 254
Changes in fair value of long-term debt and related derivatives | 3 | 102 | (8) | 17
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 3 | 143 | 493 | 285
Gains less losses from financial investments |  | (60) | 60 | 95
Net insurance premium income | 4 | 1,787 | 1,906 | 1,559
(Losses)/gains recognised on Assets held for sale 4 |  | (1,947) | 67 | —
Other operating income |  | 356 | 527 | 417
Total operating income |  | 5,052 | 9,159 | 7,683
Net insurance claims, benefits paid and movement in liabilities to policyholders | 4 | (406) | (3,039) | (1,783)
Net operating income before change in expected credit losses and other credit impairment charges 5 |  | 4,646 | 6,120 | 5,900
Change in expected credit losses and other credit impairment charges |  | (222) | 174 | (808)
Net operating income |  | 4,424 | 6,294 | 5,092
Total operating expenses |  | (5,353) | (5,462) | (6,705)
– employee compensation and benefits | 5 | (1,762) | (2,023) | (2,340)
– general and administrative expenses |  | (3,463) | (3,265) | (3,092)
– depreciation and impairment of property, plant and equipment and right of use assets |  | (103) | (110) | (372)
– amortisation and impairment of intangible assets | 20 | (25) | (64) | (901)
Operating (loss)/profit |  | (929) | 832 | (1,613)
Share of (loss)/profit in associates and joint ventures | 17 | (30) | 191 | (1)
(Loss)/profit before tax |  | (959) | 1,023 | (1,614)
Tax credit | 7 | 561 | 23 | 136
(Loss)/profit for the year |  | (398) | 1,046 | (1,478)
(Loss)/profit attributable to the parent company |  | (408) | 1,041 | (1,488)
Profit attributable to non-controlling interests |  | 10 | 5 | 10

*For Notes on the financial statements, see page 124.
1 Interest income includes £5,512m (2021: £1,986m; 2020: £2,773m) of interest recognised on financial assets measured at amortised cost; £422m
(2021: £659m; 2020: £656m) of negative interest recognised on financial liabilities and £601m (2021: £504m; 2020: £657m) of interest recognised
on financial assets measured at fair value through other comprehensive income. Include within this is £59m (2021: £61m; 2020: £57m) 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 £3,740m (2021: £616m; 2020: £1,299) of interest on financial liabilities, excluding interest on financial liabilities held for
trading or designated or otherwise mandatorily measured at fair value.
4 2022 balances include losses on disposal of businesses classified as held-for-sale as part of a broader restructuring of our European business.
5 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as 'revenue'.
Financial statements

114 | HSBC Bank plc Annual Report and Accounts 2022

Consolidated statement of comprehensive income |
for the year ended 31 December |
| 2022 | 2021 | 2020
| £m | £m | £m
(Loss)/profit for the year | (398) | 1,046 | (1,478)
Other comprehensive (expense)/income |  |  |
Items that will be reclassified subsequently to profit or loss when specific conditions are met: |  |  |
Debt instruments at fair value through other comprehensive income | (454) | (237) | 213
– fair value (losses)/gains | (698) | (247) | 366
– fair value losses/(gains) transferred to the income statement on disposal | 59 | (63) | (90)
– expected credit losses/(recoveries) recognised in the income statement | 6 | (5) | 8
– income taxes | 179 | 78 | (71)
Cash flow hedges | (943) | (165) | 118
– fair value (losses)/gains | (1,418) | (40) | 86
– fair value losses/(gains) reclassified to the income statement | 127 | (202) | 72
– income taxes | 348 | 77 | (40)
Exchange differences | 701 | (603) | 467
Items that will not be reclassified subsequently to profit or loss: |  |  |
Remeasurement of defined benefit asset/liability | 38 | 44 | (8)
– before income taxes | 56 | 61 | (18)
– income taxes | (18) | (17) | 10
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 | 329 | 2 | 67
– fair value gains | 462 | 3 | 93
– income taxes | (133) | (1) | (26)
Other comprehensive (expense)/income for the year, net of tax | (329) | (957) | 859
Total comprehensive (expense)/income for the year | (727) | 89 | (619)
Attributable to: |  |  |
– shareholders of the parent company | (739) | 93 | (653)
– non-controlling interests | 12 | (4) | 34
Total comprehensive (expense)/income for the year | (727) | 89 | (619)

HSBC Bank plc Annual Report and Accounts 2022 | 115

Consolidated balance sheet
at 31 December
|  | 2022 | 2021
| Notes* | £m | £m
Assets |  |  |
Cash and balances at central banks |  | 131,433 | 108,482
Items in the course of collection from other banks |  | 2,285 | 346
Trading assets | 10 | 79,878 | 83,706
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 13 | 15,881 | 18,649
Derivatives | 14 | 225,238 | 141,221
Loans and advances to banks |  | 17,109 | 10,784
Loans and advances to customers |  | 72,614 | 91,177
Reverse repurchase agreements – non-trading |  | 53,949 | 54,448
Financial investments | 15 | 32,604 | 41,300
Assets held for sale 1 | 34 | 21,214 | 9
Prepayments, accrued income and other assets | 21 | 61,379 | 43,118
Current tax assets |  | 595 | 1,135
Interests in associates and joint ventures | 17 | 728 | 743
Goodwill and intangible assets | 20 | 1,167 | 894
Deferred tax assets | 7 | 1,279 | 599
Total assets |  | 717,353 | 596,611
Liabilities and equity |  |  |
Liabilities |  |  |
Deposits by banks |  | 20,836 | 32,188
Customer accounts |  | 215,948 | 205,241
Repurchase agreements – non-trading |  | 32,901 | 27,259
Items in the course of transmission to other banks |  | 2,226 | 489
Trading liabilities | 22 | 41,265 | 46,433
Financial liabilities designated at fair value | 23 | 27,287 | 33,608
Derivatives | 14 | 218,867 | 139,368
Debt securities in issue |  | 7,268 | 9,428
Liabilities of disposal groups held for sale 1 | 34 | 24,711 | —
Accruals, deferred income and other liabilities | 24 | 66,945 | 43,456
Current tax liabilities |  | 130 | 97
Liabilities under insurance contracts | 4 | 19,987 | 22,264
Provisions | 25 | 424 | 562
Deferred tax liabilities | 7 | 14 | 15
Subordinated liabilities | 26 | 14,528 | 12,488
Total liabilities |  | 693,337 | 572,896
Equity |  |  |
Total shareholders’ equity |  | 23,875 | 23,584
– called up share capital | 29 | 797 | 797
– share premium account |  | 420 | —
– other equity instruments | 29 | 3,930 | 3,722
– other reserves |  | (6,368) | (5,670)
– retained earnings |  | 25,096 | 24,735
Non-controlling interests |  | 141 | 131
Total equity |  | 24,016 | 23,715
Total liabilities and equity |  | 717,353 | 596,611

1 Includes businesses classified as held-for-sale as part of a broader restructuring of our European business. Refer to Note 34 'Assets held for sale
and liabilities of disposal groups held for sale' on page 186.
*For Notes on the financial statements, see page 124.
The accompanying notes on pages 124 to 190, and the audited sections of the 'Report of the Directors' on pages 26 to 102 form an
integral part of these financial statements.
The financial statements were approved by the Board of Directors on 20 February 2023 and signed on its behalf by:
David Watts
Director
Financial statements

116 | HSBC Bank plc Annual Report and Accounts 2022

Consolidated statement of cash flows |
for the year ended 31 December |
| 2022 | 2021 | 2020
| £m | £m | £m
(Loss)/profit before tax | (959) | 1,023 | (1,614)
Adjustments for non-cash items |  |  |
Depreciation, amortisation and impairment 1 | 128 | 174 | 1,273
Net loss/(gain) from investing activities 2 | 2,002 | (62) | (99)
Share of loss/(profit) in associates and joint ventures | 30 | (191) | 1
Change in expected credit losses gross of recoveries and other credit impairment charges | 253 | (171) | 810
Provisions including pensions | 192 | 104 | 424
Share-based payment expense | 46 | 96 | 78
Other non-cash items included in loss/(profit) before tax | (242) | (198) | 135
Elimination of exchange differences 3 | (6,714) | 4,926 | (2,527)
Changes in operating assets and liabilities | 37,454 | 9,602 | 35,418
– change in net trading securities and derivatives | (6,213) | 8,157 | 8,070
– change in loans and advances to banks and customers | (2,717) | 11,149 | 6,780
– change in reverse repurchase agreements – non-trading | 6,251 | 9,538 | 16,084
– change in financial assets designated and otherwise mandatorily measured at fair value | 2,729 | (2,429) | 735
– change in other assets | (7,329) | 10,924 | (7,513)
– change in deposits by banks and customer accounts | 19,835 | 7,940 | 28,262
– change in repurchase agreements – non-trading | 5,641 | (7,643) | (14,482)
– change in debt securities in issue | (1,060) | (7,943) | (7,668)
– change in financial liabilities designated at fair value | (1,822) | (7,191) | (402)
– change in other liabilities | 21,297 | (12,295) | 5,432
– dividend received from associates | 7 | — | —
– contributions paid to defined benefit plans | (10) | (24) | (22)
– tax received/(paid) | 845 | (581) | 142
Net cash from operating activities | 32,190 | 15,303 | 33,899
– purchase of financial investments | (13,227) | (18,890) | (21,037)
– proceeds from the sale and maturity of financial investments | 20,490 | 25,027 | 17,417
– net cash flows from the purchase and sale of property, plant and equipment | (20) | 52 | (70)
– net investment in intangible assets | (28) | (45) | (150)
– net cash outflow from investment in associates and acquisition of businesses and subsidiaries | (29) | (85) | (371)
– net cash flow on disposal of subsidiaries, businesses, associates and joint ventures | — | — | 57
Net cash from investing activities | 7,186 | 6,059 | (4,154)
– redemption of preference shares and other equity instruments | 628 | — | (318)
– subordinated loan capital issued | 3,111 | 10,466 | —
– subordinated loan capital repaid 4 | (2,248) | (10,902) | (18)
– dividends to the parent company | (1,052) | (194) | (263)
– funds received from the parent company | 1,465 | — | 1,000
– dividends paid to non-controlling interests | (2) | (1) | —
Net cash from financing activities | 1,902 | (631) | 401
Net increase in cash and cash equivalents | 41,278 | 20,731 | 30,146
Cash and cash equivalents at 1 Jan | 140,923 | 125,304 | 92,338
Exchange difference in respect of cash and cash equivalents | 7,706 | (5,112) | 2,820
Cash and cash equivalents at 31 Dec 5 | 189,907 | 140,923 | 125,304
Cash and cash equivalents comprise of |  |  |
– cash and balances at central banks | 131,433 | 108,482 | 85,092
– items in the course of collection from other banks | 2,285 | 346 | 243
– loans and advances to banks of one month or less | 13,801 | 7,516 | 8,676
– reverse repurchase agreement with banks of one month or less | 23,182 | 17,430 | 21,020
– treasury bills, other bills and certificates of deposit less than three months | 294 | 235 | 685
– cash collateral and net settlement accounts | 19,213 | 7,403 | 9,878
– cash and cash equivalents held for sale 6 | 1,925 | — | —
– less: items in the course of transmission to other banks | (2,226) | (489) | (290)
Cash and cash equivalents at 31 Dec 5 | 189,907 | 140,923 | 125,304

1 Included within 2020 are the impact of impairment and write-offs related principally to our businesses in the UK and HSBC Continental Europe
£(994)m.
2 2022 balances include losses on disposal of businesses classified as held-for-sale as part of a broader restructuring of our European business.
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 Subordinated liabilities changes during the year are attributable to cash flows from issuance £3,111m (2021: £10,466m; 2020: nil) and repayment
of £(2,248)m (2021: £(10,902)m; 2020: £(18)m) of securities as presented in the Consolidated statement of cash flows. Non-cash changes during
the year included foreign exchanges g ains/(losse s) £711m (2021: £(512)m; 2020: £351m) and fair value gains/(losses) £(427)m (2021: £(82)m;
2020: £69m).
5 At 31 December 2022, £23,395m (2021: £9,410m; 2020: £11,828m) was not available for use by the group, of which £1,601m (2021: £1,393m;
2020: £2,460m) related to mandatory deposits at central banks.
6 Inc ludes £1,562m of cash and balances at central banks (excluding the expected cash contribution as part of the planned sale of our retail banking
operations in France. For further details, see Note 34); £208m of reverse repurchase agreements with banks of one month or less, £114m of loans
and advances to banks of one month or less and remaining £41m relates to other cash and cash equivalents.
Interest received was £7,668m (2021: £4,285m; 2020: £5,424m), interest paid was £5,284m (2021: £2,919m; 2020: £3,725m) and
dividends received were £431m (2021: £704m; 2020: £423m).

HSBC Bank plc Annual Report and Accounts 2022 | 117

Consolidated statement of changes in equity
for the year ended 31 December
|  |  |  | Other reserves |  |  |
| Called up share capital & share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorganisa- tion reserve ('GRR')7 | Total share- holders’ equity | Non- controlling interests | Total equity
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 797 | 3,722 | 24,735 | 1,081 | (7) | 948 | (7,692) | 23,584 | 131 | 23,715
Loss for the year | — | — | (408) | — | — | — | — | (408) | 10 | (398)
Other comprehensive (expense)/income (net of tax) | — | — | 367 | (449) | (943) | 694 | — | (331) | 2 | (329)
– debt instruments at fair value through other comprehensive income | — | — | — | (449) | — | — | — | (449) | (5) | (454)
– cash flow hedges | — | — | — | — | (943) | — | — | (943) | — | (943)
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 1 | — | — | 329 | — | — | — | — | 329 | — | 329
– remeasurement of defined benefit asset/ liability | — | — | 38 | — | — | — | — | 38 | — | 38
– exchange differences | — | — | — | — | — | 694 | — | 694 | 7 | 701
Total comprehensive (expense)/ income for the year | — | — | (41) | (449) | (943) | 694 | — | (739) | 12 | (727)
Capital securities issued during the period | 420 | 208 | — | — | — | — | — | 628 | — | 628
Dividends to the parent company 2 | — | — | (1,052) | — | — | — | — | (1,052) | (2) | (1,054)
Net impact of equity-settled share-based payments | — | — | 5 | — | — | — | — | 5 | — | 5
Capital contribution 3 | — | — | 1,465 | — | — | — | — | 1,465 | — | 1,465
Change in business combinations and other movements | — | — | (16) | — | — | — | — | (16) | — | (16)
At 31 Dec 2022 | 1,217 | 3,930 | 25,096 | 632 | (950) | 1,642 | (7,692) | 23,875 | 141 | 24,016

At 1 Jan 2021 | 797 | 3,722 | 23,829 | 1,309 | 158 | 1,543 | (7,692) | 23,666 | 183 | 23,849
Profit for the year | — | — | 1,041 | — | — | — | — | 1,041 | 5 | 1,046
Other comprehensive (expense)/income (net of tax) | — | — | 46 | (234) | (165) | (595) | — | (948) | (9) | (957)
– debt instruments at fair value through other comprehensive income | — | — | — | (236) | — | — | — | (236) | (1) | (237)
– equity instruments designated at fair value through other comprehensive income | — | — | — | 2 | — | — | — | 2 | — | 2
– cash flow hedges | — | — | — | — | (165) | — | — | (165) | — | (165)
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 1 | — | — | 2 | — | — | — | — | 2 | — | 2
– remeasurement of defined benefit asset/ liability | — | — | 44 | — | — | — | — | 44 | — | 44
– exchange differences | — | — | — | — | — | (595) | — | (595) | (8) | (603)
Total comprehensive income/(expense) for the year | — | — | 1,087 | (234) | (165) | (595) | — | 93 | (4) | 89
Capital securities issued during the period | — | — | — | — | — | — | — | — | — | —
Dividends to the parent company 2 | — | — | (194) | — | — | — | — | (194) | (1) | (195)
Net impact of equity-settled share-based payments | — | — | (10) | — | — | — | — | (10) | — | (10)
Change in business combinations and other movements 5 | — | — | 23 | 6 | — | — | — | 29 | (47) | (18)
At 31 Dec 2021 | 797 | 3,722 | 24,735 | 1,081 | (7) | 948 | (7,692) | 23,584 | 131 | 23,715

Financial statements

118 | HSBC Bank plc Annual Report and Accounts 2022

Consolidated statement of changes in equity (continued)
for the year ended 31 December
|  |  |  |  | Other reserves |  |  |
| Called up share capital & share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorganisa- tion reserve ('GRR')7 | Total share- holders’ equity | Non- controlling interests | Total equity
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
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 (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 (expense)/income for the year | — | — | (1,432) | 216 | 118 | 445 | — | (653) | 34 | (619)
Dividends to the parent company 2 | — | — | (263) | — | — | — | — | (263) | — | (263)
Net impact of equity-settled share-based payments | — | — | 11 | — | — | — | — | 11 | — | 11
Capital contribution 4 | — | — | 1,000 | — | — | — | — | 1,000 | — | 1,000
Change in business combinations and other movements 6 | — | — | 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 The cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a gain of
£292m (2021: loss of £165m and 2020: loss of £189m).
2 The dividends to the parent company includes dividend on ordinary share capital £850m (2021: nil and 2020: nil), coupon payment on additional
tier 1 instrument £202m (2021: £194m and 2020: £212m) & dividend on preference share capital nil (2021: nil and 2020: £51m).
3 HSBC Holdings plc injected £1.5 bn of CET1 capital into HSBC Bank plc during November 2022 which in turn injected into HSBC Continental
Europe for funding the acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH.
4 HSBC UK Holdings Limited (during 2021, parent company of the bank changed to HSBC Holdings plc) injected £1 bn 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.
5 Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH and HSBC Bank Armenia cjsc, in 2021 increasing the group’s interest to
100%.
6 Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in May 2020, increasing the group’s interest from 80.67% to 99.33%.
7 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 Annual Report and Accounts 2022 | 119

HSBC Bank plc balance sheet
at 31 December
|  | 2022 | 2021
| Notes* | £m | £m
Assets |  |  |
Cash and balances at central banks |  | 78,441 | 63,008
Items in the course of collection from other banks |  | 1,863 | 211
Trading assets | 10 | 67,623 | 70,790
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 13 | 1,618 | 3,215
Derivatives | 14 | 196,714 | 125,787
Loans and advances to banks |  | 14,486 | 6,778
Loans and advances to customers |  | 36,992 | 33,936
Reverse repurchase agreements – non-trading |  | 43,055 | 39,708
Financial investments | 15 | 18,639 | 26,542
Prepayments, accrued income and other assets | 21 | 43,907 | 31,490
Current tax assets |  | 394 | 1,071
Investments in subsidiary undertakings | 18 | 10,646 | 6,479
Goodwill and intangible assets | 20 | 41 | 34
Deferred tax assets | 7 | 608 | 509
Total assets |  | 515,027 | 409,558
Liabilities and equity |  |  |
Liabilities |  |  |
Deposits by banks |  | 13,594 | 14,655
Customer accounts |  | 141,714 | 124,706
Repurchase agreements – non-trading |  | 29,638 | 22,344
Items in the course of transmission to other banks |  | 1,758 | 172
Trading liabilities | 22 | 25,765 | 31,161
Financial liabilities designated at fair value | 23 | 19,415 | 20,869
Derivatives | 14 | 193,336 | 127,651
Debt securities in issue |  | 4,656 | 5,658
Accruals, deferred income and other liabilities | 24 | 47,982 | 30,170
Current tax liabilities |  | 21 | 5
Provisions | 25 | 167 | 250
Subordinated liabilities | 26 | 14,252 | 12,218
Total liabilities |  | 492,298 | 389,859
Equity |  |  |
Called up share capital | 29 | 797 | 797
Share premium account |  | 420 | —
Other equity instruments | 29 | 3,930 | 3,722
Other reserves |  | (6,073) | (5,173)
Retained earnings |  | 23,655 | 20,353
Total equity |  | 22,729 | 19,699
Total liabilities and equity |  | 515,027 | 409,558

*For Notes on the financial statements, see page 124.
Profit after tax for the year was £2,743m (2021: £455m; 2020: loss after tax £(644)m.
The accompanying notes on pages 124 to 190, and the audited sections of the 'Report of the Directors' on pages 26 to 102 form an
integral part of these financial statements.
The financial statements were approved by the Board of Directors on 20 February 2023 and signed on its behalf by:
David Watts
Director
Financial statements

120 | HSBC Bank plc Annual Report and Accounts 2022

HSBC Bank plc statement of cash flows |
for the year ended 31 December |
|  | 2022 | 2021 | 2020
|  | £m | £m | £m
Profit/(loss) before tax |  | 2,548 | 273 | (936)
Adjustments for non-cash items |  |  |  |
Depreciation, amortisation and impairment 1 |  | 17 | 18 | 635
Net gain from investing activities 2 |  | (1,669) | (34) | (67)
Change in expected credit losses gross of recoveries and other credit impairment charges |  | 130 | (216) | 457
Provisions including pensions |  | 91 | 42 | 154
Share-based payment expense |  | 27 | 71 | 56
Other non-cash items included in loss/(profit) before tax |  | (21) | (7) | 8
Elimination of exchange differences 3 |  | (2,109) | 1,073 | 108
Changes in operating assets and liabilities |  | 18,609 | 4,150 | 27,197
– change in net trading securities and derivatives |  | (9,551) | 11,761 | 11,580
– change in loans and advances to banks and customers |  | (3,870) | 9,712 | 8,568
– change in reverse repurchase agreements – non-trading |  | 791 | 5,651 | 5,890
– change in financial assets designated and otherwise mandatorily measured at fair value |  | 1,597 | (1,350) | 1,264
– change in other assets 4 |  | (10,912) | 4,383 | (3,771)
– change in deposits by banks and customer accounts |  | 15,947 | 1,903 | 12,062
– change in repurchase agreements – non-trading |  | 7,294 | (4,652) | (9,331)
– change in debt securities in issue |  | (1,002) | (9,698) | 318
– change in financial liabilities designated at fair value |  | (116) | (3,831) | 500
– change in other liabilities |  | 17,343 | (9,357) | (71)
– contributions paid to defined benefit plans |  | (10) | (21) | (22)
– tax received/(paid) |  | 1,098 | (351) | 210
Net cash from operating activities |  | 17,623 | 5,370 | 27,612
– purchase of financial investments |  | (8,535) | (15,185) | (13,882)
– proceeds from the sale and maturity of financial investments |  | 17,022 | 18,285 | 11,791
– net cash flows from the purchase and sale of property, plant and equipment |  | (2) | (4) | (9)
– net investment in intangible assets |  | (176) | (8) | (98)
Net cash from investing activities |  | 8,309 | 3,088 | (2,198)
– issue of ordinary share capital and other equity instruments |  | 628 | — |
– subordinated loan capital issued 5 |  | 3,111 | 10,466 | —
– subordinated loan capital repaid 5 |  | (2,240) | (10,791) | (313)
– funds received from the parent company |  | 1,465 | — | 1,000
– dividends to the parent company |  | (1,052) | (194) | (263)
Net cash from financing activities |  | 1,912 | (519) | 424
Net increase in cash and cash equivalents |  | 27,844 | 7,939 | 25,838
Cash and cash equivalents at 1 Jan |  | 83,814 | 77,605 | 51,235
Exchange difference in respect of cash and cash equivalents |  | 3,652 | (1,730) | 532
Cash and cash equivalents at 31 Dec |  | 115,310 | 83,814 | 77,605
Cash and cash equivalents comprise of: |  |  |  |
– cash and balances at central banks |  | 78,441 | 63,008 | 48,777
– items in the course of collection from other banks |  | 1,863 | 211 | 37
– loans and advances to banks of one month or less |  | 11,353 | 4,323 | 5,338
– reverse repurchase agreement with banks of one month or less |  | 13,917 | 9,779 | 14,558
– treasury bills, other bills and certificates of deposit less than three months |  | 150 | 175 | 279
– cash collateral and net settlement accounts |  | 11,344 | 6,490 | 8,630
– less: items in the course of transmission to other banks |  | (1,758) | (172) | (14)
Cash and cash equivalents at 31 Dec |  | 115,310 | 83,814 | 77,605

1 Included within 2020 is the impact of impairment related to our business in the UK (£531m).
2 Included within 2022 is the impact of impairment reversal booked in Paris branch for investment in subsidiary.
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 (2021: £17m; 2020: £443m).
5 Subordinated liabilities changes during the year are attributable to cash flows from issuance £3,111m (2021: £10,466m; 2020: nil) and repayment
of £(2,240)m (2021: £10,791m; 2020: £313m) of securities as presented in the HSBC Bank plc statement of cash flows. Non-cash changes during
the year included foreign exchange gains(losses) £696m (2021: £489m; 2020: £329m) and fair value gains £(427)m (2021: £(82)m; 2020: £69m).
Interest received was £5,023m (2021: £2,321m; 2020: £3,211m), interest paid was £3,891m (2021: £1,827m; 2020: £2,539m) and
dividends received was £936m (2021: £902m; 2020: £555m).

HSBC Bank plc Annual Report and Accounts 2022 | 121

HSBC Bank plc statement of changes in equity
for the year ended 31 December
|  |  |  | Other reserves |
| Called up share capital & share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorganisation reserve (‘GRR’)7 | Total shareholders’ equity
| £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 797 | 3,722 | 20,353 | 135 | (82) | 22 | (5,248) | 19,699
Profit for the year | — | — | 2,743 | — | — | — | — | 2,743
Other comprehensive income/(expense) (net of tax) | — | — | 141 | (257) | (714) | 71 | — | (759)
– debt instruments at fair value through other comprehensive income | — | — | — | (258) | — | — | — | (258)
– equity instruments designated at fair value through other comprehensive income | — | — | — | 1 | — | — | — | 1
– cash flow hedges | — | — | — | — | (714) | — | — | (714)
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 1 | — | — | 156 | — | — | — | — | 156
– remeasurement of defined benefit asset/ liability | — | — | (15) | — | — | — | — | (15)
– exchange differences | — | — | — | — | — | 71 | — | 71
Total comprehensive income/(expense) for the period | — | — | 2,884 | (257) | (714) | 71 | — | 1,984
Capital securities issued during the period | 420 | 208 | — | — | — | — | — | 628
Dividends to the parent company 2 | — | — | (1,052) | — | — | — | — | (1,052)
Net impact of equity-settled share-based payments | — | — | 5 | — | — | — | — | 5
Capital contribution 3 |  |  | 1,465 |  |  |  |  | 1,465
At 31 Dec 2022 | 1,217 | 3,930 | 23,655 | (122) | (796) | 93 | (5,248) | 22,729

At 1 Jan 2021 | 797 | 3,722 | 20,099 | 351 | 55 | 43 | (5,248) | 19,819
Profit for the year | — | — | 455 | — | — | — | — | 455
Other comprehensive income/(expense) (net of tax) | — | — | 14 | (216) | (137) | (21) | — | (360)
– debt instruments at fair value through other comprehensive income | — | — | — | (215) | — | — | — | (215)
– equity instruments designated at fair value through other comprehensive income | — | — | — | (1) | — | — | — | (1)
– cash flow hedges | — | — | — | — | (137) | — | — | (137)
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 1 | — | — | — | — | — | — | — | —
– remeasurement of defined benefit asset/ liability | — | — | 14 | — | — | — | — | 14
– exchange differences | — | — | — | — | — | (21) | — | (21)
Total comprehensive income/(expense) for the period | — | — | 469 | (216) | (137) | (21) | — | 95
Dividends to the parent company 2 | — | — | (194) | — | — | — | — | (194)
Net impact of equity-settled share-based payments | — | — | (10) | — | — | — | — | (10)
Change in business combinations and other movements 5 | — | — | (11) | — | — | — | — | (11)
At 31 Dec 2021 | 797 | 3,722 | 20,353 | 135 | (82) | 22 | (5,248) | 19,699

Financial statements

122 | HSBC Bank plc Annual Report and Accounts 2022

HSBC Bank plc statement of changes in equity (continued)
for the year ended 31 December
|  |  |  | Other reserves |
| Called up share capital & share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorganisation reserve (‘GRR’) | Total shareholders' equity
| £m | £m | £m | £m | £m | £m | £m | £m
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 (expense)/income for the period | — | — | (537) | 170 | 87 | (28) | — | (308)
Dividends to the parent company 2 | — | — | (263) | — | — | — | — | (263)
Net impact of equity-settled share-based payments | — | — | 11 | — | — | — | — | 11
Capital contribution 4 | — |  | 1,000 | — | — | — | — | 1,000
Change in business combinations and other movements 6 | — |  | 12 | (1) | — | (6) | — | 5
At 31 Dec 2020 | 797 | 3,722 | 20,099 | 351 | 55 | 43 | (5,248) | 19,819

1 The cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a gain of
£139m (2021: loss of £72m and 2020: loss of £76m).
2 The dividends to the parent company includes dividend on ordinary share capital £850m (2021: nil and 2020: nil), coupon payment on additional
tier 1 instrument £222m (2021: £194m and 2020: £212m) & dividend on preference share capital nil (2021: nil and 2020: £51m).
3 HSBC Holdings plc injected £1.5 bn of CET1 capital into HSBC Bank plc during November 2022 which in turn injected into HSBC Continental
Europe for funding the acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH.
4 HSBC UK Holdings Limited (during 2021, parent company of the bank changed to HSBC Holdings plc) injected £1 bn 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.
5 Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in Feb 2021, increasing the group’s interest from 99.33% to 100.00%.
6 Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in May 2020, increasing the group’s interest from 80.67% to 99.33%.
7 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 Annual Report and Accounts 2022 | 123

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 UK-adopted
international accounting standards and 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. There were no unendorsed standards effective for the year ended
31 December 2022 affecting these consolidated and separate financial statements.
Standards adopted during the year ended 31 December 2022
There were no new accounting standards or interpretations that had a significant effect on the group in 2022. 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 2022 that are applicable to the group. However, the IASB
has published a number of minor amendments to IFRSs that are effective from 1 January 2023 and 1 January 2024. 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 and December 2021.
Following the amendments, IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 and is applied
retrospectively, with comparatives restated from 1 January 2022. IFRS 17 has been adopted in its entirety for use in the UK while it has
been adopted by the EU subject to certain optional exemptions.
IFRS 17 sets out the requirements that the group will apply in accounting for insurance contracts it issues, reinsurance contracts it holds,
and investment contracts with discretionary participation features.
The group is at an advanced stage in the implementation of IFRS 17, having put in place accounting policies, data and models, and
made progress with preparing 2022 comparative data. Below are set out our expectations of the impact of IFRS 17 compared with our
current accounting policy for insurance contracts, which is set out in policy 1.2(j) on page 344.
Under IFRS 17, no present value of in-force business (‘PVIF’) asset is recognised. Instead, the measurement of the insurance contracts
liability is based on groups of insurance contracts and will include fulfilment cash flows, as well as the contractual service margin
(‘CSM’), which represents the unearned profit.
To identify groups of insurance contracts, individual contracts subject to similar dominant risk and managed together are identified as a
portfolio of insurance contracts. Each portfolio is further separated by profitability group and issue date into periodic cohorts.
The fulfilment cash flows comprise:
•the best estimates of future cash flows, including amounts expected to be collected from premiums and payouts for claims, benefits
and expenses, which are projected using assumptions based on demographic and operating experience;
•an adjustment for the time value of money and financial risks associated with the future cash flows; and
•an adjustment for non-financial risk that reflects the uncertainty about the amount and timing of future cash flows.
In contrast to the group’s IFRS 4 accounting where profits are recognised upfront, the CSM will be systematically recognised in revenue,
as services are provided over the expected coverage period of the group of contracts without any change to the overall profit of the
contracts. Losses resulting from the recognition of onerous contracts are recognised in the income statement immediately.
The CSM is adjusted depending on the measurement model of the group of insurance contracts. While the general measurement model
(‘GMM’) is the default measurement model under IFRS 17, the group expects that the majority of its contracts will be accounted for
under the variable fee approach (‘VFA’), which is mandatory to apply for insurance contracts with direct participation features upon
meeting the eligibility criteria.
IFRS 17 requires entities to apply IFRS 17 retrospectively as if IFRS 17 had always been applied, using the full retrospective approach
(‘FRA’) unless it is impracticable. When FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an
accounting policy choice to use either the modified retrospective approach (‘MRA’) or the fair value approach (‘FVA’). The group will
primarily apply the MRA for new business where FRA is impracticable. The group will make use of the other comprehensive income
(‘OCI’) option for some contracts.
Impact of IFRS 17
Changes to equity on transition are driven by the elimination of the PVIF asset, the re-designation of certain eligible financial assets in
the scope of IFRS 9, the remeasurement of insurance liabilities and assets under IFRS 17, and the recognition of the CSM.
IFRS 17 requires the use of current market values for the measurement of insurance liabilities. The shareholder’s share of the investment
experience and assumption changes will be absorbed by the CSM and released over time to profit or loss under VFA. For contracts
measured under GMM, the shareholder’s share of the investment volatility is recorded in profit or loss as it arises. Under IFRS 17,
operating expenses will be lower as directly attributable costs will be incorporated in the CSM and recognised in the insurance service
result.
Notes on the Financial Statements

124 | HSBC Bank plc Annual Report and Accounts 2022

While the profit over the life of an individual contract will be unchanged, its emergence will be later under IFRS 17.
All of these impacts will be subject to deferred tax.
Estimates of the opening balance sheet as at 1 January 2022 have been calculated and are presented below, showing separately the
impact on the total assets, liabilities and equity of our insurance manufacturing operations. These estimates are based on accounting
policies, assumptions, judgements and estimation techniques that remain subject to change.

| Total assets | Total liabilities | Total equity
Impact of transition to IFRS 17, at 1 January 2022 | £bn | £bn | £bn
Balance sheet values at 1 January 2022 under IFRS 4 | 27.1 | 25.5 | 1.6
Removal of PVIF | (0.8) | — | (0.8)
Replacement of IFRS 4 liabilities with IFRS 17 | — | — | —
Removal of IFRS 4 liabilities and recording of IFRS 17 fulfilment cash flows | — | (0.9) | 0.9
IFRS 17 contractual service margin | — | 0.9 | (0.9)
Re-measurement effect of IFRS 9 re-designations | — | — | —
Tax effect | — | (0.2) | 0.2
Estimated balance sheet values at 1 January 2022 under IFRS 17 | 26.3 | 25.3 | 1.0

PVIF o f £812m less deferred tax of £175m constitute the overall estimated reduction in intangible assets, after tax, of £637m on transition to IFRS 17.
(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 2022 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 26 to 93;
•the 'Own funds' disclosure is included in the ‘Report of the Directors: Capital Risk in 2022’ on page 80; 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, 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.
Management has considered the impact of climate-related risks on HSBC’s financial position and performance. While the effects of
climate change are a source of uncertainty, as at 31 December 2022 management do not consider there to be a material impact on our
critical judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular
management has considered the known and observable potential impact of climate-related risks of associated judgements and
estimates in our value in use calculations.
(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 –
Our global businesses’ on page 9
(g)Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the grou p and the 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 uncertainty in structural changes from the Covid-19

HSBC Bank plc Annual Report and Accounts 2022 | 125

pandemic, the Russia-Ukraine war, disrupted supply chains globally, climate change and other top and emerging risks, as well as from
the related impacts 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.
Impairment testing is performed where there is an indication of impairment, by comparing the recoverable amount of a cash-generating
unit with its carrying amount.
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:
Judgements | Estimates
•The accuracy of forecast cash flows is subject to a high degree of uncertainty in volatile market conditions. Where such circumstances are determined to exist, management re-tests for impairment more frequently than once a year when indicators of impairment exist. This ensures that the assumptions on which the cash flow forecasts are based continue to reflect current market conditions and management's best estimate of future business prospects. | •The future cash flows of each investment are sensitive to the cash flows projected for the periods for which detailed forecasts are available and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance and verifiable economic data, but they reflect management’s view of future business prospects at the time of the 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 equity assigned to the investment. The cost of equity percentage is generally derived from a capital asset pricing model and the market implied cost of equity, 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.

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.
Notes on the Financial Statements

126 | HSBC Bank plc Annual Report and Accounts 2022

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 an 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:
Judgements | Estimates
•An instrument in its entirety is classified as valued using significant unobservable inputs if, in the opinion of management, greater than 5% of the instrument’s valuation is driven by 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). | •Details on the group’s level 3 financial instruments and the sensitivity of their valuation to the effect of applying reasonably possible alternative assumptions in determining their fair value are set out in Note 11.

(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.
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 sold shortly after origination, 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.

HSBC Bank plc Annual Report and Accounts 2022 | 127

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. Dividends from such investments are
recognised in profit or loss. 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.
(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’ or ‘Changes in fair value of designated debt and related derivatives’
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 where doing so reduces an accounting mismatch, 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
Notes on the Financial Statements

128 | HSBC Bank plc Annual Report and Accounts 2022

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.
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 fair value through other comprehensive income ('FVOCI'),
and certain loan commitments and financial guarantee contracts. At initial recognition, an 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, an
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 that a concession has been granted to the borrower for economic or legal reasons relating to the
borrower’s financial condition, or 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.
Forbearance
Loans are identified as forborne and classified as either performing or non-performing when the group modifies the contractual terms
due to financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet
the cure criteria, as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of
default have been present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon
entering forbearance would not be reversed.
In 2022, the group adopted the EBA Guidelines on the application of definition of default for our retail portfolios, which affects credit risk
policies and our reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof). Further
details are provided under 'Forborne loans and advances' on page 37.
Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable cure criteria (for example, they
continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is
either stage 1 or stage 2 as determined 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).
A forborne loan 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 forborne loan is a substantially different financial instrument. Any new
loans that arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be
disclosed as forborne.
Loan modifications other than forborne loans
Loan modifications that are not identified as forborne are considered to be commercial restructurings. 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. Modifications of certain higher credit risk wholesale loans are assessed for
derecognition having regard to changes in contractual terms that either individually or in combination are judged to result in a
substantially different financial instrument. Mandatory and general offer loan modifications that are not borrower specific, for example
market-wide customer relief programmes generally do not result in derecognition, but their stage allocation is determined considering all
available and supportable information under our ECL impairment policy. Changes made to these financial instruments that are

HSBC Bank plc Annual Report and Accounts 2022 | 129

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, but instead require the effective interest rate to be updated to reflect the change of the interest rate
benchmark.
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’), macro-economic 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:

Origination CRR | Significance trigger – PD to increase by
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 PDs and through-the-cycle 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:

Origination CRR | Additional significance criteria – number of CRR grade notches deterioration required to identify as significant credit deterioration (stage 2) (> or equal to)
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 37.
For Retail portfolios, default risk is assessed using a reporting date 12-month PD derived from credit scores, which incorporate 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
homogenous 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 therefore
identifies loans with a PD higher than would be expected from loans that are performing as originally expected and higher than that
which would have been acceptable at origination. It therefore approximates a comparison of origination to reporting date PDs.
As additional data becomes available, the retail transfer criteria approach continues to be refined to utilise a more relative approach for
certain portfolios. These enhancements take advantage of the increase in origination related data in the assessment of significant
increases in credit risk by comparing remaining lifetime PD to the comparable remaining term lifetime PD at origination based on
portfolio-specific origination segments. These enhancements resulted in significant migrations of loans to customers gross carrying
amounts from stage 1 to stage 2, but did not have a significant impact on the overall ECL for these portfolios in 2022 due to low loan-to-
value ratios.
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 new financial instruments recognised in most cases following the derecognition of forborne loans. The amount
of change in lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan 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
Notes on the Financial Statements

130 | HSBC Bank plc Annual Report and Accounts 2022

increased since initial recognition based on the assessments described above. In the case of non-performing forborne loans such
financial instruments are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing
criteria as described above.
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information
which 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 and considers other factors such as climate-related risks.
In general, HSBC calculates ECL using three main components, a probability of default ('PD'), 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 makes use of the Basel II IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in
the following table:

Model | Regulatory capital | IFRS 9
PD | •Through the cycle (represents long-run average PD throughout a full economic cycle). •The definition of default includes a backstop of 90+ days past due, although this has been modified to 180+ days past due for some portfolios, particularly UK and US mortgages. | •Point in time (based on current conditions, adjusted to take into account estimates of future conditions that will impact PD). •Default backstop of 90+ days past due for all portfolios.
EAD | •Cannot be lower than current balance | •Amortisation captured for term products
LGD | •Downturn LGD (consistent losses expected to be suffered during a severe but plausible economic downturn). •Regulatory floors may apply to mitigate risk of underestimating downturn LGD due to lack of historical data. •Discounted using cost of capital. •All collection costs included. | •Expected LGD (based on estimate of loss given default including the expected impact of future economic conditions such as changes in value of collateral). •No floors. •Discounted using the original effective interest rate of the loan. •Only costs associated with obtaining/selling collateral included.
Other |  | •Discounted back from point of default to balance sheet date.

While 12-month PDs are recalibrated from Basel 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 of 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. 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. For wholesale overdraft
facilities, credit risk management actions are taken no less frequently than on an annual basis.
Forward-looking economic inputs
HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions
representative of its 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 48.

HSBC Bank plc Annual Report and Accounts 2022 | 131

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:
Judgements | Estimates
•Defining what is considered to be a significant increase in credit risk. •Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making 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. •Selecting applicable recovery strategies for certain wholesale credit-impaired loans. | •The section ‘Measurement uncertainty and sensitivity analysis of ECL estimates’, marked as audited from page 48 sets out the assumptions used in determining ECL, and provides an indication of the sensitivity of the result to the application of different weightings being applied to different economic assumptions.

(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.
Notes on the Financial Statements

132 | HSBC Bank plc Annual Report and Accounts 2022

(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 costs 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.
In assessing the probability and sufficiency of future taxable profit, we consider the availability of evidence to support the recognition of
deferred tax assets. taking into account the inherent risks in long-term forecasting, including climate change-related, and drivers of
recent history of tax losses where applicable. We also consider the future reversal of existing taxable temporary differences and tax
planning strategies, including corporate reorganisations.
Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
Critical accounting judgements

The recognition of deferred tax assets depends on judgements and estimates
Judgements | Estimates
•Specific judgements supporting deferred tax assets are described in Note 7. | The recognition of deferred tax assets is sensitive to estimates of future cash flows projected for periods for which detailed forecasts are available and to assumptions regarding the long-term pattern of cash flows thereafter, on which forecasts of future taxable profit are based, and which affect the expected recovery periods and the pattern of utilisation of tax losses and tax credits.

The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of the deferred tax assets in
the next financial year but does consider this to be an area that is inherently judgemental.
(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.

HSBC Bank plc Annual Report and Accounts 2022 | 133

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:
Judgements | Estimates
•Determining whether a present obligation exists. Professional advice is taken on the assessment of litigation and similar obligations. •Provisions for legal proceedings and regulatory matters typically require a higher degree of judgement than other types of provisions. When matters are at an early stage, accounting judgements can be difficult because of the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the 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. | •Provisions for legal proceedings and regulatory matters remain very sensitive to the assumptions used 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 not practicable to quantify a range of possible outcomes for individual matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in aggregate for these types of provisions, because of the diverse nature and circumstances of such matters and the wide range of uncertainties involved.

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.
(o)Non-current assets and disposal groups held for sale
HSBC classifies non-current assets or disposal groups (including assets and liabilities) as held for sale when their carrying amounts will
be recovered principally through sale rather than through continuing use. To be classified as held for sale, the non-current asset or
disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales
of such assets (or disposal groups), and the sale must be highly probable. For a sale to be highly probable, the appropriate level of
management must be committed to a plan to sell the asset (or disposal group) and an active programme to locate a buyer and complete
the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in
relation to its current fair value. In addition, the sale should be expected to qualify as a completed sale within one year from the date of
classification and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be
made or that the plan will be withdrawn.
Held-for-sale assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to sell except for
those assets and liabilities that are not within the scope of the measurement requirements of IFRS 5. If the carrying amount of the non-
current asset (or disposal group) is greater than the fair value less costs to sell, an impairment loss for any initial or subsequent write
down of the asset or disposal group to fair value less costs to sell is recognised. Any such impairment loss is first allocated against the
non-current assets that are in scope of IFRS 5 for measurement. This first reduces the carrying amount of any goodwill allocated to the
disposal group, and then to the other assets of the disposal group pro rata on the basis of the carrying amount of each asset in the
disposal group. Thereafter, any impairment loss in excess of the carrying value of the non-current assets in scope of IFRS 5 for
measurement is recognised against the total assets of the disposal group.
Notes on the Financial Statements

134 | HSBC Bank plc Annual Report and Accounts 2022

Critical accounting estimates and judgements

The classification as held for sale depends on certain judgements
Judgements
Management judgement is required in determining whether the IFRS 5 held for sale criteria are met, including whether a sale is highly probable and expected to complete within one year of classification. The exercise of judgement will normally consider the likelihood of successfully securing any necessary regulatory or political approvals which are almost always required for sales of banking businesses. For large and complex plans judgement will also include an assessment of the enforceability of any binding sale agreement, the nature and magnitude of any disincentives for non-performance, and the ability of the counterparty to undertake necessary pre-completion preparatory work, comply with conditions precedent, and otherwise be able to comply with contractual undertakings to achieve completion within the expected timescale. Once classified as held for sale, judgement is required to be applied on a continuous basis to ensure that classification remains appropriate in future accounting periods.

2 | Net fee income

Net fee income by product type
2022 |  | 2021 | 2020
| £m | £m | £m
Account services | 302 | 271 | 239
Funds under management | 433 | 465 | 424
Cards | 56 | 44 | 44
Credit facilities | 235 | 246 | 250
Broking income | 354 | 368 | 369
Imports/exports | 44 | 40 | 41
Remittances | 101 | 84 | 62
Underwriting | 171 | 286 | 360
Global custody | 203 | 200 | 220
Corporate finance | 124 | 132 | 85
Securities others — (including stock lending) | 81 | 76 | —
Trust income | 49 | 43 | 45
Other | 453 | 451 | 535
Fee income | 2,606 | 2,706 | 2,674
Less: fee expense | (1,345) | (1,293) | (1,274)
Net fee income | 1,261 | 1,413 | 1,400

Net fee income by global business
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
Year ended 31 Dec 2022 |  |  |  |  |  |  |
Fee income | 1,301 | 817 | 70 | 425 | 592 | (599) | 2,606
Less: fee expense | (1,439) | (173) | (55) | (26) | (246) | 594 | (1,345)
Net fee income | (138) | 644 | 15 | 399 | 346 | (5) | 1,261
Year ended 31 Dec 2021 |  |  |  |  |  |  |
Fee income | 1,251 | 861 | 89 | 415 | 633 | (543) | 2,706
Less: fee expense | (1,245) | (188) | (83) | (54) | (255) | 532 | (1,293)
Net fee income | 6 | 673 | 6 | 361 | 378 | (11) | 1,413
Year ended 31 Dec 2020 |  |  |  |  |  |  |
Fee income | 1,243 | 857 | 94 | 407 | 603 | (530) | 2,674
Less: fee expense | (1,209) | (172) | (123) | (51) | (245) | 526 | (1,274)
Net fee income | 34 | 685 | (29) | 356 | 358 | (4) | 1,400

Net fee income includes £778m 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) (2021: £935m; 2020 £883m), £229m 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) (2021: £221m; 2020: £176m),
£687m of fees earned on trust and other fiduciary activities (2021: £709m; 2020: £688m), and £69m of fees payable relating to trust and
other fiduciary activities (2021: £61m; 2020 £68m).

HSBC Bank plc Annual Report and Accounts 2022 | 135

3 | Net income from financial instruments measured at fair value through profit or loss

| 2022 | 2021 | 2020
| £m | £m | £m
Net income arising on: |  |  |
Net Trading activities | (2,840) | 3 | 1,948
Other instruments managed on a fair value basis | 5,715 | 1,730 | (190)
Net income from financial instruments held for trading or managed on a fair value basis | 2,875 | 1,733 | 1,758
Financial assets held to meet liabilities under insurance and investment contracts | (1,436) | 1,305 | 290
Liabilities to customers under investment contracts | 67 | (91) | (36)
Net (expense)/income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | (1,369) | 1,214 | 254
Derivatives managed in conjunction with the group's issued debt securities | (736) | (337) | 112
Other changes in fair value | 838 | 329 | (95)
Changes in fair value of designated debt and related derivatives | 102 | (8) | 17
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 143 | 493 | 285
Year ended 31 Dec | 1,751 | 3,432 | 2,314

4 | Insurance business

Net insurance premium income
| Non-linked insurance | Linked life insurance | Investment contracts with DPF 1 | Total
| £m | £m | £m | £m
Gross insurance premium income | 214 | 432 | 1,238 | 1,884
Reinsurers’ share of gross insurance premium income | (96) | (1) | — | (97)
Year ended 31 Dec 2022 | 118 | 431 | 1,238 | 1,787
Gross insurance premium income | 218 | 429 | 1,360 | 2,007
Reinsurers’ share of gross insurance premium income | (100) | (1) | — | (101)
Year ended 31 Dec 2021 | 118 | 428 | 1,360 | 1,906
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

1 Discretionary participation features.

Net insurance claims and benefits paid and movement in liabilities to policyholders
| Non-linked insurance | Linked life insurance | Investment contracts with DPF 1 | Total
| £m | £m | £m | £m
Gross claims and benefits paid and movement in liabilities | 44 | 238 | 177 | 459
– claims, benefits and surrenders paid | 122 | 129 | 1,491 | 1,742
– movement in liabilities | (78) | 109 | (1,314) | (1,283)
Reinsurers’ share of claims and benefits paid and movement in liabilities | (64) | 11 | — | (53)
– claims, benefits and surrenders paid | (57) | (2) | — | (59)
– movement in liabilities | (7) | 13 | — | 6
Year ended 31 Dec 2022 | (20) | 249 | 177 | 406
Gross claims and benefits paid and movement in liabilities | 120 | 550 | 2,420 | 3,090
– claims, benefits and surrenders paid | 126 | 106 | 1,554 | 1,786
– movement in liabilities | (6) | 444 | 866 | 1,304
Reinsurers’ share of claims and benefits paid and movement in liabilities | (45) | (6) | — | (51)
– claims, benefits and surrenders paid | (68) | (1) | — | (69)
– movement in liabilities | 23 | (5) | — | 18
Year ended 31 Dec 2021 | 75 | 544 | 2,420 | 3,039
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

1 Discretionary participation features.
Notes on the Financial Statements

136 | HSBC Bank plc Annual Report and Accounts 2022

Liabilities under insurance contracts
| Non-linked insurance | Linked life insurance | Investment contracts with DPF 1 | Total
| £m | £m | £m | £m
Gross liabilities under insurance contracts at 1 Jan 2022 | 556 | 1,938 | 19,770 | 22,264
Claims and benefits paid | (122) | (129) | (1,491) | (1,742)
Increase in liabilities to policyholders | 44 | 238 | 177 | 459
Exchange differences and other movements 2 | 20 | 15 | (1,029) | (994)
Gross liabilities under insurance contracts at 31 Dec 2022 | 498 | 2,062 | 17,427 | 19,987
Reinsurers’ share of liabilities under insurance contracts | (100) | (40) | — | (140)
Net liabilities under insurance contracts at 31 Dec 2022 | 398 | 2,022 | 17,427 | 19,847
Gross liabilities under insurance contracts at 1 Jan 2021 | 594 | 1,512 | 20,710 | 22,816
Claims and benefits paid | (126) | (106) | (1,554) | (1,786)
Increase in liabilities to policyholders | 120 | 550 | 2,420 | 3,090
Exchange differences and other movements 2 | (32) | (18) | (1,806) | (1,856)
Gross liabilities under insurance contracts at 31 Dec 2021 | 556 | 1,938 | 19,770 | 22,264
Reinsurers‘ share of liabilities under insurance contracts | (93) | (53) | — | (146)
Net liabilities under insurance contracts at 31 Dec 2021 | 463 | 1,885 | 19,770 | 22,118
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

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

| 2022 | 2021 | 2020
| £m | £m | £m
Wages and salaries | 1,423 | 1,609 | 1,917
Social security costs | 282 | 341 | 367
Post-employment benefits 1 | 57 | 73 | 56
Year ended 31 Dec | 1,762 | 2,023 | 2,340

1 Includes £42m (2021: £37m; 2020: £36m) in employer contributions to the defined contribution pension plans.

Average number of persons employed by the group during the year by global business 1
| 2022 | 2021 | 2020
MSS | 3,722 | 4,322 | 4,590
GB | 2,155 | 2,458 | 2,857
GBM Other | 81 | 140 | 158
CMB | 2,748 | 3,023 | 3,396
WPB | 6,484 | 6,709 | 6,807
Corporate Centre | 215 | 171 | 58
Year ended 31 Dec | 15,405 | 16,823 | 17,866

1 Average numbers of headcount in corporate centre are allocated in respective businesses on the basis of amounts charged to the respective
global businesses.
Share-based payments
'Wages and salaries’ includes the effect of share-based payments arrangements, of which £45m were equity settled (2021: £96m;
2020: £76m), as follows:

| 2022 | 2021 | 2020
| £m | £m | £m
Restricted share awards | 45 | 96 | 77
Savings-related and other share award option plans | 1 | 1 | 2
Year ended 31 Dec | 46 | 97 | 79

HSBC Bank plc Annual Report and Accounts 2022 | 137

HSBC share awards
Award | Policy
Deferred share awards (including annual incentive awards, long-term incentive ('LTI') awards delivered in shares) and Group Performance Share Plan ('GPSP') | •An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award to be granted. •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, four, five or seven years. •Vested shares may be subject to a retention requirement post-vesting. •Awards are subject to malus and clawback.
International Employee Share Purchase Plan (‘ShareMatch’) | •The plan was first introduced in Hong Kong in 2013 and now includes employees based in 31 jurisdictions. •Shares are purchased in the market each quarter up to a maximum value of £750, 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
| 2022 | 2021 | 2020
| Number | Number | Number
| (000s) | (000s) | (000s)
Restricted share awards outstanding at 1 Jan | 21,828 | 24,367 | 24,578
Additions during the year 1 | 11,651 | 15,479 | 16,823
Released in the year 1 | (12,279) | (16,690) | (16,024)
Forfeited in the year | (746) | (1,328) | (1,010)
Restricted share awards outstanding at 31 Dec | 20,454 | 21,828 | 24,367
Weighted average fair value of awards granted (£) | 4.96 | 4.49 | 5.58

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

HSBC share option plans
Main plans | Policy
Savings-related share option plans (‘Sharesave’) | •From 2014, eligible employees for the UK plan can save up to £500 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 years or five years contract, respectively. •The exercise price is set at a 20% (2021: 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) | £
Outstanding at 1 Jan 2022 | 6,936 | 2.87
Granted during the year 2 | (179) | 3.96
Exercised during the year | (173) | 3.36
Expired during the year | (177) | 4.72
Forfeited during the year | (625) | 2.98
Outstanding at 31 Dec 2022 | 5,782 | 2.91
Weighted average remaining contractual life (years) | 2.18 |
Outstanding at 1 Jan 2021 | 7,206 | 2.96
Granted during the year 2 | 984 | 3.25
Exercised during the year | (227) | 3.97
Expired during the year | (99) | 4.70
Forfeited during the year | (928) | 3.68
Outstanding at 31 Dec 2021 | 6,936 | 2.87
Weighted average remaining contractual life (years) | 2.98 |
Outstanding at 1 Jan 2020 | 4,245 | 4.78
Granted during the year 2 | 5,909 | 2.56
Exercised during the year | (107) | 4.43
Expired during the year | (78) | 4.64
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 |

1 Weighted average exercise price.
2 Includes a number of share option plans transferred from or to other subsidiaries of HSBC Holdings plc.
Notes on the Financial Statements

138 | HSBC Bank plc Annual Report and Accounts 2022

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 Plan is the most prominent within the group.
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 Plan
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 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.
Plan assets were created to fund the pension obligations and separated through what is known as a contractual trust agreement ('CTA').
HSBC Trinkaus Vermögenstreu¬händer e. V. and HSBC Trinkaus Mitarbeitertreuhänder e. V. assume the role of trustee. Active members
of the trustee constitute members of the Management Board, of the Supervisory Board and Bank employees.
The Bank regularly aims to comprehensively finance the committed benefits externally. There is no obligation to allocate contributions to
the CTA. The Bank is entitled to assets that are not needed to fund the committed benefits. No further additions to the plan assets are
envisaged at the present time.
In accordance with the Memorandum and Articles of Association, the revenues may only be used, for example, for pension payments or
for reinvestment. Similarly, withdrawals may only be made in accordance with the Memorandum and Articles of Association. In so far as
the benefits are directly committed and there is a shortfall in the CTA, provisions are created for these.
The latest measurement of the defined benefit obligation of the plan at 31 December 2022 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 measurement will have an effective date of 31 December 2023.

Net assets/(liabilities) recognised on the balance sheet in respect of defined benefit plans
| Fair value of plan assets | Present value of defined benefit obligations | Total
| £m | £m | £m
Defined benefit pension plans | 534 | (531) | 3
Defined benefit healthcare plans | — | (51) | (51)
At 31 Dec 2022 | 534 | (582) | (48)
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) |  |  | (121)
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) |  |  | 73
Defined benefit pension plans | 668 | (742) | (74)
Defined benefit healthcare plans | — | (68) | (68)
At 31 Dec 2021 | 668 | (810) | (142)
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) |  |  | (196)
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) |  |  | 54

HSBC Bank plc Annual Report and Accounts 2022 | 139

Defined benefit pension plans

Net asset/(liability) under defined benefit pension plans
| Fair value of plan assets | Present value of defined benefit obligations | Net defined benefit asset/(liability)
| HSBC Trinkaus & Burkhardt Pension Plan 2 | Other plans | HSBC Trinkaus & Burkhardt Pension Plan 2 | Other plans | HSBC Trinkaus & Burkhardt Pension Plan 2 | Other plans
| £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 434 | 234 | (438) | (304) | (4) | (70)
Service cost | — | — | 4 | (8) | 4 | (8)
– current service cost | — | — | 3 | (9) | 3 | (9)
– past service cost and gains from settlements | — | — | 1 | 1 | 1 | 1
Net interest income/(cost) on the net defined benefit asset/(liability) | (3) | 5 | (4) | (5) | (7) | —
Remeasurement effects recognised in other comprehensive income | (51) | (99) | 94 | 98 | 43 | (1)
– return on plan assets (excluding interest income) | (51) | (99) | — | — | (51) | (99)
– actuarial gains/(losses) financial assumptions | — | — | 94 | 106 | 94 | 106
– actuarial gains/(losses) demographic assumptions | — | — | — | (2) | — | (2)
– actuarial gains/(losses) experience assumptions | — | — | — | (6) | — | (6)
– other changes | — | — | — | — | — | —
Exchange differences | 22 | 1 | (20) | (3) | 2 | (2)
Benefits paid | — | (7) | 10 | 13 | 10 | 6
Other movements 1 | 3 | (5) | (3) | 35 | — | 30
At 31 Dec 2022 | 405 | 129 | (357) | (174) | 48 | (45)

At 1 Jan 2021 | 435 | 258 | (489) | (387) | (54) | (129)
Service cost | — | — | (7) | (27) | (7) | (27)
– current service cost | — | — | (8) | (11) | (8) | (11)
– past service cost and gains from settlements | — | — | 1 | (16) | 1 | (16)
Net interest income/(cost) on the net defined benefit asset/(liability) | 3 | 4 | (3) | (3) | — | 1
Remeasurement effects recognised in other comprehensive income | 17 | (2) | 26 | 16 | 43 | 14
– return on plan assets (excluding interest income) | 17 | (2) | — | — | 17 | (2)
– actuarial gains/(losses) financial assumptions | — | — | 26 | 7 | 26 | 7
– actuarial gains/(losses) demographic assumptions | — | — | — | — | — | —
– actuarial gains/(losses) experience assumptions | — | — | — | 9 | — | 9
– other changes | — | — | — | — | — | —
Exchange differences | (28) | (1) | 29 | 9 | 1 | 8
Benefits paid | — | (15) | 10 | 19 | 10 | 4
Other movements 1 | 7 | (10) | (4) | 69 | 3 | 59
At 31 Dec 2021 | 434 | 234 | (438) | (304) | (4) | (70)

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. Figures disclosed comprise this prominent plan and other plans in Germany.
HSBC Trinkaus & Burkhardt GmbH has not made contributions to the HSBC Trinkaus & Burkhardt Pension Plan during 2022. 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
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028-2032
| £m | £m | £m | £m | £m | £m
HSBC Trinkaus & Burkhardt Pension Plan 1 | 11 | 10 | 12 | 11 | 12 | 66

1 The duration of the defined benefit obligation is 13.7 Years for the HSBC Trinkaus & Burkhardt Pension Plan under the disclosure assumptions
adopted (2021: 17.1).
Notes on the Financial Statements

140 | HSBC Bank plc Annual Report and Accounts 2022

Fair value of plan assets by asset classes
| 31 Dec 2022 | 31 Dec 2021
| Value | Quoted market price in active market | No quoted market price in active market | Thereof HSBC | Value | Quoted market price in active market | No quoted market price in active market | Thereof HSBC
| £m | £m | £m | £m | £m | £m | £m | £m
HSBC Trinkaus & Burkhardt Pension Plan |  |  |  |  |  |  |  |
Fair value of plan assets | 405 | 352 | 53 | — | 434 | 377 | 57 | —
– equities | 8 | 8 | — | — | 11 | 11 | — | —
– bonds | 199 | 199 | — | — | 112 | 112 | — | —
– other | 198 | 145 | 53 | — | 311 | 254 | 57 | —

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
| Discount rate | Inflation rate | Rate of increase for pensions | Rate of pay increase
| % | % | % | %
HSBC Trinkaus & Burkhardt Pension Plan |  |  |  |
At 31 Dec 2022 | 3.71 | 2.25 | 2.25 | 2.25
At 31 Dec 2021 | 1.14 | 1.75 | 1.75 | 1.75

Mortality tables and average life expectancy at age 60
| Mortality table | Life expectancy at age 60 for a male member currently: | Life expectancy at age 60 for a female member currently:
|  | Aged 60 | Aged 40 | Aged 60 | Aged 40
HSBC Trinkaus & Burkhardt Pension Plan |  |  |  |  |
At 31 Dec 2022 | RT 2018G1 1 | 25.2 | 28.2 | 28.9 | 31.2
At 31 Dec 2021 2 | RT 2018G1 1 | 20.6 | 23.4 | 24.0 | 26.3

1 Heubeck tables: RT 2018G. These are 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.
2 2021 data provided based on Heubeck tables for Life expectancy at age 65 for male/female members currently aged 65 or 45.

The effect of changes in key assumptions
| HSBC Trinkaus & Burkhardt Pension Plan Obligation
| Financial impact of increase | Financial impact of decrease
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020
| £m | £m | £m | £m | £m | £m
Discount rate – increase/decrease of 0.25% | (7) | (13) | (15) | 8 | 13 | 16
Inflation rate – increase/decrease of 0.25% | 7 | 11 | 16 | (5) | (9) | (12)
Pension payments and deferred pensions – increase/decrease of 0.25% | 5 | 9 | 10 | (5) | (8) | (10)
Pay – increase/decrease of 0.25% | 1 | 2 | 4 | (1) | (2) | (4)
Change in mortality – increase of 1 Year | 10 | 16 | 19 | N/A | 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.

HSBC Bank plc Annual Report and Accounts 2022 | 141

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:

| 2022 | 2021 | 2020
| £000 | £000 | £000
Fees 1 | 1,410 | 1,525 | 1,256
Salaries and other emoluments 2 | 2,294 | 3,569 | 2,321
Annual incentives 3 | 979 | 694 | 576
Long-term incentives 4 | 779 | 511 | 727
Year ended 31 Dec | 5,462 | 6,299 | 4,880

1 Fees paid to non-executive Directors.
2 Salaries and other emoluments include Fixed Pay Allowances.
3 Discretionary annual incentives for executive D irectors 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 £489,285 (2021: £346,959) in cash and £489,285 (2021:
£346,959) in Restricted Shares, which is the upfront portion of the annual incentive granted in respect of performance year 2022.
4 The amount shown is comprised of £380,893 (2021: £274,177) in deferred cash, £398,162 (2021: £237,259) in deferred Restricted Shares. 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
2022. 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. 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.
No Director exercised share options over HSBC Holdings plc ordinary shares during the year.
No Director is accruing retirement benefits under a money purchase scheme in respect of Directors’ qualifying services (2021: one
Director).
In addition, there were payments during 2022 under unfunded retirement benefit agreements to former Directors of £394,334 (2021:
£396,363). The provision at 31 December 2022 in respect of unfunded pension obligations to former Directors amounted to £4,286,951
(2021: £5,387,505).
Of these aggregate figures, the following amounts are attributable to the highest paid Director:

| 2022 | 2021 | 2020
| £000 | £000 | £000
Salaries and other emoluments | 1,641 | 1,399 | 1,392
Annual incentives 1 | 859 | 558 | 417
Long-term incentives 2 | 677 | 390 | 677
Year ended 31 Dec | 3,177 | 2,347 | 2,486

1 Awards made to the highest paid Dire ctor are delivered in the form of cash and HSBC Holdings plc shares. The amount shown comprises
£429,285 (2021: £279,225) in cash and £429,285 (2021: £279,225) in Restricted Shares.
2 The amount shown comprises £330,687 (2021: £209,492) in deferred cash, £345,818 (2021: £180,147) 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
2022. The to tal 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.
No pension contributions were made by the bank in respect of services by the highest paid Director during the year (2021: £0).
Notes on the Financial Statements

142 | HSBC Bank plc Annual Report and Accounts 2022

6 | Auditors’ remuneration

| 2022 | 2021 | 2020
| £m | £m | £m
Audit fees payable to PwC | 11.3 | 10.4 | 11.3
Other audit fees payable | 0.7 | 0.4 | 0.4
Year ended 31 Dec | 12.0 | 10.8 | 11.7

Fees payable by the group to PwC
|  | 2022 | 2021 | 2020
|  | £m | £m | £m
Fees for HSBC Bank plc‘s statutory audit 1 |  | 5.5 | 4.8 | 5.3
Fees for other services provided to the group |  | 15.6 | 14.3 | 13.1
– audit of the group‘s subsidiaries 2 |  | 5.8 | 5.6 | 6.0
– audit-related assurance services 3 |  | 5.3 | 5.7 | 4.2
– other assurance services 4 |  | 4.5 | 3.0 | 2.9
Year ended 31 Dec |  | 21.1 | 19.1 | 18.4

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 interim reviews.
4 Including permitted services relating to attestation reports on internal controls of a service organisation primarily prepared for and used by third-
party end user, including comfort letters.
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 |
| 2022 | 2021 | 2020
| £m | £m | £m
Current tax | (283) | (187) | 195
– for this year | (243) | (245) | 186
– adjustments in respect of prior years | (40) | 58 | 9
Deferred tax | (278) | 164 | (331)
– origination and reversal of temporary differences | (444) | 248 | (339)
– effect of changes in tax rates | 33 | (56) | (26)
– adjustments in respect of prior years | 133 | (28) | 34
Year ended 31 Dec 1 | (561) | (23) | (136)

1 In addition to amounts recorded in the incom e statement, a tax credit of £393m (2021: credit of £135m; 2020 charge of £135m) 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 2022 included the UK and France. The UK tax rate applying to HSBC Bank plc and its banking subsidiaries wa s 27% (2021: 27%),
comprising 19% corporation tax plus 8% surcharge on UK banking profits. The applicable tax rate in France was 26% (2021: 28%). Other
overseas subsidiaries and overseas branches provided for taxation at the appropriate rates in the countries in which they operate.
During 2022, legislation was enacted to reduce the UK banking surcharge rate from 8% to 3% from 1 April 2023, decreasing the tax
credit for 2021 by £33m due to the remeasurement of deferred tax balances. The main rate of UK corporation tax will increase from 19%
to 25% from 1 April 2023.
In December 2021, the OECD published model rules that provided a template for countries to implement a new global minimum tax rate
of 15%. These rules are due to be effective from 2024. In January 2022, the UK government opened a consultation on how the UK
implements the rules. The impact on HSBC will depend on exactly how the UK implements the model rules, as well as the profitability
and local tax liabilities of HSBC’s operations in each tax jurisdiction from 2024. In addition, potential changes to tax legislation and tax
rates in the countries and territories in which we operate could increase our effective tax rate in the future.

HSBC Bank plc Annual Report and Accounts 2022 | 143

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:

| 2022 | 2021 | 2020
| £m | % | £m | % | £m | %
(Loss)/profit before tax | (959) |  | 1,023 |  | (1,615) |
Tax expense |  |  |  |  |  |
Taxation at UK corporation tax rate | (182) | 19.0 | 194 | 19.0 | (307) | 19.0
Impact of taxing overseas profits at different rates | (75) | 7.8 | 7 | 0.7 | (75) | 4.6
UK banking surcharge | (47) | 4.9 | (2) | (0.2) | (100) | 6.2
Items increasing the tax charge in 2022: |  |  |  |  |  |
– adjustment in respect of prior years | 93 | (9.7) | 30 | 2.9 | 45 | (2.8)
– UK and European Bank levies | 50 | (5.2) | 72 | 7.0 | 31 | (1.9)
– impact of held for sale adjustments | 47 | (4.9) | — | — | — | —
– adjustment to deferred tax on insurance contracts | 36 | (3.8) | — | — | — | —
– impact of changes in tax rates | 33 | (3.4) | (56) | (5.5) | (26) | 1.6
– effect of profits in associates and joint ventures | 5 | (0.5) | (43) | (4.2) | (3) | 0.2
– local taxes and overseas withholding taxes | 4 | (0.4) | (4) | (0.4) | 49 | (3.0)
– impact of temporary differences between French tax returns and IFRS | — | — | 324 | 31.7 | — | —
– other | 1 | (0.1) | (34) | (3.4) | 34 | (2.1)
Items reducing the tax charge in 2022: |  |  |  |  |  |
– movements in unrecognised deferred tax | (268) | 27.9 | (47) | (4.6) | 321 | (19.9)
– movement in uncertain tax positions | (110) | 11.5 | 5 | 0.5 | 1 | (0.1)
– non-taxable income and gains | (93) | 9.7 | (92) | (9.0) | (55) | 3.4
– deductions for AT1 coupon payments | (55) | 5.7 | (53) | (5.2) | (51) | 3.2
– tax impact of planned sale of French retail banking business | — | — | (324) | (31.7) | — | —
Year ended 31 Dec | (561) | 58.5 | (23) | (2.3) | (136) | 8.4

The effective tax rate for the yea r was 58.5% (2021: (2.3)%; 2020: 8.4%), reflecting a tax credit arising on a loss before tax. The tax credit
for 2022 was driven by underlying losses before tax and non-recurring items, including recognition of previously unrecognised deferred
tax assets in France and a tax credit of £110m from movement in provisions for uncertain tax positions. The tax credit for 2021 included
favourable non-recurring items in respect of tax rate changes, prior period adjustments and the recognition of previously unrecognised
deferred tax assets in France.
In 2021, the signing of a framework agreement for the planned sale of the French retail banking business resulted in a tax deduction (tax
value of £324m) for a provision for loss on disposal which was recorded in the French tax return. A deferred tax liability of the same
amount arose as a consequence of the temporary difference between the French tax basis and IFRS in respect of this provision. This
temporary difference reversed in 2022 upon application of held for sale accounting for IFRS, resulting in the reversal of this deferred tax
liability to the income statement.
Accounting for taxes involves some estimation because tax law is uncertain and its 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.
Notes on the Financial Statements

144 | HSBC Bank plc Annual Report and Accounts 2022

Movement of deferred tax assets and liabilities
|  | Retirement benefits | Loan impairment provisions | Property, plant and equipment | FVOCI investments | Goodwill and intangibles | Relief for tax losses 2 | Other 1 | Total
The group |  | £m | £m | £m | £m | £m | £m | £m | £m
Assets |  | 74 | 53 | 215 | — | 212 | 381 | — | 935
Liabilities |  | — | (4) | — | (58) | — | — | (289) | (351)
At 1 Jan 2022 |  | 74 | 49 | 215 | (58) | 212 | 381 | (289) | 584
Income statement |  | (11) | — | 22 | 3 | (201) | 243 | 222 | 278
Other comprehensive income |  | (18) | — | — | 179 | — | — | 215 | 376
Foreign exchange and other |  | — | — | (1) | 18 | — | 4 | 6 | 27
At 31 Dec 2022 |  | 45 | 49 | 236 | 142 | 11 | 628 | 154 | 1,265
Assets 3 |  | 45 | 50 | 236 | 142 | 11 | 628 | 154 | 1,266
Liabilities 3 |  | — | (1) | — | — | — | — | — | (1)
Assets |  | 63 | 66 | 171 | — | 157 | 418 | — | 875
Liabilities |  | — | (9) | (6) | 166) | — | — | (117) | (298)
At 1 Jan 2021 |  | 63 | 57 | 165 | 166) | 157 | 418 | (117) | 577
Income statement |  | 28 | (10) | 51 | 3 | 55 | (37) | (254) | (164)
Other comprehensive income |  | (17) | 2 | (1) | 105 | — | — | 82 | 171
At 31 Dec 2021 |  | 74 | 49 | 215 | (58) | 212 | 381 | (289) | 584
Assets 3 |  | 74 | 53 | 215 | — | 212 | 381 | — | 935
Liabilities 3 |  | — | (4) | — | (58) | — | — | (289) | (351)

1 Other deferred tax assets and liabilities relate to share-based payments, cash flow hedges and temporary differences arising between IFRS and
French tax returns.
2 The deferred tax asset recognised in respect of tax losses mainly relates to France £(588)m, and US State tax losses of the New York branch of
HSBC Bank plc £(28)m, all of which are supported by future profit forecasts.
3 After netting off balances within countries, the balances as disclosed in the financial statements are as follows: deferred tax assets £1,279m (2021:
£599 m); and deferred tax liabilities £14m (2021:£15m).
Management has assessed the likely availability of future taxable profits against which to recover the deferred tax assets of the Company
and th e Group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts
of futur e business performance.
The group’s net deferred tax asset of £1,265m (2021: £584m) included a net UK deferred tax asset of £498m (2021: £448m) and a net
deferred asset of £597m (2021: £7m) in France, of which £588m (2021: £294m) related to tax losses which are expected to be
substantially recovered within 10 years.
Management is satisfied that although the Company recorded a UK tax loss in the year, the aforementioned evidence is sufficient to
support recognition of all UK deferred tax assets. These deferred tax assets 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.
Following the signing of a framework agreement in 2021 for the planned sale of the French retail banking business, that business is now
excluded from our deferred tax recognition analysis as its sale is considered probable. Although the French consolidated tax group
recorded a tax loss in 2020 and 2021, this would have been taxable profit if the effects of the retail banking business and other non-
recurring items, mainly related to the restructuring of the European business, were excluded. The accounting loss for France in 2022 is
driven by the loss on assets held for sale. Excluding this amount, the business in France recorded a profit in 2022. The French net
deferred tax asset is supported by forecasts of taxable profit, also taking into consideration the history of profitability in the remaining
businesses.

HSBC Bank plc Annual Report and Accounts 2022 | 145

Movement of deferred tax assets and liabilities
| Retirement benefits | Property, plant and equipment | FVOCI | Goodwill and intangibles | Relief for tax losses 2 | Other 1 | Total
The bank | £m | £m | £m | £m | £m | £m | £m
Assets 2 | 17 | 207 | — | 191 | 69 | 48 | 532
Lliabilities 2 | — | — | (23) | — | — | — | (23)
At 1 Jan 2022 | 17 | 207 | (23) | 191 | 69 | 48 | 509
Income statement | (4) | 24 | — | (191) | (41) | (6) | (218)
Other comprehensive income | 1 | — | 98 | — | — | 210 | 309
Foreign exchange and other adjustments | — | — |  | — | — | 8 | 8
At 31 Dec 2022 | 14 | 231 | 75 | — | 28 | 260 | 608
Assets 3 | 14 | 231 | 75 | — | 28 | 260 | 608
Liabilities 3 | — | — | — | — | — | — | —
Assets | 16 | 162 | — | 156 | 416 | — | 750
Liabilities | — | — | (100) | — | — | (104) | (204)
At 1 Jan 2021 | 16 | 162 | (100) | 156 | 416 | (104) | 546
Income statement | 2 | 45 | — | 35 | (347) | 73 | (192)
Other comprehensive income | (1) | — | 77 | — | — | 77 | 153
Foreign exchange and other adjustments | — | — | — | — | — | 2 | 2
At 31 Dec 2021 | 17 | 207 | (23) | 191 | 69 | 48 | 509
Assets 3 | 17 | 207 | — | 191 | 69 | 48 | 532
Liabilities 3 | — | — | (23) | — | — | — | (23)

1 Other deferred tax assets and liabilities relate to fair value of own debt, loan impairment allowances, share-based payments and cash flow hedges.
2 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,which 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 £608m (2021: £509m) and
deferred tax liabilities nil (2021:nil).
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 £1,017m (2021: £1,944m). These amounts include unused tax losses, tax credits and temporary differences of £912m (2021:
£1,141m) arising in the New York branch of HSBC Bank plc and of nil (2021: £782m) arising in France. Of the unrecognised losses,
£502m expire within 10 years (2021: £394m), and the remainder expire after 10 years or do not expire.
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 £912m (2021: £1,141m). These amounts include unused tax losses, tax credits and temporary differences arising in the New
York branch of HSBC Bank plc of £912m (2021: £1,141m). Of the unrecognised losses, £402m expire within 10 years (2021: £394m), and
the remainder expire after 10 years.
There are no unrecognised deferred tax liabilities arising from the group’s investments in subsidiaries and branches.
Notes on the Financial Statements

146 | HSBC Bank plc Annual Report and Accounts 2022

8 | Dividends

Dividends to the parent company
| 2022 | 2021 | 2020
| £ per share | £m | £ per share | £m | £ per share | £m
Dividends paid on ordinary shares |  |  |  |  |  |
In respect of previous year: |  |  |  |  |  |
Previous year: | — | — | — | — |  |
– first special dividend |  |  | — | — |  |
In respect of current year: |  |  |  |  |  |
Current year: | — | — | — | — |  |
– first special dividend 1 | 1.067 | 850 |  |  |  |
– second special dividend | — | — | — | — |  |
Total | 1.067 | 850 | — | — |  |
Dividends on preference shares classified as equity |  |  |  |  |  |
Dividend on HSBC Bank plc non-cumulative third dollar preference shares 2 | 0.001 | — | 0.001 | — | 1.47 | 51
Total | 0.001 | — | 0.001 | — | 1.47 | 51
Total coupons on capital securities classified as equity | — | 202 | — | 194 | 0 | 212
Dividends to parent | — | 1,052 | — | 194 | 0 | 263

1 Special dividend declared/paid on CET1 capital in 2022.
2 In 2021, the liquidation value of USD third dollar preference shares reduced to $0.01 per share.

Total coupons on capital securities classified as equity
|  | 2022 | 2021 | 2020
| First call date | £m | £m | £m
Undated Subordinated additional Tier 1 instruments |  |  |  |
Undated Subordinated Resettable Additional Tier 1 instrument 2015 | Dec 2020 | 87 | 84 | 103
Undated Subordinated Resettable Additional Tier 1 instrument 2016 | Jan 2022 | 11 | 12 | 11
Undated Subordinated Resettable Additional Tier 1 instrument 2018 | Mar 2023 | 28 | 10 | 10
Undated Subordinated Resettable Additional Tier 1 instrument 2018 | Mar 2023 | 10 | 28 | 28
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 24 | 24 | 24
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 8 | 7 | 8
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Dec 2024 | 20 | 20 | 20
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Jan 2025 | 8 | 9 | 8
Undated Subordinated Resettable Additional Tier 1 instrument 2022 | Mar 2027 | 6 | — | —
Total |  | 202 | 194 | 212

9 | Segmental analysis

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.

HSBC Bank plc Annual Report and Accounts 2022 | 147

Our businesses
HSBC provides a comprehensive range of banking and related financial services to its customers through its global businesses. The
products and services offered to customers are organised by these global businesses.
Our operating model has the following material segments: WPB; CMB; a GBM business which is further split into three reportable
segments MSS, GB and GBM O ther reflecting the reorganisation of the GBM management structure during 2021 and a Corporate Centre.
These segments are supported by Digital Business Services and eleven g lobal functions, including Risk, Finance, Compliance, Legal,
Marketing and Human Resources. These business segment are our reportable segments under IFRS 8 'Operating Segments'.
By operating segment:

Adjusted profit/(loss) before tax
| 2022
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
Net operating income before change in expected credit losses and other credit impairment charges | 2,413 | 1,571 | (8) | 1,432 | 1,492 | (118) | 6,782
– of which: net interest income/(expense) | (54) | 903 | (16) | 925 | 710 | (564) | 1,904
Change in expected credit losses and other credit impairment charges | (1) | (153) | (1) | (54) | (7) | (6) | (222)
Net operating income/(expense) | 2,412 | 1,418 | (9) | 1,378 | 1,485 | (124) | 6,560
Total operating expenses | (1,940) | (932) | (318) | (593) | (908) | (115) | (4,806)
Operating profit/(loss) | 472 | 486 | (327) | 785 | 577 | (239) | 1,754
Share of loss in associates and joint ventures | — | — | (2) | — | — | (28) | (30)
Adjusted profit/(loss) before tax | 472 | 486 | (329) | 785 | 577 | (267) | 1,724
| % | % | % | % | % |  | %
Adjusted cost efficiency ratio | 80.4 | 59.3 | n/a | 41.4 | 60.9 |  | 70.9
| 2021
Net operating income/(expense) before change in expected credit losses and other credit impairment charges 1 | 2,055 | 1,367 | 579 | 1,095 | 1,275 | (41) | 6,330
– of which: net interest income/(expense) | (232) | 568 | 224 | 649 | 567 | (22) | 1,754
Change in expected credit losses and other credit impairment charges | 1 | 140 | 5 | 7 | 23 | (2) | 174
Net operating income/(expense) | 2,056 | 1,507 | 584 | 1,102 | 1,298 | (43) | 6,504
Total operating expenses | (2,064) | (918) | (485) | (612) | (975) | (64) | (5,118)
Operating profit/(loss) | (8) | 589 | 99 | 490 | 323 | (107) | 1,386
Share of profit in associates and joint ventures | — | — | — | — | — | 191 | 191
Adjusted profit/(loss) before tax | (8) | 589 | 99 | 490 | 323 | 84 | 1,577
| % | % | % | % | % |  | %
Adjusted cost efficiency ratio | 100.4 | 67.2 | 83.9 | 55.9 | 76.5 |  | 80.9
| 2020
Net operating income/(expense) before change in expected credit losses and other credit impairment charges 1 | 1,968 | 1,381 | 624 | 1,133 | 1,035 | (144) | 5,997
– of which: net interest income/(expense) | (96) | 651 | 46 | 686 | 664 | (53) | 1,898
Change in expected credit losses and other credit impairment charges | 1 | (448) | (4) | (322) | (39) | 4 | (808)
Net operating income/(expense) | 1,969 | 933 | 620 | 811 | 996 | (140) | 5,189
Total operating expenses | (1,949) | (878) | (672) | (659) | (1,128) | (86) | (5,372)
Operating profit/(loss) | 20 | 55 | (52) | 152 | (132) | (226) | (183)
Share of profit in associates and joint ventures | — | — | — | — | — | (1) | (1)
Adjusted profit/(loss) before tax | 20 | 55 | (52) | 152 | (132) | (227) | (184)
| % | % | % | % | % |  | %
Adjusted cost efficiency ratio | 99.0 | 63.6 | 107.7 | 58.2 | 109.0 |  | 89.6

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. It i ncludes in ter-
segment revenue which is eliminated in Corporate centre, amounting to £120 m (2021: £124m; 2020: £167m).
Reported 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:

| 2022 | 2021 | 2020
| £m | £m | £m
Reported external net operating income by country | 4,646 | 6,120 | 5,900
– United Kingdom | 3,161 | 2,937 | 2,914
– France 1 | 171 | 1,677 | 1,528
– Germany | 732 | 887 | 814
– Other countries 1 | 582 | 619 | 644

1 2022 balances include losses on disposal of businesses classified as held-for-sale as part of a broader restructuring of our European business.
Notes on the Financial Statements

148 | HSBC Bank plc Annual Report and Accounts 2022

Adjusted results reconciliation
| 2022 | 2021 | 2020
| Adjusted | Significant items | Reported | Adjusted | Significant items | Reported | Adjusted | Significant items | Reported
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Revenue 1 | 6,782 | (2,136) | 4,646 | 6,330 | (210) | 6,120 | 5,997 | (97) | 5,900
ECL | (222) | — | (222) | 174 | — | 174 | (808) | — | (808)
Operating expenses | (4,806) | (547) | (5,353) | (5,118) | (344) | (5,462) | (5,372) | (1,333) | (6,705)
Share of profit/(loss) in associates and joint ventures | (30) | — | (30) | 191 | — | 191 | (1) | — | (1)
Profit/(loss) before tax | 1,724 | (2,683) | (959) | 1,577 | (554) | 1,023 | (184) | (1,430) | (1,614)

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

Adjusted profit/(loss) reconciliation |
| 2022 | 2021 | 2020
| £m | £m | £m
Year ended 31 Dec |  |  |
Adjusted profit/(loss) before tax | 1,724 | 1,577 | (184)
Significant items | (2,683) | (554) | (1,430)
– fair value movements on financial instruments 1 | 43 | (5) | (3)
– European restructurings | (2,034) | (23) | —
– restructuring and other related costs | (692) | (526) | (773)
– settlements and provisions in connection with legal and regulatory matters | — | — | (9)
– impairment of other intangible assets | — | — | (645)
Reported profit/(loss) before tax | (959) | 1,023 | (1,614)

1 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.

Balance sheet by business
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
31 Dec 2022 |  |  |  |  |  |  |
Loans and advances to customers | 2,785 | 37,523 | 115 | 25,219 | 6,826 | 146 | 72,614
Customer accounts | 45,320 | 79,606 | 5,903 | 55,749 | 29,211 | 159 | 215,948
31 Dec 2021 |  |  |  |  |  |  |
Loans and advances to customers | 2,016 | 37,685 | 197 | 23,529 | 27,574 | 176 | 91,177
Customer accounts | 34,243 | 74,179 | 4,355 | 50,297 | 41,939 | 228 | 205,241

10 | Trading assets

| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Treasury and other eligible bills | 3,712 | 2,451 | 3,061 | 1,872
Debt securities | 21,873 | 27,004 | 13,960 | 17,794
Equity securities | 38,330 | 40,930 | 35,407 | 38,570
Trading securities | 63,915 | 70,385 | 52,428 | 58,236
Loans and advances to banks 1 | 3,987 | 4,142 | 3,872 | 3,559
Loans and advances to customers 1 | 11,976 | 9,179 | 11,323 | 8,995
At 31 Dec | 79,878 | 83,706 | 67,623 | 70,790

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

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;

HSBC Bank plc Annual Report and Accounts 2022 | 149

•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
| 2022 | 2021
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Recurring fair value measurements at 31 Dec |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Trading assets | 52,493 | 24,647 | 2,738 | 79,878 | 59,813 | 22,549 | 1,344 | 83,706
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 6,183 | 6,380 | 3,318 | 15,881 | 6,332 | 9,146 | 3,171 | 18,649
Derivatives | 2,296 | 221,205 | 1,737 | 225,238 | 1,987 | 137,418 | 1,816 | 141,221
Financial investments | 19,007 | 8,902 | 1,447 | 29,356 | 29,668 | 10,235 | 1,387 | 41,290
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 26,258 | 14,592 | 415 | 41,265 | 32,886 | 12,967 | 580 | 46,433
Financial liabilities designated at fair value | 938 | 23,888 | 2,461 | 27,287 | 1,020 | 30,467 | 2,121 | 33,608
Derivatives | 1,744 | 214,645 | 2,478 | 218,867 | 1,105 | 135,809 | 2,454 | 139,368

The bank
Recurring fair value measurements at 31 Dec |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Trading assets | 41,524 | 23,940 | 2,159 | 67,623 | 49,435 | 20,021 | 1,334 | 70,790
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 252 | 1,094 | 272 | 1,618 | 298 | 2,556 | 361 | 3,215
Derivatives | 2,037 | 192,778 | 1,899 | 196,714 | 1,413 | 122,422 | 1,952 | 125,787
Financial investments | 11,214 | 976 | 71 | 12,261 | 21,806 | 1,346 | 53 | 23,205
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 11,771 | 13,591 | 403 | 25,765 | 19,367 | 11,240 | 554 | 31,161
Financial liabilities designated at fair value | — | 17,565 | 1,850 | 19,415 | — | 19,306 | 1,563 | 20,869
Derivatives | 1,691 | 189,908 | 1,737 | 193,336 | 1,066 | 123,863 | 2,722 | 127,651

Transfers between Level 1 and Level 2 fair values
| Assets | Liabilities
| Financial investments | Trading assets | Designated and otherwise mandatorily measured at fair value through profit or loss | Derivatives | Trading liabilities | Designated at fair value | Derivatives
| £m | £m | £m | £m | £m | £m | £m
At 31 Dec 2022 |  |  |  |  |  |  |
Transfers from Level 1 to Level 2 | 126 | 1,194 | — | 39 | — | — | —
Transfers from Level 2 to Level 1 | 189 | 682 | — | 32 | — | — | —
At 31 Dec 2021 |  |  |  |  |  |  |
Transfers from Level 1 to Level 2 | 366 | 1,731 | 757 | — | 27 | — | —
Transfers from Level 2 to Level 1 | 244 | 990 | 399 | — | 91 | — | —

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.
Notes on the Financial Statements

150 | HSBC Bank plc Annual Report and Accounts 2022

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.

Fair value adjustments
| 2022 | 2021
| MSS | Corporate | MSS | Corporate
| £m | £m | £m | £m
Type of adjustment |  |  |  |
Risk-related | 359 | 33 | 505 | 31
– bid-offer | 188 | — | 190 | —
– uncertainty | 50 | — | 37 | 1
– credit valuation adjustment | 98 | 29 | 99 | 26
– debt valuation adjustment | (64) | — | (27) | —
– funding fair value adjustment | 87 | 4 | 206 | 4
– other | — | — | — | —
Model-related | 31 | — | 19 | —
– model limitation | 31 | — | 19 | —
– other | — | — | — | —
Inception profit (Day 1 P&L reserves) | 64 | — | 65 | —
At 31 Dec | 454 | 33 | 589 | 31

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 the 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.

HSBC Bank plc Annual Report and Accounts 2022 | 151

Fair value valuation bases

Financial instruments measured at fair value using a valuation technique with significant unobservable inputs – Level 3
| Assets | Liabilities
| Financial Investments | Held for trading | Designated and otherwise mandatorily measured at fair value through profit or loss | Derivatives | Total | Held for trading | Designated at fair value | Derivatives | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m
Private equity including strategic investments | 85 | 59 | 3,058 | — | 3,202 | 104 | — | — | 104
Asset-backed securities | 275 | 170 | 78 | — | 523 | — | — | — | —
Structured notes | — | — | — | — | — | — | 2,461 | — | 2,461
Derivatives | — | — | — | 1,737 | 1,737 | — | — | 2,478 | 2,478
Other portfolios | 1,087 | 2,509 | 182 | — | 3,778 | 311 | — | — | 311
At 31 Dec 2022 | 1,447 | 2,738 | 3,318 | 1,737 | 9,240 | 415 | 2,461 | 2,478 | 5,354
Private equity including strategic investments | 79 | 1 | 2,898 | — | 2,978 | 7 | — | — | 7
Asset-backed securities | 495 | 97 | — | — | 592 | — | — | — | —
Structured notes | — | — | — | — | — | — | 2,120 | — | 2,120
Derivatives | — | — | — | 1,816 | 1,816 | — | — | 2,454 | 2,454
Other portfolios | 813 | 1,246 | 273 | — | 2,332 | 573 | 1 | — | 574
At 31 Dec 2021 | 1,387 | 1,344 | 3,171 | 1,816 | 7,718 | 580 | 2,121 | 2,454 | 5,155

The bank |  |  |  |  |  |  |  |  |
Private equity including strategic investments | 54 | 58 | 272 | — | 384 | 103 | — | — | 103
Asset-backed securities | 17 | 170 | — | — | 187 | — | — | — | —
Structured notes | — | — | — | — | — | — | 1,850 | — | 1,850
Derivatives | — | — | — | 1,899 | 1,899 | — | — | 1,728 | 1,728
Other portfolios | — | 1,931 | — | — | 1,931 | 300 | — | 9 | 309
At 31 Dec 2022 | 71 | 2,159 | 272 | 1,899 | 4,401 | 403 | 1,850 | 1,737 | 3,990
Private equity including strategic investments | 53 | — | 353 | — | 406 | 6 | — | — | 6
Asset-backed securities | — | 97 | — | — | 97 | — | — | — | —
Structured notes | — | — | — | — | — | — | 1,563 | — | 1,563
Derivatives | — | — | — | 1,952 | 1,952 | — | — | 2,722 | 2,722
Other portfolios | — | 1,237 | 8 | — | 1,245 | 548 | — | — | 548
At 31 Dec 2021 | 53 | 1,334 | 361 | 1,952 | 3,700 | 554 | 1,563 | 2,722 | 4,839

.
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.
Notes on the Financial Statements

152 | HSBC Bank plc Annual Report and Accounts 2022

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

Movement in Level 3 financial instruments
| Assets | Liabilities
| Financial Investments | Trading assets | Designated and otherwise mandatorily measured at fair value through profit or loss | Derivatives | Trading liabilities | Designated at fair value | Derivatives
The group | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 1,387 | 1,344 | 3,171 | 1,816 | 580 | 2,121 | 2,454
Total gains/(losses) on assets and total (gains)/losses on liabilities recognised in profit or loss | (6) | (415) | (84) | 564 | (223) | (638) | 723
– net income from financial instruments held for trading or managed on a fair value basis | — | (415) | — | 564 | (223) | — | 723
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | (84) | — | — | (638) | —
– gains less losses from financial investments at fair value through other comprehensive income | (6) | — | — | — | — | — | —
Total gains/(losses) recognised in other comprehensive income (‘OCI’)1 | (145) | 12 | 238 | 3 | 1 | 29 | 17
– financial investments: fair value gains/(losses) | (232) | — | — | — | — | — | —
– exchange differences | 87 | 12 | 238 | 3 | 1 | 29 | 17
Purchases | 601 | 2,067 | 562 | — | 151 | — | —
New issuances | — | — | — | — | 7 | 1,705 | —
Sales | (142) | (716) | (594) | — | (120) | (78) | —
Settlements | (90) | (323) | (51) | (731) | (407) | (575) | (701)
Transfers out | (199) | (283) | (2) | (473) | (15) | (564) | (582)
Transfers in | 41 | 1,052 | 78 | 558 | 441 | 461 | 567
At 31 Dec 2022 | 1,447 | 2,738 | 3,318 | 1,737 | 415 | 2,461 | 2,478
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2022 | — | (5) | 49 | 565 | 2 | 30 | 2,339
– trading income/(expense) excluding net interest income | — | (5) | — | 565 | 2 | — | 2,339
– net income/(expense) from other financial instruments designated at fair value | — | — | 49 | — | — | 30 | —
At 1 Jan 2021 | 1,635 | 1,611 | 3,467 | 1,974 | 118 | 1,150 | 3,096
Total gains/(losses) on assets and total (gains)/losses on liabilities recognised in profit or loss | 15 | (77) | 148 | 1,608 | 11 | (316) | 1,362
– net income from financial instruments held for trading or managed on a fair value basis | — | (77) | — | 1,608 | 11 | — | 1,362
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | 148 | — | — | (316) | —
– gains less losses from financial investments at fair value through other comprehensive income | 15 | — | — | — | — | — | —
Total gains/(losses) recognised in other comprehensive income (‘OCI’)1 | (75) | (4) | (152) | (6) | (1) | (32) | (8)
– financial investments: fair value gains/(losses) | (27) | — | — | — | — | — | —
– exchange differences | (48) | (4) | (152) | (6) | (1) | (32) | (8)
Purchases | 555 | 686 | 543 | — | 742 | 1 | —
New issuances | — | — | — | — | 25 | 2,213 | —
Sales | (417) | (209) | (813) | — | (3) | (20) | —
Settlements | (109) | (506) | (5) | (1,722) | (504) | (1,053) | (2,343)
Transfers out | (218) | (668) | (41) | (368) | (5) | (137) | (465)
Transfers in | 1 | 511 | 24 | 330 | 197 | 315 | 812
At 31 Dec 2021 | 1,387 | 1,344 | 3,171 | 1,816 | 580 | 2,121 | 2,454
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2021 | — | (11) | 51 | 846 | — | 102 | (721)
– trading income/(expense) excluding net interest income | — | (11) | — | 846 | — | — | (721)
– net income from other financial instruments designated at fair value | — | — | 51 | — | — | 102 | —

1 Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of
comprehensive income.
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 primarily attributable to observability of valuation inputs and price transparency.

HSBC Bank plc Annual Report and Accounts 2022 | 153

Movement in Level 3 financial instruments (continued)
| Assets | Liabilities
| Financial Investments | Trading Assets | Designated and otherwise mandatorily measured at fair value through profit or loss | Derivatives | Trading Liabilities | Designated at fair value | Derivatives
The bank | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 53 | 1,334 | 361 | 1,952 | 554 | 1,563 | 2,722
Total gains/(losses) on assets and total (gains)/losses on liabilities recognised in profit or loss | 2 | (419) | (91) | 665 | (216) | (569) | 45
– net income from financial instruments held for trading or managed on a fair value basis | — | (419) | — | 665 | (216) | — | 45
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | (91) | — | — | (569) | —
– gains less losses from financial investments at fair value through other comprehensive income | 2 | — | — | — | — | — | —
Total gains/(losses) recognised in other comprehensive income (‘OCI’)1 | 1 | — | 24 | — | — | — | —
– financial investments: fair value gains/(losses) | 1 | — | — | — | — | — | —
– exchange differences | — | — | 24 | — | — | — | —
Purchases | — | 1,495 | — | — | 151 | — | —
New issuances | — | — | — | — | — | 1,682 | —
Sales | — | (659) | (12) | — | (120) | — | —
Settlements | — | (323) | (8) | (850) | (392) | (557) | (1,025)
Transfers out | — | (283) | (2) | (541) | (15) | (471) | (606)
Transfers in | 15 | 1,014 | — | 673 | 441 | 202 | 601
At 31 Dec 2022 | 71 | 2,159 | 272 | 1,899 | 403 | 1,850 | 1,737
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2022 | — | — | — | 688 | — | 19 | 3,020
– trading income/(expense) excluding net interest income | — | — | — | 688 | — | — | 3,020
– net income/(expense) from other financial instruments designated at fair value | — | — | — | — | — | 19 | —
At 1 Jan 2021 | 141 | 1,583 | 311 | 2,032 | 103 | 651 | 3,287
Total gains/(losses) on assets and total (gains)/losses on liabilities recognised in profit or loss | 1 | (76) | 77 | 1,730 | 12 | (246) | 1,443
– net income from financial instruments held for trading or managed on a fair value basis | — | (76) | — | 1,730 | 12 | — | 1,443
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | 77 | — | — | (246) | —
– gains less losses from financial investments at fair value through other comprehensive income | 1 | — | — | — | — | — | —
Total gains/(losses) recognised in other comprehensive income (‘OCI’)1 | (1) | (3) | (11) | — | — | — | —
– financial investments: fair value gains/(losses) | (1) | — | — | — | — | — | —
– exchange differences | — | (3) | (11) | — | — | — | —
Purchases | — | 683 | 2 | — | 741 | — | —
New issuances | — | — | — | — | — | 2,128 | —
Sales | (2) | (186) | (13) | — | — | — | —
Settlements | (3) | (505) | (5) | (1,778) | (494) | (950) | (2,297)
Transfers out | (83) | (668) | — | (375) | (5) | (153) | (511)
Transfers in | — | 506 | — | 343 | 197 | 133 | 800
At 31 Dec 2021 | 53 | 1,334 | 361 | 1,952 | 554 | 1,563 | 2,722
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2021 | — | (11) | 1 | 973 | — | 46 | (949)
– trading income/(expense) excluding net interest income | — | (11) | — | 973 | — | — | (949)
– net income from other financial instruments designated at fair value | — | — | 1 | — | — | 46 | —

1 Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of
comprehensive income.
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 primarily attributable to observability of valuation inputs and price transparency.
Notes on the Financial Statements

154 | HSBC Bank plc Annual Report and Accounts 2022

Effect of changes in significant unobservable assumptions to reasonably possible alternatives

Sensitivity of Level 3 fair values to reasonably possible alternative assumptions
| 2022 | 2021
| Reflected in profit or loss | Reflected in OCI | Reflected in profit or loss | Reflected in OCI
| Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes
The group | £m | £m | £m | £m | £m | £m | £m | £m
Derivatives, trading assets and trading liabilities 1 | 201 | (261) | — | — | 92 | (70) | — | —
Designated and otherwise mandatorily measured at fair value through profit or loss | 236 | (235) | — | — | 247 | (247) | — | —
Financial investments | 9 | (9) | 27 | (19) | 15 | (15) | 51 | (50)
Year ended 31 Dec | 446 | (505) | 27 | (19) | 354 | (332) | 51 | (50)

The bank
Derivatives, trading assets and trading liabilities 1 | 193 | (253) | — | — | 93 | (72) | — | —
Designated and otherwise mandatorily measured at fair value through profit or loss | 45 | (45) | — | — | 64 | (64) | — | —
Financial investments | — | — | 14 | (6) | 0 | — | 6 | (5)
Year ended 31 Dec | 238 | (298) | 14 | (6) | 157 | (136) | 6 | (5)

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

Sensitivity of Level 3 fair values to reasonably possible alternative assumptions by instrument type
| 2022 | 2021
| Reflected in profit or loss | Reflected in OCI | Reflected in profit or loss | Reflected in OCI
| Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes
| £m | £m | £m | £m | £m | £m | £m | £m
Private equity including strategic investments | 225 | (389) | 8 | (7) | 232 | (234) | 7 | (7)
Asset-backed securities | 28 | (17) | 12 | (5) | 39 | (20) | 1 | —
Structured notes | 5 | (5) | — | — | 6 | (6) | — | —
Derivatives | 44 | (44) | — | — | 29 | (34) | — | —
Other portfolios | 144 | (50) | 7 | (7) | 48 | (38) | 43 | (43)
Total | 446 | (505) | 27 | (19) | 354 | (332) | 51 | (50)

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.

HSBC Bank plc Annual Report and Accounts 2022 | 155

Key unobservable inputs to Level 3 financial instruments

Quantitative information about significant unobservable inputs in Level 3 valuations
| Fair value |  |  | 2022 | 2021
| Assets | Liabilities | Valuation techniques | Key unobservable inputs | Full range of inputs | Full range of inputs
| £m | £m | Lower | Higher | Lower | Higher
Private equity including strategic investments | 3,202 | 104 | See below | See below | N/A | N/A | N/A | N/A
Asset-backed securities | 523 | — |  |  |  |  |  |
– CLO/CDO 1 | 156 | — | Market proxy | Bid quotes | — | 92 | — | 100
– Other ABSs | 367 | — | Market proxy | Bid quotes | — | 99 | — | 100
Structured notes | — | 2,461 |  |  |  |  |  |
– equity-linked notes | — | 2,042 | Model – Option model | Equity Volatility | 6% | 99% | 6% | 124%
| Equity Correlation | 32% | 99% | 34% | 99%
– fund-linked notes | — | — | Model – Option model | Fund Volatility |  |  |  |
– FX-linked notes | — | 3 | Model – Option model | FX Volatility | 3% | 20% | 3% | 99%
– other | — | 416 |  |  |  |  |  |
Derivatives | 1,737 | 2,478 |  |  |  |  |  |
– Interest rate derivatives: | 507 | 633 |  |  |  |  |  |
securitisation swaps | 215 | 173 | Model – Discounted cash flow | Constant Prepayment | 5% | 10% | 5% | 50%
long-dated swaptions | 44 | 56 | Model – Option model | IR Volatility | 9% | 33% | 15% | 35%
other | 248 | 404 |  |  |  |  |  |
– FX derivatives: | 447 | 304 |  |  |  |  |  |
FX options | 418 | 294 | Model – Option model | FX Volatility | 3% | 46% | 2% | 99%
other | 29 | 10 |  |  |  |  |  |
– Equity derivatives: | 688 | 1,324 |  |  |  |  |  |
long-dated single stock options | 344 | 376 | Model – Option model | Equity Volatility | 7% | 153% | 4% | 138%
other 2 | 344 | 948 |  |  |  |  |  |
– Credit derivatives: | 95 | 217 |  |  |  |  |  |
other | 95 | 217 |  |  |  |  |  |
Other portfolios | 3,778 | 311 |  |  |  |  |  |
– repurchase agreements | 387 | 272 | Model – Discounted cash flow | IR Curve | 1% | 9% | 1% | 5%
– other 3 | 3,391 | 39 |  |  |  |  |  |
At 31 Dec | 9,240 | 5,354 |  |  |  |  |  |

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. The
key unobservable inputs would be price and correlation. The valuation approach includes using a range of inputs that include company
specific financials, traded comparable companies multiples, published net asset values and qualitative assumptions, which are not
directly comparable or quantifiable.
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.
Notes on the Financial Statements

156 | HSBC Bank plc Annual Report and Accounts 2022

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
| Carrying amount | Quoted market price Level 1 | Observable inputs Level 2 | Significant unobservable inputs Level 3 | Total
The group | £m | £m | £m | £m | £m
At 31 Dec 2022 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 17,109 | — | 17,112 | — | 17,112
Loans and advances to customers | 72,614 | — | — | 72,495 | 72,495
Reverse repurchase agreements – non-trading | 53,949 | — | 53,949 | — | 53,949
Financial investments – at amortised cost | 3,248 | 2,336 | 848 | 8 | 3,192
Liabilities |  |  |  |  |
Deposits by banks | 20,836 | — | 20,900 | — | 20,900
Customer accounts | 215,948 | — | 215,955 | — | 215,955
Repurchase agreements – non-trading | 32,901 | — | 32,901 | — | 32,902
Debt securities in issue | 7,268 | — | 7,124 | 132 | 7,256
Subordinated liabilities | 14,528 | — | 14,434 | — | 14,434
At 31 Dec 2021 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 10,784 | — | 10,786 | — | 10,786
Loans and advances to customers | 91,177 | — | — | 91,276 | 91,276
Reverse repurchase agreements – non-trading | 54,448 | — | 54,448 | — | 54,448
Financial investments – at amortised cost | 10 | 2 | — | 8 | 10
Liabilities |  |  |  |  |
Deposits by banks | 32,188 | — | 32,102 | — | 32,102
Customer accounts | 205,241 | — | 205,236 | — | 205,236
Repurchase agreements – non-trading | 27,259 | — | 27,259 | — | 27,259
Debt securities in issue | 9,428 | — | 9,286 | 144 | 9,430
Subordinated liabilities | 12,488 | — | 13,118 | — | 13,118

Fair values of selected financial instruments not carried at fair value and bases of valuation – assets and disposal groups held for sale
|  | Fair value
| Carrying amount | Quoted market price Level 1 | Observable inputs Level 2 | Significant unobservable inputs Level 3 | Total
| $m | $m | $m | $m | $m
At 31 Dec 2022 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 127 | — | 131 | — | 131
Loans and advances to customers | 21,067 | — | — | 19,481 | 19,481
Reverse repurchase agreements – non-trading | 208 | — | 208 | — | 208
Liabilities |  |  |  |  |
Deposits by banks | 2 | — | 2 | — | 2
Customer accounts | 20,478 | — | 20,393 | — | 20,393
Debt securities in issue | 1,100 | — | 1,100 | — | 1,100

HSBC Bank plc Annual Report and Accounts 2022 | 157

Fair values of financial instruments not carried at fair value and bases of valuation
|  | Fair value
| Carrying amount | Quoted market price Level 1 | Observable inputs Level 2 | Significant unobservable inputs Level 3 | Total
The bank | £m | £m | £m | £m | £m
At 31 Dec 2022 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 14,486 | — | 14,508 | — | 14,508
Loans and advances to customers | 36,992 | — | — | 36,875 | 36,875
Reverse repurchase agreements – non-trading | 43,055 | — | 43,055 | — | 43,055
Financial investments – at amortised cost | 6,378 | 1,984 | 4,305 | — | 6,289
Liabilities |  |  |  |  |
Deposits by banks | 13,594 | — | 13,594 | — | 13,594
Customer accounts | 141,714 | — | 141,714 | — | 141,714
Repurchase agreements – non-trading | 29,638 | — | 29,638 | — | 29,638
Debt securities in issue | 4,656 | — | 4,656 | — | 4,656
Subordinated liabilities | 14,252 | — | 14,139 | — | 14,139
At 31 Dec 2021 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 6,778 | — | 6,881 | — | 6,881
Loans and advances to customers | 33,936 | — | — | 33,921 | 33,921
Reverse repurchase agreements – non-trading | 39,708 | — | 39,708 | — | 39,708
Financial investments – at amortised cost 1 | 3,337 | — | 3,300 | — | 3,300
Liabilities |  |  |  |  |
Deposits by banks | 14,655 | — | 14,655 | — | 14,655
Customer accounts | 124,706 | — | 124,706 | — | 124,706
Repurchase agreements – non-trading | 22,344 | — | 22,344 | — | 22,344
Debt securities in issue | 5,658 | — | 5,658 | — | 5,658
Subordinated liabilities | 12,218 | — | 12,851 | — | 12,851

1 Fair value of Financial investment is represented to include the impact of inter-company.
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.
Notes on the Financial Statements

158 | HSBC Bank plc Annual Report and Accounts 2022

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

| The group | The bank
2022 |  | 2021 | 2022 | 2021
| Designated at fair value and otherwise mandatorily measured at fair value | Designated at fair value and otherwise mandatorily measured at fair value | Designated at fair value and otherwise mandatorily measured at fair value | Designated at fair value and otherwise mandatorily measured at fair value
| £m | £m | £m | £m
Securities | 14,581 | 15,738 | 318 | 418
– debt securities | 1,975 | 2,584 | 44 | 146
– equity securities | 12,606 | 13,154 | 274 | 272
Loans and advances to banks and customers | 971 | 2,613 | 971 | 2,498
Other | 329 | 298 | 329 | 299
At 31 Dec | 15,881 | 18,649 | 1,618 | 3,215

14 | Derivatives

Notional contract amounts and fair values of derivatives by product contract type
| Notional contract amount | Fair value – Assets | Fair value – Liabilities
| Trading | Hedging | Trading | Hedging | Total | Trading | Hedging | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Foreign exchange | 6,101,153 | 582 | 88,244 | 2 | 88,246 | (86,119) | (57) | (86,176)
Interest rate | 10,141,018 | 56,144 | 206,689 | 433 | 207,122 | (201,419) | (819) | (202,238)
Equities | 465,626 | — | 7,751 | — | 7,751 | (8,175) | — | (8,175)
Credit | 146,522 | — | 865 | — | 865 | (1,012) | — | (1,012)
Commodity and other | 57,594 | — | 1,053 | — | 1,053 | (1,065) | — | (1,065)
Offset (Note 28) |  |  |  |  | (79,799) |  |  | 79,799
At 31 Dec 2022 | 16,911,913 | 56,726 | 304,602 | 435 | 225,238 | (297,790) | (876) | (218,867)
Foreign exchange | 4,737,254 | 4,045 | 49,775 | 266 | 50,041 | (48,613) | (67) | (48,680)
Interest rate | 8,727,934 | 39,553 | 99,744 | 144 | 99,888 | (96,297) | (270) | (96,567)
Equities | 498,980 | — | 9,718 | — | 9,718 | (11,881) | — | (11,881)
Credit | 134,440 | — | 1,582 | — | 1,582 | (2,159) | — | (2,159)
Commodity and other | 42,677 | — | 681 | — | 681 | (770) | — | (770)
Offset (Note 28) |  |  |  |  | (20,689) |  |  | 20,689
At 31 Dec 2021 | 14,141,285 | 43,598 | 161,500 | 410 | 141,221 | (159,720) | (337) | (139,368)

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 2022, 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 | £m | £m | £m | £m | £m | £m | £m | £m
Foreign exchange | 6,049,682 | 582 | 87,459 | 2 | 87,461 | (84,885) | (56) | (84,941)
Interest rate | 7,665,449 | 33,408 | 158,492 | 244 | 158,736 | (157,315) | (780) | (158,095)
Equities | 439,588 | — | 7,626 | — | 7,626 | (7,325) | — | (7,325)
Credit | 144,972 | — | 847 | — | 847 | (982) | — | (982)
Commodity and other | 57,346 | — | 1,051 | — | 1,051 | (1,000) | — | (1,000)
Offset |  |  |  |  | (59,007) |  |  | 59,007
At 31 Dec 2022 | 14,357,037 | 33,990 | 255,475 | 246 | 196,714 | (251,507) | (836) | (193,336)
Foreign exchange | 4,713,729 | 3,829 | 48,651 | 247 | 48,898 | (47,771) | (67) | (47,838)
Interest rate | 6,846,965 | 27,206 | 80,798 | 193 | 80,991 | (80,281) | (240) | (80,521)
Equities | 478,832 | — | 9,153 | — | 9,153 | (11,896) | — | (11,896)
Credit | 132,582 | — | 1,558 | — | 1,558 | (2,121) | — | (2,121)
Commodity and other | 41,308 | — | 677 | — | 677 | (765) | — | (765)
Offset |  |  |  |  | (15,490) |  |  | 15,490
At 31 Dec 2021 | 12,213,416 | 31,035 | 140,837 | 440 | 125,787 | (142,834) | (307) | (127,651)

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.

HSBC Bank plc Annual Report and Accounts 2022 | 159

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
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Unamortised balance at 1 Jan | 64 | 60 | 64 | 56
Deferral on new transactions | 110 | 156 | 99 | 155
Recognised in the income statement during the year: | (111) | (152) | (107) | (147)
– amortisation | (59) | (88) | (56) | (88)
– subsequent to unobservable inputs becoming observable | — | (2) | — | (2)
– maturity, termination or offsetting derivative | (52) | (60) | (51) | (57)
– risk hedged | — | (2) | — | —
Exchange differences and other | 1 | — | — | —
Unamortised balance at 31 Dec 1 | 64 | 64 | 56 | 64

1 This amount is yet to be recognised in the consolidated income statement.
Hedge accounting derivatives
The group applies hedge accounting to manage the following risks: interest rate and foreign exchange. The Report of the Directors – Risk
presents more details on how these risks arise and how they are managed by the group.
Hedged risk components
HSBC designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign
currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or
otherwise separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest
rates generally are regarded as being both separately identifiable and reliably measurable, except for the IBOR Reform transition where
HSBC designates Alternative Benchmark Rates as the hedged risk which may not have been separately identifiable upon initial
designation, provided HSBC reasonably expects it will meet the requirement within 24 months from the first designation date. The
designated risk component accounts for a significant portion of the overall changes in fair value or cash flows of the hedged item(s).
Fair value hedges
The group enters into fixed-for-floating-interest-rate swaps to manage the exposure to changes in fair value due to movements in market
interest rates on certain fixed rate financial instruments which are not measured at fair value through profit or loss, including debt
securities held and issued.

Hedging instrument by hedged risk
| Hedging instrument
|  | Carrying amount |  |
The group | Notional amount 1 | Assets | Liabilities | Balance sheet presentation | Change in fair value 2
Hedged risk | £m | £m | £m | £m
Interest rate 3 | 26,649 | 428 | (799) | Derivatives | 981
At 31 Dec 2022 | 26,649 | 428 | (799) |  | 981

Interest rate 3 | 24,486 | 139 | (270) | Derivatives | 159
At 31 Dec 2021 | 24,486 | 139 | (270) |  | 159

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.
Notes on the Financial Statements

160 | HSBC Bank plc Annual Report and Accounts 2022

Hedged item by hedged risk
| Hedged item | Ineffectiveness
| Carrying amount | Accumulated fair value hedge adjustments included in carrying amount 2 |  | Change in fair value 1 | Recognised in profit and loss | Profit and loss presentation
The group | Assets | Liabilities | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Interest rate 3 | 15,446 | — | (1,095) | — | Financial assets at fair value through other comprehensive income | (1,850) | 31 | Net income from financial instruments held for trading or managed on a fair value basis
— | — | — | — | Loans and advances to banks | —
713 | — | (31) | — | Loans and advances to customers | (40)
431 | — | (15) | — | Reverse Repos | (14)
— | 1,576 | — | (169) | Debt securities in issue | 398
— | 5,686 | — | (659) | Subordinated liabilities and deposits by banks 4 | 556
At 31 Dec 2022 | 16,590 | 7,262 | (1,141) | (828) |  | (950) | 31 |

Interest rate 3 | 14,099 | — | 167 | — | Financial assets at fair value through other comprehensive income | (278) | (9) | Net income from financial instruments held for trading or managed on a fair value basis
1 | — | (2) | — | Loans and advances to banks | (2)
997 | — | 7 | — | Loans and advances to customers | (16)
— | 2,844 | — | 71 | Debt securities in issue | 24
— | 5,841 | — | (77) | Subordinated liabilities and deposits by banks 4 | 104
At 31 Dec 2021 | 15,097 | 8,685 | 172 | (6) |  | (168) | (9) |

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 £10m (2021: £21m) for 'Financial assets at fair value through other comprehensive income', is nil
(2021: nil) for 'Deposits by banks' and £13m (2021: £19m) for 'Debt securities in issue'.
3 The hedged risk ‘interest rate’ includes inflation risk.
4 The notional amount of non-dynamic fair value hedges was £6,312m (2021: £5,886m) of which the weighted-average maturity is March 2026 and
the weighted average swap rate is 0.06% (2021: 0.06%) (negative). £6,312m (2021: £5,886m) of these hedges are internal to HSBC Group and
composed by internal funding between HSBC Holdings and the group.

Hedging instrument by hedged risk
| Hedging instrument
|  | Carrying amount |  | Change in fair value 2
The bank | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m
Interest rate 3 | 18,391 | 242 | (773) | Derivatives | 466
At 31 Dec 2022 | 18,391 | 242 | (773) |  | 466

Interest rate 3 | 18,016 | 188 | (234) | Derivatives | 27
At 31 Dec 2021 | 18,016 | 188 | (234) |  | 27

1 The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions
outstanding at the balance sheet date; they do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.
3 The hedged risk ‘interest rate’ includes inflation risk.

Hedged item by hedged risk
| Hedged item | Ineffectiveness
| Carrying amount | Accumulated fair value hedge adjustments included in carrying amount 2 |  | Change in fair value 1 | Recognised in profit and loss |
The bank | Assets | Liabilities | Assets | Liabilities | Balance sheet presentation | Profit and loss presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Interest rate 3 | 9,072 | — | (642) | — | Financial assets at fair value through other comprehensive income | (1,389) | 31 | Net income from financial instruments held for trading or managed on a fair value basis
7 | — | 3 | — | Loans and advances to customers | —
— | — | — | — | Reverse Repos | —
— | 1,576 | — | (169) | Debt securities in issue | 398
— | 5,653 | — | (659) | Subordinated liabilities and deposits by banks 4 | 556
At 31 Dec 2022 | 9,079 | 7,229 | (639) | (828) |  | (435) | 31 |

HSBC Bank plc Annual Report and Accounts 2022 | 161

Hedged item by hedged risk (continued)
| Hedged item | Ineffectiveness
| Carrying amount | Accumulated fair value hedge adjustments included in carrying amount 2 |  | Change in fair value 1 | Recognised in profit and loss |
The bank | Assets | Liabilities | Assets | Liabilities | Balance sheet presentation | Profit and loss presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Interest rate 3 | 9,232 | — | 159 | — | Financial assets at fair value through other comprehensive income | (163) | (8) | Net income from financial instruments held for trading or managed on a fair value basis
6 | — | — | — | Loans and advances to customers | —
— | 2,844 | — | 71 | Debt securities in issue | 24
— | 5,810 | — | (77) | Subordinated liabilities and deposits by banks 4 | 104
At 31 Dec 2021 | 9,238 | 8,654 | 159 | (6) |  | (35) | (8) |

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 £10m (2021: £21m) for 'Financial assets at fair value through other comprehensive income', nil (2021:
nil) for 'Deposits by banks' and £13m (2021: £19m) for 'Debt securities in issue'.
3 The hedged risk ‘interest rate’ includes inflation risk.
4 The notional amount of non-dynamic fair value hedges was £6,312m (2021: £5,886m), of which the weighted-average maturity is March 2026
and the weighted average swap rate is 0.06% (2021: 0.06%) (negative). Those hedges are internal to HSBC Group and composed by internal
funding between HSBC Holdings and the group.
Cash flow hedges
The group's cash flow hedging instruments consist principally of interest rate swaps and cross-currency swaps that are used to manage
the variability in future interest cash flows of non-trading financial assets and liabilities, arising due to changes in market interest rates
and foreign-currency basis.
The group applies macro cash flow hedging for interest-rate risk exposures on portfolios of replenishing current and forecasted issuances
of non-trading assets and liabilities that bear interest at variable rates, including rolling such instruments. The amounts and timing of
future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the
basis of their contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate cash flows
representing both principal balances and interest cash flows across all portfolios are used to determine the effectiveness and
ineffectiveness. Macro cash flow hedges are considered to be dynamic hedges.
The group also hedges the variability in future cash-flows on foreign-denominated financial assets and liabilities arising due to changes in
foreign exchange market rates with cross-currency swaps; these are considered dynamic hedges.

Hedging instrument by hedged risk 4
| Hedging instrument | Hedged item | Ineffectiveness
|  | Carrying amount |  | Change in fair value 2 | Change in fair value 3 | Recognised in profit and loss | Profit and loss presentation
The group | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Foreign exchange | 582 | 2 | (57) | Derivatives | (84) | (84) | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 29,495 | 5 | (20) | (1,345) | (1,334) | (11)
At 31 Dec 2022 | 30,077 | 7 | (77) |  | (1,429) | (1,418) | (11) |
Foreign exchange | 4,042 | 266 | (67) | Derivatives | 127 | 127 | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 15,067 | 5 | (2) | (178) | (167) | (11)
At 31 Dec 2021 | 19,109 | 271 | (69) |  | (51) | (40) | (11) |
| Hedging instrument | Hedged item | Ineffectiveness
|  | Carrying amount |  | Change in fair value 2 | Change in fair value 3 | Recognised in profit and loss | Profit and loss presentation
The bank | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Foreign exchange | 582 | 2 | (56) | Derivatives | (84) | (84) | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 15,017 | 2 | (7) | (1,021) | (1,021) | —
At 31 Dec 2022 | 15,599 | 4 | (63) |  | (1,105) | (1,105) | — |

Notes on the Financial Statements

162 | HSBC Bank plc Annual Report and Accounts 2022

Hedging instrument by hedged risk 4 (continued)
| Hedging instrument | Hedged item | Ineffectiveness
|  | Carrying amount |  | Change in fair value 2 | Change in fair value 3 | Recognised in profit and loss | Profit and loss presentation
The bank | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Foreign exchange | 3,829 | 247 | (67) | Derivatives | 127 | 127 | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 9,190 | 5 | (2) | (119) | (116) | (3)
At 31 Dec 2021 | 13,019 | 252 | (69) |  | 8 | 11 | (3) |

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.
4 The amounts in the above table predominantly represent the bank's exposure.
Sources of hedge ineffectiveness may arise from basis risk including, but not limited to timing differences between the hedged items and
hedging instruments, and hedges using instruments with a non-zero fair value.

Reconciliation of equity and analysis of other comprehensive income by risk type
| Interest rate | Foreign exchange
| £m | £m
Cash flow hedging reserve at 1 Jan 2022 | 32 | (39)
Fair value (losses)/gains | (1,334) | (84)
Fair value (gains) reclassified from cash flow hedge reserve to income statement in respect of: |  |
– hedged items that have affected profit or loss | 53 | 74
Income taxes | 348 | —
Cash flow hedging reserve at 31 Dec 2022 | (901) | (49)

Cash flow hedging reserve at 1 Jan 2021 | 147 | 11
Fair value gains/(losses) | (167) | 127
Fair value (gains)/losses reclassified from cash flow hedge reserve to income statement in respect of: |  |
– hedged items that have affected profit or loss | (25) | (177)
Income taxes | 77 | —
Cash flow hedging reserve at 31 Dec 2021 | 32 | (39)

Interest rate benchmark reform: amendments to IFRS 9 and IAS 39 ‘Financial Instruments’
HSBC has applied both the first set of amendments (‘Phase 1’) and the second set of amendments (‘Phase 2’) to IFRS 9 and IAS 39
applicable to hedge accounting. The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are
presented in the balance sheet as ‘Financial assets designated and otherwise mandatorily measured at fair value through other
comprehensive income’, ‘Loans and advances to customers’, ‘Debt securities in issue’ and ‘Deposits by banks’. The notional value of the
derivatives impacted by the Ibors reform, including those designated in hedge accounting relationships, is disclosed on page 31 in the
section ‘Financial instruments impacted by the Ibor reform’. For further details of Ibor transition, see ‘Top and emerging risks’ on page
28.
During 2022, the group transitioned all of its hedging instruments referencing sterling Libor, European Overnight Index Average rate
(‘Eonia’) and Japanese yen Libor. The group also transitioned some of the hedging instruments referencing US dollar Libor. There is no
significant judgement applied for these benchmarks to determine whether and when the transition uncertainty has been resolved.
The most significant Ibor benchmark in which the group continues to have hedging instruments is US dollar Libor. The transition out of
US dollar Libor hedging derivatives has been largely completed by the end of 2022. These transitions do not necessitate new approaches
compared with any of the mechanisms used so far for transition and it will not be necessary to change the transition risk management
strategy.
For some of the Ibors included under the 'Other' header, in the table below, judgment has been needed to establish whether a transition
is required, since there are Ibor benchmarks which are subject to computation methodology improvements and insertion of fallback
provisions without full clarity being provided by their administrators on whether these Ibor benchmarks will be demised.
The notional amounts of Interest Rate derivatives designated in hedge accounting relationships do not represent the extent of the risk
exposure managed by the group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1
amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by
Ibor reform are not significant and have not been presented below.

HSBC Bank plc Annual Report and Accounts 2022 | 163

Hedging instrument impacted by Ibor Reform
| Hedging instrument
| Impacted by Ibor Reform | NOT Impacted by Ibor Reform | Notional Amount 1
| EUR 2 | GBP | USD | Other 3 | Total
The group | £m | £m | £m | £m | £m | £m | £m
Fair Value Hedges | 7,581 | — | 225 | 105 | 7,911 | 18,738 | 26,649
Cash Flow Hedges | 7,359 | — | — | — | 7,359 | 22,136 | 29,495
At 31 Dec 2022 | 14,940 | — | 225 | 105 | 15,270 | 40,874 | 56,144
Fair Value Hedges | 6,407 | — | 336 | 124 | 6,867 | 17,619 | 24,486
Cash Flow Hedges | 5,877 | — | — | — | 5,877 | 9,190 | 15,067
At 31 Dec 2021 | 12,284 | — | 336 | 124 | 12,744 | 26,809 | 39,553
The bank |  |  |  |  |  |  |
Fair Value Hedges | 5,184 | — | 4 | 104 | 5,292 | 13,099 | 18,391
Cash Flow Hedges | — | — | — | — | — | 15,017 | 15,017
At 31 Dec 2022 | 5,184 | — | 4 | 104 | 5,292 | 28,116 | 33,408
Fair Value Hedges | 4,920 | — | 6 | 124 | 5,050 | 12,966 | 18,016
Cash Flow Hedges | — | — | — | — | — | 9,190 | 9,190
At 31 Dec 2021 | 4,920 | — | 6 | 124 | 5,050 | 22,156 | 27,206

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 The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which
are Fair value hedges of £7,581 m (31 Dec 2021: £6,407m) and Cash flow hedges £7,359 m (31 Dec 2021: £5,877m).
3 Other benchmarks impacted by Ibor reform comprise derivatives that are expected to transition, but do not have a published cessation date.

15 | Financial investments

Carrying amount of financial investments
|  | The group | The bank
|  | 2022 | 2021 | 2022 | 2021
|  | £m | £m | £m | £m
Financial investments measured at fair value through other comprehensive income |  | 29,356 | 41,290 | 12,261 | 23,205
– treasury and other eligible bills |  | 1,447 | 2,229 | 693 | 1,441
– debt securities |  | 27,710 | 38,924 | 11,514 | 21,711
– equity securities |  | 109 | 103 | 54 | 53
– other instruments 1 |  | 90 | 34 | — | —
Debt instruments measured at amortised cost |  | 3,248 | 10 | 6,378 | 3,337
– treasury and other eligible bills |  | 1,030 | 2 | 976 | —
– debt securities 2 |  | 2,218 | 8 | 5,402 | 3,337
At 31 Dec |  | 32,604 | 41,300 | 18,639 | 26,542

1'Other instruments’ are comprised of loans and advances.
2 The £4.2bn (2021: £3.3bn) of debt securities in the bank relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with
Single Resolution Board requirements on Minimum Required Eligible Liabilities.

Equity instruments measured at fair value through other comprehensive income
| Instruments held at year end
| Fair value | Dividends recognised
Type of equity instruments | £m | £m
Business facilitation | 77 | —
Investments required by central institutions | 31 | —
Others | 1 | —
At 31 Dec 2022 | 109 | —
Business facilitation | 76 | —
Investments required by central institutions | 26 | —
Others | 1 | —
At 31 Dec 2021 | 103 | —

Notes on the Financial Statements

164 | HSBC Bank plc Annual Report and Accounts 2022

16 | Assets pledged, collateral received and assets transferred

Assets pledged 1

Financial assets pledged as collateral
| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Treasury bills and other eligible securities | 1,649 | 990 | 877 | 990
Loans and advances to banks | 3,300 | — | 3,300 | —
Loans and advances to customers | 4,996 | 18,403 | — | —
Debt securities | 17,407 | 20,247 | 9,699 | 11,415
Equity securities | 25,408 | 23,612 | 25,014 | 25,452
Cash collateral | 45,034 | 29,963 | 32,255 | 22,961
Other | 330 | 298 | 329 | 298
Assets pledged at 31 Dec | 98,124 | 93,513 | 71,474 | 61,116

Financial assets pledged as collateral which the counterparty has the right to sell or repledge
| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Trading assets | 38,896 | 39,594 | 32,371 | 35,311
Financial investments | 3,588 | 1,436 | 1,974 | 542
At 31 Dec | 42,484 | 41,030 | 34,345 | 35,853

Assets pledged as collateral includes all assets categorised as encumbered in the disclosure on page 84 except for assets held for sale.
The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the
case of securitisations and covered bonds, the amount of liabilities issued, plus mandatory over-collateralisation, is less than the book
value of the pool of assets available for use as collateral. This is also the case where assets are placed with a custodian or a settlement
agent that has a floating charge over all the assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant,
standard securities lending and borrowing, repurchase agreements and derivative margining. The group places both cash and non-cash
collateral in relation to derivative transactions.
Collateral received 1
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 £180,233 m (2021: £202,794m)
(the bank: 2022: £154,376 m; 2021: £167,737m). The fair value of any such collateral sold or repledged was £136,777m (2021:
£151,378m) (the bank: 2022: £113,917m; 2021: £120,436m).
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 1
The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt
securities held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending
agreements, as well as swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be
recognised in full and a related liability, reflecting the group’s obligation to repurchase the assets for a fixed price at a future date is also
recognised on the balance sheet.
Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash
collateral received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the
duration of these transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty’s
recourse is not limited to the transferred assets.

Transferred financial assets not qualifying for full derecognition and associated financial liabilities
| Carrying amount of:
| Transferred assets | Associated liabilities
The group | £m | £m
At 31 Dec 2022 |  |
Repurchase agreements | 13,349 | 13,371
Securities lending agreements | 29,171 | 3,442
At 31 Dec 2021 |  |
Repurchase agreements | 11,710 | 11,732
Securities lending agreements | 29,321 | 2,129

1 Excludes assets classified as held for sale.

HSBC Bank plc Annual Report and Accounts 2022 | 165

Transferred financial assets not qualifying for full derecognition and associated financial liabilities
| Carrying amount of:
| Transferred assets | Associated liabilities
The bank | £m | £m
At 31 Dec 2022 |  |
Repurchase agreements | 5,795 | 5,795
Securities lending agreements | 28,550 | 3,467
At 31 Dec 2021 |  |
Repurchase agreements | 4,489 | 4,488
Securities lending agreements | 31,365 | 2,132

17 | Interests in associates and joint ventures

Principal associates of the group and the bank
Business Growth Fund Group plc (‘BGF’) is a principal associate of the group. BGF is an independent company, established in 2011 to
provide investment to growing small to medium-sized British businesses. BGF is backed by five of the UK’s main banking groups:
Barclays, HSBC, Lloyds, RBS and Standard Chartered. At 31 Dec 2022, the group had a 24.62% interest in the equity capital of BGF.
Share of (Loss)/profit in BGF is £(22)m (2021: £192m; 2020: £5m) and carrying amount of interest in BGF is £673m (2021: £702m; 2020:
£471m).
Interests in joint ventures
A list of all associates is set out on page 189.

18 | Investments in subsidiaries

Main subsidiaries of HSBC Bank plc 1
| At 31 Dec 2022
| Country of incorporation or registration | HSBC Bank plc’s interest in equity capital | Share class
| %
HSBC Investment Bank Holdings Limited | England and Wales | 100.00 | £1 Ordinary
HSBC Life (UK) Limited | England and Wales | 100.00 | £1 Ordinary
HSBC Trinkaus & Burkhardt GmbH | Germany | 99.99 | €1 Ordinary
HSBC Continental Europe | France | 99.99 | €5 Actions
HSBC Bank Malta p.l.c | Malta | 70.03 | €0.3 Ordinary

1 Main subsidiaries are either held directly or indirectly via intermediate holding companies.
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, in accordance with the
requirements of IAS 36. The value in use is calculated by discounting management’s cash flow projections for the investment.
The cash flows represent the Free Cash Flows ('FCF') based on the subsidiary’s binding capital requirements.
•The cash flow projections for each investment are based on the latest approved plans, which includes forecast capital available for
distribution based on the capital requirements of the subsidiary taking into account minimum and core capital requirements. Our cash
flow projections include known climate-related opportunities and costs associated with our sustainable offering. A long term growth
rate is used to extrapolate the free 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.
Notes on the Financial Statements

166 | HSBC Bank plc Annual Report and Accounts 2022

During 2022, an additional investment of £3.4bn is made in HSBC Continental Europe. Further, an impairment reversal of £2bn was
recognised in the fourth quarter as a result of the impairment test performed which relates to the investment in subsidiary i.e. HSBC
Continental Europe. This was due to updates to inputs and assumptions in the model used to estimate value-in-use ('VIU') and increase in
forecast free cash flows, resulting from acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH as well as interest
rates rise in the Eurozone. No investments in subsidiaries were impaired or reversed in 2021. There is no impact on the group financial
statement due to these transactions.

Impairment test results
Investments | Carrying amount | Value in use | Discount rate | Long-term growth rate | Headroom
HSBC Continental Europe | £m | £m | % | % | £m
At 31 Dec 2022 | 7,743 | 11,507 | 9.95 | 1.56 | 3,764
At 31 Dec 2021 | 4,331 | 4,429 | 8.34 | 1.53 | 98

Sensitivities of key assumptions in calculating VIU
At 31 December 2022, the investment in HSBC Continental Europe was sensitive to reasonably possible changes in the key assumptions
supporting the recoverable amount.
In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in respect of each
input to the model. These include the external range of observable discount rates, historical performance against forecast, and risks
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, there is a sufficient headroom to cover the changes which could not result in an impairment.

Reasonably possible changes in key assumptions
| Input | Key assumptions | Associated risks | Reasonably possible change
Investment
HSBC Continental Europe | Free Cash Flows projections | •Level of interest rates and yield curves. •Competitors’ positions within the market. •Level and change in unemployment rates. | •Customer remediation and regulatory actions. •Achievement of strategic actions relating to revenue and costs. | •FCF projections decrease by 10% . •Achievement of revenue and cost targets.
| Discount rate | •Discount rate used is a reasonable estimate of a suitable market rate for the profile of the business. | •External evidence arises to suggest that the rate used is not appropriate to the business. | •Discount rate increases by 1%.

Sensitivity of VIU to reasonably possible changes in key assumptions and changes to current assumptions to reduce headroom to nil
|  |  | Increase/(decrease)
Investments | Carrying amount | Value in use | Discount rate | Free Cash flows
At 31 Dec 2022 | £m | £m | bps | %
HSBC Continental Europe | 7,743 | 11,507 | 614 | (33.3)

19 | Structured entities

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

Total assets of the group’s consolidated structured entities, split by entity type
| Conduits | Securitisations | HSBC managed funds | Other | Total
| £m | £m | £m | £m | £m
At 31 Dec 2022 | 3,479 | 192 | 3,981 | 463 | 8,115
At 31 Dec 2021 | 3,233 | 287 | 4,653 | 568 | 8,741

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 Dec 2022, Solitaire, the group's principal SIC held £1.1bn of ABSs (2021: £1.2bn). It is currently funded entirely by commercial
paper (‘CP’) issued to the group. At 31 Dec 2022, the group held £1.3bn of CP (2021: £1.3bn).
Multi-seller conduits
The group's multi-seller conduit was established to provide access to flexible market-based sources of finance for its clients. Currently,
the group bears risk equal to transaction-specific facility offered to the multi-seller conduits, amounting to £4.7bn at 31 December 2022
(2021: £4.6bn). 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.

HSBC Bank plc Annual Report and Accounts 2022 | 167

Securitisations
The group uses structured entities to securitise customer loans and advances it originates in order to diversify the sources of funding for
asset origination and capital efficiency purposes. The loans and advances are transferred by the group to the structured entities for cash
or synthetically through credit default swaps, and the structured entities issue debt securities to investors.
HSBC managed funds
The group together with other HSBC entities has established a number of money market and non-money market funds. Where it is
deemed to be acting as principal rather than agent in its role as investment manager, the group controls these funds.
Other
The group has entered into a number of transactions in the normal course of business, which include asset and structured finance
transactions where it has control of the structured entity. In addition, the group is deemed to control a number of third-party managed
funds through its involvement as a principal in the funds.
Unconsolidated structured entities
The term ‘unconsolidated structured entities’ refers to all structured entities not controlled by the group. The group enters into
transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific
investment opportunities.

Nature and risks associated with the group’s interests in unconsolidated structured entities
| Securitisations | HSBC managed funds | Non-HSBC managed funds | Other | Total
Total asset values of the entities (£m) |  |  |  |  |
0 – 400 | 2 | 155 | 966 | 12 | 1,135
400 – 1,500 | 1 | 55 | 757 | 1 | 814
1,500 – 4,000 | — | 19 | 304 | — | 323
4,000 – 20,000 | — | 16 | 155 | — | 171
20,000+ | — | 3 | 14 | — | 17
Number of entities at 31 Dec 2022 | 3 | 248 | 2,196 | 13 | 2,460
| £m | £m | £m | £m | £m
Total assets in relation to the group's interests in the unconsolidated structured entities | 220 | 4,671 | 4,425 | 925 | 10,241
– trading assets | — | 1 | 104 | — | 105
– financial assets designated and otherwise mandatorily measured at fair value | — | 4,665 | 3,869 | — | 8,534
– loans and advances to banks | — | — | — | — | —
– loans and advances to customers | 220 | — | 452 | 497 | 1,169
– financial investments | — | 5 | — | — | 5
– other assets | — | — | — | 428 | 428
Total liabilities in relation to the group’s interests in the unconsolidated structured entities | — | 4 | — | — | 4
Other off-balance sheet commitments | 34 | — | 571 | 24 | 629
The group's maximum exposure at 31 Dec 2022 | 254 | 4,667 | 4,996 | 949 | 10,866
Total asset values of the entities (£m) |  |  |  |  |
0 – 400 | 2 | 157 | 1,194 | 14 | 1,367
400 – 1,500 | — | 81 | 774 | — | 855
1,500 – 4,000 | — | 16 | 354 | — | 370
4,000 – 20,000 | — | 12 | 149 | — | 161
20,000+ | — | 2 | 9 | — | 11
Number of entities at 31 Dec 2021 | 2 | 268 | 2,480 | 14 | 2,764
| £m | £m | £m | £m | £m
Total assets in relation to the group’s interests in the unconsolidated structured entities | 193 | 4,414 | 5,225 | 631 | 10,463
– trading assets | — | 1 | 1,807 | — | 1,808
– financial assets designated at fair value | — | 4,409 | 3,273 | — | 7,682
– loans and advances to customers | 193 | — | 49 | 631 | 873
– financial investments | — | 4 | 96 | — | 100
– other assets | — | — | — | — | —
Total liabilities in relation to group‘s interests in the unconsolidated structured entities | — | — | 2 | — | 2
Other off-balance sheet commitments | 20 | 4 | 916 | 38 | 978
The group's maximum exposure at 31 Dec 2021 | 213 | 4,418 | 6,139 | 669 | 11,439

Notes on the Financial Statements

168 | HSBC Bank plc Annual Report and Accounts 2022

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.
HSBC managed funds
The group together with other HSBC entities establishes and manages money market funds and non-money market investment funds to
provide customers with investment opportunities. The group, as fund manager, may be entitled to receive management and performance
fees based on the assets under management. The group may also retain units in these funds.
Non-HSBC managed funds
The group purchases and holds units of third-party managed funds in order to facilitate business and meet customer needs.
Other
The group has established structured entities in the normal course of business, such as structured credit transactions for customers, to
provide finance to public and private sector infrastructure projects, and for asset and structured finance transactions.
In addition to the interests disclosed above, the group enters into derivative contracts, reverse repos and stock borrowing transactions
with structured entities. These interests arise in the normal course of business for the facilitation of third-party transactions and risk
management solutions.
Group sponsored structured entities
The amount of assets transferred to and income received from such sponsored entities during 2022 and 2021 was not significant.

20 | Goodwill and intangible assets

| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Goodwill | — | — | 19 | 19
Present value of in-force long-term insurance business | 1,076 | 811 | — | —
Other intangible assets 1 | 91 | 83 | 22 | 15
At 31 Dec | 1,167 | 894 | 41 | 34

1 Included within the group's other intangible assets is internally generated software with a net carrying value of £87m (2021: £77m). During 2022,
capitalisation of internally generated software was £47m (2021: £46m), impairment was £21m (2021: £45m) and amortisation was £34m (2021:
£15m).
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.
Financial reporting 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 Financial Reporting Committee.

Movements in PVIF |  |
| 2022 | 2021
| £m | £m
PVIF at 1 Jan | 811 | 647
Change in PVIF of long-term insurance business | 226 | 200
– value of new business written during the year | 79 | 67
– expected return 1 | (53) | (70)
– assumption changes and experience variances 2,3 (see below) | 200 | 202
– other adjustments | — | 1
Exchange differences | 39 | (36)
PVIF at 31 Dec | 1,076 | 811

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 gain of £200m in the year (2021: gain
of £202m) was primarily driven by a reduction in the cost of financial guarantees in France as a result of rising interest rates during 2022.
3 2022 includes £52m impact recognised on the classification of France retail as discontinued operations.

HSBC Bank plc Annual Report and Accounts 2022 | 169

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.

| 2022 | 2021
| UK | France 1 | UK | France 1
| % | % | % | %
Weighted average risk-free rate | 3.71 | 2.80 | 0.95 | 0.69
Weighted average risk discount rate | 3.71 | 4.44 | 0.95 | 1.55
Expense inflation | 3.70 | 4.26 | 3.80 | 1.80

1 For 2022, the calculation of France’s PVIF assumes a risk discount rate of 4.44% (2021: 1.55%) plus a risk margin of £83 m (2021: £156m).
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 92 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 93 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
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Cash collateral and margin receivables | 44,932 | 29,947 | 32,255 | 22,961
Settlement accounts | 6,926 | 4,960 | 5,441 | 4,604
Bullion | 3,464 | 2,253 | 3,464 | 2,253
Prepayments and accrued income | 1,769 | 1,365 | 994 | 531
Property, plant and equipment | 761 | 846 | 9 | 10
Right-of-use assets | 166 | 251 | 32 | 37
Reinsurers’ share of liabilities under insurance contracts (Note 4) | 140 | 146 | — | —
Employee benefit assets (Note 5) | 73 | 54 | 12 | 43
Endorsements and acceptances | 243 | 196 | 218 | 172
Other accounts | 2,905 | 3,100 | 1,482 | 879
At 31 Dec | 61,379 | 43,118 | 43,907 | 31,490

Prepayments, accrued income and other assets include £55,801m (2021: £39,064m) of financial assets, the majority of which are
measured at amortised cost.

22 | Trading liabilities

| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Deposits by banks 1 | 4,337 | 3,122 | 4,350 | 3,141
Customer accounts 1 | 5,812 | 6,386 | 5,692 | 6,216
Other debt securities in issue | 812 | 1,324 | 61 | 30
Other liabilities – net short positions in securities | 30,304 | 35,601 | 15,662 | 21,774
At 31 Dec | 41,265 | 46,433 | 25,765 | 31,161

1'Deposits by banks' and 'Customer accounts' include repos, stock lending and other amounts.
Notes on the Financial Statements

170 | HSBC Bank plc Annual Report and Accounts 2022

23 | Financial liabilities designated at fair value

|  | The group | The bank
|  | 2022 | 2021 | 2022 | 2021
|  | £m | £m | £m | £m
Deposits by banks and customer accounts |  | 4,864 | 4,302 | 4,864 | 4,245
Liabilities to customers under investment contracts |  | 948 | 1,032 | — | —
Debt securities in issue |  | 20,666 | 26,049 | 13,742 | 14,399
Subordinated liabilities (Note 26) |  | 809 | 2,225 | 809 | 2,225
At 31 Dec |  | 27,287 | 33,608 | 19,415 | 20,869

The group
The carrying amount of financial liabilities designated at fair value was £(3,431)m lower than the contractual amount at maturity
(2021: £(1,568)m lower). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of £(292)m (2021:
loss of £165m).
The bank
The carrying amount of financial liabilities designated at fair value was £(2,230)m lower than the contractual amount at maturity (2021:
£(2,146)m lower). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of £(139)m (2021: loss
of £72m).

24 | Accruals, deferred income and other liabilities

|  | The group | The bank
|  | 2022 | 2021 | 2022 | 2021
|  | £m | £m | £m | £m
Cash collateral and margin payables |  | 55,470 | 32,309 | 40,356 | 24,204
Settlement accounts |  | 4,915 | 4,767 | 4,485 | 3,996
Accruals and deferred income |  | 1,903 | 1,507 | 1,241 | 859
Amount due to investors in funds consolidated by the group |  | 991 | 1,315 | — | —
Lease liabilities |  | 269 | 386 | 45 | 55
Employee benefit liabilities (Note 5) |  | 121 | 196 | 56 | 74
Share-based payment liability to HSBC Holdings |  | 98 | 129 | 72 | 102
Endorsements and acceptances |  | 231 | 189 | 218 | 172
Other liabilities |  | 2,947 | 2,658 | 1,509 | 708
At 31 Dec |  | 66,945 | 43,456 | 47,982 | 30,170

For the group, accruals, deferred income and other liabilities include £66,356m (2021: £42,887m), and for the bank £47,683m
(2021: £29,913m) of financial liabilities, the majority of which are measured at amortised cost.

HSBC Bank plc Annual Report and Accounts 2022 | 171

25 | Provisions

| Restructuring costs | Legal proceedings and regulatory matters | Customer remediation | Other provisions | Total
The group | £m | £m | £m | £m | £m
Provisions (excluding contractual commitments) |  |  |  |  |
At 1 Jan 2022 | 164 | 175 | 21 | 99 | 459
Additions | 117 | 61 | 4 | 63 | 245
Amounts utilised | (124) | (152) | (6) | (34) | (316)
Unused amounts reversed | (35) | (4) | (6) | (23) | (68)
Exchange and other movements | 4 | (3) | — | (2) | (1)
At 31 Dec 2022 | 126 | 77 | 13 | 103 | 319
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2022 |  |  |  |  | 103
Net change in expected credit loss provision and other movements |  |  |  |  | 2
At 31 Dec 2022 |  |  |  |  | 105
Total Provisions |  |  |  |  |
At 31 Dec 2021 |  |  |  |  | 562
At 31 Dec 2022 |  |  |  |  | 424

Provisions (excluding contractual commitments) |  |  |  |  |
At 1 Jan 2021 | 309 | 237 | 25 | 103 | 674
Additions | 91 | 32 | 11 | 86 | 220
Amounts utilised | (170) | (63) | (10) | (32) | (275)
Unused amounts reversed | (63) | (25) | (6) | (58) | (152)
Exchange and other movements | (3) | (6) | 1 | — | (8)
At 31 Dec 2021 | 164 | 175 | 21 | 99 | 459
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2021 |  |  |  |  | 187
Net change in expected credit loss provision and other movements |  |  |  |  | (84)
At 31 Dec 2021 |  |  |  |  | 103
Total Provisions |  |  |  |  |
At 31 Dec 2020 |  |  |  |  | 861
At 31 Dec 2021 |  |  |  |  | 562

1 The contractual commitments include 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 53.

| Restructuring costs | Legal proceedings and regulatory matters | Customer remediation | Other provisions | Total
The bank | £m | £m | £m | £m | £m
Provisions (excluding contractual commitments) |  |  |  |  |
At 1 Jan 2022 | 12 | 155 | 13 | 27 | 207
Additions | 36 | 51 | 1 | 32 | 120
Amounts utilised | (14) | (146) | (3) | (11) | (174)
Unused amounts reversed | (17) | (3) | (3) | (13) | (36)
Exchange and other movements | — | — | — | — | —
At 31 Dec 2022 | 17 | 57 | 8 | 35 | 117
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2022 |  |  |  |  | 43
Net change in expected credit loss provision and other movements |  |  |  |  | 7
At 31 Dec 2022 |  |  |  |  | 50
Total Provisions |  |  |  |  |
At 31 Dec 2021 |  |  |  |  | 250
At 31 Dec 2022 |  |  |  |  | 167

Notes on the Financial Statements

172 | HSBC Bank plc Annual Report and Accounts 2022

| Restructuring costs | Legal proceedings and regulatory matters | Customer remediation | Other provisions | Total
The bank | £m | £m | £m | £m | £m
Provisions (excluding contractual commitments) |  |  |  |  |
At 1 Jan 2021 | 39 | 198 | 17 | 52 | 306
Additions | 54 | 23 | 7 | 30 | 114
Amounts utilised | (54) | (32) | (8) | (15) | (109)
Unused amounts reversed | (26) | (24) | (4) | (40) | (94)
Exchange and other movements | (1) | (10) | 1 | — | (10)
At 31 Dec 2021 | 12 | 155 | 13 | 27 | 207
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2021 |  |  |  |  | 107
Net change in expected credit loss provision and other movements |  |  |  |  | (64)
At 31 Dec 2021 |  |  |  |  | 43
Total Provisions |  |  |  |  |
At 31 Dec 2020 |  |  |  |  | 413
At 31 Dec 2021 |  |  |  |  | 250

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 53.
Restructuring costs
These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made
during the year relate to formal restructuring plans made within the group.
Legal proceedings and regulatory matters
Further details of legal proceedings and regulatory matters are set out in Note 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
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
At amortised cost | 14,528 | 12,488 | 14,252 | 12,218
– subordinated liabilities | 13,828 | 11,788 | 14,252 | 12,218
– preferred securities | 700 | 700 | — | —
Designated at fair value (Note 23) | 809 | 2,225 | 809 | 2,225
– subordinated liabilities | 809 | 2,225 | 809 | 2,225
At 31 Dec | 15,337 | 14,713 | 15,061 | 14,443

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

HSBC Bank plc Annual Report and Accounts 2022 | 173

Subordinated liabilities of the group
|  | Carrying amount
|  | 2022 | 2021
|  | £m | £m
Additional tier 1 instruments guaranteed by the bank |  |
£700m | 5.844% Non-cumulative Step-up Perpetual Preferred Securities 1,5,6 | 569 | 700
Tier 2 instruments |  |
$750m | 3.43% Subordinated Loan 2022 | — | 558
£300m | 6.5% Subordinated Notes 2023 3 | 134 | 300
£1,500m | Floating Rate Subordinated Loan 2023 | — | 1,260
€1,500m | Floating Rate Subordinated Loan 2032 | 1,326 | —
€1,500m | Floating Rate Subordinated Loan 2024 | 1,329 | 1,260
$300m | 7.65% Subordinated Notes 2025 2 | 141 | 222
$750m | HSBC Bank plc 4.19% Subordinated Loan 2027 | 593 | 604
€300m | Floating Rate Subordinated Loan 2027 | — | 252
£200m | Floating Rate Subordinated Loan 2028 | 200 | 200
€300m | Floating Rate Subordinated Loan 2028 | 266 | 252
€260m | Floating Rate Subordinated Loan 2029 | 230 | 218
£350m | 5.375% Callable Subordinated Step-up Notes 2030 3,4,6 | 60 | 398
$2,000m | HSBC Bank plc 1.625% Subordinated Loan 2031 | 1,497 | 1,457
€2,000m | HSBC Bank plc 0.375% Subordinated Loan 2031 | 1,583 | 1,658
€2,000m | HSBC Bank plc 0.375% Subordinated Loan 2031 | 1,583 | 1,658
€1,250m | HSBC Bank plc 0.25% Subordinated Loan 2031 | 990 | 1,036
£500m | 5.375% Subordinated Notes 2033 3 | 152 | 665
£225m | 6.25% Subordinated Notes 2041 3 | 47 | 224
£600m | 4.75% Subordinated Notes 2046 3 | 191 | 595
$750m | Undated Floating Rate Primary Capital Notes | 624 | 554
$500m | Undated Floating Rate Primary Capital Notes | 415 | 369
$300m | Undated Floating Rate Primary Capital Notes (Series 3) | 249 | 222
$1,250m | HSBC Bank plc floating Subordinated Loan 2028 | 1,035 | —
$1,100m | HSBC Bank plc floating Subordinated Loan 2033 | 910 | —
€400m | HSBC Bank plc floating Subordinated Loan 2028 | 362 | —
€400m | HSBC Bank plc floating Subordinated Loan 2027 | 361 | —
€500m | HSBC Bank plc floating Subordinated Loan 2028 | 443 | —
Other Tier 2 instruments each less than £100m | 47 | 51
At 31 Dec | 15,337 | 14,713

1 The value of the security partially decreased as a result of a fair value hedge gain. The instrument was held at amortised cost in 2021. Also, the
interest rate payable after November 2031 is the sum of the compounded daily Sonia rate plus 2.0366%.
2 The bank tendered for this security in November 2022. T he principal balance is $180m. The original notional value of the security is $300m.
3 The bank tendered for these securities in November 2022. The principal balance is £135m, £61m, £157m, £70m and £237m respectively. The
original notional values of these securities are £300m, £350m, £500m, £225m and £600m respectively.
4 The interest rate payable after November 2025 is the sum of the compounded daily Sonia rate plus 1.6193%.
5 See paragraph below, ‘Guaranteed by HSBC Bank plc’.
6 These securities are ineligible for inclusion in the capital base of the group.
Guaranteed by HSBC Bank plc
A capital security guaranteed by the bank was issued by a Jersey limited partnership. The proceeds of this was lent to the bank by the
limited partnership in the form of a subordinated note. It qualified as additional tier 1 capital for the group (on a solo and consolidated
basis) under CRR II until 31 December 2021 by virtue of the application of grandfathering provisions. Since 31 December 2021, this
security has no longer qualified as regulatory capital for the group.
This preferred security, together with the guarantee, is intended to provide investors with rights to income, capital distributions and
distributions upon liquidation of the company that are equivalent to the rights that they would have had if they had purchased non-
cumulative perpetual preference shares of the company. There are limitations on the payment of distributions if such payments are
prohibited under UK banking regulations or other requirements, if a payment would cause a breach of HSBC’s capital adequacy
requirements, or if the bank has insufficient distributable reserves (as defined).
The bank has individually covenanted that, if prevented under certain circumstances from paying distributions on the preferred security in
full, it will not pay dividends or other distributions in respect of its ordinary shares, or repurchase or redeem its ordinary shares, until the
distribution on the preferred security has been paid in full.
If the preferred security guaranteed by the bank is outstanding in November 2048, or if the total capital ratio of the group (on a solo or
consolidated basis) falls below the regulatory minimum required, or if the Directors expect it to do so in the near term, provided that
proceedings have not been commenced for the liquidation, dissolution or winding up of the bank, the holders’ interests in the preferred
security guaranteed by the bank will be exchanged for interests in preference shares issued by the bank that have economic terms which
are in all material respects equivalent to the preferred security and its guarantee.
Tier 2 securities
Tier 2 capital securities are either perpetual or dated subordinated securities on which there is an obligation to pay coupons. These capital
securities are included within the group’s regulatory capital base as tier 2 capital under CRR II, either as fully eligible capital or by virtue
of the application of grandfathering provisions. In accordance with CRR II, the capital contribution of all tier 2 securities is amortised for
regulatory purposes in their final five years before maturity.
Notes on the Financial Statements

174 | HSBC Bank plc Annual Report and Accounts 2022

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

Contractual maturity of financial liabilities
The balances in the table below do not agree directly with those in our consolidated balance sheet as the table incorporates, on an
undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading liabilities and derivatives not
treated as hedging derivatives).
Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities.
Trading liabilities and derivatives not treated as hedging derivatives are included in the ‘Due not more than 1 month’ time bucket and not
by contractual maturity.
In addition, loans and other credit-related commitments, and financial guarantees are generally not recognised on our balance sheet. The
undiscounted cash flows potentially payable under loan and other credit-related commitments and financial guarantees are classified on
the basis of the earliest date they can be called.

Cash flows payable under financial liabilities by remaining contractual maturities
| Due not more than 1 month | Due over 1 month but not more than 3 months | Due between 3 and 12 months | Due between 1 and 5 years | Due after 5 years | Total
The group | £m | £m | £m | £m | £m | £m
Deposits by banks | 16,178 | 36 | 2,479 | 1,994 | 256 | 20,943
Customer accounts | 197,400 | 11,821 | 6,441 | 127 | 285 | 216,074
Repurchase agreements – non-trading | 30,572 | 1,793 | 203 | 427 | — | 32,995
Trading liabilities | 41,265 | — | — | — | — | 41,265
Financial liabilities designated at fair value | 9,558 | 1,950 | 4,887 | 7,200 | 6,857 | 30,452
Derivatives | 218,015 | 88 | 391 | 1,382 | 437 | 220,313
Debt securities in issue | 832 | 3,047 | 2,352 | 812 | 851 | 7,894
Subordinated liabilities | 9 | 137 | 427 | 3,300 | 14,713 | 18,586
Other financial liabilities 1 | 65,305 | 272 | 824 | 180 | 1,080 | 67,661
| 579,134 | 19,144 | 18,004 | 15,422 | 24,479 | 656,183
Loan and other credit-related commitments | 127,913 | — | — | — | — | 127,913
Financial guarantees 2 | 5,327 | — | — | — | — | 5,327
At 31 Dec 2022 | 712,374 | 19,144 | 18,004 | 15,422 | 24,479 | 789,423
Deposits by banks | 16,783 | 1,555 | 1,106 | 12,277 | 401 | 32,122
Customer accounts | 196,609 | 5,599 | 2,770 | 199 | 101 | 205,278
Repurchase agreements – non-trading | 24,273 | 1,924 | 1,061 | 7 | — | 27,265
Trading liabilities | 46,433 | — | — | — | — | 46,433
Financial liabilities designated at fair value | 9,358 | 2,790 | 4,310 | 8,269 | 11,873 | 36,600
Derivatives | 139,040 | 46 | 104 | 406 | 581 | 140,177
Debt securities in issue | 2,755 | 2,952 | 2,145 | 1,328 | 335 | 9,515
Subordinated liabilities | 14 | 62 | 123 | 3,969 | 10,734 | 14,902
Other financial liabilities 1 | 40,292 | 423 | 442 | 234 | 1,417 | 42,808
| 475,557 | 15,351 | 12,061 | 26,689 | 25,442 | 555,100
Loan and other credit-related commitments | 119,476 | — | — | — | — | 119,476
Financial guarantees 2 | 11,054 | — | — | — | — | 11,054
At 31 Dec 2021 | 606,087 | 15,351 | 12,061 | 26,689 | 25,442 | 685,630

HSBC Bank plc Annual Report and Accounts 2022 | 175

Cash flows payable under financial liabilities by remaining contractual maturities (continued)
| Due not more than 1 month | Due over 1 month but not more than 3 months | Due between 3 and 12 months | Due between 1 and 5 years | Due after 5 years | Total
The bank | £m | £m | £m | £m | £m | £m
Deposits by banks | 13,327 | 6 | 214 | 53 | — | 13,600
Customer accounts | 129,308 | 8,578 | 3,867 | 3 | — | 141,756
Repurchase agreements – non-trading | 27,436 | 1,663 | 203 | 427 | — | 29,729
Trading liabilities | 25,765 | — | — | — | — | 25,765
Financial liabilities designated at fair value | 9,446 | 646 | 4,303 | 3,820 | 3,967 | 22,182
Derivatives | 192,521 | 88 | 365 | 1,372 | 434 | 194,780
Debt securities in issue | — | 2,878 | 1,525 | 83 | 314 | 4,800
Subordinated liabilities | 9 | 137 | 417 | 3,283 | 14,874 | 18,720
Other financial liabilities | 48,283 | 180 | 297 | 18 | 18 | 48,796
| 446,095 | 14,176 | 11,191 | 9,059 | 19,607 | 500,128
Loan and other credit-related commitments | 36,474 | — | — | — | — | 36,474
Financial guarantees 2 | 1,363 | — | — | — | — | 1,363
At 31 Dec 2022 | 483,932 | 14,176 | 11,191 | 9,059 | 19,607 | 537,965
Deposits by banks | 18,053 | 4,781 | 1,516 | 1,453 | — | 25,803
Customer accounts | 119,749 | 3,504 | 1,453 | 2 | — | 124,708
Repurchase agreements – non-trading | 19,707 | 1,575 | 1,061 | 7 | — | 22,350
Trading liabilities | 31,161 | — | — | — | — | 31,161
Financial liabilities designated at fair value | 9,241 | 1,597 | 3,723 | 2,360 | 7,055 | 23,976
Derivatives | 127,352 | 46 | 104 | 379 | 574 | 128,455
Debt securities in issue | 1,480 | 1,915 | 845 | 1,118 | 327 | 5,685
Subordinated liabilities | 14 | 62 | 111 | 3,700 | 11,202 | 15,089
Other financial liabilities | 29,248 | 320 | 148 | 28 | 22 | 29,766
| 356,005 | 13,800 | 8,961 | 9,047 | 19,180 | 406,993
Loan and other credit-related commitments | 32,471 | — | — | — | — | 32,471
Financial guarantees 2 | 1,270 | — | — | — | — | 1,270
At 31 Dec 2021 | 389,746 | 13,800 | 8,961 | 9,047 | 19,180 | 440,734

1 Excludes financial liabilities of disposal groups.
2 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
Maturity analysis of financial assets and financial liabilities
The following table provides an analysis of financial assets and liabilities by residual contractual maturity at the balance sheet date. These
balances are included in the maturity analysis as follows:
•Financial assets and liabilities with no contractual maturity (such as equity securities) are included in the ‘Due after more than 1 year’
time bucket. Undated or perpetual instruments are classified based on the contractual notice period, which the counterparty of the
instrument is entitled to give. Where there is no contractual notice period, undated or perpetual contracts are included in the ‘Due
after more than 1 year’ time bucket.
•Financial instruments included within assets and liabilities of disposal groups held for sale are classified on the basis of the contractual
maturity of the underlying instruments and not on the basis of the disposal transaction.
•Liabilities under investment contracts are classified in accordance with their contractual maturity. Undated investment contracts are
included in the ‘Due after more than 1 year’ time bucket, however, such contracts are subject to surrender and transfer options by the
policyholders.
Notes on the Financial Statements

176 | HSBC Bank plc Annual Report and Accounts 2022

Maturity analysis of financial assets and financial liabilities |  |
| 2022 | 2021
| Due within 1 year | Due after more than 1 year | Total | Due within 1 year | Due after more than 1 year | Total
The group | £m | £m | £m | £m | £m | £m
Assets |  |  |  |  |  |
Financial assets designated or otherwise mandatorily measured at fair value | 1,391 | 14,490 | 15,881 | 3,225 | 15,424 | 18,649
Loans and advances to banks | 15,867 | 1,242 | 17,109 | 8,841 | 1,943 | 10,784
Loans and advances to customers | 38,405 | 34,209 | 72,614 | 40,837 | 50,340 | 91,177
Reverse repurchase agreement – non-trading | 52,324 | 1,625 | 53,949 | 53,079 | 1,369 | 54,448
Financial investments | 7,201 | 25,403 | 32,604 | 6,748 | 34,552 | 41,300
Other financial assets | 55,369 | 428 | 55,797 | 38,851 | 203 | 39,054
Assets held for sale | 4,174 | 17,040 | 21,214 | 9 | — | 9
At 31 Dec | 174,731 | 94,437 | 269,168 | 151,590 | 103,831 | 255,421
Liabilities |  |  |  |  |  |
Deposits by banks | 18,674 | 2,162 | 20,836 | 19,439 | 12,749 | 32,188
Customer accounts | 215,562 | 386 | 215,948 | 204,973 | 268 | 205,241
Repurchase agreements – non-trading | 32,486 | 415 | 32,901 | 27,252 | 7 | 27,259
Financial liabilities designated at fair value | 16,281 | 11,006 | 27,287 | 16,329 | 17,279 | 33,608
Debt securities in issue | 6,149 | 1,119 | 7,268 | 7,840 | 1,588 | 9,428
Other financial liabilities | 65,108 | 1,248 | 66,356 | 41,131 | 1,754 | 42,885
Subordinated liabilities | 142 | 14,386 | 14,528 | 8 | 12,480 | 12,488
Liabilities of disposal groups held for sale | 21,621 | 3,090 | 24,711 | — | — | —
At 31 Dec | 376,023 | 33,812 | 409,835 | 316,972 | 46,125 | 363,097

The bank |  |  |  |  |  |
Assets |  |  |  |  |  |
Financial assets designated or otherwise mandatorily measured at fair value | 1,287 | 331 | 1,618 | 2,796 | 419 | 3,215
Loans and advances to banks | 13,338 | 1,148 | 14,486 | 5,267 | 1,511 | 6,778
Loans and advances to customers | 25,814 | 11,178 | 36,992 | 23,609 | 10,327 | 33,936
Reverse repurchase agreement – non-trading | 41,430 | 1,625 | 43,055 | 38,759 | 949 | 39,708
Financial investments | 3,415 | 15,224 | 18,639 | 4,580 | 21,962 | 26,542
Other financial assets | 39,605 | 2 | 39,607 | 28,812 | — | 28,812
At 31 Dec | 124,889 | 29,508 | 154,397 | 103,823 | 35,168 | 138,991
Liabilities |  |  |  |  |  |
Deposits by banks | 13,543 | 51 | 13,594 | 14,655 | — | 14,655
Customer accounts | 141,712 | 2 | 141,714 | 124,704 | 2 | 124,706
Repurchase agreements – non-trading | 29,223 | 415 | 29,638 | 22,337 | 7 | 22,344
Financial liabilities designated at fair value | 14,290 | 5,125 | 19,415 | 14,425 | 6,444 | 20,869
Debt securities in issue | 4,341 | 315 | 4,656 | 4,240 | 1,418 | 5,658
Other financial liabilities | 47,651 | 32 | 47,683 | 29,868 | 44 | 29,912
Subordinated liabilities | 133 | 14,119 | 14,252 | — | 12,218 | 12,218
At 31 Dec | 250,893 | 20,059 | 270,952 | 210,229 | 20,133 | 230,362

28 | Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously (‘the offset criteria’).
In the following table, the ‘Amounts not set off in the balance sheet’ include transactions where:
•the counterparty has an offsetting exposure with the group and a master netting or similar arrangement is in place with a right of set
off only in the event of default, insolvency or bankruptcy, or the offset criteria are not otherwise satisfied; and
•in the case of derivatives and reverse repurchase/repurchase, stock borrowing/lending and similar agreements, cash and non-cash
collateral (debt securities and equities) has been received/pledged to cover net exposure in the event of a default or other
predetermined events.
The effect of over-collateralisation is excluded.
‘Amounts not subject to enforceable master netting agreements’ include contracts executed in jurisdictions where the rights of set off
may not be upheld under the local bankruptcy laws, and transactions where a legal opinion evidencing enforceability of the right of offset
may not have been sought, or may have been unable to obtain.
For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored and the
relevant customer agreements are subject to review and updated, as necessary, to ensure that the legal right of offset remains
appropriate.

HSBC Bank plc Annual Report and Accounts 2022 | 177

| Amounts subject to enforceable netting arrangements | Amounts not subject to enforceable netting arrangements 5 | Total
|  |  |  | Amounts not set off in the balance sheet |
| Gross amounts | Amounts offset | Net amounts in the balance sheet | Financial instruments, including non- cash collateral 6 | Cash collateral | Net amount
| £m | £m | £m | £m | £m | £m | £m | £m
Financial assets |  |  |  |  |  |  |  |
Derivatives (Note 14)1 | 303,911 | (79,799) | 224,112 | (193,720) | (29,998) | 394 | 1,126 | 225,238
Reverse repos, stock borrowing and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading assets | 14,490 | (196) | 14,294 | (14,293) | — | 1 | 63 | 14,357
– non-trading assets | 103,839 | (52,268) | 51,571 | (51,310) | (260) | 1 | 2,378 | 53,949
Loans and advances to customers 3 | 17,979 | (8,105) | 9,874 | (8,143) | — | 1,731 | 1 | 9,875
At 31 Dec 2022 | 440,219 | (140,368) | 299,851 | (267,466) | (30,258) | 2,127 | 3,568 | 303,419
Derivatives (Note 14)1 | 160,801 | (20,689) | 140,112 | (114,985) | (24,277) | 850 | 1,109 | 141,221
Reverse repos, stock borrowing and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading assets | 11,960 | (156) | 11,804 | (11,804) | — | — | 40 | 11,844
– non-trading assets | 125,935 | (72,788) | 53,147 | (53,044) | (103) | — | 1,301 | 54,448
Loans and advances to customers 3 | 14,741 | (6,091) | 8,650 | (7,053) | — | 1,597 | 5 | 8,655
At 31 Dec 2021 | 313,437 | (99,724) | 213,713 | (186,886) | (24,380) | 2,447 | 2,455 | 216,168
Financial liabilities |  |  |  |  |  |  |  |
Derivatives (Note 14)1 | 297,341 | (79,799) | 217,542 | (197,201) | (19,662) | 679 | 1,325 | 218,867
Repos, stock lending and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading liabilities | 10,180 | (196) | 9,984 | (9,983) | — | 1 | 2 | 9,986
– non-trading liabilities | 85,168 | (52,268) | 32,900 | (32,719) | (182) | (1) | 1 | 32,901
Customer accounts 4 | 24,082 | (8,105) | 15,977 | (8,143) | — | 7,834 | 10 | 15,987
At 31 Dec 2022 | 416,771 | (140,368) | 276,403 | (248,046) | (19,844) | 8,513 | 1,338 | 277,741
Derivatives (Note 14)1 | 159,169 | (20,689) | 138,480 | (124,745) | (13,273) | 462 | 888 | 139,368
Repos, stock lending and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading liabilities | 9,444 | (156) | 9,288 | (9,288) | — | — | 13 | 9,301
– non-trading liabilities | 100,031 | (72,788) | 27,243 | (27,090) | (153) | — | 16 | 27,259
Customer accounts 4 | 21,846 | (6,091) | 15,755 | (7,053) | — | 8,702 | 11 | 15,766
At 31 Dec 2021 | 290,490 | (99,724) | 190,766 | (168,176) | (13,426) | 9,164 | 928 | 191,694

1 At 31 Dec 2022, the amount of cash margin received that had been offset against the gross derivatives assets was £2,373 m (2021: £2,590m). The
amount of cash margin paid that had been offset against the gross derivatives liabilities was £7,279 m (2021: £6,180m).
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 83.
3 At 31 Dec 2022, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £72,614 m (2021: £91,177m) of
which £9,874 m (2021: £8,650m) was subject to offsetting.
4 At 31 Dec 2022, the total amount of 'Customer accounts' recognised on the balance sheet was £215,948 m (2021: £205,241m) of which
£15,977 m (2021: £15,755m) was subject to offsetting.
5 These exposures continue to be secured by financial collateral, but we may not have sought or been able to obtain a legal opinion evidencing
enforceability of the right of offset.
6 The disclosure has been enhanced this year to support consistency across Group entities. All financial instruments (whether recognised on our
balance sheet or as non-cash collateral received or pledged) are presented within ‘financial instruments, including non-cash collateral‘ as balance
sheet classification has no effect on the rights of set-off associated with financial instruments. Comparative data have been represented
accordingly.

29 | Called up share capital and other equity instruments

Issued and fully paid

HSBC Bank plc £1.00 ordinary shares
|  | 2022 | 2021
|  | Number | £m | Number | £m
At 1 Jan |  | 796,969,111 | 797 | 796,969,111 | 797
At 31 Dec |  | 796,969,112 | 797 | 796,969,111 | 797

HSBC Bank plc share premium
|  | 2022 | 2021
|  | £m | £m
At 31 Dec |  | 420 | —

Notes on the Financial Statements

178 | HSBC Bank plc Annual Report and Accounts 2022

Total called up share capital and share premium
|  | 2022 | 2021
|  | £m | £m
At 31 Dec |  | 1,217 | 797

HSBC Bank plc $0.01 non-cumulative third dollar preference shares
| 2022 | 2021
| Number | £000 | Number | £000
At 1 Jan and 31 Dec | 35,000,000 | 172 | 35,000,000 | 172

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

HSBC Bank plc additional tier 1 instruments
|  | 2022 | 2021
|  | £m | £m
€1,900m | Undated Subordinated Resettable Additional Tier 1 instrument issued 2015 (Callable December 2020 onwards) | 1,388 | 1,388
€235m | Undated Subordinated Resettable Additional Tier 1 instrument issued 2016 (Callable January 2022 onwards) | 197 | 197
€300m | Undated Subordinated Resettable Additional Tier 1 instrument 2018 (Callable March 2023 onwards) | 263 | 263
£555m | Undated Subordinated Resettable Additional Tier 1 instrument 2018 (Callable March 2023 onwards) | 555 | 555
£500m | Undated Subordinated Resettable Additional Tier 1 instrument 2019 (Callable November 2024 onwards) | 500 | 500
€250m | Undated Subordinated Resettable Additional Tier 1 instrument 2019 (Callable November 2024 onwards) | 213 | 213
£431m | Undated Subordinated Resettable Additional Tier 1 instrument 2019 (Callable December 2024 onwards) | 431 | 431
€200m | Undated Subordinated Resettable Additional Tier 1 instrument 2019 (Callable January 2025 onwards) | 175 | 175
€250m | Undated Subordinated Resettable Additional Tier 1 instruments issued 2022 (Callable March 2027 onwards) | 208 | —
At 31 Dec |  | 3,930 | 3,722

These instruments are held by HSBC Holdings plc. The bank has issued capital instruments that are included in the group’s capital base
as fully CRR II compliant additional tier 1 capital.
Interest on these instruments will be due and payable only at the sole discretion of the bank, and the bank has sole and absolute
discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any
date. There are limitations on the payment of principal, interest or other amounts if such payments are prohibited under UK banking
regulations, or other requirements, if the bank has insufficient distributable items reserves or if the bank fails to satisfy the solvency
condition as defined in the instruments terms.
The instruments are undated and are repayable, at the option of the bank, in whole at the initial call date, or on any Interest Payment
Date after the initial call date. In addition, the instruments are repayable at the option of the bank in whole for certain regulatory or tax
reasons. Any repayments require the prior consent of the Prudential Regulation Authority. These instruments rank pari passu with the
bank’s most senior class or classes of issued preference shares and therefore ahead of ordinary shares. These instruments will be written
down in whole, together with any accrued but unpaid interest if either the group’s solo or consolidated Common Equity Tier 1 Capital
Ratio falls below 7.00%.

HSBC Bank plc Annual Report and Accounts 2022 | 179

30 | Contingent liabilities, contractual commitments, guarantees and contingent assets

| The group | The bank
| 2022 | 2021 | 2022 | 2021
| £m | £m | £m | £m
Guarantees and other contingent liabilities: |  |  |  |
– financial guarantees | 5,327 | 11,054 | 1,363 | 1,270
– performance and other guarantees | 17,136 | 15,833 | 6,886 | 7,334
– other contingent liabilities | 353 | 367 | 342 | 364
At 31 Dec | 22,816 | 27,254 | 8,591 | 8,968
Commitments:1 |  |  |  |
– documentary credits and short-term trade-related transactions | 2,317 | 1,928 | 820 | 778
– forward asset purchases and forward deposits placed | 33,684 | 30,005 | 3,317 | 1,138
– standby facilities, credit lines and other commitments to lend | 91,912 | 87,543 | 32,337 | 30,555
At 31 Dec | 127,913 | 119,476 | 36,474 | 32,471

1 Includes £126,457m of commitments (2021: £115,695m), to which the impairment requirements in IFRS 9 are applied where the group has
become party to an irrevocable commitment.
The above table discloses the nominal principal amounts, which represent the maximum amounts at risk should the contracts be fully
drawn upon and clients default. As a significant portion of guarantees and commitments is expected to expire without being drawn upon,
the total of the nominal principal amounts is not indicative of future liquidity requirements.
UK branches of HSBC overseas entities
In December 2017, HM Revenue & Customs (‘HMRC’) challenged the VAT status of certain UK branches of HSBC overseas entities.
HMRC has also issued notices of assessment covering the period from 1 October 2013 to 31 December 2017 totalling £262m, with
interest to be determined. No provision has been recognised in respect of these notices. In Q1 2019, HMRC reaffirmed its assessment
that the UK branches are ineligible to be members of the UK VAT group and, consequently, HSBC paid HMRC the sum of £262m and
filed appeals. In February 2022, the Upper Tribunal issued a judgement addressing several preliminary legal issues, which was partially in
favour of HMRC and partially in favour of HSBC. The case will now return to the First-tier Tax tribunal for full trial and we await
confirmation of the trial window. 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 £174m 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 (‘F SCS’) provides compensation, up to certain limits, to eligible customers of financial
services firms that are unable, or likely to be unable, to pay claims against them. The FSCS may impose a further levy on the group to the
extent the industry levies imposed to date are not sufficient to cover the compensation due to customers in any future possible collapse.
The ultimate FSCS levy to the industry as a result of collapse cannot be estimated reliably. It is dependent on various uncertain factors
including the potential recovery of assets by the FSCS, changes in the level of protected products (including deposits and investments)
and the population of FSCS members at the time. In December 2022, the FCA announced that it expects to review various elements of
the scheme to ensure consumers are appropriately and proportionately protected, with costs distributed across industry levy payers in a
fair and sustainable way, with a view to deliver the majority of changes by the end of the 2023/24 financial year.
Guarantees

| The group | The bank
| 2022 | 2021 | 2022 | 2021
| In favour of third parties | By the group in favour of other HSBC Group entities | In favour of third parties | By the group in favour of other HSBC Group entities | In favour of third parties | By the bank in favour of other HSBC Group entities | In favour of third parties | By the bank in favour of other HSBC Group entities
| £m | £m | £m | £m | £m | £m | £m | £m
Financial guarantees 1 | 4,158 | 1,169 | 10,635 | 419 | 1,105 | 258 | 824 | 446
Performance and other guarantees | 15,475 | 1,661 | 14,433 | 1,400 | 5,516 | 1,370 | 6,119 | 1,215
Total | 19,633 | 2,830 | 25,068 | 1,819 | 6,621 | 1,628 | 6,943 | 1,661

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.
Notes on the Financial Statements

180 | HSBC Bank plc Annual Report and Accounts 2022

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.

| 2022 | 2021
| Total future minimum payments | Unearned finance income | Present value | Total future minimum payments | Unearned finance income | Present Value
| £m | £m | £m | £m | £m | £m
Lease receivables: |  |  |  |  |  |
No later than one year | 211 | (24) | 187 | 409 | (20) | 389
One to two years | 214 | (26) | 188 | 251 | (19) | 232
Two to three years | 207 | (21) | 186 | 187 | (17) | 170
Three to four years | 117 | (16) | 101 | 177 | (13) | 164
Four to five years | 100 | (13) | 87 | 90 | (9) | 81
Later than one year and no later than five years | 638 | (76) | 562 | 705 | (58) | 647
Later than five years | 457 | (50) | 407 | 556 | (33) | 523
At 31 Dec | 1,306 | (150) | 1,156 | 1,670 | (111) | 1,559

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 2022 (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
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the
US whose assets were invested with Bernard L. Madoff Investment Securities LLC ('Madoff Securities'). Based on information provided
by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4 bn, 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 $4 bn. Various
HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities’ fraud.
US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of
transfers from Madoff Securities to HSBC in an amount not specified, and these lawsuits remain pending in the US Bankruptcy Court for
the Southern District of New York (the 'US Bankruptcy Court').
Certain Fairfield entities (together, ‘Fairfield’) (in liquidation 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 August 2022, the US
District Court for the Southern District of New York (the 'New York District Court') affirmed earlier decisions by the US Bankruptcy Court
that dismissed the majority of the liquidators' claims (against most of the HSBC companies). In September 2022, the remaining
defendants before the US Bankruptcy Court sought leave to appeal and the liquidators filed appeals to the US Court of Appeals for the
Second Circuit, which are currently pending. Meanwhile, proceedings before the US Bankruptcy Court with respect to the remaining
claims are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales,
seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been
specified.
Cayman Islands litigation: In February 2013, Primeo Fund (‘Primeo’) (in liquidation 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 monetary damages. Following dismissal of Primeo's action by the lower and
appellate courts in the Cayman Islands, in 2019, Primeo appealed to the UK Privy Council. During 2021, the UK Privy Council held two
separate hearings in connection with Primeo's appeal. Judgment was given against HSBC in respect of the first hearing and judgment is
pending in respect of the second hearing.
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
and money damages claims. 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 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.

HSBC Bank plc Annual Report and Accounts 2022 | 181

In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch, seeking restitution of
Senator’s securities or money damages. These matters are currently pending before the Luxembourg District Court.
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 around $600m, 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. For several years thereafter, HSBC retained a Skilled Person under section 166 of
the Financial Services and Markets Act and an Independent Consultant under the FRB cease-and-desist order to produce periodic
assessments of the Group’s AML and sanctions compliance programme. The Skilled Person completed its engagement in the second
quarter of 2021, and the FCA determined that no further Skilled Person work is required. Separately, the Independent Consultant's
engagement is now complete and, in August 2022, the FRB terminated its cease-and-desist order.
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. Nine actions against
HSBC Bank plc remain pending in federal courts and HSBC Bank plc's motions to dismiss have been granted in five of these cases. In
September 2022 and January 2023, respectively, the appellate courts affirmed the dismissals of two of the cases, and the plaintiffs’
requests for review of these decisions by the full appellate courts have been denied. The dismissals in the other cases are subject to
appeal. The four remaining actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including
the timing or any possible impact on HSBC, 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 (‘EC’) issued a decision finding that HSBC, among other
banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on
HSBC based on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January
2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate appeal by
HSBC concerning the amount of the fine remains pending before the General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed
in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US federal and state laws, including
antitrust and racketeering laws and the Commodity Exchange Act (‘US CEA’). 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. HSBC has reached
class settlements with five groups of plaintiffs, and the court has approved these settlements. HSBC has also resolved several of the
individual actions, although a number of other US dollar Libor-related actions remain pending.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including
the timing or any possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
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 December 2021, a hearing on HSBC Bank plc's application
to dismiss the revised complaint took place before the South African Competition Tribunal, where a decision remains pending.
Beginning in 2013, various HSBC companies and other banks have been named as defendants in a number of putative class actions filed
in, or transferred to, the New York District Court arising from allegations that the defendants conspired to manipulate foreign exchange
rates. HSBC has reached class settlements with two groups of plaintiffs, including direct and indirect purchasers of foreign exchange
products, and the court has granted final approval of these settlements.
In 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 direct purchaser class action settlement
in the US. In December 2022, HSBC reached a settlement-in-principle with the plaintiffs to resolve these matters. The settlement remains
subject to the negotiation of definitive documentation. Additionally, in January 2023, HSBC reached a settlement-in-principle with
plaintiffs in Israel to resolve a class action lawsuit filed in the local courts alleging foreign exchange-related misconduct. The settlement
remains subject to the negotiation of definitive documentation and court approval. Lawsuits alleging foreign exchange-related
misconduct remain pending against HSBC and other banks in courts in Brazil. It is possible that additional civil actions will be initiated
against HSBC in relation to its historical foreign exchange activities.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could be
significant.
Precious metals fix-related litigation
Gold: Beginning in December 2015, numerous putative class actions 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, which were consolidated in the New York District
Court, 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. In February 2022, following the
Notes on the Financial Statements

182 | HSBC Bank plc Annual Report and Accounts 2022

conclusion of pre-class certification discovery, the defendants filed a motion seeking to dismiss the plaintiffs’ antitrust claims, which
remains pending.
In April 2016, two putative class actions 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 and related
financial products for their collective benefit in violation of US antitrust laws and the US CEA. In March 2020, the court granted the
defendants' motion to dismiss the plaintiffs’ 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 US Commodity Futures Trading Commission ('CFTC') concerning compliance with records preservation
requirements relating to the use of unapproved electronic messaging platforms for business communications. HSBC Bank plc has
reached a settlement-in-principle with the CFTC's Division of Enforcement to resolve this investigation. The settlement is subject to the
negotiation of definitive documentation and final approval by the CFTC;
•an investigation by the PRA in connection with depositor protection arrangements in the UK;
•an investigation by the FCA in connection with collections and recoveries operations in the UK;
•an investigation by the UK Competition and Markets Authority into potentially anti-competitive arrangements involving historical
trading activities relating to certain UK-based fixed income products and related financial instruments; 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 and ultimate parent company of the group is HSBC Holdings plc, which is incorporated in England and Wales.
Copies of the Group financial statements may be obtained from the below address.
HSBC Holdings plc
8 Canada Square
London E14 5HQ
IAS 24 ‘Related party disclosures’ defines related parties as including the parent, fellow subsidiaries, associates, joint ventures, post-
employment benefit plans for HSBC employees, Key Management Personnel (‘KMP’) of the group and its ultimate parent company, close
family members of the KMP and entities which are controlled, jointly controlled or significantly influenced by the KMP or their close
family members.
Particulars of transactions between the group and the related parties are tabulated below. The disclosure of the year-end balance and the
highest amounts outstanding during the year are considered to be the most meaningful information to represent the amount of the
transactions and outstanding balances during the year.
Key Management Personnel
The KMP of the bank are defined as those persons having authority and responsibility for planning, directing and controlling the activities
of the bank. They include the Directors and certain senior executives of the bank, directors and certain members of the Group Executive
Committee of HSBC Holdings plc, to the extent they have a role in directing the affairs of the bank.
The emoluments of those KMP who are not Directors or senior executives of the bank are paid by other Group companies who make no
recharge to the bank. Accordingly, no emoluments in respect of these KMP are included in the following disclosure.
The tables below represent the compensation for KMP (directors and certain senior executives) of the bank in exchange for services
rendered to the bank for the period they served during the year.

Compensation of Key Management Personnel
| 2022 | 2021 | 2020
| £000 | £000 | £000
Short-term employee benefits 1,2 | 13,487 | 13,678 | 3,865
Post-employment benefits | 69 | 46 | 19
Other long-term employee benefits | 1,152 | 1,378 | 429
Share-based payments | 4,234 | 4,331 | 586
Year ended 31 Dec | 18,942 | 19,433 | 4,899

1 Includes fees paid to non-executive Directors.
2 2022 includ es payment of £600,000 (2021: £2,091,617) relating to compensation for loss of employment.

HSBC Bank plc Annual Report and Accounts 2022 | 183

Advances and credits, guarantees and deposit balances during the year with Key Management Personnel
| 2022 | 2021
| Balance at 31 Dec | Highest amounts outstanding during year 2 | Balance at 31 Dec | Highest amounts outstanding during year
| £m | £m | £m | £m
Key Management Personnel 1 |  |  |  |
Advances and credits | — | — | 0.03 | 0.08
Deposits | 21 | 32 | 11 | 18

1 Includes close family members and entities which are controlled or jointly controlled by KMP of the bank or their close family members.
2 Exchange rate applied for non-GBP amounts is the average for the year.
The above transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and
security, as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions
did not involve more than the normal risk of repayment or present other unfavourable features.
In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the
group with Directors of HSBC Bank plc are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the
Companies Act, there is no requirement to disclose transactions with other KMP. During the course of 2022, there were no advances,
credits and guarantees entered into by the group with Directors of HSBC Bank plc.
Other related parties
Transactions and balances during the year with KMP of the bank’s ultimate parent company
During the course of 2022, 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 2022, 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
| 2022 | 2021
| Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc
| Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec
| £m | £m | £m | £m | £m | £m | £m | £m
Assets |  |  |  |  |  |  |  |
Trading assets | 62 | 17 | 7,074 | 848 | 108 | 19 | 4,702 | 1,360
Derivatives | 7,196 | 5,714 | 39,341 | 27,473 | 2,002 | 787 | 25,566 | 21,862
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 6 | 5 | 28 | 25 | 7 | 6 | 29 | 27
Loans and advances to banks | — | — | 6,237 | 5,585 | — | — | 4,890 | 3,173
Loans and advances to customers | 183 | — | 496 | 424 | — | — | 490 | 329
Financial investments | 154 | 136 | — | — | 172 | 154 | — | —
Reverse repurchase agreements – non-trading | — | — | 6,150 | 4,341 | — | — | 2,332 | 1,690
Prepayments,accrued income and other assets | 1,263 | 21 | 11,591 | 8,389 | 1,540 | 1,262 | 9,853 | 4,784
Total related party assets at 31 Dec | 8,864 | 5,893 | 70,917 | 47,085 | 3,829 | 2,228 | 47,862 | 33,225
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 45 | 21 | 522 | 91 | 158 | 23 | 116 | 82
Financial liabilities designated at fair value | 1,162 | 593 | — | — | 1,181 | 1,162 | 1,201 | —
Deposits by banks | — | — | 6,034 | 3,310 | — | — | 6,659 | 2,261
Customer accounts | 6,202 | 4,315 | 3,149 | 1,551 | 2,364 | 1,875 | 3,428 | 3,149
Derivatives | 4,345 | 2,680 | 43,384 | 30,997 | 3,443 | 2,074 | 26,152 | 22,133
Subordinated liabilities | 12,115 | 12,115 | — | — | 9,485 | 9,251 | 10,421 | —
Repurchase agreements – non-trading | — | — | 5,811 | 5,738 | — | — | 6,162 | 1,841
Provisions, accruals, deferred income and other liabilities | 3,357 | 3,161 | 10,816 | 4,864 | 189 | 179 | 8,057 | 3,826
Total related party liabilities at 31 Dec | 27,226 | 22,885 | 69,716 | 46,551 | 16,820 | 14,564 | 62,196 | 33,292
Guarantees and commitments | — | — | 4,762 | 3,383 | — | — | 2,622 | 2,061

Notes on the Financial Statements

184 | HSBC Bank plc Annual Report and Accounts 2022

The group’s transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc (continued)
| Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020
| £m | £m | £m | £m | £m | £m
Income statement |  |  |  |  |  |
Interest income | 3 | 4 | 5 | 178 | 32 | 55
Interest expense 1 | 307 | 50 | (55) | 162 | 58 | 256
Fee income | 9 | 8 | 13 | 74 | 61 | 55
Fee expense | — | — | — | 382 | 357 | 389
Trading income | — | — | — | 53 | 2 | 2
Trading expense | — | — | — | 2 | — | 2
Other operating income | 1 | 7 | 30 | 149 | 236 | 365
General and administrative expenses | 65 | 143 | 126 | 2,387 | 2,110 | 2,077

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
| 2022 | 2021
| Due to/from subsidiaries of HSBC Bank plc subsidiaries | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | Due to/from subsidiaries of HSBC Bank plc subsidiaries | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc
| Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Assets |  |  |  |  |  |  |  |  |  |  |  |
Trading assets | 264 | 172 | 62 | 17 | 7,074 | 845 | 603 | 264 | 108 | 19 | 4,695 | 1,360
Derivatives | 17,187 | 11,332 | 7,196 | 5,714 | 37,475 | 26,170 | 15,309 | 9,025 | 2,002 | 787 | 22,953 | 19,755
Loans and advances to banks | 3,484 | 2,940 | — | — | 5,197 | 3,892 | 3,172 | 2,259 | — | — | 3,561 | 2,100
Loans and advances to customers | 4,517 | 4,515 | 183 | — | 285 | 247 | 6,446 | 3,850 | — | — | 416 | 242
Financial investments | 4,521 | 4,183 | — | — | — | — | 3,337 | 3,337 | — | — | — | —
Reverse repurchase agreements – non-trading | 4,683 | 2,332 | — | — | 5,920 | 3,947 | 2,313 | 2,313 | — | — | 2,058 | 1,428
Prepayments, accrued income and other assets | 4,868 | 2,905 | 1,262 | 21 | 10,096 | 6,818 | 5,921 | 1,685 | 1,537 | 1,261 | 9,327 | 4,557
Investments in subsidiary undertakings | 10,646 | 10,646 | — | — | — | — | 6,479 | 6,479 | — | — | — | —
Total related party assets at 31 Dec | 50,170 | 39,025 | 8,703 | 5,752 | 66,047 | 41,919 | 43,580 | 29,212 | 3,647 | 2,067 | 43,010 | 29,442
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Trading liabilities | 113 | 32 | 44 | 21 | 508 | 91 | 112 | 49 | 158 | 21 | 116 | 82
Financial liabilities designated at fair value | — | — | 1,162 | 593 | — | — | — | — | 1,181 | 1,162 | 1,201 | —
Deposits by banks | 3,385 | 960 | — | — | 3,601 | 1,979 | 1,808 | 1,229 | — | — | 3,245 | 965
Customer accounts | 1,095 | 514 | 6,202 | 4,315 | 3,048 | 1,426 | 1,287 | 696 | 2,364 | 1,875 | 3,321 | 3,013
Derivatives | 13,479 | 13,361 | 4,345 | 2,680 | 40,460 | 29,001 | 17,378 | 10,190 | 3,443 | 2,074 | 23,787 | 20,182
Subordinated liabilities | 700 | 700 | 11,884 | 11,884 | — | — | 700 | 700 | 9,262 | 9,033 | 10,187 | —
Repurchase agreements – non-trading | 1,279 | 429 | — | — | 5,328 | 5,030 | 988 | 431 | — | — | 5,670 | 1,645
Provisions, accruals, deferred income and other liabilities | 7,596 | 1,015 | 3,349 | 3,167 | 9,511 | 4,437 | 6,166 | 1,127 | 174 | 166 | 6,423 | 3,302
Total related party liabilities at 31 Dec | 27,647 | 17,011 | 26,986 | 22,660 | 62,456 | 41,964 | 28,439 | 14,422 | 16,582 | 14,331 | 53,950 | 29,189
Guarantees and commitments | 4,469 | 2,655 | — | — | 2,690 | 1,380 | 5,338 | 2,676 | — | — | 1,686 | 1,130

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 2022, the gross notional value of the swaps was £5,449m (2021: £5,490m), the swaps
had a positive fair value of £424m to the bank (2021: positive fair value of £766m) and the bank had delivered collateral of £425m (2021:
£775m) to the Scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market bid/
offer spreads.

HSBC Bank plc Annual Report and Accounts 2022 | 185

34 | Assets held for sale and liabilities of disposal groups held for sale

Held for sale at 31 December
| 2022 | 2021
| £m | £m
Disposal groups | 23,179 | 3
Unallocated impairment losses 1 | (1,978) | —
Non-current assets held for sale | 13 | 6
Total assets | 21,214 | 9
Liabilities of disposal groups | 24,711 | 0

1 This represents impairment losses in excess of the carrying value on the non-current assets, excluded from the measurement scope of IFRS 5.
Disposal groups
Planned sale of our retail banking operations in France
On 25 November 2021, HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS (‘My Money Group’) and
its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe’s retail banking operations in France. The
sale, which is subject to regulatory approvals and the satisfaction of other relevant conditions, includes: HSBC Continental Europe’s
French retail banking operations; the Crédit Commercial de France (‘CCF’) brand; and HSBC Continental Europe’s 100% ownership
interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement.
The framework agreement has a long-stop date of 31 May 2024, if the sale has not closed by that point the agreement will terminate,
although that date can be extended by either party to 30 November 2024 in certain circumstances or with the agreement of both parties.
We have agreed a detailed plan with My Money Group with the aim of completing the sale in the second half of 2023, subject to
regulatory approvals, agreement and implementation of necessary financing structures and the completion of the operational transfer,
including customer and data migrations. In this regard the framework agreement imposes certain obligations on the parties in planning
for completion.
Given the scale and complexity of the business being sold, there is risk of delay in the implementation of this plan. The disposal group
was classified as held for sale for the purposes of IFRS 5 as at 30 September 2022, reflecting the prevailing judgements concerning
likelihood of the framework agreement’s timetable being achieved. The assets and liabilities classified as held for sale were determined in
accordance with the framework agreement, and are subject to change as the detailed transition plan is executed. This classification and
consequential remeasurement resulted in an impairment loss of £1.7bn, which included related transaction costs. At 31 December 2022,
we reassessed the likelihood of completion taking account of the most recent correspondence with My Money Group concerning the
implementation of the plan and related developments. As a result of this reassessment, the likelihood of completion in 2023 is judged to
be highly probable. As such, and in accordance with IFRS 5, the disposal group continues to be classified as held for sale.
The disposal group will be remeasured at the lower of the carrying amount and fair value less costs to sell at each reporting period. Any
remaining gains or losses not previously recognised, including from the recycling of foreign currency translation reserves and the reversal
of any remaining deferred tax assets and liabilities, will be recognised on completion.
Planned sale of our branch operations in Greece
On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to
Pancreta Bank SA. Completion of the transaction is subject to regulatory approval, and is currently expected to occur in the first half of
2023. At 31 December 2022, the disposal group included £0.3bn of loans and advances to customers and £1.9bn of customer accounts,
which met the criteria to be classified as held for sale. In the second quarter of 2022, we recognised a loss of £0.1bn upon reclassification
as held for sale in accordance with IFRS 5. On completion accumulated foreign currency translation reserves will be recycled to the
income statement.
Planned sale of our business in Russia
On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc)
entered into an agreement for the planned sell of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). Completion of
the transaction is subject to regulatory and governmental approval, and is currently expected to occur in the first half of 2023. In 2022, a
£0.2bn loss on the planned sale was recognised, upon reclassification as held for sale in accordance with IFRS5. On completion
accumulated foreign currency translation reserves will be recycled to the income statement.
Notes on the Financial Statements

186 | HSBC Bank plc Annual Report and Accounts 2022

At 31 December 2022, the major classes of assets and associated liabilities of disposal groups held for sale, including allocated
impairment losses, were as follows:

| France retail business | Branch operations in Greece | Business in Russia | Total
| £m | £m | £m | £m
Assets of disposal groups held for sale |  |  |  |
Cash and balances at central banks | 60 | 1,502 | — | 1,562
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss | 39 | — | — | 39
Loans and advances to banks | — | 25 | 102 | 127
Loans and advances to customers | 20,776 | 291 | — | 21,067
Reverse repurchase agreements | — | — | 208 | 208
Financial investments | — | 66 | 22 | 88
Prepayments, accrued income and other assets | 63 | 4 | 21 | 88
Total Assets at 31 Dec 2022 | 20,938 | 1,888 | 353 | 23,179
Liabilities of disposal groups held for sale |  |  |  |
Customer accounts | 18,551 | 1,900 | 27 | 20,478
Financial liabilities designated at fair value | 2,925 | — | — | 2,925
Debt securities in issue | 1,100 | — | — | 1,100
Accruals, deferred income and other liabilities | 138 | 52 | 18 | 208
Total Liabilities at 31 Dec 2022 | 22,714 | 1,952 | 45 | 24,711
Expected date of completion | Second Half of 2023 | First Half of 2023 | First Half of 2023 |
Operating segment | WPB | All global businesses | CMB, GBM |

| France retail banking operations
| £m
Net assets/(liabilities) classified as held for sale 1 | (1,712)
Expected cash contribution 2 | 3,398
Disposal group post-cash contribution 3 | 1,686

1 Excludes impairment loss allocated against the non-current assets that are in scope of IFRS 5 measurement of £64m.
2 The contributions are reported within ‘Cash and balances at central banks’ on the group’s consolidated balance sheet.
3‘Disposal group post-cash contribution’ includes the net asset value of the transferring business of €1.6bn (£1.5bn) and £0.2bn of additional items
to which a nil value is ascribed per the framework agreement.
Under the financial terms of the planned transaction, HSBC Continental Europe will transfer the business with a net asset value of €1.6bn
(£1.5bn), subject to adjustment (upwards or downwards) in certain circumstances, for a consideration of €1. Any required increase to the
net asset value of the business to achieve the net asset value of €1.6bn (£1.5bn) will be satisfied by the inclusion of additional cash. The
value of cash contribution will be determined by the net asset or liability position of the disposal group at the point of completion. Based
upon the net liabilities of the disposal group at 31 December 2022, HSBC would be expected to include a cash contribution of £3.4bn as
part of the planned transaction.

35 | Events after the balance sheet date

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

36 | HSBC Bank plc’s subsidiaries, joint ventures and associates

In accordance with section 409 of the Companies Act 2006 a list of HSBC Bank plc subsidiaries, joint ventures and associates, their
registered office address and the effective percentage of equity owned at 31 December 2022 is disclosed below.
Unless otherwise stated, the share capital comprises ordinary or common shares which are held by HSBC Bank plc or its subsidiaries.
The ownership percentage is provided for each undertaking. The undertakings below are consolidated by HSBC Bank plc unless
otherwise indicated.
HSBC Bank plc's registered office address is:
HSBC Bank plc
8 Canada Square
London E14 5HQ

HSBC Bank plc Annual Report and Accounts 2022 | 187

Subsidiaries
The undertakings below are consolidated by th e group.

Subsidiaries | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
Assetfinance December (H) Limited | 100.00 |  | 9
Assetfinance December (P) Limited | 100.00 |  | 2,9
Assetfinance December (R) Limited | 100.00 |  | 9
Assetfinance June (A) Limited | 100.00 |  | 9
Assetfinance Limited | 100.00 |  | 9
Assetfinance March (B) Limited | 100.00 |  | 10
Assetfinance March (F) Limited | 100.00 |  | 9
Assetfinance September (F) Limited | 100.00 |  | 9
Banco Nominees (Guernsey) Limited | 100.00 |  | 11
Banco Nominees 2 (Guernsey) Limited | 100.00 |  | 11
Beau Soleil Limited Partnership | n/a |  | 0,12
BentallGreenOak China Real Estate Investments, L.P. | n/a |  | 0,1,13
Canada Crescent Nominees (UK) Limited | 100.00 |  | 2,9
CCF & Partners Asset Management Limited | 100.00 | (99.99) | 9
CCF Holding (LIBAN) S.A.L. (In Liquidation) | 74.99 |  | 16
Charterhouse Administrators (D.T.) Limited | 100.00 | (99.99) | 9
Charterhouse Management Services Limited | 100.00 | (99.99) | 9
Charterhouse Pensions Limited | 100.00 |  | 2,9
COIF Nominees Limited | n/a |  | 0,2,9
Corsair IV Financial Services Capital Partners - B L.P | n/a |  | 0,1,18
Dem 9 | 100.00 | (99.99) | 3,19
Dempar 1 | 100.00 | (99.99) | 3,19
Eton Corporate Services Limited | 100.00 |  | 11
Flandres Contentieux S.A. | 100.00 | (99.99) | 19
Foncière Elysées | 100.00 | (99.99) | 19
Griffin International Limited | 100.00 |  | 9
HLF | 100.00 | (99.99) | 19
HSBC (BGF) Investments Limited | 100.00 |  | 2,9
HSBC Asset Finance (UK) Limited | 100.00 |  | 2,9
HSBC Asset Finance M.O.G. Holdings (UK) Limited | 100.00 |  | 2,9
HSBC Assurances Vie (France) | 100.00 | (99.99) | 24
HSBC Bank (General Partner) Limited | 100.00 |  | 2,25
HSBC Bank (RR) (Limited Liability Company) | n/a |  | 0,6,26
HSBC Bank Armenia cjsc | 100.00 |  | 27
HSBC Bank Capital Funding (Sterling 1) LP | n/a |  | 0,25
HSBC Bank Capital Funding (Sterling 2) LP | n/a |  | 0,25
HSBC Bank Malta p.l.c. | 70.03 |  | 28
HSBC City Funding Holdings | 100.00 |  | 9
HSBC Client Holdings Nominee (UK) Limited | 100.00 |  | 2,9
HSBC Client Nominee (Jersey) Limited | 100.00 |  | 2,29
HSBC Continental Europe | 99.99 |  | 19
HSBC Corporate Trustee Company (UK) Limited | 100.00 |  | 2,9
HSBC Custody Services (Guernsey) Limited | 100.00 |  | 11
HSBC Epargne Entreprise (France) | 100.00 | (99.99) | 24
HSBC Equity (UK) Limited | 100.00 |  | 2,9
HSBC Europe B.V. | 100.00 |  | 9
HSBC Factoring (France) | 100.00 | (99.99) | 19
HSBC Global Asset Management (Deutschland) GmbH | 100.00 |  | 30
HSBC Global Asset Management (France) | 100.00 | (99.99) | 24
HSBC Global Asset Management (Malta) Limited | 100.00 | (70.03) | 31
HSBC Global Asset Management (Switzerland) AG | 100.00 | (99.99) | 3,32
HSBC Global Custody Nominee (UK) Limited | 100.00 |  | 2,9
HSBC Global Custody Proprietary Nominee (UK) Limited | 100.00 |  | 1,2,9
HSBC Global Shared Services (India) Private Limited (In Liquidation) | 99.99 |  | 1,33
HSBC Infrastructure Limited | 100.00 |  | 9
HSBC Insurance Services Holdings Limited | 100.00 |  | 2,9

Subsidiaries | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
HSBC Investment Bank Holdings Limited | 100.00 |  | 2,9
HSBC Issuer Services Common Depositary Nominee (UK) Limited | 100.00 |  | 2,9
HSBC Issuer Services Depositary Nominee (UK) Limited | 100.00 |  | 2,9
HSBC Life (UK) Limited | 100.00 |  | 2,9
HSBC Life Assurance (Malta) Limited | 100.00 | (70.03) | 31
HSBC LU Nominees Limited | 100.00 |  | 2,9
HSBC Marking Name Nominee (UK) Limited | 100.00 |  | 2,9
HSBC Middle East Leasing Partnership | n/a |  | 0,34
HSBC Operational Services GmbH | 100.00 | (99.99) | 30
HSBC Overseas Nominee (UK) Limited | 100.00 |  | 2,9
HSBC PB Corporate Services 1 Limited | 100.00 |  | 35
HSBC Pension Trust (Ireland) DAC | 100.00 |  | 2,36
HSBC PI Holdings (Mauritius) Limited | 100.00 |  | 37
HSBC Preferential LP (UK) | 100.00 |  | 2,9
HSBC Private Banking Nominee 3 (Jersey) Limited | 100.00 |  | 35
HSBC Private Equity Investments (UK) Limited | 100.00 |  | 9
HSBC Private Markets Management SARL | n/a |  | 0,38
HSBC Property Funds (Holding) Limited | 100.00 |  | 9
HSBC Real Estate Leasing (France) | 100.00 | (99.99) | 19
HSBC REIM (France) | 100.00 | (99.99) | 24
HSBC Securities (South Africa) (Pty) Limited | 100.00 |  | 2,39
HSBC Securities Services (Guernsey) Limited | 100.00 |  | 11
HSBC Securities Services (Ireland) DAC | 100.00 |  | 36
HSBC Securities Services (Luxembourg) S.A. | 100.00 |  | 2,40
HSBC Securities Services Holdings (Ireland) | 100.00 |  | 36
HSBC Service Company Germany GmbH | 100.00 | (99.99) | 1,30
HSBC Services (France) | 100.00 | (99.99) | 19
HSBC SFH (France) | 100.00 | (99.99) | 3,24
HSBC SFT (C.I.) Limited | 100.00 |  | 2,11
HSBC Specialist Investments Limited | 100.00 |  | 9
HSBC Titan GmbH & Co. KG | 100.00 | (99.99) | 1,41
HSBC Transaction Services GmbH | 100.00 | (99.99) | 5,30
HSBC Trinkaus & Burkhardt (International) S.A. | 100.00 | (99.99) | 42
HSBC Trinkaus & Burkhardt Gesellschaft fur Bankbeteiligungen mbH | 100.00 | (99.99) | 30
HSBC Trinkaus & Burkhardt GmbH | 100.00 | (99.99) | 5,30
HSBC Trinkaus Europa Immobilien-Fonds Nr. 5 GmbH | 100.00 | (99.99) | 30
HSBC Trinkaus Family Office GmbH | 100.00 | (99.99) | 5,30
HSBC Trinkaus Real Estate GmbH | 100.00 | (99.99) | 5,30
HSBC Trustee (C.I.) Limited | 100.00 |  | 2,35
HSBC Trustee (Guernsey) Limited | 100.00 |  | 2,11
HSIL Investments Limited | 100.00 |  | 9
INKA Internationale Kapitalanlagegesellschaft mbH | 100.00 | (99.99) | 30
James Capel (Nominees) Limited | 100.00 |  | 2,9
James Capel (Taiwan) Nominees Limited | 100.00 |  | 2,9
Keyser Ullmann Limited | 100.00 | (99.99) | 9
Midcorp Limited | 100.00 |  | 2,9
Prudential Client HSBC GIS Nominee (UK) Limited | 100.00 |  | 2,9
Republic Nominees Limited | 100.00 |  | 2,11
RLUKREF Nominees (UK) One Limited | 100.00 |  | 1,2,9
RLUKREF Nominees (UK) Two Limited | 100.00 |  | 1,2,9
S.A.P.C. - Ufipro Recouvrement | 99.99 |  | 19
Saf Baiyun | 100.00 | (99.99) | 3,19
Saf Guangzhou | 100.00 | (99.99) | 3,19
SCI HSBC Assurances Immo | 100.00 | (99.99) | 24
SFM | 100.00 | (99.99) | 19
SFSS Nominees (Pty) Limited | 100.00 |  | 39
SNC Les Oliviers D'Antibes | 60.00 | (59.99) | 4,24
SNCB/M6 - 2008 A | 100.00 | (99.99) | 19
SNCB/M6-2007 A | 100.00 | (99.99) | 3,19

Notes on the Financial Statements

188 | HSBC Bank plc Annual Report and Accounts 2022

SNCB/M6-2007 B | 100.00 | (99.99) | 3,19
Société Française et Suisse | 100.00 | (99.99) | 19
Somers Dublin DAC | 100.00 | (99.99) | 36
Sopingest | 100.00 | (99.99) | 19
South Yorkshire Light Rail Limited | 100.00 |  | 9
Swan National Limited | 100.00 |  | 9
The Venture Catalysts Limited | 100.00 |  | 2,9
Trinkaus Australien Immobilien Fonds Nr. 1 Brisbane GmbH & Co. KG | 100.00 | (99.99) | 30
Trinkaus Australien Immobilien-Fonds Nr. 1 Treuhand-GmbH | 100.00 | (99.99) | 5,30
Trinkaus Europa Immobilien-Fonds Nr.3 Objekt Utrecht Verwaltungs-GmbH | 100.00 | (99.99) | 30
Trinkaus Immobilien-Fonds Geschaeftsfuehrungs-GmbH | 100.00 | (99.99) | 5,30
Trinkaus Immobilien-Fonds Verwaltungs- GmbH | 100.00 | (99.99) | 5,30
Trinkaus Private Equity Management GmbH | 100.00 | (99.99) | 30
Trinkaus Private Equity Verwaltungs GmbH | 100.00 | (99.99) | 5,30
Valeurs Mobilières Elysées | 100.00 | (99.99) | 19

Joint ventures
The undertakings below are joint ventures and equity accounted.

Joint Ventures | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
HCM Holdings Limited (In Liquidation) | 50.99 |  | 23
The London Silver Market Fixing Limited | n/a |  | 0,1,2,48

Associates
The undertakings below are associates and equity accounted.

Associates | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
BGF Group plc | 24.62 |  | 14
Bud Financial Limited | 5.36 |  | 1,15
Contour Pte Ltd | 12.65 |  | 1,17
Divido Financial Services Limited | 5.56 |  | 1,20
Episode Six Limited | 7.02 |  | 1,21
Euro Secured Notes Issuer | 16.67 |  | 22
LiquidityMatch LLC | n/a |  | 0,1,43
London Precious Metals Clearing Limited | 30.00 |  | 1,2,44
Monese Ltd | 5.39 |  | 1,45
Quantexa Ltd | 10.10 |  | 46
Services Epargne Enterprise | 14.18 |  | 47
Threadneedle Software Holdings Limited | 6.56 |  | 1,49
Trade Information Network Limited | 16.67 |  | 1,50
Trinkaus Europa Immobilien-Fonds Nr. 7 Frankfurt Mertonviertel KG | n/a |  | 0,30
Vizolution Limited | 17.95 |  | 1,7
We Trade Innovation Designated Activity Company (In Liquidation) | 9.88 |  | 1,8

Footnotes
0 | Where an entity is governed by voting rights, HSBC consolidates when it holds — directly or indirectly — the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC's consolidation policy is described in Note 1.2(a).
1 | Management has determined that these undertakings are excluded from consolidation in the Group accounts as these entities do not meet the definition of subsidiaries in accordance with IFRSs. HSBC’s consolidation policy is described in Note 1.2(a).
2 | Directly held by HSBC Bank plc
Description of shares
3 | Actions
4 | Parts
5 | GmbH Anteil
6 | Russian Limited Liability Company Shares
Registered offices
7 | Office Block A, Bay Studios Business Park, Fabian Way, Swansea, Wales, United Kingdom, SA1 8QB
8 | 10 Earlsfort Terrace, Dublin, Ireland, D02 T380
9 | 8 Canada Square, London, United Kingdom, E14 5HQ
10 | 5 Donegal Square South, Northern Ireland, Belfast, United Kingdom, BT1 5JP
11 | Arnold House, St Julians Avenue, St Peter Port, Guernsey, GY1 3NF
12 | HSBC Main Building, 1 Queen's Road Central, Hong Kong
13 | Oak House Hirzel Street, St Peter Port, Guernsey, GY1 2NP
14 | 13-15 York Buildings, London, United Kingdom, WC2N 6JU
15 | Linen Court Floor 3, 10 East Road, London, United Kingdom, N1 6AD
16 | Solidere - Rue Saad Zaghloul Immeuble - 170 Marfaa, P.O. Box 17 5476 Mar Michael, Beyrouth, Lebanon, 11042040
17 | 50 Raffles Place, #32-01 Singapore Land Tower, Singapore, 048623
18 | c/o Walkers Corporate Services Limited Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands, KY1-9005
19 | 38 avenue Kléber, Paris, France, 75116
20 | Office 7, 35-37 Ludgate Hill, London, United Kingdom, EC4M 7JN
21 | 9/F Amtel Bldg, 148 des Voeux Rd Central, Central, Hong Kong
22 | 3 avenue de l'Opera, Paris, France, 75001
23 | c/o Teneo Financial Advisory Limited, 156 Great Charles Street, Queensway, Birmingham, West Midlands, United Kingdom, B3 3HN
24 | Immeuble Cœur Défense, 110 esplanade du Général de Gaulle, Courbevoie, France, 92400
25 | HSBC House Esplanade, St. Helier, Jersey, JE4 8UB
26 | 2 Paveletskaya Square Building 2, Moscow, Russian Federation, 115054
27 | 66 Teryan Street, Yerevan, Armenia, 0009
28 | 116 Archbishop Street, Valletta, Malta
29 | HSBC House Esplanade, St. Helier, Jersey, JE1 1HS
30 | Hansaallee 3, Düsseldorf, Germany, 40549
31 | 80 Mill Street, Qormi, Malta, QRM 3101
32 | 26 Gartenstrasse, Zurich, Switzerland, 8002
33 | 52/60, M G Road Fort, Mumbai, India, 400 001
34 | Unit 401 Level 4, Gate District Precinct Building 2, Dubai International Financial Centre, Dubai, United Arab Emirates, 506553
35 | HSBC House Esplanade, St. Helier, Jersey, JE1 1GT

HSBC Bank plc Annual Report and Accounts 2022 | 189

Registered offices (continued)
36 | 1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland, D02 P820
37 | 6th Floor HSBC Centre 18, Cybercity, Ebene, Mauritius, 72201
38 | 5 rue Heienhaff, Senningerberg, Luxembourg, 1736
39 | 1 Mutual Place, 107 Rivonia Road, Sandton, Gauteng, South Africa, 2196
40 | 18 Boulevard de Kockelscheuer, Luxembourg, Luxembourg, L-1821
41 | 3 Hansaallee, Düsseldorf, Nordrhein-Westfalen, Germany, 40549
42 | 16 Boulevard d'Avranches, Luxembourg, Luxembourg, L-1160
43 | 100 Town Square Place, Suite 201 | Jersey City, NJ, United States Of America, 07310
44 | 7th Floor 62 Threadneedle Street, London, United Kingdom, EC2R 8HP
45 | Eagle House, 163 City Road, London, United Kingdom, EC1V 1NR
46 | Hill House, 1 Little New Street, London, United Kingdom, EC4A 3TR
47 | 32 rue du Champ de Tir, Nantes, France, 44300
48 | c/o Hackwood Secretaries Limited, One Silk Street, London, United Kingdom, EC2Y 8HQ
49 | 2nd Floor Regis House, 45 King William Street, London, United Kingdom, EC4R 9AN
50 | 3 More London Riverside, London, United Kingdom, SE1 2AQ

Notes on the Financial Statements

190 | HSBC Bank plc Annual Report and Accounts 2022

HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888 www.hsbc.co.uk
Registered number 00014259