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: £1,023m); (2020: £(1,614)m)

Reported revenue (£m)

£4,646m

(2021: £6,120m); (2020: £5,900m)

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

£114bn

(2021: £107bn); (2020: £124bn)

.

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

£1,724m

(2021: £1,577m); (2020: £(184)m)

Total assets at period end (£bn)

£717bn

(2021: £597bn); (2020: £681bn)

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 assets3,8	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’ equity5	(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

1Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 18 to 20.

2Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue.

3Unless 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.

4The 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.

5The return on average ordinary shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average

total shareholders’ equity.

6The 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.

7Reported 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).

8From 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.

Focus 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 markets1. 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.

1Full 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: £20m)	(2021: £589m); (2020: £55m)	(2021: £99m); (2020: £(52)m)	(2021: £490m); (2020: £152m)	(2021: £323m); (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, HSBC 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 engagement1 score was 47% as at the

end of 2022, an increase of 1% compared to 2021;

•Our ethnic diversity goal2 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 leadership3 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.

1Employee 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.

2Our 2022 ethnicity goal of 2.2% includes UK RFB and NRFB.

3Senior 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.

4The 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 £1,724m, 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

internal 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 income1	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 charges2	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 assets1	(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

1Total operating income and expense include significant items as detailed on pages 16 to 19.

2Net 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 operating 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 instruments1	(35)	—	(6)	(1)	—	(1)	(43)
–  restructuring and other related costs2	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 instruments1	12	—	(5)	(1)	(1)	—	5
–  restructuring and other related costs2	—	—	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 instruments1	2	—	2	1	—	(2)	3
–  restructuring and other related costs2	—	—	185	—	—	(91)	94
Adjusted revenue	1,968	1,381	624	1,133	1,035	(144)	5,997

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

2Includes 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 lower

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 yield1	1.53	0.51	0.74
Less: gross interest payable1	(1.23)	(0.01)	(0.27)
Net interest spread2	0.30	0.50	0.47
Net interest margin3	0.51	0.50	0.51

1Gross 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.

2Net 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.

3Net 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	Yield1	Average balance	Interest income	Yield1	Average balance	Interest income	Yield1
	£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

1Interest 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	Cost1	Average balance	Interest expense	Cost1	Average balance	Interest expense	Cost1
	£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

1Interest 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 benchmark3
	USD Libor	GBP Libor	Others1
At 31 Dec 2022	£m	£m	£m
Non-derivative financial assets2
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 assets2
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 liabilities2			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

1Comprises 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.

2Gross carrying amount excluding allowances for expected credit losses.

The amounts in the above table relate to the group's main

operating entities where we have material exposures impacted by

Ibor reform, including in the United Kingdom, France and

Germany. The amounts provide an indication of the extent of the

group’s exposure to the Ibor benchmarks that are due to be

replaced. Amounts are in respect of financial instruments that:

•contractually reference an interest rate benchmark that is

planned to transition to an alternative benchmark;

•have a contractual maturity date beyond the date by which the

reference interest rate benchmark is expected to cease; and

•are recognised on the group’s consolidated balance sheet.

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 classification1,2
Strong	BBB and above	A- and above	CRR1 to CRR21	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

1Customer risk rating (‘CRR’).

212-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 ECL1	Gross carrying/ nominal amount	Allowance for ECL1
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 assets2	55,634	(3)	38,851	(9)
–  assets held for sale6	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 guarantees3	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 sheet4	131,784	(87)	126,749	(72)
	492,408	(1,370)	432,006	(1,240)
	Fair value	Memorandum allowance for ECL5	Fair value	Memorandum allowance for ECL5
	£m	£m	£m	£m
Debt instruments measured at fair value through other comprehensive income ('FVOCI')	29,248	(24)	41,188	(19)

1The 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.

2Includes 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.

3Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.

4Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

5Debt 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.

6For 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 ECL1	Gross carrying/ nominal amount	Allowance for ECL1
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 assets2	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 guarantees3	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 sheet4	37,055	(43)	32,525	(36)
	258,275	(467)	208,626	(391)
	Fair value	Memorandum allowance for ECL5	Fair value	Memorandum allowance for ECL5
	£m	£m	£m	£m
Debt instruments measured at FVOCI	12,206	(4)	23,152	(4)

1The 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.

2Includes 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.

3Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.

4Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

5Debt 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 amount2					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	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 guarantees1	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

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

2Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

3Purchased 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 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2
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

1Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.

2The 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 amount2					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	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 guarantees1	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

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

2Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

3Purchased 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 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2
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	—	—	—	—	—	—	—	—

1Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.

2The 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 amount2					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	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 guarantees1	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

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

2Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

3Purchased 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 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2	Stage 2	1 to 29 DPD1,2	30 and > DPD1,2
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	—	—

1Days past due (‘DPD’). Up-to-date accounts in stage 2 are not shown in amounts presented above.

2The 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 amount2					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	Total	Stage 1	Stage 2	Stage 3	POCI3	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 guarantees1	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

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

2Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

3Purchased 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 DPD1	30 and > DPD1	Stage 2	1 to 29 DPD1	30 and > DPD1	Stage 2	1 to 29 DPD1	30 and > DPD1
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	—	—	—	—	—	—	—	—

1Days 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 20221
	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 backstop2	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 backstop2	—	—	—	—	—	—	—	—	—
Total stage 2	482	1,547	547	2,576	(7)	(27)	(1)	(35)	1.4

1Where 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.

2Days past due (‘DPD’).

Loans and advances to customers at 31 December 20211
	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 backstop2	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 backstop2	—	—	—	—	—	—	—	—	—
Total stage 2	88	2,893	216	3,197	(2)	(45)	—	(47)	1.5

1Where 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.

2Days 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	Other1	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)

1Comprising 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 guarantees1	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 guarantees1	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 20221
	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 for 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 conditions1,2,3
	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 amount2	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 amount2	142,450	120,955

1ECL sensitivity includes off-balance sheet financial instruments that

are subject to significant measurement uncertainty.

2Includes 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 conditions1
	UK	France2
	£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 conditions1
	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

1ECL sensitivities exclude portfolios utilising less complex modelling

approaches.

2Includes 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 guarantees1
(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)
Others2,3	(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 guarantees1 (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)

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

2Includes 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.

3Total 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 guarantees1 (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
Others2	(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 guarantees1 (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

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

2Includes 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 guarantees1
(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)
Others2	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 guarantees1 (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)

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

2Includes 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 guarantees1 (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
Others2	(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 guarantees1 (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

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

2Includes 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 income1	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

1For 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 income1	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

1For 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 income1	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

1For 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 income1	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

1For 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 FVOCI1
–  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

1For 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 FVOCI1
–  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

1For 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 FVOCI1
–  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

1For 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 FVOCI1
–  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

1For 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 20211	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 20211	(1)	(5)	(233)	(2)	(241)

1Forborne 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 20211	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 20211	(1)	(2)	(124)	—	(127)

1Forborne 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 guarantees1 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)

1Excludes 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 guarantees1 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)

1Excludes 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
UK1	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 guarantees2 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	—	—	—	—

1Includes primarily first lien residential mortgages in Channel Islands and Isle of Man.

2Excludes 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
UK1	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 guarantees2 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)

1Includes primarily first lien residential mortgages in Channel Islands and Isle of Man.

2Excludes 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

Report of the Directors | Risk

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 diversification1	Total2
	£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

1Portfolio 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.

2The 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 earnings1,2	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 dividend3	(1,459)	625
6	Common equity tier 1 capital before regulatory adjustments2	20,017	19,921
28	Total regulatory adjustments to common equity tier 1	(833)	(958)
29	Common equity tier 1 capital2	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 capital2	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 capital2	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 £7.5bn during the year, including an increase

of £7.4bn 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’ LCRs1,2,3
		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’ NSFRs1,2
		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 assets1,2,3
	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 conduits1
–  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 sector3	13.3	7.7

1Exposures 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.

2Represents the undrawn balance for the five largest committed liquidity facilities provided to customers, other than those facilities to conduits.

3Represents 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.

Report of the Directors | Risk

84 HSBC Bank plc Annual Report and Accounts 2022

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 Diversification1	Total2
	£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

1Portfolio 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.

2The 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.

Report of the Directors | Risk

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.

Report of the Directors | Risk

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 contracts1	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 assets2	996	8	4	77	1,085
Reinsurance assets	—	40	112	—	152
PVIF3	—	—	—	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 tax4	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 assets2	1,156	65	61	98	1,380
Reinsurance assets	—	53	104	—	157
PVIF3	—	—	—	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 tax4	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.

2Comprise mainly loans and advances to banks, cash and intercompany balances with other non-insurance legal entities.

3Present 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 and Chief Financial Officer

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 Board: 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 Officer of ESO at National 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 by 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. Feedback 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

Report of the Directors | Corporate Governance Report

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.

Report of the Directors | Corporate Governance Report

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

Financial 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.

Report of the Directors | Corporate Governance Report

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 employees1	—	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 western 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.

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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 income1,2		6,535	3,149	4,086
–  interest expense3		(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 sale4		(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 charges5		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.

1Interest 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.

2Interest 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.

3Interest 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.

42022 balances include losses on disposal of businesses classified as held-for-sale as part of a broader restructuring of our European business.

5Net 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 sale1	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 sale1	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

1Includes 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 impairment1	128	174	1,273
Net loss/(gain) from investing activities2	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 differences3	(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 repaid4	(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 Dec5	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 sale6	1,925	—	—
–  less: items in the course of transmission to other banks	(2,226)	(489)	(290)
Cash and cash equivalents at 31 Dec5	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 gains/(losses) £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  Includes £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 risk1	—	—	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 company2	—	—	(1,052)	—	—	—	—	(1,052)	(2)	(1,054)
Net impact of equity-settled share-based payments	—	—	5	—	—	—	—	5	—	5
Capital contribution3	—	—	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 risk1	—	—	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 company2	—	—	(194)	—	—	—	—	(194)	(1)	(195)
Net impact of equity-settled share-based payments	—	—	(10)	—	—	—	—	(10)	—	(10)
Change in business combinations and other movements5	—	—	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 risk1	—	—	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 company2	—	—	(263)	—	—	—	—	(263)	—	(263)
Net impact of equity-settled share-based payments	—	—	11	—	—	—	—	11	—	11
Capital contribution4	—	—	1,000	—	—	—	—	1,000	—	1,000
Change in business combinations and other movements6	—	—	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

1The 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).

2The 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 £1.5bn 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.

4HSBC UK Holdings Limited (during 2021, parent company of the bank changed to HSBC Holdings plc) injected £1bn 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.

5Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH and HSBC Bank Armenia cjsc, in 2021 increasing the group’s interest to

100%.

6Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in May 2020, increasing the group’s interest from 80.67% to 99.33%.

7The 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 impairment1		17	18	635
Net gain from investing activities2		(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 differences3		(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 assets4		(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 issued5		3,111	10,466	—
–  subordinated loan capital repaid5		(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

1Included within 2020 is the impact of impairment related to our business in the UK (£531m).

2Included 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.

4Includes additional investment in subsidiaries (2021: £17m; 2020: £443m).

5Subordinated 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 risk1	—	—	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 company2	—	—	(1,052)	—	—	—	—	(1,052)
Net impact of equity-settled share-based payments	—	—	5	—	—	—	—	5
Capital contribution3			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 risk1	—	—	—	—	—	—	—	—
–  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 company2	—	—	(194)	—	—	—	—	(194)
Net impact of equity-settled share-based payments	—	—	(10)	—	—	—	—	(10)
Change in business combinations and other movements5	—	—	(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 risk1	—	—	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 company2	—	—	(263)	—	—	—	—	(263)
Net impact of equity-settled share-based payments	—	—	11	—	—	—	—	11
Capital contribution4	—		1,000	—	—	—	—	1,000
Change in business combinations and other movements6	—		12	(1)	—	(6)	—	5
At 31 Dec 2020	797	3,722	20,099	351	55	43	(5,248)	19,819

1The 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).

2The 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 £1.5bn 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.

4HSBC UK Holdings Limited (during 2021, parent company of the bank changed to HSBC Holdings plc) injected £1bn 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.

5Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in Feb 2021, increasing the group’s interest from 99.33% to 100.00%.

6Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH in May 2020, increasing the group’s interest from 80.67% to 99.33%.

7The 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

1.1Basis 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 of £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 group 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.

1.2Summary 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 DPF1	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

1Discretionary participation features.

Net insurance claims and benefits paid and movement in liabilities to policyholders
	Non-linked insurance	Linked life insurance	Investment contracts with DPF1	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

1Discretionary 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 DPF1	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 movements2	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 movements2	(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 movements2	(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

1Discretionary 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 benefits1	57	73	56
Year ended 31 Dec	1,762	2,023	2,340

1Includes £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 business1
	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

1Average 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 year1	11,651	15,479	16,823
Released in the year1	(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

1Includes 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	WAEP1
	(000s)	£
Outstanding at 1 Jan 2022	6,936	2.87
Granted during the year2	(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 year2	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 year2	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

1Weighted average exercise price.

2Includes 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 Plan2	Other plans	HSBC Trinkaus & Burkhardt Pension Plan2	Other plans	HSBC Trinkaus & Burkhardt Pension Plan2	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 movements1	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 movements1	7	(10)	(4)	69	3	59
At 31 Dec 2021	434	234	(438)	(304)	(4)	(70)

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

2The 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 Plan1	11	10	12	11	12	66

1The 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 2018G11	25.2	28.2	28.9	31.2
At 31 Dec 20212	RT 2018G11	20.6	23.4	24.0	26.3

1Heubeck 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.

22021 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
Fees1	1,410	1,525	1,256
Salaries and other emoluments2	2,294	3,569	2,321
Annual incentives3	979	694	576
Long-term incentives4	779	511	727
Year ended 31 Dec	5,462	6,299	4,880

1Fees paid to non-executive Directors.

2Salaries and other emoluments include Fixed Pay Allowances.

3Discretionary annual incentives for executive Directors are based on a combination of individual and corporate performance, and are determined

by the Remuneration Committee of the bank’s parent company, HSBC Holdings plc. Incentive awards made to executive directors are delivered in

the form of cash and HSBC Holdings plc shares. The total amount shown is comprised of £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.

4The 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 incentives1	859	558	417
Long-term incentives2	677	390	677
Year ended 31 Dec	3,177	2,347	2,486

1Awards made to the highest paid Director 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.

2The 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 total vesting period of deferred cash and share awards is no less than three years, with 33% of the award vesting on each of the first

and second anniversaries of the date of the award, and the balance vesting on the third anniversary of the date of the award. The share awards

are subject to a six-month retention period upon vesting.

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 audit1		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 subsidiaries2		5.8	5.6	6.0
–  audit-related assurance services3		5.3	5.7	4.2
–  other assurance services4		4.5	3.0	2.9
Year ended 31 Dec		21.1	19.1	18.4

1Fees 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’.

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

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

4Including 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 Dec1	(561)	(23)	(136)

1In addition to amounts recorded in the income 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 was 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 year 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 losses2	Other1	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
Assets3		45	50	236	142	11	628	154	1,266
Liabilities3		—	(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
Assets3		74	53	215	—	212	381	—	935
Liabilities3		—	(4)	—	(58)	—	—	(289)	(351)

1Other deferred tax assets and liabilities relate to share-based payments, cash flow hedges and temporary differences arising between IFRS and

French tax returns.

2The 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.

3After netting off balances within countries, the balances as disclosed in the financial statements are as follows: deferred tax assets £1,279m (2021:

£599m); 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 the Group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts

of future 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 losses2	Other1	Total
The bank	£m	£m	£m	£m	£m	£m	£m
Assets2	17	207	—	191	69	48	532
Lliabilities2	—	—	(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
Assets3	14	231	75	—	28	260	608
Liabilities3	—	—	—	—	—	—	—
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
Assets3	17	207	—	191	69	48	532
Liabilities3	—	—	(23)	—	—	—	(23)

1Other deferred tax assets and liabilities relate to fair value of own debt, loan impairment allowances, share-based payments and cash flow hedges.

2The 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.

3After 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 dividend1	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 shares2	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 Other reflecting the reorganisation of the GBM management structure during 2021 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. 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 charges1	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 charges1	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

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

segment revenue which is eliminated in Corporate centre, amounting to £120m (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
–  France1	171	1,677	1,528
–  Germany	732	887	814
–  Other countries1	582	619	644

12022 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
Revenue1	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 instruments1	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 banks1	3,987	4,142	3,872	3,559
Loans and advances to customers1	11,976	9,179	11,323	8,995
At 31 Dec	79,878	83,706	67,623	70,790

1Loans 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	—

1Included 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	—

1Included 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 liabilities1	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 liabilities1	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)

1Derivatives, 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/CDO1	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%
other2	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%
–  other3	3,391	39
At 31 Dec	9,240	5,354

1Collateralised loan obligation/collateralised debt obligation.

2Other Equity Derivatives consists mainly of Swaps and OTC Options.

3Other 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 cost1	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 Dec1	64	64	56	64

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

Hedge accounting derivatives

The group applies hedge accounting to manage the following risks: interest rate and foreign exchange. The Report of the Directors – Risk

presents more details on how these risks arise and how they are managed by the group.

Hedged risk components

HSBC designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign

currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or

otherwise separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest

rates generally are regarded as being both separately identifiable and reliably measurable, except for the IBOR Reform transition where

HSBC designates Alternative Benchmark Rates as the hedged risk which may not have been separately identifiable upon initial

designation, provided HSBC reasonably expects it will meet the requirement within 24 months from the first designation date. The

designated risk component accounts for a significant portion of the overall changes in fair value or cash flows of the hedged item(s).

Fair value hedges

The group enters into fixed-for-floating-interest-rate swaps to manage the exposure to changes in fair value due to movements in market

interest rates on certain fixed rate financial instruments which are not measured at fair value through profit or loss, including debt

securities held and issued.

Hedging instrument by hedged risk
	Hedging instrument
		Carrying amount
The group	Notional amount1	Assets	Liabilities	Balance sheet presentation	Change in fair value2
Hedged risk	£m	£m	£m		£m
Interest rate3	26,649	428	(799)	Derivatives	981
At 31 Dec 2022	26,649	428	(799)		981

Interest rate3	24,486	139	(270)	Derivatives	159
At 31 Dec 2021	24,486	139	(270)		159

1The 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.

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

3The 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 amount2			Change in fair value1	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 rate3	15,446	—	(1,095)	—	Financial assets at fair value through other comprehensive income	(1,850)	31	Net income from financial instruments held for trading or managed on a fair value basis
	—	—	—	—	Loans and advances to banks	—
	713	—	(31)	—	Loans and advances to customers	(40)
	431	—	(15)	—	Reverse Repos	(14)
	—	1,576	—	(169)	Debt securities in issue	398
	—	5,686	—	(659)	Subordinated liabilities and deposits by banks4	556
At 31 Dec 2022	16,590	7,262	(1,141)	(828)		(950)	31

Interest rate3	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 banks4	104
At 31 Dec 2021	15,097	8,685	172	(6)		(168)	(9)

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

2The 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 value2
The bank	Notional amount1	Assets	Liabilities	Balance sheet presentation
Hedged risk	£m	£m	£m		£m
Interest rate3	18,391	242	(773)	Derivatives	466
At 31 Dec 2022	18,391	242	(773)		466

Interest rate3	18,016	188	(234)	Derivatives	27
At 31 Dec 2021	18,016	188	(234)		27

1The 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.

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

3The hedged risk ‘interest rate’ includes inflation risk.

Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount2			Change in fair value1	Recognised in profit and loss
The bank	Assets	Liabilities	Assets	Liabilities	Balance sheet presentation			Profit and loss presentation
Hedged risk	£m	£m	£m	£m		£m	£m
Interest rate3	9,072	—	(642)	—	Financial assets at fair value through other comprehensive income	(1,389)	31	Net income from financial instruments held for trading or managed on a fair value basis
	7	—	3	—	Loans and advances to customers	—
	—	—	—	—	Reverse Repos	—
	—	1,576	—	(169)	Debt securities in issue	398
	—	5,653	—	(659)	Subordinated liabilities and deposits by banks4	556
At 31 Dec 2022	9,079	7,229	(639)	(828)		(435)	31

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 amount2			Change in fair value1	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 rate3	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 banks4	104
At 31 Dec 2021	9,238	8,654	159	(6)		(35)	(8)

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

2The 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'.

3The hedged risk ‘interest rate’ includes inflation risk.

4The 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 risk4
	Hedging instrument					Hedged item	Ineffectiveness
		Carrying amount			Change in fair value2	Change in fair value3	Recognised in profit and loss	Profit and loss presentation
The group	Notional amount1	Assets	Liabilities	Balance sheet presentation
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 value2	Change in fair value3	Recognised in profit and loss	Profit and loss presentation
The bank	Notional amount1	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 risk4 (continued)
	Hedging instrument					Hedged item	Ineffectiveness
		Carrying amount			Change in fair value2	Change in fair value3	Recognised in profit and loss	Profit and loss presentation
The bank	Notional amount1	Assets	Liabilities	Balance sheet presentation
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)

1The 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.

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

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

4The 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 Amount1
	EUR2	GBP	USD	Other3	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

1The 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 £7,581m (31 Dec 2021: £6,407m) and Cash flow hedges £7,359m (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 instruments1		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 securities2		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.

2The £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 pledged1

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 received1

The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and

derivative margining, that the group is permitted to sell or repledge in the absence of default was £180,233m (2021: £202,794m)

(the bank: 2022: £154,376m; 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 transferred1

The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt

securities held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending

agreements, as well as swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be

recognised in full and a related liability, reflecting the group’s obligation to repurchase the assets for a fixed price at a future date is also

recognised on the balance sheet.

Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash

collateral received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the

duration of these transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty’s

recourse is not limited to the transferred assets.

Transferred financial assets not qualifying for full derecognition and associated financial liabilities
	Carrying amount of:
	Transferred assets	Associated liabilities
The group	£m	£m
At 31 Dec 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 plc1
	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

1Main 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 assets1	91	83	22	15
At 31 Dec	1,167	894	41	34

1Included 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 return1	(53)	(70)
–  assumption changes and experience variances2,3 (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.

2Represents 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.

32022 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	France1	UK	France1
	%	%	%	%
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

1For 2022, the calculation of France’s PVIF assumes a risk discount rate of 4.44% (2021: 1.55%) plus a risk margin of £83m (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 banks1	4,337	3,122	4,350	3,141
Customer accounts1	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 commitments1
At 1 Jan 2022					103
Net change in expected credit loss provision and other movements					2
At 31 Dec 2022					105
Total Provisions
At 31 Dec 2021					562
At 31 Dec 2022					424

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 commitments1
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

1The 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 commitments1
At 1 Jan 2022					43
Net change in expected credit loss provision and other movements					7
At 31 Dec 2022					50
Total Provisions
At 31 Dec 2021					250
At 31 Dec 2022					167

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 commitments1
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

1The 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 Securities1,5,6	569	700
Tier 2 instruments
$750m	3.43% Subordinated Loan 2022	—	558
£300m	6.5% Subordinated Notes 20233	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 20252	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 20303,4,6	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 20333	152	665
£225m	6.25% Subordinated Notes 20413	47	224
£600m	4.75% Subordinated Notes 20463	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

1The 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%.

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

3The 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 liabilities1	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 guarantees2	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 liabilities1	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 guarantees2	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 guarantees2	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 guarantees2	1,270	—	—	—	—	1,270
At 31 Dec 2021	389,746	13,800	8,961	9,047	19,180	440,734

1Excludes financial liabilities of disposal groups.

2Excludes 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 arrangements5	Total
				Amounts not set off in the balance sheet
	Gross amounts	Amounts offset	Net amounts in the balance sheet	Financial instruments, including non- cash collateral6	Cash collateral	Net amount
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives (Note 14)1	303,911	(79,799)	224,112	(193,720)	(29,998)	394	1,126	225,238
Reverse repos, stock borrowing and similar agreements classified as2:
–  trading assets	14,490	(196)	14,294	(14,293)	—	1	63	14,357
–  non-trading assets	103,839	(52,268)	51,571	(51,310)	(260)	1	2,378	53,949
Loans and advances to customers3	17,979	(8,105)	9,874	(8,143)	—	1,731	1	9,875
At 31 Dec 2022	440,219	(140,368)	299,851	(267,466)	(30,258)	2,127	3,568	303,419
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 as2:
–  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 customers3	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 as2:
–  trading liabilities	10,180	(196)	9,984	(9,983)	—	1	2	9,986
–  non-trading liabilities	85,168	(52,268)	32,900	(32,719)	(182)	(1)	1	32,901
Customer accounts4	24,082	(8,105)	15,977	(8,143)	—	7,834	10	15,987
At 31 Dec 2022	416,771	(140,368)	276,403	(248,046)	(19,844)	8,513	1,338	277,741
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 as2:
–  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 accounts4	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

1At 31 Dec 2022, the amount of cash margin received that had been offset against the gross derivatives assets was £2,373m (2021: £2,590m). The

amount of cash margin paid that had been offset against the gross derivatives liabilities was £7,279m (2021: £6,180m).

2For 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.

3At 31 Dec 2022, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £72,614m (2021: £91,177m) of

which £9,874m (2021: £8,650m) was subject to offsetting.

4At 31 Dec 2022, the total amount of 'Customer accounts' recognised on the balance sheet was £215,948m (2021: £205,241m) of which

£15,977m (2021: £15,755m) was subject to offsetting.

5These 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.

6The 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

The bank has no obligation to redeem the preference shares but may redeem them in part or in whole at any time, subject to prior

notification to the Prudential Regulation Authority ('PRA'). Dividends on the preference shares in issue are paid annually at the sole and

absolute discretion of the Board of Directors. The Board of Directors will not declare a dividend on the preference shares in issue if (i)

payment of the dividend would cause a breach of the capital adequacy requirements of the bank (or its subsidiary undertakings) under

applicable laws or regulations or (ii) the distributable profits of the bank are insufficient to enable the payment in full or in part (as

applicable) of the dividends on the preference shares in issue. If either the solo or consolidated Common Equity Tier 1 Capital Ratio of the

bank as of any date falls below 7.00% (a so-called 'right conversion event'), the rights attaching to the preference shares shall be altered

irrevocably and permanently such that they have the same rights attaching to them as ordinary shares. Holders of the preference shares

in issue will be able to attend any general meetings of shareholders of the bank and to vote on any resolution proposed to vary or

abrogate any of the rights attaching to the preference shares or any resolution proposed to reduce the paid up capital of the preference

shares. If the dividend payable on the preference shares in issue has not been paid in full for the most recent dividend period, if a rights

conversion event has 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

1Includes £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 (‘FSCS’) provides compensation, up to certain limits, to eligible customers of financial

services firms that are unable, or likely to be unable, to pay claims against them. The FSCS may impose a further levy on the 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 guarantees1	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

1Financial 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 $8.4bn, including fictitious profits

reported by Madoff. Based on information available to HSBC, the funds’ actual transfers to Madoff Securities minus their actual

withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various

HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities’ fraud.

US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of

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 benefits1,2	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

1Includes fees paid to non-executive Directors.

22022 includes 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 year2	Balance at    31 Dec	Highest amounts outstanding during year
	£m	£m	£m	£m
Key Management Personnel1
Advances and credits	—	—	0.03	0.08
Deposits	21	32	11	18

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

2Exchange 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 expense1	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

12020 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 losses1	(1,978)	—
Non-current assets held for sale	13	6
Total assets	21,214	9
Liabilities of disposal groups	24,711	0

1This 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 sale1	(1,712)
Expected cash contribution 2	3,398
Disposal group post-cash contribution 3	1,686

1Excludes impairment loss allocated against the non-current assets that are in scope of IFRS 5 measurement of £64m.

2The 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 the 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