RNS Number : 5915Q

HSBC Bank plc

21 February 2023

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

1     Net 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

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

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

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

11 Fair values of financial instruments carried at fair value

Control framework

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

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

•     the extent to which prices may be expected to represent genuine traded or tradable prices;

•     the degree of similarity between financial instruments;

•     the degree of consistency between different sources;

•     the process followed by the pricing provider to derive the data;

•     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.

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.

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.

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

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

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

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

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

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

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

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)

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

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

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

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

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

1     Collateralised loan obligation/collateralised debt obligation.

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

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

Private equity including strategic investments

Given the bespoke nature of the analysis in respect of each holding, it is not practical to quote a range of key unobservable inputs. The key unobservable inputs would be price and correlation. The valuation approach includes using a range of inputs that include company specific financials, traded comparable companies multiples, published net asset values and qualitative assumptions, which are not directly comparable or quantifiable.

Prepayment rates

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

Market proxy

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

Volatility

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

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

Correlation

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

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

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

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.

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.

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

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

Hedge accounting derivatives

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

Hedged risk components

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

Fair value hedges

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

Hedging instrument by hedged risk
	Hedging instrument
		Carrying amount
The group	Notional amount1	Assets	Liabilities	Balance sheet presentation	Change in fair value2
Hedged risk	£m	£m	£m		£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

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

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

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

Hedged item by hedged risk
	Hedged item												Ineffectiveness
	Carrying amount				Accumulated fair value hedge adjustments included in carrying amount2						Change in fair value1		Recognised in profit and loss		Profit and loss presentation
The group	Assets		Liabilities		Assets		Liabilities		Balance sheet presentation
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)

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

2     The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were £10m (2021: £21m) for 'Financial assets at fair value through other comprehensive income', is nil (2021: nil) for 'Deposits by banks' and £13m (2021: £19m) for 'Debt securities in issue'.

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

4   The notional amount of non-dynamic fair value hedges was £6,312m (2021: £5,886m) of which the weighted-average maturity is March 2026 and the weighted average swap rate is 0.06% (2021: 0.06%) (negative). £6,312m (2021: £5,886m) of these hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

Hedging instrument by hedged risk
	Hedging instrument
		Carrying amount			Change in fair 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

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

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

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

Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount2			Change in fair value1	Recognised in profit and loss
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

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)

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

2     The accumulated amounts of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses were £10m (2021: £21m) for 'Financial assets at fair value through other comprehensive income', nil (2021: nil) for 'Deposits by banks' and £13m (2021: £19m) for 'Debt securities in issue'.

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

4     The notional amount of non-dynamic fair value hedges was £6,312m (2021: £5,886m), of which the weighted-average maturity is March 2026 and the weighted average swap rate is 0.06% (2021: 0.06%) (negative). Those hedges are internal to HSBC Group and composed by internal funding between HSBC Holdings and the group.

Cash flow hedges

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

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

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

Hedging instrument by hedged 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)	-

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)

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

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

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

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

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

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

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

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

HSBC has applied both the first set of amendments ('Phase 1') and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39 applicable to hedge accounting. The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue' and 'Deposits by banks'. The notional value of the derivatives impacted by the Ibors reform, including those designated in hedge accounting relationships, is disclosed on page 31 in the section 'Financial instruments impacted by the Ibor reform'. For further details of Ibor transition, see 'Top and emerging risks' on page 28.

During 2022, the group transitioned all of its hedging instruments referencing sterling Libor, European Overnight Index Average rate ('Eonia') and Japanese yen Libor. The group also transitioned some of the hedging instruments referencing US dollar Libor. There is no significant judgement applied for these benchmarks to determine whether and when the transition uncertainty has been resolved.

The most significant Ibor benchmark in which the group continues to have hedging instruments is US dollar Libor. The transition out of US dollar Libor hedging derivatives has been largely completed by the end of 2022. These transitions do not necessitate new approaches compared with any of the mechanisms used so far for transition and it will not be necessary to change the transition risk management strategy.

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

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

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

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

2   The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are Fair value hedges of £7,581m (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.

2     The £4.2bn (2021: £3.3bn) of debt securities in the bank relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with Single Resolution Board requirements on Minimum Required Eligible Liabilities.

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

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.

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

1     Main subsidiaries are either held directly or indirectly via intermediate holding companies.

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

Impairment testing of investments in subsidiaries

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

The recoverable amount is the higher of the investment's fair value less costs of disposal and its value in use, in accordance with the requirements of IAS 36. The value in use is calculated by discounting management's cash flow projections for the investment.

The cash flows represent the Free Cash Flows ('FCF') based on the subsidiary's binding capital requirements.

•     The cash flow projections for each investment are based on the latest approved plans, which includes forecast capital available for distribution based on the capital requirements of the subsidiary taking into account minimum and core capital requirements. Our cash flow projections include known climate-related opportunities and costs associated with our sustainable offering. A long term growth rate is used to extrapolate the free cash flows in perpetuity.

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

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

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
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.

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

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

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

Present value of in-force long-term insurance business

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

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

Movements in PVIF
	2022	2021
	£m	£m
PVIF at 1 Jan	811	647
Change in PVIF of long-term insurance business	226	200
-  value of new business written during the year	79	67
-  expected 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.

2     Represents the effect of changes in assumptions on expected future profits and the difference between assumptions used in the previous PVIF calculation and actual experience observed during the year to the extent that this affects future profits. The gain of £200m in the year (2021: gain of £202m) was primarily driven by a reduction in the cost of financial guarantees in France as a result of rising interest rates during 2022.

3     2022 includes £52m impact recognised on the classification of France retail as discontinued operations.

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

1     For 2022, the calculation of France's PVIF assumes a risk discount rate of 4.44% (2021: 1.55%) plus a risk margin of £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.

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.

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

1     The contractual commitments include provision for off-balance sheet loan commitments and guarantees, for which expected credit losses are provided under IFRS 9. Further analysis of the movement in the expected credit loss is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 53.

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The bank	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2022	12	155	13	27	207
Additions	36	51	1	32	120
Amounts utilised	(14)	(146)	(3)	(11)	(174)
Unused amounts reversed	(17)	(3)	(3)	(13)	(36)
Exchange and other movements	-	-	-	-	-
At 31 Dec 2022	17	57	8	35	117
Contractual 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

	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

1     The contractual commitments provision includes off-balance sheet loan commitments and guarantees, for which expected credit losses are provided under IFRS 9. Further analysis of the movement in the expected credit loss is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 53.

Restructuring costs

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

Legal proceedings and regulatory matters

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

26 Subordinated liabilities

Subordinated liabilities
	The group		The bank
	2022	2021	2022	2021
	£m	£m	£m	£m
At amortised cost	14,528	12,488	14,252	12,218
-  subordinated liabilities	13,828	11,788	14,252	12,218
-  preferred securities	700	700	-	-
Designated at fair value (Note 23)	809	2,225	809	2,225
-  subordinated liabilities	809	2,225	809	2,225
At 31 Dec	15,337	14,713	15,061	14,443

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

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

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

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

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

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

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

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

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

Guaranteed by HSBC Bank plc

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

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

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

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

Tier 2 securities

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

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

Contractual maturity of financial liabilities

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

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

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

Cash flows payable under financial liabilities by remaining contractual maturities
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due between 3 and 12 months	Due between 1 and 5 years	Due after 5 years	Total
The group	£m	£m	£m	£m	£m	£m
Deposits by banks	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

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

1     Excludes financial liabilities of disposal groups.

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

Maturity analysis of financial assets and financial liabilities

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

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

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

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

Maturity analysis of financial assets and financial liabilities
	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.

	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

1     At 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).

2     For the amount of repos, reverse repos, stock lending, stock borrowing and similar agreements recognised on the balance sheet within 'Trading assets' and 'Trading liabilities', see the 'Funding sources and uses' table on page 83.

3     At 31 Dec 2022, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £72,614m (2021: £91,177m) of which £9,874m (2021: £8,650m) was subject to offsetting.

4     At 31 Dec 2022, the total amount of 'Customer accounts' recognised on the balance sheet was £215,948m (2021: £205,241m) of which £15,977m (2021: £15,755m) was subject to offsetting.

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

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

29 Called up share capital and other equity instruments

Issued and fully paid

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

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

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%.

30 Contingent liabilities, contractual commitments, guarantees and contingent assets

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

1     Includes £126,457m of commitments (2021: £115,695m), to which the impairment requirements in IFRS 9 are applied where the group has become party to an irrevocable commitment.

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

UK branches of HSBC overseas entities

In December 2017, HM Revenue & Customs ('HMRC') challenged the VAT status of certain UK branches of HSBC overseas entities. HMRC has also issued notices of assessment covering the period from 1 October 2013 to 31 December 2017 totalling £262m, with interest to be determined. No provision has been recognised in respect of these notices. In Q1 2019, HMRC reaffirmed its assessment that the UK branches are ineligible to be members of the UK VAT group and, consequently, HSBC paid HMRC the sum of £262m and filed appeals. In February 2022, the Upper Tribunal issued a judgement addressing several preliminary legal issues, which was partially in favour of HMRC and partially in favour of HSBC. The case will now return to the First-tier Tax tribunal for full trial and we await confirmation of the trial window. Since January 2018, HSBC's returns have been prepared on the basis that the UK branches are not in the UK VAT group. In the event that HSBC's appeals are successful, HSBC will seek a refund of this VAT, of which £174m is estimated to be attributable to HSBC Bank plc.

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

Financial Services Compensation Scheme

The Financial Services Compensation Scheme ('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

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

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

31 Finance lease receivables

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

	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.

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

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

1     Includes fees paid to non-executive Directors.

2     2022 includes payment of £600,000 (2021: £2,091,617) relating to compensation for loss of employment.

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

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

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

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

In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the group with Directors of HSBC Bank plc are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the Companies Act, there is no requirement to disclose transactions with other KMP. During the course of 2022, there were no advances, credits and guarantees entered into by the group with Directors of HSBC Bank plc.

Other related parties

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

During the course of 2022, there were no transactions and balances between KMP of the bank's ultimate parent company, who were not considered KMP of the bank, in respect of advances and credits, guarantees and deposits.

Transactions and balances during the year with associates and joint ventures

During the course of 2022, there were no transactions and balances with associates and joint ventures, in respect of loans, deposits, guarantees and commitments.

The group's transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2022				2021
	Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Trading assets	62	17	7,074	848	108	19	4,702	1,360
Derivatives	7,196	5,714	39,341	27,473	2,002	787	25,566	21,862
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	6	5	28	25	7	6	29	27
Loans and advances to banks	-	-	6,237	5,585	-	-	4,890	3,173
Loans and advances to customers	183	-	496	424	-	-	490	329
Financial investments	154	136	-	-	172	154	-	-
Reverse repurchase agreements - non-trading	-	-	6,150	4,341	-	-	2,332	1,690
Prepayments,accrued income and other assets	1,263	21	11,591	8,389	1,540	1,262	9,853	4,784
Total related party assets at 31 Dec	8,864	5,893	70,917	47,085	3,829	2,228	47,862	33,225
Liabilities
Trading liabilities	45	21	522	91	158	23	116	82
Financial liabilities designated at fair value	1,162	593	-	-	1,181	1,162	1,201	-
Deposits by banks	-	-	6,034	3,310	-	-	6,659	2,261
Customer accounts	6,202	4,315	3,149	1,551	2,364	1,875	3,428	3,149
Derivatives	4,345	2,680	43,384	30,997	3,443	2,074	26,152	22,133
Subordinated liabilities	12,115	12,115	-	-	9,485	9,251	10,421	-
Repurchase agreements - non-trading	-	-	5,811	5,738	-	-	6,162	1,841
Provisions, accruals, deferred income and other liabilities	3,357	3,161	10,816	4,864	189	179	8,057	3,826
Total related party liabilities at 31 Dec	27,226	22,885	69,716	46,551	16,820	14,564	62,196	33,292
Guarantees and commitments	-	-	4,762	3,383	-	-	2,622	2,061

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

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

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

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

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

Post-employment benefit plans

The HSBC Bank (UK) Pension Scheme (the 'Scheme') entered into swap transactions with the bank to manage the inflation and interest rate sensitivity of the liabilities. At 31 December 2022, the gross notional value of the swaps was £5,449m (2021: £5,490m), the swaps had a positive fair value of £424m to the bank (2021: positive fair value of £766m) and the bank had delivered collateral of £425m (2021: £775m) to the Scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market bid/offer spreads.

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

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

Disposal groups

Planned sale of our retail banking operations in France

On 25 November 2021, HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS ('My Money Group') and its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe's retail banking operations in France. The sale, which is subject to regulatory approvals and the satisfaction of other relevant conditions, includes: HSBC Continental Europe's French retail banking operations; the Crédit Commercial de France ('CCF') brand; and HSBC Continental Europe's 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement.

The framework agreement has a long-stop date of 31 May 2024, if the sale has not closed by that point the agreement will terminate, although that date can be extended by either party to 30 November 2024 in certain circumstances or with the agreement of both parties. We have agreed a detailed plan with My Money Group with the aim of completing the sale in the second half of 2023, subject to regulatory approvals, agreement and implementation of necessary financing structures and the completion of the operational transfer, including customer and data migrations. In this regard the framework agreement imposes certain obligations on the parties in planning for completion.

Given the scale and complexity of the business being sold, there is risk of delay in the implementation of this plan. The disposal group was classified as held for sale for the purposes of IFRS 5 as at 30 September 2022, reflecting the prevailing judgements concerning likelihood of the framework agreement's timetable being achieved. The assets and liabilities classified as held for sale were determined in accordance with the framework agreement, and are subject to change as the detailed transition plan is executed. This classification and consequential remeasurement resulted in an impairment loss of £1.7bn, which included related transaction costs. At 31 December 2022, we reassessed the likelihood of completion taking account of the most recent correspondence with My Money Group concerning the implementation of the plan and related developments. As a result of this reassessment, the likelihood of completion in 2023 is judged to be highly probable. As such, and in accordance with IFRS 5, the disposal group continues to be classified as held for sale.

The disposal group will be remeasured at the lower of the carrying amount and fair value less costs to sell at each reporting period. Any remaining gains or losses not previously recognised, including from the recycling of foreign currency translation reserves and the reversal of any remaining deferred tax assets and liabilities, will be recognised on completion.

Planned sale of our branch operations in Greece

On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. Completion of the transaction is subject to regulatory approval, and is currently expected to occur in the first half of 2023. At 31 December 2022, the disposal group included £0.3bn of loans and advances to customers and £1.9bn of customer accounts, which met the criteria to be classified as held for sale. In the second quarter of 2022, we recognised a loss of £0.1bn upon reclassification as held for sale in accordance with IFRS 5. On completion accumulated foreign currency translation reserves will be recycled to the income statement.

Planned sale of our business in Russia

On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an agreement for the planned sell of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). Completion of the transaction is subject to regulatory and governmental approval, and is currently expected to occur in the first half of 2023. In 2022, a £0.2bn loss on the planned sale was recognised, upon reclassification as held for sale in accordance with IFRS5. On completion accumulated foreign currency translation reserves will be recycled to the income statement.

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

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

2     The contributions are reported within 'Cash and balances at central banks' on the group's consolidated balance sheet.

3     'Disposal group post-cash contribution' includes the net asset value of the transferring business of €1.6bn (£1.5bn) and £0.2bn of additional items to which a nil value is ascribed per the framework agreement.

Under the financial terms of the planned transaction, HSBC Continental Europe will transfer the business with a net asset value of €1.6bn (£1.5bn), subject to adjustment (upwards or downwards) in certain circumstances, for a consideration of €1. Any required increase to the net asset value of the business to achieve the net asset value of €1.6bn (£1.5bn) will be satisfied by the inclusion of additional cash. The value of cash contribution will be determined by the net asset or liability position of the disposal group at the point of completion. Based upon the net liabilities of the disposal group at 31 December 2022, HSBC would be expected to include a cash contribution of £3.4bn as part of the planned transaction.

35 Events after the balance sheet date

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

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

In accordance with section 409 of the Companies Act 2006 a list of HSBC Bank plc subsidiaries, joint ventures and associates, their registered office address and the effective percentage of equity owned at 31 December 2022 is disclosed below.

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

HSBC Bank plc's registered office address is:

HSBC Bank plc

8 Canada Square

London E14 5HQ

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
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
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

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