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HSBC Bank plc
Annual Report and Accounts 2023
Registered number - 00014259

Contents

| Strategic Report
3 | Key themes of 2023
4 | Key financial metrics
5 | About HSBC Group
5 | Purpose and strategy
7 | Our Global Businesses
8 | ESG Overview
12 | Key Performance Indicators
13 | Economic background and outlook
14 | Financial summary
20 | Risk overview
| Risk review
22 | Our approach to risk
23 | Top and emerging risks
28 | Our material banking and insurance risks
| Corporate governance report
87 | Biographies of Directors and senior management
89 | Directors’ emoluments
89 | Board committees
| Financial Statements
99 | Independent auditors’ report to the members of HSBC Bank plc
106 | Financial Statements
118 | Notes on the financial statements

Presentation of Information
This document comprises the Annual Report and Accounts 2023 for
HSBC Bank plc (‘the bank’ or 'the company') and its subsidiaries
(together ‘the group’). ’We’, ‘us’ and ‘our’ refer to HSBC Bank plc
together with its subsidiaries. It contains the Strategic Report, the
Report of the Directors, the Statement of Directors’ Responsibilities
and Financial Statements, together with the Independent Auditors’
Report, as required by the UK Companies Act 2006. References to
‘HSBC’, 'HSBC Group' or ‘Group’ within this document mean HSBC
Holdings plc together with its subsidiaries.
HSBC Bank plc is exempt from publishing information required by The
Capital Requirements Country-by-Country Reporting Regulations
2013, as this information is published by its parent, HSBC Holdings
plc. This information is available on HSBC’s website: www.hsbc.com.
Pillar 3 disclosures for the group are also available on www.hsbc.com,
under Investors.
Contents of the linked websites are not incorporated into this
document.
All narrative disclosures, tables and graphs within the Strategic Report
and Report of the Directors are unaudited unless otherwise stated.
Our reporting currency is £ sterling.
Unless otherwise specified, all $ symbols represent US dollars.
Cautionary Statement Regarding
Forward-Looking Statements
This Annual Report and Accounts 2023 contains certain forward-
looking statements with respect to the company’s financial condition;
results of operations and business, including the strategic priorities;
financial, investment and capital targets; and the company’s ability to
contribute to the HSBC Group’s environmental, social and governance
(‘ESG’) targets, commitments and ambitions described herein.
Statements that are not historical facts, including statements about
the company’s beliefs and expectations, are forward-looking
statements. Words such as ‘may’, ‘will’, ‘should’, ‘expects’, ‘targets’,
‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’,
‘potential’ and ‘reasonably possible’, or the negative thereof, other
variations thereon or similar expressions are intended to identify
forward-looking statements. These statements are based on current
plans, information, data, estimates and projections, and therefore
undue reliance should not be placed on them. Forward-looking
statements speak only as of the date they are made. The company
makes no commitment to revise or update any forward-looking
statements to reflect events or circumstances occurring or existing
after the date of any forward-looking statements. Written and/or oral
forward-looking statements may also be made in the periodic reports
to the US Securities and Exchange Commission, offering circulars and
prospectuses, press releases and other written materials, and in oral
statements made by the company’s Directors, officers or employees
to third parties, including financial analysts. Forward-looking
statements involve inherent risks and uncertainties.
Readers are cautioned that a number of factors could cause actual
results to differ, in some instances materially, from those anticipated
or implied in any forward-looking statement. These include, but are
not limited to:
– changes in general economic conditions in the markets in which
the company operates, such as new, continuing or deepening
recessions, prolonged inflationary pressures and fluctuations in
employment levels and the creditworthiness of customers beyond
those factored into consensus forecasts; the Russia-Ukraine war
and the Israel-Hamas war and their impact on global economies
and the markets where the company operates, which could have a
material adverse effect on (among other things) the company’s
financial condition, results of operations, prospects, liquidity,
capital position and credit ratings; deviations from the market and
economic assumptions that form the basis for the company’s ECL
measurements (including, without limitation, as a result of the
Russia-Ukraine war and the Israel-Hamas war and inflationary
pressures and commodity price changes); changes and volatility in
foreign exchange rates and interest rates levels; volatility in equity
markets; lack of liquidity in wholesale funding or capital markets,
which may affect the company’s ability to meet its obligations
under financing facilities or to fund new loans, investments and
businesses; geopolitical tensions or diplomatic developments,
both in Europe and in other regions such as Asia, producing social
instability or legal uncertainty, such as the Russia-Ukraine war or
the Israel-Hamas war (including the continuation and escalation
thereof) and the related imposition of sanctions and trade
restrictions, supply chain restrictions and disruptions, sustained
increases in energy prices and key commodity prices, claims of
human rights violations and diplomatic tensions between China
and the US, extending to the UK and the EU, alongside other
potential areas of tension, which may adversely affect the group
by creating regulatory, reputational and market risks; the efficacy
of government, customer, and the company’s and the HSBC
Group’s actions in managing and mitigating ESG risks, in particular
climate risk, nature-related risks and human rights risks, and in
supporting the global transition to net zero carbon emissions, each
of which can impact the company both directly and indirectly
through its customers and which may result in potential financial
and non-financial impacts; illiquidity and downward price pressure
in national real estate markets; adverse changes in central banks’
policies with respect to the provision of liquidity support to
financial markets; heightened market concerns over sovereign
creditworthiness in over-indebted countries; adverse changes in
the funding status of public or private defined benefit pensions;
societal shifts in customer financing and investment needs,
including consumer perception as to the continuing availability of
credit; exposure to counterparty risk, including third parties using
the company as a conduit for illegal activities without the
company’s knowledge; the discontinuation of certain key Ibors and
the transition of the remaining legacy Ibor contracts to near risk-
free benchmark rates, which continues to expose the company to
some financial and non-financial risks; and price competition in the
market segments that the company serves;

HSBC Bank plc Annual Report and Accounts 2023 | 1

– changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which the
company operates and the consequences thereof (including,
without limitation, actions taken as a result of the impact of the
Russia-Ukraine war on inflation); initiatives to change the size,
scope of activities and interconnectedness of financial institutions
in connection with the implementation of stricter regulation of
financial institutions in key markets worldwide; revised capital and
liquidity benchmarks, which could serve to deleverage bank
balance sheets and lower returns available from the current
business model and portfolio mix; changes to tax laws and tax
rates applicable to the company, including the imposition of levies
or taxes designed to change business mix and risk appetite; the
practices, pricing or responsibilities of financial institutions serving
their consumer markets; expropriation, nationalisation, confiscation
of assets and changes in legislation relating to foreign ownership;
the UK’s relationship with the EU, which continues to be
characterised by uncertainty and political disagreement, despite
the signing of the Trade and Cooperation Agreement between the
UK and the EU, particularly with respect to the potential
divergence of UK and EU law on the regulation of financial
services; changes in government approach and regulatory
treatment in relation to ESG disclosures and reporting
requirements, and the current lack of a single standardised
regulatory approach to ESG across all sectors and markets;
changes in UK macroeconomic and fiscal policy, which may result
in fluctuations in the value of the pound sterling; general changes
in government policy that may significantly influence investor
decisions; the costs, effects and outcomes of regulatory reviews,
actions or litigation, including any additional compliance
requirements; and the effects of competition in the markets where
the company operates, including increased competition from non-
bank financial services companies; and
– factors specific to the company and the HSBC Group, including the
company’s success in adequately identifying the risks it faces,
such as the incidence of loan losses or delinquency, and managing
those risks (through account management, hedging and other
techniques); the company’s ability to achieve its financial,
investment, capital targets and the HSBC Group’s ESG targets,
commitments and ambitions, which may result in the company’s
failure to achieve any of the expected benefits of its strategic
priorities; evolving regulatory requirements and the development
of new technologies, including artificial intelligence, affecting how
the company manages model risk; model limitations or failure,
including, without limitation, the impact that high inflationary
pressures and rising interest rates have had on the performance
and usage of financial models, which may require the company to
hold additional capital, incur losses and/or use compensating
controls, such as judgemental post-model adjustments, to address
model limitations; changes to the judgements, estimates and
assumptions the company bases its financial statements on;
changes in the company’s ability to meet the requirements of
regulatory stress tests; a reduction in the credit ratings assigned to
the company or any of its subsidiaries, which could increase the
cost or decrease the availability of the company’s funding and
affect its liquidity position and net interest margin; changes to the
reliability and security of the company’s data management, data
privacy, information and technology infrastructure, including
threats from cyber-attacks, which may impact its ability to service
clients and may result in financial loss, business disruption and/or
loss of customer services and data; the accuracy and effective use
of data, including internal management information that may not
have been independently verified; changes in insurance customer
behaviour and insurance claim rates; the company’s dependence
on loan payments and dividends from subsidiaries to meet its
obligations; changes in the HSBC Group’s reporting framework
and accounting standards, which have had and may continue to
have a material impact on the way the company prepares its
financial statements; the company’s ability to successfully execute
planned strategic acquisitions and disposals; the company’s
success in adequately integrating acquired businesses into its
business; changes in the company’s ability to manage third-party,
fraud, financial crime and reputational risks inherent in its
operations; employee misconduct, which may result in regulatory
sanctions and/or reputational or financial harm; changes in skill
requirements, ways of working and talent shortages, which may
affect the company’s ability to recruit and retain senior
management and diverse and skilled personnel; and changes in
the company’s ability to develop sustainable finance and ESG-
related products consistent with the evolving expectations of its
regulators, and the company’s capacity to measure the
environmental and social impacts from its financing activity
(including as a result of data limitations and changes in
methodologies), which may affect HSBC Group’s ability to achieve
its ESG targets, commitments and ambitions, and increase the risk
of greenwashing. Effective risk management depends on, among
other things, the company’s ability through stress testing and
other techniques to prepare for events that cannot be captured by
the statistical models it uses; the company’s success in
addressing operational, legal and regulatory, and litigation
challenges; and other risks and uncertainties that the company
identifies in ‘Top and emerging risks’ on pages 23 to 28 of the
Annual Report and Accounts 2023.
This Annual Report and Accounts 2023 contains a number of graphics
and credentials which aim to give a high-level overview of certain
elements of the company’s disclosures and to improve accessibility
for readers. These graphics and credentials are designed to be read
within the context of the Annual Report and Accounts 2023 as a
whole.
Strategic Report | Key themes of 2023

2 | HSBC Bank plc Annual Report and Accounts 2023

Key themes of 2023

HSBC Bank plc continued to support the HSBC Group and make
progress on its strategic aims, although challenges in the geopolitical
and economic environment remain.
Financial Performance
Our financial performance in 2023 included a year-on-year favourable
impact associated with the sale of our retail banking operations in
France and the benefit of a higher interest rate environment.
Expected Credit Losses decreased, reflecting a more stable view of
the economic outlook. Costs decreased driven by the impact of lower
restructuring and other related costs following the completion of the
HSBC Group’s cost-saving programme at the end of 2022. Read more
on pages 14 to 19.
Strategic Transformation
We have continued to progress in our areas of strength and to
simplify our operating model in order to improve returns. During the
course of 2023, we prepared for the sale of our French retail banking
operations, which was successfully completed on 1st January 2024.
We also executed the sale of the assets in our HSBC Continental
Europe ('HBCE') Greece branch.
As the final step to implement the Intermediate Parent Undertaking
(‘IPU’) structure, in line with European Union ('EU') Capital
Requirements Directive V ('CRD V'), HBCE acquired HSBC Private
Bank (Luxembourg) SA ('PBLU') from HSBC Private Bank (Suisse) SA
in November 2023. More information can be found on pages 5 and 6.
Transition to net zero
In 2020, the HSBC Group set an ambition to become a net zero bank
by 2050. Since 2020, HSBC Bank plc has provided and facilitated
$137.3bn of sustainable finance and investment 1. This financing and
investment contributes towards the HSBC Group's ambition to
provide and facilitate $750bn to $1tn of sustainable finance and
investment by 2030.
1 The detailed definitions of the contributing activities for sustainable
finance and investment are available in the HSBC Group’s revised
Sustainable Finance and Investment Data Dictionary 2023. For this,
together with the HSBC Group’s ESG Data Pack and third-party limited
assurance report, see www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.

HSBC Bank plc Annual Report and Accounts 2023 | 3

Key financial metrics

| 2023 | 2022 1 | 2021 1
For the year (£m) |  |  |
Profit/(loss) before tax | 2,152 | (1,199) | 1,023
Net operating income before change in expected credit losses and other credit impairment charges 2 | 7,506 | 4,304 | 6,120
Profit/(loss) attributable to the parent company | 1,703 | (563) | 1,041
At 31 December (£m) |  |  |
Total equity attributable to the parent company | 24,359 | 23,102 | 23,584
Total assets | 702,970 | 716,646 | 596,611
Risk-weighted assets 3,7,8 | 107,449 | 113,241 | 106,868
Loans and advances to customers (net of impairment allowances) | 75,491 | 72,614 | 91,177
Customer accounts | 222,941 | 215,948 | 205,241
Capital ratios (%)3,7,8 |  |  |
Common equity tier 1 | 17.9 | 16.3 | 17.7
Tier 1 | 21.5 | 19.7 | 21.4
Total capital | 34.6 | 31.3 | 31.8
Leverage ratio (%)4,7 | 5.1 | 5.4 | 4.2
Performance, efficiency and other ratios (%) |  |  |
Return on average ordinary shareholders’ equity 5,9 | 7.4 | (4.0) | 4.3
Return on tangible equity 9 | 7.3 | (3.9) | 3.6
Return on average tangible equity excluding strategic transactions 9 | 6.7 | 2.6 | 6.1
Cost efficiency ratio 6 | 68.5 | 122.0 | 89.2
Ratio of customer advances to customer accounts | 33.9 | 33.6 | 44.4

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue.
3 Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation
in force at the time. These include the regulatory transitional arrangements for IFRS 9 'Financial Instruments', which are explained further on page 72.
References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK's version of such
regulation and/or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under
UK law.
4 The leverage ratio is calculated using the end point definition of capital and the IFRS 9 regulatory transitional arrangements, in line with the UK
leverage rules that were implemented on 1 January 2022, and excludes central bank claims and cash pooling netting. Comparatives for 2021 are
reported based on the disclosure rules in force at that time, and include claims on central banks.
5 The return on average ordinary shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average total
shareholders’ equity.
6 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before change in expected credit
losses and other credit impairment charges (reported).
7 From 30 September 2022, investments in non-financial institution subsidiaries or participations have been measured on an equity accounting basis in
compliance with UK regulatory requirements. Comparatives for prior periods have been represented on a consistent basis with the current year.
8 From November 2023, we reverted to the on-shored UK version of closely correlated currency list (CIR(EU) 2019/2091) from the previously applied
EBA list (CIR(EU) 2021/249). Comparative data have been represented.
9 Definitions and calculations of alternative performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 19.
Strategic Report | Key financial metrics | About HSBC Group | Purpose and strategy

4 | HSBC Bank plc Annual Report and Accounts 2023

About HSBC Group

With assets of $3.0tn and operations in 62 countries and territories at
31 December 2023, HSBC is one of the largest banking and financial
services organisations in the world. Approximately 42 million
customers bank with the HSBC Group and the HSBC Group employs
around 221,000 full-time equivalent staff. The HSBC Group has
around 172,000 shareholders.

Purpose and strategy

HSBC's purpose and ambition
The HSBC Group's purpose is ‘Opening up a world of opportunity’
and the HSBC Group's ambition is to be the preferred international
financial partner for the HSBC Group's clients.
HSBC values
HSBC values help define who we are as an organisation and are key
to our long-term success.
We value difference
Seeking out different perspectives.
We succeed together
Collaborating across boundaries.
We take responsibility
Holding ourselves accountable and taking the long view.
We get it done
Moving at pace and making things happen.
HSBC Group strategy
The HSBC Group is implementing its strategy across the four
strategic pillars aligned to its purpose, values and ambition. The HSBC
Group's strategy remains anchored around its four strategic pillars:
'Focus', 'Digitise', 'Energise' and 'Transition'.
F ocus: Maintain leadership in scale markets; double-down on
international connectivity; diversify our revenue; maintain cost
discipline and reshape our portfolio.
Digitise: Deliver seamless customer experiences; ensure resilience
and security; embrace disruptive technologies and partner with
innovators; automate and simplify at scale.
Energise: Inspire leaders to drive performance and delivery; unlock
our edge to enable success; deliver a unique and exceptional
colleague experience; prepare our workforce for the future.
Transition: Support our customers; embed net zero into the way we
operate; partner for systemic change; become net zero in our own
operations and supply chain by 2030, and our financed emissions by
2050.
HSBC in Europe
Europe is an important part of the global economy, accounting for
roughly 40% of global trade and one-quarter of global Gross Domestic
Product (UNCTAD, IMF 2023). In addition, Europe is the world’s top
exporter of services and second largest exporter of manufactured
goods (UNCTAD, IMF 2023). HSBC Bank plc facilitates trade within
Europe and between Europe and other jurisdictions where the HSBC
Group has a presence.
With assets of £703bn at 31 December 2023, HSBC Bank plc is one
of Europe’s largest banking and financial services organisations. We
employ around 14,050 people across our locations. HSBC Bank plc is
responsible for HSBC’s European business, apart from UK retail and
most UK commercial banking activity which, post ring-fencing, is
managed by HSBC UK Bank plc.
HSBC Bank plc operates as one integrated business with two main
hubs in London and Paris.
HSBC Bank plc is present in 20 markets 1. We are organised around
the principal operating units detailed below, which represent the
region to customers, regulators, employees and other stakeholders.
The London hub consists of the UK non-ring fenced bank, which
provides overall governance and management for the Europe region
as a whole and is a global centre of excellence for wholesale banking
for the HSBC Group.
HSBC Continental Europe comprises our Paris hub, its EU branches
(Belgium, Czech Republic, Germany, Ireland, Italy, Luxembourg,
Netherlands, Poland, Spain and Sweden) and its subsidiaries in Malta
and Luxembourg (PBLU). We are creating an integrated Continental
European bank anchored in Paris to better serve our clients and
simplify our organisation.
1 Full list of markets where HSBC Bank plc has a presence: Armenia,
Belgium, Bermuda, Channel Islands and Isle of Man, Czech Republic,
France, Germany, Ireland, Italy, Israel, Luxembourg, Malta,
Netherlands, Poland, Russia, South Africa, Spain, Sweden, Switzerland
and the UK.
HSBC Bank plc's strategy and
progress on our 2023 commitments
Our ambition is to be the leading international wholesale bank in
Europe, complemented by a targeted Wealth and Personal Banking
business, an efficient operating model and a robust control framework
(see our global businesses on page 7).
HSBC Bank plc exists to open up a world of opportunity for our
customers by connecting them to international markets. Europe is the
largest trading region in the world and Asia is Europe’s biggest and
fastest growing external trading partner (UNCTAD, IMF 2023). We are
well positioned to capitalise on this opportunity and play a pivotal role
for the HSBC Group.
The transformation we announced in 2020 is essentially complete
(see 'Focus on our strengths' for more information). We are
repositioning for growth and are well placed to seek to deliver strong
financial performance. Further detail can be found below.
In 2023, Europe faced significant inflationary pressure, resulting in
rapid central bank interest rate rises. Inflationary pressures have
started to ease which may lead to central bank interest rate cuts in
2024.
Further information regarding how we support and engage with our
stakeholders can be found on page 8.
Below we provide a progress update on our commitments and
strategic initiatives for 2023.
Focus
Through our transformation programme we have built a leaner,
simpler bank with a sharper strategic focus and have redesigned our
franchise around the needs of our international clients.
Regulation in the EU has provided an opportunity to continue
simplifying our structure. HBCE has completed its conversion into an
EU Intermediate Parent Undertaking in compliance with the
EU CRD V regulation following the acquisition of PBLU in November
2023, and in July 2023, we transferred the Guernsey Private Banking
business from HSBC Bank plc to HSBC Private Bank (Suisse) SA
('PBRS').
HBCE continued to simplify its operating model in 2023. In June, the
operations of its principal Germany subsidiary, HSBC Trinkaus &
Burkhardt GmbH, were transferred into a new German branch of
HBCE, a key step in the process to integrate our Continental

HSBC Bank plc Annual Report and Accounts 2023 | 5

European business. We also completed the sale of the assets in our
HBCE Greece branch in July 2023, following which the legal wind
down process has been initiated.
Throughout 2023, HBCE continued to prepare for the sale of our
French retail banking operations which was completed on 1 January
2024.
Following a strategic review, HSBC Europe BV (a wholly-owned
subsidiary of HSBC Bank plc) has entered into an agreement to sell its
wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company).
While we remain committed to the sale of our business in Russia, the
outcome of the sale became less certain and remains subject to
regulatory approval.
HSBC Europe BV has also reached an agreement to sell HSBC Bank
Armenia CJSC, a wholly-owned indirect subsidiary of HSBC Bank plc,
to Ardshinbank CJSC. The agreement was signed on 6 February 2024
and is expected to complete within 12 months. The transaction is
subject to regulatory approvals.
For further details on the disposal of our retail banking operations in
France and the planned sale of our business in Russia please see
Note 35: 'Assets held for sale and liabilities of disposal groups held for
sale', for further financial information on the transaction on page 184.
In October 2023, HSBC Bank plc acquired HSBC Bank Bermuda
Limited ('HBBM') from HSBC Overseas Holdings (UK) Limited
('HOHU'). Bermuda is now reported as part of HSBC Bank plc, better
aligning management and investors' view of Europe.
HSBC Bank plc completed the acquisition of HSBC Private Bank
(Suisse) SA ('PBRS') in February 2024.
Digitise
We continue to invest in the digitisation of our global businesses,
which is central to our strategy. Within Europe, Wealth and Personal
Banking (‘WPB’) is focused on enhancing our engagement between
clients and relationship managers, and allowing clients to self-serve at
a time that suits them. In the Channel Islands and Isle of Man, we
serve local and international customers through our HSBC Expat
proposition. For these customers we have enhanced our global
payments solutions, offering a multi-currency proposition (Global
Money), giving customers a virtual card to use with access to 19
currencies. We have also increased the speed of transfer for
international payments in 58 currencies and 82 countries. We will
seek to deploy secure and private communications via social media
channels between clients and relationship managers in 2024.
We continue to be committed to maintaining our core strength in
Global Payments Solutions ('GPS'). In 2023, self-serve improvements
were made to direct channels such as HSBCnet. We additionally
delivered digital enhancements in France to support self-serve options
and functionality of additional products such as Letter de Change. We
have rolled out SEPA ('Single Euro Payments Area') instant payments
in Germany and improved tax payment management in Israel.
Our strategy within Global Trade and Receivables Finance (‘GTRF’)
Europe is to help make trade easier, faster and safer, while seeking to
deliver sustainable and profitable growth. During 2023, we deployed
enhancements to our digital channel HSBCnet. We continue to
support our clients opting to use bank agnostic platforms that provide
trade finance solutions. In Germany and Israel, we rolled out third-
party digital solutions for the issuance and storage of bank
guarantees. At the end of 2023, 87% of trade transactions across all
channels within HSBC Europe were conducted digitally and we
continue to see an increase in clients adopting digital solutions.
We have achieved significant advancements in digital assets and
currencies through the launch of our strategic tokenisation platform,
HSBC Orion, within Global Banking and Markets ('GBM'). In February
2023, the HSBC Orion platform was used to launch the world's first
Pound sterling tokenised bond. HSBC Orion enables registration and
issuance of digital bonds, supports both primary and secondary
market trading, and aligns with our ambition to promote wider
adoption of digital assets. We expect the platform will be used for
additional bond issuances and will be expanded to support other
products. In 2023, HSBC also tokenised physical gold, allowing
customers to trade a ‘digital twin’ of gold custodied in HSBC’s
London vault.
Within Markets & Securities Services ('MSS'), HSBC AI Markets
delivered an expanded range of market insights and continued to
facilitate informed execution. HSBC’s clients and staff are increasingly
using AI Markets to access AI or Machine-Learning powered
solutions, from finding optimal hedging strategies to providing cross-
asset market colour and liquidity. Use of AI Markets in 2023 increased
65% compared with the prior year.
Energise
Empowering our organisation and energising our employees is critical
to HSBC Bank plc's success and remains a key focus. We have made
progress against our people strategy, including our diversity and
inclusion agenda, and are committed to offering colleagues the
opportunities to develop their skills while building our talent pipelines
to support the achievement of our strategic priorities.
The 2023 annual employee Snapshot survey has shown notable
improvement across all indices in Europe from 2022, with the largest
increase in the Employee Engagement Index (EEI), Employee Focus
Index (EFI) and Strategy indices, which all improved by 8 points.
We are committed to increasing diverse representation in Europe,
especially at senior levels and we significantly increased sponsorship
and accountability to achieve our goals. HR and our Diversity and
Inclusion ('D&I') Council (which includes our European Executive
Committee) define and drive specific actions across our D&I strands,
supported by our Employee Resource Groups ('ERG'), including the
pan-European ERG, 'Inclusive Europe'.
To support the HSBC Group's ambitions, the Group launched the
Sustainability Academy in 2022. The academy continues to be
available to all colleagues across the HSBC Group. It is a central point
for colleagues to access learning plans and curated resources and
develop practical skills. The HSBC Group has partnered with leading
educational institutions such as Imperial College Business School.
They will continue to update the academy with new research and
content related to ESG issues, including those related to social and
governance issues.
We continue to focus on the development of people managers who
enrich the experience and the skills of our colleagues. In addition to
our core People Manager Excellence curriculum, we developed
content aimed at new people managers with complementary digital
learning pathways. We have also developed a leadership programme
aimed at our Managing Directors ('MDs') to build their strategic
clarity, alignment, community and capability. In 2023, 124 MDs across
Europe registered for the leadership programme. We also continued
the Enterprise Leadership Programme, an annual forum focused on
strategy and leadership.
Transition
Net zero in our own operations
The HSBC Group has an ambition to be net zero in its own operations
and supply chain by 2030.
In 2020 the HSBC Group announced a target to reduce energy
consumption by 50% by 2030, against a 2019 baseline. HSBC Bank
plc met targeted reductions in 2023 by reducing energy and travel
emissions by 48% from the 2019 baseline. Key measures that have
been implemented to achieve this include:
– Optimising the use of our property portfolio – 11 data centres have
been consolidated to five; a new branch building in Malta reduced
its carbon footprint by 30% using low carbon cement; and the new
Luxembourg office building is rated “Excellent” for Green
Buildings and Sustainability by BREEAM (Building Research
Establishment Environmental Assessment Method).
– Purchasing 72% of our energy from renewable sources in 2023.
– Managing employee business travel in line with the HSBC Group’s
aim to halve travel emissions by 2030, compared with pre-
pandemic levels.
The HSBC Group plans to remove any remaining emissions in the
Group's operations which cannot be reduced or replaced from 2030
Strategic Report | Purpose and strategy | Our Global Businesses

6 | HSBC Bank plc Annual Report and Accounts 2023

onwards by procuring high-integrity carbon credits that have
undergone third party verification.
The HSBC Group is also actively encouraging its suppliers to disclose
their emissions through the Carbon Disclosure Programme and have a
revised supplier code of conduct. For HSBC Bank plc, 89% of our
contracted suppliers have signed the supplier code of conduct or have
an accepted equivalent (compared with 84% in 2022). The supplier
code of conduct sets out our ambitions, targets and commitments on
the environment, diversity and human rights, and outlines the
minimum standards we expect of our suppliers on these issues.
For further information on the transition to net zero, please see the
ESG review in the HSBC Group’s Annual Report and Accounts for the
year ended 31 December 2023.
Supporting our Customers
The HSBC Group recognises that it has an important role to play in
supporting the transition to a net zero global economy. Since
1 January 2020, HSBC Bank plc has provided and facilitated $110.7bn
of sustainable finance and $26.6bn of ESG and sustainable investing,
as defined in the HSBC Group’s Sustainable Finance and Investment
Data Dictionary 2023.
This financing and investment contributes towards the HSBC Group's
ambition to provide and facilitate $750bn to $1tn of sustainable
finance and investment by 2030.
In 2023, we continued to focus on providing our customers with
products, services and initiatives to help enable emissions reduction
in the real economy.
For example, HBCE is helping zolar, the German climate-tech scale-
up, to accelerate the adoption of rooftop solar power.
To complement their capital strategy, zolar turned to us for venture
debt financing, which is an alternative to equity capital and is available
to scale-ups that would like to raise additional funds for growth
initiatives.
Our financing aims to support zolar's ability to ramp up its operations
and meet its ambitious goals of serving 10 million households in
Europe with renewable energy by 2030.

Our Global Businesses

The HSBC Group manages its products and services through its three
global businesses: Global Banking and Markets ('GBM'); Commercial
Banking ('CMB'); Wealth and Personal Banking ('WPB'); and the
Corporate Centre (comprising: certain legacy assets, central
stewardship costs, and interests in our associates and joint ventures).
Business segments
Our operating model has the following material segments: a GBM
business which is further split into three reportable segments: MSS,
GB and GBM Other (each as defined below), CMB, WPB and a
Corporate Centre. These segments are supported by Digital Business
Services and eleven global functions, including Risk, Finance,
Compliance, Legal, Marketing and Human Resources.
Markets & Securities Services (‘MSS’)
(Loss)/profit before tax £(144)m (2022: £509m); (2021: £(12)m)
Markets & Securities Services is a products group that services
customers of all Global Businesses across the financial sector
globally. We offer our clients a range of services and capabilities
including trading, financing and securities services across asset
classes and geographies, supported by dedicated sales and research
teams.
Our European business continues to support the increasing European
needs of our global client base, providing access to the suite of
Markets & Securities Services products, connecting emerging and
developed markets, and collaborating with other global businesses to
provide clients across the HSBC Group with commoditised and
bespoke solutions that seek to support their growth ambitions.
Global Banking (‘GB’)
Profit before tax £988m (2022: £486 m); (2021: £589 m)
Global Banking delivers tailored financial solutions to corporate and
institutional clients worldwide opening up opportunities through the
strength of our global network and capabilities. We provide a
comprehensive suite of services including capital markets, advisory,
lending, trade services and global payments solutions.
Our European teams take a client-centric approach bringing together
relationship and product expertise to deliver financial solutions
customised to suit our clients’ growth ambitions and financial
objectives. We work closely with our business partners including
MSS, WPB and CMB, to provide a range of tailored products and
services that seek to meet the needs of international clients across
HSBC. Global Banking Europe operates as an integral part of the
global business and contributes significant revenues to other regions,
particularly Asia and the Middle East, through our European client
base.
GBM Other
(Loss)/profit before tax £(266)m (2022: £(517)m; (2021:
£(281)m)
GBM Other primarily comprises Principal Investments and GBM’s
share of HSBC’s Markets Treasury function.
The Principal Investments portfolio selectively makes commitments
to funds which align with HSBC’s strategic priorities. The day-to-day
management of the portfolio is undertaken by HSBC Asset
Management on GBM’s behalf.
Commercial Banking (‘CMB’)
Profit before tax £1,000m (2022: £716m); (2021: £492m)
We have a clear strategy to be the leading international corporate
bank in Europe. We connect our European customers to our
international network of relationship managers and product specialists
to support their growth ambitions globally, and we support global
multinationals with growing their European subsidiaries through our
specialist subsidiary relationship managers and product specialists.
Commercial Banking contributes significant revenues to other
regions, particularly Asia, through our European client base, and
draws benefit from the client network managed outside Europe.
Our products range from bespoke lending solutions to global treasury
and trade solutions tailored to clients’ requirements, supported by
expertise in markets and investment banking products through our
collaboration with Global Banking and Markets. Our Global Payments
Services and Global Trade teams also provide treasury and trade
finance solutions to Global Banking clients. HSBC has been awarded
as the Best Bank for Trade Finance both by Euromoney and Global
Trade Review (GTR) for the second consecutive year in 2023, a
testament to how we are leading the industry with quality of service
and innovative solutions.
HSBC has received the top global recognition in The Banker's
Transaction Banking Awards 2023 in addition to winning the Asia
Pacific category on the supply chain award which helps demonstrate
how strategies in both GPS and GTRF are providing HSBC’s clients
with tools to operate their business more effectively.

HSBC Bank plc Annual Report and Accounts 2023 | 7

Wealth and Personal Banking (‘WPB’)
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As
required by the standard, the group applied the requirements
retrospectively with comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022
transition date. Comparative data for 2021 has not been restated.
Profit/(loss) before tax £457m (2022: £(1,273)m); (2021: £319m)
In Europe, Wealth and Personal Banking serves customers through
Private Banking, Retail Banking, Wealth Management, Insurance and
Asset Management. Our core retail proposition offers personal
banking, mortgages, loans, credit cards, savings, investments and
insurance. WPB offers propositions in certain markets such as
Premier; as well as wealth solutions, financial planning and
international services. In the Channel Islands and Isle of Man, we
serve local and international customers, the majority of whom are
customers of HSBC in other markets, through our HSBC Expat
proposition. Our Private Banking proposition serves high net worth
and ultra-high net worth clients with a relationship balance greater
than $2m. Services available to Private Banking clients include
investment management, Private Wealth Solutions and bespoke
lending.
Private Banking hosts a ‘Next Generation’ programme of events to
support our clients’ next generation in building and retaining the
wealth within the family. We continue to focus on meeting the needs
of our customers, communities we serve, and our people, while
working to build the bank of the future.

ESG Overview

We conduct our business to support the sustained success of our
customers, employees and other stakeholders.
Our approach
We are guided by HSBC Group's purpose: to open up a world of
opportunity for our customers, colleagues, and communities. Our
purpose is underpinned by the HSBC Group's values: we value
difference; we succeed together; we take responsibility; and we get it
done.
The HSBC Group’s approach to ESG is shaped by its purpose and
values and a desire to create sustainable long-term value for our
stakeholders. As an international bank with significant breadth and
scale, we understand that our economies, societies, supply chains
and people’s lives are interconnected. The HSBC Group recognises it
can play an important role in helping to tackle ESG challenges. The
HSBC Group focuses its efforts on three areas: the transition to net
zero, building inclusion and resilience, and acting responsibly.
Good outcomes
We are focused on running a strong and sustainable business that
puts the customer first, values good governance, and gives our
stakeholders confidence in how we do what we do.
Since July 2023, FCA Consumer Duty rules and guidance have
required firms to consider the needs, characteristics and objectives of
their customers at every stage of the customer journey. Regular
reporting will be made available to the HSBC Bank plc Executive
Committee and Board to help ensure we operate in an environment in
which good outcomes for customers are considered when doing
business.
Our conduct approach helps to guide us to do the right thing and to
focus on the impact we have on our customers and the financial
markets in which we operate. Details on our Conduct Framework are
available at www.hsbc.com/Conduct. Our section 172 statement,
detailing our Directors’ responsibility to stakeholders, can be found on
page 10.
Our colleagues
We aspire to open up a world of opportunity for our colleagues and
build an inspiring, dynamic culture where the best talent wants to
work. We value difference and continue to build an inclusive
workforce representative of the communities we serve. We set and
report on progress made against the HSBC Group-wide gender and
ethnic diversity goals. Understanding the experience of colleagues is
central to our efforts. Through the HSBC Group employee Snapshot
survey, we capture our colleagues’ views on topics such as hybrid
working and well-being. In 2023, over 9,000 colleagues responded to
the survey across Europe, a participation rate of 62%. Developing the
skills of colleagues is critical to energising our organisation. We foster
a learning culture through various resources, providing colleagues
with many educational materials and development opportunities.
Net zero ambition
The HSBC Group has continued to take steps to implement its
ambition to become net zero in its operations and its supply chain by
2030, and align its financed emissions to net zero by 2050.
In January 2024, the HSBC Group published its first net zero transition
plan, which is an important milestone in our journey to achieving our
net zero ambition – helping our people, customers, investors and
other stakeholders to understand our long-term vision, the challenges,
uncertainties and dependencies that exist, the progress we are
making and what we plan to do in the future.
Engaging with our stakeholders
Engaging with our stakeholders is core to being a responsible
business. To determine material topics that our stakeholders are
interested in, we conduct a number of activities throughout the year,
including engagements outlined in the table below.

Our stakeholders | How we engage | Material topics highlighted by the engagement
Customers | Our customers’ voices are heard through our interactions with them, surveys and by listening to their complaints | – Customer advocacy – Cybersecurity
Employees | Our colleagues’ voices are heard through the HSBC Group's employee Snapshot survey, exchange meetings, and our ‘speak-up’ channels, including our global whistleblowing platform, HSBC Confidential | – Employee training – Diversity and inclusion – Employee engagement
Investors | Our ordinary shares are held by our parent HSBC Holdings plc, however external parties invest in our bond issuances. We engage with these investors via our investor relations programme which enables investor queries alongside a broader programme of management meetings and market engagement | – Strategic progress – ESG metrics and targets – Risk management
Communities | We engage with non-governmental organisations (‘NGOs’), charities and other civil society groups. We engage directly on specific issues by taking part in working groups | – Financial Inclusion and Community Investment
Regulators and governments | We proactively engage with regulators and governments to facilitate strong relationships via virtual and in-person meetings, responses to consultations individually and jointly via the industry bodies | – Anti-bribery and Corruption
Suppliers | HSBC’s code of conduct sets out our ambitions, targets and commitments on the environment, diversity and human rights, and outlines the minimum standards we expect of our suppliers | – Supply Chain Management – Human Rights

Strategic Report | Our Global Businesses | ESG Overview

8 | HSBC Bank plc Annual Report and Accounts 2023

Supporting our stakeholders facing a rising
cost of living
We know that many of our customers continue to face difficult
financial circumstances due to the increasing cost of living pressures,
and we are working to support them.
During 2023, proactive frontline contact was made by trained staff to
customers in the Channel Islands & Isle of Man ('CIIOM') identified as
being most at risk of being financially impacted by a rise in mortgage
repayments. In CIIOM, HSBC offers differential mortgage pricing for
existing customers due to the challenging cost of living environment,
and we complete monthly analysis to identify customers most likely
to experience mortgage rate shocks at the end of their current
mortgage rate term.
Our ESG metrics and targets
The HSBC Group has established targets that guide how we do
business, including how we operate and how we serve our
customers. These include targets designed to track the progress
against our environment and social sustainability goals.
They also help us to improve employee advocacy, the diversity of
senior leadership and to strengthen our market conduct.
The targets for these measures are linked to the pillars of our ESG
strategy: transitioning to net zero, building inclusion and resilience,
and acting responsibly.
To help us achieve our ESG ambitions, measures are included in the
annual incentive scorecards of the Europe Chief Executive and
Executive Committee members.
Below we set out how we have made progress against the ESG-
related ambitions and targets.
Environmental – Transition to net zero
Since 1 January 2020, HSBC Bank plc has provided and facilitated
$110.7bn of sustainable finance and $26.6bn of ESG and sustainable
investing, as defined in the HSBC's Group's Sustainable Finance and
Investment Data Dictionary 2023.
At the end of 2023, we achieved a 48% reduction in emissions from
our energy consumption and travel compared with a 2019 baseline in
France, Germany, Switzerland, Malta and Bermuda. HSBC Bank plc
continues to work to support the Group's ambition to achieve net zero
in its own operations and supply chain by 2030.
Social – Build inclusion and resilience
– Our Snapshot Employee Engagement score was 54% at the end
of 2023, an increase of 8 points compared with 2022;1
– Our current representation of black heritage colleagues in senior
leadership roles is 2.8%, an increase of 0.4% from 2022. This
includes all colleagues based in the UK;2,3 and
– In 2023, senior leadership roles held by women increased to
25.3%, an improvement of 0.2% from 2022.4
Governance – Acting responsibly
In 2023, 75% of HSBC Bank plc staff completed conduct training,
which covers Conduct and Regulatory Compliance topics including
market abuse, conflicts of interest and treating customers fairly. The
current completion rate is lower than prior years (96% of staff
completed conduct training in 2022) due to technical and translation
issues which delayed the launch of the training, but is expected to
rise in line with completion rates in prior years.5
1 The Employee Engagement Index is our headline measure of how
employees feel about HSBC. HSBC Bank plc's score is lower than the
HSBC Group's, with a key contributing factor being our ongoing
regional transformation. However, the relatively low engagement is
consistent with findings in Gallup's 2023 State of the Global Workplace
Report, which showed significant regional variations in Employee
Engagement across all sectors and industries globally. Europe scored
lower relative to other regions on employee engagement.
Nevertheless, we are seeing year-on-year improvements and will
continue to embed a positive and inclusive culture where our
colleagues can thrive.
2 Senior leadership is classified as those at band 3 and above in the
HSBC Group's global career band structure.
3 Our 2023 ethnicity goal of 2.9% black heritage colleagues in senior
leadership roles is set at the UK level, and includes all colleagues based
in the UK including those in the ringfenced bank (HBUK).
4 Our 2023 gender diversity target of 26.8% is cascaded by HSBC Group
and inclusive of our operations in Bermuda; with HSBC Bank plc
achieving 25.3% by end of 2023 at the regional level. We missed our
2023 target, therefore our focus on improving gender balance in senior
leadership across Europe remains a priority for the HSBC Bank plc
executive committee for 2024.
5 The completion rate shown relates to the 2023 ‘Taking Responsibility’
Compliance training module which is categorised as ‘required’ learning
for Global employees. Unlike with mandatory training, a formal target is
not established for ‘required’ learning modules and non-completion is
performance managed.
Responsible Business Culture
We have a responsibility to help protect our customers, our
communities and the integrity of the financial system.
E mployee matte rs
We are opening up a world of opportunity for our colleagues through
building an inclusive organisation that values difference, takes
responsibility and seeks different perspectives for the overall benefit
of our customers.
We promote an environment where our colleagues can expect to be
treated with dignity and respect. We are an organisation that acts
where we find behaviours that fall short. The employee Snapshot
index measuring colleagues’ confidence in speaking up is at 70% in
2023.
At times, our colleagues may need to speak up about behaviours in
the workplace. We encourage colleagues to speak to their line
manager in the first instance, and the annual employee Snapshot
survey showed 76% feel able to speak up when they see behaviour
that is wrong. We recognise that at times people may not feel
comfortable speaking up through the usual channels. HSBC
Confidential is a global whistleblowing channel, allowing our
colleagues past and present to raise concerns confidentially and, if
preferred, anonymously (subject to local laws).
We aspire to be an organisation that is representative of the
communities which we serve. To achieve this, we set goals that will
build sustainable lasting change. We are focused on increasing
women and Black heritage colleagues in senior leadership roles and
while we have made progress, we know there is more to be done.
To support our ambition, we encourage our colleagues to self-identify
their ethnicity data where legally permissible. At a European level, we
are limited in our collection of ethnicity data and can only report in:
U K, Channel Islands, Bermuda, the Isle of Man, and South Africa.
However, we are continuing to drive open dialogue and action to
strengthen our employee networks and improved our diversity data
where possible.
In 2024, HSBC in France, Germany, Italy, Luxembourg, Poland and
Spain was recognised as a Top Employer by the Top Employers
Institute, recognising excellence in Human Resources practices.
Social matters
The HSBC Group has a long-standing commitment to help support the
communities in which it operates. It aims to empower people and
communities to develop the skills and knowledge needed to thrive in
the future.
We work with charity partners to initiate programmes that help
people and communities respond to opportunities and challenges as
economies transition towards a low-carbon future. We also work with
our charity partners to strengthen the resilience of disadvantaged
communities. For HSBC Bank plc, in 2023, these included:
– In France, HSBC Continental Europe partnered with Article 1 to
help young people from deprived communities succeed in higher
education through mentoring programmes and workshop
facilitation.

HSBC Bank plc Annual Report and Accounts 2023 | 9

– HSBC Continental Europe also supported ‘Rewilding Europe’
through the Together Challenge, which involved more than 2,000
employees, to strengthen our commitment to sustainability.
– In Bermuda, we are the lead sponsor for the Ignite Young Adult
Entrepreneurship programme. The programme offers participants
first-hand experience and insight into how to structure and develop
early-stage companies.
– In Malta, the HSBC Malta Foundation continued to support the
Prince’s Trust International Achieve Programme which surpassed
its targeted reach this year with 299 newly enrolled students.
HSBC Bank plc’s charitable giving in 2023 was £2.8m and was further
supported by our employees' contribution of over 2,000 volunteer
hours to community activities during work hours.
Human rights
As set out in the HSBC Group's Human Rights Statement, we
recognise the role of business in respecting human rights. The HSBC
Group's approach is guided by the UN Guiding Principles on Business
and Human Rights (‘UNGPs’) and the Organisation for Economic Co-
operation and Development ('OECD') Guidelines for Multinational
Enterprises on Responsible Business Conduct. The HSBC Group's
Human Rights Statement and annual statements under the UK
Modern Slavery Act are available on https://www.hsbc.com/who-we-
are/esg-and-responsible-business/esg-reporting-centre
Anti-corruption and anti-bribery
We require compliance with all applicable anti-bribery and corruption
laws in every market and jurisdiction in which we operate, including
the UK Bribery Act and France’s ’Sapin II’ law, while focusing on the
spirit of relevant laws and regulations to demonstrate our
commitment to ethical behaviours and conduct as part of our
approach to ESG.
HSBC provides annual mandatory training on the prevention of money
laundering, bribery and corruption and tax evasion to all staff and
carries out regular risk assessments, monitoring and testing of its
programmes incorporating applicable findings within the annual policy
refresh. HSBC also maintains clear whistleblowing policies and
processes, to ensure that individuals can confidentially report
concerns.
Environmental matters
More information about the HSBC Group's assessment of climate risk
can be found in the HSBC Holdings plc Annual Report and Accounts
2023.
Non-Financial Information Statement
Disclosures required pursuant to the Companies, Partnerships and
HSBC Group's (Accounts and Non-Financial Reporting) Regulations
2016 can be found on the following pages:

Environmental matters (including the impact of the company’s business on the environment) | Page 10
The company’s employees | Pages 8 to 11 and 94 to 95
Social matters | Pages 9 to 10
Respect for human rights | Page 10
Anti-corruption and anti-bribery matters | Page 10
Business Segments | Page 7
Principal risks | Page 20

HSBC creates value by providing products and services to meet our
customers' needs. We aim to do so in a way that fits seamlessly into
their lives. This helps us to build long-lasting relationships with our
customers. HSBC maintains trust by striving to protect our
customers’ data and information, and delivering fair outcomes for
them and if things go wrong, we need to address complaints in a
timely manner.
Operating with high standards of conduct is central to our long-term
success and underpins our ability to serve our customers. Our
Conduct Framework guides activities to strengthen our business and
increases our understanding of how the decisions we make affect
customers and other stakeholders. Details on our Conduct
Framework are available at www.hsbc.com/Conduct.
Section 172 statement
This section, from pages 10 to 11 forms our section 172 statement
and addresses the requirements of the Companies (Miscellaneous
Reporting) Regulations 2018. It describes how the Directors have
performed their duty to promote the success of the bank, including
how they have considered and engaged with stakeholders and, in
particular, how they have taken account of the matters set out in
section 172(1)(a) to (f) of the Companies Act 2006 (the 'Act').
The Board considered a range of factors when making decisions and
is supported in the discharge of its responsibilities by:
– an induction programme and ongoing training for Directors to
provide an understanding of our business and financial
performance and prospects;
– management processes which help ensure that proposals
presented to Board and committee meetings for decision include
information relevant to determine the action that would most likely
promote the success of the bank and involve engagement with
stakeholders where relevant, to support appropriate decision
making;
– agenda planning for Board and committee meetings to provide
sufficient time for the consideration and discussion of key matters:
and
– engagement with key stakeholders which allows the Board to gain
valuable insight on various perspectives, and in turn, inform their
deliberations and decision making in Board and committee
meetings.
Stakeholder Engagement
The Board understands the importance of effective engagement with
its six key stakeholders, namely customers, employees, shareholders
and investors, regulators and governments, suppliers, and
communities and is committed to open and constructive dialogue
with such stakeholders. Engagement with stakeholders takes place at
the holding company level and at the operational level. On certain
issues, the Board may engage directly with stakeholders. The
outcomes from such stakeholder engagement feed into Board
discussions and decision making. This approach allows the Board to
better understand the impact of the bank's actions on its stakeholders
and respond to the challenges facing the bank. The relevance of each
stakeholder group to an issue considered by the Board,varies
depending on the specific decision being taken by the Board. Not
every decision the Board makes will necessarily result in a positive
outcome for all stakeholders.
As a result of both its direct stakeholder interactions and the reporting
and information on stakeholder engagement it receives about its
stakeholders, the Board seeks to understand, and have regard to, the
interests and priorities of these stakeholders.
The two examples provided below of principal discussions and
decisions taken by the Board in 2023 show how the Directors and
Board respectively discharged their individual and collective
responsibility for promoting the long-term success of the bank and
took different stakeholder considerations into account in reaching a
decision or forming a view.
For further details regarding the role of the Board and the way in
which it makes decisions, including key activities during 2023, please
see page 89.
Customers
As one of Europe’s largest banking and financial services
organisations, our corporate and institutional customers are at the
core of the bank's business model: without customers there would
be no bank. We have a clear vision to be the leading international
wholesale bank in Europe, complemented by a targeted wealth and
personal banking business. The Board strives to ensure it has a broad
understanding of HSBC Bank plc's customers, their needs and
challenges, and to give full consideration to them when its approval is
sought on matters such as material acquisitions, disposals,
Strategic Report | ESG Overview

10 | HSBC Bank plc Annual Report and Accounts 2023

investments, large scale change or transformation programmes. How
we have served and supported our customers during 2023 is covered
in the 'Purpose and Strategy' section on page 5 in the Strategic
Report.
Throughout 2023, continued geopolitical and economic uncertainty
has created additional challenges for our customers and senior
management have engaged directly with customers to better
understand their issues and difficulties and how the bank can respond
to them. During this period, the Board has been provided with
customer feedback and key performance indicators, such as net
promoter scores, customer complaints, customer on-boarding times
and satisfaction survey results.
The Board schedule also included Commercial Banking, Wealth and
Personal Banking, Global Banking and Markets and Digital Business
Services overview strategy sessions which incorporated discussions
on customer interactions, customer surveys, complaints feedback and
product developments to meet customers’ needs.
Employee (Workforce Engagement)
Employees are critical to the success of the bank, its sustainability
and long-term future. Understanding employee sentiment and how
we are addressing feedback is a key area of Board focus. During the
year, the Board received regular updates from senior management on
the progression of our people priorities covering various employee-
focused initiatives across culture, leadership, talent, skills, inclusion,
wellbeing and colleague experience. Further information on people
priorities can be found under Employees at pages 94 to 95.
Feedback from employees is gathered via various mechanisms
including surveys, exchange meetings and 'speak up' channels and
reported to the Board. The Board is also presented annually with the
results of the Snapshot survey and a culture dashboard which has
been developed to track progress in embedding a positive and
inclusive culture across the business. Board focus on employees was
heightened due to the ongoing transformation programme and the
need for continuing consideration of the impact on employees when
making Board decisions.
In 2023, the Board extended its engagement with colleagues in
Europe and each non-executive Director met individually with a small
group of the bank’s ‘rising star’ top talent to deepen their
understanding of and familiarity with those employees in the talent
pool. Further details of the bank’s engagement with employees can
be found on pages 10 to 11 and 94 to 95.
Shareholders and Investors
The bank is a wholly-owned subsidiary of HSBC Holdings plc and, as
such, the Board took into account the implications of its decisions
with regard to its shareholder, HSBC Holdings plc, and its debt
security investors. Examples of how it did this include:
– the Board Chair and Committee Chairs engaged with HSBC Group
counterparts and attended Group forums and Group committee
meetings, together with Executive Directors, to engage on
common issues and strategic priorities;
– Board review and approval of HSBC Bank plc specific components
of Group programmes;
– Board consideration of the strength of the balance sheet to ensure
that the ability to pay principal or interest on its debt securities was
not at risk; and
– engaging with HSBC Holdings plc Board members to showcase
the business and its people.
Regulators and Governments
During the year, the Directors met regularly with regulators both in
the UK and Europe. It is central to the success of the bank that it has
constructive relationships with regulators and governments and that
there is a mutual understanding of expectations and challenges and
their impact on customers, the business model and the bank’s
strategy.
The Board receives regular updates on how HSBC interacts with
regulators globally and at the European level. Understanding
regulators’ views and priorities shapes and influences Board
discussions and decision making. Board engagement with regulators
during 2023 also included participation by Directors in industry and
regulator forums and round table events.
Suppliers
Suppliers are critical to supporting the infrastructure and operations of
the business and we work with suppliers to ensure mutually
beneficial relationships. Board engagement with suppliers during
2023 included reviewing and overseeing management reporting on
progress against the Operational Resiliency regulatory requirements,
including how the bank oversees the health of the services provided
by our critical third-party suppliers and how we work together with
our suppliers to mitigate impacts to customers.
Communities
We have a long-standing commitment to support the communities in
which we operate. The bank is conscious of the need to manage the
societal and environmental impact of its business when making
decisions. During the year the Board received regular updates on
matters spanning human rights and environmental and climate issues.
Principal Decisions
Set out below are two of the principal decisions made by the Board
during 2023. In each case, in taking such decisions, the Directors
exercised their statutory duty under section 172(1) (a)-(f) of the
Companies Act 2006.
Establishment of a new HSBC Private Bank (Suisse) SA,
Guernsey Branch ('PBRSGSY') and transfer of existing
Private Banking business in Guernsey
As a result of the Capital Requirements Directive (2013/36/EU) (‘CRD
V’) non-EU headquartered banking groups like HSBC with significant
EU operations were required to establish an EU Intermediate Parent
Undertaking (‘EU IPU’) structure by the end of 2023 to hold its
relevant EU-based credit institutions and investment firms to facilitate
holistic supervision and resolution within the EU.
As a result, the HSBC Group has been restructuring its legal entity
structure across Europe, including the designation of a subsidiary
entity of the bank, HSBC Continental Europe, as the HSBC Group’s
EU IPU. The impact of these mandated transfers has created the
need for funding solutions in some areas.
In support of finding a strategic funding solution for HSBC Private
Bank (Suisse) SA ('PBRS') during 2023, management considered
several options to address PBRS challenges and a proposal to transfer
the existing Private Banking business in Guernsey from the bank’s
branch to a new PBRSGSY was considered by the Board.
Prior to approval, the Board reviewed and assessed options presented
by management to achieve compliance with the CRD V requirements
while also ensuring that PBRS remained a sustainable enterprise. The
Board constructively engaged with management to consider the
financial and regulatory implications and the likely consequence of the
proposal on the bank’s key stakeholders, as appropriate.
The implications of the transaction for several key stakeholders were
considered. Management outlined engagement with customers
impacted, noting that, as an intragroup exercise, client offering and
the majority of contracts would not be impacted by the change in
ownership. While impacts on employees were minimal, associated
staff engagement was undertaken given the required novation of
employment contracts to the new entity, PBRSGSY.
Associated engagement with regulators resulted in no objections
being raised in respect of the proposal.
Mindful of longer-term consequences of decisions and the impact on
operations, the Board also carefully considered the approach to
valuation and purchaser protections in connection with the
transaction. In reaching its decision the Board acknowledged the
strategic rationale for the proposal in ensuring the financial
sustainability of PBRS and the full mitigation of any financial impacts
on the bank. Having taken all these and other factors into account, the
Board approved the transaction.
Acquisition of HSBC Bank Bermuda Limited ('HBBM')
To simplify the structure of the HSBC Group, the Board considered a
proposal for the bank to acquire the shares in HBBM that were held

HSBC Bank plc Annual Report and Accounts 2023 | 11

by an unregulated holding company and direct subsidiary of HSBC
Holdings plc. Oversight of Bermuda entities was already within the
bank’s management perimeter and therefore the Board considered
the benefits of a transfer of the entity to the bank’s legal perimeter.
The proposal was first endorsed at the Group Executive Committee
for further consideration and decision making by the Board. Key to
decision making was HBBM’s strategic fit and profitability. HBBM
serves both domestic and international clients, managing its activities
through three Global businesses: Wholesale Banking, Wealth and
Personal Banking and Markets and Securities Services.
The benefits of the proposal included simplifying the HSBC Group
structure and improving the bank’s diversification of business.
Furthermore, the transaction would promote alignment of
management and investors’ views of the Europe business and its
returns.
In reaching its decision, the Board constructively engaged with
management to consider the financial and regulatory implications and
any impacts on the bank’s key stakeholders, as appropriate. While
HBBM is one of two systematically important banks in Bermuda, with
both retail and wholesale clients, the change in ownership would have
no impact on customers with the client product offering remaining
unchanged.
Similarly, the change in ownership did not create any employee
impact or changes in functional reporting as the bank’s management
already had a delegation from HSBC Group to oversee the business.
The Board recognised the complexity associated with the existing
management arrangements which required preparing multiple views
of financial and operational performance and how this would be
overcome, post-acquisition, when management oversight would be
aligned to legal ownership and deployment of capital.
Prior to the Board’s approval, engagement with the relevant
regulators was undertaken to secure approval of the change of control
with no issues raised by the regulators. Having taken these factors
into consideration, including an assessment of the financial merits and
risks, regulatory engagement, and the absence of impact on
employees and investors, the Board approved the proposal and the
transaction completed on 1 October 2023.
Tax
Our approach to tax
We are committed to applying both the letter and the spirit of the law
in all territories where we operate, and have adopted the UK Code of
Practice for the Taxation of Banks. As a consequence, we seek to pay
our fair share of tax in the countries in which we operate. We
continue to strengthen our processes to help ensure our banking
services are not associated with any arrangements known or
suspected to facilitate tax evasion.
HSBC continues to apply global initiatives to improve tax transparency
such as:
– the US Foreign Account Tax Compliance Act (‘FATCA’);
– the Organisation for Economic Co-operation and Development
('OECD') Standard for Automatic Exchange of Financial Account
Information (also known as the Common Reporting Standard);
– the CRD IV Country by Country Reporting;
– the OECD Base Erosion and Profit Shifting (‘BEPS’) initiative; and
– the UK legislation on the corporate criminal offence (‘CCO’) of
failing to prevent the facilitation of tax evasion.

Key Performance Indicators

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

| 2023 | 2022 | 2021
Profit/(Loss) before tax (£m) | 2,152 | (1,199) | 1,023
Cost efficiency ratio (%) | 68.5 | 122.0 | 89.2
Return on tangible equity (%) | 7.3 | (3.9) | 3.6
Common equity tier 1 capital ratio (%) | 17.9 | 16.3 | 17.7

Profit before tax in 2023 was £2,152m compared with a loss before
tax of £(1,199)m in 2022, including the impact of a £1.9bn loss on
reclassification as held for sale of our retail banking operations in
France in 2022. This also included the impacts from the restructuring
of our business in Europe, including the non-repeat of 2022 losses
associated with the completed sale of our branch operations in
Greece and lower losses and impairments related to the planned
disposal of our business in Russia. Revenue also increased due to a
gain from the transfer of our Guernsey Private Banking branch to
PBRS and the non-repeat of 2022 restructuring and other related
costs comprising disposal losses of £234m associated with RWA
reduction commitments by the HSBC Group, which concluded at the
end of 2022. In addition, revenue growth was supported by interest
rate rises across Global Banking, CMB and WPB. In contrast, revenue
in MSS was lower compared with a strong 2022 when market
volatility was high.
Expected credit losses and other credit impairment charges ('ECL')
were a net charge, largely reflecting stage 3 charges.
Operating expenses were lower, mainly driven by lower restructuring
and other related costs following the completion of the Group’s cost-
saving programme at the end of 2022, partly offset by spend
associated with ongoing strategic transformation initiatives. This was
partly offset by a higher UK bank levy and higher technology costs
reflecting ongoing strategic investments to support our growth
initiatives.
Cost efficiency ratio was 53.5 percentage points lower compared
with 2022 driven by higher revenue and lower operating expenses.
Revenue increased by 74% and operating expenses decreased by
2%, mainly driven by the factors mentioned above.
Return on tangible equity (‘RoTE’) is computed by adjusting profit
attributable to ordinary shareholders by excluding impairment of
goodwill and other intangible assets, divided by average tangible
shareholders' equity excluding goodwill and intangibles for the period.
The adjustment to reported results and reported equity excludes
amounts attributable to non-controlling interests.
We provide RoTE as a way of assessing our performance, which is
closely aligned to our capital positions.
CET1 capital ratio represents the ratio of common equity tier 1
capital to total risk-weighted assets ('RWA'). CET1 capital is the
highest quality form of capital comprising shareholders’ equity and
related non-controlling interests less regulatory deductions and
adjustments.
The group seeks to maintain a strong capital base to support the
development of its business and meet regulatory capital requirements
at all times.
The CET1 capital ratio of 17.9% in 2023 increased by 1.6% from
2022, mainly due to a decrease in RWAs and an increase in capital
due to capital generation through profits and share issuance.
Non-financial KPIs
We monitor a range of non-financial KPIs focusing on customers,
people, culture and values, including customer service satisfaction,
employee engagement and diversity and sustainability.
For details on customer service and satisfaction please refer below;
for the remaining non-financial KPIs, refer to the Non-financial
reporting section on page 10 and Corporate Governance section on
pages 87 to 96.
Strategic Report | ESG Overview | Key Performance Indicators | Economic background and
outlook

12 | HSBC Bank plc Annual Report and Accounts 2023

Customer service, awards and satisfaction
MSS
Our customers are at the heart of what we do and we are committed
to delivering services and capabilities that meet their needs and help
them fulfil their ambitions.
In 2023, we won numerous awards and consistently ranked highly
with our European clients, including winning Best Prime Broker in the
Risk Awards, Currency Manager of the Year in the European Pension
Awards, Best Prime Broker – Emerging Markets (for the 11th
consecutive year) and Best Administrator – Alternative Credit in the
HFM European Services Awards, Best FX Prime Broker in the
Euromoney FX Awards, European Investment-Grade Corporate Bond
House and EMEA Equity House of the Year in the International
Financing Review ('IFR') Awards and ranking number one in ‘UK
Research’ in Extel.
These accolades, coupled with multiple milestones and achievements
in sustainable finance, demonstrate our leading capabilities to support
clients locally and connect them to markets and expertise in the East,
as well the key role Europe plays in supporting the HSBC Group’s
strategic priorities.
GB
Global Banking Europe remains committed to providing excellent
customer experience and continues to strive towards improving our
proposition to meet client needs.
In 2023, Global Banking Europe played a key role in receiving industry
recognition at a global level across both our product and sector
capabilities. This was showcased by being recognised as the World’s
Best Bank for Trade Finance and Public Sector clients by Euromoney
Awards for Excellence, Best Global Transaction Bank and Best Bank
for Supply Chain Finance by The Banker and EMEA Equity House of
the Year by IFR.
In Western Europe, HSBC won the Market Leader award for Financial
Institutions in the Euromoney Cash Management Survey and was
awarded the Best Investment Bank in Spain by Euromoney Awards
for Excellence.
Aligned with our purpose of opening up opportunities for our clients,
GB Europe’s contribution in HSBC Group winning ESG Financing
House of the year by IFR was important. This award also highlights
the continued strength and differentiation of our Sustainability
capabilities globally as well as the role we can play in Europe helping
our clients transition to net zero.
CMB
Customer experience and satisfaction are priorities for Commercial
Banking in Europe. We measure several operational metrics on
customer service levels and gather direct customer feedback to
ensure our solutions and channels remain relevant and fit for our
customers’ digital needs today. Our centralised booking model in
Paris for our pan-European customers enables us to regionally cover
and manage customers through a consistent and streamlined level of
service. This also ensures our Relationship Managers can support and
cover customers using a common toolkit. As a testament to our
efforts in the industry through the development of solutions,
technology provisions and customer service, HSBC has been awarded
as Market Leader for Trade Finance in four European markets and
Best in Service in five markets, with Greenwich Excellence awards in
Europe across six key client touchpoints including Quality of Advice,
Catering to Client Needs, and International Network Breadth.
Looking ahead, we will continue to measure how we deploy
resources to open a world of opportunity to European corporates
looking to expand and grow internationally, while also supporting
them with their transition plans to achieve net zero.
WPB
Enhancing customer experience and improving satisfaction remains
integral to our strategy. This is monitored through a number of
customer satisfaction metrics covering branch, contact centre and
digital channels. One example is iNPS ('Interactions Net Promoter
Score') which measures interactions with our customers. The
Channel Islands and Isle of Man (‘CIIOM’) business receives separate
scores for its domestic ‘Islands’ business and its international ‘Expat’
business. The ‘Islands’ business scored 35 for online, in line with
target, and 35 for mobile, against a target of 38. The Expat proposition
scored 13 against a target of 15 for Online. Additional Journey NPS
(‘jNPS’) metrics highlighted a score of 39 for payments, 10 points
ahead of target, and 59 for term deposit savings, 27 points ahead of
target. We recognise the importance of customer feedback and
continue to enhance our insights to gain a better understanding of our
clients to provide a more personalised and relevant service.
In our Expat proposition, we have placed further efforts into reducing
paper waste. We have transitioned all remaining customers opting for
paper statements from a monthly to quarterly cycle and provided
them access to monthly e-statements via mobile banking, with
189,000 bank statements viewed or downloaded via mobile banking.
We continue to strive for a seamless, friction free Expat customer
onboarding journey and have deployed a number of enhancements
resulting in a 41% year-on-year growth in new to bank Expat
customers onboarded.
Private Banking remains committed to enhancing our digital
capabilities and offering, with improved internal platforms and
software to support the delivery of excellent client service. Within
Switzerland, Luxembourg and Channel Islands service improvements
have been delivered within the E-Banking platform including client
access to on-demand statements.
We recognise that enhancing customer satisfaction is an evolving
process and are committed to ensure our investments and focus are
prioritised to achieve this.

Economic background and outlook

UK
Falling inflation raises prospects of interest
rate cuts
UK consumer price inflation has fallen considerably. In January 2024,
the annual inflation rate stood at 4.0%, compared with the 11.1%
peak seen in October 2022 (Office for National Statistics, ONS). A
large portion of that decline reflects the impact of past energy price
increases 'dropping out' of the annual calculation. But there has also
been a notable decline in price inflation in other categories, including
food, non-energy goods and, to a lesser extent, services. These
broader based declines partly reflect the easing of supply disruption
following the Covid-19 pandemic, while the prospect of further
inflation declines is likely to hinge on domestic cost pressures,
particularly those stemming from the labour market.
And indeed, pressures in the UK labour market are abating. The
number of unfilled job vacancies declined for 20 consecutive months
between April 2022 and December 2023 (ONS). In turn, wage growth
is starting to fall, with the annual rate of pay growth (excluding
bonuses) reaching 6.2% in the three months to December 2023,
versus 7.9% in July and August 2023 (ONS). However, this is still
above levels which are usually consistent with reaching the Bank of
England's (BoE's) 2% target over the medium term.
While the Bank of England's policy rate was raised from 0.10% to
5.25% since December 2021, policy rates have been on hold since
August 2023. Market pricing implies the expectation that a number of
rate cuts will take place through the course of 2024. But how soon,
and how quickly, those cuts take place (if at all) will depend on the
speed of the prospective further decline in underlying inflation.

HSBC Bank plc Annual Report and Accounts 2023 | 13

Falling inflation and prospective reductions in policy rates could also
raise the possibility of a gradual increase in economic growth. In
2023, GDP grew by 0.1% (ONS), but most economists expect a
gradual pick-up in GDP growth over the coming quarters.
Eurozone
Falling inflation, but growth prospects
remain subdued
Having peaked at an all-time high of 10.6% in October 2022, the
annual rate of eurozone consumer price inflation stood at 2.8% in
January 2024, according to the Eurostat 'flash' estimate. Falling
energy and food price inflation have driven much of the decline, but
the 'core' inflation rate – which excludes food and energy – stood at
3.3% in January 2024, versus 5.7% in March 2023 (Eurostat).
However, labour cost pressures remain elevated. In Q3 2023, annual
growth in average employee compensation only edged down
marginally, from 5.5% to 5.2% (Eurostat). To the extent that wage
growth might remain elevated, that could delay the prospect of
inflation sustainably reaching the European Central Bank's (ECB's) 2%
target. While lower headline inflation and easing labour market
pressures should see wage growth decline further over the coming
months, the outcome of negotiated pay deals over the first half of the
year will be a key test of whether this is happening.
Meanwhile, the economic growth backdrop remains challenging.
Eurozone GDP did not grow in Q4 2023, following a 0.1% contraction
in Q3 2023 (Eurostat). While falling inflation is providing a stimulus to
real household incomes, activity indicators remain weak in Germany,
which is more heavily reliant on exports and industrial production.
Indeed, GDP in Germany fell by 0.3% in 2023 (Destatis).
With inflation falling against a soft demand backdrop, the ECB has
stopped raising interest rates, having lifted the deposit rate from
-0.50% in July 2022 to 4.00% in September 2023. Market
expectations are for a number of ECB interest rate cuts this year, but
the timing and pace of cuts will depend on the extent to which
underlying inflation eases over the coming months.

Financial summary

Use of alternative performance measures
Our reported results are prepared in accordance with International
Financial Reporting Standards ('IFRS Accounting Standards'), as
detailed in the Financial Statements starting on page 106.
In measuring our performance we use financial measures which
eliminate factors that distort period-on-period comparisons. These are
considered alternative performance measures. All alternative
performance measures are described and reconciled to the closest
reported financial measure when used. The global business
segmental results are presented in accordance with IFRS 8 ‘Operating
Segments’, as detailed in ‘Basis of preparation’ in Note 9: ‘Segmental
analysis’ on page 146.
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As
required by the standard, the group applied the requirements
retrospectively with comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022
transition date. Under IFRS 17 there is no present value of in-force
business (‘PVIF’) asset recognised up front. Instead the measurement
of the insurance contract liability takes into account fulfilment cash
flows and a contractual service margin (‘CSM’) representing the
unearned profit. In contrast to the group’s previous IFRS 4 accounting
where profits are recognised up front, under IFRS 17 they are
deferred and systematically recognised in revenue as services are
provided over the life of the contract.
The CSM also includes attributable cost, which had previously been
expensed as incurred and which is now incorporated within the
insurance liability measurement and recognised over the life of the
contract. The impact of the transition was a reduction of £341m on
the group’s FY22 reported revenue and an increase of £239m to
reported loss before tax.
The group’s total shareholders’ equity at 1 January 2022 reduced by
£570m to £23,014m on the transition.
Further details on our adoption of IFRS 17 are provided in Note 1:
‘Basis of preparation and material accounting policies’ on page 118
and Note 36: ‘Effects of adoption of IFRS 17’ on page 186.
Strategic Report | Economic background and outlook | Financial summary

14 | HSBC Bank plc Annual Report and Accounts 2023

Summary consolidated income statement for the year ended
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Net interest income | 2,151 | 1,904 | 1,754
Net fee income | 1,229 | 1,295 | 1,413
Net income from financial instruments measured at fair value | 4,784 | 1,750 | 3,432
Gains less losses from financial investments | (84) | (60) | 60
Net insurance premium income | — | — | 1,906
Gains/(losses) recognised on Assets held for sale 2,3 | 296 | (1,947) | 67
Insurance finance (expense)/income | (1,184) | 1,106 | —
Insurance service result | 124 | 121 | —
Other operating income 3 | 190 | 135 | 527
Total operating income | 7,506 | 4,304 | 9,159
Net insurance claims, benefits paid and movement in liabilities to policyholders | — | — | (3,039)
Net operating income before change in expected credit losses and other credit impairment charges 4 | 7,506 | 4,304 | 6,120
Change in expected credit losses and other credit impairment charges | (169) | (222) | 174
Net operating income | 7,337 | 4,082 | 6,294
Total operating expenses | (5,142) | (5,251) | (5,462)
Operating profit/(loss) | 2,195 | (1,169) | 832
Share of (loss)/profit in associates and joint ventures | (43) | (30) | 191
Profit/(loss) before tax | 2,152 | (1,199) | 1,023
Tax (charge)/ credit | (427) | 646 | 23
Profit/(loss) for the year | 1,725 | (553) | 1,046
Profit/(loss) attributable to the parent company | 1,703 | (563) | 1,041
Profit attributable to non-controlling interests | 22 | 10 | 5

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2 In relation to the sale of our retail banking operations in France, we recognised a £1.7bn impairment loss in 3Q22 on initial classification of the
business as held-for-sale. In 1Q23, we reversed the £1.7bn impairment loss as the sale became less certain. On subsequent re-classification of the
business as held-for-sale in 4Q23, we recognised a £1.5bn impairment loss.
3 In 2022, a £0.2bn impairment loss on the planned sale of our business in Russia was recognised upon classification as held for sale in accordance with
IFRS 5. As at 31 December 2023, the outcome of the planned sale became less certain. This resulted in the reversal of £0.2bn of the previously
recognised loss, as the business was no longer classified as held for sale. However, owing to restrictions impacting the recoverability of assets in
Russia, we recognised a charge of £0.2bn in other operating income.
4 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue.
Reported performance
Profit before tax was £2,152m, compared with a loss before tax in
2022 of £(1,199)m, an increase of £3,351m. The increase included the
year-on-year £1.9bn favourable impact of the sale of our retail banking
operations in France. This comprised an initial impairment loss of
£1.7bn following the classification of these operations as held for sale
in 2022, a reversal of £1.7bn in the first quarter of 2023 as the sale
became less certain, and a subsequent impairment loss of £1.5bn as
we classified these operations as held for sale in the fourth quarter of
2023.
Profit before tax in 2023 also included a £37m net favourable impact
relating to the restructuring of our legal entities. This comprised the
transfer of the Guernsey Private Banking business to PBRS, and the
acquisitions of HBBM and PBLU.
Revenue was £3,202m higher in 2023 compared with 2022, which
included the year-on-year £1.9bn favourable impact of the sale of our
retail banking operations in France and the non-repeat of 2022
restructuring and other related costs comprising disposal losses of
£234m associated with RWA reduction commitments by the HSBC
G roup, which concluded at the end of 2022. The increase also
reflected the impacts from the restructuring of our business in
Europe, including the non-repeat of 2022 losses associated with the
completed sale of our branch operations in Greece and a £285m gain
relating to the transfer of our Guernsey Private Banking business in
2023. Furthermore, there was a £47m net impact of the reversal of
held for sale accounting for the planned sale of our Russia subsidiary
and a provision reflecting restrictions impacting the recoverability of
assets in Russia.
In addition, revenue increased, notably in Global Banking, CMB and
WPB, primarily reflecting the impact of interest rate rises. This was
partly offset by lower revenue in MSS.
ECL of £169m were down by £53m, primarily comprising stage 3
charges.
Operating expenses of £5,142m decreased by £109m, mainly driven
by lower restructuring and other related costs following the
completion of the HSBC Group’s cost-saving programme at the end
of 2022. This was partly offset by spend associated with ongoing
strategic transformation and investments to support our growth
initiatives and a higher UK bank levy.
Net interest income (‘NII’) increased by £247m or 13% compared
with 2022. This included lower net interest income in Corporate
Centre (down by £1,191m compared with 2022) mainly due to
increased funding costs associated with the funding of our Markets
business in MSS generating trading income. Excluding this, NII was
up by £1,438m, including Global Banking (up £527m) and CMB (up
£406m), notably in Global Payments Solutions ('GPS'), and in WPB (up
£236m), from higher global interest rates. NII was also higher in MSS
(up £266m), including in Securi ties Services (up £60m) driven by
interest rate rises. Markets (up £206m) now reflects all of the funding
cost of trading activities in Trading Income, where previously an
element was reported in NII.
Net fee income decreased by £66m or 5% compared with the prior
year, mainly in MSS, driven by higher brokerage and transaction costs
and higher fee sharing in Global Foreign Exchange. This was partly
offset by higher fee income in GPS, as volumes grew and we
delivered on our strategic initiatives.
Net income from financial instruments measured at fair value
increased by £3,034m or 73% compared with 2022, primarily in
insurance manufacturing in WPB. This increase was driven by higher
returns on financial assets supporting insurance contracts where the
policyholder is subject to part or all of the investment risks.
This favourable movement resulted in a corresponding movement in
liabilities to policyholders, reflecting the extent to which policyholders
participate in the investment performance of the associated assets.
The offsetting movements are recorded in ‘Insurance finance income/
(expense)’.

HSBC Bank plc Annual Report and Accounts 2023 | 15

In MSS, revenue decreased by £553m, mainly in Equities and Global
Foreign Exchange due to lower client volumes. This compared with a
strong 2022 where market volatility was high, driven by the
macroeconomic impacts from rising inflation and increasing interest
rates.
Gains less losses from financial investments decreased by £24m,
mainly driven by higher losses on the disposal of bonds held at fair
value through other comprehensive income ('FVOCI') in Markets
Treasury.
Gain s/(losses) recognised on Assets held for sale of £296m
increased by £2,243m from 2022, mainly driven by the year-on-year
favourable impact associated with the sale of our retail banking
operations in France (£1.9bn) and the non-repeat of 2022 losses
associated with the sale of our branch operations in Greece (£87m).
Gains in 2023 also included the reversal of held for sale accounting for
the planned sale of our Russia subsidiary of £159m.
Insurance finance (expense)/income decreased by £2,290m in
insurance manufacturing in WPB. This decrease was driven by lower
returns on financial assets supporting contracts where the
policyholder is subject to part or all of the investment risk. The losses
recognised on the financial assets measured at fair value through
profit and loss held to support these insurance contract liabilities are
reported in ‘Net income from financial instruments designated at fair
value’.
Insurance service result remained broadly flat.
Other operating income increased by £55m or 41%, mainly due to a
gain from the transfer of our Guernsey Private Banking business
Guernsey branch to PBRS (£285m), partly offset by the provision to
reflect restrictions impacting the recoverability of assets in Russia of
£186m. There was also lower intercompany recharge recoveries from
other entities in the HSBC Group, with an offsetting decrease in
operating expenses.
ECL were a charge of £169m in 2023, £53m lower compared with
2022. ECL in 2023 primarily comprised stage 3 charges, and reflected
a more stable outlook relative to 2022 where there was a heightened
level of economic uncertainty.
Total operating expenses decreased by £109m or 2%, mainly driven
by a number of non-recurring and volatile items in both periods. These
included reductions in restructuring and other related costs of £458m
following the completion of the HSBC Group’s cost-saving
programme at the end of 2022, a reversal of a historical value-in-use
impairment (£52m) and a lower Single Resolution Fund (‘SRF’) levy
(down £40m). These items were partly offset by spend associated
with ongoing strategic transformation initiatives, a higher UK bank
levy charge (£125m) and the non-recurrence of a recovery of historical
VAT in the first half of 2022 (£66m). Excluding these items, operating
expenses were £185m or 4% higher, mainly driven by higher
technology costs reflecting ongoing strategic investments to support
our growth initiatives.
Share of (loss)/profit in associates and joint ventures was a loss
of £43m, an increase of £13m compared with 2022, largely due to an
impairment of an investment in an associate of £18m.
Tax charge was £(427)m in 2023 compared with a tax credit of
£646m in 2022. The effective tax rate of 19.8% for 2023 reflected the
mix of profits and losses in different jurisdictions and is decreased by
the release of provisions for uncertain tax positions, recognition of a
deferred tax asset for prior period excess expenses in HSBC Life (UK)
and the non-taxable gain arising on the transfer of the Guernsey
branch to PBRS and increased by non-deductible UK and European
bank levy expenses and charges in respect of prior periods.
The effective tax rate for 2022 of 53.9% represented a tax credit on a
loss before tax and was increased by non-recurring items, including
recognition of previously unrecognised deferred tax assets in France
and a tax credit of £11m from the release of provisions for uncertain
tax positions and reduced by charges in respect of prior periods and
non-deductible UK and European bank levy expenses.
Analysis of reported results by global
business
Markets and Securities Services
Loss before tax was £(144)m compared with a profit before tax of
£509m in 2022, a decrease of £653m. This was driven by lower
revenue and higher operating expenses.
Revenue decreased by £(450)m or 18%, mainly in Equities (down
£270m) due to lower client activity as a result of reduced market
volatility. Revenue was also lower in Global Foreign Exchange (down
£199m) driven by lower market volatility. This compared with a strong
performance in 2022 driven by elevated client activity as we benefited
from market-wide volatility relating to interest rates and inflation rate
rises. Revenue increased in Securities Services (up £26m) driven by
higher net interest income reflecting interest rates rises.
Operating expenses increased by £195m or 10%, largely driven by
continued investment in technology to support our growth initiatives.
Costs were also higher driven by inflation and strategic investments.
Global Banking
Profit before tax was £988m, an increase of £502m compared with
2022, largely driven by strong revenue and lower ECL, partly offset by
higher costs.
Revenue increased by £521m or 33%, mainly in GPS (up by £483m)
driven by margin growth reflecting the higher interest rate
environment supported by fee income growth of 12% compared with
the prior year. Revenue in Capital Markets and Advisory was also
higher (up £69m) mainly in Leveraged & Acquisition Finance following
adverse valuation movements in 2022, and in Issuer Services from
higher interest rates. This was partly offset by lower revenue in
Advisory due to reduced market activity and in Credit & Lending due
to lower demand.
ECL were £62m or 41% lower compared with 2022. The charge in
2023 reflected a relatively more stable outlook compared with 2022
where we saw heightened levels of economic uncertainty.
Operating expenses were £81m or 9% higher compared with 2022,
mainly driven by legal and litigation provisions (£63m) booked in 2023.
The remaining increase was primarily due to the impact of strategic
investments and inflation, partly offset by the impact of our ongoing
cost discipline.
Global Banking and Markets Other
Loss before tax was £(266)m, an improvement of £251m compared
with 2022. This was largely driven by higher revenue and lower
operating expenses.
Revenue increased by £121m, mainly driven by the non-recurrence of
2022 losses related to the buy-back of legacy securities (£84m) and
the disposal of assets aligned with the HSBC Group RWA reduction
commitments (£106m). The increase in revenue also included lower
tax gross-up charges (down £123m), an adjustment between GBM
Other, Global Banking and MSS (net nil impact), reflecting the tax
impact of certain positions that are non-standard. This was partly
offset by lower revenue allocated from Markets Treasury driven by
disposal losses on repositioning activities as well as Principal
Investments recognising valuation losses compared with gains in
2022 (down £58m). There were also lower intercompany recoveries
of costs from other entities in the HSBC Group of £91m (offset in
costs).
Operating expenses decreased by £124m or 31% compared with
2022, reflecting the move of certain GBM costs from the bank to
other entities in the HSBC Group (offset by lower intercompany
recoveries in revenue). There was also a reduction in restructuring
and other related costs of £84m, lower staff costs and the impact of
our ongoing cost discipline. This was partly offset by a higher UK bank
levy in 2023 (up £113m).
Strategic Report | Financial summary

16 | HSBC Bank plc Annual Report and Accounts 2023

Commercial Banking
CMB performed strongly in 2023 as we continued to implement our
strategy to focus on serving our international customers. Profit before
tax was £1,000m, up by £284m compared with 2022. This was mainly
driven by higher revenue partly offset by higher ECL charges.
Revenue increased by £313m or 22% compared with 2022, primarily
in GPS (up by £426m) driven by an increase in margins reflecting
rising interest rates net of pass-through to customers. This was partly
offset by a decrease in Credit & Lending revenue (down £45m) driven
by margin compression and lower revenue from Markets Treasury.
Revenue also reflected adverse fair value movements in preference
shares holding in Visa (£36m).
ECL were £29m higher compared with 2022, mainly driven by higher
stage 3 charges.
Operating expenses were in line with 2022.
Wealth and Personal Banking ('WPB')
Profit before tax was £457m in 2023 compared with a loss of
£(1,273)m in 2022, mainly driven by the non-recurrence of the loss
associated with the sale of our retail banking operations in France
£1.7bn. The increase also reflected lower ECL, partly offset by higher
operating expenses.
Revenue increased by £1,771m, mainly due to the impact of an
impairment relating to the sale of our retail banking operations in
France recognised in 2022. Revenue also increased driven by higher
net interest income from retail, notably in the Channel Islands and Isle
of Man and Malta, from the higher interest rate environment and
deposit growth.
ECL were a net release of £12m as credit performance remained
resilient, despite a rise in inflationary pressures. The net charge in
2022 mainly reflected heightened levels of economic uncertainty.
Operating expenses increased by £60m or 11%, mainly driven by
the non-recurrence of a VAT recovery booked in France in 2022.
Corporate Centre
Profit before tax of £117m compared with a loss before tax of
£(1,120)m in 2022. This was mainly driven by higher revenue and
lower operating expenses.
Revenue increased by £926m, driven by the impacts of the
restructuring of our business in Europe, including the non-repeat of
2022 losses associated with the completed sale of our branch
operations in Greece £(87)m and lower losses and impairments
related to the planned disposal of our business in Russia £(164)m. The
increase also reflected the non-recurrence of disposal losses in 2022
associated with RWA reduction commitments by the HSBC Group,
which concluded at the end of 2022 (£126m). In addition, there was a
gain relating to the transfer of the Guernsey Private Banking business
to PBRS in 2023 of £285m.
ECL were £5m lower compared with 2022, mainly driven by lower
losses in Legacy Credit.
Operating expenses decreased by £321m, largely driven by a
reduction in restructuring and other related costs of £485m following
the completion of the HSBC Group’s cost-saving programme, which
concluded at the end of 2022.
Shares of loss in associates and joint ventures increased by £15m
compared with 2022, largely due to an impairment of an investment
in an associate of £18m.
Dividends
The consolidated reported profit for the year attributable to the
shareholders of the bank was £1,703m.
A special dividend was paid on CET1 capital in 2023.
Further information about the results is given in the consolidated
income statement on page 106.
Review of business position

Summary consolidated balance sheet at 31 December
| 2023 | 2022 1
| £m | £m
Total assets | 702,970 | 716,646
– cash and balances at central banks | 110,618 | 131,433
– trading assets | 100,696 | 79,878
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 19,068 | 15,881
– derivatives | 174,116 | 225,238
– loans and advances to banks | 14,371 | 17,109
– loans and advances to customers | 75,491 | 72,614
– reverse repurchase agreements – non-trading | 73,494 | 53,949
– financial investments | 46,368 | 32,604
– assets held for sale | 20,368 | 21,214
– other assets | 68,380 | 66,726
Total liabilities | 678,465 | 693,413
– deposits by banks | 22,943 | 20,836
– customer accounts | 222,941 | 215,948
– repurchase agreements – non-trading | 53,416 | 32,901
– trading liabilities | 42,276 | 41,265
– financial liabilities designated at fair value | 32,545 | 27,282
– derivatives | 171,474 | 218,867
– debt securities in issue | 13,443 | 7,268
– insurance contract liabilities | 20,595 | 20,004
– liabilities of disposal groups held for sale | 20,684 | 24,711
– other liabilities | 78,148 | 84,331
Total equity | 24,505 | 23,233
Total shareholders’ equity | 24,359 | 23,102
Non-controlling interests | 146 | 131

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.

HSBC Bank plc Annual Report and Accounts 2023 | 17

Total assets were £13.5bn or 1.9% lower than at 31 December 2022.
The group maintained a strong and liquid balance sheet with the ratio
of customer advances to customer accounts remaining below 35%.
We have assessed the impact of climate risk on our balance sheet
and have concluded that there is no material impact on the financial
statements for the year ended 31 December 2023.
Assets
Cash and balances at central banks decreased by £20.8bn or 15.8%
as a result of an increase in trading balances and preparation for the
sale of our retail banking operations in France.
Trading assets (up £20.8bn or 26.0%) and financial assets designated
at fair value (up £3.3bn or 20.5%) increased due to growth in
Securities Financing (in the Prime business) in 2023.
Derivative assets decreased by £50.9bn or 22.7% due to market
movements in interest rates and FX rates.
Non-trading reverse repos increased by £19.5bn or 36.2% primarily
due to changes in market conditions.
Financial investments increased by £13.8bn or 42.2% as a result of
our NII optimisation strategy.
Assets held for sale decreased by £0.9bn or 4.3% reflecting the
disposal of our branch operations in Greece in July 2023 and the
reclassification of our operations in Russia as no longer being held for
sale. The remaining held for sale balance comprises assets associated
with our retail operations in France.
Liabilities
Customer accounts increased by £7.0bn or 3.2%, which is consistent
with our funding strategy to grow customer deposits and increase
stable funding.
Total of trading liabilities and financial liabilities designated at fair value
balances increased by £6.3bn or 9.2% due to increase in issuance of
structured bonds.
Debt securities in issue increased by £6.2bn or 85.0% in line with the
our funding strategy.
Non-trading repos increased by £20.5bn or 62.4% as a result of
market activities.
Derivative liabilities decreased by £47.2bn or 21.7%. This is in line
with derivative assets as the underlying risk is broadly matched.
Equity
Total shareholder's equity increased by £1.3bn or 5.4% from 2022,
including an increase in called up share capital & share premium of
£0.6bn to support the acquisition of HBBM in the third quarter of
2023.
Net interest margin
Net interest margin is calculated by dividing net interest income as
reported in the income statement by the average balance of interest-
earning assets. Average balances are based on daily averages for the
principal areas of our banking activities with monthly or less frequent
averages are used elsewhere.

Net interest income
| 2023 | 2022 | 2021
| £m | £m | £m
Interest income | 17,782 | 6,535 | 3,149
Interest expense 1 | (15,631) | (4,631) | (1,395)
Net interest income | 2,151 | 1,904 | 1,754
Average interest-earning assets | 388,644 | 371,971 | 354,324
| % | % | %
Gross interest yield 2 | 4.55 | 1.53 | 0.51
Less: gross interest payable 2 | (4.60) | (1.23) | (0.01)
Net interest spread 3 | (0.05) | 0.30 | 0.50
Net interest margin 4 | 0.55 | 0.51 | 0.50

1 Interest expense includes the funding cost of Market business which is reported in 'net insurance income' with an equal and offsetting income in 'net
income from financial instruments held for trading or managed on a fair value basis'.
2 Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Gross interest payable is the average
annualised interest cost as a percentage of average interest-bearing liabilities.
3 Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the
average annualised interest rate payable on average interest-bearing liabilities.
4 Net interest margin is net interest income expressed as an annualised percentage of AIEA.

Summary of interest income by asset type
| 2023 | 2022 1 | 2021 1
| Average balance | Interest income | Yield 2 | Average balance | Interest income | Yield 2 | Average balance | Interest income | Yield 2
| £m | £m | % | £m | £m | % | £m | £m | %
Short term funds and loans and advances to banks | 139,997 | 4,993 | 3.57 | 144,826 | 1,115 | 0.77 | 119,025 | (221) | (0.19)
Loans and advances to customers | 88,161 | 4,076 | 4.62 | 91,882 | 2,177 | 2.37 | 99,151 | 1,585 | 1.60
Reverse repurchase agreements – non-trading 3 | 71,974 | 4,691 | 6.52 | 56,144 | 1,099 | 1.96 | 57,630 | (132) | (0.23)
Financial investments | 41,178 | 1,509 | 3.66 | 37,875 | 633 | 1.67 | 45,142 | 497 | 1.10
Other interest-earning assets | 47,334 | 2,426 | 5.13 | 41,244 | 686 | 1.66 | 33,376 | 67 | 0.20
Total interest-earning assets | 388,644 | 17,695 | 4.55 | 371,971 | 5,710 | 1.54 | 354,324 | 1,796 | 0.51

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 Interest yield calculations include negative interest on assets recognised as interest expense in the income statement.
3 The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a
lower net balance reported with a higher yield and cost of funds.
Strategic Report | Financial summary

18 | HSBC Bank plc Annual Report and Accounts 2023

Summary of interest expense by type of liability and equity
| 2023 | 2022 1 | 2021 1
| Average balance | Interest expense | Cost 2 | Average balance | Interest expense | Cost 2 | Average balance | Interest expense | Cost 2
| £m | £m | % | £m | £m | % | £m | £m | %
Deposits by banks | 23,512 | 911 | 3.87 | 31,930 | 55 | 0.17 | 32,891 | (186) | (0.57)
Customer accounts | 185,731 | 6,893 | 3.71 | 164,681 | 1,742 | 1.06 | 150,048 | 95 | 0.06
Repurchase agreements – non-trading 3 | 45,337 | 3,518 | 7.76 | 31,898 | 680 | 2.13 | 32,916 | (192) | (0.58)
Debt securities in issue – non-trading | 30,627 | 1,534 | 5.01 | 29,385 | 589 | 2.00 | 38,727 | 258 | 0.67
Other interest-bearing liabilities | 52,560 | 2,688 | 5.11 | 50,301 | 739 | 1.47 | 36,811 | 68 | 0.18
Total interest-bearing liabilities | 337,767 | 15,544 | 4.60 | 308,195 | 3,805 | 1.23 | 291,393 | 43 | 0.01

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 Interest payable calculations include negative interest on liabilities recognised as interest income in the income statement.
3 The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a
lower net balance reported with a higher yield and cost of funds.
Reconciliation of alternative performance measures
Return on average ordinary shareholders’ equity and return on average tangible equity
Return on average ordinary shareholders’ equity (‘RoE’) is computed
by taking profit attributable to the ordinary shareholders of the parent
company (‘reported results’), divided by average ordinary
shareholders’ equity (‘reported equity’) for the period. The adjustment
to reported results and reported equity excludes amounts attributable
to non-controlling interests and holders of preference shares and
other equity instruments.
Return on average tangible equity (‘RoTE’) is computed by adjusting
reported results for impairment of goodwill and other intangible
assets (net of tax), divided by average reported equity adjusted for
goodwill and intangibles for the period.
We provide RoTE ratio in addition to RoE as a way of assessing our
performance, which is closely aligned to our capital position.

Return on average ordinary shareholders’ equity and return on average tangible equity
| Year ended
| 31 Dec | 31 Dec | 31 Dec
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Profit/(loss) |  |  |
Profit/(loss) attributable to the ordinary shareholders of the parent company | 1,489 | (753) | 847
Decrease/(increase) in PVIF (net of tax) | N/A | N/A | (149)
Profit/(loss) attributable to the ordinary shareholders, excluding other intangible assets impairment | 1,489 | (753) | 698
Significant items (net of tax) | N/A | N/A | 468
Impact of strategic transactions 2 | (134) | 1,252 | —
Profit attributable to the ordinary shareholders, excluding other intangible assets impairment and strategic transactions | 1,355 | 499 | 1,166
Equity |  |  |
Average total shareholders’ equity | 24,180 | 22,888 | 23,629
Effect of average preference shares and other equity instruments | (3,930) | (3,889) | (3,722)
Average ordinary shareholders’ equity | 20,250 | 18,999 | 19,907
Effect of goodwill and other intangibles (net of deferred tax) | N/A | N/A | (553)
Other adjustments (net of tax) | 33 | 89 | (92)
Average tangible equity | 20,283 | 19,088 | 19,262
Average impact of strategic transactions | (19) | 250 | N/A
Average tangible equity excluding strategic transactions | 20,264 | 19,338 | N/A
| % | % | %
Ratio |  |  |
Return on average ordinary shareholders’ equity (annualised) | 7.4 | (4.0) | 4.3
Return on average tangible equity (annualised) | 7.3 | (3.9) | 3.6
Return on average tangible equity excluding strategic transactions (annualised) | 6.7 | 2.6 | 6.1

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 Includes the impacts of the sale of our retail banking operations in France.

HSBC Bank plc Annual Report and Accounts 2023 | 19

Risk overview

The group continuously identifies, assesses, manages and monitors
risks. This process, which is informed by its risk factors and the
results of its stress testing programme, gives rise to the classification
of certain financial and non-financial risks. Changes in the assessment
of these risks may result in adjustments to the group’s business
strategy and, potentially, its risk appetite.
Our banking risks include credit risk, treasury risk, market risk, climate
risk, resilience risk (including cybersecurity risk), regulatory
compliance risk, financial crime and fraud risk and model risk. We also
incur insurance risk.
In addition to these banking risks, we have identified top and
emerging risks with the potential to have a material impact on our
financial results, our reputation and the sustainability of our long-term
business model.
The exposure to our risks and risk management of these are
explained in more detail in the Risk section on pages 22 to 86.
Our suite of top and emerging risks is subject to regular review by
senior governance forums. During 2023, we removed Ibor transition
as a top risk given the cessation of the publication of US dollar Libor in
June 2023. We continue to monitor closely the identified risks and
ensure management actions are in place, as required.
The risk from digitalisation and technological advances has been
added reflecting their increasing impact on the banking sector.

Risk |  | Description
Externally driven
Geopolitical and macroeconomic risk | ~ | Our operations and portfolios are exposed to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. Conflicts and geopolitical tensions, including the ongoing Russia-Ukraine and Israel-Hamas wars, are creating a more complicated business environment. Despite expected reductions, interest rates in Europe and the UK, are nevertheless likely to remain high in 2024, which could slow the growth of the economies in which the group operates and affect our credit portfolio.
Credit risk | } | We regularly undertake detailed reviews of our portfolios and proactively manage credit facilities to customers and sectors likely to come under stress as a result of current macroeconomic and geopolitical events, including UK recessionary pressures and impacts of the Russia-Ukraine and Israel-Hamas wars. We remain focused on assessing and managing the impacts of the cost of living crisis and higher interest rates on our customers as well as inflationary pressures across our major markets. Particular emphasis has been maintained on the Commodity Traders, Leverage, Construction and Building Materials, Automotives, Retail, ‘Consumer Spend’ and Commercial Real Estate sectors. We have increased the frequency and depth of our monitoring activities with stress tests and other sectoral reviews performed to identify portfolios or customers who are likely to experience financial difficulty through the slowdown in economic activity.
Cyber threat and unauthorised access to systems | } | The risk of service disruption or loss of data resulting from technology failures or malicious activities by internal or external threats remains heightened. We seek to continue to monitor changes to the threat landscape, including those arising from geopolitical events, and the impact this may have on third party risk management. We operate a continuous improvement programme to help protect our technology operations and to counter a fast-evolving cyber threat environment.
Evolving regulatory environment risk | ~ | The regulatory and compliance risk environment remains complex, in part due to the UK’s Financial Conduct Authority’s (‘FCA’) implementation of its Consumer Duty in July 2023. There continues to be an intense regulatory focus on ESG matters, including on ‘green’ products. Regulatory scrutiny of financial institutions, following banking failures in 2023, may result in new or additional regulatory requirements impacting the group in the short to medium term.
Financial crime and fraud risk | ~ | We are exposed to financial crime risk from our customers, staff and third-parties engaging in criminal activity. The financial crime risk environment continues to evolve, due to increasingly complex geopolitical challenges, the macroeconomic outlook, evolving financial crime regulations, rapid technological developments, an increasing number of national data privacy requirements and the increasing sophistication of fraud. As a result, we will continue to face the possibility of regulatory enforcement and reputational risk.
Environmental, social and governance risk | ~ | We are subject to ESG risks, including in relation to climate change, nature and human rights. These risks have increased owing to the pace and volume of regulatory developments globally, increasing frequency of severe weather events, and due to stakeholders placing more emphasis on financial institutions’ actions and investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in financial and non-financial risks, including reputational, legal and regulatory compliance risks.
Digitalisation and technological advances | ● | Developments in technology and changes in regulations continue to enable new entrants to the banking industry and new products and services offered by competitors. This challenges us to continue to innovate with new digital capabilities and adapt our products, to attract, retain and best serve our customers. Along with opportunities, new technology, including generative Artificial intelligence ('AI'), can introduce risks and we seek to ensure these are understood and managed with appropriate controls.
Internally driven
People risk | Ä | Our businesses, functions and countries in the region are exposed to risks associated with employee retention, talent availability, and compliance with employment laws and regulations. The group has undertaken notable transformation activities through 2023 and several structural changes were achieved. Elevated workloads while transitioning into new operating models have exposed the various businesses and functions to capacity and capability risks. Employment practices and relation risks across the region continue to be mitigated through continuous and transparent engagement with employees’ representative bodies and regulators and are on a reducing trend. Strong oversight is maintained on all aspects of people risk management, including monitoring hiring activities and levels of employee attrition to ensure that effective workforce forecasting is supporting business demands. Failure to manage these risks may impact the delivery of our strategic objectives or lead to regulatory sanctions or legal claims.

Strategic Report | Risk overview

20 | HSBC Bank plc Annual Report and Accounts 2023

Risk |  | Description
Internally driven (continued)
IT systems infrastructure and resilience | } | We continue to monitor and improve our IT systems and network resilience, both on our premises and on the Cloud to minimise service disruption and improve customer experience. To support the business strategy, we remain focused on strengthening our end to end management, building and deploying controls and system monitoring capabilities. We continue to seek to reduce the complexity of our technology estate and consolidate our core banking systems onto a single strategic platform.
Execution risk | } | Failure to effectively prioritise, manage and/or deliver transformation across the group impacts our ability to achieve our strategic objectives. Given the complexity and volume of change planned throughout 2024, we aim to continue to monitor, manage and oversee change execution risk to ensure our change portfolio and initiatives continue to deliver the right outcomes for our customers, people, regulators, investors and communities.
Model risk | ~ | Model risk arises whenever business decision making includes reliance on models. We use models in both financial and non-financial contexts, as well as in a range of business applications. The model landscape continues to be impacted by regulatory requirements driving material changes to the way model risk is managed across the banking industry. The PRA’s Supervisory Statement (SS 1/23) 'Model Risk Management Principles for Banks' issued in May 2023 requires increased oversight and controls on the management of model risks across the bank. We continue strengthening the dialogue with regulators within the region to ensure our deliverables meet their expectations. New technologies, including AI and generative AI, are driving a need for enhanced model risk controls.
Data risk | } | We use data to serve our customers and run our operations, often in real-time within digital experiences and processes. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could be impacted. We seek to ensure that non-public data is kept confidential, and that we comply with the regulations that govern data privacy and cross-border movement of data.
Third-party risk | ~ | We procure goods and services from a range of third parties. Due to the current macroeconomic and geopolitical climate, the risk of service disruption in our supply chain has heightened. We continue to strengthen our controls, oversight and risk management policies and processes to select and manage third parties, including our third parties’ own supply chains, particularly for key activities that could affect our operational resilience.

● | New risk introduced in 2023
~ | Risk has heightened during 2023
} | Risk remains at the same level as 2022
Ä | Risk has decreased during 2023

On behalf of the Board
Kavita Mahtani
Director
20 February 2024
Registered number 00014259

HSBC Bank plc Annual Report and Accounts 2023 | 21

Risk

Contents
22 | Our approach to risk
22 | Our risk appetite
23 | Risk management
23 | Stress testing
23 | Key developments and risk profile
23 | Key developments in 2023
23 | Top and emerging risks
24 | Externally driven
27 | Internally driven
28 | Our material banking and insurance risks
30 | Credit risk
68 | Treasury risk
76 | Market risk
78 | Climate risk
79 | Resilience risk
80 | Cybersecurity Risk
80 | Regulatory compliance risk
81 | Financial crime risk
82 | Model risk
82 | Insurance manufacturing operations risk Overview

Our approach to risk
Our risk appetite
We recognise the importance of a strong risk culture, which refers to
our shared attitudes, values and standards that shape behaviours
related to risk awareness, risk taking and risk management. All our
people are responsible for the management of risk, with the ultimate
accountability residing with the Board. Our risk appetite defines the
level and types of risk that we are willing to take, while informing the
financial planning process and guiding strategic decision making.
The following principles guide the group’s overarching appetite for
risk and determine how our businesses and risks are managed.
Financial position
– Strong capital position, defined by regulatory and internal ratios.
– Liquidity and funding management for each entity on a stand-alone
basis.
Operating model
– Ambition to generate returns in line with our risk appetite and
strong risk management capability.
– Ambition to deliver sustainable earnings and consistent returns for
shareholders.
Business practice
– Zero tolerance for knowingly engaging in any business, activity or
association where foreseeable reputational risk or damage has not
been considered and/or mitigated.
– No appetite for deliberately or knowingly causing detriment to
consumers arising from our products and services or incurring a
breach of the letter or spirit of regulatory requirements.
– No appetite for inappropriate market conduct by a member of staff
or by any group business.
Enterprise-wide application
Our risk appetite encapsulates the consideration of financial and non-
financial risks. We define financial risk as the risk of a financial loss as
a result of business activities. We actively take these types of risks to
maximise shareholder value and profits.
Non-financial risk is defined as the risk to achieving our strategy or
objectives as a result of inadequate or failed internal processes,
people and systems, or from external events.
Our Risk Management Framework
An established risk governance framework and ownership structure
seeks to ensure oversight of, and accountability for, the effective
management of risk within the group. HSBC's Risk Management
Framework ('RMF') fosters the continuous monitoring of the risk
environment and an integrated evaluation of risks and their
interactions. Integral to the RMF are risk appetite, stress testing and
the identification of emerging risks.
Our Risk Committee focuses on risk governance and seeks to ensure
a forward-looking view of risks and their mitigation. The Risk
Committee is a committee of the Board and has responsibility for
oversight and advice to the Board on, amongst other things, the
bank’s risk appetite, tolerance and strategy, systems of risk
management, internal control and compliance. Additionally, members
of the Risk Committee attend meetings of the bank’s Nomination,
Remuneration and Governance Committee at which the alignment of
the reward structures to risk appetite is considered.
In carrying out its responsibilities, the Risk Committee is closely
supported by the Chief Risk Officer, the Chief Financial Officer, the
Head of Internal Audit and the Head of Compliance, together with
other business functions on risks within their respective areas of
responsibility.
Responsibility for managing both financial and non-financial risk lies
with our people. They are required to manage the risks of the
business and operational activities for which they are responsible. We
maintain oversight of our risks through our various specialist Risk
Stewards, as well as the accountability held by the Chief Risk Officer.
Non-financial risk includes some of the most material risks HSBC
faces, such as cyber-attacks, poor customer outcomes and loss of
data and the current geopolitical risks. Actively managing non-financial
risks is crucial to serving our customers effectively and having a
positive impact on society. During 2023 we continued to strengthen
the control environment and our approach to the management of non-
financial risks, as is broadly set out in our Risk Management
Framework. The management of non-financial risk focuses on
governance and risk appetite, providing a single view of the non-
financial risks that matter most, and associated controls. It
incorporates a risk management system designed to enable the active
management of non-financial risk. Our ongoing focus is on simplifying
our approach to non-financial risk management, while driving more
effective oversight and better end-to-end identification and
management of non-financial risks. This is overseen by our Enterprise
Risk Management function, headed by the group Head of Enterprise
Risk Management.
Three lines of defence
All our people are responsible for identifying and managing risk within
the scope of their roles. Roles are defined using the three lines of
defence model, which takes into account our business and functional
structures.
To create a robust control environment to manage risks, we use an
activity-based three lines of defence model, whereby the activity a
member of staff undertakes drives which line they reside within. This
model delineates management accountabilities and responsibilities for
risk management and the control environment.
The model underpins our approach to risk management by clarifying
responsibility, encouraging collaboration and enabling efficient
coordination of risk and control activities.
The three lines are summarised below:
– The first line of defence owns the risks and is responsible
for identifying, recording, reporting and managing them in line with
risk appetite, and ensuring that the right controls and assessments
are in place to mitigate them.
– The second line of defence challenges the first line of defence on
effective risk management, and provides advice and guidance in
relation to the risk.
Risk review

22 | HSBC Bank plc Annual Report and Accounts 2023

– The third line of defence is our Internal Audit function, which
provides independent assurance that the group’s risk management
approach and processes are designed and operating effectively.
Risk appetite
We formally articulate our risk appetite through our risk appetite
statement ('RAS'), which is approved by the Board on the
recommendation of the Risk Committee. Setting out our risk appetite
ensures that planned business activities provide an appropriate
balance of return for the risk we are taking, and that we agree a
suitable level of risk for our strategy. In this way, risk appetite informs
our financial planning process and helps senior management to
allocate capital to business activities, services and products.
The RAS consists of qualitative statements and quantitative metrics,
covering financial and non-financial risks. It is fundamental to the
development of business line strategies, strategic and business
planning and senior management balanced scorecards. Performance
against the RAS is reported to the Risk Management Meeting
('RMM') so that any actual performance that falls outside the
approved risk appetite is discussed and appropriate mitigating actions
are determined. This reporting allows risks to be promptly identified
and mitigated, and informs risk-adjusted remuneration to drive a
strong risk culture.
Risk management
Stress testing
Stress testing is an important tool that is used by banks, as part of
their internal risk management, and by regulators to assess
vulnerabilities in individual banks and/or the financial banking sector
under hypothetical adverse scenarios. The results of stress testing are
used to assess banks’ resilience to a range of adverse shocks and to
assess their capi tal and liquidity adequacy.
HSBC Bank plc is subject to regulatory stress testing in several
jurisdictions. These requirements are increasing in frequency and
granularity. They include the programmes of the BoE, Prudential
Regulation Authority (‘PRA’) and the European Banking Authority
(‘EBA’). Assessment by regulators is on both a quantitative and
qualitative basis, the latter focusing on our portfolio quality, data
provision, stress testing capability and capital planning processes.
A number of internal macroeconomic and event-driven scenarios
specific to the European region were considered and reported to
senior management during the course of the year. The selection of
stress scenarios is based upon the output of our top and emerging
risks identified and our risk appetite. The results help the Board and
senior management to set our risk appetite and confirm the strength
of our strategic and financial plans. Our risk appetite is set at a level
that enables the group to withstand future stress impacts.
The macroeconomic internal stress tests, conducted throughout
2023, considered combinations of various potential impacts as
identified in our top and emerging risks, in particular the impact of the
Russia-Ukraine war, geopolitical tensions and trade wars, interest rate
shocks and a deep recession, supply chain disruption and operational
risk.
We also conduct reverse stress tests each year for HSBC Bank plc
and, where required, at subsidiary entity level to understand potential
extreme conditions that would make our business model non-viable.
Reverse stress testing identifies potential stresses and vulnerabilities
we might face, and helps inform early warning triggers, management
actions and contingency plans designed to mitigate risks.
Recovery and resolution plans
Recovery and resolution plans form part of the integral framework
safeguarding HSBC Bank plc financial stability. The recovery plan,
together with stress testing, help us understand the likely outcomes
of adverse business or economic conditions and in the identification
of appropriate risk mitigating actions.
Climate Risk
In 2023, we have considered four bespoke scenarios that were
designed to articulate our view of the range of potential outcomes for
global climate change. The scenarios explore a wide range of physical
and transition risks that could materialise under certain technological,
behavioural and political assumptions: the Net-Zero - Corporate
Strategy scenario, which aligns with the HSBC Group's net zero
strategy and is consistent with the Paris Agreement; the Baseline -
Current Commitments scenario, which assumes that climate action is
limited to the current governmental commitments and pledges; the
Delayed Transition scenario, which assumes that climate action is
delayed until 2030; and the Downside Physical Risk scenario, which
assumes muted climate action limited to current governmental
policies.
We consider our Current Commitments scenario as the most likely
scenario to transpire over the next five years. Under the Current
Commitments scenario, we expect moderate levels of losses relating
to transition risks. Based on this scenario the potential impact on
expected credit losses is not considered material over the next five
years, as the impacts of climate risk will emerge later in the following
decades.
Key developments and risk profile
Key developments in 2023
We actively managed the risks related to macroeconomic and
geopolitical uncertainties, as well as other key risks described in this
section. In addition, we sought to enhance our risk management in
the following areas:
– We implemented two revised risk appetite frameworks to better
manage and strengthen our controls with respect to concentration
risks. These relate to concentration risks arising from exposures to
countries and to single customer groups.
– Through our climate risk programme, we have continued to embed
climate considerations throughout the firm, including updating the
scope of our programme to cover all risk types, expanding the
scope of climate related training and developing new climate risk
metrics to monitor and manage exposures. We completed an
Internal Scenario Analysis exercise which focused on generating
more granular insights which we are using improve our
understanding of our risk exposures for use in risk management,
business decision making, and to meet ongoing regulatory
expectations.
– We enhanced our processes, framework and capabilities to
improve the control and oversight of our material third parties, and
to help maintain our operational resilience and meet new and
evolving regulatory requirements.
– We deployed industry leading technology and advanced analytics
capabilities into new markets to improve our ability to identify
suspicious activities and prevent financial crime.
– We are embedding our suite of regulatory management systems
following the Group-wide roll-out of regulatory horizon scanning
capabilities and enhanced regulation mapping tooling.
– We continued to increase the stabilisation of our net interest
income (‘NII’) as interest rate expectations fluctuated, driven by
central bank rate increases and a reassessment of the trajectory of
inflation in major economies.
Top and emerging risks
We use a top and emerging risks process to provide a forward-looking
view of issues with the potential to threaten the execution of our
strategy or operations over the medium to long term.
We proactively assess the internal and external risk environment, as
well as review the themes identified across the European region and
the group's businesses, for any risks that may require escalation. We
update our top and emerging risks as necessary.

HSBC Bank plc Annual Report and Accounts 2023 | 23

Our current top and emerging risks are as follows.
Externally driven
Geopolitical and macroeconomic risk
The group faces elevated geopolitical risks, with the Russia-Ukraine
war continuing to have global economic and political implications. The
Israel-Hamas war is also increasing tensions in the Middle East,
leading to recent attacks on shipping in the Red Sea and resulting
counter-measures, which have begun to disrupt supply chains. The
group is monitoring and assessing the impacts of these wars.
The Russia-Ukraine war has continued to elevate geopolitical
instability which could have continued ramifications for the group and
its customers. We continue to monitor and respond to financial
sanctions and trade restrictions that have been adopted in response.
These sanctions and trade restrictions are complex, novel and
evolving. In particular, the US, the UK and the EU, as well as other
countries, have imposed significant sanctions and trade restrictions
against Russia. Such sanctions and restrictions target certain Russian
government officials, politically exposed persons, business people,
Russian oil imports, energy products, financial institutions and other
major Russian companies and sanctions evasion networks. These
countries have also enacted more generally applicable investment,
export, and import bans and restrictions. In December 2023, the US
established a new secondary sanctions regime, providing itself broad
discretion to impose severe sanctions on non-US banks that are
knowingly or even unknowingly engaged in certain transactions or
services involving Russia’s military-industrial base. This creates
challenges associated with the detection or prevention of third-party
activities beyond HSBC’s control. The imposition of such sanctions
against any non-US HSBC entity could result in significant adverse
commercial, operational, and reputational consequences for HSBC,
including the restriction or termination of the non-US HSBC entity’s
ability to access the US financial system and the freezing of the
entity’s assets that are subject to US jurisdiction. In response to such
sanctions and trade restrictions, as well as asset flight, Russia has
implemented certain countermeasures, including the expropriation of
foreign assets.
Our business in Russia principally serves multinational corporate
clients headquartered in other countries. Following a strategic review,
HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) has
entered into an agreement to sell its wholly-owned subsidiary HSBC
Bank (RR) (Limited Liability Company). While we remain committed to
the sale of our business in Russia, the outcome of the sale became
less certain and remains subject to regulatory approval.
Economic and financial risks also remain significant, and we continue
to monitor our risk profile closely in the context of uncertainty over
global macroeconomic policies.
A fall in global energy and food prices from the highs of 2022
facilitated a process of disinflation across key economies during 2023.
Following the reduction in global inflation rates, central banks in most
developed markets are expected to have concluded monetary policy
tightening in the second half of 2023. A further fall in inflation is
expected to enable interest rate reductions through 2024, although
forecasts still assume that they remain materially higher than in
recent years. Higher financing costs will raise interest payment
burdens for many counterparties.
Fiscal deficits are also expected to remain large in both developed and
emerging markets, as public spending on items including social
welfare, defence and climate transition initiatives is expected to
remain high. In many countries, the fiscal response to the Covid-19
pandemic has also left a very high public debt burden. Against a
backdrop of slower economic growth and high interest rates, a rise in
borrowing costs could increase the financial strains on highly indebted
sovereigns.
Macroeconomic, financial and geopolitical risks have all impacted our
macroeconomic scenarios. Our Central scenario, which has the
highest probability weighting in our IFRS 9 ‘Financial Instruments’
calculations of ECL, assumes that GDP growth across our key
markets will remain low in 2024, followed by moderate recovery in
2025. It is anticipated that inflation will converge towards central
banks’ target rates by early 2025. Similarly, interest rates are
expected to decline but remain materially higher than in recent years.
We also consider scenarios where commodity prices are materially
higher, inflation and interest rates rise and a global recession follows,
although we assign these scenarios a lower probability of occurring.
Forecasts remain uncertain, and changing economic conditions and
the materialisation of key risks could reduce the accuracy of the
Central scenario forecast. In particular, forecasts in recent years have
been sensitive to commodity price changes, changing supply chain
conditions, monetary policy adjustments and inflation expectations.
Uncertainty remains with respect to the relationship between the
economic factors and historical loss experience, which has required
adjustments to modelled ECL in cases where we determined that the
model was unable to capture the material underlying risks.
For further details of our Central and other scenarios, see
‘Measurement uncertainty and sensitivity analysis of ECL estimates’
on page 41.
A Memorandum of Understanding (‘MoU‘) was signed on 27 June
2023, setting out a framework for voluntary regulatory cooperation in
financial services between the UK and the EU, including through the
establishment of a Joint UK-EU Financial Regulatory Forum. This is
expected to provide a platform on which both parties will be able to
discuss financial services-related issues, including future equivalence
determinations.
Negotiations between the UK and the EU over the operation of the
Northern Ireland Protocol concluded in February 2023. In January
2024, an additional agreement titled, "Safeguarding the Union" was
signed. Together, these agreements provide a greater degree of
certainty over the regulatory arrangements governing the movement
of goods between Great Britain, Northern Ireland and the EU. In
February 2024, the Northern Ireland Executive was reinstated after a
power-sharing agreement was reached by key political parties.
Challenges remain in the UK-EU relationship following the UK's
withdrawal from the EU. Over the medium to long term, the UK’s
withdrawal from the EU may continue to adversely impact the terms
of EU market access for our UK based clients. We are monitoring the
situation closely, including the potential impacts on our customers.
Our business could also be adversely affected by economic or political
developments in regions of the world outside Europe. This reflects
our extensive business links, through members of the HSBC Group
and other entities, in Asia and elsewhere. Tensions between China
and the US, extending to the UK, the EU, India and other countries,
and political developments in Hong Kong and Taiwan, may adversely
affect the group.
The US, the UK, the EU and other countries have imposed various
sanctions and trade restrictions on China. In response to foreign
sanctions and trade restrictions, China has also announced sanctions,
trade restrictions and laws that could impact the group and its
customers.
Further sanctions, counter-sanctions and trade restrictions may
adversely affect the group, its customers and the markets in which
the group operates, by creating regulatory, reputational and market
risks.
Mitigating actions
– We closely monitor geopolitical and economic developments in
our key markets and sectors, and undertake scenario analysis
where appropriate. This helps us to take actions to manage our
portfolios where necessary, including through enhanced
monitoring, amending our risk appetite and/or reducing limits and
exposures.
– We continue to monitor the EU’s relationship with the UK, and
assess the potential impact on our people, operations and
portfolios.
– We continue to monitor our risk profile closely in the context of
the current geopolitical and macroeconomic situation, and given
the significant uncertainties, additional mitigating actions may be
required.
– We have taken steps, where necessary, to enhance physical
security in geographical areas deemed to be at high risk from
terrorism and military conflicts.
Risk review

24 | HSBC Bank plc Annual Report and Accounts 2023

Credit risk
Despite ongoing macro economic and geopolitical challenges
predominantly driven by the Russia-Ukraine war, prolonged high
inflation and rising energy costs, our credit portfolio remains stable
and resilient with no material concentration risk. Economic prospects
for credit risk across our key markets will be driven by a number of
factors including how inflationary pressures are managed across the
EU and the UK, and whether a global recession develops,
exacerbated by the ongoing Russia-Ukraine war. The Israel-Hamas
war is also being monitored closely.
Mitigating actions
– Reviews of key credit portfolios are undertaken regularly to seek
to ensure that individual customer or portfolio risks are understood
and our management of the level of facilities offered through a
period of low economic growth is appropriate.
– We continue to monitor high risk wholesale industry sectors
closely via quarterly industry risk appetite reviews and in 2023 we
also undertook specific reviews of portfolios showing vulnerability
such as Commodity Traders, Leverage, Construction and Building
Materials, Automotives, Retail, ‘Consumer Spend’ and Commercial
Real Estate.
– Detailed performance monitoring is reviewed on a monthly basis,
which includes early warning indicators and a view of
concentration risks. Portfolio limits and exposures are re-assessed
and reductions implemented where appropriate.
– We stress test portfolios of particular concern to identify
sensitivity to loss under a range of scenarios, with management
actions being taken to seek to rebalance exposures and to manage
risk appetite where necessary.
Cyber threat and unauthorised access to systems
Together with other organisations, we continue to operate in an
increasingly hostile cyber threat environment. These threats include
potential unauthorised access to customer accounts, and attacks on
our systems or those of our third-party suppliers. These threats
require ongoing investment in business and technical controls to
defend against them.
Mitigating actions
– Our cyber intelligence and threat analysis team continually
evaluate threat levels for the most prevalent cyber-attack types
and their potential outcomes (see page 80 – cross-reference to
Cybersecurity). To further protect the group and our customers
and to help ensure the safe expansion of our business lines, we
continue to strengthen our controls to help reduce the likelihood
and impact of advanced malware, data leakage, exposure through
third parties and security vulnerabilities.
– We continue to seek to enhance our cybersecurity capabilities,
including Cloud security, identity and access management, metrics
and data analytics, and third-party security reviews. An important
part of our defence strategy is conducting cybersecurity training
and awareness campaigns so that our colleagues remain aware of
cybersecurity issues and know how to report incidents.
– We regularly report and review cyber risk and control
effectiveness at executive and non-executive Board level. We also
report it across our businesses and functions to help ensure
appropriate visibility and governance of the risk and its mitigating
actions.
– We participate globally in industry bodies and working groups to
collaborate on tactics employed by cyber-crime groups and to
collaborate in helping to defend against, detect and prevent cyber-
attacks on financial organisations.
– We experience numerous attempts to compromise our
cybersecurity. We respond to cybersecurity attacks in accordance
with our cybersecurity framework and applicable laws, rules and
regulations. To date, none of these attacks have had a material
impact on our business or operations.
Evolving regulatory environment risk
We aim to keep abreast of the emerging regulatory compliance and
conduct risk agenda. Current focus areas include but are not limited
to: ESG agenda developments, including in particular managing the
risks of ‘greenwashing’; ensuring good customer outcomes, including
addressing customer vulnerabilities due to cost of living pressures;
enhancements to regulatory reporting controls; and employee
compliance, including the use of e-communication channels.
We monitor regulatory developments closely and engage with
regulators, as appropriate, to help ensure new regulatory
requirements are implemented effectively and in a timely way.
The competitive landscape in which the group operates may be
impacted by future regulatory changes and government intervention.
Mitigating actions
– We monitor for regulatory developments to understand the
evolving regulatory landscape and seek to respond with changes in
a timely way.
– We continue to support work that is focused on the
implementation of UK Consumer Duty requirements.
– We engage with governments and regulators to seek to make a
contribution to regulations and to try and ensure that new
requirements are considered properly and can be implemented
effectively.
– We hold regular meetings with relevant authorities to discuss
strategic contingency plans, including those arising from
geopolitical issues.
– Our simplified conduct approach has been embedded to align to
our purpose and values, in particular the value ‘we take
responsibility’.
Financial crime and fraud risk
Financial institutions remain under considerable regulatory scrutiny
regarding their ability to detect and prevent financial crime. In 2023,
these risks were exacerbated by rising geopolitical tensions and
ongoing macroeconomic factors. These challenging developments
require managing conflicting laws and approaches to legal and
regulatory regimes, and implementing increasingly complex and less
predictable sanctions and trade restrictions.
Amid high levels of inflation and increasing cost of living pressures,
we face increasing regulatory expectations with respect to managing
internal and external fraud and protecting vulnerable customers. In
addition, the accessibility and increasing sophistication of generative
AI brings financial crime risks. While there is potential for the
technology to support financial crime detection, there is also a risk
that criminals use generative AI to perpetrate fraud, particularly
scams.
The digitisation of financial services continues to have an impact on
the payments ecosystem, with an increasing number of new market
entrants and payment mechanisms, not all of which are subject to the
same level of regulatory scrutiny or regulations as banks.
Developments around digital assets and currencies have continued at
pace, with an increasing regulatory and enforcement focus on the
financial crimes linked to these types of assets.
Expectations continue to increase with respect to the intersection of
ESG issues and financial crime, as our organisation, customers and
suppliers transition to net zero. These are particularly focused on
potential ‘greenwashing’, human rights issues and environmental
crimes. In addition, climate change itself could heighten risks linked to
vulnerable migrant populations in countries where financial crime is
already more prevalent.
We also continue to face increasing challenges presented by national
data privacy requirements, which may affect our ability to manage
financial crime risks across markets.
Mitigating actions
– We continue to seek to manage sanctions and trade restrictions
through the use of reasonably designed policies, procedures and
controls, which are subject to ongoing testing, auditing and
enhancements.
– We continue to develop our fraud controls and invest in
capabilities to fight financial crime through the application of

HSBC Bank plc Annual Report and Accounts 2023 | 25

advanced analytics and AI, while monitoring technological
developments and engaging with third parties.
– We are looking at the impact of a rapidly changing payments
ecosystem, as well as risks associated with direct and indirect
exposure to digital assets and currencies, in an effort to maintain
appropriate financial crime controls.
– We regularly review our existing policies and control framework so
that developments relating to ESG are considered and the financial
crime risks are mitigated to the extent possible.
– We engage with regulators, policymakers and relevant
international bodies, seeking to address data privacy challenges
through international standards, guidance and legislation.
Environmental, social and governance ('ESG') risk
We are subject to financial and non-financial risks associated with
ESG-related matters. Our current areas of focus include climate risk,
nature-related risks and human rights risks. These can impact us both
directly and indirectly through our business activities and
relationships.
Our assessment of climate risks covers three distinct time periods,
comprising: short term, which is up to 2025; medium term, which is
between 2026 and 2035; and long term, which is between 2036 and
2050.
– We may face credit losses if our customers business models fail
to align to a net zero economy or if our customers face disruption
to their operations or deterioration to their assets as a result of
extreme weather.
– We may face trading losses if climate change results in changes to
macroeconomic and financial variables which negatively impact
our trading book exposures.
– We may face impacts from physical risk on our own operations
and premises, owing to the increase in frequency and severity of
weather events and chronic shifts in weather patterns, which
could affect our ability to conduct our day-to-day operations.
– We may face increased reputational, legal, and regulatory risks if
we fail to make sufficient progress towards the HSBC Group’s
ESG ambitions, targets and commitments, if we fail to meet
evolving regulatory expectations and requirements on the
management of climate and broader ESG risks, or if we knowingly
or unknowingly make inaccurate, unclear, misleading, or
unsubstantiated claims regarding sustainability to our
stakeholders.
– Requirements, policy objectives, expectations or views may vary
by jurisdiction and stakeholder in relation to ESG related matters.
We may be subject to potentially conflicting approaches to ESG
matters in certain jurisdictions, which may impact our ability to
conduct certain business within those jurisdictions or result in
additional regulatory compliance, reputational, political or litigation
risks. These risks may also arise from divergence in the
implementation of ESG, climate policy and financial regulation in
the many regions in which we operate, including initiatives to
apply and enforce policy and regulation with extraterritorial effect.
– We may face financial reporting risk in relation to our climate-
related and broader ESG disclosures, as any data, methodologies,
scenarios and reporting standards we have used may evolve over
time in line with market practice, regulation or developments in
science. We may also face the risk of making reporting errors due
to issues relating to the availability, accuracy and verifiability of
data and system, process and control challenges. Any changes
and reporting errors could result in revisions to our internal
frameworks and reported data and could mean that reported
figures are not reconcilable or comparable year-on-year. We may
also have to re-evaluate our progress towards the HSBC Group’s
climate-related targets in the future and this could result in
reputational, legal, and regulatory risks.
– We may face model risk, as the uncertain and evolving impacts of
climate change and data and methodology limitations present
challenges to creating reliable and accurate model outputs.
– We may face climate and broader ESG-related litigation and
regulatory enforcement risks, either directly if stakeholders think
that we are not adequately managing climate and broader ESG-
related risks or indirectly if our clients and customers are
themselves the subject of litigation, potentially resulting in the
revaluation of client assets.
We may also be exposed to nature-related risks beyond climate
change. These risks arise when the provision of natural capital such
as water availability, air quality and soil quality is compromised by
human activity. Nature risk can manifest through macroeconomic,
market, credit, reputational, legal and regulatory risks, for the group as
well as our clients and customers.
Regulation and disclosure requirements in relation to human rights,
and to modern slavery in particular, are increasing. Businesses are
expected to be transparent about their efforts to identify and respond
to the risk of negative human rights impacts arising from their
business activities and relationships.
We remained aligned to the HSBC Group’s materiality-based
approach in developing our climate risk management capabilities
across our businesses by prioritising sectors, portfolios and
counterparties with the highest impacts.
Mitigating actions
– A dedicated Environmental Risk Oversight Forum is responsible
for shaping and overseeing our approach and providing support in
managing climate and sustainability risk.
– The Europe Reputational Risk Committee considers climate-
related matters arising from customers, transactions and third
parties that either present a serious potential reputational risk to
HSBC Bank plc (or the HSBC Group) or merit a decision to ensure
a consistent risk management approach across the regions, global
businesses and global functions.
– Our climate risk programme continues to follow the HSBC Group’s
programme set to support the development of climate risk
management capabilities across four key pillars: governance and
risk appetite, risk management, stress testing and scenario
analysis, and disclosures. We continue to enhance our approach
and mitigation to the risk of greenwashing.
– We have supported the HSBC Group in the development and
implementation of an enhanced transition engagement
questionnaire, which is used by Relationship Managers to collect
information through discussions with our clients in high transition
risk sectors, to support their transition away from high carbon
activities.
– We implement HSBC Group’s sustainability risk policies as part of
its broader reputational risk framework. We focus our policies on
sensitive sectors which may have a high adverse impact on people
or on the environment and in which we have a significant number
of customers. In January 2024, the HSBC Group updated its
energy policy covering the broader energy system including
upstream oil and gas, oil and gas power generation, coal,
hydrogen, renewables and hydropower, nuclear, biomass and
energy from waste. The HSBC Group also updated its thermal coal
phase-out policy, which aims to drive thermal coal phase-out
aligned to science-based timeframes. The HSBC Group takes a
risk-based approach in the way that it identifies transactions and
clients to which its energy and thermal coal phase-out policies
apply, and report on relevant exposures, adopting approaches
proportionate to risk and materiality.
– In 2023, the HSBC Group conducted pilot exercises to assess
nature risk exposures, focusing on our HSBC Continental Europe
portfolios in line with regulatory expectations.
– In 2023, the HSBC Group provided practical guidance and training,
where relevant, to our colleagues across the group on how to
identify and manage human rights risks.
For further details of our approach to climate risk management, see
‘Climate risk’ on page 78.
Risk review

26 | HSBC Bank plc Annual Report and Accounts 2023

Digitalisation and technological advances risk
Developments in technology and changes to regulations are enabling
new entrants to the industry, particularly with respect to payments.
This challenges us to continue innovating to address evolving
customer requirements, drive efficiency and adapt our products to
attract and retain customers. As a result, we may need to increase
our investment in our business to adapt or develop products and
services to respond to our customers’ evolving needs. We also need
to ensure that new digital capabilities do not weaken our resilience or
wider risk management capabilities.
New technologies such as generative AI, large language models
blockchain and quantum computing offer both business opportunities
and potential risks for the group. As with the use of all technologies,
we aim to maximise their potential while seeking to ensure a robust
control environment is in place to help manage the inherent risks,
such as the impact on encryption algorithms.
Mitigating actions
– We continue to monitor this emerging risk and advances in
technology, as well as changes in customer behaviours, to
understand how these may impact our business.
– We asses new technologies to help develop appropriate controls
and maintain resilience.
– We closely monitor and assess financial crime risk and the impact
on payment transparency and architecture.
Internally driven
People risk
While the overall trend in employee turnover has been improving,
certain markets in the European region are still facing elevated
inflation, higher turnover rates, and labour market complexities. Our
success in delivering our strategic priorities and managing the
regulatory and legislative environment depends on the development
and retention of our leadership and high-performing employees.
Mitigating actions
The ability to continue to attract, develop and retain talent is primarily
impacted by a competitive labour market alongside heightened
inflationary pressures, coupled with business change impacts on
employees. Compliance with employment laws and regulations
remains a priority.
– We seek to promote a diverse and inclusive workforce, provide
active support to employees, and continue to build the speak up
culture.
– We monitor people risks that could arise from organisational
restructuring. Improved capacity and enhanced workload
management through demand planning review and strengthening
is applied.
– Focus and emphasis is maintained on our strategy, values and
purpose. We encourage our people leaders to focus on talent
retention at all levels, with an empathetic mindset and approach,
while ensuring the whole proposition of working in the group is
well understood.
– Strong Senior management oversight is maintained on political,
legislative, and regulatory challenges to help mitigate the effect of
external factors which may impact our employment practices.
– We carefully monitor the impact of the rising cost of living across
the region. Our fixed pay principles consider the impact of inflation
on our employees across the region recognising the pay pressure.
– Focus is maintained on Future Skills development, with
curriculums made available to all employees through the HSBC
University.
– We develop succession plans for key management roles, with
consistent oversight from the group's Executive Committee.
– We monitor hiring activities and levels of employee attrition, with
each business and function putting in place plans to help ensure
they have effective workforce forecasting to meet business
demands.
IT systems infrastructure and operational resilience
We operate in an extensive and complex technology landscape,
which needs to remain resilient in order to support customers, the
group and markets where we operate. Risks arise where technology
is not understood, maintained, or developed appropriately. We remain
committed to investing in the reliability and resilience of our IT
systems and critical services. The group does so in order to help
protect its customers, affiliates and counterparties, and to help ensure
they do not receive disruption to services that could result in
reputational, legal and regulatory consequences. Increased pressure
has been seen on our business operations and customer support
centres as our people, processes and systems have responded to
meet the current economic environment.
The group's strategy includes simplification of our technology estate
to reduce complexity and costs; this includes consolidation of our
core banking systems onto a single strategic platform. This platform
will leverage existing and known technology, and will be simpler and
easier to maintain. However, as with any strategic transformation
programme risks associated with implementation must be managed
continuously.
Mitigating actions
– We continue to invest in transforming how software solutions are
developed, delivered and maintained to improve system resilience.
– We continue to upgrade many of our IT systems, simplify our
service provision and replace older IT infrastructure and
applications.
– We manage implementation risks arising from the simplification of
our technology estate continuously via oversight of these risks at
all levels of the programme and reporting up to our Risk
Committee.
Execution risk
In order to deliver our Strategic objectives and meet mandatory
regulatory requirements, it is important for the group to maintain a
strong focus on change execution risk. Change execution risk remains
elevated driven by the current scale, complexity and pace of the
group's strategic and regulatory change initiatives. This requires
robust management of significant resource and time sensitive
programmes that are expected to be executed in 2024.
Mitigating actions
– Change execution risk is part of our risk taxonomy and control
library so that it is defined, assessed, managed, reported and
overseen in the same as our other material risks.
– Our change framework provides colleagues across all levels of the
group who deliver on strategic and organisational initiatives with a
common and consistent understanding of their role in achieving
value and outcomes.
– The group's Change Oversight Governance function oversees the
prioritisation, strategic alignment and management of change
execution risk for our Change portfolios and initiatives.
Model risk
Model risk arises whenever business decision making includes
reliance on models. We use models in both financial and non-financial
contexts and in a range of business applications such as customer
selection, product pricing, financial crime transaction monitoring,
creditworthiness evaluation and financial reporting. Assessing model
performance is a continuous undertaking. Models can need
redevelopment as market conditions change.
We continued to prioritise the redevelopment of internal ratings-based
(‘IRB’), internal model approach (‘IMA’) and internal model methods
(‘IMM’) models, as part of the IRB repair and Basel III programmes
with a key focus on enhancing the quality of data used as model
inputs. A new suite of IRB models for local corporates used in France
is undergoing regulatory approval from the Prudential Regulation
Authority (‘PRA’) and European Central Bank (‘ECB’). A
comprehensive development and application plan of key regulatory
capital models has been submitted to both regulators and has been
designed to help ensure that HSBC meets both the PRA and ECB
increased expectations on model risk management. Climate risk

HSBC Bank plc Annual Report and Accounts 2023 | 27

modelling is a key focus as our commitment to ESG has become a
critical part of the group’s strategy.
Model risk remains a key area of focus given the regulatory scrutiny in
this area, with local regulatory exams taking place across the group
and revised principles on model risk published by the PRA (SS1/23)
and expected to come into force in 2024 and further developments in
policy expected from other regulators.
Mitigating actions
– We have continued to embed the enhanced monitoring, review
and challenge of IRB and expected credit loss model performance
through our Model Risk Management function. The Model Risk
Management team aims to provide strong and effective review
and challenge of any future redevelopment of these models.
– Model Risk Management works closely with our lines of business
to ensure that our models meet regulatory requirements as well as
risk management, pricing, liquidity and capital management needs.
Internal Audit provides assurance over the risk management
framework for models.
– Additional assurance work is performed by the model risk
governance teams, which act as second lines of defence. The
teams test whether controls implemented by model users comply
with model risk policy and if model risk standards are adequate.
– Models using AI or generative AI techniques are validated and
monitored to help ensure that risks that are determined by the
algorithms have adequate oversight and review. A framework to
manage the range of risks that are generated by these advanced
techniques, and to recognise the multidisciplinary nature of these
risks, is being developed.
Data risk
We use multiple systems and growing quantities of data to support
our customers. Risk arises if data is incorrect, unavailable, misused, or
unprotected. We need to meet external regulatory obligations and
laws that cover data, such as the Basel Committee on Banking
Supervision’s 239 guidelines and the General Data Protection
Regulation (‘GDPR’).
Mitigating actions
– Through our global data management framework, we monitor the
quality, availability and security of data that supports our
customers and internal processes. We work towards resolving any
identified data issues in a timely manner.
– We have made improvements to our data policies. We are
implementing an updated control framework to help enhance the
end-to-end management of data risk.
– We aim to protect customer data through our data privacy
framework, which establishes practices, design principles and
guidelines that enable us to demonstrate compliance with data
privacy laws and regulations.
– We seek to continue to modernise our data and analytics
infrastructure through investments in Cloud technology, data
visualisation, machine learning and artificial intelligence.
– We educate our employees on data risk and data management.
We deliver regular mandatory training on how to protect and
manage data appropriately.
Third Party risk
We use third parties to provide a range of goods and services. It is
critical that we ensure that we have appropriate risk management
policies, processes and practices over the selection, governance and
oversight of third parties and their supply chain, particularly for key
activities that could affect our operational resilience.
Any deficiency in the management of risks associated with our third
parties could affect our ability to support our customers and meet
regulatory expectations.
Mitigating actions
– We continuously seek to improve our control framework for the
use of third-party providers to seek to ensure risks associated with
these arrangements are understood and managed effectively by
our businesses and functions across the group.
– We continue to enhance the management of our intra-group
arrangements and external third-party arrangements.
– We are implementing the changes required by new regulations as
set by our regulators.
Our material banking and insurance risks
The material risk types associated with our banking and insurance manufacturing operations are described in the following tables.

Description of risks – banking operations
Risks | Arising from | Measurement, monitoring and management of risk
Credit risk (see page 30 ) |
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. | Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives. | Credit risk is: – measured as the amount that could be lost if a customer or counterparty fails to make repayments; – monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and – managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance for risk managers; and by setting limits and appetite across geographical markets, portfolios or sectors.
Treasury risk (see page 68) |
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post employment benefits to staff and their dependants. | Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment. | Treasury risk is: – measured through appetites set as target and minimum ratios; – monitored and projected against appetites and using stress and scenario testing; and – managed through control of resources in conjunction with risk profiles and cashflows.

Risk review

28 | HSBC Bank plc Annual Report and Accounts 2023

Description of risks – banking operations (continued)
Risks | Arising from | Measurement, monitoring and management of risk
Market risk (see page 76 ) |
The risk that movements in market factors such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices will reduce our income or the value of our portfolios. | Exposure to market risk is separated into two portfolios: – trading portfolios; and – non-trading portfolios. Market risk exposures arising from our insurance operations are discussed on page 83. | Market risk is: – measured using sensitivities, value at risk (‘VaR’) and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; – monitored using VaR, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and – managed using risk limits approved by the group's RMM and the RMM in various global businesses.
Climate risk (see page 78) |
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a net zero economy. | Climate risk can materialise through: – physical risk, which arises from the increased frequency and severity of weather events; – transition risk, which arises from the process of moving to a low-carbon economy; – net zero alignment risk may arise, impacting HSBC Bank plc, where the HSBC Group fails to meet its net zero commitments or to meet external expectations related to net zero, because of inadequate ambition and/or plans, poor execution, or inability to adapt to changes in external environment; and – the risk of greenwashing, which arises from the act of knowingly or unknowingly making inaccurate, unclear, misleading or unsubstantiated claims regarding sustainability to stakeholders. | Climate risk is: – measured using risk metrics and stress testing; – monitored using risk appetite statements; and – managed through adherence to risk appetite thresholds and through specific policies, enhancements to processes and the development of tools.
Resilience risk, including cybersecurity risk (see page 79) |
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates, and counterparties as a result of sustained and significant operational disruption. | Resilience risk arises from failures or inadequacies in processes, people, systems or external events. These may be driven by rapid technological innovation, changing behaviours of our consumers, cyber-threats and attacks, cross border dependencies, and third party relationships. | Resilience risk is: – measured through a range of metrics with defined maximum acceptable impact tolerances, and against our agreed risk appetite; – monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and – managed by continuous monitoring and thematic reviews.
Regulatory compliance risk (see page 80) |
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards. | Regulatory compliance risk arises from the failure to observe the letter and spirit of relevant laws, codes, rules, regulations and standards of good practice. This could result in poor market or customer outcomes leading to fines, penalties and reputational damage to our business. | Regulatory compliance risk is: – measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; – monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and – managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/ or remediation work is undertaken where required.
Financial crime risk (see page 81)
Financial crime risk is the risk of knowingly or unknowingly helping parties to commit or to further potentially illegal activity through HSBC, including money laundering, fraud, bribery and corruption, tax evasion, sanctions breaches, and terrorist and proliferation financing. | Financial crime risk arises from day-to-day banking operations involving customers, third parties and employees. | Financial crime risk is: – measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our regulatory compliance teams; – monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and – managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/ or remediation work is undertaken where required.

HSBC Bank plc Annual Report and Accounts 2023 | 29

Description of risks – banking operations (continued)
Risks | Arising from | Measurement, monitoring and management of risk
Model risk (see page 82)
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used. | Model risk arises in both financial and non- financial contexts whenever business decision making includes reliance on models. | Model risk is: – measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; – monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; and – managed by creating and communicating appropriate policies, procedures and guidance, training colleagues in their application, and supervising their adoption to ensure operational effectiveness.

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

Description of risks – insurance manufacturing operations
Risks | Arising from | Measurement, monitoring and management of risk
Financial risk (see page 82) |
For insurance entities, Financial risk includes the risk of not being able to effectively match liabilities arising under insurance contracts with appropriate investments and that the expected sharing of financial performance with policyholders under certain contracts is not possible. | Exposure to financial risks arises from: – market risk affecting the fair values of financial assets or their future cash flows; – credit risk; and – liquidity risk of entities not being able to make payments to policyholders as they fall due. | Financial risk is: – measured (i) for credit risk, in terms of economic capital and the amount that could be lost if a counterparty fails to make repayments; (ii) for market risk, in terms of economic capital, internal metrics and fluctuations in key financial variables; and (iii) for liquidity risk, in terms of internal metrics, including stressed operational cash flow projections; – monitored through a framework of approved limits and delegated authorities; and – managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance. This includes using product design and asset liability matching and bonus rates.
Insurance risk (see page 82) |
The risk that, over time, the cost of the contract, including claims and benefits may exceed the total amount of premiums and investment income received. | The cost of claims and benefits can be influenced by many factors, including mortality and morbidity experience, as well as lapse and surrender rates. | Insurance risk is: – measured in terms of life insurance liabilities and economic capital allocated to insurance underwriting risk; – monitored though a framework of approved limits and delegated authorities; and – managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance. This includes using product design, underwriting, reinsurance and claims-handling procedures.

Credit risk
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet an obligation under a contract. Credit risk arises
principally from direct lending, trade finance and leasing business, but
also from certain other products, such as guarantees and derivatives.
Credit risk management
Key developments in 2023
There were no material changes to the policies and practices for the
management of credit risk in 2023. We continued to apply the
requirements of IFRS 9 ‘Financial Instruments’ within the Credit Risk
sub-function. For our wholesale portfolios, we introduced new
policies for the management of country risk and subordinated debt
assessments. Implementation of these polices did not have a material
impact on our wholesale portfolios.
We actively managed the risks related to macroeconomic
uncertainties, including interest rates, inflation, fiscal and monetary
policy, broader geopolitical uncertainties and conflicts.
For further details, see ‘Top and emerging risks’ on page 23.
Governance and structure
We have established HSBC Group-wide credit risk management and
related IFRS 9 processes. We continue to assess the impact of
economic developments in key markets on specific customers,
customer segments or portfolios. As credit conditions change, we
take mitigating actions, including the revision of risk appetites or limits
and tenors, as appropriate. In addition, we continue to evaluate the
terms under which we provide credit facilities within the context of
individual customer requirements, the quality of the relationship, local
regulatory requirements, market practices and our local market
position.
Credit risk sub-function
(Audited)
Credit approval authorities are delegated by the Board to the Chief
Executive together with the authority to sub-delegate them. The
Credit risk sub-function in Risk is responsible for the key policies and
processes for managing credit risk, which include formulating credit
policies and risk rating frameworks, guiding the appetite for credit risk
exposures, undertaking independent reviews and objective
assessment of credit risk, and monitoring performance and
management of portfolios.
Risk review

30 | HSBC Bank plc Annual Report and Accounts 2023

The principal objectives of our credit risk management are:
– to maintain across HSBC a strong culture of responsible lending
and a robust risk policy and control framework;
– to both partner and challenge global businesses in defining,
implementing and continually re-evaluating our risk appetite under
actual and scenario conditions; and
– to ensure there is independent, expert scrutiny of credit risks, their
costs and their mitigation.
Key risk management process
IFRS 9 ‘Financial Instruments’ process
The IFRS 9 process comprises three main areas: modelling and data;
implementation; and governance.
Modelling, data and forward economic guidance
The HSBC Group has established IFRS 9 modelling and data
processes in various geographies, which are subject to internal model
risk governance including independent review of significant model
developments.
We have a centralised process for generating unbiased and
independent global economic scenarios. Scenarios are subject to a
process of review and challenge by a dedicated central team, and
individually for each region. Each quarter, the scenarios and probability
weights are reviewed and checked for consistency with the economic
conjuncture and current economic and financial risks. These are
subject to final review and approval by senior management in a
Forward Economic Guidance Global Business Impairment Committee.
Implementation
A centralised impairment engine performs the expected credit losses
calculation using data, which is subject to a number of validation
checks and enhancements, from a variety of client, finance and risk
systems. Where possible, these checks and processes are performed
in a globally consistent and centralised manner.
Governance
Management review forums are established in order to review and
approve the impairment results. Regional management review forums
have representatives from Credit Risk and Finance. Required
members of the forums are the heads of Wholesale Credit, Market
Risk, and Wealth and Personal Banking Risk, as well as the global
business Chief Financial Officers and the Chief Accounting Officer.
Concentration of exposure
(Audited)
Concentrations of credit risk arise when a number of counterparties or
exposures have comparable economic characteristics, or such
counterparties are engaged in similar activities or operate in the same
geographical areas or industry sectors so that their collective ability to
meet contractual obligations is uniformly affected by changes in
economic, political or other conditions. The group uses a number of
controls and measures to minimise undue concentration of exposure
in the group’s portfolios across industry, country and customer
groups. These include portfolio and counterparty limits, approval and
review controls, and stress testing.
Credit quality of financial instruments
(Audited)
Our risk rating system facilitates the internal ratings-based approach
under the Basel framework adopted by the HSBC Group to support
the calculation of our minimum credit regulatory capital requirement.
The five credit quality classifications encompass a range of granular
internal credit rating grades assigned to wholesale and retail
customers, and the external ratings attributed by external agencies to
debt securities.
For debt securities and certain other financial instruments, external
ratings have been aligned to the five quality classifications based upon
the mapping of related Customer Risk Rating (‘CRR’) to external credit
rating.
Wholesale lending
The CRR 10-grade scale summarises a more granular underlying
23-grade scale of obligor PD. All corporate customers are rated using
the 10- or 23-grade scale, depending on the degree of sophistication
of the Basel approach adopted for the exposure.
Each CRR band is associated with an external rating grade by
reference to long-run default rates for that grade, represented by the
average of issuer-weighted historical default rates. This mapping
between internal and external ratings is indicative and may vary over
time.
Retail lending
Retail lending credit quality is based on a 12-month point-in-time
probability-weighted PD.

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

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

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

HSBC Bank plc Annual Report and Accounts 2023 | 31

Forborne loans and advances
(Audited)
Forbearance measures consist of concessions towards an obligor that
is experiencing or about to experience difficulties in meeting its
financial commitments.
We continue to class loans as forborne when we modify the
contractual payment terms due to having significant concerns about
the borrowers’ ability to meet contractual payments when they were
due. The group definition of forborne captures non-payment-related
concessions, such as covenant waivers.
For details of our policy on forbearance, see Note 1.2(i) in the financial
statements.
Credit quality of forborne loans
For wholesale lending, where payment related forbearance measures
result in a diminished financial obligation, or if there are other
indicators of impairment, the loan will be classified as credit impaired
if it is not already so classified. All facilities with a customer, including
loans that have not been modified, are considered credit impaired
following the identification of a payment-related forborne loan. For
retail lending, where a material payment-related concession has been
granted, the loan will be classified as credit impaired.
In isolation, non-payment forbearance measures may not result in the
loan being classified as credit impaired unless combined with other
indicators of credit impairment. These are classed as performing
forborne loans for both wholesale and retail lending.
Wholesale and retail lending forborne loans are classified as credit
impaired until there is sufficient evidence to demonstrate a significant
reduction in the risk of non-payment of future cash flows, observed
over a minimum one-year period, and there are no other indicators of
impairment. Any forborne loans not considered credit impaired will
remain forborne for a minimum of two years from the date that credit
impairment no longer applies. For wholesale and retail lending, any
forbearance measures granted on a loan already classed as forborne
results in customer being classed as credit impaired.
Forborne loans and recognition of expected credit losses
(Audited)
Forborne loans expected credit loss assessments reflect the higher
rates of losses typically experienced with these types of loans such
that they are in stage 2 and stage 3. The higher rates are more
pronounced in unsecured retail lending requiring further
segmentation. For wholesale lending, forborne loans are typically
assessed individually. Credit risk ratings are intrinsic to the
impairment assessments. The individual impairment assessment
takes into account the higher risk of the future non-payment inherent
in forborne loans.
Impairment assessment
(Audited)
For details of our impairment policies on loans and advances and
financial investments see Note 1.2(i) on the financial statements.
Write-off of loans and advances
(Audited)
Under the IFRS 9, write-off should occur when there is no reasonable
expectation of recovering further cash flows from the financial asset.
This principle does not prohibit early write-off, which is defined in
local policies to ensure effectiveness in the management of
customers in the collections process.
Unsecured personal facilities, including credit cards, are generally
written off at between 150 and 210 days past due. The standard
period runs until the end of the month in which the account becomes
180 days contractually delinquent. However, in exceptional
circumstances to avoid unfair customer outcomes, deliver customer
duty or meet regulatory expectations, the period may be extended
further.
For secured facilities, write-off should occur upon repossession of
collateral, receipt of proceeds via settlement, or determination that
recovery of the collateral will not be pursued.
Where these assets are maintained on the balance sheet beyond 60
months of consecutive delinquency-driven default, the prospect of
recovery is reassessed.
Recovery activity, on both secured and unsecured assets, may
continue after write-off.
Any unsecured exposures which are not written off at 180 days past
due ('DPD'), and any secured exposures which are in ‘default’ status
for 60 months or greater but are not written off, are subject to
additional monitoring via the appropriate governance forums.
Credit risk in 2023
At 31 December 2023, gross loans and advances to customers and
banks of £91bn increased by £0.1bn, compared with 31 December
2022. This included adverse foreign exchange movements of £1.5bn.
Excluding foreign exchange movements, balance of personal loans
and advances to customers increased by £7.4bn. This was mainly
driven by an increase in France due to retention of a portfolio of home
loans and other loans previously classified as assets held for sale,
offset by decrease of £3.2bn in wholesale loans and advances to
customers and decrease in loans and advances to banks by £2.6bn.
At 31 December 2023, the allowance for ECL excluding foreign
exchange movements in relation to loans and advances to customers
increased by £5m from 31 December 2022.
This was attributable to:
– a £51m decrease in wholesale loans and advances to customers,
of which £6m was driven by stages 1 and 2, £51m by stage 3
offset by £6m increase in POCI.
– a £56m increase in personal loans and advances to customers, of
which £14m was driven by stages 1 and 2 and £42m by stage 3.
This is largely due to the inclusion of HBBM in HSBC Bank plc.
Stage 3 balances at 31 December 2023 remained broadly stable
compared with 31 December 2022.
The ECL charge for 2023 was £169m, inclusive of recoveries due to
the impact of continued economic uncertainty, rising interest rates
and inflationary pressures.
Summary of credit risk
This Credit Risk section includes new and redesigned disclosures
addressing the recommendations of the Disclosures on Expected
Credit Losses ('DECL') Taskforce's third report published in
September 2022.
Sections impacted:
– Stage 2 decomposition for loans and advances to customers and
banks as at 31 December 2023;
– Alignment of management judgemental adjustments to the DECL
definition with additional qualitative and quantitative granularity;
– Reconciliation of changes in gross carrying amount and allowances
for loans and advances to banks and customers;
– Reconciliation of changes in nominal amount and allowances for
loan commitments and financial guarantees.
Comparative information for the prior period has not been presented
in the Annual Report and Accounts 2023 as we recognised and
prioritised the importance of increasing the comparability of our
external disclosures within the timeline recommended by the DECL
Taskforce. While prior period information can be valuable in certain
contexts, we believe the prospective expansion of the level of
disclosures out-weights the benefits of presenting data from prior
years.
The following disclosure presents the gross carrying/nominal amount
of financial instruments to which the impairment requirements in
IFRS 9 are applied and the associated allowance for ECL. The
allowance for ECL decreased from £1,370m at 31 December 2022 to
£1,217m at 31 December 2023.
The allowance for ECL at 31 December 2023 comprised of £1,159m
(2022: £1,283m) in respect of assets held at amortised cost, £58m
(2022: £87m) in respect of loans and other credit related
commitments, and financial guarantees, and £23m (2022: £24m) in
respect of debt instruments measured at FVOCI.
Risk review

32 | HSBC Bank plc Annual Report and Accounts 2023

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited) |  |  |  |
| 31 Dec 2023 | 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL 1 | Gross carrying/ nominal amount | Allowance for ECL 1
The group | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 76,579 | (1,088) | 73,717 | (1,103)
Loans and advances to banks at amortised cost | 14,372 | (1) | 17,152 | (43)
Other financial assets measured at amortised cost | 273,728 | (70) | 269,815 | (137)
– cash and balances at central banks | 110,618 | — | 131,434 | (1)
– items in the course of collection from other banks | 2,114 | — | 2,285 | —
– reverse repurchase agreements – non trading | 73,494 | — | 53,949 | —
– financial investments | 8,861 | — | 3,248 | —
– prepayments, accrued income and other assets 2 | 56,845 | (6) | 55,694 | (3)
– assets held for sale 6 | 21,796 | (64) | 23,205 | (133)
Total gross carrying amount on-balance sheet | 364,679 | (1,159) | 360,684 | (1,283)
Loans and other credit-related commitments | 125,616 | (42) | 126,457 | (67)
Financial guarantees 3 | 2,401 | (16) | 5,327 | (20)
Total nominal amount off-balance sheet 4 | 128,017 | (58) | 131,784 | (87)
| 492,696 | (1,217) | 492,468 | (1,370)
| Fair value | Memorandum allowance for ECL 5 | Fair value | Memorandum allowance for ECL 5
| £m | £m | £m | £m
Debt instruments measured at fair value through other comprehensive income ('FVOCI') | 37,427 | (23) | 29,248 | (24)

1 The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset,
in which case the ECL is recognised as a provision.
2 Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other
assets’ as presented within the consolidated balance sheet on page 108 includes both financial and non-financial assets, including cash collateral and
settlement accounts.
3 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
6 For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 38.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied (continued)
(Audited) |  |  |  |
| 31 Dec 2023 | 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL 1 | Gross carrying/ nominal amount | Allowance for ECL 1
The bank | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 32,800 | (357) | 37,370 | (378)
Loans and advances to banks at amortised cost | 11,670 | — | 14,529 | (43)
Other financial assets measured at amortised cost | 174,304 | (3) | 169,321 | (3)
– cash and balances at central banks | 61,128 | — | 78,442 | (1)
– items in the course of collection from other banks | 1,877 | — | 1,863 | —
– reverse repurchase agreements-non trading | 56,973 | — | 43,055 | —
– financial investments | 12,029 | — | 6,378 | —
– prepayments, accrued income and other assets 2 | 42,206 | (3) | 39,583 | (2)
– assets held for sale | 91 | — | — | —
Total gross carrying amount on-balance sheet | 218,774 | (360) | 221,220 | (424)
Loans and other credit-related commitments | 34,799 | (22) | 35,692 | (31)
Financial guarantees 3 | 1,106 | (9) | 1,363 | (12)
Total nominal amount off-balance sheet 4 | 35,905 | (31) | 37,055 | (43)
| 254,679 | (391) | 258,275 | (467)
| Fair value | Memorandum allowance for ECL 5 | Fair value | Memorandum allowance for ECL 5
| £m | £m | £m | £m
Debt instruments measured at FVOCI | 16,307 | (5) | 12,206 | (4)

1 The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset,
in which case the ECL is recognised as a provision.
2 Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other
assets’ as presented within the consolidated balance sheet on page 114 includes both financial and non-financial assets, including cash collateral and
settlement accounts.
3 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.

HSBC Bank plc Annual Report and Accounts 2023 | 33

The following table provides an overview of the group’s and bank's
credit risk by stage and industry, and the associated ECL coverage.
The financial assets recorded in each stage have the following
characteristics:
– Stage 1: These financial assets are unimpaired and without
significant increase in credit risk on which a 12-month allowance
for ECL is recognised.
– Stage 2: A significant increase in credit risk has been experienced
since initial recognition on which a lifetime ECL is recognised.
– Stage 3: There is objective evidence of impairment and the
financial assets are therefore considered to be in default or
otherwise credit impaired on which a lifetime ECL is recognised.
– Purchased or originated credit-impaired ('POCI'): Financial assets
that are purchased or originated at a deep discount that reflects
the incurred credit losses on which a lifetime ECL is recognised.

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2023
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 66,356 | 7,881 | 2,310 | 32 | 76,579 | (75) | (125) | (882) | (6) | (1,088) | 0.1 | 1.6 | 38.2 | 18.8 | 1.4
– personal | 11,447 | 1,370 | 214 | — | 13,031 | (20) | (17) | (71) | — | (108) | 0.2 | 1.2 | 33.2 | — | 0.8
– corporate and commercial | 42,982 | 5,981 | 1,773 | 32 | 50,768 | (48) | (98) | (673) | (6) | (825) | 0.1 | 1.6 | 38.0 | 18.8 | 1.6
– non-bank financial institutions | 11,927 | 530 | 323 | — | 12,780 | (7) | (10) | (138) | — | (155) | 0.1 | 1.9 | 42.7 | — | 1.2
Loans and advances to banks at amortised cost | 14,256 | 116 | — | — | 14,372 | (1) | — | — | — | (1) | — | — | — | — | —
Other financial assets measured at amortised cost | 272,557 | 989 | 182 | — | 273,728 | (5) | (8) | (57) | — | (70) | — | 0.8 | 31.3 | — | —
Loan and other credit-related commitments | 118,242 | 7,197 | 174 | 3 | 125,616 | (13) | (21) | (8) | — | (42) | — | 0.3 | 4.6 | — | —
– personal | 1,246 | 27 | 3 | — | 1,276 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 58,225 | 4,815 | 155 | 3 | 63,198 | (11) | (17) | (7) | — | (35) | — | 0.4 | 4.5 | — | 0.1
– financial | 58,771 | 2,355 | 16 | — | 61,142 | (2) | (4) | (1) | — | (7) | — | 0.2 | 6.3 | — | —
Financial guarantees 1 | 2,078 | 251 | 72 | — | 2,401 | (2) | (1) | (13) | — | (16) | 0.1 | 0.4 | 18.1 | — | 0.7
– personal | 32 | 2 | — | — | 34 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 1,057 | 68 | 71 | — | 1,196 | (1) | (1) | (13) | — | (15) | 0.1 | 1.5 | 18.3 | — | 1.3
– financial | 989 | 181 | 1 | — | 1,171 | (1) | — | — | — | (1) | 0.1 | — | — | — | 0.1
At 31 Dec 2023 | 473,489 | 16,434 | 2,738 | 35 | 492,696 | (96) | (155) | (960) | (6) | (1,217) | — | 0.9 | 35.1 | 17.1 | 0.2

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

Stage 2 days past due analysis at 31 December 2023
(Audited) |  |  |  |  |  |  |  |  |
| Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The group | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost: | 7,881 | 234 | 298 | (125) | (4) | (1) | 1.6 | 1.7 | 0.3
– personal | 1,370 | 183 | 87 | (17) | (3) | (1) | 1.2 | 1.6 | 1.1
– corporate and commercial | 5,981 | 51 | 207 | (98) | (1) | — | 1.6 | 2.0 | —
– non-bank financial institutions | 530 | — | 4 | (10) | — | — | 1.9 | — | —
Loans and advances to banks at amortised cost | 116 | — | 10 | — | — | — | — | — | —
Other financial assets measured at amortised cost | 989 | 14 | 9 | (8) | — | — | 0.8 | — | —

1 Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis.
Risk review

34 | HSBC Bank plc Annual Report and Accounts 2023

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2022 (continued)
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 63,673 | 7,817 | 2,224 | 3 | 73,717 | (51) | (145) | (907) | — | (1,103) | 0.1 | 1.9 | 40.8 | — | 1.5
– personal | 5,293 | 615 | 105 | — | 6,013 | (9) | (15) | (31) | — | (55) | 0.2 | 2.4 | 29.5 | — | 0.9
– corporate and commercial | 46,671 | 6,479 | 1,851 | 3 | 55,004 | (40) | (123) | (774) | — | (937) | 0.1 | 1.9 | 41.8 | — | 1.7
– non-bank financial institutions | 11,709 | 723 | 268 | — | 12,700 | (2) | (7) | (102) | — | (111) | — | 1.0 | 38.1 | — | 0.9
Loans and advances to banks at amortised cost | 16,673 | 414 | 65 | — | 17,152 | (6) | (21) | (16) | — | (43) | — | 5.1 | 24.6 | — | 0.3
Other financial assets measured at amortised cost | 267,830 | 1,662 | 323 | — | 269,815 | (14) | (17) | (106) | — | (137) | — | 1.0 | 32.8 | — | 0.1
Loan and other credit- related commitments | 116,994 | 9,300 | 163 | — | 126,457 | (13) | (32) | (22) | — | (67) | — | 0.3 | 13.5 | — | 0.1
– personal | 2,004 | 107 | 5 | — | 2,116 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 60,659 | 7,625 | 157 | — | 68,441 | (12) | (28) | (22) | — | (62) | — | 0.4 | 14.0 | — | 0.1
– financial | 54,331 | 1,568 | 1 | — | 55,900 | (1) | (4) | — | — | (5) | — | 0.3 | — | — | —
Financial guarantees 1 | 4,715 | 528 | 84 | — | 5,327 | (1) | (2) | (17) | — | (20) | — | 0.4 | 20.2 | — | 0.4
– personal | 20 | 2 | 1 | — | 23 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 2,946 | 387 | 82 | — | 3,415 | (1) | (1) | (17) | — | (19) | — | 0.3 | 20.7 | — | 0.6
– financial | 1,749 | 139 | 1 | — | 1,889 | — | (1) | — | — | (1) | — | 0.7 | — | — | 0.1
At 31 Dec 2022 | 469,885 | 19,721 | 2,859 | 3 | 492,468 | (85) | (217) | (1,068) | — | (1,370) | — | 1.1 | 37.4 | — | 0.3

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

Stage 2 days past due analysis at 31 December 2022 (continued)
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The group | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost | 7,817 | 93 | 331 | (145) | (2) | (2) | 1.9 | 2.2 | 0.6
– personal | 615 | 43 | 9 | (15) | (2) | (1) | 2.4 | 4.7 | 11.1
– corporate and commercial | 6,479 | 50 | 296 | (123) | — | (1) | 1.9 | 0.0 | 0.3
– non-bank financial institutions | 723 | — | 26 | (7) | — | — | 1.0 | — | —
Loans and advances to banks at amortised cost | 414 | — | 8 | (21) | — | — | 5.1 | — | —
Other financial assets measured at amortised cost | 1,662 | 25 | 12 | (17) | — | (2) | 1.0 | — | 16.7

1 Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis.

HSBC Bank plc Annual Report and Accounts 2023 | 35

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2023
(Audited)
| Gross carrying/nominal amount 2 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | %
Loans and advances to customers at amortised cost | 28,806 | 3,229 | 740 | 25 | 32,800 | (15) | (47) | (289) | (6) | (357) | 0.1 | 1.5 | 39.1 | 24.0 | 1.1
– personal | 1,809 | 817 | 13 | — | 2,639 | (2) | (2) | (2) | — | (6) | 0.1 | 0.2 | 15.4 | — | 0.2
– corporate and commercial | 17,611 | 2,026 | 421 | 25 | 20,083 | (10) | (38) | (151) | (6) | (205) | 0.1 | 1.9 | 35.9 | 24.0 | 1.0
– non-bank financial institutions | 9,386 | 386 | 306 | — | 10,078 | (3) | (7) | (136) | — | (146) | — | 1.8 | 44.4 | — | 1.4
Loans and advances to banks at amortised cost | 11,644 | 26 | — | — | 11,670 | — | — | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 174,271 | 24 | 9 | — | 174,304 | — | (1) | (2) | — | (3) | — | 4.2 | 22.2 | — | —
Loan and other credit-related commitments | 30,672 | 4,109 | 15 | 3 | 34,799 | (7) | (14) | (1) | — | (22) | — | 0.3 | 6.7 | — | 0.1
– personal | 330 | 1 | 2 | — | 333 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 14,891 | 1,884 | 5 | 3 | 16,783 | (5) | (10) | — | — | (15) | — | 0.5 | — | — | 0.1
– financial | 15,451 | 2,224 | 8 | — | 17,683 | (2) | (4) | (1) | — | (7) | — | 0.2 | 12.5 | — | —
Financial guarantees 1 | 896 | 184 | 26 | — | 1,106 | (1) | — | (8) | — | (9) | 0.1 | — | 30.8 | — | 0.8
– personal | — | 1 | — | — | 1 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 518 | 9 | 25 | — | 552 | — | — | (8) | — | (8) | — | — | 32.0 | — | 1.4
– financial | 378 | 174 | 1 | — | 553 | (1) | — | — | — | (1) | 0.3 | — | — | — | 0.2
At 31 Dec 2023 | 246,289 | 7,572 | 790 | 28 | 254,679 | (23) | (62) | (300) | (6) | (391) | — | 0.8 | 38.0 | 21.4 | 0.2

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

Stage 2 days past due analysis at 31 December 2023
(Audited) | Gross carrying amount | Allowance for ECL | ECL coverage %
|  | of which: | of which: |  | of which: | of which: |  | of which: | of which:
| Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
The bank | £m | £m | £m | £m | £m | £m | % | % | %
Loans and advances to customers at amortised cost: | 3,229 | 157 | 78 | (47) | (1) | — | 1.5 | 0.6 | —
– personal | 817 | 157 | 78 | (2) | (1) | — | 0.2 | 0.6 | —
– corporate and commercial | 2,026 | — | — | (38) | — | — | 1.9 | — | —
– non-bank financial institutions | 386 | — | — | (7) | — | — | 1.8 | — | —
Loans and advances to banks at amortised cost | 26 | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 24 | — | — | (1) | — | — | 4.2 | — | —

1 Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis.
Risk review

36 | HSBC Bank plc Annual Report and Accounts 2023

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

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

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

1 Up-to-date accounts in stage 2 are not shown in amounts presented above.
2 The days past due amounts presented above are on a contractual basis.
Stage 2 decomposition as at 31 December 2023
The following disclosure presents the stage 2 decomposition of gross
carrying amount and allowances for ECL for loans and advances to
customers and banks. It also sets out the reasons why an exposure is
classified as stage 2 and therefore presented as a significant increase
in credit risk at 31 December 2023.
The quantitative classification shows gross carrying amount and
allowances for ECL for which the applicable reporting date PD
measure exceeds defined quantitative thresholds for retail and
wholesale exposures, as set out in Note1.2 'Summary of material
accounting policies', on page 120.
The qualitative classification primarily accounts for customer risk
rating (‘CRR’) deterioration, watch-and-worry and retail management
judgemental adjustments.
A summary of our current policies and practices for the significant
increase in credit risk is set out in ‘Summary of material accounting
policies’ on page 120.

HSBC Bank plc Annual Report and Accounts 2023 | 37

Loans and advances to customers and banks 1,2
| At 31 Dec 2023
| Gross carrying amount | Allowance for ECL
| Loans and advances to customers |  |  | Loans and advances to customers |  |
| Personal | Corporate and commercial | Non-bank financial institutions | Loans and advances to banks at amortised cost | Total Stage 2 | Personal | Corporate and commercial | Non-bank financial institutions | Loans and advances to banks at amortised cost | Total Stage 2
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Quantitative | 820 | 3,589 | 423 | 91 | 4,923 | (12) | (56) | (8) | — | (76)
Qualitative | 547 | 2,186 | 103 | 15 | 2,851 | (5) | (42) | (2) | — | (49)
of which: forbearance | 3 | 260 | 1 | — | 264 | — | (2) | — | — | (2)
30 DPD backstop | 3 | 206 | 4 | 10 | 223 | — | — | — | — | —
Total stage 2 | 1,370 | 5,981 | 530 | 116 | 7,997 | (17) | (98) | (10) | — | (125)
ECL Coverage % | 1.2 | 1.6 | 1.9 | — | 1.6 |  |  |  |  |
The bank |  |  |  |  |  |  |  |  |  |
Quantitative | 321 | 1,801 | 386 | 26 | 2,534 | (1) | (21) | (7) | — | (29)
Qualitative | 496 | 225 | — | — | 721 | (1) | (17) | — | — | (18)
of which: forbearance | 1 | 6 | — | — | 7 | — | — | — | — | —
30 DPD backstop | — | — | — | — | — | — | — | — | — | —
Total stage 2 | 817 | 2,026 | 386 | 26 | 3,255 | (2) | (38) | (7) | — | (47)
ECL Coverage % | 0.2 | 1.9 | 1.8 | — | 1.4 |  |  |  |  |

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

1 Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross
exposure and ECL have been assigned in order of categories presented.
2 Stage 2 decomposition for loans and advances to banks and Personal lending products have been reported for the first time at 31 December 2023
following the adoption of the recommendations of the DECL Taskforce's third report.
Assets held for sale
(Audited)
At 31 December 2023, the most material balances held for sale arose
from our retail banking operations in France.
Disclosures relating to assets held for sale are provided in the
following credit risk tables, primarily where the disclosure is relevant
to the measurement of these financial assets:
– Maximum exposure to credit risk (page 40);
– Distribution of financial instruments by credit quality at
31 December (page 54);
Although there was a reclassification on the balance sheet, there was
no separate income statement reclassification. As a result, charges
for loan impairment losses shown in the credit risk disclosures include
loan impairment charges relating to financial assets classified as
‘assets held for sale’.
'Loans and other credit-related commitments' and 'financial
guarantees', as reported in credit disclosures, also include exposures
and allowances relating to financial assets classified as ‘assets held
for sale’.
Risk review

38 | HSBC Bank plc Annual Report and Accounts 2023

Loans and advances to customers and banks measured at amortised cost
(Audited) |  |
| Total gross loans and advances | Impairment allowances on loans and advances
| £m | £m
As reported | 90,951 | (1,089)
Reported in ‘Assets held for sale’ | 21,512 | (64)
At 31 Dec 2023 | 112,463 | (1,153)
As reported | 90,869 | (1,146)
Reported in ‘Assets held for sale’ | 21,325 | (131)
At 31 Dec 2022 | 112,194 | (1,277)

At 31 December 2023, gross loans and advances of our retail banking
operations in France were £21.4bn, and the related impairment
allowance for ECL was £0.1bn.
Lending balances held for sale continue to be measured at amortised
cost less allowances for impairment and, therefore, such carrying
amounts may differ from fair value.
These lending balances are part of associated disposal groups that are
measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount
of these assets and their sales price is part of the overall gain or loss
on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at
31 December 2023 of loans and advances to banks and customers
classified as held for sale, see Note 35 on the financial statements.

Gross loans and impairment allowances on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited) |  |  |
| Retail banking operations in France | Other 1 | Total
Gross Loans | £m | £m | £m
Loans and advances to customers at amortised cost: | 13,319 | 90 | 13,409
Personal | 10,916 | — | 10,916
Corporate and Commercial | 2,362 | — | 2,362
Non-bank financial institutions | 41 | 90 | 131
Loans and advances to banks at amortised cost | 8,103 | — | 8,103
At 31 Dec 2023 | 21,422 | 90 | 21,512
Impairment allowance |  |  |
Loans and advances to customers at amortised cost: | (64) | — | (64)
Personal | (61) | — | (61)
Corporate and Commercial | (3) | — | (3)
Non-bank financial institutions | — | — | —
Loans and advances to banks at amortised cost | — | — | —
At 31 Dec 2023 | (64) | — | (64)
Loans and advances to customers at amortised cost: | 20,852 | 342 | 21,194
Personal | 18,835 | 253 | 19,088
Corporate and Commercial | 1,975 | 89 | 2,064
Non-bank financial institutions | 42 | — | 42
Loans and advances to banks at amortised cost | — | 131 | 131
At 31 Dec 2022 | 20,852 | 473 | 21,325
Impairment allowance |  |  |
Loans and advances to customers at amortised cost: | (76) | (51) | (127)
Personal | (73) | (38) | (111)
Corporate and Commercial | (3) | (13) | (16)
Non-bank financial institutions | — | — | —
Loans and advances to banks at amortised cost | — | (4) | (4)
At 31 Dec 2022 | (76) | (55) | (131)

1 2023 balances comprising assets held for sale relating to the planned transfer of hedge fund administration services.
The table below analyses the amount of ECL charges arising from assets held for sale and assets not held for sale. The charges arising from
assets held for sale during the period primarily relate to the retail banking operations in France.

Changes in expected credit losses and other credit impairment
(Audited) |  |
| 2023 | 2022
| £m | £m
ECL charges arising from: |  |
– Asset held for sale | 5 | 4
– Asset not held for sale | 164 | 218
At 31 Dec | 169 | 222

HSBC Bank plc Annual Report and Accounts 2023 | 39

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

‘Maximum exposure to credit risk’ table The following table presents our maximum exposure before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). The table excludes trading assets, financial assets designated and otherwise mandatorily measured at fair value trough profit and loss, and financial investments measured at fair value through other comprehensive income as their carrying amount best represents the net exposure to credit risk. Equity securities are also excluded as they are not subject to credit risk. For the financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount; for financial guarantees and other guarantees granted, it is the maximum amount that we would have to pay if the guarantees were called upon. For loan commitments and other credit-related commitments, it is generally the full amount of the committed facilities. The offset in the table relates to amounts where there is a legally enforceable right of offset in the event of counterparty default and where, as a result, there is a net exposure for credit risk purposes.

However, as there is no intention to settle these balances on a net basis under normal circumstances, they do not qualify for net presentation for accounting purposes. No offset has been applied to off-balance sheet collateral. In the case of derivatives the offset column also includes collateral received in cash and other financial assets.

Other credit risk mitigants
While not disclosed as an offset in the following ‘Maximum exposure
to credit risk’ table, other arrangements are in place which reduce our
maximum exposure to credit risk. These include a charge over
collateral on borrowers’ specific assets such as residential properties,
collateral held in the form of financial instruments that are not held on
balance sheet and short positions in securities. In addition, for
financial assets held as part of linked insurance/investment contracts
the credit risk is predominantly borne by the policyholder. See Note
28 on the financial statements for further details of collateral in
respect of certain loans and advances and derivatives.
Collateral available to mitigate credit risk is disclosed in the 'Collateral
and other credit enhancement' section on page 63.

Maximum exposure to credit risk |  |  |
(Audited) | 2023 | 2022
| Maximum exposure | Offset | Net | Maximum exposure | Offset | Net
The group | £m | £m | £m | £m | £m | £m
Loans and advances to customers held at amortised cost | 75,491 | (9,322) | 66,169 | 72,614 | (8,149) | 64,465
– personal | 12,923 | — | 12,923 | 5,958 | (1) | 5,957
– corporate and commercial | 49,943 | (8,570) | 41,373 | 54,067 | (7,269) | 46,798
– non-bank financial institutions | 12,625 | (752) | 11,873 | 12,589 | (879) | 11,710
Loans and advances to banks at amortised cost | 14,371 | (6) | 14,365 | 17,109 | (145) | 16,964
Other financial assets held at amortised cost | 272,558 | (15,283) | 257,275 | 268,083 | (10,882) | 257,201
– cash and balances at central banks | 110,618 | — | 110,618 | 131,433 | — | 131,433
– items in the course of collection from other banks | 2,114 | — | 2,114 | 2,285 | — | 2,285
– reverse repurchase agreements – non trading | 73,494 | (15,283) | 58,211 | 53,949 | (10,882) | 43,067
– financial investments | 8,861 | — | 8,861 | 3,248 | — | 3,248
– assets held for sale | 20,368 | — | 20,368 | 21,214 | — | 21,214
– prepayments, accrued income and other assets | 57,103 | — | 57,103 | 55,954 | — | 55,954
Derivatives | 174,116 | (173,718) | 398 | 225,238 | (224,444) | 794
Total on-balance sheet exposure to credit risk | 536,536 | (198,329) | 338,207 | 583,044 | (243,620) | 339,424
Total off-balance sheet | 153,695 | — | 153,695 | 150,270 | — | 150,270
– financial and other guarantees 1 | 21,908 | — | 21,908 | 22,425 | — | 22,425
– loan and other credit-related commitments | 131,787 | — | 131,787 | 127,845 | — | 127,845
At 31 Dec | 690,231 | (198,329) | 491,902 | 733,314 | (243,620) | 489,694

The bank | £m | £m | £m | £m | £m | £m
Loans and advances to customers held at amortised cost | 32,443 | (9,310) | 23,133 | 36,992 | (8,132) | 28,860
– personal | 2,633 | — | 2,633 | 3,572 | — | 3,572
– corporate and commercial | 19,878 | (8,570) | 11,308 | 22,209 | (7,264) | 14,945
– non-bank financial institutions | 9,932 | (740) | 9,192 | 11,211 | (868) | 10,343
Loans and advances to banks at amortised cost | 11,670 | — | 11,670 | 14,486 | — | 14,486
Other financial assets held at amortised cost | 174,413 | (14,733) | 159,680 | 169,367 | (10,427) | 158,940
– cash and balances at central banks | 61,128 | — | 61,128 | 78,441 | — | 78,441
– items in the course of collection from other banks | 1,877 | — | 1,877 | 1,863 | — | 1,863
– reverse repurchase agreements – non trading | 56,973 | (14,733) | 42,240 | 43,055 | (10,427) | 32,628
– financial investments | 12,029 | — | 12,029 | 6,378 | — | 6,378
– assets held for sale | 160 | — | 160 | — | — | —
– prepayments, accrued income and other assets | 42,246 | — | 42,246 | 39,630 | — | 39,630
Derivatives | 153,765 | (153,744) | 21 | 196,714 | (196,505) | 209
Total on-balance sheet exposure to credit risk | 372,291 | (177,787) | 194,504 | 417,559 | (215,064) | 202,495
Total off-balance sheet | 43,740 | — | 43,740 | 44,673 | — | 44,673
– financial and other guarantees 1 | 8,491 | — | 8,491 | 8,231 | — | 8,231
– loan and other credit-related commitments | 35,249 | — | 35,249 | 36,442 | — | 36,442
At 31 Dec | 416,031 | (177,787) | 238,244 | 462,232 | (215,064) | 247,168

1‘Financial and other guarantees’ represents 'Financial guarantees' and 'Performance and other guarantees' as disclosed in Note 31, net of ECL.
Risk review

40 | HSBC Bank plc Annual Report and Accounts 2023

Concentration of exposure
We have a number of businesses with a broad range of products. We
operate in a number of markets with the majority of our exposures in
UK and France.
For an analysis of:
– financial investments, see Note 15 on the financial statements;
– trading assets, see Note 10 on the financial statements;
– derivatives, see page 65 and Note 14 on the financial statements;
and
– loans and advances by industry sector and by the location of the
principal operations of the lending subsidiary or by the location of
the lending branch, see page 61 for wholesale lending and page 66
for personal lending.
Credit deterioration of financial instruments
(Audited)
A summary of our current policies and practices regarding the
identification, treatment and measurement of stage 1, stage 2 and
stage 3 (credit impaired) and POCI financial instruments can be found
in Note 1.2(i) on the financial statements.
Measurement uncertainty and sensitivity
analysis of ECL estimates
(Audited)
The recognition and measurement of ECL involves the use of
significant judgement and estimation. We form multiple economic
scenarios based on economic forecasts, apply these assumptions to
credit risk models to estimate future credit losses, and probability
weight the results to determine an unbiased ECL estimate.
Management assessed the current economic environment, reviewed
the latest economic forecasts and discussed key risks before
selecting the economic scenarios and their weightings.
Scenarios were constructed to reflect the latest geopolitical risks and
macroeconomic developments, including the Israel-Hamas war and
subsequent disruptions in the Red Sea, and current inflation levels
and monetary policy expectations.
Management judgemental adjustments are used where modelled
ECL does not fully reflect the identified risks and related uncertainty,
or to capture significant late-breaking events.
At 31 December 2023, there was an overall reduction in management
judgemental adjustments compared with 31 December 2022 as
modelled outcomes better reflected the key risks at 31 December
2023.
Methodology
At 31 December 2023, four scenarios are used to capture the latest
economic expectations and to articulate management’s view of the
range of risks and potential outcomes. Each scenario is updated with
the latest economic forecasts and estimates every quarter.
Three scenarios, the Upside, Central and Downside, are drawn from
external consensus forecasts, market data and distributional
estimates of the entire range of economic outcomes. The fourth
scenario, the Downside 2, represents management’s view of severe
downside risks.
The Central scenario is deemed the ‘most likely’ scenario, and usually
attracts the largest probability weighting. It is created using
consensus forecasts, which is the average of a panel of external
forecasts.
The outer scenarios represent the tails of the distribution and are less
likely to occur. The consensus Upside and Downside scenarios are
created with reference to distributions for select markets that capture
forecasters’ views of the entire range of economic outcomes. In the
later years of those scenarios, projections revert to long-term
consensus trend expectations. Reversion to trend is done with
reference to historically observed quarterly changes in the values of
macroeconomic variables.
The fourth scenario, Downside 2, is designed to represent
management’s view of severe downside risks. It is a globally
consistent, narrative-driven scenario, that explores a more extreme
economic outcomes than those captured by the consensus scenarios.
In this scenario, variables do not, by design, revert to long-term trend
expectations and may instead explore alternative states of
equilibrium, where economic activity moves permanently away from
past trends.
The consensus Downside and the consensus Upside scenarios are
each constructed to be consistent with a 10% probability. The
Downside 2 is calibrated to a 5% probability. The Central scenario is
assigned the remaining 75%. This weighting scheme is deemed
appropriate for the unbiased estimation of ECL in most
circumstances. However, management may depart from this
probability-based scenario weighting approach when the economic
outlook and forecasts are determined to be particularly uncertain and
risks are elevated.
In the fourth quarter of 2023, the weights were consistent with the
calibrated scenario probabilities, as key risk metrics implied a decline
in the uncertainty attached to the Central scenario, compared with
the fourth quarter of 2022. Economic forecasts for the Central
scenario remained stable and the dispersion within consensus
forecast panels remained low, even as the Israel-Hamas war
escalated. Risks, including the economic consequences of a broader
war in the Middle East, were reflected in Downside scenarios.
Scenarios produced to calculate ECL are aligned to HSBC’s top and
emerging risks.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC with reference to external forecasts and estimates,
specifically for the purpose of calculating ECL.
Forecasts remain subject to uncertainty and variability. Outer
scenarios are constructed so that they capture risks that could alter
the trajectory of the economy and are designed to encompass the
potential crystallisation of number of key macro-financial risks.
In our key markets, Central scenario forecasts remained broadly
stable in the fourth quarter of 2023, compared with the third quarter
of 2023. The key exception was with regard to monetary policy,
where expectations for interest rate cuts were brought forward.
There continue to be expectations that 2024 will be a period of below
trend growth, with inflation remaining above central bank targets.
At the end of 2023, risks to the economic outlook included a number
of significant geopolitical issues. Within our Downside scenarios, the
economic consequences from the crystallisation of those risks were
captured by higher commodity and goods prices, the re-acceleration
of inflation, a further rise in interest rates and recession.
The scenarios used to calculate ECL in the Annual Report and
Accounts 2023 are described below.
The consensus Central scenario
HSBC’s Central scenario reflects expectations for a low growth and
high interest rate environment across many of our key markets,
where GDP growth is expected to be lower in 2024 than in the
previous year.
Expectations of lower GDP growth in many markets in 2024 are
driven by the assumed lagged effects of higher interest rates and
inflation in Europe. In the scenario, household discretionary income
remains under pressure and business margins deteriorate amid higher
refinancing costs. Growth only returns to its long-term expected trend
in later years, once inflation reverts back towards central bank targets
and interest rates stabilise at lower levels.
Global GDP is expected to grow by 2.2% in 2024 in the Central
scenario and the average rate of global GDP growth is forecast to be
2.6% over the five-year forecast period. This is below the average
growth rate over the five-year period prior to the onset of the
pandemic of 2.9%.
The key features of our Central scenario are:
– GDP growth rates in our main markets are expected to slow down
in 2024, followed by a moderate recovery in 2025. The slowdown
in the UK is particularly notable in this scenario, with growth close
to zero through much of 2024. In the scenario, weaker growth is
caused by high interest rates, which act to deter consumption and
investment.

HSBC Bank plc Annual Report and Accounts 2023 | 41

– In most markets, unemployment is expected to rise moderately as
economic activity slows, although it remains low by historical
standards.
– Inflation is expected to continue to fall as commodity prices
decline, supply disruptions abate, and wage growth moderates. It
is anticipated that inflation converges towards central banks’ target
rates by early 2025.
– Weak conditions in housing markets are expected to persist
through 2024 and 2025 in many of our main markets, including the
UK, as higher interest rates and, in many cases, declining prices,
depress activity.
– Challenging conditions are also forecast to continue in the
commercial property sector in a number of our key markets.
Structural changes to demand in the office segment in particular
have driven lower valuations.
– Policy interest rates in key markets are forecast to have peaked
and are projected to decline in 2024. In the longer term, they are
expected to remain at a higher level than in recent years.
– The Brent crude oil price is forecast to average around $75 per
barrel over the projection period.
The Central scenario was created with forecasts available in late
November, and reviewed continually until the end of December 2023.
In accordance with HSBC’s scenario framework, a probability weight
of 75% has been assigned to the Central scenario for UK and France.
The following tables describe key macroeconomic variables in the
consensus Central scenario.

Consensus Central scenario 2024–2028 (as at 4Q23)
| UK | France
GDP (annual average growth rate, %) |  |
2024 | 0.3 | 0.8
2025 | 1.2 | 1.5
2026 | 1.7 | 1.6
2027 | 1.6 | 1.5
2028 | 1.6 | 1.5
5-year average 1 | 1.3 | 1.4
Unemployment rate (%) |  |
2024 | 4.7 | 7.5
2025 | 4.6 | 7.3
2026 | 4.3 | 7.0
2027 | 4.2 | 6.8
2028 | 4.2 | 6.8
5-year average 1 | 4.4 | 7.1
House prices (annual average growth rate, %) |  |
2024 | (5.5) | (1.0)
2025 | 0.1 | 2.4
2026 | 3.5 | 4.0
2027 | 3.0 | 4.4
2028 | 3.0 | 4.0
5-year average 1 | 0.8 | 2.8
Inflation (annual average growth rate, %) |  |
2024 | 3.2 | 2.7
2025 | 2.2 | 1.8
2026 | 2.2 | 1.7
2027 | 2.3 | 1.9
2028 | 2.3 | 2.1
5-year average 1 | 2.4 | 2.0
Central bank policy rate (annual average, %) |  |
2024 | 5.0 | 3.6
2025 | 4.3 | 2.8
2026 | 3.9 | 2.6
2027 | 3.8 | 2.6
2028 | 3.7 | 2.7
5-year average 1 | 4.1 | 2.9

1 The five-year average is calculated over a projected period of 20
quarters from 1Q24 to 4Q28.

Consensus Central scenario 2023–2027 (as at 4Q22)
| UK | France
GDP (annual average growth rate, %) |  |
2023 | (0.8) | 0.2
2024 | 1.3 | 1.6
2025 | 1.7 | 1.5
2026 | 1.7 | 1.4
2027 | 1.7 | 1.4
5-year average 1 | 1.1 | 1.2
Unemployment rate (%) |  |
2023 | 4.4 | 7.6
2024 | 4.6 | 7.5
2025 | 4.3 | 7.3
2026 | 4.1 | 7.2
2027 | 4.1 | 7.2
5-year average 1 | 4.3 | 7.3
House prices (annual average growth rate, %) |  |
2023 | 0.2 | 1.8
2024 | (3.8) | 2.0
2025 | 0.7 | 3.1
2026 | 2.1 | 3.5
2027 | 2.7 | 3.6
5-year average 1 | 0.4 | 2.8
Inflation (annual average growth rate, %) |  |
2023 | 6.9 | 4.6
2024 | 2.5 | 2.0
2025 | 2.1 | 1.8
2026 | 2.0 | 1.7
2027 | 2.0 | 1.7
5-year average 1 | 3.1 | 2.4
Central bank policy rate (annual average, %) |  |
2023 | 4.4 | 2.7
2024 | 4.2 | 2.7
2025 | 3.7 | 2.4
2026 | 3.4 | 2.3
2027 | 3.1 | 2.3
5-year average 1 | 3.8 | 2.5

1 The five-year average is calculated over a projected period of 20
quarters from 1Q23 to 4Q27.
The graphs compare the Central scenario at the end of 2022 with
economic expectations at the end of 2023.
GDP growth: Comparison of Central scenarios
UK
Note: Real GDP shown as year-on-year percentage change.
Risk review

42 | HSBC Bank plc Annual Report and Accounts 2023

France
Note: Real GDP shown as year-on-year percentage change.
The consensus Upside scenario
Compared with the Central scenario, the consensus Upside scenario
features stronger economic activity in the near term, before
converging to long-run trend expectations. It also incorporates a faster
fall in the rate of inflation than incorporated in the Central scenario.
The scenario is consistent with a number of key upside risk themes.
These include a faster fall in the rate of inflation that allows central
banks to reduce interest rates more quickly, an easing in financial
conditions, and a de-escalation in geopolitical tensions, as the Israel-
Hamas and Russia-Ukraine wars move towards conclusions, and the
US-China relationship improves.
The following tables describe key macroeconomic variables in the
consensus Upside scenario.

Consensus Upside scenario 2024-2028 (as at 4Q23)
| UK | France
GDP level (%, start-to-peak)1 | 10.8 | (4Q28) | 10.4 | (4Q28)
Unemployment rate (%, min)2 | 3.1 | (4Q24) | 6.2 | (4Q25)
House price index (%, start-to-peak)1 | 13.0 | (4Q28) | 19.6 | (4Q28)
Inflation rate (YoY % change, min)3 | 1.3 | (2Q25) | 1.5 | (3Q24)
Central bank policy rate (%, min)2 | 3.7 | (3Q28) | 2.6 | (2Q26)

1 Cumulative change to the highest level of the series during the 20-
quarter projection.
2 Lowest projected unemployment or policy interest rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.

Consensus Upside scenario 2023-2027 (as at 4Q22)
| UK | France
GDP level (%, start-to-peak)1 | 14.6 | (4Q27) | 10.2 | (4Q27)
Unemployment rate (%, min)2 | 3.5 | (4Q23) | 6.5 | (4Q24)
House price index (%, start-to-peak)1 | 7.8 | (4Q27) | 17 | (4Q27)
Inflation rate (YoY % change, min)3 | 0.7 | (1Q24) | 0.8 | (4Q23)
Central bank policy rate (%, min)2 | 3.1 | (4Q27) | 2.3 | (3Q26)

1 Cumulative change to the highest level of the series during the 20-
quarter projection.
2 Lowest projected unemployment or policy interest rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
Downside scenarios
Downside scenarios explore the intensification and crystallisation of a
number of key economic and financial risks. These include an
escalation of geopolitical tensions, which disrupt key commodity and
goods markets, causing inflation and interest rates to rise, and
creating a global recession.
As the geopolitical environment remains volatile and complex, risks
include:
– a broader and more prolonged Israel-Hamas war that undermines
confidence, drives an increase in global energy costs and reduces
trade and investment;
– a potential escalation in the Russia-Ukraine war, which expands
beyond Ukraine’s borders; and further disrupts energy, fertiliser
and food supplies; and
– continued differences between the US and China, which could
affect economic confidence, the global goods trade and supply
chains for critical technologies.
High inflation and higher interest rates also remain key risks. Should
geopolitical tensions escalate, energy and food prices could rise and
increase pressure on household budgets and firms’ costs.
A wage-price spiral, triggered by higher inflation and labour supply
shortages, could put sustained upward pressure on wages and
services prices, aggravating cost pressures and increasing the
squeeze on household real incomes and corporate margins. In turn, it
raises the risk of a more forceful policy response from central banks,
a steeper trajectory for interest rates, significantly higher defaults and,
ultimately, a deep economic recession.
The consensus Downside scenario
In the consensus Downside scenario, economic activity is weaker
compared with the Central scenario. In this scenario, GDP declines,
unemployment rates rise, and asset prices fall. The scenario features
an escalation of geopolitical tensions, which causes a rise in inflation,
as supply chain constraints intensify and energy prices rise. The
scenario also features a temporary increase in interest rates above
the Central scenario, before the effects of weaker consumption
demand begin to dominate and commodity prices and inflation fall
again.
The following tables describe key macroeconomic variables in the
consensus Downside scenario.

Consensus Downside scenario 2024-2028 (as at 4Q23)
| UK | France
GDP level (%, start-to-trough)1 | (1.0) | (2Q25) | (0.3) | (2Q24)
Unemployment rate (%, max)2 | 6.4 | (1Q25) | 8.5 | (4Q24)
House price index (%, start-to-trough)1 | (12.0) | (2Q25) | (1.2) | (3Q24)
Inflation rate (YoY % change, max)3 | 4.1 | (1Q24) | 3.8 | (2Q24)
Central bank policy rate (%, max)2 | 5.7 | (1Q24) | 4.2 | (1Q24)

1 Cumulative change to the lowest level of the series during the 20-
quarter projection.
2 The highest projected unemployment or policy interest rate in the
scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.

Consensus Downside scenario 2023-2027 (as at 4Q22)
| UK | France
GDP level (%, start-to-trough)1 | (3.0) | (1Q25) | (0.9) | (2Q23)
Unemployment rate (%, max)2 | 5.8 | (2Q24) | 8.8 | (4Q23)
House price index (%, start-to-trough)1 | (15.0) | (4Q24) | (0.7) | (3Q23)
Inflation rate (YoY % change, max)3 | 10.8 | (1Q23) | 7.2 | (1Q23)
Central bank policy rate (%, max)2 | 5.1 | (3Q23) | 3.4 | (4Q23)

1 Cumulative change to the lowest level of the series during the 20-
quarter projection.
2 The highest projected unemployment or policy interest rate in the
scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management’s view of the tail of the economic distribution. It
incorporates the crystallisation of a number of risks simultaneously,
including a further escalation of geopolitical crises globally, which
creates severe supply disruptions to goods and energy markets. In
the scenario, as inflation surges and central banks tighten monetary
policy further, confidence evaporates. However, this impulse is

HSBC Bank plc Annual Report and Accounts 2023 | 43

expected to prove short lived, as recession takes hold, causing
commodity prices to correct sharply and global price inflation to fall.
The following tables describe key macroeconomic variables in the
Downside 2 scenario.

Downside 2 scenario 2024-2028 (as at 4Q23)
| UK | France
GDP level (%, start-to-trough)1 | (8.8) | (2Q25) | (6.6) | (1Q25)
Unemployment rate (%, max)2 | 8.4 | (2Q25) | 10.2 | (4Q25)
House price index (%, start-to-trough)1 | (30.2) | (4Q25) | (14.5) | (2Q26)
Inflation rate (YoY % change, max)3 | 10.1 | (2Q24) | 8.6 | (2Q24)
Central bank policy rate (%, max)2 | 6.0 | (1Q24) | 5.2 | (1Q24)

1 Cumulative change to the lowest level of the series during the 20-
quarter projection.
2 The highest projected unemployment or policy interest rate in the
scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.

Downside 2 scenario 2023-2027 (as at 4Q22)
| UK | France
GDP level (%, start-to-trough)1 | (7.5) | (2Q24) | (7.4) | (2Q24)
Unemployment rate (%, max)2 | 8.7 | (2Q24) | 10.3 | (4Q24)
House price index (%, start-to-trough)1 | (32.9) | (1Q25) | (11.4) | (2Q25)
Inflation rate (YoY % change, max)3 | 13.5 | (2Q23) | 10.4 | (2Q23)
Central bank policy rate (%, max)2 | 5.6 | (4Q23) | 4.1 | (4Q23)

1 Cumulative change to the lowest level of the series during the 20-
quarter projection.
2 The highest projected unemployment or policy interest rate in the
scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.
The following graphs show the historical and forecasted GDP growth
rate for the various economic scenarios in UK and France.
UK
France
Scenario weighting
In reviewing the economic environment and the level of risk and
uncertainty, management has considered both global and country-
specific factors.
In the fourth quarter of 2023, key considerations around uncertainty
attached to the Central scenario projections focused on:
– the risks that the Israel-Hamas war escalates and affects
economic expectations;
– the lagged impact of elevated interest rates on household finances
and businesses, and the implications of recent changes to
monetary policy expectations on growth and employment; and
– the outlook for real estate in our key markets, particularly in the
UK.
Although these risk factors remain significant, management assessed
that they were adequately reflected in scenarios at their calibrated
probability. It was noted that despite the Israel-Hamas war, economic
forecasts had remained stable, and dispersion of forecasts around the
consensus were either stable, or have moved lower. Financial market
measures of volatility also remained low through the fourth quarter of
2023.
This has led management to assign scenario probabilities that are
aligned to the standard scenario probability calibration framework.
This entailed assigning a 75% probability weighting to the Central
scenario in our major markets. The consensus Upside scenario was
awarded a 10% weighting, and the consensus Downside scenario
was given 10%. The Downside 2 was assigned a 5% weighting.
In the UK, the Central scenario reflects a very weak growth
environment in which recession risks remain high.
Management concluded that the consensus outlook for France was
also consistent with its view of the economic outlook, while
assessments of uncertainty were also aligned to historical averages.
In fourth quarter of 2022, management varied the applied scenario
weights to reflect greater uncertainty around the inflation and interest
rate outlook, amid supply disruption to energy and food commodity
markets due to the Russia-Ukraine war.
Those factors were reflected in the measures of risk and uncertainty
used to inform judgements around the Central scenario. In particular,
large forecast changes were observed, alongside wide dispersion of
forecasts around consensus estimates and heightened financial
market volatility.
The following tables describe the probabilities assigned in each
scenario.

Scenario weightings, %
| Standard weights | UK | France
4Q23 |  |  |
Upside scenario | 10 | 10 | 10
Central scenario | 75 | 75 | 75
Downside scenario | 10 | 10 | 10
Downside 2 scenario | 5 | 5 | 5
4Q22 |  |  |
Upside scenario | 10 | 5 | 5
Central scenario | 75 | 60 | 60
Downside scenario | 10 | 25 | 25
Downside 2 scenario | 5 | 10 | 10

At 31 December 2023, the consensus Upside and Central scenarios
for all markets had a combined weighting of 85%. At 31 December
2022, the UK and France had a combined weighting of 65%.
Critical estimates and judgements
The calculation of ECL under IFRS 9 involves significant judgements,
assumptions and estimates at 31 December 2023. These included:
– the selection of weights to apply to the economic scenarios given
the rapidly changing economic conditions and the inherent
uncertainty of the underlying forecast under each scenario;
– the selection of scenarios to consider given the changing nature of
macroeconomic and geopolitical risks that HSBC Bank plc and the
wider economy face; and
Risk review

44 | HSBC Bank plc Annual Report and Accounts 2023

– estimating the economic effects of those scenarios on ECL,
particularly sector and portfolio-specific risks and the uncertainty of
default and recovery experience under all scenarios.
How economic scenarios are reflected in ECL calculations
Models are used to reflect economic scenarios on ECL estimates. As
described above, modelled assumptions and linkages based on
historical information could not alone produce relevant information
under the conditions experienced in 2023, and management
judgemental adjustments were still required to support modelled
outcomes.
We have developed globally consistent methodologies for the
application of forward economic guidance into the calculation of ECL
for wholesale and retail credit risk. These standard approaches are
described below, followed by the management judgemental
adjustments made, including those to reflect the circumstances
experienced in 2023.
For our wholesale portfolios, a global methodology is used for the
estimation of the term structure of PD and loss given default (‘LGD’).
For PDs, we consider the correlation of forward economic guidance to
default rates for a particular industry in a country. For LGD
calculations, we consider the correlation of forward economic
guidance to collateral values and realisation rates for a particular
country and industry. PDs and LGDs are estimated for the entire term
structure of each instrument.
For impaired loans, allowance for ECL estimates are derived based on
discounted cash flow (‘DCF’) calculations for internal forward-looking
scenarios specific to individual borrower circumstances (see page
123). Probability-weighted outcomes are applied, and depending on
materiality and status of the borrower, the number of scenarios
considered will change. Where relevant for the case being assessed,
forward economic guidance is incorporated as part of these scenarios.
LGD-driven proxy and modelled estimates are used for certain less
material cases.
For our retail portfolios, the models are predominantly based on
historical observations and correlations with default rates and
collateral values.
For PD, the impact of economic scenarios is modelled for each
portfolio, using historical relationships between default rates and
macroeconomic variables. These are included within IFRS 9 ECL
estimates using either economic response models or models that
contain internal, external and macroeconomic variables. The
macroeconomic impact on PD is modelled over the period equal to
the remaining maturity of the underlying assets.
For LGD, the impact is modelled for mortgage portfolios by
forecasting future loan-to-value profiles for the remaining maturity of
the asset, using national level house price index forecasts and
applying the corresponding LGD expectation relative to the updated
forecast collateral values.
Management judgemental adjustments are described below.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are
typically short-term increases or decreases to the modelled allowance
for ECL at either a customer, segment or portfolio level where
management believes allowances do not sufficiently reflect the credit
risk/ expected credit losses at the reporting date. These can relate to
risks or uncertainties that are not reflected in the models and/or to
any late-breaking events with significant uncertainty, subject to
management review and challenge.
This includes refining model inputs and outputs and using
adjustments to ECL based on management judgement and
quantitative analysis for impacts that are difficult to model.
The effects of management judgemental adjustments are considered
for balances and allowance for ECL when determining whether or not
a significant increase in credit risk has occurred and is allocated to a
stage where appropriate. This is in accordance with the internal
adjustments framework.
Management judgemental adjustments are reviewed under the
governance process for IFRS 9 (as detailed in the section ‘Credit risk
management’ on page 30). Review and challenge focuses on the
rationale and quantum of the adjustments with a further review
carried out by the second line of defence where significant. For some
management judgemental adjustments, internal frameworks establish
the conditions under which these adjustments should no longer be
required and as such are considered as part of the governance
process. This internal governance process allows management
judgemental adjustments to be reviewed regularly and, where
possible, to reduce the reliance on these through model recalibration
or redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to
evolve with the economic environment and as new risks emerge.
Management judgemental adjustments made in estimating the
scenario-weighted reported allowance for ECL at 31 December 2023
are set out in the following table.

Management judgemental adjustments to ECL at 31 December 2023 1
| Retail | Wholesale 2 | Total
| £m | £m | £m
Banks, sovereigns, government entities and low-risk counterparties | (14) | (13) | (27)
Corporate lending adjustments | — | (36) | (36)
Retail lending Inflation-related adjustments | 8 | — | 8
Other macroeconomic-related adjustments | 7 | — | 7
Other retail lending adjustments | 2 | — | 2
Total | 3 | (49) | (46)

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

1 Management judgemental adjustments presented in the table reflect
increases or (decreases) to allowance for ECL, respectively.
2 The wholesale portfolio corresponds to adjustments to the performing
portfolio (stage 1 and stage 2).
Management judgemental adjustments at 31 December 2023 were a
decrease to allowance for ECL of £49m for the wholesale portfolio
and an increase to allowance for ECL of £3m fo r the retail portfolio.
During 2023, management judgemental adjustments reflected an
evolving macroeconomic outlook and the relationship of the modelled
allowance for ECL to this outlook and to late-breaking and sector-
specific risks.
At 31 December 2023, wholesale management judgemental
adjustments were a decrease to allowance for ECL of £49m
(31 December 2022: £102m decrease).
– Adjustments relating to low credit-risk exposures decreased
allowance for ECL by £13m at 31 December 2023 (31 December
2022: £2m decrease). The adjustments mainly relate to standard,
monthly adjustments for bank and sovereign exposures secured
by Export Credit Agency guarantees; the benefit from which is not
recognised in the inbound data. Total net adjustments are broadly
flat in comparison to 31 December 2022.
– A djustments to corporate exposures decreased allowance for ECL
by £36m at 31 December 2023 (31 December 2022: £100m
decrease). The reduction in adjustment is mainly related to
standard, monthly adjustments for corporate exposures secured
by Export Credit Agency which is not recognised in the inbound
data. The reduction in allowance for ECL for these exposures has

HSBC Bank plc Annual Report and Accounts 2023 | 45

been partially offset by management overlay to reflect increased
risk on exposures in France.
At 31 December 2023, retail management judgemental adjustments
were an increase to allowance for ECL of £3m (31 December 2022:
£2m increase).
– Retail lending inflation-related adjustments increased allowance for
ECL by £8m (31 December 2022: £8m increase). These
adjustments addressed where increasing inflation and interest
rates results in affordability risks which were not fully captured by
the modelled output.
– Other macroeconomic-related adjustments increased allowance
for ECL by £7m (31 December 2022: £3m increase). These
adjustments were primarily in relation to country-specific risks
related to future macroeconomic conditions not fully captured by
the modelled output.
– Banks, sovereigns, government entities and low-risk
counterparties adjustments decreased allowance for ECL by £14m
(31 December 2022: £16m decrease). These adjustments related
to the re-alignment of PD between reporting and origination date
for certain parts of the portfolio.
– Other retail lending adjustments increased allowance for ECL by
£2m (31 December 2022: £7m increase), reflecting all other data,
model and management judgemental adjustments.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the allowance for ECL under each scenario described
above for selected portfolios, applying a 100% weighting to each
scenario in turn. The weighting is reflected in both the determination
of a significant increase in credit risk and the measurement of the
resulting allowances.
The allowance for ECL calculated for the Upside and Downside
scenarios should not be taken to represent the upper and lower limits
of possible ECL outcomes. The impact of defaults that might occur in
the future under different economic scenarios is captured by
recalculating allowances for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100%
weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes
allowance for ECL and financial instruments related to defaulted
(stage 3) obligors. The measurement of stage 3 ECL is relatively more
sensitive to credit factors specific to the obligor than future economic
scenarios, and therefore effect of macroeconomic factors are not
necessarily the key consideration when performing individual
assessment of allowances for obligors in default. Loans to defaulted
obligors are a small portion of the overall wholesale lending exposure,
even if representing the majority of the allowance for ECL. Due to the
range and specificity of the credit factors to which the ECL is
sensitive, it is not possible to provide a meaningful alternative
sensitivity analysis for a consistent set of risks across all defaulted
obligors.
For retail credit risk exposures the sensitivity analysis includes
allowance for ECL for defaulted obligors of loans and advances. This
is because the retail ECL for secured mortgage portfolios, including
loans in all stages, is sensitive to macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%
weighted results. These exclude portfolios held by the insurance
business and small portfolios, and as such cannot be directly
compared with personal and wholesale lending presented in other
credit risk tables. In both the wholesale and retail analysis, the
comparative period results for Downside 2 scenarios are also not
directly comparable with the current period, because they reflect
different risks relative to the consensus scenarios for the period end.
The wholesale and retail sensitivity analysis is stated inclusive of
management judgmental adjustments, as appropriate to each
scenario.
For both retail and wholesale portfolios, the gross carrying amount of
financial instruments are the same under each scenario. For
exposures with similar risk profile and product characteristics, the
sensitivity impact is therefore largely the result of changes in
macroeconomic assumptions.
Wholesale analysis

IFRS 9 ECL sensitivity to future economic conditions 1,2,3
| UK | France
| £m | £m
At 31 December 2023 |  |
Reported allowance for ECL | 67 | 78
Consensus Central scenario allowance for ECL | 55 | 81
Consensus Upside scenario allowance for ECL | 38 | 72
Consensus Downside scenario allowance for ECL | 87 | 99
Downside 2 scenario allowance for ECL | 276 | 112
Reported gross carrying amount 2 | 144,215 | 142,389

IFRS 9 ECL sensitivity to future economic conditions
| UK | France
| £m | £m
At 31 December 2022 |  |
Reported allowance for ECL | 84 | 94
Consensus Central scenario allowance for ECL | 64 | 87
Consensus Upside scenario allowance for ECL | 51 | 77
Consensus Downside scenario allowance for ECL | 91 | 104
Downside 2 scenario allowance for ECL | 271 | 124
Reported gross carrying amount 2 | 143,037 | 148,417

1 Allowance for ECL sensitivity includes off-balance sheet financial
instruments. These are subject to significant measurement uncertainty.
2 Includes low credit-risk financial instruments such as debt instruments
at FVOCI, which have high carrying amounts but low ECL under all the
above scenarios.
3 Excludes defaulted obligors. For a detailed breakdown of performing
and non-performing wholesale portfolio exposures, see page 61.
Retail analysis

IFRS 9 ECL sensitivity to future economic conditions 1
| UK | France 2
| £m | £m
At 31 December 2023 |  |
Reported allowance for ECL | 2 | 74
Consensus Central scenario allowance for ECL | 2 | 74
Consensus Upside scenario allowance for ECL | 2 | 72
Consensus Downside scenario allowance for ECL | 3 | 75
Downside 2 scenario allowance for ECL | 4 | 78
Reported gross carrying amount | 1,925 | 17,187

IFRS 9 ECL sensitivity to future economic conditions 1
| UK | France 2
| £m | £m
At 31 December 2022 |  |
Reported allowance for ECL | 7 | 87
Consensus Central scenario allowance for ECL | 6 | 86
Consensus Upside scenario allowance for ECL | 6 | 84
Consensus Downside scenario allowance for ECL | 7 | 88
Downside 2 scenario allowance for ECL | 12 | 92
Reported gross carrying amount | 2,037 | 18,987

1 Allowance for ECL sensitivities exclude portfolios utilising less complex
modelling approaches.
2 Includes balances and allowance for ECL which have been reclassified
from ‘loans and advances to customers’ to ‘assets held for sale’ in the
balance sheet at 31 December 2023. This also includes any balances
and allowance for ECL which continue to be reported as personal
lending in ‘loans and advances to customers’ that are in accordance
with the basis of inclusion for retail sensitivity analysis.
Risk review

46 | HSBC Bank plc Annual Report and Accounts 2023

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

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 168,371 | (71) | 18,059 | (200) | 2,536 | (962) | 3 | — | 188,969 | (1,233)
Transfers of financial instruments | 690 | (56) | (1,336) | 89 | 646 | (33) | — | — | — | —
– transfers from stage 1 to stage 2 | (14,106) | 11 | 14,106 | (11) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 15,023 | (66) | (15,023) | 66 | — | — | — | — | — | —
– transfers to stage 3 | (247) | — | (551) | 39 | 798 | (39) | — | — | — | —
– transfers from stage 3 | 20 | (1) | 132 | (5) | (152) | 6 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 48 | — | (26) | — | — | — | — | — | 22
Net new and further lending/ repayments | 4,626 | (1) | (1,916) | 22 | (442) | 125 | 33 | — | 2,301 | 146
Changes to risk parameters – credit quality | — | (1) | — | (28) | — | (305) | — | (6) | — | (340)
Changes to model used for ECL calculation | — | (3) | — | 18 | — | — | — | — | — | 15
Assets written off | — | — | — | — | (248) | 246 | — | — | (248) | 246
Credit related modifications that resulted in derecognition | — | — | — | — | (94) | 75 | — | — | (94) | 75
Foreign exchange | (2,398) | 2 | (231) | 2 | (49) | 17 | — | — | (2,678) | 21
Others 2 | (9,061) | (9) | 869 | (24) | 207 | (66) | (1) | — | (7,986) | (99)
At 31 Dec 2023 | 162,228 | (91) | 15,445 | (147) | 2,556 | (903) | 35 | (6) | 180,264 | (1,147)
ECL income statement change for the period |  | 43 |  | (14) |  | (180) |  | (6) |  | (157)
Recoveries |  |  |  |  |  |  |  |  |  | 5
Others |  |  |  |  |  |  |  |  |  | (12)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (164)

HSBC Bank plc Annual Report and Accounts 2023 | 47

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| At 31 Dec 2023 | 12 months ended 31 Dec 2023
| Gross carrying/ nominal amount | Allowance for ECL | ECL (charge)/ release
| £m | £m | £m
As above | 180,264 | (1,147) | (164)
Other financial assets measured at amortised cost | 273,728 | (70) | —
Non-trading reverse purchase agreement commitments | 38,704 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | (7)
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 492,696 | (1,217) | (171)
Debt instruments measured at FVOCI | 37,427 | (23) | 2
Total allowance for ECL/total income statement ECL change for the period | N/A | (1,240) | (169)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to
£(1.64)bn and were classified as stage 1 with no ECL.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2022 | 179,612 | (118) | 17,471 | (188) | 2,779 | (923) | 2 | (2) | 199,864 | (1,231)
Transfers of financial instruments: | (14,449) | (26) | 13,625 | 59 | 824 | (33) | — | — | — | —
– transfers from stage 1 to stage 2 | (25,027) | 15 | 25,027 | (15) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 10,847 | (42) | (10,847) | 42 | — | — | — | — | — | —
– transfers to stage 3 | (340) | 2 | (600) | 35 | 940 | (37) | — | — | — | —
– transfers from stage 3 | 71 | (1) | 45 | (3) | (116) | 4 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 29 | — | (24) | — | (10) | — | — | — | (5)
Net new and further lending/ repayments | 9,912 | 7 | (11,270) | 29 | (703) | 90 | 1 | — | (2,060) | 126
Changes to risk parameters – credit quality | — | 32 | — | (101) | — | (318) | — | 2 | — | (385)
Changes to model used for ECL calculation | — | 4 | — | 10 | — | — | — | — | — | 14
Assets written off | — | — | — | — | (165) | 165 | — | — | (165) | 165
Credit related modifications that resulted in derecognition | — | — | — | — | (1) | 1 | — | — | (1) | 1
Foreign exchange | 5,764 | (3) | 744 | (11) | 88 | (34) | — | — | 6,596 | (48)
Others 2,3 | (12,468) | 4 | (2,511) | 26 | (286) | 100 | — | — | (15,265) | 130
At 31 Dec 2022 | 168,371 | (71) | 18,059 | (200) | 2,536 | (962) | 3 | — | 188,969 | (1,233)
ECL Income statement change for the period |  | 72 |  | (86) |  | (238) |  | 2 |  | (250)
Recoveries |  |  |  |  |  |  |  |  |  | 2
Others |  |  |  |  |  |  |  |  |  | 28
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (220)

Risk review

48 | HSBC Bank plc Annual Report and Accounts 2023

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| At 31 Dec 2022 | 12 months ended 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL | ECL (charge)/ release
| £m | £m | £m
As above | 188,969 | (1,233) | (220)
Other financial assets measured at amortised cost | 269,815 | (137) | (3)
Non-trading reverse purchase agreement commitments | 33,684 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | 6
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement | 492,468 | (1,370) | (217)
Debt instruments measured at FVOCI | 29,248 | (24) | (5)
Total allowance for ECL/total income statement ECL change for the period | N/A | (1,394) | (222)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2022, these amounted to
£4bn and were classified as stage 1 with no ECL.
3 Total includes £21bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale and a corresponding
allowance for ECL of £131m reflecting business disposals as disclosed in Note 35 ‘Assets held for sale and liabilities of disposal groups held for sale’
on page 184.

Reconciliation of changes in gross carrying amount and allowances for loans and advances to banks and customers
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 80,347 | (55) | 8,230 | (166) | 2,289 | (922) | 3 | — | 90,869 | (1,143)
Transfers of financial instruments | (98) | (42) | (500) | 78 | 598 | (36) | — | — | — | —
– transfers from stage 1 to stage 2 | (7,192) | 10 | 7,192 | (10) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 7,301 | (51) | (7,301) | 51 | — | — | — | — | — | —
– transfers to stage 3 | (226) | — | (465) | 39 | 691 | (39) | — | — | — | —
– transfers from stage 3 | 19 | (1) | 74 | (2) | (93) | 3 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 36 | — | (22) | — | — | — | — | — | 14
Changes due to modifications not derecognised | — | — | — | — | — | — | — | — | — | —
Net new and further lending/ repayments | 3,230 | (9) | (923) | 15 | (401) | 94 | 30 | — | 1,936 | 100
Changes to risk parameters - credit quality | — | 1 | — | (10) | — | (289) | — | (6) | — | (304)
Changes to models used for ECL calculation | — | 2 | — | 4 | — | — | — | — | — | 6
Assets written off | — | — | — | — | (248) | 246 | — | — | (248) | 246
Credit-related modifications that resulted in | — | — | — | — | (94) | 75 | — | — | (94) | 75
Foreign exchange | (1,264) | 1 | (148) | 1 | (48) | 17 | — | — | (1,460) | 19
Others 1 | (1,603) | (10) | 1,338 | (25) | 214 | (67) | (1) | — | (52) | (102)
At 31 Dec 2023 | 80,612 | (76) | 7,997 | (125) | 2,310 | (882) | 32 | (6) | 90,951 | (1,089)
ECL income statement change for the period | — | 30 | — | (13) | — | (195) | — | (6) | — | (184)
Recoveries |  |  |  |  |  |  |  |  |  | 5
Others |  |  |  |  |  |  |  |  |  | (20)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (199)

1 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to
£(1.17)bn and were classified as stage 1 with no ECL.

HSBC Bank plc Annual Report and Accounts 2023 | 49

Reconciliation of changes in nominal amount and allowances for loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL
The group | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 88,024 | (16) | 9,829 | (34) | 247 | (40) | — | — | 98,100 | (90)
Transfers of financial instruments | 788 | (14) | (836) | 11 | 48 | 3 | — | — | — | —
– transfers from stage 1 to stage 2 | (6,914) | 1 | 6,914 | (1) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 7,722 | (15) | (7,722) | 15 | — | — | — | — | — | —
– transfers to stage 3 | (21) | — | (86) | — | 107 | — | — | — | — | —
– transfers from stage 3 | 1 | — | 58 | (3) | (59) | 3 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 12 | — | (4) | — | — | — | — | — | 8
Net new and further lending/ repayments | 1,396 | 8 | (993) | 7 | (41) | 31 | 3 | — | 365 | 46
Changes to risk parameters - credit quality | — | (2) | — | (18) | — | (16) | — | — | — | (36)
Changes to models used for ECL calculation | — | (5) | — | 14 | — | — | — | — | — | 9
Assets written off | — | — | — | — | — | — | — | — | — | —
Credit-related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | (1,134) | 1 | (83) | 1 | (1) | — | — | — | (1,218) | 2
Others 2 | (7,458) | 1 | (469) | 1 | (7) | 1 | — | — | (7,934) | 3
At 31 Dec 2023 | 81,616 | (15) | 7,448 | (22) | 246 | (21) | 3 | — | 89,313 | (58)
ECL income statement change for the period | — | 13 | — | (1) | — | 15 | — | — | — | 27
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | 8
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 35

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to
£(0.47)bn and were classified as stage 1 with no ECL.
Risk review

50 | HSBC Bank plc Annual Report and Accounts 2023

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 78,523 | (33) | 6,099 | (73) | 1,016 | (358) | — | — | 85,638 | (464)
Transfers of financial instruments | (171) | (20) | 104 | 20 | 67 | — | — | — | — | —
– transfers from stage 1 to stage 2 | (8,257) | 5 | 8,257 | (5) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 8,085 | (25) | (8,085) | 25 | — | — | — | — | — | —
– transfers to stage 3 | (1) | — | (137) | 3 | 138 | (3) | — | — | — | —
– transfers from stage 3 | 2 | — | 69 | (3) | (71) | 3 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 19 | — | (15) | — | — | — | — | — | 4
Net new and further lending/ repayments | (5,964) | 7 | 1,247 | 24 | (178) | 54 | 28 | — | (4,867) | 85
Changes to risk parameters – credit quality | — | 3 | — | (34) | — | (107) | — | (6) | — | (144)
Changes to model used for ECL calculation | — | (3) | — | 19 | — | — | — | — | — | 16
Assets written off | — | — | — | — | (37) | 37 | — | — | (37) | 37
Credit related modifications that resulted in derecognition | — | — | — | — | (89) | 75 | — | — | (89) | 75
Foreign exchange | (142) | 1 | (9) | — | (1) | — | — | — | (152) | 1
Others 2 | (4,768) | 3 | 107 | (2) | 3 | 1 | — | — | (4,658) | 2
At 31 Dec 2023 | 67,478 | (23) | 7,548 | (61) | 781 | (298) | 28 | (6) | 75,835 | (388)
ECL income statement change for the period |  | 26 |  | (6) |  | (53) |  | (6) |  | (39)
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | (12)
Total ECL income change for the period |  |  |  |  |  |  |  |  |  | (51)

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
| At 31 Dec 2023 | 12 months ended 31 Dec 2023
| Gross carrying/ nominal amount | Allowance for ECL | ECL (charge)/ release
| £m | £m | £m
As above | 75,835 | (388) | (51)
Other financial assets measured at amortised cost | 174,304 | (3) | —
Non-trading reverse purchase agreement commitments | 4,540 | — | —
Performance and other guarantees not considered for IFRS 9 |  |  | 4
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement | 254,679 | (391) | (47)
Debt instruments measured at FVOCI | 16,307 | (5) | (2)
Total allowance for ECL/total income statement ECL change for the period | n/a | (396) | (49)

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to
£(1.9)bn and were classified as stage 1 with no ECL.

HSBC Bank plc Annual Report and Accounts 2023 | 51

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees 1 (continued)
(Audited)
| Non-credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
1 Jan 2022 | 65,710 | (56) | 5,657 | (58) | 1,088 | (276) | (1) | — | 72,454 | (390)
Transfers of financial instruments: | (959) | (3) | 774 | 21 | 185 | (18) | — | — | — | —
– transfers from stage 1 to stage 2 | (6,499) | 6 | 6,499 | (6) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 5,554 | (9) | (5,554) | 9 | — | — | — | — | — | —
– transfers to stage 3 | (53) | — | (172) | 18 | 225 | (18) | — | — | — | —
– transfers from stage 3 | 39 | — | 1 | — | (40) | — | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 6 | — | (11) | — | — | — | — | — | (5)
Net new and further lending/repayments | 7,528 | (3) | (351) | 16 | (203) | 7 | — | — | 6,974 | 20
Changes to risk parameters – credit quality | — | 17 | — | (48) | — | (131) | — | — | — | (162)
Changes to model used for ECL calculation | — | 7 | — | 10 | — | — | — | — | — | 17
Assets written off | — | — | — | — | (62) | 62 | — | — | (62) | 62
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | 210 | — | 19 | (3) | 8 | (2) | 1 | — | 238 | (5)
Others 2 | 6,034 | (1) | — | — | — | — | — | — | 6,034 | (1)
At 31 Dec 2022 | 78,523 | (33) | 6,099 | (73) | 1,016 | (358) | — | — | 85,638 | (464)
ECL income statement change for the period |  | 27 |  | (33) |  | (124) |  | — |  | (130)
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | 18
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (112)

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

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

52 | HSBC Bank plc Annual Report and Accounts 2023

Reconciliation of changes in gross carrying amount and allowances for loans and advances to banks and customers
(Audited)
| Non credit – impaired | Credit – impaired | Total
| Stage 1 | Stage 2 | Stage 3 | POCI
| Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL | Gross carrying amount | Allowance for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 48,219 | (23) | 2,741 | (57) | 941 | (340) | — | — | 51,901 | (420)
Transfers of financial instruments | 280 | (9) | (396) | 11 | 116 | (2) | — | — | — | —
– transfers from stage 1 to stage 2 | (3,380) | 4 | 3,380 | (4) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 3,659 | (13) | (3,659) | 13 | — | — | — | — | — | —
– transfers to stage 3 | (1) | — | (135) | 2 | 136 | (2) | — | — | — | —
– transfers from stage 3 | 2 | — | 18 | — | (20) | — | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 10 | — | (12) | — | — | — | — | — | (2)
Net new and further lending/ repayments | (4,431) | 1 | 810 | 24 | (192) | 51 | 25 | — | (3,788) | 76
Changes to risk parameters - credit quality | — | 1 | — | (18) | — | (110) | — | (6) | — | (133)
Changes to models used for ECL calculation | — | 2 | — | 5 | — | — | — | — | — | 7
Assets written off | — | — | — | — | (37) | 37 | — | — | (37) | 37
Credit-related modifications that resulted in derecognition | — | — | — | — | (89) | 75 | — | — | (89) | 75
Foreign exchange | (172) | 1 | (7) | — | (3) | — | — | — | (182) | 1
Others 1 | (3,446) | 2 | 107 | — | 4 | — | — | — | (3,335) | 2
At 31 Dec 2023 | 40,450 | (15) | 3,255 | (47) | 740 | (289) | 25 | (6) | 44,470 | (357)
ECL income statement change for the period |  | 14 |  | (1) |  | (59) |  | (6) |  | (52)
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | (12)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (64)

1 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to
£(2.1)bn and were classified as stage 1 with no ECL.

Reconciliation of changes in nominal amount and allowances for loan commitments and financial guarantees 1
(Audited)
| Non credit – impaired | Credit – impaired |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL | Nominal amount | Allowance for ECL
The bank | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 30,304 | (10) | 3,358 | (16) | 75 | (18) | — | — | 33,737 | (44)
Transfers of financial instruments | (451) | (11) | 500 | 9 | (49) | 2 | — | — | — | —
– transfers from stage 1 to stage 2 | (4,877) | 1 | 4,877 | (1) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 4,426 | (12) | (4,426) | 12 | — | — | — | — | — | —
– transfers to stage 3 | — | — | (2) | 1 | 2 | (1) | — | — | — | —
– transfers from stage 3 | — | — | 51 | (3) | (51) | 3 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 9 | — | (3) | — | — | — | — | — | 6
Net new and further lending/ repayments | (1,533) | 6 | 437 | — | 14 | 3 | 3 | — | (1,079) | 9
Changes to risk parameters - credit quality | — | 2 | — | (16) | — | 3 | — | — | — | (11)
Changes to models used for ECL calculation | — | (5) | — | 14 | — | — | — | — | — | 9
Assets written off | — | — | — | — | — | — | — | — | — | —
Credit-related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | —
Foreign exchange | 30 | — | (2) | — | 2 | — | — | — | 30 | —
Others 2 | (1,322) | 1 | — | (2) | (1) | 1 | — | — | (1,323) | —
At 31 Dec 2023 | 27,028 | (8) | 4,293 | (14) | 41 | (9) | 3 | — | 31,365 | (31)
ECL income statement change for the period |  | 12 |  | (5) |  | 6 |  | — |  | 13
Recoveries |  |  |  |  |  |  |  |  |  | —
Others |  |  |  |  |  |  |  |  |  | —
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 13

1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2 Includes the period on period movement in exposures relating to other HSBC Group companies. As at 31 December 2023, these amounted to £0.2bn
and were classified as stage 1 with no ECL.

HSBC Bank plc Annual Report and Accounts 2023 | 53

Credit quality
Credit quality of financial instruments
(Audited)
We assess the credit quality of all financial instruments that are
subject to credit risk. The credit quality of financial instruments is a
point-in-time assessment of the PD, whereas stages 1 and 2 are
determined based on relative deterioration of credit quality since initial
recognition for the majority of portfolios. Accordingly, for non-credit-
impaired financial instruments, there is no direct relationship between
the credit quality assessment and stages 1 and 2, although typically
the lower credit quality bands exhibit a higher proportion in stage 2.
The five credit quality classifications provided below each encompass
a range of granular internal credit rating grades assigned to wholesale
and personal lending businesses and the external ratings attributed by
external agencies to debt securities, as shown in the table on
page 31.

Distribution of financial instruments by credit quality at 31 December 2023
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 32,567 | 18,634 | 19,627 | 3,409 | 2,342 | 76,579 | (1,088) | 75,491
– personal | 8,702 | 2,612 | 1,388 | 115 | 214 | 13,031 | (108) | 12,923
– corporate and commercial | 18,044 | 12,815 | 14,876 | 3,228 | 1,805 | 50,768 | (825) | 49,943
– non-bank financial institutions | 5,821 | 3,207 | 3,363 | 66 | 323 | 12,780 | (155) | 12,625
Loans and advances to banks held at amortised cost | 13,247 | 415 | 710 | — | — | 14,372 | (1) | 14,371
Cash and balances at central banks | 110,570 | — | 48 | — | — | 110,618 | — | 110,618
Items in the course of collection from other banks | 2,109 | 5 | — | — | — | 2,114 | — | 2,114
Reverse repurchase agreements – non- trading | 57,144 | 13,183 | 3,128 | 39 | — | 73,494 | — | 73,494
Financial investments | 8,840 | — | 21 | — | — | 8,861 | — | 8,861
Assets held for sale | 19,461 | 1,232 | 852 | 95 | 156 | 21,796 | (64) | 21,732
Other assets | 54,903 | 647 | 1,225 | 44 | 26 | 56,845 | (6) | 56,839
– endorsements and acceptances | 224 | 6 | 20 | — | — | 250 | — | 250
– accrued income and other | 54,679 | 641 | 1,205 | 44 | 26 | 56,595 | (6) | 56,589
Debt instruments measured at fair value through other comprehensive income 1 | 35,513 | 2,241 | 760 | 82 | — | 38,596 | (23) | 38,573
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 34,923 | 8,555 | 6,378 | 820 | — | 50,676 | — | 50,676
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 2,439 | 965 | 1,536 | 5 | — | 4,945 | — | 4,945
Derivatives | 155,106 | 15,499 | 3,457 | 46 | 8 | 174,116 | — | 174,116
Assets held for sale | 101 | — | — | — | — | 101 | — | 101
Total gross carrying amount on balance sheet | 526,923 | 61,376 | 37,742 | 4,540 | 2,532 | 633,113 | (1,182) | 631,931
Percentage of total credit quality (%) | 83 | 10 | 6 | 1 | 0 | 100 |  |
Loans and other credit-related commitments | 83,907 | 27,038 | 13,012 | 1,482 | 177 | 125,616 | (42) | 125,574
Financial guarantees | 1,270 | 530 | 503 | 26 | 72 | 2,401 | (16) | 2,385
In-scope: Irrevocable loan commitments and financial guarantees | 85,177 | 27,568 | 13,515 | 1,508 | 249 | 128,017 | (58) | 127,959
Loans and other credit-related commitments | 3,269 | 2,091 | 806 | 42 | 5 | 6,213 | — | 6,213
Performance and other guarantees | 9,582 | 5,357 | 3,917 | 484 | 208 | 19,548 | (25) | 19,523
Out-of-scope: Revocable loan commitments and non-financial guarantees | 12,851 | 7,448 | 4,723 | 526 | 213 | 25,761 | (25) | 25,736

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

54 | HSBC Bank plc Annual Report and Accounts 2023

Distribution of financial instruments by credit quality at 31 December 2022 (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 27,997 | 19,618 | 19,612 | 4,263 | 2,227 | 73,717 | (1,103) | 72,614
– personal | 2,019 | 2,928 | 858 | 103 | 105 | 6,013 | (55) | 5,958
– corporate and commercial | 19,352 | 13,393 | 16,496 | 3,910 | 1,853 | 55,004 | (937) | 54,067
– non-bank financial institutions | 6,626 | 3,297 | 2,258 | 250 | 269 | 12,700 | (111) | 12,589
Loans and advances to banks held at amortised cost | 14,637 | 790 | 1,634 | 26 | 65 | 17,152 | (43) | 17,109
Cash and balances at central banks | 131,379 | — | 55 | — | — | 131,434 | (1) | 131,433
Items in the course of collection from other banks | 2,281 | — | 4 | — | — | 2,285 | — | 2,285
Reverse repurchase agreements – non-trading | 43,777 | 7,953 | 2,219 | — | — | 53,949 | — | 53,949
Financial investments | 3,028 | — | 220 | — | — | 3,248 | — | 3,248
Assets held for sale | 19,419 | 1,598 | 1,773 | 124 | 291 | 23,205 | (133) | 23,072
Other assets | 53,967 | 708 | 948 | 39 | 32 | 55,694 | (3) | 55,691
– endorsements and acceptances | 208 | 4 | 25 | — | 6 | 243 | — | 243
– accrued income and other | 53,759 | 704 | 923 | 39 | 26 | 55,451 | (3) | 55,448
Debt instruments measured at fair value through other comprehensive income 1 | 28,248 | 2,471 | 626 | 105 | — | 31,450 | (24) | 31,426
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 26,961 | 4,323 | 9,966 | 298 | — | 41,548 | — | 41,548
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 1,945 | 331 | 669 | 1 | — | 2,946 | — | 2,946
Derivatives | 199,167 | 21,128 | 4,886 | 29 | 28 | 225,238 | — | 225,238
Assets held for sale | 107 | — | — | — | — | 107 | — | 107
Total gross carrying amount on balance sheet | 552,913 | 58,920 | 42,612 | 4,885 | 2,643 | 661,973 | (1,307) | 660,666
Percentage of total credit quality (%) | 84 | 9 | 6 | 1 | — | 100 |  |
Loans and other credit-related commitments | 82,801 | 23,578 | 17,523 | 2,392 | 163 | 126,457 | (67) | 126,390
Financial guarantees | 2,924 | 1,171 | 995 | 153 | 84 | 5,327 | (20) | 5,307
In-scope: Irrevocable loan commitments and financial guarantees | 85,725 | 24,749 | 18,518 | 2,545 | 247 | 131,784 | (87) | 131,697
Loans and other credit-related commitments | 1,168 | 183 | 90 | 14 | 1 | 1,456 | — | 1,456
Performance and other guarantees | 9,791 | 3,583 | 3,074 | 599 | 89 | 17,136 | (18) | 17,118
Out-of-scope: Revocable loan commitments and non-financial guarantees | 10,959 | 3,766 | 3,164 | 613 | 90 | 18,592 | (18) | 18,574

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

HSBC Bank plc Annual Report and Accounts 2023 | 55

Distribution of financial instruments by credit quality at 31 December 2023
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 20,450 | 6,782 | 4,140 | 663 | 765 | 32,800 | (357) | 32,443
– personal | 1,782 | 179 | 658 | 7 | 13 | 2,639 | (6) | 2,633
– corporate and commercial | 11,468 | 4,572 | 2,941 | 656 | 446 | 20,083 | (205) | 19,878
– non-bank financial institutions | 7,200 | 2,031 | 541 | — | 306 | 10,078 | (146) | 9,932
Loans and advances to banks held at amortised cost | 11,275 | 339 | 56 | — | — | 11,670 | — | 11,670
Cash and balances at central banks | 61,128 | — | — | — | — | 61,128 | — | 61,128
Items in the course of collection from other banks | 1,877 | — | — | — | — | 1,877 | — | 1,877
Reverse repurchase agreements – non-trading | 43,053 | 11,008 | 2,873 | 39 | — | 56,973 | — | 56,973
Financial investments | 12,029 | — | — | — | — | 12,029 | — | 12,029
Assets held for sale | 91 | — | — | — | — | 91 | — | 91
Other assets | 41,956 | 136 | 100 | 5 | 9 | 42,206 | (3) | 42,203
– endorsements and acceptances | 221 | 6 | — | — | — | 227 | — | 227
– accrued income and other | 41,735 | 130 | 100 | 5 | 9 | 41,979 | (3) | 41,976
Debt instruments measured at fair value through other comprehensive income 1 | 16,094 | 56 | 504 | — | — | 16,654 | (5) | 16,649
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 22,987 | 8,386 | 6,077 | 818 | — | 38,268 | — | 38,268
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 473 | 908 | 1,505 | 2 | — | 2,888 | — | 2,888
Derivatives | 136,081 | 14,639 | 3,009 | 36 | — | 153,765 | — | 153,765
Total gross carrying amount on balance sheet | 367,494 | 42,254 | 18,264 | 1,563 | 774 | 430,349 | (365) | 429,984
Percentage of total credit quality (%) | 85.4 | 9.8 | 4.2 | 0.4 | 0.2 | 100 |  |
Loans and other credit-related commitments | 24,980 | 6,929 | 2,394 | 478 | 18 | 34,799 | (22) | 34,777
Financial guarantees | 649 | 218 | 209 | 4 | 26 | 1,106 | (9) | 1,097
In-scope: Irrevocable loan commitments and financial guarantees | 25,629 | 7,147 | 2,603 | 482 | 44 | 35,905 | (31) | 35,874
Loans and other credit-related commitments | 226 | 160 | 70 | 15 | — | 471 | — | 471
Performance and other guarantees | 5,669 | 1,157 | 517 | 49 | 3 | 7,395 | (1) | 7,394
Out-of-scope: Revocable loan commitments and non- financial guarantees | 5,895 | 1,317 | 587 | 64 | 3 | 7,866 | (1) | 7,865

Distribution of financial instruments by credit quality at 31 December 2022
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 21,601 | 9,291 | 4,838 | 765 | 875 | 37,370 | (378) | 36,992
– personal | 1,837 | 927 | 797 | 10 | 13 | 3,584 | (12) | 3,572
– corporate and commercial | 12,018 | 6,001 | 3,230 | 613 | 594 | 22,456 | (247) | 22,209
– non-bank financial institutions | 7,746 | 2,363 | 811 | 142 | 268 | 11,330 | (119) | 11,211
Loans and advances to banks held at amortised cost | 13,764 | 512 | 163 | 25 | 65 | 14,529 | (43) | 14,486
Cash and balances at central banks | 78,442 | — | — | — | — | 78,442 | (1) | 78,441
Items in the course of collection from other banks | 1,863 | — | — | — | — | 1,863 | — | 1,863
Reverse repurchase agreements – non-trading | 33,159 | 7,763 | 2,133 | — | — | 43,055 | — | 43,055
Financial investments | 6,190 | — | 188 | — | — | 6,378 | — | 6,378
Assets held for sale | — | — | — | — | — | — | — | —
Other assets | 39,376 | 95 | 81 | 10 | 21 | 39,583 | (2) | 39,581
– endorsements and acceptances | 205 | 4 | 3 | — | 6 | 218 | — | 218
– accrued income and other | 39,171 | 91 | 78 | 10 | 15 | 39,365 | (2) | 39,363
Debt instruments measured at fair value through other comprehensive income 1 | 12,827 | 64 | 307 | — | — | 13,198 | (4) | 13,194
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 18,479 | 4,226 | 9,213 | 298 | — | 32,216 | — | 32,216
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 149 | 214 | 651 | 1 | — | 1,015 | — | 1,015
Derivatives | 174,548 | 18,118 | 4,031 | 17 | — | 196,714 | — | 196,714
Total gross carrying amount on balance sheet | 400,398 | 40,283 | 21,605 | 1,116 | 961 | 464,363 | (428) | 463,935
Percentage of total credit quality (%) | 86.2 | 8.7 | 4.7 | 0.2 | 0.2 | 100 |  |
Loans and other credit-related commitments | 25,143 | 6,577 | 3,200 | 732 | 40 | 35,692 | (31) | 35,661
Financial guarantees | 729 | 205 | 388 | 5 | 36 | 1,363 | (12) | 1,351
In-scope: Irrevocable loan commitments and financial guarantees | 25,872 | 6,782 | 3,588 | 737 | 76 | 37,055 | (43) | 37,012
Loans and other credit-related commitments | 493 | 183 | 91 | 14 | 1 | 782 | — | 782
Performance and other guarantees | 5,338 | 1,083 | 417 | 42 | 6 | 6,886 | (7) | 6,879
Out-of-scope: Revocable loan commitments and non- financial guarantees | 5,831 | 1,266 | 508 | 56 | 7 | 7,668 | (7) | 7,661

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

56 | HSBC Bank plc Annual Report and Accounts 2023

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The group | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 32,567 | 18,634 | 19,627 | 3,409 | 2,342 | 76,579 | (1,088) | 75,491
– stage 1 | 31,644 | 17,295 | 16,071 | 1,346 | — | 66,356 | (75) | 66,281
– stage 2 | 923 | 1,339 | 3,556 | 2,063 | — | 7,881 | (125) | 7,756
– stage 3 | — | — | — | — | 2,310 | 2,310 | (882) | 1,428
– POCI | — | — | — | — | 32 | 32 | (6) | 26
Loans and advances to banks at amortised cost | 13,247 | 415 | 710 | — | — | 14,372 | (1) | 14,371
– stage 1 | 13,220 | 414 | 622 | — | — | 14,256 | (1) | 14,255
– stage 2 | 27 | 1 | 88 | — | — | 116 | — | 116
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 253,027 | 15,067 | 5,274 | 178 | 182 | 273,728 | (70) | 273,658
– stage 1 | 252,841 | 14,788 | 4,843 | 85 | — | 272,557 | (5) | 272,552
– stage 2 | 186 | 279 | 431 | 93 | — | 989 | (8) | 981
– stage 3 | — | — | — | — | 182 | 182 | (57) | 125
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 83,907 | 27,038 | 13,012 | 1,482 | 177 | 125,616 | (42) | 125,574
– stage 1 | 81,341 | 25,083 | 10,962 | 856 | — | 118,242 | (13) | 118,229
– stage 2 | 2,566 | 1,955 | 2,050 | 626 | — | 7,197 | (21) | 7,176
– stage 3 | — | — | — | — | 174 | 174 | (8) | 166
– POCI | — | — | — | — | 3 | 3 | — | 3
Financial guarantees | 1,270 | 530 | 503 | 26 | 72 | 2,401 | (16) | 2,385
– stage 1 | 1,269 | 483 | 322 | 4 | — | 2,078 | (2) | 2,076
– stage 2 | 1 | 47 | 181 | 22 | — | 251 | (1) | 250
– stage 3 | — | — | — | — | 72 | 72 | (13) | 59
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2023 | 384,018 | 61,684 | 39,126 | 5,095 | 2,773 | 492,696 | (1,217) | 491,479
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 35,473 | 2,241 | 722 | — | — | 38,436 | (9) | 38,427
– stage 2 | 40 | — | 38 | 82 | — | 160 | (14) | 146
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2023 | 35,513 | 2,241 | 760 | 82 | — | 38,596 | (23) | 38,573

Loans and advances to customers at amortised cost | 27,997 | 19,618 | 19,612 | 4,263 | 2,227 | 73,717 | (1,103) | 72,614
– stage 1 | 27,183 | 18,885 | 16,313 | 1,292 | — | 63,673 | (51) | 63,622
– stage 2 | 814 | 733 | 3,299 | 2,971 | — | 7,817 | (145) | 7,672
– stage 3 | — | — | — | — | 2,224 | 2,224 | (907) | 1,317
– POCI | — | — | — | — | 3 | 3 | — | 3
Loans and advances to banks at amortised cost | 14,637 | 790 | 1,634 | 26 | 65 | 17,152 | (43) | 17,109
– stage 1 | 14,502 | 565 | 1,605 | 1 | — | 16,673 | (6) | 16,667
– stage 2 | 135 | 225 | 29 | 25 | — | 414 | (21) | 393
– stage 3 | — | — | — | — | 65 | 65 | (16) | 49
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 253,851 | 10,259 | 5,219 | 163 | 323 | 269,815 | (137) | 269,678
– stage 1 | 253,572 | 9,893 | 4,324 | 41 | — | 267,830 | (14) | 267,816
– stage 2 | 279 | 366 | 895 | 122 | — | 1,662 | (17) | 1,645
– stage 3 | — | — | — | — | 323 | 323 | (106) | 217
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 82,801 | 23,578 | 17,523 | 2,392 | 163 | 126,457 | (67) | 126,390
– stage 1 | 79,931 | 21,530 | 14,570 | 963 | — | 116,994 | (13) | 116,981
– stage 2 | 2,870 | 2,048 | 2,953 | 1,429 | — | 9,300 | (32) | 9,268
– stage 3 | — | — | — | — | 163 | 163 | (22) | 141
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 2,924 | 1,171 | 995 | 153 | 84 | 5,327 | (20) | 5,307
– stage 1 | 2,895 | 1,058 | 727 | 35 | — | 4,715 | (1) | 4,714
– stage 2 | 29 | 113 | 268 | 118 | — | 528 | (2) | 526
– stage 3 | — | — | — | — | 84 | 84 | (17) | 67
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 382,210 | 55,416 | 44,983 | 6,997 | 2,862 | 492,468 | (1,370) | 491,098
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 28,047 | 2,384 | 547 | — | — | 30,978 | (10) | 30,968
– stage 2 | 201 | 87 | 79 | 105 | — | 472 | (14) | 458
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 28,248 | 2,471 | 626 | 105 | — | 31,450 | (24) | 31,426

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

HSBC Bank plc Annual Report and Accounts 2023 | 57

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
The bank | £m | £m | £m | £m | £m | £m | £m | £m
Loans and advances to customers at amortised cost | 20,450 | 6,782 | 4,140 | 663 | 765 | 32,800 | (357) | 32,443
– stage 1 | 19,730 | 5,933 | 2,860 | 283 | — | 28,806 | (15) | 28,791
– stage 2 | 720 | 849 | 1,280 | 380 | — | 3,229 | (47) | 3,182
– stage 3 | — | — | — | — | 740 | 740 | (289) | 451
– POCI | — | — | — | — | 25 | 25 | (6) | 19
Loans and advances to banks at amortised cost | 11,275 | 339 | 56 | — | — | 11,670 | — | 11,670
– stage 1 | 11,268 | 339 | 37 | — | — | 11,644 | — | 11,644
– stage 2 | 7 | — | 19 | — | — | 26 | — | 26
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 160,134 | 11,144 | 2,973 | 44 | 9 | 174,304 | (3) | 174,301
– stage 1 | 160,131 | 11,137 | 2,964 | 39 | — | 174,271 | — | 174,271
– stage 2 | 3 | 7 | 9 | 5 | — | 24 | (1) | 23
– stage 3 | — | — | — | — | 9 | 9 | (2) | 7
– POCI | — | — | — | — | — | — | — | —
Loans and other credit-related commitments | 24,980 | 6,929 | 2,394 | 478 | 18 | 34,799 | (22) | 34,777
– stage 1 | 23,092 | 5,754 | 1,657 | 169 | — | 30,672 | (7) | 30,665
– stage 2 | 1,888 | 1,175 | 737 | 309 | — | 4,109 | (14) | 4,095
– stage 3 | — | — | — | — | 15 | 15 | (1) | 14
– POCI | — | — | — | — | 3 | 3 | — | 3
Financial guarantees | 649 | 218 | 209 | 4 | 26 | 1,106 | (9) | 1,097
– stage 1 | 648 | 172 | 76 | — | — | 896 | (1) | 895
– stage 2 | 1 | 46 | 133 | 4 | — | 184 | — | 184
– stage 3 | — | — | — | — | 26 | 26 | (8) | 18
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2023 | 217,488 | 25,412 | 9,772 | 1,189 | 818 | 254,679 | (391) | 254,288
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 16,094 | 56 | 499 | — | — | 16,649 | (3) | 16,646
– stage 2 | — | — | 5 | — | — | 5 | (2) | 3
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2023 | 16,094 | 56 | 504 | — | — | 16,654 | (5) | 16,649

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

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

58 | HSBC Bank plc Annual Report and Accounts 2023

Credit‑impaired loans
(Audited)
The group determines that a financial instrument is credit impaired
and in stage 3 by considering relevant objective evidence, primarily
whether:
– contractual payments of either principal or interest are past due for
more than 90 days;
– there are other indications that the borrower is unlikely to pay such
as that a concession has been granted to the borrower for
economic or legal reasons relating to the borrower’s financial
condition; and
– the loan is otherwise considered to be in default. If such
unlikeliness to pay is not identified at an earlier stage, it is deemed
to occur when an exposure is 90 days past due, even where
regulatory rules permit default to be defined based on 180 days
past due. Therefore, the definitions of credit-impaired and default
are aligned as far as possible so that stage 3 represents all loans
which are considered defaulted or otherwise credit-impaired.
Forbearance
The following table shows the gross carrying amounts of the group’s
holdings of forborne loans and advances to customers by industry
sector and by stages.
A summary of our current policies and practices for forbearance is set
out in 'Credit risk management' on page 32.

Forborne loans and advances to customers at amortised costs by stage allocation
| Performing – forborne | Non-performing – forborne | Total – forborne
| Stage 2 | Stage 3 | POCI | Total
The group | £m | £m | £m | £m
Gross carrying amount |  |  |  |
Personal | 88 | 127 | — | 215
– first lien residential mortgages | 66 | 120 | — | 186
– guaranteed loans in respect of residential property | 19 | 6 | — | 25
– other personal lending which is secured | 1 | — | — | 1
– credit cards | 1 | — | — | 1
– other personal lending which is unsecured | 1 | 1 | — | 2
Wholesale | 1,545 | 788 | 24 | 2,357
– corporate and commercial | 1,510 | 778 | 24 | 2,312
– non-bank financial institutions | 35 | 10 | — | 45
At 31 Dec 2023 | 1,633 | 915 | 24 | 2,572
Allowance for ECL |  |  |  |
Personal | (4) | (39) | — | (43)
– first lien residential mortgages | (4) | (39) | — | (43)
– guaranteed loans in respect of residential property | — | — | — | —
– other personal lending which is secured | — | — | — | —
– credit cards | — | — | — | —
– other personal lending which is unsecured | — | — | — | —
Wholesale | (15) | (267) | (6) | (288)
– corporate and commercial | (14) | (263) | (6) | (283)
– non-bank financial institutions | (1) | (4) | — | (5)
At 31 Dec 2023 | (19) | (306) | (6) | (331)

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

HSBC Bank plc Annual Report and Accounts 2023 | 59

Forborne loans and advances to customers at amortised costs by stage allocation (continued)
| Performing – forborne | Non-performing – forborne | Total – forborne
| Stage 2 | Stage 3 | POCI | Total
The bank | £m | £m | £m | £m
Gross carrying amount |  |  |  |
Personal | 1 | 8 | — | 9
– first lien residential mortgages | — | 7 | — | 7
– credit cards | 1 | — | — | 1
– other personal lending which is unsecured | — | 1 | — | 1
Wholesale | 125 | 265 | 24 | 414
– corporate and commercial | 125 | 265 | 24 | 414
At 31 Dec 2023 | 126 | 273 | 24 | 423
Allowance for ECL |  |  |  |
Personal | — | (1) | — | (1)
– first lien residential mortgages | — | (1) | — | (1)
– credit cards | — | — | — | —
– other personal lending which is unsecured | — | — | — | —
Wholesale | (4) | (126) | (6) | (136)
– corporate and commercial | (4) | (126) | (6) | (136)
At 31 Dec 2023 | (4) | (127) | (6) | (137)

The bank |  |  |  |
Gross carrying amount |  |  |  |
Personal | 1 | 7 | — | 8
– first lien residential mortgages | — | 6 | — | 6
– credit cards | 1 | — | — | 1
– other personal lending which is unsecured | — | 1 | — | 1
Wholesale | 106 | 364 | — | 470
– corporate and commercial | 106 | 364 | — | 470
At 31 Dec 2022 | 107 | 371 | — | 478
Allowance for ECL |  |  |  |
Personal | — | (1) | — | (1)
– first lien residential mortgages | — | (1) | — | (1)
– credit cards | — | — | — | —
– other personal lending which is unsecured | — | — | — | —
Wholesale | (1) | (158) | — | (159)
– corporate and commercial | (1) | (158) | — | (159)
At 31 Dec 2022 | (1) | (159) | — | (160)

Risk review

60 | HSBC Bank plc Annual Report and Accounts 2023

Wholesale lending
This section provides further details on the major countries and
industries comprising wholesale loans and advances to customers
and banks. Product granularity is also provided by stage with
geographical data presented for loans and advances to customers and
banks, loans and other credit-related commitments and financial
guarantees.
The table below provides a breakdown by industry sector and stage of
the group’s gross carrying amount and allowances for ECL for
wholesale loans and advances to banks and customers.
Counterparties or exposures are classified when presenting
comparable economic characteristics, or engaged in similar activities
so that their collective ability to meet contractual obligations is
uniformly affected by changes in economic, political or other
conditions. Therefore, the industry classification does not adhere to
Nomenclature des Activités Économiques dans la Communauté
Européenne (‘NACE’), which is applicable to other financial regulatory
reporting.

Total wholesale lending for loans and advances to banks and customers by stage distribution
| Gross carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 42,982 | 5,981 | 1,773 | 32 | 50,768 | (48) | (98) | (673) | (6) | (825)
– agriculture, forestry and fishing | 299 | 7 | 28 | — | 334 | (1) | — | (9) | — | (10)
– mining and quarrying | 584 | 157 | 162 | — | 903 | (1) | (3) | — | — | (4)
– manufacture | 8,267 | 1,465 | 348 | — | 10,080 | (6) | (17) | (123) | — | (146)
– electricity, gas, steam and air- conditioning supply | 1,254 | 98 | 69 | — | 1,421 | (2) | (1) | (6) | — | (9)
– water supply, sewerage, waste management and remediation | 359 | 42 | 5 | — | 406 | — | — | (4) | — | (4)
– construction and real estate | 4,470 | 464 | 192 | 26 | 5,152 | (11) | (11) | (55) | (6) | (83)
– wholesale and retail trade, repair of motor vehicles and motorcycles | 9,118 | 689 | 186 | 1 | 9,994 | (5) | (6) | (107) | — | (118)
– transportation and storage | 2,085 | 969 | 151 | — | 3,205 | (2) | (7) | (101) | — | (110)
– accommodation and food | 758 | 174 | 38 | — | 970 | (2) | (5) | (11) | — | (18)
– publishing, audiovisual and broadcasting | 3,400 | 262 | 28 | — | 3,690 | (3) | (15) | (16) | — | (34)
– professional, scientific and technical activities | 4,841 | 844 | 322 | 5 | 6,012 | (6) | (12) | (157) | — | (175)
– administrative and support services | 5,032 | 358 | 115 | — | 5,505 | (6) | (7) | (56) | — | (69)
– public administration and defence, compulsory social security | 4 | — | — | — | 4 | — | — | — | — | —
– education | 23 | 3 | 1 | — | 27 | — | — | — | — | —
– health and care | 91 | 4 | 5 | — | 100 | — | — | (2) | — | (2)
– arts, entertainment and recreation | 61 | 36 | 3 | — | 100 | — | (1) | (1) | — | (2)
– other services | 1,196 | 289 | 70 | — | 1,555 | (3) | (2) | (23) | — | (28)
– activities of households | 1 | — | — | — | 1 | — | — | — | — | —
– extra-territorial organisations and bodies activities | 1 | — | — | — | 1 | — | — | — | — | —
– government | 1,123 | 109 | 50 | — | 1,282 | — | — | (2) | — | (2)
– asset-backed securities | 15 | 11 | — | — | 26 | — | (11) | — | — | (11)
Non-bank financial institutions | 11,927 | 530 | 323 | — | 12,780 | (7) | (10) | (138) | — | (155)
Loans and advances to banks | 14,256 | 116 | — | — | 14,372 | (1) | — | — | — | (1)
At 31 Dec 2023 | 69,165 | 6,627 | 2,096 | 32 | 77,920 | (56) | (108) | (811) | (6) | (981)
By geography |  |  |  |  |  |  |  |  |  |
UK | 32,334 | 2,229 | 648 | 25 | 35,236 | (11) | (45) | (258) | (6) | (320)
France | 24,264 | 2,669 | 1,148 | 6 | 28,087 | (27) | (40) | (447) | — | (514)
Germany | 5,129 | 913 | 121 | — | 6,163 | (2) | (16) | (40) | — | (58)
Other countries | 7,438 | 816 | 179 | 1 | 8,434 | (16) | (7) | (66) | — | (89)
At 31 Dec 2023 | 69,165 | 6,627 | 2,096 | 32 | 77,920 | (56) | (108) | (811) | (6) | (981)

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution 1
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Corporate and commercial | 59,282 | 4,883 | 226 | 3 | 64,394 | (12) | (18) | (20) | — | (50)
Financial | 59,760 | 2,536 | 17 | — | 62,313 | (3) | (4) | (1) | — | (8)
At 31 Dec 2023 | 119,042 | 7,419 | 243 | 3 | 126,707 | (15) | (22) | (21) | — | (58)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 119,042 | 7,419 | 243 | 3 | 126,707 | (15) | (22) | (21) | — | (58)
– of which: UK | 27,612 | 4,704 | 13 | 3 | 32,332 | (5) | (14) | (1) | — | (20)
– of which: France | 81,739 | 1,405 | 77 | — | 83,221 | (5) | (3) | (7) | — | (15)
– of which: Germany | 5,896 | 915 | 111 | — | 6,922 | (1) | (5) | — | — | (6)

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

HSBC Bank plc Annual Report and Accounts 2023 | 61

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

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

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

62 | HSBC Bank plc Annual Report and Accounts 2023

Collateral and other credit enhancement
(Audited)
Although collateral can be an important mitigant of credit risk, it is the
g roup ’s practice to lend on the basis of the customer’s ability to meet
their obligations out of cash flow resources rather than placing
primary reliance on collateral and other credit risk enhancements.
Depending on the customer’s standing and the type of product,
facilities may be provided without any collateral or other credit
enhancements. For other lending, a charge over collateral is obtained
and considered in determining the credit decision and pricing. In the
event of default, the group may utilise the collateral as a source of
repayment.
Depending on its form, collateral can have a significant financial effect
in mitigating our exposure to credit risk. Where there is sufficient
collateral, an expected credit loss is not recognised. This is the case
for reverse repurchase agreements and for certain loans and
advances to customers where the loan to value (‘LTV’) is very low.
Mitigants may include a charge on borrowers’ specific assets, such as
real estate or financial instruments. Other credit risk mitigants include
short positions in securities and financial assets held as part of linked
insurance/investment contracts where the risk is predominantly borne
by the policyholder. Additionally, risk may be managed by employing
other types of collateral and credit risk enhancements, such as
second charges, other liens and unsupported guarantees. Guarantees
are normally taken from corporates and export credit agencies.
Corporates would normally provide guarantees as part of a parent/
subsidiary relationship and span a number of credit grades. The export
credit agencies will normally be investment grade.
Certain credit mitigants are used strategically in portfolio management
activities. While single name concentrations arise in portfolios
managed by Global Banking and Corporate Banking, it is only in Global
Banking that their size requires the use of portfolio level credit
mitigants. Across Global Banking, risk limits and utilisations, maturity
profiles and risk quality are monitored and managed proactively. This
process is key to the setting of risk appetite for these larger, more
complex, geographically distributed customer groups. While the
principal form of risk management continues to be at the point of
exposure origination, through the lending decision-making process,
Global Banking also utilises loan sales and credit default swap (‘CDS’)
hedges to manage concentrations and reduce risk.
These transactions are the responsibility of a dedicated Global
Banking portfolio management team. Hedging activity is carried out
within agreed credit parameters, and is subject to market risk limits
and a robust governance structure. Where applicable, CDSs are
entered into directly with a central clearing house counterparty.
Otherwise, our exposure to CDS protection providers is diversified
among mainly banking counterparties with strong credit ratings.
CDS mitigants are held at portfolio level and are not included in the
expected credit loss calculations. CDS mitigants are not reported in
the following tables.
Collateral on loans and advances
Collateral held is analysed separately for commercial real estate and
for other corporate, commercial and financial (non-bank) lending. The
following tables include off-balance sheet loan commitments,
primarily undrawn credit lines.
The collateral measured in the following tables consists of charges
over cash and marketable financial instruments. The values in the
tables represent the expected market value on an open market basis.
No adjustment has been made to the collateral for any expected costs
of recovery. Marketable securities are measured at their fair value.
Other types of collateral such as unsupported guarantees and floating
charges over the assets of a customer’s business are not measured
in the following tables. While such mitigants have value, often
providing rights in insolvency, their assignable value is not sufficiently
certain and they are therefore assigned no value for disclosure
purposes.
The LTV ratios presented are calculated by directly associating loans
and advances with the collateral that individually and uniquely
supports each facility. When collateral assets are shared by multiple
loans and advances, whether specifically or, more generally, by way
of an all monies charge, the collateral value is pro-rated across the
loans and advances protected by the collateral.
For credit-impaired loans, the collateral values cannot be directly
compared with impairment allowances recognised. The LTV figures
use open market values with no adjustments. Impairment allowances
are calculated on a different basis, by considering other cash flows
and adjusting collateral values for costs of realising collateral as
explained further on page 123.
Other corporate, commercial and financial (non-bank) loans
and advances
Other corporate, commercial and financial (non-bank) loans are
analysed separately in the following table, which focuses on the
countries containing the majority of our loans and advances balances.
For financing activities in other corporate and commercial lending,
collateral value is not strongly correlated to principal repayment
performance.
Collateral values are generally refreshed when an obligor’s general
credit performance deteriorates and we have to assess the likely
performance of secondary sources of repayment should it prove
necessary to rely on them.

HSBC Bank plc Annual Report and Accounts 2023 | 63

Wholesale lending – other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories (by stage)
(Audited)
| Gross carrying/nominal amount | ECL coverage
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
| £m | £m | £m | £m | £m | % | % | % | % | %
Not collateralised | 115,898 | 10,983 | 1,617 | 6 | 128,504 | — | 1.0 | 43.8 | — | 0.7
Fully collateralised by LTV ratio | 8,709 | 908 | 101 | — | 9,718 | 0.1 | 1.2 | 23.8 | — | 0.4
– less than 50% | 2,221 | 342 | 41 | — | 2,604 | 0.2 | 1.5 | 24.4 | — | 0.7
– 51% to 75% | 1,830 | 196 | 29 | — | 2,055 | 0.1 | 1.0 | 20.7 | — | 0.4
– 76% to 90% | 336 | 149 | 13 | — | 498 | — | 0.7 | 38.5 | — | 1.2
– 91% to 100% | 4,322 | 221 | 18 | — | 4,561 | — | 1.8 | 22.2 | — | 0.2
Partially collateralised (A): LTV > 100% | 3,709 | 821 | 404 | 1 | 4,935 | 0.1 | 0.5 | 12.1 | — | 1.1
– collateral value on A | 2,963 | 595 | 135 | 1 | 3,694 |  |  |  |  |
Total at 31 Dec 2023 | 128,316 | 12,712 | 2,122 | 7 | 143,157 | — | 1.0 | 36.8 | — | 0.7
of which: UK |  |  |  |  |  |  |  |  |  |
Not collateralised | 42,157 | 5,901 | 622 | — | 48,680 | — | 0.9 | 38.7 | — | 0.6
Fully collateralised by LTV ratio | 4,464 | 168 | 11 | — | 4,643 | — | — | 27.3 | — | 0.1
– less than 50% | 654 | 119 | 6 | — | 779 | — | — | 16.7 | — | 0.1
– 51% to 75% | 1,031 | 47 | 3 | — | 1,081 | — | — | — | — | —
– 76% to 90% | 33 | — | 2 | — | 35 | — | — | 100.0 | — | 5.7
– 91% to 100% | 2,746 | 2 | — | — | 2,748 | — | — | — | — | —
Partially collateralised (B): LTV > 100% | 229 | 19 | 7 | — | 255 | — | — | 42.9 | — | 1.2
– collateral value on B | 150 | — | 2 | — | 152 |  |  |  |  |
Total UK at 31 Dec 2023 | 46,850 | 6,088 | 640 | — | 53,578 | — | 0.9 | 38.6 | — | 0.6
of which: France |  |  |  |  |  |  |  |  |  |
Not collateralised | 59,349 | 2,634 | 715 | 6 | 62,704 | — | 1.1 | 53.8 | — | 0.7
Fully collateralised by LTV ratio | 2,110 | 341 | 26 | — | 2,477 | 0.1 | 1.2 | 15.4 | — | 0.4
– less than 50% | 1,047 | 146 | 12 | — | 1,205 | 0.1 | 0.7 | 16.7 | — | 0.3
– 51% to 75% | 614 | 115 | 4 | — | 733 | 0.2 | 0.9 | 25.0 | — | 0.4
– 76% to 90% | 87 | 19 | 8 | — | 114 | — | — | 12.5 | — | 0.9
– 91% to 100% | 362 | 61 | 2 | — | 425 | — | 3.3 | 50.0 | — | 0.7
Partially collateralised (C): LTV > 100% | 3,038 | 787 | 390 | 1 | 4,216 | — | 0.4 | 10.0 | — | 1.0
– collateral value on C | 2,418 | 583 | 129 | 1 | 3,131 |  |  |  |  |
Total France at 31 Dec 2023 | 64,497 | 3,762 | 1,131 | 7 | 69,397 | — | 1.0 | 37.8 | — | 0.7
of which: Germany |  |  |  |  |  |  |  |  |  |
Not collateralised | 8,949 | 1,603 | 173 | — | 10,725 | — | 1.1 | 20.8 | — | 0.5
Fully collateralised by LTV ratio | 624 | 113 | 12 | — | 749 | — | 0.9 | 25.0 | — | 0.5
– less than 50% | — | — | — | — | — | — | — | — | — | —
– 51% to 75% | — | — | — | — | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | — | — | — | — | —
– 91% to 100% | 624 | 113 | 12 | — | 749 | — | 0.9 | 25.0 | — | 0.5
Partially collateralised (D): LTV > 100% | — | — | — | — | — | — | — | — | — | —
– collateral value on D | — | — | — | — | — |  |  |  |  |
Total Germany at 31 Dec 2023 | 9,573 | 1,716 | 185 | — | 11,474 | — | 1.1 | 21.1 | — | 0.5

Risk review

64 | HSBC Bank plc Annual Report and Accounts 2023

Wholesale lending – other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories (by stage)
(Audited)
| Gross carrying/nominal amount | ECL coverage
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
| £m | £m | £m | £m | £m | % | % | % | % | %
Not collateralised | 117,166 | 13,074 | 1,795 | 2 | 132,037 | — | 0.9 | 40.3 | — | 0.7
Fully collateralised by LTV ratio | 10,444 | 1,132 | 80 | — | 11,656 | 0.1 | 1.5 | 26.3 | — | 0.4
– less than 50% | 2,456 | 515 | 26 | — | 2,997 | 0.2 | 1.7 | 23.1 | — | 0.7
– 51% to 75% | 3,321 | 272 | 6 | — | 3,599 | 0.1 | 1.5 | 33.3 | — | 0.2
– 76% to 90% | 354 | 4 | 11 | — | 369 | — | — | 36.4 | — | 1.1
– 91% to 100% | 4,313 | 341 | 37 | — | 4,691 | — | 1.2 | 21.6 | — | 0.3
Partially collateralised (A): LTV > 100% | 4,542 | 509 | 172 | — | 5,223 | 0.1 | 1.4 | 23.8 | — | 1.0
– collateral value on A | 3,664 | 426 | 125 | — | 4,215 |  |  |  |  |
Total at 31 Dec 2022 | 132,152 | 14,715 | 2,047 | 2 | 148,916 | — | 1.0 | 38.4 | — | 0.7
of which: UK |  |  |  |  |  |  |  |  |  |
Not collateralised | 46,080 | 4,219 | 673 | — | 50,972 | — | 0.8 | 31.2 | — | 0.5
Fully collateralised by LTV ratio | 6,300 | 327 | 10 | — | 6,637 | 0.1 | 1.2 | 10.0 | — | 0.1
– less than 50% | 1,643 | 224 | 2 | — | 1,869 | 0.2 | 0.4 | — | — | 0.2
– 51% to 75% | 2,161 | 84 | 3 | — | 2,248 | — | 3.6 | 33.3 | — | 0.2
– 76% to 90% | 234 | 2 | 2 | — | 238 | — | — | — | — | —
– 91% to 100% | 2,262 | 17 | 3 | — | 2,282 | — | — | — | — | —
Partially collateralised (B): LTV > 100% | 169 | 23 | 11 | — | 203 | — | — | 27.3 | — | 1.5
– collateral value on B | 77 | 13 | 3 | — | 93 |  |  |  |  |
Total UK at 31 Dec 2022 | 52,549 | 4,569 | 694 | — | 57,812 | — | 0.8 | 30.8 | — | 0.5
of which: France |  |  |  |  |  |  |  |  |  |
Not collateralised | 53,960 | 4,581 | 668 | 2 | 59,211 | — | 1.0 | 57.9 | — | 0.8
Fully collateralised by LTV ratio | 2,146 | 239 | 12 | — | 2,397 | — | 1.7 | 33.3 | — | 0.3
– less than 50% | 491 | 122 | 7 | — | 620 | — | 0.8 | 28.6 | — | 0.6
– 51% to 75% | 1,050 | 69 | 2 | — | 1,121 | — | 1.4 | 50.0 | — | 0.2
– 76% to 90% | 36 | 1 | 1 | — | 38 | — | — | — | — | —
– 91% to 100% | 569 | 47 | 2 | — | 618 | — | 4.3 | 50.0 | — | 0.3
Partially collateralised (C): LTV > 100% | 3,797 | 472 | 159 | — | 4,428 | 0.1 | 1.5 | 23.3 | — | 1.0
– collateral value on C | 3,128 | 405 | 122 | — | 3,655 |  |  |  |  |
Total France at 31 Dec 2022 | 59,903 | 5,292 | 839 | 2 | 66,036 | — | 1.1 | 51.0 | — | 0.8
of which: Germany |  |  |  |  |  |  |  |  |  |
Not collateralised | 11,577 | 3,269 | 348 | — | 15,194 | — | 0.9 | 28.7 | — | 0.9
Fully collateralised by LTV ratio | 809 | 228 | 24 | — | 1,061 | — | 0.9 | 29.2 | — | 0.8
– less than 50% | — | — | — | — | — | — | — | — | — | —
– 51% to 75% | — | — | — | — | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | — | — | — | — | —
– 91% to 100% | 809 | 228 | 24 | — | 1,061 | — | 0.9 | 29.2 | — | 0.8
Partially collateralised (D): LTV > 100% | — | — | — | — | — | — | — | — | — | —
– collateral value on D | — | — | — | — | — |  |  |  |  |
Total Germany at 31 Dec 2022 | 12,386 | 3,497 | 372 | — | 16,255 | — | 0.9 | 28.8 | — | 0.9

Other credit risk exposures
In addition to collateralised lending, other credit enhancements are
employed and methods used to mitigate credit risk arising from
financial assets. These are described in more detail below:
– Some securities issued by governments, banks and other financial
institutions benefit from additional credit enhancement provided
by government guarantees that cover the assets;
– Debt securities issued by banks and financial institutions include
asset-backed securities ('ABSs') and similar instruments which are
supported by underlying pools of financial assets. Credit risk
associated with ABSs is reduced through the purchase of credit
default swap (‘CDS’) protection;
– Trading loan and advances mainly pledged against cash collaterals
are posted to satisfy margin requirements. There is limited credit
risk on trading loans and advances since in the event of default of
the counterparty these would be set off against the related liability.
Reverse repos and stock borrowings are by their nature
collateralised.
Collateral accepted as security that the group is permitted to sell or
repledge under these arrangements is described on page 164 of the
financial statements.
– The group’s maximum exposure to credit risk includes financial
guarantees and similar contracts granted; as well as loan and other
credit-related commitments. Depending on the terms of the
arrangement, we may use additional credit mitigation if a
guarantee is called upon or a loan commitment is drawn and
subsequently defaults.
For further information on these arrangements, see Note 31 on the
financial statements.
Derivatives
We participate in transactions exposing us to counterparty credit risk.
Counterparty credit risk is the risk of financial loss if the counterparty
to a transaction defaults before satisfactorily settling it. It arises
principally from over-the-counter (‘OTC’) derivatives and securities
financing transactions and is calculated in both the trading and non-
trading books. Transactions vary in value by reference to market
factors such as interest rates, exchange rates or asset prices.
The counterparty risk from derivative transactions is taken into
account when reporting the fair value of derivative positions. The
adjustment to the fair value is known as the credit valuation
adjustment (‘CVA’).
The International Swaps and Derivatives Association (‘ISDA’) master
agreement is our preferred agreement for documenting derivatives
activity. It is common, and our preferred practice, for the parties
involved in a derivative transaction to execute a credit support annex
(‘CSA’) in conjunction with the ISDA master agreement. Under a CSA,
collateral is passed between the parties to mitigate the counterparty
risk inherent in outstanding positions. The majority of our CSAs are
with financial institutional clients.

HSBC Bank plc Annual Report and Accounts 2023 | 65

We manage the counterparty exposure on our OTC derivative
contracts by using collateral agreements with counterparties and
netting agreements. Currently, we do not actively manage our general
OTC derivative counterparty exposure in the credit markets, although
we may manage individual exposures in certain circumstances.
We place strict policy restrictions on collateral types and as a
consequence the types of collateral received and pledged are, by
value, highly liquid and of a strong quality, being predominantly cash.
Where a collateral type is required to be approved outside the
collateral policy, approval is required from a committee of senior
representatives from Markets, Legal and Risk.
See Note 28 on the financial statements for details regarding legally
enforceable right of offset in the event of counterparty default and
collateral received in respect of derivatives.
Personal lending
This section provides further details on the countries and products
comprising personal loans and advances to customers.
Further product granularity is also provided by stage, with
geographical data presented for loans and advances to customers,
loan and other credit-related commitments, and financial guarantees.

Total personal lending for loans and advances to customers at amortised costs by stage distribution
| Gross Carrying amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
| £m | £m | £m | £m | £m | £m | £m | £m
By portfolio |  |  |  |  |  |  |  |
First lien residential mortgages | 4,915 | 1,029 | 193 | 6,137 | (14) | (15) | (63) | (92)
– of which: interest only (including offset) | 820 | 292 | 27 | 1,139 | — | (1) | (11) | (12)
– affordability including ARMs | 221 | 4 | — | 225 | (1) | (1) | — | (2)
Other personal lending | 6,532 | 341 | 21 | 6,894 | (6) | (2) | (8) | (16)
– guaranteed loans in respect of residential property | 5,497 | 314 | 11 | 5,822 | — | — | — | —
– Other personal lending which is secured | 756 | 19 | 1 | 776 | (1) | — | — | (1)
– credit cards | 121 | 4 | 1 | 126 | (2) | (1) | (1) | (4)
– Other personal lending which is unsecured | 129 | 3 | 8 | 140 | (3) | (1) | (7) | (11)
– motor vehicle finance | 29 | 1 | — | 30 | — | — | — | —
– IPO Loans | — | — | — | — | — | — | — | —
– second lien residential mortgages | — | — | — | — | — | — | — | —
At 31 Dec 2023 | 11,447 | 1,370 | 214 | 13,031 | (20) | (17) | (71) | (108)
By geography |  |  |  |  |  |  |  |
UK 1 | 1,810 | 818 | 13 | 2,641 | (2) | (2) | (3) | (7)
France | 5,811 | 356 | 37 | 6,204 | — | (1) | (15) | (16)
Germany | 116 | 14 | — | 130 | — | — | — | —
Other countries | 3,710 | 182 | 164 | 4,056 | (18) | (14) | (53) | (85)
At 31 Dec 2023 | 11,447 | 1,370 | 214 | 13,031 | (20) | (17) | (71) | (108)

Total personal lending for loans and other credit-related commitments and financial guarantees 2 by stage distribution
| Nominal amount | Allowance for ECL
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
| £m | £m | £m | £m | £m | £m | £m | £m
UK | 330 | 2 | 2 | 334 | — | — | — | —
France | 517 | 24 | 1 | 542 | — | — | — | —
Germany | — | — | — | — | — | — | — | —
Other countries | 431 | 3 | — | 434 | — | — | — | —
At 31 Dec 2023 | 1,278 | 29 | 3 | 1,310 | — | — | — | —

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

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

Risk review

66 | HSBC Bank plc Annual Report and Accounts 2023

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

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

Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage
(Audited)
| Gross carrying/nominal amount | ECL coverage
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
| £m | £m | £m | £m | % | % | % | %
Fully collateralised by LTV ratio | 5,019 | 1,011 | 125 | 6,155 | 0.3 | 1.2 | 22.4 | 0.9
– less than 50% | 2,320 | 448 | 59 | 2,827 | 0.2 | 0.9 | 15.3 | 0.6
– 51% to 70% | 1,753 | 352 | 28 | 2,133 | 0.2 | 1.1 | 21.4 | 0.7
– 71% to 80% | 594 | 121 | 11 | 726 | 0.5 | 1.7 | 27.3 | 1.1
– 81% to 90% | 271 | 59 | 15 | 345 | 0.7 | 1.7 | 33.3 | 2.3
– 91% to 100% | 81 | 31 | 12 | 124 | 1.2 | 3.2 | 41.7 | 5.6
Partially collateralised (A): LTV > 100% | 77 | 19 | 68 | 164 | — | 15.8 | 52.9 | 23.8
– collateral value on A | 33 | 16 | 54 | 103 |  |  |  |
Total at 31 Dec 2023 | 5,096 | 1,030 | 193 | 6,319 | 0.3 | 1.5 | 33.2 | 1.5
of which: UK |  |  |  |  |  |  |  |
Fully collateralised by LTV ratio | 1,752 | 814 | 10 | 2,576 | — | — | 10.0 | —
– less than 50% | 863 | 354 | 9 | 1,226 | — | — | 11.1 | 0.1
– 51% to 70% | 559 | 295 | 1 | 855 | — | — | — | —
– 71% to 80% | 179 | 96 | — | 275 | — | — | — | —
– 81% to 90% | 102 | 48 | — | 150 | — | — | — | —
– 91% to 100% | 49 | 21 | — | 70 | — | — | — | —
Partially collateralised (B): LTV > 100% | 9 | 1 | — | 10 | — | — | — | —
– collateral value on B | 3 | 1 | — | 4 |  |  |  |
Total UK at 31 Dec 2023 | 1,761 | 815 | 10 | 2,586 | — | — | 10.0 | —
of which: France |  |  |  |  |  |  |  |
Fully collateralised | 280 | 36 | 6 | 322 | — | — | 16.7 | 0.3
– less than 50% | 108 | 17 | 5 | 130 | — | — | — | —
– 51% to 70% | 126 | 15 | — | 141 | — | — | — | —
– 71% to 80% | 30 | 3 | — | 33 | — | — | — | —
– 81% to 90% | 14 | 1 | — | 15 | — | — | — | —
– 91% to 100% | 2 | — | 1 | 3 | — | — | 100.0 | 33.3
Partially collateralised (C): LTV > 100% | 4 | — | 14 | 18 | — | — | 64.3 | 50.0
– collateral value on C | 4 | — | 14 | 18 |  |  |  |
Total France at 31 Dec 2023 | 284 | 36 | 20 | 340 | — | — | 50.0 | 2.9

HSBC Bank plc Annual Report and Accounts 2023 | 67

Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage (continued)
(Audited)
| Gross carrying/nominal amount | ECL coverage
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
| £m | £m | £m | £m | % | % | % | %
Fully collateralised by LTV ratio | 4,340 | 510 | 65 | 4,915 | 0.1 | 1.4 | 16.9 | 0.5
– less than 50% | 2,199 | 203 | 46 | 2,448 | 0.1 | 1.5 | 13.0 | 0.4
– 51% to 70% | 1,482 | 196 | 14 | 1,692 | 0.4 | 3.0 | 42.2 | 0.5
– 71% to 80% | 442 | 66 | 3 | 511 | 0.2 | 1.5 | 33.3 | 0.6
– 81% to 90% | 202 | 39 | 1 | 242 | — | — | — | 0.4
– 91% to 100% | 15 | 6 | 1 | 22 | — | — | 100.0 | 4.5
Partially collateralised (A): LTV > 100% | 50 | 1 | 16 | 67 | — | — | 68.8 | 16.4
– collateral value on A | 10 | 1 | — | 11 |  |  |  |
Total at 31 Dec 2022 | 4,390 | 511 | 81 | 4,982 | 0.1 | 1.4 | 27.2 | 0.7
of which: UK |  |  |  |  |  |  |  |
Fully collateralised by LTV ratio | 2,376 | 428 | 10 | 2,814 | — | 0.5 | 10.0 | 0.1
– less than 50% | 1,255 | 151 | 9 | 1,415 | — | 0.7 | 11.1 | 0.1
– 51% to 70% | 849 | 173 | 1 | 1,023 | 0.2 | 1.1 | — | 0.2
– 71% to 80% | 198 | 60 | — | 258 | — | — | — | —
– 81% to 90% | 63 | 38 | — | 101 | — | — | — | —
– 91% to 100% | 11 | 6 | — | 17 | — | — | — | —
Partially collateralised (B): LTV > 100% | 11 | 1 | — | 12 | — | — | — | —
– collateral value on B | 6 | 1 | — | 7 |  |  |  |
Total UK at 31 Dec 2022 | 2,387 | 429 | 10 | 2,826 | — | 0.5 | 10.0 | 0.1
of which: France |  |  |  |  |  |  |  |
Fully collateralised | 3 | — | 7 | 10 | — | — | 14.3 | 10.0
– less than 50% | 3 | — | — | 3 | — | — | — | —
– 51% to 70% | — | — | 6 | 6 | — | — | — | —
– 71% to 80% | — | — | — | — | — | — | — | —
– 81% to 90% | — | — | — | — | — | — | — | —
– 91% to 100% | — | — | 1 | 1 | — | — | 100.0 | 100.0
Partially collateralised (C): LTV > 100% | — | — | 16 | 16 | — | — | 62.5 | 62.5
– collateral value on C | — | — | — | — |  |  |  |
Total France at 31 Dec 2022 | 3 | — | 23 | 26 | — | — | 47.8 | 42.3

Treasury risk
Overview
Treasury risk is the risk of having insufficient capital, liquidity or
funding resources to meet financial obligations and satisfy regulatory
requirements, including the risk of adverse impact on earnings or
capital due to structural and transactional foreign exchange
exposures, as well as changes in market interest rates, together with
pension and insurance risk.
Treasury risk arises from changes to the respective resources and risk
profiles driven by customer behaviour, management decisions or the
external environment.
Approach and policy
(Audited)
Our objective in the management of treasury risk is to maintain
appropriate levels of capital, liquidity, funding, foreign exchange and
market risk to support our business strategy, and meet our regulatory
and stress testing-related requirements.
Our approach to treasury management is driven by our strategic and
organisational requirements, taking into account the regulatory,
economic and commercial environment. We aim to maintain a strong
capital and liquidity base to support the risks inherent in our business
and invest in accordance with our strategy, to meet regulatory
requirements.
Our policy is underpinned by our risk management framework. The
risk management framework incorporates a number of measures
aligned to our assessment of risks for both internal and regulatory
purposes. These risks include credit, market, operational, pensions,
structural and transactional foreign exchange risk, and interest rate
risk in the banking book.
For further details, refer to our Pillar 3 Disclosures at 31 December
2023.
Treasury risk management
Key developments in 2023
– Following high-profile banking failures in the first quarter of 2023,
we reviewed our liquidity monitoring and metric assumptions as
part of our internal liquidity adequacy assessment process
('ILLAP') cycle to ensure they continued to cover observed and
emerging risks.
– Effective July 2023, the Bank of England’s Financial Policy
Committee doubled the UK countercyclical capital buffer rate from
1% to 2%, in line with the usual 12‑month implementation lag.
The change increased our CET1 requirement by approximately 0.3
percentage point.
– We further stabilised our net interest income against a backdrop of
fluctuating interest rate expectations as the trajectory of inflation
for major economies was reassessed.
– We acquired HBBM in October 2023 to better align the HSBC
Group corporate structure with management responsibilities. This
was partially funded by equity issuance to HSBC Holdings plc.
– Asset de-risking remained a focus for our pension plans over 2023
and we have worked with the fiduciaries of the plans to implement
a number of de-risking strategies over the year. These have
included improving the hedging position of our German plans by
reducing the exposure to movements in interest rates and
transitioning to lower risk investment strategies for two of our
smaller plans enabling them to become better positioned to cope
with future volatility.
– We completed the sale of our retail banking operations in France in
January 2024.
Risk review

68 | HSBC Bank plc Annual Report and Accounts 2023

Governance and structure
The Chief Risk Officer is the accountable risk steward for all treasury
risks. The Chief Financial Officer is the risk owner for all treasury
risks, with the exception of pension risk which is co-owned with the
regional heads of Performance & Reward.
Capital risk, liquidity risk, interest rate risk in the banking book,
structural foreign exchange risk and transactional foreign exchange
risk are the responsibility of the Executive Committee and the Risk
Committee. Treasury actively manages these risks on an ongoing
basis, supported by the Asset and Liability Management Committee
(‘ALCO’) and local ALCOs, overseen by Treasury Risk Management.
Pension risk is overseen by the Pension Risk Management Meeting.
Capital, liquidity and funding risk management processes
Assessment and risk appetite
Our capital management policy is supported by a global capital
management framework. The framework sets out our approach to
determining key capital risk appetites including CET1, total capital,
minimum requirements for own funds and eligible liabilities (‘MREL’),
and the leverage ratio. Our internal capital adequacy assessment
process (‘ICAAP’) is an assessment of the g roup’s capital position,
outlining both regulatory and internal capital resources and
requirements resulting from our business model, strategy, risk profile
and management, performance and planning, risks to capital, and the
implications of stress testing. Our assessment of capital adequacy is
driven by an assessment of risks. These risks include credit, market,
operational, pensions, insurance, structural foreign exchange, interest
rate risk in the banking book and Group risk. Climate risk is also
considered as part of the ICAAP, and we are continuing to develop
our approach. The group’s ICAAP supports the determination of the
capital risk appetite and target ratios, as well as enabling the
assessment and determination of capital requirements by regulators.
Subsidiaries prepare ICAAPs in line with global guidance, while
considering their local regulatory regimes to determine their own risk
appetites and ratios.
HSBC Holdings provides our MREL, including equity and non-equity
capital. These investments are funded by HSBC Holdings’ own equity
capital and MREL-eligible debt. MREL includes own funds and
liabilities that can be written down or converted into capital resources
in order to absorb losses or recapitalise a bank in the event of its
failure. In line with the HSBC Group's existing structure and business
model, HSBC has three resolution groups – the European resolution
group (of which HSBC Bank plc forms part), the Asian resolution
group and the US resolution group.
We aim to ensure that management has oversight of our liquidity and
funding risks at group and entity level through robust governance, in
line with our risk management framework. We manage liquidity and
funding risk in accordance with globally consistent policies,
procedures and reporting standards.
We are required to meet internal minimum requirements and any
applicable regulatory requirements at all times. These requirements
are assessed through our ILAAP, which ensures that we have robust
strategies, policies, processes and systems for the identification,
measurement, management and monitoring of liquidity risk over an
appropriate set of time horizons, including intra-day. The ILAAP
informs the setting of risk tolerance and risk appetite. It also assesses
our capability to manage liquidity and funding effectively. These
metrics are set and managed locally but are subject to robust global
review and challenge to ensure consistency of approach and
application of the HSBC Group’s policies and controls.
Planning and performance
Capital and RWA plans form part of the annual financial resource plan
that is approved by the Board. Capital and RWA forecasts are
submitted to the ALCO on a monthly basis, and capital and RWAs are
monitored and managed against the plan. The responsibility for global
capital allocation principles rests with the HSBC Group Chief Financial
Officer, supported by the HSBC Group Capital Management Meeting.
This is a specialist forum addressing capital management, reporting
into Holdings ALCO.
Through our internal governance processes, we seek to strengthen
discipline over our investment and capital allocation decisions, and to
ensure that returns on investment meet management’s objectives.
The group’s strategy is to allocate capital to businesses and entities to
support growth objectives where returns above internal hurdle levels
have been identified and in order to meet their regulatory and
economic capital needs. We evaluate and manage business returns
by using a return on average tangible equity measure and a related
economic profit measure.
Funding and liquidity plans also form part of the financial resource
plan. The Board-level appetite measures are the liquidity coverage
ratio (‘LCR’) and net stable funding ratio (‘NSFR’), together with an
internal liquidity metric. In addition, we use a wider set of measures
to manage an appropriate funding and liquidity profile, including legal
entity depositor concentration limits, intra-day liquidity, forward-
looking funding assessments and other key measures.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified
that have the potential to affect our RWAs, capital and/or liquidity
position. Downside and Upside scenarios are assessed against our
management objectives, and mitigating actions are assigned as
necessary. We closely monitor future regulatory developments and
continue to evaluate the impact of these upon our capital and liquidity
requirements, particularly those related to the UK’s implementation of
the outstanding measures to be implemented from the Basel III
reforms (‘Basel 3.1‘).
Regulatory developments
In November 2022, the PRA consulted on the implementation of
Basel III Reforms (‘Basel 3.1’) in the UK. In September 2023, it
announced that the implementation date of Basel 3.1 would be
delayed by six months to 1 July 2025. In December 2023, the PRA
published near-final rules in relation to the market risk, credit valuation
adjustment, counterparty credit risk and operational risk elements of
the package, together with information on the planned review of the
Pillar 2 framework. The PRA intends to publish the near-final rules on
the remaining parts, namely credit risk, the output floor and reporting
and disclosure, in the second quarter of 2024.
We continue to assess the impact of the proposed rules, noting that
the output floor is not expected to apply to HSBC Bank plc on either a
solo or consolidated basis. Our subsidiaries will be subject to Basel
3.1 rules, including potentially the output floor, as determined by their
local regulators.
Regulatory reporting processes and controls
The quality of regulatory reporting remains a key priority for
management and regulators. We are progressing with a
comprehensive programme to strengthen our processes, improve
consistency and enhance controls across regulatory reports.
The ongoing programme of work focuses on our material regulatory
reports and is being phased over a number of years. This programme
includes data enhancement, transformation of the reporting systems
and an uplift to the control environment over the report production
process.
While this programme continues, there may be further impacts on
some of our regulatory ratios, such as the CET1, LCR and NSFR, as
we implement recommended changes and continue to enhance our
controls across the process.
Stress testing and recovery planning
The group uses stress testing to inform management of the capital
and liquidity needed to withstand internal and external shocks,
including a global economic downturn or a systems failure. Stress
testing results are also used to inform risk mitigation actions, input
into global business performance measures through tangible equity
allocation, and recovery and resolution planning, as well as to re-
evaluate business plans where analysis shows capital, liquidity and/or
returns do not meet their target.
In addition to a range of internal stress tests, we are subject to
supervisory stress testing by the PRA and Bank of England. Our
subsidiaries may also be subject to supervisory stress tests, including
by the European Banking Authority and the European Central Bank.

HSBC Bank plc Annual Report and Accounts 2023 | 69

The results of regulatory stress testing and our internal stress tests
are used when assessing our internal capital and liquidity
requirements through the ICAAP and ILAAP. The outcomes of stress
testing exercises carried out by the PRA and other regulators inform
the setting of regulatory minimum ratios and buffers.
We maintain recovery plans for the group and material entities, which
set out potential options management could take in a range of stress
scenarios that could result in a breach of capital or liquidity buffers.
They also set out the framework and governance arrangements to
support restoring the group to a stable and viable position, and so
lowering the probability of failure from either idiosyncratic company-
specific stress or systemic market-wide issues. Our recovery plans
provide detailed actions that management would consider taking in a
stress scenario should our position deteriorate and threaten to breach
risk appetite and regulatory minimum levels. This is to help ensure
that we can stabilise our financial position and recover from financial
losses in a stress environment.
The HSBC Group, including HSBC Bank plc, also has capabilities,
resources and arrangements in place to address the unlikely event
that HSBC might not be recoverable and would therefore need to be
resolved by regulators. The HSBC Group and the BoE publicly
disclosed the status of HSBC’s progress against the BoE’s
Resolvability Assessment Framework in June 2022, following the
submission of HSBC’s inaugural resolvability self-assessment in
October 2021. The HSBC Group has continued to enhance its
resolvability capabilities since this time and submitted its second self-
assessment in October 2023. A subsequent update was provided to
the BoE in January 2024. Further public disclosure by the HSBC
Group and the BoE as to HSBC’s progress against the Resolvability
Assessment Framework will be made in June 2024.
Overall, our recovery and resolution planning helps safeguard the
group’s financial and operational stability. The HSBC Group is
committed to further developing its recovery and resolution
capabilities, including in relation to the Bank of England’s Resolvability
Assessment Framework.
Measurement of interest rate risk in the banking book
Interest rate risk in the banking book is the risk of an adverse impact
to earnings or capital due to changes in market interest rates. It is
generated by our non-traded assets and liabilities, specifically loans,
deposits and financial instruments that are not held for trading intent
or held to hedge positions held with trading intent. Interest rate risk
that can be economically hedged may be transferred to the Markets
Treasury business. Hedging is generally executed through interest
rate derivatives or fixed-rate government bonds. Any interest rate risk
that Markets Treasury cannot economically hedge is not transferred
and will remain within the global business where the risks originate.
The following measures are used by Treasury to monitor and control
interest rate risk in the banking book including:
– Net Interest Income ('NII') sensitivity and banking net interest
income ('BNII') sensitivity
– Economic Value of Equity ('EVE') Sensitivity; and
– Non-Trading Value at Risk ('VaR').
Net interest income and Banking Net Interest Income ('BNII')
sensitivity
A principal part of our management of non-traded interest rate risk is
to monitor the sensitivity of expected Net Interest Income (NII) under
varying interest rate scenarios (simulation modelling), where all other
economic variables are held constant. This monitoring is undertaken
at an entity level. HSBC Bank plc calculates both one-year and five-
year NII sensitivities across a range of interest rate scenarios.
NII sensitivity figures represent the effect of pro forma movements in
projected yield curves based on a static balance sheet size and
structure. The exception to this is where the size of the balances or
repricing is deemed interest rate sensitive, for example, early
prepayment of mortgages. These sensitivity calculations do not
incorporate actions that would be taken by Markets Treasury or in the
business that originates the risk to mitigate the effect of interest rate
movements.
The NII sensitivity calculations assume that interest rates of all
maturities move by the same amount in the ‘up-shock’ scenario. The
sensitivity calculations in the ‘down-shock’ scenarios reflect no floors
to the shocked market rates.
However, customer product-specific interest rate floors are
recognised where applicable.
During 2023, we introduced an additional metric to measure and
manage the sensitivity of our income to interest rate shocks. In
addition to Net Interest Income Sensitivity, we now also monitor
Banking Net Interest Income Sensitivity. HSBC has a significant
quantity of Trading Book assets that are funded by Banking Book
liabilities and the NII sensitivity measure does not include the
sensitivity of the internal transfer income from this funding. Banking
net interest income sensitivity includes an adjustment on top of NII
sensitivity to reflect this. Going forwards, this will be our primary
metric for monitoring and management of net interest income
sensitivity.
As at 31 December 2023, the 12 month BNII sensitivity for the bank
to an immediate 100bps parallel shock to interest rates is £96m for an
upwards shock, and £(96)m for a downwards shock. This assessment
is based on a static balance sheet with no management actions, a
50% pass-on assumption on certain interest bearing deposits and
excludes pensions.
Economic value of equity sensitivity
EVE represents the present value of the future banking book cash
flows that could be distributed to equity holders under a managed
run-off scenario. This equates to the current book value of equity plus
the present value of future NII in this scenario. EVE can be used to
assess the economic capital required to support interest rate risk in
the banking book. An EVE sensitivity represents the expected
movement in EVE due to pre-specified interest rate shocks, where all
other economic variables are held constant. Operating entities are
required to monitor EVE sensitivities as a percentage of capital
resources.
Non-trading Value at Risk
Non-trading portfolios comprise positions that primarily arise from the
interest rate management of our retail and commercial banking assets
and liabilities, financial investments measured at FVOCI, debt
instruments measured at amortised cost, and exposures arising from
our insurance operations.
The following table summarises the main business areas where non-
trading market risks reside, and the market risk measures used to
monitor and limit exposures.

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

Non-trading portfolios
Value at risk of the non-trading portfolios
(Audited)
The non-trading VaR in 2023 was driven by interest rate risk in the
banking book arising from Markets Treasury and ALCM book
positions. The non-trading VaR averaged £29m this year, with the low
of £16.9m coming in Q1, and high in Q2 at £37.4m.
Throughout 2023, markets remained volatile, driven by continued
geopolitical events and the shifting of the path of central bank interest
rate hikes and the terminal Central Bank's rate expectations, driven by
changing economic growth and inflation outlooks. During the first half
of the year, the non-trading VaR trended upwards into the month of
May as the Markets Treasury business took advantage of the higher
yield environment, increasing G3 sovereign bond holdings, on an
outright basis in Q2 contributing to a peak in the non-trading VaR of
£37.4m. During the second half of the year the VaR remained steady
over the period to end the year at £32.7m as Markets Treasury
actively managed risk within their limits.
Risk review

70 | HSBC Bank plc Annual Report and Accounts 2023

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

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

Non-trading VaR, 99% 1 day
(Audited)
| Interest rate ('IR') | Credit spread ('CS') | Portfolio diversification 1 | Total 2
| £m | £m | £m | £m
Balance at 31 Dec 2023 | 32.0 | 7.6 | (6.8) | 32.7
Average | 28.8 | 8.3 | (8.1) | 29.0
Maximum | 40.0 | 13.3 | — | 37.4
Minimum | 14.5 | 6.1 | — | 16.9
Balance at 31 Dec 2022 | 17.1 | 7.2 | (5.6) | 18.6
Average | 26.3 | 6.7 | (5.0) | 28.0
Maximum | 39.7 | 11.9 | — | 40.9
Minimum | 16.3 | 4.2 | — | 17.8

1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange,
together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative
number represents the benefit of portfolio diversification. As the maximum occurs on different days for different risk types, it is not meaningful to
calculate a portfolio diversification benefit for this measure.
2 The total VaR is non-additive across risk types due to diversification effect.
Other Risk
Non-trading book foreign exchange exposures are outlined below.
Structural foreign exchange exposures
Structural foreign exchange exposures arise from net assets or capital
investments in foreign operations, together with any associated
hedging. A foreign operation is defined as a subsidiary, associate, joint
arrangement or branch where the activities are conducted in a
currency other than that of the reporting entity. An entity’s functional
reporting currency is normally that of the primary economic
environment in which the entity operates.
Exchange differences on structural exposures are recognised in other
comprehensive income (‘OCI’). We use the pound sterling as our
presentation currency in our consolidated financial statements.
Therefore, our consolidated balance sheet is affected by exchange
differences between the pound sterling and all the other functional
currencies of underlying foreign operations.
Our structural foreign exchange exposures are managed with the
primary objective of ensuring, where practical, that our most
constraining capital ratio is largely protected from the effect of
changes in exchange rates. For capital efficiency reasons, we rely on
net investment hedges held at HSBC Holdings plc level to manage
our structural foreign exchange positions.
For further details of our structural foreign exchange exposures, see
page 74.
Transaction foreign exchange exposures
Transactional foreign exchange risk arises primarily from day-to-day
transactions in the banking book generating profit and loss or FVOCI
reserves in a currency other than the reporting currency of the
operating entity. Transactional foreign exchange exposure generated
through profit and loss is periodically transferred to Markets and
Securities Services with the exception of limited residual foreign
exchange exposure arising from timing differences or for other
reasons. Transactional foreign exchange exposure generated through
OCI reserves is managed by the Markets Treasury business within
agreed limits.
Pension risk management processes
HSBC provides future pension benefits on a defined contribution
basis from many of its European operations. However, there remain
future defined benefit pensions provided in the region.
Pension plans are run by local fiduciaries in line with local legislative
requirements. The largest pension plan is the HSBC Germany Pension
Scheme which is regulated by the German Company Benefits Act
(Gesetz zur Verbesserung der betrieblichen Altersversorgung –
Betriebsrentengesetz – BetrAVG).

HSBC Bank plc Annual Report and Accounts 2023 | 71

In defined contribution pension plans, the contributions that HSBC is
required to make are known, while the ultimate pension benefit will
vary, typically with investment returns achieved by investment
choices made by the employee.
While the market risk to HSBC of defined contribution plans is low, it
is still exposed to operational and reputational risk.
In defined benefit pension plans, the level of pension benefit is
known. Therefore, the level of contributions required by HSBC will
vary due to a number of risks, including:
– investments delivering a return below that required to provide the
projected plan benefits;
– the prevailing economic environment leading to corporate failures,
thus triggering write-downs in asset values (both equity and debt);
– a change in either interest rates or inflation, causing an increase in
the value of the plan liabilities; and
– plan members living longer than expected (known as longevity
risk).
Pension risk is assessed using an economic capital model that takes
into account potential variations in these factors.
The impact of these variations on both pension assets and pension
liabilities are assessed using a 1-in-200-year stress test. Scenario
analysis and other stress tests are also used to support pension risk
management.
To fund the benefits associated with defined benefit plans,
sponsoring group companies, and in some instances employees,
make regular contributions in accordance with advice from actuaries
and in consultation with the plan’s fiduciaries where relevant. These
contributions are normally set to ensure that there are sufficient funds
to meet the cost of the accruing benefits for the future service of
active members. However, higher contributions are required when
plan assets are considered insufficient to cover the existing pension
liabilities. Contribution rates are typically revised annually or once
every three years, depending on the plan.
The defined benefit plans invest contributions in a range of
investments designed to limit the risk of assets failing to meet a
plan’s liabilities. Any changes in expected returns from the
investments may also change future contribution requirements. In
pursuit of these long-term objectives, an overall target allocation of
the defined benefit plan assets between asset classes is established.
In addition, each permitted asset class has its own benchmarks, such
as stock market or property valuation indices or liability
characteristics. The benchmarks are reviewed at least once every
three to five years and more frequently if required by local legislation
or circumstances. The process generally involves an extensive asset
and liability review.
Capital risk in 2023
Capital overview

Capital adequacy metrics
| At
| 31 Dec | 31 Dec
| 2023 | 2022 1,2
Risk-weighted assets ('RWAs') (£m) |  |
Credit risk | 61,983 | 66,887
Counterparty credit risk | 17,066 | 17,981
Market risk | 15,525 | 16,826
Operational risk | 12,875 | 11,547
Total RWAs | 107,449 | 113,241
Capital on a transitional basis (£m) |  |
Common equity tier 1 ('CET1') capital | 19,230 | 18,411
Tier 1 capital | 23,124 | 22,304
Total capital | 37,131 | 35,414
Capital ratios on a transitional basis (%) |  |
Common equity tier 1 | 17.9 | 16.3
Total tier 1 | 21.5 | 19.7
Total capital ratio | 34.6 | 31.3
Leverage ratio (fully phased-in) |  |
Tier 1 capital (£m) | 23,124 | 22,304
Total leverage ratio exposure measure (£m) | 455,852 | 416,814
Leverage ratio (%) | 5.1 | 5.4

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’,
which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have
been restated accordingly.
2 From November 2023, we reverted to the on-shored UK version of
closely correlated currency list (CIR(EU) 2019/2091) from the previously
applied EBA list (CIR(EU) 2021/249). Comparative data have been re-
presented.
References to EU regulations and directives (including technical
standards) should, as applicable, be read as references to the UK's
version of such regulation and/or directive, as onshored into UK
law under the European Union (Withdrawal) Act 2018, and as may be
subsequently amended under UK law.
Capital figures and ratios in the table above are calculated in
accordance with the revised Capital Requirements Regulation and
Directive, as implemented (‘CRR II’). Leverage ratios are calculated
using the end point definition of capital and the IFRS 9 regulatory
transitional arrangements.
Risk review

72 | HSBC Bank plc Annual Report and Accounts 2023

Own funds

Own funds disclosure
(Audited) |
|  | At
|  | 31 Dec | 31 Dec
|  | 2023 | 2022
Ref* |  | £m | £m
| Common equity tier 1 (‘CET1’) capital: instruments and reserves |  |
1 | Capital instruments and the related share premium accounts | 1,801 | 1,217
| – ordinary shares | 1,801 | 1,217
2,3 | Retained earnings, accumulated other comprehensive income (and other reserves)1 | 17,886 | 19,414
5 | Minority interests (amount allowed in consolidated CET1) | 77 | 72
5a | Independently reviewed interim net profits net of any foreseeable charge or dividend | 742 | (1,459)
6 | Common equity tier 1 capital before regulatory adjustments 1 | 20,506 | 19,244
28 | Total regulatory adjustments to common equity tier 1 | (1,276) | (833)
29 | Common equity tier 1 capital 1 | 19,230 | 18,411
36 | Additional tier 1 capital before regulatory adjustments | 3,941 | 3,942
43 | Total regulatory adjustments to additional tier 1 capital | (47) | (49)
44 | Additional tier 1 capital | 3,894 | 3,893
45 | Tier 1 capital 1 | 23,124 | 22,304
51 | Tier 2 capital before regulatory adjustments | 14,403 | 13,559
57 | Total regulatory adjustments to tier 2 capital | (396) | (449)
58 | Tier 2 capital | 14,007 | 13,110
59 | Total capital 1 | 37,131 | 35,414

*The references identify the lines prescribed in the template, that are applicable and where there is a value.
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
At 31 December 2023, our common equity tier 1 ('CET1') capital ratio
increased to 17.9% from 16.3% at 31 December 2022. The key
drivers of the increase in our CET1 ratio were:
– a 0.9 percentage point increase from RWA reduction due to
balance sheet reductions and upstream risk parameter
refinements mainly in corporate lending and overdraft, further
supplemented by favourable FX movements.
– a 0.9 percentage point increase from capital generation through
profits and issuance of share capital net of dividend payment.
– a (0.2) percentage point decrease from unfavourable FX
movement and other movements in own funds.
Throughout 2023, we complied with the PRA's regulatory capital
adequacy requirements, including those relating to stress testing.
Risk-weighted assets

RWA movement by key driver
| Total RWAs
| £m
RWAs at 1 Jan 2023 1 | 113,241
Asset size | (698)
Asset quality | (760)
Model updates | (339)
Methodology and policy | (2,476)
Acquisitions, disposals and transfers | 2,285
Foreign exchange movement | (3,804)
Total RWA movement | (5,792)
RWAs at 31 Dec 2023 | 107,449

1 From November 2023, we reverted to the on-shored UK version of
closely correlated currency list (CIR(EU) 2019/2091) from the previously
applied EBA list (CIR(EU) 2021/249). Comparative data have been re-
presented.
RWAs decreased by £(5.8)bn during the year, including a decrease of
£(3.8)bn due to favourable foreign currency translation differences.
Asset size
Asset size decreased by £(0.7)bn driven mainly by a decrease in
Credit risk RWAs by £(2.2)bn due to balance sheet reductions mainly
in corporate lending and due to management initiatives. This was
further supplemented by a Market risk RWAs fall of £(0.5)bn due to
lower structural foreign exchange exposures. This was partially offset
by the Operational Risk RWA increase by £1.1bn mainly driven by
higher average revenue in the annual recalculation of operational risk
and a £0.9bn increase in Counterparty Credit Risk RWA driven by an
increase in cash exposures and the Securities Financing Transactions
portfolio.
Asset quality
The £(0.8)bn decrease in RWAs is mainly due to portfolio mix changes
in Credit Risk and Counterparty Credit Risk.
Model updates
The £(0.3)bn decrease in RWAs is mainly due to implementation of a
new Incremental Risk Charge model in Market Risk. This was further
supplemented by a decrease in Credit Risk driven by a change in
approach to report multilateral development banks' exposures under
the STD method, partially offset by an increase due to implementation
of the new Retail EAD model.
Acquisitions and disposals
The £2.3bn increase is mainly due to the acquisition of HBBM and
PBLU, which was offset by a £(0.4)bn decrease due to strategic
disposals including the sale of our branch operations in Greece.
Methodology and policy
The £(2.5)bn decrease was primarily driven by RWA initiatives and risk
parameter refinements in Credit Risk and Counterparty Credit Risk.

HSBC Bank plc Annual Report and Accounts 2023 | 73

Leverage ratio
Our leverage ratio was 5.1 % at 31 December 2023, down from 5.4%
at 31 December 2022. The increase in leverage exposure is primarily
due to growth in the balance sheet, which led to a fall by 0.5
percentage points in the leverage ratio. This is partly offset by a rise
of 0.2 percentage points due to an increase in the tier 1 capital.

Leverage ratio |
| At
| 31 Dec | 31 Dec
| 2023 | 2022
| £bn | £bn
Tier 1 capital | 23,124 | 22,304
Total leverage ratio exposure | 455,852 | 416,814
| % | %
Leverage ratio | 5.1 | 5.4

Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market
discipline and aims to make financial services firms more transparent
by requiring publication of wide-ranging information on their risks,
capital and management. Our Pillar 3 Disclosures at 31 December
2023 is published on our website, www.hsbc.com/investors.
Structural foreign exchange exposures
The group’s structural foreign currency exposure is represented by
the net assets or capital investments in subsidiaries, branches, joint
arrangements or associates, the functional currencies of which are
currencies other than the sterling.
For our policies and procedures for managing structural foreign
exchange exposures, see page 71 of the ‘Risk management’ section.

Net structural foreign exchange exposures
| 2023 | 2022
| £m | £m
Currency of structural exposure |  |
Euro | 10,117 | 9,387
US Dollars | 1,482 | 1,062
South African Rand | 287 | 287
Armenian dram | 118 | 116
Israeli New Shekel | 107 | 85
Others, each less than £100m | 192 | 188
At 31 Dec | 12,303 | 11,125

Liquidity and funding risk in 2023
Liquidity coverage ratio
The LCR aims to ensure that a bank has sufficient unencumbered
HQLA to meet its liquidity needs in a 30-calendar-day liquidity stress
scenario. HQLA consist of cash or assets that can be converted into
cash at little or no loss of value in markets.
At 31 December 2023, all the group’s principal operating entities were
within the LCR risk tolerance level established by the Board and
applicable under the LFRF.

LCR 1,2
|  | At
|  | 31 Dec | 31 Dec
|  | 2023 | 2022
|  | % | %
HSBC Bank plc |  | 148 | 143

In addition to the regulatory metric, the group manages liquidity via
'internal liquidity metric', which is being used to monitor and manage
liquidity risk via a low-point measure across a 270-day horizon, taking
into account recovery capacity.
Net stable funding ratio
The Net Stable Funding Ratio (‘NSFR’) requires institutions to
maintain sufficient stable funding relative to required stable funding,
and reflects a bank’s long-term funding profile (funding with a term of
more than a year).
At 31 December 2023, all the group’s principal operating entities were
within the NSFR risk tolerance level established by the Board and
applicable under the LFRF.

NSFR 1
|  | At
|  | 31 Dec | 31 Dec
|  | 2023 | 2022
|  | % | %
HSBC Bank plc |  | 116 | 115

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

Liquid assets 2 |
| At Estimated liquidity value | At Estimated liquidity value
| 31 Dec 2023 | 31 Dec 2022
| £m | £m
HSBC Bank plc |  |
Level 1 | 88,678 | 93,500
Level 2a | 8,699 | 5,726
Level 2b | 6,051 | 3,270

1 The LCR and NSFR ratios presented in this table are based on average
value. The LCR is the average of the preceding 12 months. The NSFR
is the average of preceding quarters. Prior period numbers have been
restated for consistency.
2 In December 2022, a strategic data enhancement for HSBC Bank plc
was implemented which resulted in a reclassification of some
securities. This reclassification drove a reduction in total High Quality
Liquid Assets and corresponding LCR as of 31 December 2022. Prior
period numbers have been restated for consistency.
Risk review

74 | HSBC Bank plc Annual Report and Accounts 2023

Sources of funding
Our primary sources of funding are customer current accounts, repo
and wholesale securities.
The following ‘Funding sources and uses’ table provides a
consolidated view of how our balance sheet is funded, and should be
read in light of the LFRF, which requires operating entities to manage
liquidity and funding risk on a stand-alone basis.
The table analyses our consolidated balance sheet according to the
assets that primarily arise from operating activities and the
sources of funding primarily supporting these activities. Assets and
liabilities that do not arise from operating activities are presented at
other balance sheet lines. In 2023, the level of customer accounts
continued to exceed the level of loans and advances to customers.
The positive funding gap was predominantly deployed in liquid assets,
cash and balances with central banks and financial investments, as
required by the LFRF.

Funding sources and uses for the group
| 2023 | 2022 1 |  |  | 2023 | 2022 1
| £m | £m |  |  | £m | £m
Sources |  |  |  | Uses |  |
Customer accounts | 222,941 | 215,948 |  | Loans and advances to customers | 75,491 | 72,614
Deposits by banks | 22,943 | 20,836 |  | Loans and advances to banks | 14,371 | 17,109
Repurchase agreements – non-trading | 53,416 | 32,901 |  | Reverse repurchase agreements – non-trading | 73,494 | 53,949
Debt securities in issue | 13,443 | 7,268 |  | Cash collateral, margin and settlement accounts | 52,154 | 51,858
Cash collateral, margin and settlement accounts | 53,094 | 60,385 |  | Assets held for sale | 20,368 | 21,214
Liabilities of disposal groups held for sale | 20,684 | 24,711 |  | Trading assets | 100,696 | 79,878
Subordinated liabilities | 14,920 | 14,528 |  | – reverse repos | 8,510 | 8,729
Financial liabilities designated at fair value | 32,545 | 27,282 |  | – stock borrowing | 8,713 | 5,627
Insurance contract liabilities | 20,595 | 20,004 |  | – other trading assets | 83,473 | 65,522
Trading liabilities | 42,276 | 41,265 |  | Financial investments | 46,368 | 32,604
– repos | 7,929 | 8,213 |  | Cash and balances with central banks | 110,618 | 131,433
– stock lending | 2,190 | 1,773 |  | Other balance sheet assets | 209,410 | 255,987
– other trading liabilities | 32,157 | 31,279 |  | At 31 Dec | 702,970 | 716,646
Total equity | 24,505 | 23,233 |  |  |  |
Other balance sheet liabilities | 181,608 | 228,285 |  |  |  |
At 31 Dec | 702,970 | 716,646 |  |  |  |

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Contingent liquidity risk arising from committed lending facilities
The group provides customers with committed facilities such as
standby facilities to corporate customers and committed backstop
lines to conduits sponsored by the group. All of the undrawn
commitments provided to conduits or external customers are
accounted for in the LCR and NSFR in line with the applicable
regulations.
This ensures that under a stress scenario any additional outflow
generated by increased utilisation of these committed facilities by
either customers or the group’s sponsored conduits is appropriately
reflected in our liquidity and funding position.
In relation to commitments to customers, the table below shows the
level of undrawn commitments outstanding in terms of the five
largest single facilities and the largest market sector.

The group’s contractual exposures at 31 December monitored under the contingent liquidity risk limit structure
| 2023 | 2022
| £bn | £bn
Commitments to conduits |  |
Multi-seller conduits 1 |  |
– total lines | 3.6 | 3.7
– largest individual lines | 0.2 | 0.2
Securities investment conduits – total lines | 1.0 | 1.3
Commitments to customers |  |
– five largest 2 | 3.5 | 3.7
– largest market sector 3 | 14.4 | 13.3

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

HSBC Bank plc Annual Report and Accounts 2023 | 75

Summary of assets available to support potential future funding and collateral needs (on- and off-balance sheet)
| 2023 | 2022
| £m | £m
Total on-balance sheet assets at 31 Dec | 702,970 | 717,353
Less: |  |
– reverse repo/stock borrowing receivables and derivative assets | (264,834) | (293,543)
– other assets that cannot be pledged as collateral | (59,134) | (51,974)
Total on-balance sheet assets that can support funding and collateral needs at 31 Dec | 379,002 | 371,836
Add: off-balance sheet assets |  |
– fair value of collateral received in relation to reverse repo/stock borrowing/derivatives that is available to sell or repledge | 224,836 | 180,233
Total assets that can support future funding and collateral needs | 603,838 | 552,069
Less: |  |
– on-balance sheet assets pledged | (97,077) | (98,124)
– re-pledging of off-balance sheet collateral received in relation to reverse repo/stock borrowing/derivatives | (175,100) | (136,777)
Assets available to support funding and collateral needs at 31 Dec | 331,661 | 317,168

Market risk
Overview
Market risk is the risk that movements in market factors, including
foreign exchange rates and commodity prices, interest rates, credit
spreads and equity prices will reduce the group’s income or the value
of its portfolios.
Exposure to market risk is separated into two portfolios.
Trading portfolios comprise positions arising from market-making and
warehousing of customer-derived positions.
Non-trading portfolios including Markets Treasury comprise positions
that primarily arise from the interest rate management of the group’s
retail and commercial banking assets and liabilities, financial
investments designated as held-to-collect-and-sale (‘HTCS’), and
exposures arising from the group’s insurance operations.
Key developments in 2023
There were no material changes to our policies and practices for the
management of market risk in 2023.
Market risk governance
(Audited)
The following diagram summarises the main business areas where
trading market risks reside, and the market risk measures used to
monitor and limit exposures.

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

Where appropriate, we apply similar risk management policies and
measurement techniques to trading portfolios. Our objective is to
manage and control market risk exposures to optimise return on risk
while maintaining a market profile consistent with our established risk
appetite.
Market risk is managed and controlled through limits approved by the
group Chief Risk Officer. These limits are allocated across business
lines and to the group and its subsidiaries. The majority of HSBC’s
total VaR and almost all trading VaR reside in GBM. Each major
operating entity has an independent market risk management and
control sub-function, which is responsible for measuring, monitoring
and reporting market risk exposures against limits on a daily basis.
The Traded Risk function enforces the controls around trading in
permissible instruments approved for each site as well as following
completion of the new product approval process. Traded Risk also
restricts trading in the more complex derivative products to offices
with appropriate levels of product expertise and robust control
systems.
Market risk measures
Monitoring and limiting market risk exposures
Our objective is to manage and control market risk exposures while
maintaining a market profile consistent with the group’s risk appetite.
We use a range of tools to monitor and limit market risk exposures
including sensitivity analysis, VaR, and stress testing.
Sensitivity analysis
Sensitivity analysis measures the impact of individual market factor
movements on specific instruments or portfolios, including interest
rates, foreign exchange rates, credit spreads and equity prices, such
as the effect of a one basis point change in yield. We use sensitivity
measures to monitor the market risk positions within each risk type.
Sensitivity limits are set for portfolios, products and risk types, with
the depth of the market being one of the principal factors in
determining the level of limits set.
Value at risk
VaR is a technique that estimates the potential losses on risk
positions as a result of movements in market rates and prices over a
specified time horizon and to a given level of confidence. The use of
VaR is integrated into market risk management and is calculated for
all trading positions regardless of how the group capitalises those
exposures. Where there is not an approved internal model, the group
uses the appropriate local rules to capitalise exposures.
The VaR models for trading portfolios are predominantly based on
historical simulation. The VaR is calculated at a 99% confidence level
for a one-day holding period. Where we do not calculate VaR
explicitly, we use alternative tools like Stress Testing.
The VaR models derive plausible future scenarios from past series of
recorded market rates and prices, taking into account inter-
relationships between different markets and rates such as interest
rates and foreign exchange rates. The models also incorporate the
effect of option features on the underlying exposures.
The historical simulation models used incorporate the following
features:
– Historical market rates and prices are calculated with reference to
foreign exchange rates and commodity prices, interest rates,
equity prices and the associated volatilities;
– Potential market movements utilised for VaR are calculated with
reference to data from the past two years; and
– VaR measures are calculated to a 99% confidence level and use a
one-day holding period.
The nature of the VaR models means that an increase in observed
market volatility will most likely lead to an increase in VaR without any
changes in the underlying positions.
Risk review

76 | HSBC Bank plc Annual Report and Accounts 2023

VaR model limitations
Although a valuable guide to risk, VaR should always be viewed in the
context of its limitations. For example:
– the use of historical data as a proxy for estimating future events
may not encompass all potential events, particularly those which
are extreme in nature;
– the use of a holding period assumes that all positions can be
liquidated or the risks offset during that period. This may not fully
reflect the market risk arising at times of severe illiquidity, when
the holding period may be insufficient to liquidate or hedge all
positions fully;
– the use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence;
and
– VaR is calculated on the basis of exposures outstanding at the
close of business and therefore does not necessarily reflect intra-
day exposures.
Risk not in VaR framework
Other basis risks which are not completely covered in VaR are
complemented by our risk not in VaR (‘RNIV’) calculations, and are
integrated into our capital framework.
Risk factors are reviewed on a regular basis and either incorporated
directly in the VaR models, where possible, or quantified through the
VaR-based RNIV approach or a stress test approach within the RNIV
framework. The outcome of the VaR-based RNIV is included in the
VaR calculation; a stressed VaR RNIV is also computed for the risk
factors considered in the VaR-based RNIV approach.
Stress-type RNIVs include a deal contingent derivatives capital charge
to capture risk for these transactions and a de-peg risk measure to
capture risk to pegged and heavily managed currencies.
Stress testing
Stress testing is an important procedure that is integrated into our
market risk management tool to evaluate the potential impact on
portfolio values of more extreme, although plausible, events or
movements in a set of financial variables. In such scenarios, losses
can be much greater than those predicted by VaR modelling.
Stress testing is implemented at legal entity, regional and overall
HSBC Group levels. A standard set of scenarios is utilised
consistently across all regions within the HSBC Group. Scenarios are
tailored to capture the relevant events or market movements at each
level. The risk appetite around potential stress losses for the group is
set and monitored against referral limits.
Market risk reverse stress tests are undertaken on the premise that
there is a fixed loss. The stress testing process identifies which
scenarios lead to this loss. The rationale behind the reverse stress
test is to understand scenarios which are beyond normal business
settings that could have contagion and systemic implications.
Stressed VaR and stress testing, together with reverse stress testing
and the management of gap risk, provide management with insights
regarding the ‘tail risk’ beyond VaR for which the group's appetite is
limited.
Trading portfolios
Back-testing
We routinely validate the accuracy of our VaR models by back-testing
the VaR metric against both actual and hypothetical profit and loss.
Hypothetical profit and loss excludes non-modelled items such as
fees, commissions and revenue of intra-day transactions. The
hypothetical profit and loss reflects the profit and loss that would be
realised if positions were held constant from the end of one trading
day to the end of the next. This measure of profit and loss does not
align with how risk is dynamically hedged, and is not therefore
necessarily indicative of the actual performance of the business. The
number of hypothetical loss back-testing exceptions, together with a
number of other indicators, is used to assess model performance and
to consider whether enhanced internal monitoring of a VaR model is
required. We back-test our VaR at set levels of our HSBC Group entity
hierarchy.
Defined benefit pension plans
Market risk also arises within the Bank’s defined benefit pension
plans to the extent that the obligations of the plans are not fully
matched by assets with determinable cash flows. Refer to the
Pension risk management processes section on page 71 for additional
information.
Market risk in 2023
During 2023, global financial markets were mainly driven by the
inflation outlook, interest rates expectations and recession risks,
coupled with banking distress in March and rising geopolitical
tensions in the Middle East from October. Major central banks
maintained restrictive monetary policies and bond markets
experienced a volatile year. After rising significantly in the second and
third quarter, US treasury bond yields fell during 4Q23, as lower
inflation pressures led markets to expect that key rates would be cut
in 2024. The interest rates outlook was also a major driver of global
equity markets performance, alongside resilient corporate earnings
and sentiment in the technology sector. Developed markets’ equities
advanced significantly amid low volatility, while emerging markets
performance was more subdued. In foreign exchange markets, the
US dollar fluctuated against other major currencies, mostly in line with
the Fed policy and bond yields expectations. Investor sentiment
remained resilient in credit markets. High-yield and investment-grade
credit spreads were narrow in general, as fears of contagion in the
banking sector in 1Q23 abated and economic growth remained
resilient throughout 2023.
We continued to manage market risk prudently during 2023.
Sensitivity exposures and VaR remained within appetite as the
business pursued its core market-making activity in support of our
customers. Market risk was managed using a complementary set of
risk measures and limits, including stress testing and scenario
analysis.
Trading portfolios
Value at risk of the trading portfolios
(Audited)
The Trading VaR predominantly resides within Markets Securities
Services where it amounted to £25.4m as of 31 December 2023
compared with £31.2m as of 31 December 2022. The Trading VaR
peaked at £55.4m in September owing to the sensitivity of the trading
book to interest rates moves, coupled with a large volatility in the
rates market. The lower than market expected inflation data in
developed markets led to a general decrease of volatility from
beginning of November; as a result, the Trading VaR decreased in the
last two months of the year and remained fairly stable, ranging
between £19m and £31.7m.

HSBC Bank plc Annual Report and Accounts 2023 | 77

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

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

Trading VaR, 99% 1 day
(Audited)
| Foreign exchange ('FX') and commodity | Interest rate ('IR') | Equity ('EQ') | Credit Spread ('CS') | Portfolio Diversification 1 | Total 2
| £m | £m | £m | £m | £m | £m
Balance at 31 Dec 2023 | 6.2 | 20.1 | 11.0 | 5.2 | (17.0) | 25.4
Average | 11.4 | 25.8 | 10.0 | 9.2 | (24.1) | 32.3
Maximum | 17.2 | 50.2 | 14.7 | 12.7 | — | 55.4
Minimum | 5.6 | 13.8 | 7.8 | 5.2 | — | 19.0
Balance at 31 Dec 2022 | 7.5 | 26.4 | 13.6 | 8.6 | (24.9) | 31.2
Average | 10.0 | 15.3 | 11.7 | 13.0 | (22.8) | 27.2
Maximum | 21.5 | 49.2 | 17.1 | 22.9 | — | 60.0
Minimum | 3.3 | 8.2 | 6.8 | 7.0 | — | 14.2

1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange,
together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative
number represents the benefit of portfolio diversification. As the maximum occurs on different days for different risk types, it is not meaningful to
calculate a portfolio diversification benefit for this measure.
2 The total VaR is non-additive across risk types due to diversification effect and it includes VaR RNIV.
Back-Testing
In 2023, HSBC Bank plc did not experience any back-testing
exceptions against the Hypothetical P&L and Actual P&L.
Climate Risk
Overview
Our Climate risk approach is aligned to the framework outlined by the
Taskforce for Climate-related Financial Disclosures (‘TCFD’), which
identifies two primary drivers of climate risk:
– physical risk, which arises arising from the increased frequency
and severity of extreme weather events, such as hurricanes and
floods, or chronic gradual shifts in weather patterns or sea level
rise; and
– transition risk, which arises from the process of moving to a net
zero economy, including changes in government policy and
legislation, technology, market demand, and reputational
implications triggered by a change in stakeholder expectations,
action or inaction.
In addition to these primary drivers of climate risk we have also
identified the following thematic issues related to climate risk which
are most likely to materialise in the form of reputational, regulatory
compliance and litigation risks.
– net zero alignment risk, which arises from the risk of HSBC Group
failing to meet its net zero commitments or failing to meet
external expectations related to net zero, impacting HSBC Bank
plc, because of inadequate ambition and/or plans, poor execution,
or inability to adapt to changes in external environment; and
– the risk of greenwashing, which arises from the act of knowingly
or unknowingly making inaccurate, unclear, misleading or
unsubstantiated claims regarding sustainability to our
stakeholders.
Approach
We recognise that the physical impacts of climate change and the
transition to net zero economy can create significant financial risks for
the companies, investors and the financial system. HSBC Bank plc
may be affected by climate risks either directly or indirectly through
our relationships with our customers and through macro impacts on
the economies we serve, which could result in both financial and non-
financial impacts.
Our climate risk approach aims to effectively manage the material
climate risks that could impact our operations, financial performance
and stability, and reputation. It is informed by the evolving
expectations of our regulators.
We remain aligned with HSBC Group, in developing our climate risk
capabilities across our business, by prioritizing sectors, portfolios and
counterparties with the highest impacts.
Risk review

78 | HSBC Bank plc Annual Report and Accounts 2023

We continue to make progress in enhancing our climate risk
capabilities and recognise it is a long-term iterative process.
We aim to regularly review our approach to increase coverage and
incorporate maturing data, climate analytics capabilities, frameworks
and tools as well as respond to emerging industry best practice and
climate risk regulations.
This includes updating our approach to reflect how the risks
associated with climate change continue to evolve in the real world,
and maturing how we embed climate risk factors into strategic
planning, transactions and decision making across our businesses.
In 2023, the HSBC Group refreshed their assessment of how climate
risk may impact HSBC taxonomy risk types, with the assessment
focusing on a 12-month time horizon. It also considers additional short
term (up to 2025), medium term (2026 - 2035) and long term (2036 -
2050) time horizons. The assessment is refreshed annually, and
results may change as our understanding of climate risk and how it
impacts HSBC evolves.
Climate risk management
Key developments in 2023
Our climate risk programme continues to support the development of
our climate risk management capabilities, expanding the scope of
climate-related training and developing new climate risk metrics to
monitor and manage exposures. We enhanced our internal scenario
analysis through improvements of our use of customer transition
plans data.
We have enhanced and expanded the use of a client transition
engagement questionnaire to better understand our exposure to the
highest transition risk sectors and we continue to engage with our
customers to understand and support their transition away from high
carbon activities.
While the HSBC Group have made progress in enhancing our climate
risk framework, further work remains. This includes the need to
develop additional metrics and tools to measure our exposure to
climate-related risks, and to incorporate these tools within decision
making.
Governance and structure
The group's Board takes overall responsibility for our ESG strategy,
overseeing executive management in developing the approach,
execution and associated reporting.
We continue to aim to deepen our understanding of the drivers of
climate risk as well as aim to manage our exposure. The
Environmental Risk Oversight Forum (formerly the Climate Risk
Oversight Forum) oversees risk activities relating to climate and
sustainability risk management, including the transition and physical
risks from climate change.
The Europe Reputational Risk Committee considers climate-related
matters arising from customers, transactions and third parties that
either present a serious potential reputational risk to HSBC Bank plc
(or the HSBC Group) or merit a decision to ensure a consistent
approach to reputational risk management across the regions, global
businesses and global functions.
The group's Risk Management Meeting and Risk Committee receive
regular updates on our climate risk profile and progress of our climate
risk programme.
Risk appetite
Our climate risk appetite forms part of the HSBC Group’s risk appetite
statement and supports the business in delivering our net zero
ambition effectively and sustainably.
Our climate risk appetite statement is approved and overseen by the
Board. It is supported by risk appetite metrics and tolerance
thresholds. We have also defined additional key management
information metrics. Both the risk appetite statement and key
management information metrics are reported on a quarterly basis for
oversight by the HSBC Bank plc Risk Management Meeting and the
HSBC Bank plc Risk Committee receive regular updates on our
climate risk profile and progress of our climate risk programme.
Challenges
Whilst HSBC Group have continued to develop our climate risk
framework, our remaining challenges include:
– The diverse range of data sources and data structures needed for
climate related reporting drives data accuracy and reliability risks.
– Data limitations on customer assets and supply chains, and
methodology gaps, which hinder our ability to assess physical risks
accurately.
– Data gaps on customer emissions and transition plan and
methodology gaps, which limit our ability to assess transition risks
accurately.
– Limitations in our management of net zero alignment risk is due to
known and unknown factors, including the limited accuracy and
reliability of data, merging methodologies, and the need to develop
new tools to better inform decision making.
Resilience Risk
Overview
Resilience risk is the risk that we are unable to provide critical
services to our customers, affiliates and counterparties as a result of
sustained and significant operational disruption. Resilience risk arises
from failures or inadequacies in processes, people, systems or
external events.
Key developments in 2023
The Operational and Resilience Risk sub-function seeks to provide
robust Risk Steward oversight of the management of risk by our
businesses, functions and legal entities. This includes effective and
timely independent challenge and expert advice. During the year, we
carried out a number of initiatives to seek to keep pace with
geopolitical, regulatory and technology changes and to strengthen the
management of resilience risk:
– We focused on enhancing our understanding of our risk and
control environment, by updating our risk taxonomy and control
libraries, including Change Execution risk, and refreshing risk and
control assessments.
– We have continued to monitor geopolitical events, such as the
Russia-Ukraine and Israel-Hamas wars, for any potential impact
they may have on our colleagues and operations.
– We have strengthened the way third-party risk is overseen and
managed across all non-financial risks and have enhanced our
processes, framework and reporting capabilities to improve the
control and oversight of our material third parties by our global
businesses and functions in the region.
– We provided analysis and easy-to-access risk and control
information and metrics to enable management to focus on non-
financial risks in their decision making and appetite setting.
Governance and structure
The Enterprise Risk Management target operating model provides a
globally consistent view across resilience risks, strengthening our risk
management oversight while operating effectively as part of a
simplified non-financial risk structure.
We view resilience risk across seven sub-risk types related to: third
party risk; technology and cyber security risk; transaction processing
risk; business interruption and incident risk; data risk; change
execution risk; and facilities availability, safety and security risk.
Risk appetite and key escalations for resilience risk are reported to the
group's Risk Management Meeting, chaired by the Europe Chief Risk
Officer, with an escalation path to the HSBC Group Risk Management
Meeting and HSBC Group Risk Committee.
Key risk management process
Operational resilience is our ability to anticipate, prevent, adapt,
respond to, recover and learn from operational disruption while
minimising customer and market impact. Resilience is determined by
assessing whether we are able to continue to provide our important
business services, within an agreed level. This is achieved via day-to-
day oversight and periodic and ongoing assurance, such as deep dive

HSBC Bank plc Annual Report and Accounts 2023 | 79

reviews and controls testing, which may result in challenges being
raised to the business by risk stewards. Further challenge is also
raised in the form of our risk steward opinion papers to formal
governance, at least four times a year. We accept we will not be able
to prevent all disruption but we must prioritise investment to
continually improve the response and recovery strategies for our
important business services.
Business operations continuity
We continue to monitor the Israel-Hamas war and remain ready to
take measures to help ensure business continuity should the situation
require. There has been no significant impact to our services in nearby
markets where the group operates. However in light of potential
disruption, businesses and functions in these and nearby markets are
reviewing existing plans and responses to minimise any impact.
Cybersecurity Risk
Overview
The threat of cyber-attacks remains a concern for our organisation, as
it does across the financial sector and other industries. As cyber-
attacks continue to evolve, failure to protect our operations may result
in the loss of sensitive data, disruption for our customers and our
business, or financial loss. This could have a negative impact on our
customers and our reputation, among other risks.
We continue to monitor ongoing geopolitical events and changes to
the cyber threat landscape and take proactive measures with the aim
to reduce any impact to our customers.
We invest in business and technical controls to help prevent, detect,
and mitigate cyber threats. Our cybersecurity controls follow a
’defence in depth’ approach, making use of multiple security layers,
recognising the complexity of our environment. Our ability to detect
and respond to attacks through round-the-clock security operations
centre capabilities is intended to help reduce the impact of attacks.
We have a cyber intelligence and threat analysis team, which
proactively collects and analyses internal and external cyber
information to continuously evaluate threat levels for the most
prevalent attack types and their potential outcomes. We actively
participate in the broader cyber intelligence community, including by
sharing technical expertise in investigations, alongside others in the
financial services industry and government agencies around the
world.
Key developments in 2023
We have continued to work with our suppliers, financial infrastructure
bodies and other non-traditional third parties, in an effort to help
reduce the threat of cyber-attacks impacting our business services.
We have a third-party security risk management process in place to
assess, identify and manage the risks associated with cybersecurity
threats to our third-party relationships. The process includes risk-
based cybersecurity due diligence reviews that assess third parties’
cybersecurity programmes against our standards and requirements.
In 2023, we further strengthened our cyber defences and enhanced
our cybersecurity capabilities with the objective to help reduce the
likelihood and impact of unauthorised access, security vulnerabilities
being exploited, data leakage, third-party security exposure, and
advanced malware. These defences build upon a proactive data
analytical approach to help identify advanced targeted threats and
malicious behaviour.
Governance and structure
We operate a three lines of defence model, aligned to the enterprise
risk management framework, to help ensure oversight and challenge
of our cybersecurity capabilities and priorities. In the first line of
defence, we have risk owners within global businesses and functions
who are accountable for identifying and managing cyber risk. They
work with cybersecurity control owners to apply the appropriate risk
treatment in line with our risk appetite. Our controls are designed to
be executed in line with our policies and are reviewed and challenged
by our risk stewards representing the second line of defence.They are
independently assured by the Global Internal Audit function, the third
line of defence.
The assessment and management of our cybersecurity risks across
the HSBC Group is led and coordinated by a Global Chief Information
Security Officer, supported by regional and business level chief
information security officers. Our regional chief information security
officer covering Europe and the UK has extensive experience in
financial services, security and resilience as well as in strategy,
governance, risk management and regulatory compliance. In the
event of incidents, the Global Chief Information Security Officer and
relevant supporting information security officers are informed by our
security operations team and are engaged in alignment with our
cybersecurity incident response protocols.
Key risk management processes
We have a robust suite of cybersecurity policies, procedures, and key
controls designed to help ensure that the organisation is well
managed, with effective oversight and control. This includes but is not
limited to defined information security responsibilities for employees,
contractors, and third parties, as well as standard procedures for
cyber incident identification, investigation, mitigation, and reporting.
Key performance indicators, control effectiveness, and other matters
related to cybersecurity, including significant cyber incidents, are
presented on a regular basis to various management risk and control
committees, including to the Board, the Risk Management Meeting,
and across global businesses, functions, and regions. This is done to
facilitate ongoing awareness and management of our cybersecurity
position.
Our cybersecurity capabilities are regularly assessed against the
National Institute of Standards and Technology (NIST) framework by
independent third parties and we proactively collaborate with
regulators to participate in regular testing activities. In addition, HSBC
engages external independent third parties to support our penetration
and threat-led penetration testing, which help to identify our
vulnerabilities to cyber threats and test our security resilience.
Cyber training and awareness
We understand the important role our people play in protecting
against cybersecurity threats. Our mission is to equip every colleague
with the appropriate tools and behaviours they need to keep our
organisation and customers’ data safe. We provide cybersecurity
training and awareness to our people, ranging from our top executives
to IT developers to front-line relationship managers around the world.
We host an annual cyber awareness month for all colleagues,
covering topics such as online safety at home, social media safety,
safe hybrid working, and cyber incidents and response. Our dedicated
cybersecurity training and awareness team provides a wide range of
education and guidance to both customers and our colleagues about
how to spot and prevent online fraud.
Regulatory compliance risk
Overview
Regulatory compliance risk is the risk associated with breaching our
duty to clients and other counterparties, inappropriate market conduct
and breaching related financial services regulatory standards.
Regulatory compliance risk arises from the failure to observe relevant
laws, codes, rules and regulations and can manifest itself in poor
market or customer outcomes and lead to fines, penalties and
reputational damage to our business.
Key developments in 2023
The dedicated programme to embed our updated purpose-led
conduct approach has concluded. Work to map applicable regulations
to our risks and controls continued in 2023 alongside adoption of new
tooling to support enterprise-wide horizon scanning for new
regulatory obligations and to manage our regulatory reporting
inventories. Climate risk has been integrated into regulatory
compliance policies and processes, with enhancements being made
to the Product Governance Framework and controls in order to ensure
the effective consideration of Climate risk, in particular Greenwashing.
In July 2023, the FCA rules and guidance for the new Consumer Duty
became effective setting higher expectations for the standard of care
firms give to consumers. The rules require that firms consider the
needs, characteristics, and objectives of their customers and how
Risk review

80 | HSBC Bank plc Annual Report and Accounts 2023

they behave at every stage of the customer journey. As well as
enhancing processes to ensure delivery of good retail customer
outcomes, the firm has implemented measures to evidence how
those outcomes are being met.
Governance and structure
The Compliance function has now been restructured and integrated
into a combined Risk and Compliance function. In Europe, a new
Chief Compliance Officer has been appointed responsible for all
Regulatory and Financial Crime Compliance teams across the region.
Regulatory Compliance and Financial Crime teams in all markets and
lines of business continue to work to identify and manage regulatory
and financial crime compliance risks across the region. They also work
together and with all relevant stakeholders to ensure we achieve
good conduct outcomes and provide enterprise-wide support on the
Compliance risk agenda in collaboration with the regional Risk
function.
Key risk management processes
The Europe Regulatory Conduct function is engaged in setting
policies, standards and risk appetite to guide the management of
regulatory compliance risks. It also devises clear frameworks and
support processes to mitigate such risks. The capability provides
oversight, review and challenge to the Country Chief Compliance
Officers and their teams to help them identify, assess and mitigate
regulatory compliance risks, where required. The regulatory
compliance risk policies are regularly reviewed. Policies and
procedures require the prompt identification and escalation of any
actual or potential regulatory breach. Relevant reportable events are
escalated to the HSBC Bank plc RMM and to the HSBC Group Risk
Committee, as appropriate.
Conduct of business
Our purpose-led conduct approach aims to guide us to do the right
thing and to focus on the impact we have on our customers and the
financial markets in which we operate. It complements our purpose
and values and – together with more formal policies and the tools we
have to do our jobs – provides a clear path to achieving our purpose
and delivering our strategy. For further information on our Purpose-led
Conduct Approach, see www.hsbc.com/who-we-are/esg-and-
responsible-business/our-conduct.
Regulators and governments
We proactively engage with regulators and governments to facilitate
strong relationships through virtual and in-person meetings and by
responding to consultations individually and jointly via industry bodies.
Financial crime risk
Overview
Financial crime risk is the risk that HSBC’s products and services will
be exploited for criminal activity. This includes fraud, bribery and
corruption, tax evasion, sanctions and export control violations,
money laundering, terrorist financing and proliferation financing.
Financial crime risk arises from day-to-day banking operations
involving customers, third parties and employees.
Key developments in 2023
We regularly review the effectiveness of our financial crime risk
management framework, which includes continued consideration of
the complex and dynamic nature of sanctions compliance and export
control risk. We continued to respond to the economic sanctions and
trade restrictions that have been imposed on Russia, including
methods used to limit sanctions evasion.
We continued to make progress with several key financial crime risk
management initiatives, including:
– We deployed our intelligence-led, dynamic risk assessment
capability for customer account monitoring in additional entities
and global businesses including in the UK, the Channel Islands and
the Isle of Man.
– We deployed a next generation capability to increase our
monitoring coverage on correspondent banking activity in France.
– We successfully introduced the required changes to our
transaction screening capability to accommodate the global
change to payment systems formatting under ISO20022
requirements.
– We made enhancements in response to the rapidly evolving and
complex global payments landscape and refined our digital assets
and currencies strategy.
Governance and Structure
The Financial Crime function has been restructured in 2023 as part of
the continued effort to review the effectiveness of our governance
framework to manage financial crime risk. The Regional Head of
Financial Crime and HSBC Bank plc Money Laundering Reporting
Officer reports now to the Chief Compliance Officer for Europe, while
the HSBC Bank plc Risk Management Meeting retains oversight of
matters relating to money laundering, fraud, bribery and corruption,
tax evasion, sanctions and export control breaches, terrorist financing
and proliferation financing.
Key risk management processes
We will not tolerate knowingly conducting business with individuals or
entities believed to be engaged in criminal activity. We require
everybody in HSBC to play their role in maintaining effective systems
and controls to prevent and detect financial crime. Where we believe
we have identified suspected criminal activity or vulnerabilities in our
control framework, we will take appropriate mitigating action.
We manage financial crime risk because it is the right thing to do to
protect our customers, shareholders, staff, the communities in which
we operate, as well as the integrity of the financial system on which
we all rely. We operate in a highly regulated industry in which these
same policy goals are codified in law and regulation. We are
committed to complying with the law and regulation of all the markets
in which we operate in HSBC Bank plc and applying a consistently
high financial crime standard. In cases where material differences
exist between the law and regulation of these markets, our policy
adopts the highest standard while acknowledging the primacy of local
law.
We continue to assess the effectiveness of our end-to-end financial
crime risk management framework, and invest in enhancing our
operational control capabilities and technology solutions to deter and
detect criminal activity. We have simplified our framework and
consolidated previously separate financial crime policies into a single
global financial crime policy to drive consistency and provide a more
holistic assessment of financial crime risk. We further strengthened
our financial crime risk taxonomy and control libraries and our
monitoring capabilities through technology deployments. We
developed more targeted metrics, and continued to seek to enhance
our governance and reporting.
We are committed to working in partnership with the wider industry
and the public sector in managing financial crime risk, protecting the
integrity of the financial system and the communities we serve. We
participate in numerous public-private partnerships and information-
sharing initiatives around the Europe region, including holding
leadership positions in many. In 2023, our focus remained on
measures to improve information sharing, including typologies of
financial crime and highlighting key tools in the fight against it. Within
the European Police agency, Europol, we maintained a presence, and
lent our expertise to working groups, as well as advocacy teams
focused on how financial crime risk management frameworks can
deliver more effective outcomes in detecting and deterring criminal
activity, including tackling evolving criminal behaviour such as fraud.
We continued our engagement in the Joint Money Laundering
Intelligence Task Force in the UK, particularly on sanctions matters.
Safeguarding the financial system
We have continued our efforts to combat financial crime and reduce
its impact on our organisation, customers and the communities that
we serve. Financial crime includes fraud, bribery and corruption, tax
evasion, sanctions and export control violations, money laundering,
terrorist financing and proliferation financing.
We are committed to acting with integrity and have built a strong
financial crime risk management framework across all global
businesses and all countries and territories in which we operate. The

HSBC Bank plc Annual Report and Accounts 2023 | 81

financial crime risk framework, which is overseen by the HSBC Bank
plc Board, is supported by our financial crime policies that are
designed to enable adherence to applicable laws and regulations
globally.
Annual mandatory training is provided to all colleagues, with additional
targeted training tailored to certain individuals. We carry out regular
risk assessments, identifying where we need to respond to evolving
financial crime threats, as well as monitor and test our financial crime
risk management programme.
We continue to invest in new technology, including through the
deployment of a capability to monitor correspondent banking activity,
the enhancements to our fraud monitoring capability and our trade
screening controls, and the application of machine learning to improve
the accuracy and timeliness of our detection capabilities. Our adoption
of these new technologies is expected to continue to enhance our
ability to respond quickly to unusual activity and be more granular in
our risk assessments. This will help us to protect our customers,
shareholders, staff, the communities in which we operate and the
integrity of the financial system on which we all rely, while providing
actionable information to government authorities through our
reporting.
Anti-bribery and anti-corruption
Our global Financial Crime policy requires that all activity must be:
conducted without intent to bribe or corrupt; reasonable and
transparent; considered to not be lavish nor disproportionate to the
professional relationship; appropriately documented with business
rationale; and authorised at an appropriate level of seniority. There
were no concluded, nor live active, legal cases regarding bribery or
corruption brought against HSBC or its employees in 2023. The policy
requires that we identify and mitigate the risk of our customers and
third parties committing bribery or corruption. We utilise anti-money
laundering controls, including customer due diligence and transaction
monitoring, to identify and mitigate the risk that our customers are
involved in bribery or corruption. We perform a bribery risk
assessment on all third parties, and impose risk-based controls on the
third parties that expose us to bribery or corruption risk.
Model risk
Overview
Model risk is the risk of inappropriate or incorrect business decisions
arising from the use of models that have been inadequately designed,
implemented or used, or from models that do not perform in line with
expectations and predictions.
Model risk arises in both financial and non-financial contexts
whenever business decision making includes reliance on models.
Key developments in 2023
We are part of the HSBC's Global Model Risk Management
Programme to enhance model risk oversight and controls to satisfy
the regulatory requirements published by the PRA.
In addition, we enhanced our risk management in the following areas:
– In response to regulatory capital charges, we redeveloped,
validated and submitted to the PRA and ECB our models for the
internal ratings-based (‘IRB’) approach for credit risk, internal
model method (‘IMM’) for counterparty credit risk and internal
model approach (‘IMA’) for market risk. These new models have
been built to enhanced standards using improved data as a result
of investment in processes and systems. We have continued to
improve our risk governance decision making, to ensure senior
executives have appropriate oversight and visibility issues
impacting model performance and compliance to regulatory
requirements.
– We deployed new models impacted by changes to alternative rate
setting mechanisms due to the Ibor transition.
– We initiated the development and validation of models impacted
by the new Fundamental Review of Trading Book requirements.
– Our businesses and functions continue to be more involved in the
prioritisation, development, and management of models, and
hiring colleagues who have strong model risk skills. They also put
an enhanced focus on key model risk drivers such as data quality
and model methodology.
– We are proposing enhanced model risk appetite measures to
support our businesses and functions in managing model risk
more efficiently.
– We continued to support businesses in the programme of work
related to climate risk and models using advanced analytics and
machine learning, continue to be a critical areas of focus in coming
years. We also enhanced governance standards and strengthened
skills to increase the level of review and challenge provided.
– We continued the transformation of the Model Risk Management
team, with further enhancements to the independent model
validation processes, including new systems and working
practices. Key senior hires were made during the year to lead the
business areas and regions to strengthen oversight and expertise
within the function.
Governance and structure
The group's Model Risk Committee is chaired by our Chief Risk
Officer and provides oversight of model risk. The committee includes
senior leaders and risk owners across the lines of business and Risk
and focuses on model-related concerns and key model risk metrics.
Key risk management processes
We use a variety of modelling approaches, including regression,
simulation, sampling, machine learning and judgmental scorecards for
a range of business applications. These activities include customer
selection, product pricing, financial crime transaction monitoring,
creditworthiness evaluation and financial reporting. HSBC Bank plc
responsibility for managing model risk is delegated from the group's
RMM to the group's Model Risk Committee, which is chaired by the
group's Chief Risk Officer. This committee regularly reviews our
model risk management policies and procedures, and requires the
first line of defence to demonstrate comprehensive and effective
controls based on a library of model risk controls provided by Model
Risk Management.
Model Risk Management also reports on model risk to senior
management on a regular basis through the use of risk management
information, risk appetite metrics and top and emerging risks.
We regularly review the effectiveness of these processes, including
the model oversight committee structure, to help ensure appropriate
understanding and ownership of model risk is embedded in the
businesses and functions.
Insurance manufacturing operations
risk Overview
The key risks for our insurance manufacturing operations are market
risks, in particular interest rate and equity, credit risks and insurance
underwriting risks. These have a direct impact on the financial results
and capital positions of the insurance operations. Liquidity risk, whilst
significant in other parts of the bank, is less material for our insurance
operations.
HSBC’s insurance business
We sell insurance products through a range of channels including our
branches, insurance sales forces, direct channels and third-party
distributors. The majority of sales are through an integrated
bancassurance model that provides insurance products principally for
customers with whom we have a banking relationship, although the
proportion of sales though digital is increasing.
For the insurance products we manufacture, the majority of sales are
savings, universal life and protection contracts.
We choose to manufacture these insurance products in HSBC
subsidiaries based on an assessment of operational scale and risk
appetite. Manufacturing insurance allows us to retain the risks and
rewards associated with writing insurance contracts by keeping part
of the underwriting profit and investment income within the HSBC
Group.
Where we do not have the risk appetite or operational scale to be an
effective insurance manufacturer, we engage with a small number of
Risk review

82 | HSBC Bank plc Annual Report and Accounts 2023

leading external insurance companies in order to provide insurance
products to our customers. These arrangements are generally
structured with our exclusive strategic partners and earn the group a
combination of commissions, fees and a share of profits. We
distribute insurance products in all of our geographical regions.
Insurance products are sold through all global businesses, but
predominantly by WPB and CMB through our branches and direct
channels.
Insurance manufacturing operations risk
management
Key developments in 2023
The insurance manufacturing subsidiaries follow the HSBC Group’s
risk management framework. In addition, there are specific policies
and practices relating to the risk management of insurance contracts,
which have not changed materially over 2023. During the year, there
was continued market volatility observed across interest rates, equity
and credit markets and foreign exchange rates.
This was predominantly driven by geopolitical factors and wider
inflationary concerns. One key area of risk management focus during
2023 was the implementation of the new accounting standard, IFRS
17 ‘Insurance Contracts’ (which became effective on 1 January 2023).
Given the fundamental change the new accounting standard
represented in insurance accounting, this change presented additional
financial reporting and model risks for the HSBC Group which were
managed via the IFRS 17 implementation project.
Governance
(Audited)
Insurance manufacturing risks are managed to a defined risk appetite,
which is aligned to the bank’s risk appetite and risk management
framework, including the three lines of defence model. For details on
the governance framework, see page 22. The HSBC Group Insurance
Risk Management Meeting oversees the control framework globally
and is accountable to the WPB Risk Management Meeting on risk
matters relating to the insurance business.
The monitoring of the risks within the insurance operations is carried
out by Insurance Risk teams. The Bank’s risk stewardship functions
support the Insurance Risk teams in their respective areas of
expertise.
Stress and scenario testing
(Audited)
Stress testing forms a key part of the risk management framework for
the insurance business. We participate in local and HSBC Group-wide
regulatory stress tests, including, as may be required from time to
time, the Bank of England stress test of the banking system, HSBC's
Group Internal Stresses, and individual country insurance regulatory
stress tests. The results of these stress tests and the adequacy of
management action plans to mitigate these risks are considered in
the HSBC Bank plc ICAAP and the entities’ regulatory Own Risk and
Solvency Assessments ('ORSAs'), which are produced by all material
entities.
Management and mitigation of key risk types
Market risk
(Audited)
All our insurance manufacturing subsidiaries have market risk
mandates and limits that specify the investment instruments in which
they are permitted to invest and the maximum quantum of market
risk that they may retain. They manage market risk by using, among
others, some or all of the techniques listed below, depending on the
nature of the contracts written:
– We are able to adjust bonus rates to manage the liabilities to
policyholders for products with participating features. The effect is
that a significant portion of the market risk is borne by the
policyholder.
– We use asset and liability matching where asset portfolios are
structured to support projected liability cash flows. The Group
manages its assets using an approach that considers asset quality,
diversification, cash flow matching, liquidity, volatility and target
investment return. We use models to assess the effect of a range
of future scenarios on the values of financial assets and associated
liabilities, and ALCOs employ the outcomes in determining how
best to structure asset holdings to support liabilities.
– We use derivatives and other financial instruments to protect
against adverse market movements.
– We design new products to mitigate market risk, such as changing
the investment return sharing portion between policyholders and
the shareholder.
Credit risk
Our insurance manufacturing subsidiaries also have credit risk
mandates and limits within which they are permitted to operate,
which consider the credit risk exposure, quality and performance of
their investment portfolios. Our assessment of the creditworthiness
of issuers and counterparties is based primarily upon internationally
recognised credit ratings and other publicly available information.
Stress testing is performed on investment credit exposures using
credit spread sensitivities and default probabilities.
We use a number of tools to manage and monitor credit risk. These
include a credit report containing a watch-list of investments with
current credit concerns, primarily investments that may be at risk of
future impairment or where high concentrations to counterparties are
present in the investment portfolio. Sensitivities to credit spread risk
are assessed and monitored regularly.
Capital and liquidity risk
Capital risk for our insurance manufacturing subsidiaries is assessed
in the group’s ICAAP based on their financial capacity to support the
risks to which they are exposed. Capital adequacy is assessed on
both the group’s economic capital basis, and the relevant local
insurance regulatory basis.
Risk appetite buffers are set to ensure that the operations are able to
remain solvent, allowing for business-as-usual volatility and extreme
but plausible stress events.
Liquidity risk is less material for the insurance business. It is managed
by cash flow matching and maintaining sufficient cash resources,
investing in high credit-quality investments with deep and liquid
markets, monitoring investment concentrations and restricting them
where appropriate, and establishing committed contingency
borrowing facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity risk
reports and an annual review of the liquidity risks to which they are
exposed.
Insurance underwriting risk
Our insurance manufacturing subsidiaries primarily use the following
frameworks and processes to manage and mitigate insurance
underwriting risks:
– a formal approval process for launching new products or making
changes to products;
– a product pricing and profitability framework, which requires initial
and ongoing assessment of the adequacy of premiums charged on
new insurance contracts to meet the risks associated with them;
– a framework for customer underwriting;
– reinsurance, which cedes risks to third-party reinsurers to keep
risks within risk appetite, reduce volatility and improve capital
efficiency; and
– oversight of expense and reserve risks by entity Financial
Reporting Committees.

HSBC Bank plc Annual Report and Accounts 2023 | 83

Insurance manufacturing operations risk in 2023
Measurement
The following table shows the composition of assets and liabilities by contract type.

Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
| Life Direct Participating and investment DPF contracts 2 | Life other 3 | Other contracts 4 | Shareholder assets and liabilities | Total
| £m | £m | £m | £m | £m
Financial assets | 21,284 | 101 | 942 | 1,331 | 23,658
– trading assets |  |  |  |  |
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 13,101 | 78 | 935 | 776 | 14,890
– derivatives | 92 | — | — | 5 | 97
– financial investments – at amortised cost | 218 | — | — | 14 | 232
– financial investments at fair value through other comprehensive income | 6,947 | — | — | 452 | 7,399
– other financial assets 5 | 926 | 23 | 7 | 84 | 1,040
Insurance contract assets | — | 41 | — | — | 41
Reinsurance contract assets | — | 145 | — | — | 145
Other assets and investment properties | 748 | 75 | — | 82 | 905
Total assets at 31 Dec 2023 | 22,032 | 362 | 942 | 1,413 | 24,749
Liabilities under investment contracts designated at fair value | — | — | 1,002 | — | 1,002
Insurance contract liabilities | 20,289 | 306 | — | — | 20,595
Reinsurance contract liabilities | — | 33 | — | — | 33
Deferred tax | — | — | — | 2 | 2
Other liabilities | — | — | — | 1,966 | 1,966
Total liabilities at 31 Dec 2023 | 20,289 | 339 | 1,002 | 1,968 | 23,598
Total equity at 31 Dec 2023 | — | — | — | 1,151 | 1,151
Total liabilities and equity at 31 Dec 2023 | 20,289 | 339 | 1,002 | 3,119 | 24,749

Financial assets | 20,623 | 93 | 883 | 1,156 | 22,755
– trading assets | — | — | — | — | —
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 11,562 | 85 | 883 | 634 | 13,164
– derivatives | 232 | — | — | 11 | 243
– financial investments – at amortised cost | 298 | — | — | 20 | 318
– financial investments at fair value through other comprehensive income | 7,497 | — | — | 394 | 7,891
– other financial assets 5 | 1,034 | 8 | — | 97 | 1,139
Insurance contract assets | — | 43 | — | — | 43
Reinsurance contract assets | — | 121 | — | — | 121
Other assets and investment properties | 726 | 13 | — | 131 | 870
Total assets at 31 Dec 2022 1 | 21,349 | 270 | 883 | 1,287 | 23,789
Liabilities under investment contracts designated at fair value | — | — | 944 | — | 944
Insurance contract liabilities | 19,719 | 285 | — | — | 20,004
Reinsurance contract liabilities | — | 33 | — | — | 33
Deferred tax | — | — | — | — | —
Other liabilities | — | — | — | 1,837 | 1,837
Total liabilities at 31 Dec 2022 1 | 19,719 | 318 | 944 | 1,837 | 22,818
Total equity at 31 Dec 2022 1 | — | — | — | 971 | 971
Total liabilities and equity at 31 Dec 2022 1 | 19,719 | 318 | 944 | 2,808 | 23,789

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2‘Life direct participating and investment DPF’ contracts are substantially measured under the variable fee approach measurement model.
3‘Life other’ contracts are measured under the general measurement model and mainly includes protection insurance contracts as well as reinsurance
contracts. The reinsurance contracts primarily provide diversification benefits over the life direct participating and investment discretionary participation
feature (’DPF’) contracts.
4‘Other contracts’ includes investment contracts for which HSBC does not bear significant insurance risk.
5'Other financial assets' comprise mainly loans and advances to banks, cash and intercompany balances with other non-insurance legal entities.
Key risk types
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting the
bank’s capital or profit. Market factors include interest rates, equity
and growth assets, credit spreads and foreign exchange rates.
Our exposure varies depending on the type of contract issued. Our
most significant life insurance products are investment contracts with
discretionary participating features (‘DPF’) issued in France. These
products typically include some form of capital guarantee or
guaranteed return on the sums invested by the policyholders, to
which discretionary bonuses are added if allowed by the overall
performance of the funds. These funds are primarily invested in fixed
Risk review

84 | HSBC Bank plc Annual Report and Accounts 2023

interest assets with a proportion allocated to other asset classes, to
provide customers with the potential for enhanced returns.
DPF products expose the bank to the risk of variation in asset returns,
which will impact our participation in the investment performance. In
addition, in some scenarios the asset returns can become insufficient
to cover the policyholders’ financial guarantees, in which case the
shortfall has to be met by the bank. Amounts are held against the
cost of such guarantees, calculated by stochastic modelling in the
larger entities. The cost of such guarantees are generally not material
and form part of insurance fulfilment cash flows.
For unit-linked contracts, market risk is substantially borne by the
policyholder, but some market risk exposure typically remains as fees
earned are related to the market value of the linked assets.
Sensitivities
(Audited)
The following table provides the impacts on the contractual service
margin, profit after tax and equity of our insurance manufacturing
subsidiaries from reasonably possible effects of changes in selected
interest rate, equity price and growth assets scenarios for the year.
These sensitivities are prepared in accordance with current IFRS
Accounting Standards and are based on changing one assumption at a
time with other variables being held constant which in practice could
be correlated. All policies and underline investments are in respective
functional currencies, no material exposure to FX change.
Due in part to the impact of the cost of guarantees and hedging
strategies, which may be in place, the relationship between the
contractual service margin, profit after tax and total equity and the risk
factors is non-linear. Therefore, the results disclosed should not be
extrapolated to measure sensitivities to different levels of stress. For
the same reason, the impact of the stress is not necessarily
symmetrical on the upside and downside. The sensitivities are stated
before allowance for management actions, which may mitigate the
effect of changes in the market environment. The sensitivities
presented allow for adverse changes in policyholder behaviour that
may arise in response to changes in market rates.
The method used for deriving sensitivity information and significant
variables did not change from the previous period.

Sensitivity of the group's insurance manufacturing subsidiaries to market risk factors 3
| 2023 | 2022 1
| Effect on profit after tax | Effect on CSM | Effect on total equity | Effect on profit after tax | Effect on CSM | Effect on total equity
| £m | £m | £m | £m | £m | £m
+100 basis point parallel shift in yield curves | 1 | 5 | (25) | 4 | 29 | (22)
– Insurance & Reinsurance Contracts | 6 | 8 | 6 | 7 | 29 | 7
– Financial Instruments | (5) | (3) | (31) | (3) | — | (29)
–100 basis point parallel shift in yield curves | (8) | (59) | 18 | (13) | (109) | 13
– Insurance & Reinsurance Contracts | (13) | (62) | (13) | (16) | (109) | (16)
– Financial Instruments | 5 | 3 | 31 | 3 | — | 29
+100 basis point shift in credit spreads | (3) | (34) | (30) | (3) | (30) | (29)
– Insurance & Reinsurance Contracts | (2) | (34) | (2) | (2) | (30) | (2)
– Financial Instruments | (1) | — | (28) | (1) | — | (27)
–100 basis point shift in credit spreads | 4 | 36 | 31 | 4 | 57 | 30
– Insurance & Reinsurance Contracts | 3 | 36 | 3 | 3 | 57 | 3
– Financial Instruments | 1 | — | 28 | 1 | — | 27
10% increase in growth assets 2 | 32 | 65 | 32 | 26 | 78 | 26
– Insurance & Reinsurance Contracts | 6 | 65 | 6 | 4 | 78 | 4
– Financial Instruments | 26 | — | 26 | 22 | — | 22
10% decrease in growth assets 2 | (32) | (64) | (32) | (28) | (78) | (28)
– Insurance & Reinsurance Contracts | (6) | (64) | (6) | (5) | (78) | (5)
– Financial Instruments | (26) | — | (26) | (23) | — | (23)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2'Growth assets' primarily comprise equity securities and investment properties and variability in growth asset fair value constitutes a market risk to
group's insurance manufacturing subsidiaries.
3 Sensitivities presented for ‘Insurance & Reinsurance Contracts’ includes the impact of the sensitivity stress on underlying assets held to support
insurance and reinsurance contracts; sensitivities presented for ‘Financial Instruments’ includes the impact of the sensitivity stress on other financial
instruments, primarily shareholder assets.
Credit risk
(Audited)
Description and exposure
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet their obligation under a contract. It arises in two main
areas for our insurance manufacturers:
– risk associated with credit spread volatility and default by debt
security counterparties after investing premiums to generate a
return for policyholders and shareholders; and
– risk of default by reinsurance counterparties and non-
reimbursement for claims made after ceding insurance risk.
The amounts outstanding at the balance sheet date in respect of
these items are shown in the table on page 84.
The credit quality of the reinsurers’ share of liabilities under insurance
contracts is assessed as ‘satisfactory’ or higher as defined on page
31, with 100% of the exposure being neither past due nor impaired.
Credit risk on assets supporting unit-linked liabilities is predominantly
borne by the policyholder; therefore our exposure is primarily related
to liabilities under non-linked insurance and investment contracts and
shareholders’ funds.
The credit quality of these financial assets is included in the table on
page 54.
The risk associated with credit spread volatility is to a large extent
mitigated by holding debt securities to maturity, and sharing a degree
of credit spread experience with policyholders.

HSBC Bank plc Annual Report and Accounts 2023 | 85

Liquidity risk
(Audited)
Description and exposure
Liquidity risk is the risk that an insurance operation, though solvent,
either does not have sufficient financial resources available to meet
its obligations when they fall due, or can secure them only at
excessive cost. Liquidity risk may be able to be shared with
policyholders for products with participating features.
The remaining contractual maturity of investment contract liabilities is
included within ‘Financial liabilities designated at fair value’ in Note 23 .
The amounts of insurance contract liabilities that are payable on demand are set out by the product grouping below:

Amounts Payable on Demand
(Audited) |  |  |  |
| 2023 | 2022 1
| Amounts Payable on Demand | Carrying Amount for these Contracts | Amounts Payable on Demand | Carrying Amount for these Contracts
| £m | £m | £m | £m
Life direct participating and investment DPF contracts | 17,880 | 20,289 | 20,164 | 19,719
Life other contracts | — | 306 | 51 | 285
At 31 Dec | 17,880 | 20,595 | 20,215 | 20,004

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Insurance underwriting risk
Description and exposure
Insurance underwriting risk is the risk of loss through adverse
experience, in either timing or amount, of insurance underwriting
parameters (non-economic assumptions). These parameters include
mortality, morbidity, longevity, lapse and expense rates.
The principal risk we face is that, over time, the cost of the contract,
including claims and benefits, may exceed the total amount of
premiums and investment income received.
The table on page 84 analyses our insurance manufacturing
exposures by type of contract.
The insurance underwriting risk profile and related exposures remain
largely consistent with those observed at 31 December 2022.
Sensitivities
The table below shows the sensitivity of the CSM, profit and total
equity to reasonably foreseeable changes in non-economic
assumptions across all our insurance manufacturing subsidiaries.
These sensitivities are prepared in accordance with current IFRS
Accounting Standards, which have changed following the adoption of
IFRS 17 ‘Insurance Contracts’, effective from 1 January 2023. Further
information about the adoption of IFRS 17 is provided on page 186.
Mortality and morbidity risk is typically associated with life insurance
contracts. The effect on profit of an increase in mortality or morbidity
depends on the type of business being written.
Sensitivity to lapse rates depends on the type of contracts being
written. An increase in lapse rates typically has a negative effect on
CSM (and therefore expected future profits)due to the loss of future
income on the lapsed policies. However, some contract lapses have a
positive effect on profit due to the existence of policy surrender
charges. We are most sensitive to a change in lapse rates in France.
Expense rate risk is the exposure to a change in the allocated cost
of administering insurance contracts. To the extent that increased
expenses cannot be passed on to policyholders, an increase in
expense rates will have a negative effect on our profits. This risk is
generally greatest for smaller entities.
The impact of changing insurance underwriting risk factors is primarily
absorbed within the CSM, unless contracts are onerous in which case
the impact is directly to profits. The impact of changes to the CSM is
released to profits over the expected coverage periods of the related
insurance contracts.

Sensitivity of group's insurance manufacturing subsidiaries to insurance underwriting risk factors
(Audited)
| At 31 Dec 2023
| Effect on CSM (gross) 2 | Effect on profit after tax (gross) 2 | Effect on profit after tax (net) 3 | Effect on total equity (gross) 2 | Effect on total equity (net) 3
| £m | £m | £m | £m | £m
10% increase in mortality and/or morbidity rates | (61) | (11) | (5) | (11) | (5)
10% decrease in mortality and/or morbidity rates | 67 | 4 | 4 | 4 | 4
10% increase in lapse rates | (60) | (8) | (8) | (8) | (8)
10% decrease in lapse rates | 66 | 5 | 7 | 5 | 7
10% increase in expense rates | (28) | (4) | (3) | (4) | (3)
10% decrease in expense rates | 28 | 2 | 3 | 2 | 3
| At 31 Dec 2022 1
10% increase in mortality and/or morbidity rates | (67) | (5) | (4) | (5) | (4)
10% decrease in mortality and/or morbidity rates | 72 | 1 | 3 | 1 | 3
10% increase in lapse rates | (53) | (5) | (5) | (5) | (5)
10% decrease in lapse rates | 56 | 4 | 5 | 4 | 5
10% increase in expense rates | (26) | (2) | (2) | (2) | (2)
10% decrease in expense rates | 26 | 1 | 1 | 1 | 1

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2 The ‘gross’ sensitivities impacts are provided before considering the impacts of reinsurance contracts held as risk mitigation.
3 The ‘net’ sensitivities impacts are provided before considering the impacts of reinsurance contracts held as risk mitigation.
Risk review | Report of the Directors | Corporate Governance Report

86 | HSBC Bank plc Annual Report and Accounts 2023

Corporate Governance Report

Contents

87 | Directors
88 | Board Changes during 2023 and following the year-end
89 | Company Secretary
89 | Board of Directors
89 | Directors‘ emoluments
89 | Board committees
92 | Dividends
93 | Internal control
94 | Employees
95 | Disclosure of information to auditors
95 | Auditors
96 | Branches
96 | Articles of Association, Conflicts of interest and indemnification of Directors
96 | Research and Development
96 | Events after the Balance Sheet Date
97 | Statement on going concern
98 | Statement of directors' responsibilities in respect of the financial statements

The statement of corporate governance practices set out on pages 87
to 96, together with the information incorporated by reference,
constitutes the Corporate Governance Report of the bank. The
following disclosures, read together with those in the Strategic
Report, including the section 172 statement on pages 10 and 11 and
reporting on employee engagement on pages 8 to 11 describe how
the Board has discharged its responsibilities relating to section 172 of
the Companies Act 2006 (the 'Act'), as well as the requirements
under the Companies (Miscellaneous Reporting) Regulations 2018
(the 'Reporting Regulations').
Engagement with employees, suppliers, customers and other key
stakeholders:

Stakeholder | Page | Section
Customers | Page 10 | How we do business
| Pages 10 and 11 | Section 172 statement
Employees | Page 11 | How we do business
| Pages 10 and 11 | Section 172 statement
| Pages 94 to 95 | Corporate Governance statement
Shareholders and Investors | Page 11 | How we do business
| Pages 10 and 11 | Section 172
Communities | Page 11 | How we do business
| Pages 10 and 11 | Section 172 statement
Regulators and governments | Page 11 | How we do business
| Pages 10 and 11 | Section 172 statement
Suppliers | Page 11 | How we do business
| Pages 10 and 11 | Section 172 statement

The bank, together with the wider HSBC Group, is committed to high
standards of corporate governance. The HSBC Group has a
comprehensive range of principles, policies and procedures
influenced by the UK Corporate Governance Code with requirements
in respect of Board independence, composition and effectiveness to
ensure that the HSBC Group is well managed, with appropriate
oversight and control. During the year, the bank adhered to these
corporate governance principles, policies and procedures, as
applicable.
Board of Directors
As at 31 December 2023, the Board comprised 11 Directors including
the Chair, non-executive Directors, and two executive Directors, being
the Chief Executive Officer and the Chief Financial Officer. All
Directors are subject to election or re-election at each Annual General
Meeting ('AGM') of the bank. The Directors serving at 31 December
2023 are set out below.
Directors
Stephen O'Connor (62)
Chair of the Board
Chair of the Nomination, Remuneration & Governance Committee
Appointed to the Board: May 2018. Chair of the Board since August
2018.
Stephen is a non-executive Director and Vice Chair of HBCE and a
member of the HBCE Nomination Committee, Chair of Quantile
Group Limited and its subsidiary Quantile Technologies Limited, and a
Director of the London Stock Exchange plc. He is also a non-executive
Director of the Financial Markets Standards Board. He has more than
25 years’ investment banking experience in London and New York.
Former appointments include: Senior Independent Director, Chair of
the Risk Committee and member of both the Audit and Nomination
Committees of the London Stock Exchange Group; Chair of the
International Swaps and Derivatives Association; and Managing
Director and a member of the Fixed Income Management Committee
at Morgan Stanley.
Colin Bell (56)
Executive Director and Chief Executive Officer
Chair of the Executive Committee
Appointed to the Board and as Chief Executive Officer: February
2021.
Colin Bell joined HSBC in July 2016 and most recently held the role of
Group Chief Compliance Officer until February 2021.
Before joining HSBC, Colin worked at UBS, where he was Global
Head of Compliance and Operational Risk Control. He has more than
10 years of experience in managing risk and financial crime, following
16 years in the British Army.
During his time in the Army, he held a variety of command and staff
appointments, including operational tours of Iraq and Northern Ireland,
time in the Ministry of Defence, a NATO appointment and completion
of the Advanced Command and Staff Course. Colin is a Director of
HSBC Bank (Singapore) Limited and Quantexa Limited.
Kavita Mahtani (53)
Executive Director and Chief Financial Office r
Member of the Executive Committee
Appointed to the Board and as Chief Financial Officer: November
2023.
Kavita Mahtani is Chief Financial Officer for HSBC Bank plc and
Western Markets.
Kavita has 25 years of experience in financial services and a broad
strategic knowledge of banking. She joined HSBC from Citigroup,
where she most recently served as Head of Asset and Liability
Management for Citi Corporate Treasury. She has held a number of
significant strategic roles at Citigroup, including Chief Financial
Officer, Global Corporate & Investment Banking; Global Head of
Financial Planning and Analysis; and Director, Investor Relations.
Before joining Citigroup in 2006, she held key roles at Merrill Lynch
and Morgan Stanley.
Kavita is a non-executive Director of Plug Power Inc. and is active in a
number of charitable organisations in New York City.

HSBC Bank plc Annual Report and Accounts 2023 | 87

Patrick Clackson (59)
Independent non-executive Director
Member of the Audit Committee
Appointed to the Boar d: September 2022.
Former appointments include: Chief Financial Officer, Chief
Operations Officer and Chief Executive Officer at Barclays Capital
(now Barclays CIB). He also held several non-executive positions
whilst with Barclays, BarCap as Head of Business Transformation and
Structural Reform, as well as EMEA Chief Executive Officer, Chief
Operations Officer, Chief Financial Officer and Head of Risk. Between
1986-1996 he was employed in the audit and financial services
advisory teams of PwC, London.
Norma Dove-Edwin (58)
Independent non-executive Director
Member of the Transformation, Operational Resilience and
Technology Committee
Appointed to the Board: October 2021.
Norma is a non-executive Director of Pod Point Group Holdings plc
and a Director of Digital & Data Squared Ltd.
Former appointments include: Chief Digital and Information Officer at
Thames Water, Chief Information Officer of ESO at National Grid plc,
Group Chief Data and Information Officer at Places for People and a
number of positions at British American Tobacco plc including as
Head of Global Data Services.
Juliet Ellis (57)
Independent non-executive Director
Chair of the Transformation, Operational Resilience and Technology
Committee, member of the Risk Committee and the Nomination,
Remuneration & Governance Committee
Appointed to the Board: January 2021.
Former appointments include: Dual role as European Head of
Operations and Global Head of Shared Services and Banking
Operations and other senior management positions at Morgan
Stanley. Prior to 2007 she performed senior roles within Goldman
Sachs International.
Kathryn Gurney (55)
Non-executive Director
Appointed to the Board: March 2023.
Kathryn Gurney is Chief of Staff to the CEO of HSBC Group and has
been in this role since February 2020.
Kathryn is a lawyer with over 20 years’ experience working in the
legal and financial services industry. Having trained and practised as a
lawyer in the City of London, she has lived and worked in London,
Beijing, Hong Kong and Switzerland.
Lewis O’Donald (58)
Non-executive Director
Member of the Risk Committee and member of the Transformation,
Operational Resilience & Technology Committee
Appointed to the Board: February 2023.
Lewis is currently a Member of the GARP Board of Trustees and an
Advisor for the Citizens Advice Bureau. Further to this, in 2022, Lewis
established his own risk advisory business, Arboreal Risk Advisors
which he remains a co-founder of. Lewis is also a Trustee of the
Dorchester Sailing Club.
Former appointments include: Global Chief Risk Officer, a member of
the Executive Management Board at Nomura Holdings INC and
various directorships at Nomura subsidiaries.
Yukiko Omura (68)
Independent non-executive Director
Member of the Audit Committee
Appointed to the Board: May 2018.
Yukiko is the senior independent non-executive Director of The
Private Infrastructure Development Group Limited (‘PIDG’). She also
serves as a non-executive Director of Assured Guaranty Ltd, a
member of the Supervisory Board of Nishimoto HD Co. Ltd and a
member of the Advisory Board for The Critical Mineral Fund. She has
more than 40 years’ international professional experience in both the
public and private financial sectors, performing senior roles for JP
Morgan, Lehman Brothers, UBS and Dresdner Bank.
Yukiko is the Consumer Duty Champion for the Board and helps
support the Chair and Chief Executive Officer by encouraging regular
dialogue at the Board level on how the Bank is embedding Consumer
Duty and focusing on customer outcomes.
Former appointments include: Chair of GuarantCo Limited, a
subsidiary of PIDG; Under-Secretary General and COO/Vice President
of the International Fund for Agricultural Development; and Executive
Vice President and CEO of the Multilateral Investment Guarantee
Agency of the World Bank Group.
Dr Eric Strutz (59)
Independent non-executive Director
Chair of the Risk Committee, member of the Nomination,
Remuneration & Governance Committee and member of the Audit
Committee
Appointed to the Board: October 2016.
Eric is a director of HBCE, Chair of the HBCE Risk Committee and
member of the HBCE Audit Committee.
Other appointments include member of the Board and Chair of the
Finance and Audit Committee of Global Blue Group Holding AG, and a
member of the Advisory Board and Chair of the Audit and Risk
Committee of Luxembourg Investment Company 261 Sarl.
Former appointments include: Vice Chair and Lead Independent
Director of Partners Group Holding AG, where he also Chaired the
Risk and Audit Committee; Chief Financial Officer of Commerzbank
Group; Partner and Director of the Boston Consulting Group; and non-
executive Director of Mediobanca Banca di Credito Finanziario SpA.
Andrew Wright (63)
Independent non-executive Director
Chair of the Audit Committee and member of the Risk Committee
and Nomination, Remuneration & Governance Committee
Appointed to the Board: May 2018.
Former appointments include: Treasurer to the Prince of Wales and
the Duchess of Cornwall, a role he held from May 2012 until June
2019; Global Chief Financial Officer for the Investment Bank at UBS
AG; Chief Financial Officer, Europe and the Middle East at Lehman
Brothers; and Chief Financial Officer for the Private Client and Asset
Management Division at Deutsche Bank.
Board Changes during 2023 and
following the year-end
Lewis O’Donald joined the Board as an independent non-executive
Director and member of the Risk Committee with effect from
23 February 2023. He was appointed as a member of the
Transformation, Operational Resilience and Technology Committee
('TRT') with effect from 1 June 2023.
Kathryn Gurney was appointed to the Board as a non-executive
Director with effect from 1 March 2023.
Eric Strutz was appointed as a member of the Audit Committee with
effect from 1 June 2023 and stepped down as a member of the TRT
on 25 September 2023.
Report of the Directors | Corporate Governance Report

88 | HSBC Bank plc Annual Report and Accounts 2023

David Watts retired as a Director and Chief Financial Officer with
effect from 31 October 2023. Kavita Mahtani succeeded him as a
Director and Chief Financial Officer with effect from 1 November
2023.
Company Secretary
The responsibilities of the Company Secretary include ensuring good
governance practices at Board level and effective information flows
within the Board and its committees and between senior
management and the non-executive Directors.
Philip Miller was Company Secretary of the bank until 30 April 2023
and Olivier Oakley-White was appointed as Company Secretary from
1 May 2023.
Board of Directors
Key responsibilities
The Board, led by the Chair, is responsible amongst other matters for:
– promoting the long-term success of the bank and delivering
sustainable value to shareholders and other stakeholders;
– entrepreneurial leadership of the bank within a framework of
prudent and effective controls which enables risks to be assessed
and managed;
– setting the bank's strategy and risk appetite statement, including
monitoring the bank's risk profile and overseeing management’s
execution of the strategy;
– establishing and monitoring the effectiveness of procedures for
the maintenance of a sound system of control and risk
management and compliance with statutory and regulatory
obligations; and
– approving and monitoring capital and financial resource plans for
achieving strategic objectives, including material transactions.
The role of the non-executive Directors is to support the development
of proposals on strategy, hold management to account and ensure
the executive Directors are discharging their responsibilities properly
by promoting a culture that encourages constructive challenge. Non-
executive Directors also review the performance of management in
meeting agreed goals and objectives. The Chair regularly meets with
the non-executive Directors without executive Directors in attendance
after Board meetings, and otherwise, as necessary.
Operation of the Board
During 2023, the Board met on a quarterly basis. In addition, four
meetings were scheduled for strategy and ‘deep dive’ development
sessions. Three additional meetings were also held to help facilitate,
amongst other matters, the submissions of the Internal Liquidity
Adequacy Assessment Process and Internal Capital Adequacy
Assessment Process to the PRA, the approval of the acquisition of
HSBC Private Bank (Suisse), the approval of the Financial Resource
Plan and to review employee survey results and culture metrics. The
Board agenda is agreed with the Chair, working closely with the
Company Secretary, in advance of scheduled meetings. The agenda is
informed by forward-looking planning and additional emerging matters
that require Board oversight or approval.
The Chief Risk Officer, General Counsel, and Company Secretary are
regular attendees at Board meetings, and other senior executives
attend to contribute their subject matter expertise and insight, as
required.
Board activities during 2023
During 2023, the areas of focus for the Board included overseeing
implementation of the approved strategy and the continued execution
of the bank’s transformation programme across Europe. The Board
also considered performance against financial and other strategic
objectives, key business challenges, emerging risks, business
development and relationships with the bank’s key stakeholders.
'Deep dives' on key aspects of the bank's business covered a range
of areas, including individual business lines, ESG, sustainability,
technology, Artificial Intelligence, culture, regulatory developments
and the bank’s preparedness for the FCA’s new Consumer Duty.
Throughout the year, the Board received regular updates from
management on, amongst other things, the implementation of
regulatory programmes, technology, ESG, operations and resilience,
as well as people, culture and talent.
Directors’ emoluments
Details of the emoluments of the Directors for 2023, disclosed in
accordance with the Act, are shown in Note 5: ‘Employee
compensation and benefits’.
Non-executive Directors do not have service contracts and are
engaged through letters of appointment. There are no obligations in
the non-executive Directors’ letters of appointment that could give
rise to payments other than fees due or payments for loss of office.
Board committees
The Board delegates oversight of certain audit risk, remuneration,
nomination and governance matters to its committees. With the
exception of the Executive Committee which is chaired by the Chief
Executive Officer, each Board committee is chaired by a non-
executive Board member and has a remit to cover specific topics in
accordance with their respective terms of reference approved by the
Board. Only non-executive Directors are members of Board
committees. The Chair of each non-executive Board committee
reports to the Board on the activities of the committee since the
previous Board meeting.
Board and Committee effectiveness and
performance
The Board understands the importance of, and benefits that derive
from, regular reviews of the effectiveness of the Board and its
committees. An effectiveness review was facilitated by the bank’s
Company Secretary in 2023 which included a written questionnaire
for Board committees and a series of individual interviews with the
Directors for the Board review. Overall, the work of the Board and its
committees was rated highly, with feedback highlighting positive and
constructive engagement with executive management. Each review
covered a number of areas, including the Board’s composition and
skills, stakeholder engagement, the quality of management reporting
and presentation, Director and management engagement and debate,
and Board priorities for 2023-24. Outcomes and recommendations
were reported to the Board and an action plan was produced for each
committee and the Board. All actions arising were completed over
2023.
An annual review of the terms of reference for the Board and its
committees was facilitated by the Corporate Governance and
Secretariat function. This concluded that the Board and its
committees had complied with their respective terms of reference
during 2023. Executive Directors are also subject to performance
evaluation which helps to determine the level of variable pay they
receive each year.
At the date of this report, the following are the principal committees
of the Board:
Audit Committee
Key Responsibilities
The Audit Committee is accountable to the Board and has non-
executive responsibility for oversight of financial reporting related
matters, internal controls over financial reporting and implementation
of the group policies and procedures for capturing and responding to
whistleblower concerns.
The committee's key responsibilities include:
– monitoring and assessing the integrity of the financial statements,
formal announcements and supplementary regulatory information
in relation to the bank's financial performance;
– reviewing, as applicable, compliance with accounting standards,
listing rules, and other requirements in relation to financial
reporting;
– reviewing and monitoring the relationship with the external
auditor; and

HSBC Bank plc Annual Report and Accounts 2023 | 89

– overseeing the work of Internal Audit and monitoring and
assessing the effectiveness, performance, resourcing,
independence and standing of the function.
The committee has responsibility for the oversight of the bank’s
whistleblowing arrangements, and receives regular updates on
matters relating to the whistleblowing arrangements that are in place.
Committee activities during 2023
In addition to significant accounting judgements, key topics
considered by the committee during the year were regulatory
reporting matters as a key component of financial reporting and tax
risk, control enhancements, disposal groups, IFRS 17 implementation,
the development of climate-related disclosure, the bank’s financial
resources and capital, implementation of a new clawback policy to
comply with new U.S. Securities and Exchange Commission (‘SEC’)
rules on the recovery of erroneously awarded compensation, the
independence, fees and performance of the external auditor, PwC
UK, and updates on key issues identified by Internal Audit related to
the bank and its subsidiaries.
During the year, the committee oversaw the bank’s compliance with
the U.S. Sarbanes-Oxley Act of 2002 ('SOX') following its registration
with the SEC.
The committee also received updates from the Chairs of the audit
committees of key subsidiaries of the bank, updates from the external
auditor on the progress and findings of their audit, and biannual
updates on the tax position of the bank and its subsidiaries.
Regulatory reporting
Regulatory reporting has been a key priority for the committee over
recent years, and will continue to be a priority for 2024. The
committee is focused on monitoring the programme of work to
address the quality and reliability of regulatory reporting to meet
regulatory expectations.
The committee received regular updates on the Integrity of
Regulatory Reporting Programme, management’s strategy to
strengthen processes, improve consistency and enhance controls
across regulatory reports. The committee also received updates on
PRA Skilled Person Reviews, including a review of the sustainability
of the bank’s regulatory reporting control environment, which
commenced in 2023 for an initial period to 31 December 2025.
Management provided updates on the status of ongoing HSBC-
specific external reviews, and discussed the issues and themes
identified from the increased assurance work and focus on regulatory
reporting. The committee also discussed root cause themes,
remediation of known issues and new issues identified through the
increased assurance work and focus on regulatory reporting. The
committee challenged management on remediation plans, to ensure
there was a sustainable reduction in issues and that dependencies
with other key programmes were well understood.
Operation of the Committee
The committee held seven scheduled meetings during the year and
held separate meetings with each of the Chief Financial Officer, the
Chief Risk Officer, the Head of Internal Audit and representatives of
the external auditor without management present. Two additional
committee meetings were convened during the year to discuss the
accounting treatment of the planned sale of the French retail banking
operations (April 2023) and to approve the succession of the Head of
Internal Audit, Europe (June 2023).
The committee meets regularly with the bank’s senior financial and
Internal Audit management and the external auditors to consider,
among other matters, the bank’s financial reporting, the nature and
scope of audit reviews, the effectiveness of the systems of internal
control relating to financial reporting and the monitoring of the
Finance function transformation programme.
The Chief Financial Officer, Financial Controller, Chief Risk Officer,
Head of Internal Audit, and Company Secretary are standing
attendees and regularly attend committee meetings to contribute
their subject matter expertise and insight. Other members of senior
management routinely attended meetings of the committee. The
external auditor attended all scheduled meetings.
The committee continued to actively engage with the bank’s key
subsidiaries and key subsidiary audit committees, with regular
reporting throughout the year. During 2023, the Audit and Risk
Committee Chairs held two engagement sessions with their material
subsidiary counterparts covering key topics including ESG, regulatory
reporting and capital management.
The Chair of the committee regularly meets with the Chair of the
Group Audit Committee ('GAC') to help maintain connectivity with the
HSBC Group and develop deeper understanding on judgements
around key matters. Further, from time to time, the Chair is invited to
attend meetings of the GAC on relevant topics. The Chair joined the
GAC meeting held in April 2023 and the Chair of the GAC attended a
committee meeting held in November 2023.
The committee membership increased to four independent non-
executive Directors following the appointment of Eric Strutz with
effect from 1 June 2023. The current members are Andrew Wright
(Chair), Eric Strutz, Yukiko Omura, and Patrick Clackson.

Significant accounting judgements and related matters considered by the Audit Committee ('AC') for the year ended 31 December 2023 included:
Key area | Action taken
Interim and annual reporting | The AC considered key matters in relation to interim and annual reporting, including US filings 20-F and 6-K.
Disposals | The AC considered the financial and accounting impacts of the disposal of the retail banking operations in France and planned disposal of our business in Russia. In particular, the AC considered judgements related to the timing of recognition of assets as held-for-sale, the remeasurement of those assets and losses arising, and their impact in the year ended 31 December 2023.
Expected credit loss ('ECL') | The AC considered key judgements in relation to ECL, in particular multiple economic scenarios and post-model adjustments, with due consideration to risk and uncertainty.
Valuation of financial instruments | The AC considered key valuation metrics and judgements involved in the determination of the fair value of financial instruments.
Going concern | The AC considered a wide range of information relating to present and potential financial conditions, including projections for profitability, cash flow, liquidity and capital.
Impairment of investment in subsidiaries | The AC reviewed management's periodic assessment of impairment of investments in subsidiaries and paid particular attention to the sensitivities to cash flow projections and long- term growth rate and discount rate assumptions.
Appropriateness of provisioning for legal proceedings and regulatory matters | The AC received reports from management on the recognition and measurement of provisions and contingent liabilities for legal proceedings and regulatory matters, including investigations by regulators and competition and law-enforcement authorities.
Regulatory reporting | The AC reviewed management action to strengthen the control environment and operating model. The AC also received updates on ongoing independent external reviews of key aspects of regulatory reporting.

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90 | HSBC Bank plc Annual Report and Accounts 2023

Significant accounting judgements and related matters considered by the Audit Committee ('AC') for the year ended 31 December 2023 included: (continued)
Key area | Action taken
Controls | The AC considered the financial reporting control environment on an ongoing basis through the year, reviewing and challenging remediation actions undertaken and enhancements made. This included confirmation of mitigating controls where programmes of work had not fully completed by the year end. Areas of particular focus in 2023 have been embedding of the IFRS 17 reporting process, considering the control impact of restructuring activities, forward looking planning for Environmental, Social and Governance (“ESG”) reporting requirements, and Regulatory Reporting programmes of work.
Tax | The AC reviewed management’s judgements on the recognition and measurement of deferred tax assets and liabilities, in particular those arising from the sale of retail banking operations in France, and the accounting and disclosure of retrospective VAT assessments issued by HMRC.
Environmental, Social and Governance (‘ESG’) Reporting | The AC reviewed UK and international regulatory developments in ESG Reporting, and received updates on disclosures by bank subsidiaries in the European Union.
IFRS 17 implementation | The AC reviewed accounting policy judgements, controls and disclosures in relation to the retrospective implementation of IFRS 17 Insurance Contracts on 1 January 2023.

Risk Committee
Key Responsibilities
The Risk Committee is accountable to the Board and has overall non-
executive responsibility for oversight of risk-related matters and the
risks impacting the bank.
The committee's key responsibilities include:
– advising the Board on risk appetite and risk tolerance related
matters;
– reviewing and recommending key regulatory submissions to the
Board;
– overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks (including resilience risk,
incorporating information technology, cyber security and third-party
risk) and reviewing the effectiveness of the bank's conduct
framework;
– reviewing, challenging, and satisfying itself that the bank's stress
testing framework, governance and internal controls are robust;
and
– reviewing the effectiveness of the bank's risk management
framework and internal control systems (other than internal
financial controls overseen by the Audit Committee).
Committee activities during 2023
Key matters considered by the committee during the year included
the bank’s approach to the financial and non-financial risks in the
context of capital and liquidity, retail, wholesale credit and market
risks including, financial crime and fraud, geopolitical, operational,
people and climate-related risks.
The committee also reviewed and challenged management on key
regulatory processes, including the bank’s internal capital adequacy
assessment process ('ICAAP') and the internal liquidity adequacy
assessment process ('ILAAP'), recovery and resolution plans, the
outcome of stress tests undertaken during the year, HSBC Bank plc's
2023 Resolvability Assessment Framework; and the bank’s capital
liquidity and funding plans.
Deep dives were undertaken throughout the year on key aspects of
the bank covering areas such as ESG, global greenwashing and stress
loss measurement and management. The Risk Committee also
reviewed the impacts of HSBC Innovation Banking, Europe to the
group's risk profile.
The committee was provided with quarterly updates from the TRT
during the year to ensure appropriate alignment in the review and
discussion on areas such as operational resilience and technology
risk-related matters. Two non-executive directors are members of
both the TRT and the Risk Committee, which ensures further
alignment between the two committees.
Operation of the Committee
The committee held eight scheduled meetings during the year and
two workshops allowing the Committee to deep dive into specific
areas of the bank. The Chief Risk Officer, Chief Financial Officer and
Head of Internal Audit are standing attendees and regularly attend
committee meetings to contribute their subject matter expertise and
insight. The Chair and members of the committee also hold private
meetings with the Chief Risk Officer, and Head of Internal Audit
following scheduled meetings.
The committee reviews and challenges current and forward-looking
risk issues, and the regional senior business leaders are regularly
invited to participate at committee meetings, working together with
functional and regional leaders across all three lines of defence.
The Chair and members of the committee meet regularly with the
bank’s senior financial, risk, internal audit and compliance
management and the external auditors to consider and discuss,
among other matters, specific risk matters and priorities, risk reports
and internal audit reports and the effectiveness of compliance
activities. The Chair meets regularly with the committee secretary to
ensure the committee meets its governance responsibilities.
During 2023 the committee continued to actively engage with the
bank’s key subsidiaries and key subsidiary risk committees, with
regular reporting from the respective Chairs throughout the year. The
Chair of the committee attended several HSBC Group-led meetings to
help promote connectivity, escalation, and cascade of important
topics.
The committee comprises four independent non-executive Directors.
The current members are Eric Strutz (Chair), Juliet Ellis, Andrew
Wright, and Lewis O’Donald.
Transformation, Operational Resilience and
Technology Committee
Key Responsibilities
The Transformation, Operational Resilience and Technology
Committee was established to assist the Board and Risk Committee
with their respective responsibilities in relation to the Bank's
transformation strategy, operational resilience, as well as the
governance and oversight of Information Technology ('IT'). The
committee submits to the Board and Risk Committee a quarterly
report, which provides an overview of matters discussed at each
meeting. Furthermore, the committee escalates any matters that it
deems necessary, including those relating to cyber, to the Board and/
or Risk Committee, taking into account their respective
responsibilities. During the year, on recommendation of the Board,
the Group Nomination & Corporate Governance Committee approved
the continuation of the committee until 1Q24 to continue necessary
engagement allowing a more detailed oversight of matters within its
remit.

HSBC Bank plc Annual Report and Accounts 2023 | 91

The committee's key responsibilities include:
– reviewing progress of the Europe transformation strategy and the
steps management have taken to manage risk, and to monitor
progress against set objectives;
– reviewing the effectiveness of governance frameworks to set and
oversee the internal control environment in relation to IT;
– reviewing global and regional technology strategies to ensure
alignment and to ensure that both support the adopted business
strategies of the bank; and
– overseeing and challenging management on execution of
operational resilience objectives and deliverables.
Committee activities during 2023
Key matters considered by the committee during the year included
review and oversight of Europe IT and Cloud strategies and
governance, the bank’s operating systems, operational resilience,
technology infrastructure, including operational resilience of critical IT
and other business services, and major IT change programmes. The
committee received a quarterly independent Operational and
Resilience Risk opinion on the management of resilience risk and the
internal control environment for the bank, including but not limited to
IT, cyber security and change execution risk. The committee also
reviewed and challenged management on the progress, associated
risks and governance with respect to the transformation strategy, key
change programmes, and initiatives including those related to
outsourced technology services and meeting regulatory requirements
and expectations.
Operation of the Committee
The committee held five scheduled meetings during 2023.
The Board Chair, Chief Operating Officer, Chief Information Officer,
Head of Internal Audit, Regional Head of Operational and Resilience
Risk, Europe and Head of Strategy and Planning Chief of Staff (Europe
CEO) are standing attendees and regularly attend Committee
meetings to contribute their subject matter expertise and insight.
The current members are Juliet Ellis (Chair), Norma Dove-Edwin, and
Lewis O’Donald.
Nomination, Remuneration & Governance
Committee
Key Responsibilities
The Nomination, Remuneration & Governance Committee has
responsibility for:
– leading the process for Board appointments and for identifying and
nominating, for the approval of the Board, candidates for
appointment to the Board and its committees;
– the endorsement of the appointment of individuals to certain
Board and management positions of the bank's subsidiaries,
including proposed fees payable to non-executive Directors on
subsidiary boards;
– overseeing the implementation and operation of the HSBC
Group’s directors’ remuneration policy and the remuneration of the
bank’s senior executives, including the identification of the
Material Risk Taker population for the purposes of the PRA’s
Capital Requirements Directive V (‘CRD V’);
– reviewing the corporate governance framework on behalf of the
Board, considering its appropriateness to the size, complexity and
strategy of the bank; and
– overseeing compliance with the HSBC Group Subsidiary
Accountability Framework ('SAF').
Further information in relation to HSBC’s approach to remuneration
for HSBC Group employees is available in the Director’s remuneration
report on pages 279 to 283 of HSBC’s Annual Report and Accounts
2023 available on https://www.hsbc.com/investors/results-and-
announcements/annual-report.
Committee activities during 2023
During the year the committee continued to review the Board’s
composition, succession planning, skills, experience and diversity in
keeping with best practice and applicable policies, including the SAF.
A Board skills matrix was utilised to support this review. The
appointment of Lewis O’Donald to the Board in early 2023 as an
independent non-executive Director and member of the Risk
Committee and the Transformation, Resilience and Technology
Committee alongside the appointment of Kathryn Gurney as an
employee non-executive of the Board has strengthened the skills and
experience of the Board. In view of these enhancements, the
committee was satisfied with the composition of the Board and its
committees and associated succession planning taking into account
current Directors’ experience, diversity and skills.
Further information in relation to Board and committee changes
throughout the year can be found on p age 88.
In overseeing compliance with the SAF, the committee reviewed the
Board composition and succession planning for all the bank's material
subsidiaries as well as reviewing their overall compliance with the
principles and provisions of the SAF.
Other activities during the year included the review of key
remuneration matters for the bank and its subsidiaries in the context
of the HSBC Group's remuneration framework, including variable and
fixed pay allocations and the alignment of remuneration with the
bank's risk appetite, business strategy, culture and values, and long-
term interests.
The committee reviewed the annual pay review outcomes across the
region and received regular updates on relevant subsidiary and
regulatory matters.
Operation of the Committee
The committee held six meetings during 2023.
The Head of HR and Head of Performance & Reward attend
committee meetings on a regular basis to contribute their subject
matter expertise and insight. Other senior executives attend
periodically for specific items considered by the committee.
The committee comprises four non-executive Directors. The current
members are: Stephen O'Connor (Chair), Juliet Ellis, Eric Strutz, and
Andrew Wright.
Executive Committee
The Executive Committee is a committee of the Board and has overall
executive responsibility, under formal delegation, for the management
and day-to-day running of the bank. The committee is accountable to
the Board for overseeing the execution of the bank’s strategy.
The purpose of the committee is to support the Chief Executive
Officer of the bank in the performance of their duties and exercise of
their powers, authorities and discretions in relation to the
management of the bank and its subsidiaries. The committee meets
on a regular basis and is chaired by the Chief Executive Officer.
During 2023, in addition to its day-to-day oversight of the bank's
operations, the committee remained focused on the Bank’s strategic
transformation and corporate restructuring across Europe, including
the acquisition of HBBM and the transfer of the Guernsey Private
Banking business to a new branch of PBRS in Guernsey.
The committee is responsible for oversight of the performance across
the bank's lines of business, review of the bank’s financial
performance, cost management, and preparing and overseeing the
implementation of the bank’s forward looking Financial Resource
Plan. In addition, the committee receives updates on people matters
such as D&I, Snapshot survey results, talent, succession planning and
retention. During the year, updates were also received on ESG and
sustainability matters.
Dividends
Information about dividends paid during the year is provided on page
17 of the Strategic Report and in Note 8 to the financial statements.
Report of the Directors | Corporate Governance Report

92 | HSBC Bank plc Annual Report and Accounts 2023

Internal control
The Board is responsible for the establishment and operation of
effective procedures for the maintenance of a sound system of
internal control and risk management, adequate accounting, and
compliance with statutory and regulatory obligations. The Board
determine the aggregate level and types of risks the bank is willing to
take in achieving its strategic objectives.
To meet this requirement and to discharge its obligations under the
FCA Handbook and the PRA Handbook, procedures have been
designed for safeguarding assets against unauthorised use or
disposal, for maintaining proper accounting records, and for ensuring
the reliability and usefulness of financial information used within the
business or for publication.
These procedures provide reasonable assurance against material
misstatement, errors, losses or fraud. They are designed to provide
effective internal control within the group and accord with the
Financial Reporting Council's guidance for Directors issued in 2014
(and subsequent relevant publications), internal control and related
financial and business reporting. The procedures have been in place
throughout the year and up to 21 February 2024, the date of
publication of this Annual Report and Accounts 2023.
The key risk management and internal control procedures include the
following:
– Global principles: The HSBC Group's Global Principles set an
overarching standard for all other policies and procedures and are
fundamental to the HSBC Group’s risk management structure.
They inform and connect our purpose, values, strategy and risk
management principles, guiding us to do the right thing and treat
our customers and our colleagues fairly at all times.
– Risk management framework ('RMF'): The RMF supports our
Global Principles. It outlines the key principles and practices that
we employ in managing material risks. It applies to all categories
of risk and supports a consistent approach in identifying,
assessing, managing and reporting the risks we accept and incur
in our activities.
– Delegation of authority within limits set by the Board: Subject
to certain matters reserved for the Board, the Chief Executive
Officer has been delegated authority limits and powers within
which to manage the day-to-day affairs of the bank, including the
right to sub-delegate those limits and powers. Each relevant
executive has authority within which to manage the day-to-day
affairs of the business or function for which he or she is
accountable. Those individuals are required to maintain a clear and
appropriate apportionment of significant responsibilities and to
oversee the establishment and maintenance of systems of control
that are appropriate to their business or function.
– A new delegation of authorities framework was implemented by
the HSBC Group in April 2023 with the aim of providing a simpler
HSBC Group structure for the management of delegated powers.
These delegated authorities can be used for the approval, signing
and execution of specific written agreements and documents such
as procurement contracts.
– Authorities to enter into credit and market risk exposures are
delegated with limits to line management of g roup companies.
However, credit proposals with specified higher-risk characteristics
require the concurrence of the appropriate global function. Credit
and market risks are measured and reported at subsidiary
company level and aggregated for risk concentration analysis on a
group-wide basis.
– Risk identification and monitoring: Systems and procedures are
in place to identify, assess, control and monitor the material risk
types facing the group as set out in the RMF. The group‘s risk
measurement and reporting systems are designed to help ensure
that material risks are captured with all the attributes necessary to
support well-founded decisions, that those attributes are
accurately assessed and that information is delivered in a timely
manner for those risks to be successfully managed and mitigated.
– Changes in market conditions/practices: Processes are in place
to identify new risks arising from changes in market conditions/
practices or customer behaviours, which could expose the group
to heightened risk of loss or reputational damage. The group
employs a top and emerging risks framework, which contains an
aggregate of all current and forward-looking risks and enables it to
take action that either prevents them materialising or limits their
impact.
– We remain committed to investing in the reliability and resilience
of our IT systems and critical services, including those provided by
third parties, that support all parts of our business. We do so to
help protect our customers, affiliates and counterparties, and to
help ensure that we minimise any disruption to services that could
result in reputational and regulatory consequences. In our
approach to defend against these threats, we invest in business
and technical controls to help us detect, manage and recover from
issues, including data loss, in a timely manner.
– We continue our focus on the quality and timeliness of the data
used to inform management decisions, through measures such as
early warning indicators, prudent active risk management of our
risk appetite, and ensuring regular communication with our Board
and other key stakeholders.
– Responsibility for risk management: All employees are
responsible for identifying and managing risk within the scope of
their role as part of the three lines of defence model. This is an
activity-based model to delineate management accountabilities
and responsibilities for risk management and the control
environment. For more details on the three lines of defence please
refer to page 22.
– The Board has delegated to the Audit Committee oversight for the
implementation of the group’s policies and procedures for
capturing and responding to whistleblower concerns, ensuring
confidentiality, protection and fair treatment of whistleblowers,
and receiving reports arising from the operation of those policies
as well as ensuring arrangements are in place for independent
investigation.
– Strategic plans: Strategic plans are prepared for global
businesses, global functions and geographical regions within the
framework of the HSBC Group’s overall strategy. The bank also
prepares and adopts a Financial Resource Plan, which is informed
by detailed analysis of risk appetite, describing the types and
quantum of risk that the bank is prepared to take in executing its
strategy and sets out the key business initiatives and the likely
financial effects of those initiatives.
– The effectiveness of the group’s system of risk management and
internal control is reviewed regularly by the Board, the Risk
Committee and the Audit Committee.
– During 2023, the group continued to focus on operational
resilience and invest in the non-financial risk infrastructure. There
was a particular focus on material and emerging risks with
progress made enhancing the end-to-end risk and control
assessment process. The Risk Committee, supported by the TRT,
and the Audit Committee ensured that executive management
continued to take efforts to effect the necessary actions to
remedy any failings or weaknesses identified through the
operation of the group's framework of controls.
Internal control over financial reporting
The bank is required to comply with section 404 of the US Sarbanes-
Oxley Act of 2002 and assess its effectiveness of internal control over
financial reporting at 31 December 2023, adopting the principles of
the Committee of Sponsoring Organizations of the Treadway
Commission (’COSO’) 2013 framework for the monitoring of risk
management and internal control systems to satisfy the requirements
of section 404 of the Sarbanes-Oxley Act.
The primary mechanism through which comfort over risk
management and internal control systems is achieved is through
annual assessments of the effectiveness of controls to manage risk,

HSBC Bank plc Annual Report and Accounts 2023 | 93

and the reporting of issues on a regular basis through the various risk
management and risk governance forums.
The key risk management and internal control procedures over
financial reporting include the following:
– Entity level controls ('ELC'): ELCs are a defined suite of internal
controls that have a pervasive influence over the entity as a whole
and meet the principles of the COSO framework. They include
controls related to the control environment, such as the bank's
values and ethics, the promotion of effective risk management and
the overarching governance exercised by the Board and its non-
executive committees. The design and operational effectiveness
of ELCs are assessed on an ongoing basis. If issues are significant
to the group, they are notified to the Risk Committee, and also to
the Audit Committee if concerning financial reporting matters.
– Process level transactional controls: Key process level controls
that mitigate risk of financial misstatement are identified, recorded
and monitored in accordance with the risk framework. This
includes the identification and assessment of relevant control
issues against which action plans are tracked through to
remediation. Further details on the group’s approach to risk
management can be found on page 22. The Audit Committee has
continued to receive regular updates on HSBC’s ongoing activities
for improving the effective oversight of end-to-end business
processes and management continues to identify opportunities for
enhancing key controls, such as through the use of automation
technologies.
– Financial reporting controls: The group’s financial reporting
process is controlled using documented accounting policies and
reporting formats, supported by detailed instructions and guidance
on reporting requirements, issued to all reporting entities within
the group in advance of each reporting period end. The submission
of financial information from each reporting entity is supported by
a certification by the responsible financial officer and analytical
review procedures at subsidiary and group levels.
– External Reporting Forum: The External Reporting Forum
reviews financial reporting disclosures to be made by the bank for
accuracy and completeness. The integrity of disclosures is
underpinned by structures and processes within the group's
Finance and Risk functions that support rigorous analytical review
of financial reporting and the maintenance of proper accounting
records.
– Disclosure Committee: Chaired by the Chief Financial Officer, the
committee supports the discharge of the bank’s obligations under
relevant legislation and regulation including the European Union’s
Market Abuse Regulation ('EU MAR'), as amended by the Market
Abuse (Amendment) (EU Exit) Regulations 2019, the United
Kingdom’s Listing Rules, Prospectus Rules and the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority, the New York Stock Exchange’s Listed Company
Manual, U.S. Securities laws and the rules and regulations of the
SEC, and also any other listing and disclosure rules of the markets
and exchanges on which the bank’s financial instruments are
listed, including any other requirements that shall apply from time
to time. In so doing, the Disclosure Committee is empowered to
determine whether a new event or circumstance should be
disclosed, including the form and timing of such disclosure, and
review certain material disclosures made or to be made by the
group. The membership of the Disclosure Committee consists of
senior management, including the Chief Financial Officer, Chief
Risk Officer, General Counsel, Company Secretary and Head of
Debt / Fixed Income Investor Relations. The integrity of
disclosures is underpinned by structures and processes within the
Finance, Risk and Compliance functions that support rigorous
analytical review of financial reporting and the maintenance of
proper accounting records. As required by the Sarbanes-Oxley Act,
the Chief Executive and the Chief Financial Officer have certified
that the Group’s disclosure controls and procedures were effective
as at the end of the period covered by the Annual Report and
Accounts 2023. The annual review of the effectiveness of the
group’s system of risk management and internal control over
financial reporting was conducted with reference to the COSO
2013 framework. Based on the assessment performed, the
Directors concluded that for the year ended 31 December 2023,
the Group’s internal control over financial reporting was effective.
– Subsidiary certifications: Certifications are provided to the Audit
Committee and the Risk Committee (full and half yearly) and to the
Nomination, Remuneration and Governance Committee (annually)
from the audit, risk and remuneration committees of key material
subsidiary companies confirming amongst other things that:
– Audit – the financial statements of the subsidiary have been
prepared in accordance with group policies, present fairly the
state of affairs of the subsidiary and are prepared on a going
concern basis;
– Risk – the risk committee of the subsidiary has carried out its
oversight activities consistent with and in alignment to the
RMF; and
– Remuneration – the remuneration committee of the subsidiary
has discharged its obligations in overseeing the implementation
and operation of HSBC’s Group Remuneration Policy.
Employees
Health and safety
We are committed to providing a safe and healthy working
environment for everyone. We have adopted global policies,
mandatory procedures, and incident and information reporting
systems across the organisation that reflect our core values and are
aligned to international standards. Our global health and safety
performance is subject to ongoing monitoring and assurance to
ensure we are compliant with relevant laws and regulations.
Our Chief Operating Officers have overall responsibility for
engendering a positive health and safety culture and ensuring that
global policies, procedures and systems are put into practice locally.
They also have responsibility for ensuring all local legal requirements
are met.
We delivered a range of programmes in 2023 to help us understand
and manage our health and safety risks:
– We reinforced our advice and risk assessment and control
methodology on working from home for employees adopting a
hybrid work style, providing more awareness and best practices on
good ergonomics and well-being.
– We delivered health and safety training and awareness our
employees and contractors, ensuring roles and responsibilities
were clear and understood.
– We completed the annual safety inspection on all of our buildings
globally, to ensure we were meeting our standards and
continuously improving our safety performance.
– We maintained measures in our workplaces globally to minimise
the risks from the spread of respiratory disease, including
provision of hand sanitiser, improved ventilation, and guidance on
good hygiene practices.
– We continued to focus on enhancing the safety culture in our
supply chain through our SAFER Together programme, covering
the five key elements of best practice safety culture, including
speaking up about safety, and recognising excellence.
– We delivered Safety Passport training to more than 100
construction workers carrying out works at HSBC premises to
reduce the likelihood of accidents occurring by helping them
understand and deliver industry leading health and safety
performance.
– In 2023, our Eat Well Live Well programme continued to promote
healthier and more sustainable diets among our colleagues and
contributed to 30% of global food sales from HSBC catering
outlets. We also extended the reach of our programme through
the launch of increased plant-based offers, monthly events
dedicated to Eat Well Live Well, healthy vending machine options
and virtual teaching kitchens accessible to all our employees.
– Protection of our colleagues and operations is of critical
importance and we have effective controls in place to protect our
people from natural disasters (such as storms and earthquakes). In
2023, there was no major impact to our buildings from storms.
Report of the Directors | Corporate Governance Report

94 | HSBC Bank plc Annual Report and Accounts 2023

Employee health and safety
| 2023 | 2022 | 2021
Number of employee workplace fatalities | — | — | —
Number of major injuries to employees 1 | 3 | — | —
Number of employee All Other Accidents | 19 | 21 | 4
All injury rate per 100,000 employees | 51 | 49 | 35

1 Fractures, dislocation, concussion, loss of consciousness overnight
admission to hospital.
Diversity and Inclusion
Our purpose, 'Opening up a world of opportunity', explains why we
exist as an organisation and is the foundation of our diversity and
inclusion strategy. Promoting diversity and fostering inclusion
contributes to our 'Energise' priority. By valuing differences, we can
use our colleagues' unique expertise, capabilities, breadth, and
perspectives to benefit our customers. To achieve progress, we are
focused on specific region-wide priorities for which we hold senior
executives accountable. We are pleased to report on key progress
made in 2023:
Achievements
– We continue to hold our Diversity and Inclusion Council, chaired by
the Chief Executive Officer and consisting of the European
Executive Committee, to reinforce our commitments, define high-
impact actions, engage more closely with our Employee
Resources Groups and track progress and accountability.
– Throughout 2023, we arranged multiple events and conferences to
support our colleagues across our European countries, including a
week of Inclusion events in May hosted by Inclusive Europe
Employee Resource Group ('ERG'). Other key events included our
event on Neurodiversity, "Creating a Brain-Friendly Workplace", and
"The Power of Resilience" during Europe Disability Week.
– We have continued supporting colleagues through our ERGs
focused on disability, gender, LGBTQ+, ethnicity, and parents.
e.g., Atypik in France, Pride in Luxembourg, and Balance in Ireland.
– We focused on developing our middle management female
colleagues through a new digital coaching programme and our
"Taste of the Top" initiative, which gives high-performing female
colleagues a chance to cover senior leadership roles.
– We have a Black heritage action plan to support our ethnicity
goals, including a Black Heritage Sponsorship Programme in Global
Banking and Markets.
– 63.3% of employees in the UK, Bermuda, Channels Islands and
Isle of Man and South Africa have declared their ethnicity in our
'HR Direct' system, as of 31 December 2023.
Gender diversity statistics
Our overall female representation is improving, and we are committed
to building a strong pipeline of female talent to improve gender
balance in senior leadership across Europe.
F emale representation by management level:
– All grades – 52.5%
– GCB 6-8 Clerical grades – 65.8%
– GCB 4-5 Management – 45.2%
– GCB 0-3 Senior management – 25.3%
Employment of people with a disability
We strongly believe in providing equal opportunities for all employees.
The employment of people with a disability is included in this
commitment. The recruitment, training, development, and promotion
of people with a disability are based on the aptitudes and abilities of
the individual. Should employees become disabled during their
employment with us, efforts are made to continue their employment.
Where necessary, we will provide appropriate training, facilities, and
reasonable equipment. For example, for people with a visual
impairment in France, we offer access to dedicated software for voice
reading.
Our ERG's, supported by HR and business leadership, are doing an
important job of breaking down barriers. They offer a space for
discussion between those with a disability and their allies for
exchanges of inclusive best practices.
Continuous work ensures individualised support is provided to make
home office adjustments.
Learning and talent development
We aim to build a dynamic environment where our colleagues can
develop skills and undertake experiences that help them fulfil their
potential. Our approach allows us to meet our strategic priorities and
support our colleagues' career goals.
We expect all colleagues to complete global mandatory training each
year regardless of their contract type. This training plays a critical role
in shaping our culture, ensuring a focus on the issues fundamental to
our work – such as sustainability, financial crime risk, and intolerance
of bullying and harassment. New joiners attend our Global Discovery
programme to build their knowledge of the organisation and engage
them with our purpose, values, and strategy.
HSBC University remains our home for skills development with
access to face-to-face training and an extensive digital content
catalogue from partners such as LinkedIn Learning, Harvard Business
Review podcast and Microsoft Learn. Powered by Degreed, our
HSBC University platform provides tailored content aligned to
employees' chosen skills and development areas. Our Leadership
development partners include Imperial College and London Business
Schools, with whom we work on topics of strategic importance. For
example, in 2023, we launched the Managing Director Programmes,
which offer experiential learning with small working groups
addressing live challenges across the business. Executive
Masterclasses provide a deep dive into topics, issues and skills that
will shape HSBC's future.
My HSBC Career Portal, which offers career development information
and resources to help colleagues manage the various stages of their
careers, from joining to career progression, is also available to all our
employees. However, we also recognise that most development
happens while our colleagues work through regular coaching,
feedback, and performance management, and we will extend the use
of the HSBC Talent Marketplace platform in Europe in 2024 (the
platform is already live in the UK, Malta, and Poland). This will connect
our employees to 'on-the-job' development opportunities across the
HSBC Group by matching individuals' existing skills and career
aspirations to live projects within the HSBC Group. HSBC Europe will
also be able to call upon talent across the HSBC Group to supplement
its personnel in developing local initiatives and projects.
Employee relations
We consult and, where appropriate, negotiate with employee
representative bodies where we have them. We also aim to maintain
well-developed communications and consultation programmes with
all employee representative bodies, and there have been no material
disruptions to our operations from labour disputes during the past five
years.
Disclosure of information to auditors
The directors are not aware that there is any relevant audit
information (as defined in the Companies Act 2006) of which the
bank’s auditors are unaware and processes are in place to ensure that
the bank’s auditors are aware of any relevant audit information.
Auditors
PricewaterhouseCoopers LLP (‘PwC’) are the external auditors to the
bank. PwC has expressed its willingness to continue in office and the
Board recommends that PwC be re-appointed as the bank’s auditors.
A resolution proposing the re-appointment of PwC as the bank’s
auditors, and giving authority to the Audit Committee to determine its
remuneration, will be submitted to the forthcoming AGM.

HSBC Bank plc Annual Report and Accounts 2023 | 95

Branches
HSBC Bank plc provides a wide range of banking and financial
services through 20 markets. HSBC Bank plc is simplifying its
operating model to one integrated business supporting a wholesale
banking hub for the EU in Paris and a wholesale banking hub for
we stern markets in London. Further information on the bank’s
branches are located in ‘HSBC in Europe’ on page 5.
Disclosures required pursuant to the Large
and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as
updated by Companies (Miscellaneous
Reporting) Regulations 2018 can be found
on the following pages:

Engagement with employees (Sch.7 Para 11 and 11A 2008/2018 Regs), s172 Statement) | Pages 10 to 12
Engagement with suppliers, customers and others in a business relationship with the bank (Sch.7 Para 11B 2008 Regs) | Pages 10 to 12
Policy concerning the employment of disabled persons (Sch.7 Para 10 2008 Regs) | Page 95
Financial Instruments (Sch.7 Para 6 2008 Regs) | Pages 30 to 68
Hedge accounting policy (Sch.7 Para 6 2008 Regs) | Note 14, Pages 158 to 163
Future developments (Sch.7 Para 7(1)(B) 2008 Regs) | Pages 5 to 7

Articles of Association, Conflicts of
interest and indemnification of
Directors
The bank's Articles of Association gives the Board authority to
approve Directors’ conflicts and potential conflicts of interest. The
Board has adopted policies and procedures for the approval of
Directors’ conflicts or potential conflicts of interest. On appointment,
new Directors are advised of the process for dealing with conflicts
and a review of those conflicts that have been authorised, and the
terms of those authorisations, is routinely undertaken by the Board.
The Articles of Association of the bank contain a qualifying third-party
indemnity provision, which entitles Directors and other officers to be
indemnified out of the assets of the bank against claims from third
parties in respect of certain liabilities. HSBC Group has granted, by
way of deed poll, indemnities to the Directors, including former
Directors who retired during the year, against certain liabilities arising
in connection with their position as a Director of any HSBC Group
company, including the bank and its subsidiaries. Directors are
indemnified to the maximum extent permitted by law.
The indemnities that constitute a 'qualifying third-party indemnity
provision', as defined by section 234 of the Companies Act 2006,
remained in force for the whole of the financial year (or, in the case of
Directors appointed during 2023, from the date of their appointment).
The deed poll is available for inspection at the registered office of
HSBC Holdings plc.
Additionally, Directors have the benefit of Directors’ and Officers’
liability insurance. Qualifying pension scheme indemnities have also
been granted to the Trustees of the Group's pension schemes, which
were in force for the whole of the financial year and remain in force as
at the date of this report.
Research and Development
In the ordinary course, the lines of business develop new products
and services.
Events after the Balance Sheet Date
In its assessment of events after the balance sheet date, the group
has considered and concluded that there are no events requiring
adjustment or disclosures in the financial statements.
Report of the Directors | Corporate Governance Report

96 | HSBC Bank plc Annual Report and Accounts 2023

Statement on going concern

The Directors consider it appropriate to prepare the financial statements on the going concern basis. In making their going concern assessment,
the Directors have considered a wide range of detailed information relating to present and potential conditions, including profitability, cash flows,
capital requirements and capital resources.
Further information relevant to the assessment is provided in the Strategic Report and the Report of the Directors, in particular:
– a description of the group’s strategic direction;
– a summary of the group's financial performance and a review of performance by business;
– the group’s approach to capital management and its capital position; and
– the top and emerging risks facing the group, as appraised by the Directors, along with details of the group's approach to mitigating those
risks and its approach to risk management in general.
In addition, the objectives, policies and processes for managing credit, liquidity and market risk are set out in the ‘Report of the Directors: Risk’.
The Report of the Directors comprising pages 22 to 96 was approved by the Board on 20 February 2024 and is signed on its behalf:
By order of the Board
Kavita Mahtani
Director
HSBC Bank plc
20 February 2024
Registered number 00014259

HSBC Bank plc Annual Report and Accounts 2023 | 97

Statement of directors' responsibilities in respect of the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group
and the company financial statements in accordance with UK-adopted international accounting standards. In preparing the group and company
financial statements, the directors have also elected to comply with International Financial Reporting Standards issued by the International
Accounting Standards Board ('IFRS Accounting Standards').
The group and company have also prepared financial statements in accordance with international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union.
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state
of affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements, the directors are
required to:
– select suitable accounting policies and then apply them consistently;
– state whether applicable UK-adopted international accounting standards, international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union and IFRS Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
– make judgements and accounting estimates that are reasonable and prudent; and
– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue
in business.
The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s
transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that
the financial statements comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company’s financial statements published on the ultimate parent
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are listed in Corporate governance report confirm that, to the best of their knowledge:
– the group and company financial statements, which have been prepared in accordance with UK-adopted international accounting standards,
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRS
Accounting Standards, give a true and fair view of the assets, liabilities and financial position of the group and company, and of the profit or
loss of the group; and
– the Strategic Report includes a fair review of the development and performance of the business and the position of the group and company,
together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
Kavita Mahtani
Director
HSBC Bank plc
20 February 2024
Registered number 00014259
Report of the Directors | Corporate Governance Report | Independent auditors’ report to the
members of HSBC Bank plc

98 | HSBC Bank plc Annual Report and Accounts 2023

Independent auditors’ report to the members of HSBC Bank plc

Report on the audit of the financial statements
Opinion
In our opinion, HSBC Bank plc’s group financial statements and company financial statements (the 'financial statements'):
– give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2023 and of the group’s profit and the
group’s and company’s cash flows for the year then ended;
– have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the provisions
of the Companies Act 2006; and
– have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2023 (the 'Annual Report'), which comprise the:
– consolidated balance sheet as at 31 December 2023;
– consolidated income statement and consolidated statement of comprehensive income for the year then ended;
– consolidated statement of changes in equity for the year then ended;
– consolidated statement of cash flows for the year then ended;
– HSBC Bank plc balance sheet as at 31 December 2023;
– HSBC Bank plc statement of changes in equity for the year then ended;
– HSBC Bank plc statement of cash flows for the year then ended; and
– notes on the financial statements, comprising material accounting policies and other explanatory information.
Certain notes to the financial statements have been presented elsewhere in the Annual Report, rather than in the notes to the financial
statements. These are cross-referenced from the financial statements and are identified as ‘(Audited)’. The relevant disclosures are included in
the Risk review section on pages 22 to 86.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international accounting
standards, have also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In our opinion, the group and company financial statements have been properly prepared in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international accounting
standards, have also applied international financial reporting standards ('IFRSs') as issued by the International Accounting Standards Board
('IASB') ('IFRS Accounting Standards').
In our opinion, the group and company financial statements have been properly prepared in accordance with IFRS Accounting Standards
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)'), International Standards on Auditing issued by
the International Auditing and Assurance Standards Board ('ISAs') and applicable law. Our responsibilities under ISAs (UK) and ISAs are further
described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.

HSBC Bank plc Annual Report and Accounts 2023 | 99

Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and the International Code of Ethics for
Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by either the FRC’s Ethical Standard or Article 5(1) of
Regulation (EU) No 537/2014 were not provided.
Other than those disclosed in note 6, we have provided no non-audit services to the company or its controlled undertakings in the period under
audit.
Our audit approach
Overview
Audit scope
– We performed audits of the complete financial information of two Components, namely the UK non-ring-fenced bank ('UK NRFB') and HSBC
Continental Europe ('HBCE'). For five further Components, specific audit procedures were performed over selected significant account
balances and financial statement note disclosures.
Key audit matter
– Expected credit losses - Impairment of loans and advances to customers (group and company)
Materiality
– Overall group materiality: £231 million (2022: £230 million) based on 1% of Tier 1 capital.
– Overall company materiality: £129 million (2022: £133 million) based on 1% of Tier 1 capital.
– Performance materiality: £174 million (2022: £172 million) (group) and £97 million (2022: £99 million) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Held for sale accounting (group), recognition of deferred tax assets (group) and impairment of investment in subsidiaries (company), which were
key audit matters last year, are no longer included. The judgement in relation to held for sale accounting (group) has reduced following the
completion of the disposal of the HBCE retail banking business on 1 January 2024. The judgement associated with the recognition of deferred
tax assets has also reduced as the forecast cash flows of HBCE have improved and there is less uncertainty on the underlying assumptions.
The risk of impairment of investment in subsidiaries (company) has reduced due to a significantly improved Value in Use assessment resulting in
a lower risk of material misstatement.
Expected credit losses – Impairment of loans and advances to customers (group and company)

Nature of the key audit matter
Determining expected credit losses ('ECL') involves management judgement and is subject to a high degree of estimation uncertainty. Management makes various assumptions when estimating ECL. The significant assumptions that we focused on in our audit included those with greater levels of management judgement and for which variations had the most significant impact on ECL. These included assumptions made in determining forward looking economic scenarios and their probability weightings (specifically the central and downside scenarios given these have the most material impact on ECL) and estimating expected cash flows and collateral valuations to assess the ECL of credit impaired wholesale exposures. The level of estimation uncertainty and judgement has remained high during 2023 as a result of the uncertain macroeconomic and geopolitical environment, high levels of inflation and the rising global interest rate environment. This leads to uncertainty around judgements made in determining the severity and probability weighting of macroeconomic variable forecasts across the different economic scenarios used in ECL models, and in the estimation of expected cash flows and collateral valuations on credit impaired stage 3 exposures.

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

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100 | HSBC Bank plc Annual Report and Accounts 2023

How our audit addressed the Key Audit Matter
We assessed the design and effectiveness of governance and controls over the estimation of ECL. We observed management’s review and challenge in governance forums for (1) the determination of forward looking economic scenarios and their probability weightings and (2) the assessment of ECL for Wholesale portfolios, including the assessment of ECL calculated on high value credit impaired stage 3 exposures. We also tested controls over: – the input of critical data into source systems and the flow and transformation of critical data elements from source systems to impairment models and management judgemental adjustments; – the calculation and approval of management’s judgemental adjustments to modelled outcomes; – the identification of credit impairment triggers; and – the calculation and approval of significant individual impairments relating to high value wholesale credit impaired exposures. We involved our economic experts in assessing the significant assumptions made in determining the severity and probability weighting of forward looking economic scenarios, with particular focus on the downside and consensus central scenarios. These assessments considered the sensitivity of ECL to variations in the severity and probability weighting of macroeconomic variables for different economic scenarios. We involved our modelling specialists in assessing the appropriateness of the significant assumptions and methodologies used for models and independently reperformed the calculations for a sample of those models. We further considered whether the judgements made in selecting the significant assumptions would give rise to indicators of possible management bias. We tested a sample of Credit Risk Ratings (‘CRRs’) applied to wholesale exposures and for certain credit impaired wholesale exposures we tested calculations made in estimating expected cash flows and challenged assumptions used by management. Where necessary, we involved our valuation specialists to assist in testing the valuation of collateral for a sample of wholesale credit impaired exposures. In addition, we performed substantive testing over: – the compliance of ECL methodologies and assumptions with the requirements of IFRS 9; – the appropriateness and application of the quantitative and qualitative criteria used to assess significant increases in credit risk; and – a sample of critical data elements used in the year end ECL calculation. We evaluated and tested the Credit Risk disclosures made in the financial statements.

Relevant references in the Annual Report and Accounts 2023
– Credit risk page 30 - 68 – Audit Committee Report, page 90 – Note 1.2(d) Financial instruments measured at amortised cost, page 122. – Note 1.2(i) Impairment of amortised cost and FVOCI financial assets, page 123.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they
operate.
The risks that HSBC Bank plc faces are diverse, with the interdependencies between them being numerous and complex. In performing our risk
assessment we engaged with a number of stakeholders to ensure we appropriately understood and considered these risks and their
interrelationships. This included stakeholders within HSBC and our own experts within PwC. This engagement covered external factors across
the geopolitical, macroeconomic, regulatory and accounting landscape, the impact of climate change risk, as well as the internal environment at
HSBC, driven by strategy and transformation.
We evaluated and challenged management's assessment of the impact of climate change risk including their conclusion that there is no
material impact on the financial statements. In making this evaluation we considered management’s use of stress testing and scenario analysis
to arrive at the conclusion that there is no material impact on the financial statements. We considered management's assessment on the areas
in the financial statements most likely to be impacted by climate risk, including:
– the impact on ECL on loans and advances to customers, for both physical and transition risk;
– the forecast cash flows from management’s five year business plan and long term growth rates used in estimating recoverable amounts as
part of impairment assessments of investments in subsidiaries;
– the impact of climate related terms on the solely payments of principal and interest test for classification and measurement of loans and
advances to customers; and
– climate risks relating to contingent liabilities as HSBC faces increased reputational, legal and regulatory risk as it progresses towards its
climate ambition.
HSBC Bank plc’s progress on their group-wide ESG targets is not included within the scope of this audit.
Scoping
HSBC Bank plc operates as one integrated business with two main hubs in London and Paris. The London hub consists of the UK NRFB and the
Paris hub comprises HBCE, its EU branches and its subsidiaries in Malta and Luxembourg.
Through our risk assessment, we tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and
the industry in which they operate. The risks of material misstatement can be reduced to an acceptable level by testing the most financially
significant entities within the group and those that drive particular significant risks identified as part of our risk assessment (collectively
‘Components’). This ensures that sufficient coverage has been obtained for each financial statement line item ('FSLI'). We continually assessed
risks and changed the scope of our audit where necessary.
In establishing the overall approach to the group and company audit, we scoped using the balances relevant to each Component and
determined the type of work that needed to be performed over the Components by us, as the group engagement team, or auditors within PwC
UK and from other PwC network firms operating under our instruction (‘Component auditors’).
As a result of our scoping for the group we determined that audits of the complete financial information of the UK NRFB and HBCE were
necessary, owing to their financial significance. We instructed Component auditors, PwC UK and PwC France to perform the audits of these

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Components. We then considered the significance of other Components in relation to primary statement account balances and note
disclosures. In doing this we also considered the presence of any significant audit risks and other qualitative factors (including history of
misstatements through fraud or error). For five Components, specific audit procedures were performed over selected significant account
balances. For the remainder, the risk of material misstatement was mitigated through group audit procedures including testing of entity level
controls and group and company level analytical review procedures.
In June 2023, we held a meeting in London with the partners and senior staff from the group audit team and the PwC teams who undertake
audits of the financially significant Components. The meeting focused primarily on assessing our approach to auditing the group’s businesses,
changes at HSBC Bank plc and in our PwC teams, and how we continue to innovate and improve the quality of the audit. We also discussed our
significant audit risks.
We were in active dialogue throughout the year with the partners and teams responsible for the UK NFRB and HBCE audits, including
consideration of how they planned and performed their work. Senior members of our team undertook at least one in-person site visit prior to the
year end where a full scope audit was requested. Our interactions with Component auditors included regular communication throughout the
audit, including the issuance of instructions, a review of working papers relating to the key audit matters, in-person site visits to inspect their
working papers throughout the different phases of the audit and formal clearance meetings. This enabled us to effectively oversee and monitor
the quality of the audit carried out by the Component auditors. The group audit engagement partner was also the partner on the audit of the UK
NRFB significant Component.
Certain balances were audited by the PwC HSBC Holdings plc Group engagement team where they related to Group level accounts. HSBC has
entity level controls that have a pervasive influence across the Group, as well as other global and regional governance and controls over aspects
of financial reporting, such as those operated by the Global Risk function for expected credit losses. A significant amount of IT and operational
processes and controls relevant to financial reporting are undertaken in operations centres run by Digital Business Services ('DBS'). Whilst these
operations centres are not separate Components, the IT and operational processes and controls are relevant to the financial information of
HSBC Bank plc. Financial reporting processes and controls are also performed centrally in HSBC Bank plc’s finance operations centres (‘Finance
Operations’), including the impairment assessment of investment in subsidiaries and intangible assets, the consolidation of HSBC Bank plc's
results, the preparation of financial statements, and certain management oversight controls relevant to financial reporting.
HSBC Holdings plc Group-wide processes or processes in DBS and Finance Operations are subject to specified audit procedures or an audit
over specific FSLIs. These procedures primarily relate to testing of IT general controls, forward looking economic scenarios for ECL, operating
expenses, intangible assets, valuation of financial instruments, intercompany eliminations, reconciliations, consolidation and payroll. For these
areas, we either performed audit work ourselves, or directed and provided oversight of the audit work performed by other PwC teams. This
audit work, together with analytical review procedures and assessing the outcome of local external audits, also mitigated the risk of material
misstatement for balances in entities that were not financially significant components.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

| Financial statements – group | Financial statements – company
Overall materiality | £231 million (2022: £230 million). | £129 million (2022: £133 million).
How we determined it | 1% of Tier 1 capital | 1% of Tier 1 capital
Rationale for benchmark applied | Tier 1 capital is used as a benchmark as it is considered to be a key driver of HSBC Bank plc's decision making process and has been a primary focus for regulators. | Tier 1 capital is used as a benchmark as it is considered to be a key driver of HSBC Bank plc's decision making process and has been a primary focus for regulators.

Tier 1 capital was also used as the benchmark in the prior year. The basis for determining materiality was re-evaluated and we considered other
benchmarks, such as profit before tax. Tier 1 capital is a common benchmark for wholly owned banking subsidiaries, because of the focus on
financial stability. Tier 1 capital was determined to be the most appropriate benchmark given the importance of this metric to the HSBC Bank plc
decision making process and to principal users of the financial statements, including the ultimate holding company HSBC Holdings plc.
For each Component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality. The range of
materiality allocated across Components was £6 million to £117 million. Certain Components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our
performance materiality was 75% (2022: 75%) of overall materiality, amounting to £174 million (2022: £172 million) for the group financial
statements and £97 million (2022: £99 million) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £12 million (group audit)
(2022: £11 million) and £6 million (company audit) (2022: £6 million) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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102 | HSBC Bank plc Annual Report and Accounts 2023

Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern basis of accounting
included:
– Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including both internal risks (i.e.,
strategy execution) and external risks (i.e., macroeconomic conditions);
– Understanding and evaluating the group and company’s financial forecasts and stress testing of liquidity and regulatory capital, including the
severity of the stress scenarios that were used;
– Inspecting credit rating agency ratings and actions; and
– Reading and evaluating the adequacy of the disclosures made in the financial statements in relation to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the company's
ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Report of the Directors
for the year ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Report of the Directors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities in respect of the financial statements, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) and ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related
to Financial Conduct Authority's ('FCA') regulations, the Prudential Regulation Authority's ('PRA') regulations, and equivalent local laws and
regulations applicable to other countries in which the company operates, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements
such as the Companies Act 2006 and relevant tax legislation. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to
posting inappropriate journal entries to increase revenue or reduce costs, creation of fictitious transactions to hide losses or to improve financial

HSBC Bank plc Annual Report and Accounts 2023 | 103

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

104 | HSBC Bank plc Annual Report and Accounts 2023

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches
not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 31 March 2015 to audit the financial statements
for the year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement is nine years, covering
the years ended 31 December 2015 to 31 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
Lawrence Wilkinson
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
20 February 2024

HSBC Bank plc Annual Report and Accounts 2023 | 105

Financial statements

Contents

106 | Consolidated income statement
107 | Consolidated statement of comprehensive income
108 | Consolidated balance sheet
109 | Consolidated statement of changes in equity
112 | Consolidated statement of cash flows
114 | HSBC Bank plc balance sheet
115 | HSBC Bank plc statement of changes in equity
117 | HSBC Bank plc statement of cash flows

Consolidated income statement |
for the year ended 31 December |
|  | 2023 | 2022 1 | 2021 1
| Notes* | £m | £m | £m
Net interest income |  | 2,151 | 1,904 | 1,754
– interest income 2,3 |  | 17,782 | 6,535 | 3,149
– interest expense 4 |  | (15,631) | (4,631) | (1,395)
Net fee income | 2 | 1,229 | 1,295 | 1,413
– fee income |  | 2,594 | 2,593 | 2,706
– fee expense |  | (1,365) | (1,298) | (1,293)
Net income from financial instruments held for trading or managed on a fair value basis | 3 | 3,395 | 2,875 | 1,733
Net income/ (expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | 3 | 1,168 | (1,370) | 1,214
Changes in fair value of long-term debt and related derivatives | 3 | (63) | 102 | (8)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 3 | 284 | 143 | 493
Net (losses)/ gains from financial investments |  | (84) | (60) | 60
Net insurance premium income | 4 | — | — | 1,906
Gains/ (losses) recognised on Assets held for sale 5,6 |  | 296 | (1,947) | 67
Insurance finance (expense)/income |  | (1,184) | 1,106 | —
Insurance service result |  | 124 | 121 | —
– Insurance revenue |  | 379 | 361 | —
– Insurance service expense |  | (255) | (240) | —
Other operating income 6 |  | 190 | 135 | 527
Total operating income |  | 7,506 | 4,304 | 9,159
Net insurance claims, benefits paid and movement in liabilities to policyholders | 4 | — | — | (3,039)
Net operating income before change in expected credit losses and other credit impairment charges 7 |  | 7,506 | 4,304 | 6,120
Change in expected credit losses and other credit impairment charges |  | (169) | (222) | 174
Net operating income |  | 7,337 | 4,082 | 6,294
Total operating expenses |  | (5,142) | (5,251) | (5,462)
– employee compensation and benefits | 5 | (1,706) | (1,698) | (2,023)
– general and administrative expenses |  | (3,375) | (3,425) | (3,265)
– depreciation and impairment of property, plant and equipment and right of use assets |  | (45) | (103) | (110)
– amortisation and impairment of intangible assets |  | (16) | (25) | (64)
Operating profit/ (loss) |  | 2,195 | (1,169) | 832
Share of (loss)/profit in associates and joint ventures | 17 | (43) | (30) | 191
Profit/(loss) before tax |  | 2,152 | (1,199) | 1,023
Tax (charge)/ credit | 7 | (427) | 646 | 23
Profit/(loss) for the year |  | 1,725 | (553) | 1,046
Profit/ (loss) attributable to the parent company |  | 1,703 | (563) | 1,041
Profit attributable to non-controlling interests |  | 22 | 10 | 5

*For Notes on the financial statements, see page 118.
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 Interest income includes £16,484m (2022: £5,512m; 2021: £1,986m) of interest recognised on financial assets measured at amortised cost; £42m
(2022: £422m; 2021: £659m) of negative interest recognised on financial liabilities and £1,256m (2022: £601m; 2021: £504m) of interest recognised
on financial assets measured at fair value through other comprehensive income. Include within this is £117m ( 2022: £59m; 2021: £61m) interest
recognised on impaired financial assets.
3 Interest revenue calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost
or fair value through other comprehensive income.
4 Interest expense includes £14,226m (2022: £3,740m; 2021: £616m) of interest on financial liabilities, excluding interest on financial liabilities held for
trading or designated or otherwise mandatorily measured at fair value.
5 In relation to the sale of our retail banking operations in France, we recognised a £1.7b n impairment loss in 3Q22 on initial classification of the
business as held-for-sale. In 1Q23, we reversed the £1.7b n impairment loss as the sale became less certain. On subsequent re-classification of the
business as held-for-sale in 4Q23, we recognised a £1.5b n impairment loss.
6 In 2022, a £0.2b n impairment loss on the planned sale of our business in Russia was recognised upon classification as held for sale in accordance with
IFRS 5. As at 31 December 2023, the outcome of the planned sale become less certain. This resulted in the reversal of £0.2b n of the previously
recognised loss, as the business was no longer classified as held for sale. However, owing to restrictions impacting the recoverability of assets in
Russia, we recognised a charge of £0.2b n in other operating income.
7 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as 'revenue'.
Financial statements

106 | HSBC Bank plc Annual Report and Accounts 2023

Consolidated statement of comprehensive income |
for the year ended 31 December |
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Profit/(loss) for the year | 1,725 | (553) | 1,046
Other comprehensive income/(expense) |  |  |
Items that will be reclassified subsequently to profit or loss when specific conditions are met: |  |  |
Debt instruments at fair value through other comprehensive income | 439 | (1,886) | (237)
– fair value gains/(losses) | 495 | (2,631) | (247)
– fair value (gains)/losses transferred to the income statement on disposal | 93 | 59 | (63)
– expected credit (recoveries)/losses recognised in the income statement | (2) | 6 | (5)
– income taxes | (147) | 680 | 78
Cash flow hedges | 663 | (943) | (165)
– fair value gains/(losses) | 614 | (1,418) | (40)
– fair value losses/(gains) reclassified to the income statement | 301 | 127 | (202)
– income taxes | (252) | 348 | 77
Finance (expenses)/income from insurance contracts | (298) | 1,408 | —
– before income taxes | (402) | 1,898 | —
– income taxes | 104 | (490) | —
Exchange differences | (302) | 672 | (603)
Items that will not be reclassified subsequently to profit or loss: |  |  |
Remeasurement of defined benefit asset/liability | (2) | 38 | 44
– before income taxes | (20) | 56 | 61
– income taxes | 18 | (18) | (17)
Equity instruments designated at fair value through other comprehensive income | (1) | — | 2
– fair value (losses)/gains | (1) | — | 2
– income taxes | — | — | —
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk | (132) | 329 | 2
– fair value (losses)/gains | (179) | 462 | 3
– income taxes | 47 | (133) | (1)
Other comprehensive income/(expense) for the year, net of tax | 367 | (382) | (957)
Total comprehensive income/(expense) for the year | 2,092 | (935) | 89
Attributable to: |  |  |
– shareholders of the parent company | 2,070 | (947) | 93
– non-controlling interests | 22 | 12 | (4)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.

HSBC Bank plc Annual Report and Accounts 2023 | 107

Consolidated balance sheet |
at 31 December |
|  | At
|  | 31 Dec | 31 Dec | 1 Jan
|  | 2023 | 2022 1 | 2022
| Notes* | £m | £m | £m
Assets |  |  |  |
Cash and balances at central banks |  | 110,618 | 131,433 | 108,482
Items in the course of collection from other banks |  | 2,114 | 2,285 | 346
Trading assets | 10 | 100,696 | 79,878 | 83,706
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 13 | 19,068 | 15,881 | 18,649
Derivatives | 14 | 174,116 | 225,238 | 141,221
Loans and advances to banks |  | 14,371 | 17,109 | 10,784
Loans and advances to customers |  | 75,491 | 72,614 | 91,177
Reverse repurchase agreements – non-trading |  | 73,494 | 53,949 | 54,448
Financial investments | 15 | 46,368 | 32,604 | 41,300
Assets held for sale 2 | 35 | 20,368 | 21,214 | 9
Prepayments, accrued income and other assets | 21 | 63,635 | 61,444 | 43,146
Current tax assets |  | 485 | 595 | 1,135
Interests in associates and joint ventures | 17 | 665 | 728 | 743
Goodwill and intangible assets | 20 | 203 | 91 | 83
Deferred tax assets | 7 | 1,278 | 1,583 | 798
Total assets |  | 702,970 | 716,646 | 596,027
Liabilities and equity |  |  |  |
Liabilities |  |  |  |
Deposits by banks |  | 22,943 | 20,836 | 32,188
Customer accounts |  | 222,941 | 215,948 | 205,241
Repurchase agreements – non-trading |  | 53,416 | 32,901 | 27,259
Items in the course of transmission to other banks |  | 2,116 | 2,226 | 489
Trading liabilities | 22 | 42,276 | 41,265 | 46,433
Financial liabilities designated at fair value | 23 | 32,545 | 27,282 | 33,608
Derivatives | 14 | 171,474 | 218,867 | 139,368
Debt securities in issue |  | 13,443 | 7,268 | 9,428
Liabilities of disposal groups held for sale 2 | 35 | 20,684 | 24,711 | —
Accruals, deferred income and other liabilities | 24 | 60,444 | 67,020 | 43,515
Current tax liabilities |  | 272 | 130 | 97
Insurance contract liabilities | 4 | 20,595 | 20,004 | 22,201
Provisions | 25 | 390 | 424 | 562
Deferred tax liabilities | 7 | 6 | 3 | 5
Subordinated liabilities | 26 | 14,920 | 14,528 | 12,488
Total liabilities |  | 678,465 | 693,413 | 572,882
Equity |  |  |  |
Total shareholders’ equity |  | 24,359 | 23,102 | 23,014
– called up share capital | 30 | 797 | 797 | 797
– share premium account |  | 1,004 | 420 | —
– other equity instruments | 30 | 3,930 | 3,930 | 3,722
– other reserves |  | (6,096) | (6,413) | (5,662)
– retained earnings |  | 24,724 | 24,368 | 24,157
Non-controlling interests |  | 146 | 131 | 131
Total equity |  | 24,505 | 23,233 | 23,145
Total liabilities and equity |  | 702,970 | 716,646 | 596,027

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. We have restated 2022 comparative
data and the IFRS 17 transition impact on the balance sheet at 1 January 2022.
2 Includes businesses classified as held-for-sale as part of a broader restructuring of our European business. Refer to Note 35 'Assets held for sale and
liabilities of disposal groups held for sale' on page 184.
*For Notes on the financial statements, see page 118.
The accompanying notes on pages 118 to 192, and the audited sections of the 'Report of the Directors' on pages 22 to 96 f orm an integral part
of these financial statements.
The financial statements were approved by the Board of Directors on 20 February 2024 and signed on its behalf by:
Kavita Mahtani
Director
Financial statements

108 | HSBC Bank plc Annual Report and Accounts 2023

Consolidated statement of changes in equity
for the year ended 31 December
|  |  |  | Other reserves |  |  |  |
| Called up share capital & share premium | Other equity instru- ments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorgan- isation reserve (‘GRR’)7 | Insur- ance finance reserve 1 | Total share- holders’ equity | Non- control- ling interests | Total equity
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 1,217 | 3,930 | 24,368 | (278) | (950) | 1,613 | (7,692) | 894 | 23,102 | 131 | 23,233
Profit for the period | — | — | 1,703 | — | — | — | — | — | 1,703 | 22 | 1,725
Other comprehensive income/(expense) (net of tax) | — | — | (134) | 422 | 661 | (294) | — | (288) | 367 | — | 367
– debt instruments at fair value through other comprehensive income | — | — | — | 437 | — | — | — | — | 437 | 2 | 439
– equity instruments designated at fair value through other comprehensive income | — | — | — | (1) | — | — | — | — | (1) | — | (1)
– cash flow hedges | — | — | — | — | 663 | — | — | — | 663 | — | 663
– remeasurement of defined benefit asset/liability | — | — | (2) | — | — | — | — | — | (2) | — | (2)
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 3 | — | — | (132) | — | — | — | — | — | (132) | — | (132)
– insurance finance (expense)/income recongnised in other comprehensive income | — | — | — | — | — | — | — | (298) | (298) | — | (298)
– exchange differences | — | — | — | (14) | (2) | (294) | — | 10 | (300) | (2) | (302)
Total comprehensive income/(expense) for the year | — | — | 1,569 | 422 | 661 | (294) | — | (288) | 2,070 | 22 | 2,092
Capital securities issued during the period | 584 | — | — | — | — | — | — | — | 584 | — | 584
Dividends paid to the parent company 4 | — | — | (961) | — | — | — | — | — | (961) | (7) | (968)
Net impact of equity-settled share-based payments | — | — | (18) | — | — | — | — | — | (18) | — | (18)
Change in business combinations and other movements | — | — | (234) | (1,012) | (41) | 859 | — | 10 | (418) | — | (418)
At 31 Dec 2023 | 1,801 | 3,930 | 24,724 | (868) | (330) | 2,178 | (7,692) | 616 | 24,359 | 146 | 24,505

HSBC Bank plc Annual Report and Accounts 2023 | 109

Consolidated statement of changes in equity (continued)
for the year ended 31 December
|  |  |  |  | Other reserves |  |  |  |
| Called up share capital & share premium | Other equity instru- ments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorgani- sation reserve ('GRR')7 | Insur- ance finance reserve 1 | Total share- holders’ equity | Non- control- ling interests | Total equity
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
As on 31 Dec 2021 | 797 | 3,722 | 24,735 | 1,081 | (7) | 948 | (7,692) | — | 23,584 | 131 | 23,715
IFRS 17 Transition | — | — | (578) | 522 | — | — | — | (514) | (570) | — | (570)
At 1 Jan 2022 | 797 | 3,722 | 24,157 | 1,603 | (7) | 948 | (7,692) | (514) | 23,014 | 131 | 23,145
Loss for the year | — | — | (563) | — | — | — | — | — | (563) | 10 | (553)
Other comprehensive (expense)/income (net of tax) | — | — | 367 | (1,881) | (943) | 665 | — | 1,408 | (384) | 2 | (382)
– debt instruments at fair value through other comprehensive income | — | — | — | (1,881) | — | — | — | — | (1,881) | (5) | (1,886)
– equity instruments designated at fair value through other comprehensive income | — | — | — | — | — | — | — | — | — | — | —
– cash flow hedges | — | — | — | — | (943) | — | — | — | (943) | — | (943)
– remeasurement of defined benefit asset/ liability | — | — | 38 | — | — | — | — | — | 38 | — | 38
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 3 | — | — | 329 | — | — | — | — | — | 329 | — | 329
– insurance finance income/ (expense) recongnised in other comprehensive income | — | — | — | — | — | — | — | 1,408 | 1,408 | — | 1,408
– exchange differences | — | — | — | — | — | 665 | — | — | 665 | 7 | 672
Total comprehensive (expense)/income for the year | — | — | (196) | (1,881) | (943) | 665 | — | 1,408 | (947) | 12 | (935)
Capital securities issued during the period | 420 | 208 | — | — | — | — | — | — | 628 | — | 628
Dividends paid to the parent company 4 | — | — | (1,052) | — | — | — | — | — | (1,052) | (2) | (1,054)
Net impact of equity- settled share-based payments | — | — | 5 | — | — | — | — | — | 5 | — | 5
Capital contribution 5 | — | — | 1,465 | — | — | — | — | — | 1,465 | — | 1,465
Change in business combinations and other movements | — | — | (11) | — | — | — | — | — | (11) | (10) | (21)
At 31 Dec 2022 2 | 1,217 | 3,930 | 24,368 | (278) | (950) | 1,613 | (7,692) | 894 | 23,102 | 131 | 23,233

Financial statements

110 | HSBC Bank plc Annual Report and Accounts 2023

Consolidated statement of changes in equity (continued)
for the year ended 31 December
|  |  |  |  | Other reserves |  |  |
| Called up share capital & share premium | Other equity instru- ments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorgani- sation reserve ('GRR')7 | Total share- holders’ equity | Non- control- ling interests | Total equity
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2021 | 797 | 3,722 | 23,829 | 1,309 | 158 | 1,543 | (7,692) | 23,666 | 183 | 23,849
Profit for the year | — | — | 1,041 | — | — | — | — | 1,041 | 5 | 1,046
Other comprehensive (expense)/ income (net of tax) | — | — | 46 | (234) | (165) | (595) | — | (948) | (9) | (957)
– debt instruments at fair value through other comprehensive income | — | — | — | (236) | — | — | — | (236) | (1) | (237)
– equity instruments designated at fair value through other comprehensive income | — | — | — | 2 | — | — | — | 2 | — | 2
– cash flow hedges | — | — | — | — | (165) | — | — | (165) | — | (165)
– remeasurement of defined benefit asset/liability | — | — | 44 | — | — | — | — | 44 | — | 44
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 3 | — | — | 2 | — | — | — | — | 2 | — | 2
– exchange differences | — | — | — | — | — | (595) | — | (595) | (8) | (603)
Total comprehensive income/(expense) for the year | — | — | 1,087 | (234) | (165) | (595) | — | 93 | (4) | 89
Capital securities issued during the period | — | — | — | — | — | — | — | — | — | —
Dividends paid to the parent company 4 | — | — | (194) | — | — | — | — | (194) | (1) | (195)
Net impact of equity-settled share- based payments | — | — | (10) | — | — | — | — | (10) | — | (10)
Change in business combinations and other movements 6 | — | — | 23 | 6 | — | — | — | 29 | (47) | (18)
At 31 Dec 2021 2 | 797 | 3,722 | 24,735 | 1,081 | (7) | 948 | (7,692) | 23,584 | 131 | 23,715

1 The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France.
Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount
that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the
elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is
recognised in other comprehensive income (‘OCI’).
2 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
3 The cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value wa s a gain of
£151m (2022: gain of £292m and 2021: loss of £165m).
4 The dividends to the parent company includes dividend on ordinary share capital £750m (2022: £850m and 2021: nil) and coupon payments on
additional tier 1 instrument £211m (2022: £202m and 2021: £194m).
5 HSBC Holdings plc injected £1.5 bn of CET1 capital into HSBC Bank plc during November 2022 which in turn injected into HSBC Continental Europe
for funding the acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH.
6 Additional shares were acquired in HSBC Trinkaus & Burkhardt GmbH and HSBC Bank Armenia CJSC, in 2021 increasing the group’s interest to
100%.
7 The Group reorganisation reserve ('GRR') is an accounting reserve resulting from the ring-fencing implementation.

HSBC Bank plc Annual Report and Accounts 2023 | 111

Consolidated statement of cash flows |
for the year ended 31 December |
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Profit/(loss) before tax | 2,152 | (1,199) | 1,023
Adjustments for non-cash items |  |  |
Depreciation, amortisation and impairment | 61 | 128 | 174
Net loss/(gain) from investing activities 2 | (66) | 2,002 | (62)
Share of loss/(profit) in associates and joint ventures | 43 | 30 | (191)
Change in expected credit losses gross of recoveries and other credit impairment charges | 161 | 253 | (171)
Provisions including pensions | 132 | 192 | 104
Share-based payment expense | 58 | 46 | 96
Other non-cash items included in loss/(profit) before tax | (165) | (16) | (198)
Elimination of exchange differences 3 | 4,426 | (6,761) | 4,926
Changes in operating assets and liabilities | (3,172) | 37,515 | 9,602
– change in net trading securities and derivatives | (15,528) | (6,213) | 8,157
– change in loans and advances to banks and customers | 4,245 | (2,717) | 11,149
– change in reverse repurchase agreements – non-trading | (13,531) | 6,251 | 9,538
– change in financial assets designated and otherwise mandatorily measured at fair value | (3,296) | 2,729 | (2,429)
– change in other assets | (5,707) | (7,359) | 10,924
– change in deposits by banks and customer accounts | 7,548 | 19,835 | 7,940
– change in repurchase agreements – non-trading | 20,516 | 5,641 | (7,643)
– change in debt securities in issue | 6,175 | (1,060) | (7,943)
– change in financial liabilities designated at fair value | 4,042 | (1,827) | (7,191)
– change in other liabilities | (7,506) | 21,393 | (12,295)
– dividend received from associates | 15 | 7 | —
– contributions paid to defined benefit plans | (5) | (10) | (24)
– tax received/(paid) | (140) | 845 | (581)
Net cash from operating activities | 3,630 | 32,190 | 15,303
– purchase of financial investments | (26,586) | (13,227) | (18,890)
– proceeds from the sale and maturity of financial investments | 15,497 | 20,490 | 25,027
– net cash flows from the purchase and sale of property, plant and equipment | (31) | (20) | 52
– net investment in intangible assets | (125) | (28) | (45)
– net cash outflow from investment in associates and acquisition of businesses and subsidiaries 4 | (1,161) | (29) | (85)
– net cash flow on disposal of subsidiaries, businesses, associates and joint ventures 5 | (394) | — | —
Net cash from investing activities | (12,800) | 7,186 | 6,059
– issue of ordinary share capital and other equity instruments | 584 | 628 | —
– subordinated loan capital issued 6 | 3,246 | 3,111 | 10,466
– subordinated loan capital repaid 6 | (2,693) | (2,248) | (10,902)
– dividends to the parent company | (961) | (1,052) | (194)
– funds received from the parent company | — | 1,465 | —
– dividends paid to non-controlling interests | (7) | (2) | (1)
Net cash from financing activities | 169 | 1,902 | (631)
Net increase in cash and cash equivalents | (9,001) | 41,278 | 20,731
Cash and cash equivalents at 1 Jan | 189,907 | 140,923 | 125,304
Exchange difference in respect of cash and cash equivalents | (3,869) | 7,706 | (5,112)
Cash and cash equivalents at 31 Dec 7 | 177,037 | 189,907 | 140,923

Financial statements

112 | HSBC Bank plc Annual Report and Accounts 2023

Consolidated statement of cash flows (continued) |
for the year ended 31 December |
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Cash and cash equivalents comprise of |  |  |
– cash and balances at central banks | 110,618 | 131,433 | 108,482
– items in the course of collection from other banks | 2,114 | 2,285 | 346
– loans and advances to banks of one month or less | 12,970 | 13,801 | 7,516
– reverse repurchase agreement with banks of one month or less | 28,704 | 23,182 | 17,430
– treasury bills, other bills and certificates of deposit less than three months | 144 | 294 | 235
– cash collateral and net settlement accounts | 16,325 | 19,213 | 7,403
– cash and cash equivalents held for sale 8 | 8,278 | 1,925 | —
– less: items in the course of transmission to other banks | (2,116) | (2,226) | (489)
Cash and cash equivalents at 31 Dec 6 | 177,037 | 189,907 | 140,923

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year 31 December 2021 is prepared on an IFRS 4 basis.
2 2022 balances include losses on disposal of businesses classified as held-for-sale as part of a broader restructuring of our European business.
3 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details
cannot be determined without unreasonable expense.
4 During 2023, HSBC Bank plc acquired HSBC Bank Bermuda Limited ('HBBM') from HSBC Overseas Holdings (UK) Limited ('HOHU') for £990m and
HSBC Continental Europe ('HBCE') acquired HSBC Private Bank (Luxembourg) SA ('PBLU') for £170m.
5 2023 balances includes net cash outflow of £(667)m on sale of the assets of our HBCE Greece branch.
6 Subordinated liabilities changes during the year are attributable to cash flows from issuance £3,246m (2022: £3,111m; 2021: £10,466m) and
repayment of £(2,693)m ( 2022: £(2,248)m; 2021: £(10,902)m) of securities as presented in the Consolidated statement of cash flows. Non-cash
changes during the year included foreign exchanges g ains/(losse s) £(420)m (2022: £711m; 2021: £(512)m) and fair value gains/(losses) £62m (2022:
£(427)m; 2021: £(82)m).
7 At 31 December 2023, £26,554m (2022: £23,395m; 2021: £9,410m) was not available for use by the group due to a range of restrictions including
currency exchange and other restrictions.
8 Includes £177m (2022: £1,562m) of cash and balances at central banks; £8,103m (2022: £114m) of loans and advances to banks of one month or less,
nil (2022: £208m) of reverse repurchase agreements with banks of one month or less and remaining £(2)m (2022: £41m) relates to other cash and
cash equivalents.
Interest received was £19,288m (2022: £7,668m; 2021: £4,285m), interest paid was £17,267m (2022: £5,284m; 2021: £2,919m) and dividends
received were £522m (2022: £431m; 2021: £704m).

HSBC Bank plc Annual Report and Accounts 2023 | 113

HSBC Bank plc balance sheet
at 31 December
|  | 2023 | 2022
| Notes* | £m | £m
Assets |  |  |
Cash and balances at central banks |  | 61,128 | 78,441
Items in the course of collection from other banks |  | 1,877 | 1,863
Trading assets | 10 | 85,766 | 67,623
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 13 | 3,181 | 1,618
Derivatives | 14 | 153,765 | 196,714
Loans and advances to banks |  | 11,670 | 14,486
Loans and advances to customers |  | 32,443 | 36,992
Reverse repurchase agreements – non-trading |  | 56,973 | 43,055
Financial investments | 15 | 28,391 | 18,639
Assets held for sale 1 | 35 | 160 | —
Prepayments, accrued income and other assets | 21 | 47,400 | 43,907
Current tax assets |  | 39 | 394
Investments in subsidiary undertakings | 18 | 11,627 | 10,646
Goodwill and intangible assets | 20 | 88 | 41
Deferred tax assets | 7 | 391 | 608
Total assets |  | 494,899 | 515,027
Liabilities and equity |  |  |
Liabilities |  |  |
Deposits by banks |  | 18,775 | 13,594
Customer accounts |  | 133,373 | 141,714
Repurchase agreements – non-trading |  | 48,842 | 29,638
Items in the course of transmission to other banks |  | 1,837 | 1,758
Trading liabilities | 22 | 24,932 | 25,765
Financial liabilities designated at fair value | 23 | 23,446 | 19,415
Derivatives | 14 | 152,799 | 193,336
Debt securities in issue |  | 7,353 | 4,656
Accruals, deferred income and other liabilities | 24 | 44,922 | 47,982
Current tax liabilities |  | 77 | 21
Provisions | 25 | 176 | 167
Deferred tax liabilities | 7 | 1 | —
Subordinated liabilities | 26 | 14,658 | 14,252
Total liabilities |  | 471,191 | 492,298
Equity |  |  |
Called up share capital | 30 | 797 | 797
Share premium account |  | 1,004 | 420
Other equity instruments | 30 | 3,930 | 3,930
Other reserves |  | (5,522) | (6,073)
Retained earnings |  | 23,499 | 23,655
Total equity |  | 23,708 | 22,729
Total liabilities and equity |  | 494,899 | 515,027

*For Notes on the financial statements, see page 118.
1 Includes planned transfer of hedge fund administration services.
Profit after tax for the year was £887m (2022: £2,743m).
The accompanying notes on pages 118 to 192, and the audited sections of the 'Report of the Directors' on pages 22 to 96 form an integral part
of these financial statements.
The financial statements were approved by the Board of D irectors on 20 Fe bruary 2024 and signed on its behalf by:
Kavita Mahtani
Director
Financial statements

114 | HSBC Bank plc Annual Report and Accounts 2023

HSBC Bank plc statement of changes in equity
for the year ended 31 December
|  |  |  | Other reserves |
| Called up share capital & share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Group reorganisation reserve (‘GRR’)4 | Total shareholders’ equity
| £m | £m | £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 1,217 | 3,930 | 23,655 | (122) | (796) | 93 | (5,248) | 22,729
Profit for the year | — | — | 887 | — | — | — | — | 887
Other comprehensive income/ (expense) (net of tax) | — | — | (63) | 65 | 516 | (30) | — | 488
– debt instruments at fair value through other comprehensive income | — | — | — | 67 | — | — | — | 67
– equity instruments designated at fair value through other comprehensive income | — | — | — | — | — | — | — | —
– cash flow hedges | — | — | — | — | 516 | — | — | 516
– changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 1 | — | — | (80) | — | — | — | — | (80)
– remeasurement of defined benefit asset/liability | — | — | 17 | — | — | — | — | 17
– exchange differences | — | — | — | (2) | — | (30) | — | (32)
Total comprehensive income/(expense) for the period | — | — | 824 | 65 | 516 | (30) | — | 1,375
Capital securities issued during the period | 584 | — | — | — | — | — | — | 584
Dividends to the parent company 2 | — | — | (961) | — | — | — | — | (961)
Net impact of equity-settled share-based payments | — | — | (18) | — | — | — | — | (18)
Change in business combinations and other movements | — | — | (1) | (29) | 4 | 25 | — | (1)
At 31 Dec 2023 | 1,801 | 3,930 | 23,499 | (86) | (276) | 88 | (5,248) | 23,708

HSBC Bank plc Annual Report and Accounts 2023 | 115

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

1 The cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at fair value was a gain of
£42m (2022: gain of £139m).
2 The dividends to the parent company includes dividend on ordinary share capital £750m (2022: £850m) and coupon payments on additional tier 1
instrument £211m (2022: £222m) & dividend on preference share capital nil (2022: nil).
3 HSBC Holdings plc injected £1.5bn of CET1 capital into HSBC Bank plc during November 2022 which in turn injected into HSBC Continental Europe for
funding the acquisition of HSBC Bank Malta plc and HSBC Trinkaus & Burkhardt GmbH.
4 The Group reorganisation reserve ('GRR') is an accounting reserve resulting from the ring-fencing implementation.
Financial statements

116 | HSBC Bank plc Annual Report and Accounts 2023

HSBC Bank plc statement of cash flows
for the year ended 31 December
|  | 2023 | 2022
|  | £m | £m
Profit before tax |  | 1,063 | 2,548
Adjustments for non-cash items |  |  |
Depreciation, amortisation and impairment |  | 4 | 17
Net (gain)/loss from investing activities 1 |  | 80 | (1,669)
Change in expected credit losses gross of recoveries and other credit impairment charges |  | 37 | 130
Provisions including pensions |  | 110 | 91
Share-based payment expense |  | 45 | 27
Other non-cash items included in loss/(profit) before tax |  | (127) | (21)
Elimination of exchange differences 2 |  | 2,650 | (2,109)
Changes in operating assets and liabilities |  | (5,098) | 18,609
– change in net trading securities and derivatives |  | (16,033) | (9,551)
– change in loans and advances to banks and customers |  | (1,405) | (3,870)
– change in reverse repurchase agreements – non-trading |  | (8,040) | 791
– change in financial assets designated and otherwise mandatorily measured at fair value |  | (1,632) | 1,597
– change in other assets 3 |  | (6,509) | (10,912)
– change in deposits by banks and customer accounts |  | 5,989 | 15,947
– change in repurchase agreements – non-trading |  | 19,204 | 7,294
– change in debt securities in issue |  | 2,697 | (1,002)
– change in financial liabilities designated at fair value |  | 3,946 | (116)
– change in other liabilities |  | (3,554) | 17,343
– contributions paid to defined benefit plans |  | (5) | (10)
– tax received |  | 244 | 1,098
Net cash from operating activities |  | (1,236) | 17,623
– purchase of financial investments |  | (19,798) | (8,535)
– proceeds from the sale and maturity of financial investments |  | 11,115 | 17,022
– net cash flows from the purchase and sale of property, plant and equipment |  | (6) | (2)
– net investment in intangible assets |  | (76) | (176)
– net cash outflow from investment in associates and acquisition of businesses and subsidiaries 4 |  | (990) | —
– net cash flow on disposal of subsidiaries, businesses, associates and joint ventures |  | 268 | —
Net cash from investing activities |  | (9,487) | 8,309
– issue of ordinary share capital and other equity instruments |  | 584 | 628
– subordinated loan capital issued 5 |  | 3,246 | 3,111
– subordinated loan capital repaid 5 |  | (2,685) | (2,240)
– funds received from the parent company |  | — | 1,465
– dividends to the parent company |  | (961) | (1,052)
Net cash from financing activities |  | 184 | 1,912
Net increase in cash and cash equivalents |  | (10,539) | 27,844
Cash and cash equivalents at 1 Jan |  | 115,310 | 83,814
Exchange difference in respect of cash and cash equivalents |  | (2,354) | 3,652
Cash and cash equivalents at 31 Dec |  | 102,417 | 115,310
Cash and cash equivalents comprise of: |  |  |
– cash and balances at central banks |  | 61,128 | 78,441
– items in the course of collection from other banks |  | 1,877 | 1,863
– loans and advances to banks of one month or less |  | 9,922 | 11,353
– reverse repurchase agreement with banks of one month or less |  | 19,795 | 13,917
– treasury bills, other bills and certificates of deposit less than three months |  | — | 150
– cash collateral and net settlement accounts |  | 11,532 | 11,344
– less: items in the course of transmission to other banks |  | (1,837) | (1,758)
Cash and cash equivalents at 31 Dec |  | 102,417 | 115,310

1 Included within 2022 is the impact of impairment reversal booked in Paris branch for investment in subsidiary.
2 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details
cannot be determined without unreasonable expense.
3 Includes additional investment in subsidiaries nil (2022: £3,406m).
4 During 2023, HSBC Bank plc acquired HBBM from HOHU and invested £990m.
5 Subordinated liabilities changes during the year are attributable to cash flows from issuance £3,246m (2022: £3,111m) and repayment of £(2,685)m
(2022: £(2,240)m) of securities as presented in the HSBC Bank plc statement of cash flows. Non-cash changes during the year included foreign
exchange gains/(losses) £(415)m (2022: £696m) and fair value gains/(losses) £62m (2022: £(427)m).
Interest received was £13,005m (2022: £5,023m), interest paid was £12,934m (2022: £3,891m) and dividends received was £629m (2022:
£936m).

HSBC Bank plc Annual Report and Accounts 2023 | 117

Notes on the Financial Statements

Contents
118 | 1 | Basis of preparation and material accounting policies | 168 | 20 | Goodwill and intangible assets
130 | 2 | Net fee income | 169 | 21 | Prepayments, accrued income and other assets
131 | 3 | Net income from financial instruments measured at fair value through profit or loss | 169 | 22 | Trading liabilities
169 | 23 | Financial liabilities designated at fair value
131 | 4 | Insurance business | 170 | 24 | Accruals, deferred income and other liabilities
138 | 5 | Employee compensation and benefits | 170 | 25 | Provisions
143 | 6 | Auditors’ remuneration | 171 | 26 | Subordinated liabilities
143 | 7 | Tax | 173 | 27 | Maturity analysis of assets, liabilities and off-balance sheet commitments
146 | 8 | Dividends
146 | 9 | Segmental analysis | 176 | 28 | Offsetting of financial assets and financial liabilities
148 | 10 | Trading assets | 177 | 29 | Interest rate benchmark reform
148 | 11 | Fair values of financial instruments carried at fair value | 177 | 30 | Called up share capital and other equity instruments
156 | 12 | Fair values of financial instruments not carried at fair value | 178 | 31 | Contingent liabilities, contractual commitments, guarantees and contingent assets
158 | 13 | Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
179 | 32 | Finance lease receivables
158 | 14 | Derivatives | 179 | 33 | Legal proceedings and regulatory matters
163 | 15 | Financial investments | 182 | 34 | Related party transactions
164 | 16 | Assets pledged, collateral received and assets transferred | 184 | 35 | Assets held for sale and liabilities of disposal groups held for sale
165 | 17 | Interests in associates and joint ventures | 186 | 36 | Effects of adoption of IFRS 17
165 | 18 | Investments in subsidiaries | 189 | 37 | Events after the balance sheet date
166 | 19 | Structured entities | 190 | 38 | HSBC Bank plc’s subsidiaries, joint ventures and associates

1 | Basis of preparation and material accounting policies

1.1 Basis of preparation
(a)Compliance with International Financial Reporting Standards
The consolidated financial statements of the group and the separate financial statements of the bank comply with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006, and have also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements are also prepared in
accordance with International Financial Reporting Standards as issued by the IASB ('IFRS Accounting Standards'), including interpretations
issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS Accounting standards adopted by the UK, IFRS
Accounting Standards as adopted by the EU and IFRS Accounting Standards as issued by the IASB in terms of their application to the group for
the periods presented. There were no unendorsed standards effective for the year ended 31 December 2023 affecting these consolidated and
separate financial statements.
Standards adopted during the year ended 31 December 2023
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, the group adopted the requirements of IFRS 17 ‘Insurance Contracts’ retrospectively with comparatives restated from the
transition date, 1 January 2022. At transition, the group’s total equity reduced by £570m.
On adoption of IFRS 17, balances based on IFRS 4, including the present value of in-force long-term insurance business (‘PVIF’) asset in relation
to the upfront recognition of future profits of in-force insurance cont racts, were derecognise d. Insurance contract liabilities have been
remeasured under IFRS 17 based on groups of insurance contracts, which include the fulfilment cash flows comprising the best estimate of the
present value of the future cash flows (for example premiums and payouts for claims, benefits and expenses), together with a risk adjustment
for non-financial risk, as well as the contractual service margin (‘CSM’). The CSM represents the unearned profits that will be released and
systematically recognised in insurance revenue as services are provided over the expected coverage period.
In addition, the group has made use of the option under the standard to re-designate certain eligible financial assets held to support insurance
contract liabilities, which were predominantly measured at amortised cost, as financial assets measured at fair value through profit or loss, with
comparatives restated from the transition date. The effects on adoption of IFRS 17 are set out in Note 36 with a description of the policy set out
in Note 1.2(j).
Notes on the Financial Statements

118 | HSBC Bank plc Annual Report and Accounts 2023

The key differences between IFRS 4 and IFRS 17 are summarised in the following table:

| IFRS 4 | IFRS 17
Balance sheet | – Insurance contract liabilities for non-linked life insurance contracts are calculated by local actuarial principles. Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, by reference to the value of the relevant underlying funds or indices. Grouping requirements follow local regulations. – An intangible asset for the PVIF is recognised, representing the upfront recognition of future profits associated with in-force insurance contracts. | – Insurance contract liabilities are measured for groups of insurance contracts at current value, comprising the fulfilment cash flows and the CSM. – The fulfilment cash flows comprise the best estimate of the present value of the future cash flows, together with a risk adjustment for non-financial risk. – The CSM represents the unearned profit.
Profit emergence / recognition | – The value of new business is reported as revenue on Day 1 as an increase in PVIF. – The impact of the majority of assumption changes is recognised immediately in the income statement. – Variances between actual and expected cash flows are recognised in the period they arise. | – The CSM is systematically recognised in revenue as services are provided over the expected coverage period of the group of contracts (i.e. no Day 1 profit). – Contracts are measured using the GMM or VFA model for insurance contracts with direct participation features upon meeting the eligibility criteria. Under the VFA model, the group’s share of the investment experience and assumption changes are absorbed by the CSM and released over time to profit or loss. For contracts measured under GMM, the group’s share of the investment volatility is recorded in profit or loss as it arises. – Losses from onerous contracts are recognised in the income statement immediately.
Investment return assumptions (discount rate) | – PVIF is calculated based on long-term investment return assumptions based on assets held. It therefore includes investment margins expected to be earned in future. | – Under the market consistent approach, expected future investment spreads are not included in the investment return assumption. Instead, the discount rate includes an illiquidity premium that reflects the nature of the associated insurance contract liabilities.
Expenses | – Total expenses to acquire and maintain the contract over its lifetime are included in the PVIF calculation. – Expenses are recognised across operating expenses and fee expense as incurred and the allowances for those costs are released from the PVIF simultaneously. | – Projected lifetime expenses that are directly attributable costs are included in the insurance contract liabilities and recognised in the insurance service result. – Non-attributable costs are reported in operating expenses.

Transition
In applying IFRS 17 for insurance contracts retrospectively, the full retrospective approach (‘FRA’) has been used unless it was impracticable.
When the FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an accounting policy choice to use
either the modified retrospective approach (‘MRA’) or the fair value approach (‘FVA’). The group has applied the MRA in France prior to 2019,
and the FVA for the UK insurance business prior to 2019. The FVA has been applied for all other businesses prior to 2020 when the FRA is
impracticable to apply.
Under the FVA, the valuation of insurance liabilities on transition is based on the applicable requirements of IFRS 13 ‘Fair Value Measurement’.
This requires consideration 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 (an exit price). The CSM is calculated as the difference between what a market participant would
demand for assuming the unexpired risk associated with insurance contracts, including required profit, and the fulfilment cash flows that are
determined using IFRS 17 principles.
In determining the fair value, the group considered the estimated profit margin that a market participant would demand in return for assuming
the insurance liabilities with the consideration of the level of capital that a market participant would be required to hold, and the discount rate
with an allowance for an illiquidity premium that takes into account the level of ‘matching’ between the group’s assets and related liabilities.
These assumptions were set taking into account the assumptions that a hypothetical market participant operating in each local jurisdiction
would consider.
Amendments to IAS 12 ‘International Tax Reform - Pillar Two Model Rules’
On 23 May 2023, the IASB issued amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’, which became effective
immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July 2023 and by the European Financial
Reporting Advisory Group on 8 November 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the OECD’s
Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. T he group has applied
the IAS 12 exemption from recognising and disclosing information on associated deferred tax assets and liabilities.
There were no other new standards or amendments to standards that had an effect on these financial statements.
(b)Future accounting developments
Minor amendments to IFRS Accounting Standards
The IASB has published a number of minor amendments to IFRS Accounting Standards that are effective from 1 January 2024. The group
expects they will have an insignificant effect, when adopted, on the consolidated financial statements of the group and the separate financial
statements of HSBC Bank plc.
(c)Foreign currencies
The functional currency of the bank is sterling, which is also the presentational currency of the consolidated financial statements of the group.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Assets and liabilities denominated in
foreign currencies are translated at the rate of exchange at the balance sheet date except non-monetary assets and liabilities measured at
historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other
comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised.

HSBC Bank plc Annual Report and Accounts 2023 | 119

In the consolidated financial statements, the assets and liabilities of branches, subsidiaries, joint ventures and associates whose functional
currency is not sterling are translated into the group’s presentation currency at the rate of exchange at the balance sheet date, while their
results are translated into sterling at the average rates of exchange for the reporting period. Exchange differences arising are recognised in other
comprehensive income. On disposal of a foreign operation, exchange differences previously recognised in other comprehensive income are
reclassified to the income statement.
(d)Presentation of information
Certain disclosures required by IFRS Accounting standards have been included in the audited sections of this Annual Report and Accounts 2023
as follows:
– disclosures concerning the nature and extent of risks relating to financial instruments and insurance contracts are included in the 'Report of
the Directors: Risk’ on pages 22 to 86;
– the 'Own funds' disclosure is included in the ‘Report of the Directors: Capital Risk in 2023’ on page 73; and
– in publishing the parent company financial statements together with the group financial statements, the bank has taken advantage of the
exemption in section 408(3) of the Companies Act 2006 not to present its individual income statement and related notes.
(e)Critical estimates and judgements
The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent
uncertainties and the high level of subjectivity involved in the recognition or measurement of items highlighted, as the 'critical estimates and
judgements' in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on which management’s
estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes of
these financial statements. Management’s selection of the group’s accounting policies that contain critical estimates and judgements reflects
the materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.
Management has considered the impact of climate-related risks on HSBC’s financial position and performance. While the effects of climate
change are a source of uncertainty, as at 31 December 2023 management did not consider there to be a material impact on our critical
judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular management
has considered the known and observable potential impacts of climate-related risks of associated judgements and estimates in our value in use
calculations.
(f) Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the group and the company have the
resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of
information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital
resources. These considerations include stressed scenarios that reflect the uncertainty in the macroeconomic environment following, rising
inflation and disrupted supply chains as a result of the ongoing Russia-Ukraine and Israel-Hamas wars. They also considered other top and
emerging risks, including climate change, as well as the related impacts on profitability, capital and liquidity.
1.2 Summary of material accounting policies
(a)Consolidation and related policies
Investments in subsidiaries
Where an entity is governed by voting rights, the group consolidates when it holds – directly or indirectly – the necessary voting rights to pass
resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors,
including having exposure to variability of returns, power to direct relevant activities and whether power is held as agent or principal.
Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair value or
at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
The bank's investments in subsidiaries are stated at cost less impairment losses.
Impairment testing is performed where there is an indication of impairment, by comparing the recoverable amount of a cash-generating unit
with its carrying amount.
Critical estimates and judgements

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

The group does not consider there to be a significant risk of a material adjustment to the carrying amount of investment in subsidiary in the next
financial year but does consider this to be an area that is inherently judgemental.
Notes on the Financial Statements

120 | HSBC Bank plc Annual Report and Accounts 2023

Group sponsored structured entities
The group is considered to sponsor another entity if, in addition to ongoing involvement with the entity, it had a key role in establishing that
entity or in bringing together relevant counterparties so the transaction that is the purpose of the entity could occur. The group is generally not
considered a sponsor if the only involvement with the entity is merely administrative.
Interests in associates and joint arrangements
Joint arrangements are investments in which the group, together with one or more parties, has joint control. Depending on the group’s rights
and obligations, the joint arrangement is classified as either a joint operation or a joint venture. The group classifies investments in entities over
which it has significant influence, and those that are neither subsidiaries nor joint arrangements, as associates.
The group recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures
are recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates are included in the
consolidated financial statements of the group based on either financial statements made up to 31 December or pro-rated amounts adjusted for
any material transactions or events occurring between the date the financial statements are available and 31 December.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the
investment may be impaired, by comparing the recoverable amount of the relevant investment to its carrying amount. Goodwill on acquisition of
interests in joint ventures and associates is not tested separately for impairment, but is assessed as part of the carrying amount of the
investment.
(b)Income and expense
Operating income
Interest income and expense
Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value, are
recognised in ‘interest income’ and ‘interest expense’ in the income statement using the effective interest method. However, as an exception
to this, interest on debt instruments issued by the group for funding purposes that are designated under the fair value option to reduce an
accounting mismatch and on derivatives managed in conjunction with those debt instruments is included in interest expense.
Interest on credit-impaired financial assets is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount
of the asset less allowance for ECL).
Non-interest income and expense
The group generates fee income from services provided over time, such as account service and card fees, or when the group delivers a specific
transaction at a point in time, such as broking services and import/export services. With the exception of certain fund management and
performance fees, all other fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size
of the customer portfolio and HSBC’s performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee
income is generally earned from short-term contracts with payment terms that do not include a significant financing component.
The group acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, the
group acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.
The group recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer.
Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement.
Where the group offers a package of services that contains multiple non-distinct performance obligations, such as those included in account
service packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance
obligations, the corresponding transaction price is allocated to each performance obligation based on the estimated stand-alone selling prices.
Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and
usually the date when shareholders approve the dividend for unlisted equity securities.
Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:
– ‘Net income from financial instruments held for trading or managed on a fair value basis’: This comprises net trading income, which includes
all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial instruments
managed on a fair value basis, together with the related interest income, expense and dividends, excluding the effect of changes in the
credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair value of derivatives that are
managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.
– ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit
or loss’: This includes all gains and losses from changes in the fair value, together with related interest income, interest expense and
dividend income in respect of financial assets and liabilities measured at fair value through profit or loss, and those derivatives managed in
conjunction with the above that can be separately identifiable from other trading derivatives.
– ‘Changes in fair value of designated debt instruments and related derivatives’: Interest paid on the debt instruments and interest cash flows
on related derivatives is presented in interest expense where doing so reduces an accounting mismatch.
– ‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’: This includes interest on
instruments that fail the solely payments of principal and interest (‘SPPI’) test, see (d) below.
The accounting policies for insurance service result and insurance finance income/(expense) are disclosed in Note 1.2(j).
(c)Valuation of financial instruments
All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial
recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference
between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a
valuation technique that uses only data from observable markets, the group recognises the difference as a trading gain or loss at inception (a
‘day 1 gain or loss’). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the
transaction either until the transaction matures or is closed out or the valuation inputs become observable.

HSBC Bank plc Annual Report and Accounts 2023 | 121

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

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

(d)Financial instruments measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash
flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances
to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. The group accounts for
regular way amortised cost financial instruments using trade date accounting. The carrying amount of these financial assets at initial recognition
includes any directly attributable transactions costs.
The group may commit to underwriting loans on fixed contractual terms for specified periods of time. When the loan arising from the lending
commitment is expected to be sold shortly after origination, the commitment to lend is recorded as a derivative. When the group intends to hold
the loan, the loan commitment is included in the impairment calculations set out below.
Non-trading reverse repurchase, repurchase and similar agreements
When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance
sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell (‘reverse repos’) are
not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos
are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as
interest and recognised in net interest income over the life of the agreement.
Contracts that are economically equivalent to reverse repo or repo agreements (such as sales or purchases of debt securities entered into
together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with, reverse repo or repo
agreements.
(e)Financial assets measured at fair value through other comprehensive income
Financial assets managed within a business model that is achieved by both collecting contractual cash flows and selling and which contain
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at fair value
through other comprehensive income (‘FVOCI’). These comprise primarily debt securities. They are recognised on the trade date when HSBC
enters into contractual arrangements to purchase and are generally derecognised when they are either sold or redeemed. They are
subsequently remeasured at fair value with changes therein (except for those relating to impairment, interest income and foreign currency
exchange gains and losses) are recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or
losses in other comprehensive income are recognised in the income statement as ‘Gains less losses from financial instruments’. Financial
assets measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.
(f)Equity securities measured at fair value with fair value movements presented in other comprehensive income
The equity securities for which fair value movements are shown in other comprehensive income are business facilitation and other similar
investments where HSBC holds the investments other than to generate a capital return. Dividends from such investments are recognised in
profit or loss. Gains or losses on the derecognition of these equity securities are not transferred to profit or loss. Otherwise, equity securities are
measured at fair value through profit or loss.
(g)Financial instruments designated at fair value through profit or loss
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and
are so designated irrevocably at inception:
– the use of the designation removes or significantly reduces an accounting mismatch;
– a group of financial assets and liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy; and
– the financial liability contains one or more non-closely related embedded derivatives.
Designated financial assets are recognised when HSBC enters into contracts with counterparties, which is generally on trade date, and are
normally derecognised when the rights to the cash flows expire or are transferred. Designated financial liabilities are recognised when HSBC
enters into contracts with counterparties, which is generally on settlement date, and are normally derecognised when extinguished. Subsequent
changes in fair values are recognised in the income statement in ‘Net income from financial instruments held for trading or managed on a fair
value basis’ or ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value
through profit or loss’ or ‘Changes in fair value of designated debt and related derivatives’ except for the effect of changes in the liabilities' credit
risk, which is presented in 'Other comprehensive income', unless that treatment would create or enlarge an accounting mismatch in profit or
loss.
Notes on the Financial Statements

122 | HSBC Bank plc Annual Report and Accounts 2023

Under the above criterion, the main classes of financial instruments designated by HSBC are:
– Debt instruments for funding purposes that are designated to reduce an accounting mismatch: The interest and/or foreign exchange
exposure on certain fixed-rate debt securities issued has been matched with the interest and/or foreign exchange exposure on certain swaps
as part of a documented risk management strategy.
– Financial assets and financial liabilities under unit-linked and non-linked investment contracts: A contract under which HSBC does not accept
significant insurance risk from another party is not classified as an insurance contract, other than investment contracts with discretionary
participation features (‘DPF’), but is accounted for as a financial liability. Customer liabilities under linked and certain non-linked investment
contracts issued by insurance subsidiaries are determined based on the fair value of the assets held in the linked funds or by a valuation
model. The related financial assets and liabilities are managed and reported to management on a fair value basis. Designation at fair value of
the financial assets and related liabilities allows changes in fair values to be recorded in the income statement and presented in the same
line.
– Financial liabilities that contain both deposit and derivative components: These financial liabilities are managed and their performance
evaluated on a fair value basis.
(h)Derivatives
Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices.
Derivatives are recognised initially and are subsequently measured at fair value through profit or loss, with changes in fair value generally
recorded in the income statement. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is
negative. This includes embedded derivatives in financial liabilities, which are bifurcated from the host contract when they meet the definition of
a derivative on a stand-alone basis. Where the derivatives are managed with debt securities issued by HSBC that are designated at fair value
where doing so reduces an accounting mismatch, the contractual interest is shown in ‘Interest expense’ together with the interest payable on
the issued debt.
Hedge accounting
When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge
accounting relationships where the required criteria for documentation and hedge effectiveness are met. The group uses these derivatives or,
where allowed, other non-derivative hedging instruments in fair value hedges, cash flow hedges or hedges of net investments in foreign
operations as appropriate to the risk being hedged.
Fair value hedge
Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in
recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in
the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the
cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income
statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income
statement immediately.
Cash flow hedge
The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of
the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the
income statement within ‘Net trading income’. The accumulated gains and losses recognised in other comprehensive income are reclassified to
the income statement in the same periods in which the hedged item affects profit or loss. When a hedge relationship is discontinued, or
partially discontinued, any cumulative gain or loss recognised in other comprehensive income remains in equity until the forecast transaction is
recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously
recognised in other comprehensive income is immediately reclassified to the income statement.
Derivatives that do not qualify for hedge accounting
Non-qualifying hedges are derivatives entered into as economic hedges of assets and liabilities for which hedge accounting was not applied.
(i)Impairment of amortised cost and FVOCI financial assets
Expected credit losses are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements, other
financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee contracts.
At initial recognition, an allowance (or provision in the case of some loan commitments and financial guarantees) is recognised for ECL resulting
from possible default events within the next 12 months, or less, where the remaining life is less than 12 months, (’12-month ECL’). In the event
of a significant increase in credit risk, an allowance (or provision) is recognised for ECL resulting from all possible default events over the
expected life of the financial instrument (‘lifetime ECL’). Financial assets where 12-month ECL is recognised are considered to be ‘stage 1’;
financial assets which are considered to have experienced a significant increase in credit risk are in ‘stage 2’; and financial assets for which
there is objective evidence of impairment, and so are considered to be in default or otherwise credit impaired are in ‘stage 3’. Purchased or
originated credit-impaired financial assets ('POCI') are treated differently as set out below.
Credit-impaired (stage 3)
The group determines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether
contractual payments of either principal or interest are past due for more than 90 days, there are other indications that the borrower is unlikely
to pay such as that a concession has been granted to the borrower for economic or legal reasons relating to the borrower’s financial condition,
or the loan is otherwise considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due. Therefore, the
definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or
otherwise credit-impaired.
Interest income is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount less allowance for ECL).

HSBC Bank plc Annual Report and Accounts 2023 | 123

Write-off
Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of
recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security.
In circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further
recovery, write-off may be earlier.
Forbearance
Loans are identified as forborne and classified as either performing or non-performing when the group modifies the contractual terms due to
financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet the cure criteria,
as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of default have been
present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon entering forbearance would not
be reversed.
The group applies the EBA Guidelines on the application of definition of default for our retail portfolios, which affects credit risk policies and our
reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof). Further details are provided under
'Forborne loans and advances' on page 32.
Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable cure criteria (for example, they
continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is either
stage 1 or stage 2 as determined by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms)
and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms).
A forborne loan is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the
terms of an existing agreement are modified such that the forborne loan is a substantially different financial instrument. Any new loans that
arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be disclosed as forborne.
Loan modifications other than forborne loans
Loan modifications that are not identified as forborne are considered to be commercial restructurings. Where a commercial restructuring results
in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC’s
rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The
rights to cash flows are generally considered to have expired if the commercial restructuring is at market rates and no payment-related
concession has been provided. Modifications of certain higher credit risk wholesale loans are assessed for derecognition having regard to
changes in contractual terms that either individually or in combination are judged to result in a substantially different financial instrument.
Mandatory and general offer loan modifications that are not borrower specific, for example market-wide customer relief programmes generally
do not result in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL
impairment policy. Changes made to these financial instruments that are economically equivalent and required by interest rate benchmark
reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective interest
rate to be updated to reflect the change of the interest rate benchmark.
Significant increase in credit risk (stage 2)
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering
the change in the risk of default occurring over the remaining life of the financial instrument.
The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at initial recognition,
taking into account reasonable and supportable information, including information about past events, current conditions and future economic
conditions. The assessment is unbiased, probability-weighted, and to the extent relevant, uses forward-looking information consistent with that
used in the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its
weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the borrower, and the
geographical region. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a significant
increase in credit risk and these criteria will differ for different types of lending, particularly between retail and wholesale. However, unless
identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when 30 days past due. In
addition, wholesale loans that are individually assessed, which are typically corporate and commercial customers, and included on a watch or
worry list, are included in stage 2.
For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime probability of default ('PD'), which encompasses a
wide range of information including the obligor’s customer risk rating (‘CRR’), macro-economic condition forecasts and credit transition
probabilities. For origination CRRs up to 3.3, significant increase in credit risk is measured by comparing the average PD for the remaining term
estimated at origination with the equivalent estimation at reporting date. The quantitative measure of significance varies depending on the credit
quality at origination as follows:

Origination CRR | Significance trigger – PD to increase by
0.1-1.2 | 15bps
2.1-3.3 | 30bps

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

124 | HSBC Bank plc Annual Report and Accounts 2023

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

Origination CRR | Additional significance criteria – number of CRR grade notches deterioration required to identify as significant credit deterioration (stage 2) (> or equal to)
0.1 | 5 notches
1.1–4.2 | 4 notches
4.3–5.1 | 3 notches
5.2–7.1 | 2 notches
7.2–8.2 | 1 notch
8.3 | 0 notch

Further information about the 23-grade scale used for CRR can be found on page 31.
For Retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internally developed statistical models, which
incorporate all available information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than
12 months and is considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into
homogenous portfolios, generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an
adjusted 12-month PD greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The
expert credit risk judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a
PD higher than would be expected from loans that are performing as originally expected and higher than that which would have been acceptable
at origination. It therefore approximates a comparison of origination to reporting date PDs.
We continue to refine the retail transfer criteria approach for certain portfolios, as additional data becomes available, in order to utilise a more
relative approach for certain portfolios. These enhancements take advantage of the increase in origination related data in the assessment of
significant increases in credit risk by comparing remaining lifetime PD to the comparable remaining term lifetime PD at origination based on
portfolio-specific origination segments.
Unimpaired and without significant increase in credit risk (stage 1)
ECL resulting from default events that are possible within the next 12 months (’12-month ECL’) are recognised for financial instruments that
remain in stage 1.
Purchased or originated credit impaired
Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This
population includes new financial instruments recognised in most cases following the derecognition of forborne loans. The amount of change in
lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan is derecognised, even if the lifetime ECL are less than the amount
of ECL included in the estimated cash flows on initial recognition.
Movement between stages
Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since
initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased
since initial recognition based on the assessments described above. In the case of non-performing forborne loans such financial instruments are
transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing criteria as described above.
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information which is
relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future
events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money and
considers other factors such as climate-related risks.
In general, HSBC calculates ECL using three main components, a probability of default ('PD'), a loss given default ('LGD') and the exposure at
default (‘EAD’).
The 12-month ECL is calculated by multiplying the 12-month PD, LGD, and EAD. Lifetime ECL is calculated using the lifetime PD instead. The
12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument
respectively.
The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to
the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the
event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and
the time value of money.

HSBC Bank plc Annual Report and Accounts 2023 | 125

HSBC makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following
table:

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

While 12-month PDs are recalibrated from Basel models where possible, the lifetime PDs are determined by projecting the 12-month PD using
a term structure. For the Wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the
CRR bands over its life.
The ECL for Wholesale stage 3 is determined primarily on an individual basis using a discounted cash flow (‘DCF’) methodology. The expected
future cash flows are based on estimates as of the reporting date, reflecting reasonable and supportable assumptions and projections of future
recoveries and expected future receipts of interest.
Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its
estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral.
The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under up to
four different scenarios are probability-weighted by reference to the status of the borrower, economic scenarios applied more generally by
HSBC Group and judgement of in relation to the likelihood of the workout strategy succeeding or receivership being required. For less significant
cases where an individual assessment is undertaken, the effect of different economic scenarios and work-out strategies results in an ECL
calculation based on a most likely outcome which is adjusted to capture losses resulting from less likely but possible outcomes. For certain less
significant cases, the bank may use an LGD-based modelled approach to ECL assessment, which factors in a range of economic scenarios.
Period over which ECL is measured
Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it
12-month or lifetime ECL) is the maximum contractual period over which HSBC is exposed to credit risk. However, where the financial
instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn
commitment does not serve to limit HSBC’s exposure to credit risk to the contractual notice period, the contractual period does not determine
the maximum period considered. Instead, ECL is measured over the period HSBC remains exposed to credit risk that is not mitigated by credit
risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to
default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these
facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset component. As a result,
the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision. For wholesale overdraft facilities, credit risk management actions are taken no less
frequently than on an annual basis.
Forward-looking economic inputs
HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of
its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit loss in most economic
environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios or adjustments, to
reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in 'Measurement
uncertainty and sensitivity analysis of ECL estimates' on page 41.
Critical estimates and judgements

The calculation of the group’s ECL under IFRS 9 requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Judgements | Estimates
– Defining what is considered to be a significant increase in credit risk. – Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making reasonable and supportable judgements about how models react to current and future economic conditions. – Selecting model inputs and economic forecasts, including determining whether sufficient and appropriately weighted economic forecasts are incorporated to calculate unbiased expected credit loss. – Making management judgemental adjustments to account for late breaking events, model and data limitations and deficiencies, and expert credit judgements. – Selecting applicable recovery strategies for certain wholesale credit-impaired loans. | – The section ‘Measurement uncertainty and sensitivity analysis of ECL estimates’, marked as audited from page 41 sets out the assumptions used in determining ECL, and provides an indication of the sensitivity of the result to the application of different weightings being applied to different economic assumptions.

Notes on the Financial Statements

126 | HSBC Bank plc Annual Report and Accounts 2023

(j)Insurance contracts
A contract is classified as an insurance contract where the group accepts significant insurance risk from another party by agreeing to
compensate that party on the occurrence of a specified uncertain future event. An insurance contract may also transfer financial risk, but is
accounted for as an insurance contract if the insurance risk is significant. In addition, the group issues investment contracts with discretionary
participation features ('DPF') which are also accounted for as insurance contracts as required by IFRS 17 ‘Insurance Contracts’.
Aggregation of insurance contracts
Individual insurance contracts that are managed together and subject to similar risks are identified as a portfolio. Contracts that are managed
together usually belong to the same product group, and have similar characteristics such as being subject to a similar pricing framework or
similar product management, and are issued by the same legal entity. If a contract is exposed to more than one risk, the dominant risk of the
contract is used to assess whether the contract features similar risks. Each portfolio is further separated by the contract’s expected profitability.
The portfolios are split by their profitability into: (i) contracts that are onerous at initial recognition; (ii) contracts that at initial recognition have no
significant possibility of becoming onerous subsequently; and (iii) the remaining contracts. These profitability groups are then divided by issue
date, with most contracts the group issues after the transition date being grouped into calendar quarter cohorts. For multi-currency groups of
contracts, the group considers its groups of contracts as being denominated in a single currency.
The measurement of the insurance contract liability is based on groups of insurance contracts as established at initial recognition, and will
include fulfilment cash flows as well as the CSM representing the unearned profit. The group has elected to update the estimates used in the
measurement on a year-to-date basis.
Fulfilment cash flows
The fulfilment cash flows comprise the following:
Best estimates of future cash flows
These cash flows within the contract boundary of each contract in the group include amounts expected to be collected from premiums and
payouts for claims, benefits and expenses, and are projected using a range of scenarios and assumptions in an unbiased way based on the
group’s demographic and operating experience along with external mortality data where the group’s own experience data is not sufficiently
large in size to be credible.
Adjustment for the time value of money (i.e. discounting) and financial risks associated with the future cash flows
The estimates of future cash flows are adjusted to reflect the time value of money and the financial risks to derive an expected present value.
The group generally makes use of stochastic modelling techniques in the estimation for products with options and guarantees.
A bottom-up approach is used to determine the discount rate to be applied to a given set of expected future cash flows. This is derived as the
sum of the risk-free yield and an illiquidity premium. The risk-free yield is determined based on observable market data, where such markets are
considered to be deep, liquid and transparent. When information is not available, management judgement is applied to determine the
appropriate risk-free yield. Illiquidity premiums reflect the liquidity characteristics of the associated insurance contracts.
Risk adjustment for non-financial risk
The risk adjustment reflects the compensation required for bearing the uncertainty about the amount and timing of future cash flows that arises
from non-financial risk. It is calculated as a 75th percentile level of stress over a one-year period. The level of the stress is determined with
reference to external regulatory stresses and internal economic capital stresses.
For the main insurance manufacturing entity in the group, the one-year 75th percentile level of stress corresponds to the 60th percentile (2022:
60th percentile) based on an ultimate view of risk over all future years.
The group does not disaggregate changes in the risk adjustment between insurance service result (comprising insurance revenue and insurance
service expense) and insurance finance income or expenses. All changes are included in insurance service result.
Measurement models
The variable fee approach (‘VFA’) measurement model is used for most of the contracts issued by the group, which is mandatory upon meeting
the following eligibility criteria at inception:
– the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
– the group expects to pay to the policyholder a substantial share of the fair value returns on the underlying items. The group considers that a
substantial share is a majority of returns; and
– the group expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value of
the underlying items. The group considers that a substantial proportion is a majority proportion of change on a present value probability-
weighted average of all scenarios.
For some contracts measured under VFA, the other comprehensive income (‘OCI’) option is used. The OCI option is applied where the
underlying items held by the group are not accounted for at fair value through profit or loss. Under this option, only the amount that matches
income or expenses recognised in profit or loss on underlying items is included in finance income or expenses for these insurance contracts,
and hence results in the elimination of accounting mismatches. The remaining amount of finance income or expenses for these insurance
contracts issued for the period is recognised in OCI. In addition, the risk mitigation option is used for a number of economic offsets against the
instruments that meet specific requirements.
The remaining contracts issued and the reinsurance contracts held are accounted for under the general measurement model (‘GMM’).
CSM and coverage units
The CSM represents the unearned profit and results in no income or expense at initial recognition when the group of contracts is profitable. The
CSM is adjusted at each subsequent reporting period for changes in fulfilment cash flows relating to future service (e.g. changes in non-
economic assumptions, including mortality and morbidity rates). For initial recognition of onerous groups of contracts and when groups of
contracts become onerous subsequently, losses are recognised in insurance service expense immediately.

HSBC Bank plc Annual Report and Accounts 2023 | 127

For groups of contracts measured using the VFA, changes in the group’s share of the underlying items, and economic experience and economic
assumption changes adjust the CSM, whereas these changes do not adjust the CSM under the GMM, but are recognised in profit or loss as
they arise. However, under the risk mitigation option for VFA contracts, the changes in the fulfilment cash flows and the changes in the group’s
share in the fair value return on underlying items that the instruments mitigate are not adjusted in CSM but recognised in profit or loss. The risk
mitigating instruments are primarily reinsurance contracts held.
The CSM is systematically recognised in insurance revenue to reflect the insurance contract services provided, based on the coverage units of
the group of contracts. Coverage units are determined by the quantity of benefits and the expected coverage period of the contracts.
The group identifies the quantity of the benefits provided as follows:
– Insurance coverage: This is based on the expected net policyholder insurance benefit at each period after allowance for decrements, where
net policyholder insurance benefit refers to the amount of sum assured less the fund value or surrender value.
– Investment services (including both investment-return service and investment-related service): This is based on a constant measure basis
which reflects the provision of access for the policyholder to the facility.
For contracts that provide both insurance coverage and investment services, coverage units are weighted according to the expected present
value of the future cash outflows for each service.
Insurance service result
Insurance revenue reflects the consideration to which the group expects to be entitled in exchange for the provision of coverage and other
insurance contract services (excluding any investment components). Insurance service expenses comprise the incurred claims and other
incurred insurance service expenses (excluding any investment components), and losses on onerous groups of contracts and reversals of such
losses.
Insurance finance income and expenses
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising from the effects
of the time value of money, financial risk and changes therein. For VFA contracts, changes in the fair value of underlying items (excluding
additions and withdrawals) are recognised in insurance finance income or expenses.
(k) Employee compensation and benefits
Share-based payments
The group enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the
provision of their services. The vesting period for these schemes may commence before the legal grant date if the employees have started to
render services in respect of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the
arrangement. Expenses are recognised when the employee starts to render service to which the award relates.
Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting
recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the
amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.
Post-employment benefit plans
The group operates a number of pension schemes including defined benefit, defined contribution and post-employment benefit schemes.
Payments to defined contribution schemes are charged as an expense as the employees render service.
Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly
comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.
Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net
defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets, after
applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and reductions in future
contributions to the plan.
The costs of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.
(l)Tax
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to
items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement in which the
related item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years.
The group provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities.
Payments associated with any incremental base erosion and anti-abuse tax are reflected in tax expense in the period incurred.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the
amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods
as the assets will be realised or the liabilities settled.
In assessing the probability and sufficiency of future taxable profit, we consider the availability of evidence to support the recognition of deferred
tax assets. taking into account the inherent risks in long-term forecasting, including climate change-related, and drivers of recent history of tax
losses where applicable. We also consider the future reversal of existing taxable temporary differences and tax planning strategies, including
corporate reorganisations.
Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
Notes on the Financial Statements

128 | HSBC Bank plc Annual Report and Accounts 2023

Critical estimates and judgements

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

The group does not consider there to be a significant risk of a material adjustment to the carrying amount of the deferred tax assets in the next
financial year but does consider this to be an area that is inherently judgemental.
(m) Provisions, contingent liabilities and guarantees
Provisions
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive
obligation that has arisen as a result of past events and for which a reliable estimate can be made.
Critical estimates and judgements

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

Contingent liabilities, contractual commitments and guarantees
Contingent liabilities
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related to
legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of settlement is
remote.
Financial guarantee contracts
Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is
generally the fee received or present value of the fee receivable.
The bank has issued financial guarantees and similar contracts to other group entities. The group elects to account for certain guarantees as
insurance contracts in the bank’s financial statements, in which case they are measured and recognised as insurance liabilities. This election is
made on a contract by contract basis, and is irrevocable.
(n)Impairment of non-financial assets
Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible
assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of
impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In addition,
impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are considered to be the
principal operating legal entities divided by global business.
Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of the fair
value less costs of disposal or the value in use. The carrying amount of a CGU comprises the carrying amount of its assets and liabilities,
including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and consistent
basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping of CGUs. The
recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent and
qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs. When the recoverable amount of a CGU
is less than its carrying amount, an impairment loss is recognised in the income statement to the extent that the impairment can be allocated on
a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of their respective individual recoverable amount or
nil. Impairment is not allocated to the financial assets in a CGU.
Impairment losses recognised in prior periods for non-financial assets are reversed when there has been a change in the estimate used to
determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would not
exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior
periods.

HSBC Bank plc Annual Report and Accounts 2023 | 129

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

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

2 | Net fee income

Net fee income by product type
2023 |  | 2022 1 | 2021 1
| £m | £m | £m
Net fee income by product |  |  |
Account services | 339 | 302 | 271
Funds under management | 408 | 420 | 465
Cards | 59 | 56 | 44
Credit facilities | 278 | 235 | 246
Broking income | 327 | 354 | 368
Underwriting | 239 | 171 | 286
Imports/exports | 35 | 44 | 40
Remittances | 114 | 101 | 84
Global custody | 190 | 203 | 200
Corporate finance | 45 | 124 | 132
Securities others — (including stock lending) | 95 | 81 | 76
Trust income | 55 | 49 | 43
Other | 410 | 453 | 451
Fee income | 2,594 | 2,593 | 2,706
Less: fee expense | (1,365) | (1,298) | (1,293)
Net fee income | 1,229 | 1,295 | 1,413

Net fee income by global business
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
Year ended 31 Dec 2023 |  |  |  |  |  |  |
Fee income | 1,275 | 847 | 131 | 427 | 556 | (642) | 2,594
Less: fee expense | (1,496) | (177) | (102) | (19) | (207) | 636 | (1,365)
Net fee income/ (expense) | (221) | 670 | 29 | 408 | 349 | (6) | 1,229
Year ended 31 Dec 2022 1 |  |  |  |  |  |  |
Fee income | 1,301 | 817 | 69 | 425 | 580 | (599) | 2,593
Less: fee expense | (1,439) | (173) | (55) | (25) | (199) | 593 | (1,298)
Net fee income/ (expense) | (138) | 644 | 14 | 400 | 381 | (6) | 1,295
Year ended 31 Dec 2021 1 |  |  |  |  |  |  |
Fee income | 1,251 | 861 | 89 | 415 | 633 | (543) | 2,706
Less: fee expense | (1,245) | (188) | (83) | (54) | (255) | 532 | (1,293)
Net fee income/ (expense) | 6 | 673 | 6 | 361 | 378 | (11) | 1,413

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
Notes on the Financial Statements

130 | HSBC Bank plc Annual Report and Accounts 2023

Net fee income includes £842m of fees earned on financial assets that are not at fair value through profit or loss (other than amounts included in
determining the effective interest rate) (2022: £778m; 2021: £935m), £247m of fees payable on financial liabilities that are not at fair value
through profit of loss (other than amounts included in determining the effective interest rate) (2022: £229m; 2021: £221m), £654m of fees
earned on trust and other fiduciary activities (2022: £673m; 2021: £709m), and £83m of fees payable relating to trust and other fiduciary
activities (2022: £69m; 2021: £61m).

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

| 2023 | 2022 | 2021
| £m | £m | £m
Net income arising on: |  |  |
Net Trading activities | 4,569 | (2,840) | 3
Other instruments managed on a fair value basis | (1,174) | 5,715 | 1,730
Net income from financial instruments held for trading or managed on a fair value basis | 3,395 | 2,875 | 1,733
Financial assets held to meet liabilities under insurance and investment contracts | 1,231 | (1,429) | 1,305
Liabilities to customers under investment contracts | (63) | 59 | (91)
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | 1,168 | (1,370) | 1,214
Derivatives managed in conjunction with the group's issued debt securities | 189 | (736) | (337)
Other changes in fair value | (252) | 838 | 329
Changes in fair value of designated debt and related derivatives | (63) | 102 | (8)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 284 | 143 | 493
Year ended 31 Dec | 4,784 | 1,750 | 3,432

4 | Insurance business

The table below represents an analysis of the total insurance revenue and expenses recognised in the period:

Insurance Service result
| Year ended 31 Dec 2023 | Year ended 31 Dec 2022 1
| Life direct participating and Investment DPF contracts 2 | Life other contracts 3 | Total | Life direct participating and Investment DPF contracts 2 | Life other contracts 3 | Total
| £m | £m | £m | £m | £m | £m
Insurance revenue |  |  |  |  |  |
Amounts relating to changes in liabilities for remaining coverage | 183 | 188 | 371 | 165 | 193 | 358
– Contractual service margin recognised for services provided | 77 | 43 | 120 | 78 | 36 | 114
– Change in risk adjustment for non-financial risk for risk expired | 6 | 6 | 12 | 5 | 7 | 12
– Expected incurred claims and other insurance service expenses | 100 | 139 | 239 | 82 | 150 | 232
Recovery of insurance acquisition cash flows | 2 | 6 | 8 | 1 | 2 | 3
Total insurance revenue | 185 | 194 | 379 | 166 | 195 | 361
Insurance service expenses |  |  |  |  |  |
Incurred claims and other insurance service expenses | (88) | (120) | (208) | (88) | (132) | (220)
Losses and reversal of losses on onerous contracts | (8) | (7) | (15) | (2) | (6) | (8)
Amortisation of insurance acquisition cash flows | (2) | (6) | (8) | (1) | (2) | (3)
Adjustments to liabilities for incurred claims | — | (24) | (24) | 1 | (10) | (9)
Total insurance service expenses | (98) | (157) | (255) | (90) | (150) | (240)
Total insurance service results | 87 | 37 | 124 | 76 | 45 | 121

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2 'Life direct participating and investment DPF contracts' are substantially measured under the variable fee approach measurement model.
3 'Life other contracts' are measured under the general measurement model.

HSBC Bank plc Annual Report and Accounts 2023 | 131

Net investment return
| Year ended 31 Dec 2023 | Year ended 31 Dec 2022 1
| Life direct participating and Investment DPF contracts | Life other contracts | Total | Life direct participating and Investment DPF contracts | Life other contracts | Total
| £m | £m | £m | £m | £m | £m
Investment return |  |  |  |  |  |
Amounts recognised in profit or loss 2 | 1,246 | 17 | 1,263 | (1,086) | (4) | (1,090)
Amounts recognised in OCI 3 | 404 | — | 404 | (1,899) | — | (1,899)
Total investment return (memorandum) | 1,650 | 17 | 1,667 | (2,985) | (4) | (2,989)
Net finance (expense)/income |  |  |  |  |  |
Changes in fair value of underlying items of direct participating contracts | (1,585) | — | (1,585) | 2,979 | — | 2,979
Interest accreted | — | 2 | 2 | — | 7 | 7
Effect of changes in interest rates and other financial assumptions | — | 1 | 1 | — | 19 | 19
Effect of measuring changes in estimates at current rates and adjusting the CSM at rates on initial recognition | — | (4) | (4) | — | (1) | (1)
Total net finance (expenses)/income from insurance contracts | (1,585) | (1) | (1,586) | 2,979 | 25 | 3,004
Represented by: |  |  |  |  |  |
Amounts recognised in profit or loss | (1,183) | (1) | (1,184) | 1,081 | 25 | 1,106
Amounts recognised in OCI | (402) | — | (402) | 1,898 | — | 1,898
Total net investment results | 65 | 16 | 81 | (6) | 21 | 15
Represented by: |  |  |  |  |  |
Amounts recognised in profit or loss | 63 | 16 | 79 | (5) | 21 | 16
Amounts recognised in OCI | 2 | — | 2 | (1) | — | (1)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2 Total Bank ‘Net income/(expense) from assets and liabilities of insurance business, including related derivatives, measured at fair value through profit
or loss’ gain of £1,168m (2022: £1,370m loss) includes returns on assets and liabilities supporting insurance policies o f £1,082m (2022: £1,300m loss)
and on shareholder assets of £86m (2022: £70m loss). Investment returns of £1,263m (2022: £1,090m loss) include gains of £1,082m (2022: £1,300m
loss) on underlying assets supporting insurance liabilities reported in ‘Net income/(expense) from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through profit or loss’, £187m gains (2022: £210m gain) reported in ‘Net interest income’ and £6m
loss (2022: nil) reported in ‘Other operating income’.
3 ‘Amounts recognised in OCI’ for the year ended 31 December 2023 included fair value gains of £407m (2022: £1,902m losses) and impairment of £3m
(2022: £3m impairment reversal).

Reconciliation of amounts included in other comprehensive income for financial assets measured at fair value through other comprehensive income - Contracts measured under the modified retrospective approach
| 2023 | 2022
| £m | £m
Balance at 1 Jan | (808) | 459
Net change in fair value | 363 | (1,665)
Net amount reclassified to profit or loss | (5) | (1)
Related income tax | (93) | 430
Foreign exchange and other | 17 | (31)
Balance at 31 Dec | (526) | (808)

Notes on the Financial Statements

132 | HSBC Bank plc Annual Report and Accounts 2023

Movements in carrying amounts of insurance contracts - Analysis by remaining coverage and incurred claims
| Year ended 31 Dec 2023
| Life direct participating and Investment DPF contracts | Life other contracts |
| Liabilities for remaining coverage: |  |  | Liabilities for remaining coverage: |  |  |
| Excluding loss component | Loss component | Incurred claims | Total | Excluding loss component | Loss component | Incurred claims | Total | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Opening assets | — | — | — | — | (49) | — | 6 | (43) | (43)
Opening liabilities | 19,712 | 5 | 2 | 19,719 | 146 | 10 | 129 | 285 | 20,004
Net opening balance at 1 Jan 2023 | 19,712 | 5 | 2 | 19,719 | 97 | 10 | 135 | 242 | 19,961
Changes in the statement of profit or loss and other comprehensive income |  |  |  |  |  |  |  |  |
Insurance revenue |  |  |  |  |  |  |  |  |
Contracts under the fair value approach | (11) | — | — | (11) | (78) | — | — | (78) | (89)
Contracts under the modified retrospective approach | (119) | — | — | (119) | (17) | — | — | (17) | (136)
Other contracts 2 | (55) | — | — | (55) | (99) | — | — | (99) | (154)
Total insurance revenue | (185) | — | — | (185) | (194) | — | — | (194) | (379)
Insurance service expenses |  |  |  |  |  |  |  |  |
Incurred claims and other insurance service expenses | — | (1) | 89 | 88 | — | (1) | 121 | 120 | 208
Amortisation of insurance acquisition cash flows | 2 | — | — | 2 | 6 | — | — | 6 | 8
Losses and reversal of losses on onerous contracts | — | 8 | — | 8 | — | 7 | — | 7 | 15
Adjustments to liabilities for incurred claims | — | — | — | — | — | — | 24 | 24 | 24
Total insurance service expenses | 2 | 7 | 89 | 98 | 6 | 6 | 145 | 157 | 255
Investment components | (1,879) | — | 1,879 | — | (3) | — | 3 | — | —
Insurance service result | (2,062) | 7 | 1,968 | (87) | (191) | 6 | 148 | (37) | (124)
Net finance (income)/expense from insurance contracts 3 | 1,585 | — | — | 1,585 | — | — | 1 | 1 | 1,586
Effect of movements in exchange rates | (371) | — | — | (371) | (1) | — | — | (1) | (372)
Total changes in the statement of profit or loss and other comprehensive income | (848) | 7 | 1,968 | 1,127 | (192) | 6 | 149 | (37) | 1,090
Cash flows |  |  |  |  |  |  |  |  |
Premiums received | 1,471 | — | — | 1,471 | 218 | — | — | 218 | 1,689
Claims and other insurance service expenses paid, including investment components | (51) | — | (1,968) | (2,019) | — | — | (116) | (116) | (2,135)
Insurance acquisition cash flows | (15) | — |  | (15) | (28) | — |  | (28) | (43)
Total cash flows | 1,405 | — | (1,968) | (563) | 190 | — | (116) | 74 | (489)
Other movements | 5 | 1 | — | 6 | 3 | — | (17) | (14) | (8)
Net closing balance at 31 Dec 2023 | 20,274 | 13 | 2 | 20,289 | 98 | 16 | 151 | 265 | 20,554
Closing assets | — | — | — | — | (54) | 4 | 9 | (41) | (41)
Closing liabilities | 20,274 | 13 | 2 | 20,289 | 152 | 12 | 142 | 306 | 20,595
Net closing balance at 31 Dec 2023 | 20,274 | 13 | 2 | 20,289 | 98 | 16 | 151 | 265 | 20,554

HSBC Bank plc Annual Report and Accounts 2023 | 133

Movements in carrying amounts of insurance contracts - Analysis by remaining coverage and incurred claims (continued)
| Year ended 31 Dec 2022 1
| Life direct participating and Investment DPF contracts | Life other contracts |
| Liabilities for: |  | Liabilities for: |  |
| Excluding loss component | Loss component | Incurred claims | Total | Excluding loss component | Loss component | Incurred claims | Total | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Opening assets | — | — | — | — | (53) | 1 | 5 | (47) | (47)
Opening liabilities | 21,916 | 4 | 2 | 21,922 | 170 | 4 | 105 | 279 | 22,201
Net opening balance at 1 Jan 2022 | 21,916 | 4 | 2 | 21,922 | 117 | 5 | 110 | 232 | 22,154
Changes in the statement of profit or loss and other comprehensive income |  |  |  |  |  |  |  |  |
Insurance revenue |  |  |  |  |  |  |  |  |
Contracts under the fair value approach | (10) | — | — | (10) | (83) | — | — | (83) | (93)
Contracts under the modified retrospective approach | (120) | — | — | (120) | (20) | — | — | (20) | (140)
Other contracts 2 | (36) | — | — | (36) | (92) | — | — | (92) | (128)
Total insurance revenue | (166) | — | — | (166) | (195) | — | — | (195) | (361)
Insurance service expenses |  |  |  |  |  |  |  |  |
Incurred claims and other insurance service expenses | — | (1) | 89 | 88 | — | — | 132 | 132 | 220
Amortisation of insurance acquisition cash flows | 1 | — | — | 1 | 2 | — | — | 2 | 3
Losses and reversal of losses on onerous contracts | — | 2 | — | 2 | — | 6 | — | 6 | 8
Adjustments to liabilities for incurred claims | — | — | (1) | (1) | — | — | 10 | 10 | 9
Total insurance service expenses | 1 | 1 | 88 | 90 | 2 | 6 | 142 | 150 | 240
Investment components | (1,687) | — | 1,687 | — | (3) | — | 3 | — | —
Insurance service result | (1,852) | 1 | 1,775 | (76) | (196) | 6 | 145 | (45) | (121)
Net finance income from insurance contracts 3 | (2,979) | — | — | (2,979) | (19) | — | (6) | (25) | (3,004)
Effect of movements in exchange rates | 946 | — | — | 946 | — | — | 3 | 3 | 949
Total changes in the statement of profit or loss and other comprehensive income | (3,885) | 1 | 1,775 | (2,109) | (215) | 6 | 142 | (67) | (2,176)
Cash flows |  |  |  |  |  |  |  |  |
Premiums received | 1,721 | — | — | 1,721 | 215 | — | — | 215 | 1,936
Claims and other insurance service expenses paid, including investment components | (41) | — | (1,775) | (1,816) | — | — | (124) | (124) | (1,940)
Insurance acquisition cash flows | (14) | — | — | (14) | (26) | — | — | (26) | (40)
Total cash flows | 1,666 | — | (1,775) | (109) | 189 | — | (124) | 65 | (44)
Other movements | 15 | — | — | 15 | 6 | (1) | 7 | 12 | 27
Net closing balance at 31 Dec 2022 | 19,712 | 5 | 2 | 19,719 | 97 | 10 | 135 | 242 | 19,961
Closing assets | — | — | — | — | (49) | — | 6 | (43) | (43)
Closing liabilities | 19,712 | 5 | 2 | 19,719 | 146 | 10 | 129 | 285 | 20,004
Net closing balance at 31 Dec 2022 | 19,712 | 5 | 2 | 19,719 | 97 | 10 | 135 | 242 | 19,961

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2 'Other contracts' are those contracts measured by applying IFRS 17 from inception of the contracts. This includes contracts measured under the full
retrospective approach at Transition and contracts incepted after Transition.
3 ‘Net finance (income)/expense from insurance contracts’ expense of £1,586m (2022: £3,004m income) comprises expense of £1,184m (2022:
£1,106m income) recognised in the statement of profit or loss and expense of £402m (2022: £1,898m income) recognised in the statement of other
comprehensive income.
Notes on the Financial Statements

134 | HSBC Bank plc Annual Report and Accounts 2023

Movements in carrying amounts of insurance contracts - Analysis by measurement component
| Year ended 31 Dec 2023 |
| Life direct participating and investment discretionary participating contracts | Life other contracts
|  | Contractual service margin |  |  | Contractual service margin |
| Estimates of present value of future cash flows and risk adjustment | Contracts under the fair value approach | Contracts under the modified retros- pective approach | Other contracts 2 | Total | Estimates of present value of future cash flows and risk adjustment | Contracts under the fair value approach | Contracts under the modified retros- pective approach | Other contracts 2 | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Opening assets | — | — | — | — | — | (76) | 6 | — | 27 | (43)
Opening liabilities | 18,771 | 29 | 657 | 262 | 19,719 | 134 | 114 | 15 | 22 | 285
Net opening balance at 1 Jan 2023 | 18,771 | 29 | 657 | 262 | 19,719 | 58 | 120 | 15 | 49 | 242
Changes in the statement of profit or loss and other comprehensive income |  |  |  |  |  |  |  |  |  |
Changes that relate to current services |  |  |  |  |  |  |  |  |  |
Contractual service margin recognised for services provided | — | (3) | (57) | (17) | (77) | — | (19) | (5) | (19) | (43)
Change in risk adjustment for non-financial risk expired | (6) | — | — | — | (6) | (6) | — | — | — | (6)
Experience adjustments | (12) | — | — | — | (12) | (19) | — | — | — | (19)
Changes that relate to future services |  |  |  |  |  |  |  |  |  |
Contracts initially recognised in the year | (48) | — | — | 48 | — | (24) | — | — | 25 | 1
Changes in estimates that adjust contractual service margin | 133 | (16) | (26) | (91) | — | (1) | 9 | 5 | (13) | —
Changes in estimates that result in losses and reversal of losses on onerous contracts | 8 | — | — | — | 8 | 6 | — | — | — | 6
Changes that relate to past services |  |  |  |  |  |  |  |  |  |
Adjustments to liabilities for incurred claims | — | — | — | — | — | 24 | — | — | — | 24
Insurance service result | 75 | (19) | (83) | (60) | (87) | (20) | (10) | — | (7) | (37)
Net finance (income)/expense from insurance contracts 3 | 1,585 | — | — | — | 1,585 | (1) | 1 | — | 1 | 1
Effect of movements in exchange rates | (352) | — | (14) | (5) | (371) | — | (1) | — | — | (1)
Total changes in the statement of profit or loss and other comprehensive income | 1,308 | (19) | (97) | (65) | 1,127 | (21) | (10) | — | (6) | (37)
Cash flows |  |  |  |  |  |  |  |  |  |
Premiums received | 1,471 | — | — | — | 1,471 | 218 | — | — | — | 218
Claims, other insurance service expenses paid (including investment components) and other cash flows | (2,019) | — | — | — | (2,019) | (116) | — | — | — | (116)
Insurance acquisition cash flows | (15) | — | — | — | (15) | (28) | — | — | — | (28)
Total cash flows | (563) | — | — | — | (563) | 74 | — | — | — | 74
Other movements | 1 | — | 1 | 4 | 6 | (21) | — | — | 7 | (14)
Net closing balance at 31 Dec 2023 | 19,517 | 10 | 561 | 201 | 20,289 | 90 | 110 | 15 | 50 | 265
Closing assets | — | — | — | — | — | (63) | 4 | — | 18 | (41)
Closing liabilities | 19,517 | 10 | 561 | 201 | 20,289 | 153 | 106 | 15 | 32 | 306
Net closing balance at 31 Dec 2023 | 19,517 | 10 | 561 | 201 | 20,289 | 90 | 110 | 15 | 50 | 265

HSBC Bank plc Annual Report and Accounts 2023 | 135

Movements in carrying amounts of insurance contracts - Analysis by measurement component (continued)
| Year ended 31 Dec 2022 |
| Life direct participating and investment discretionary participating contracts | Life other contracts
|  | Contractual service margin |  |  | Contractual service margin |
| Estimates of present value of future cash flows and risk adjustment | Contracts under the fair value approach | Contracts under the modified retros- pective approach | Other contracts 2 | Total | Estimates of present value of future cash flows and risk adjustment | Contracts under the fair value approach | Contracts under the modified retros- pective approach | Other contracts 2 | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Opening assets | — | — | — | — | — | (79) | 17 | — | 15 | (47)
Opening liabilities | 21,172 | 34 | 520 | 196 | 21,922 | 139 | 94 | 19 | 27 | 279
Net opening balance at 1 Jan 2022 | 21,172 | 34 | 520 | 196 | 21,922 | 60 | 111 | 19 | 42 | 232
Changes in the statement of profit or loss and other comprehensive income |  |  |  |  |  |  |  |  |  |
Changes that relate to current services |  |  |  |  |  |  |  |  |  |
Contractual service margin recognised for services provided | — | (3) | (57) | (18) | (78) | — | (21) | (5) | (10) | (36)
Change in risk adjustment for non- financial risk expired | (5) | — | — | — | (5) | (7) | — | — | — | (7)
Experience adjustments | 6 | — | — | — | 6 | (20) | — | — | — | (20)
Changes that relate to future services |  |  |  |  |  |  |  |  |  |
Contracts initially recognised in the year | (54) | — | — | 54 | — | (23) | — | — | 25 | 2
Changes in estimates that adjust contractual service margin | (178) | 1 | 161 | 16 | — | (8) | 11 | — | (3) | —
Changes in estimates that result in losses and reversal of losses on onerous contracts | 2 | — | — | — | 2 | 6 | — | — | — | 6
Changes that relate to past services |  |  |  |  |  |  |  |  |  |
Adjustments to liabilities for incurred claims | (1) | — | — | — | (1) | 10 | — | — | — | 10
Insurance service result | (230) | (2) | 104 | 52 | (76) | (42) | (10) | (5) | 12 | (45)
Net finance income from insurance contracts 3 | (2,979) | — | — | — | (2,979) | (26) | 1 | — | — | (25)
Effect of movements in exchange rates | 901 | 1 | 33 | 11 | 946 | (2) | 3 | 1 | 1 | 3
Total changes in the statement of profit or loss and other comprehensive income | (2,308) | (1) | 137 | 63 | (2,109) | (70) | (6) | (4) | 13 | (67)
Cash flows |  |  |  |  |  |  |  |  |  |
Premiums received | 1,721 | — | — | — | 1,721 | 215 | — | — | — | 215
Claims, other insurance service expenses paid (including investment components) and other cash flows | (1,816) | — | — | — | (1,816) | (124) | — | — | — | (124)
Insurance acquisition cash flows | (14) | — | — | — | (14) | (26) | — | — | — | (26)
Total cash flows | (109) | — | — | — | (109) | 65 | — | — | — | 65
Other movements | 16 | (4) | — | 3 | 15 | 3 | 15 | — | (6) | 12
Net closing balance at 31 Dec 2022 | 18,771 | 29 | 657 | 262 | 19,719 | 58 | 120 | 15 | 49 | 242
Closing assets | — | — | — | — | — | (76) | 6 | — | 27 | (43)
Closing liabilities | 18,771 | 29 | 657 | 262 | 19,719 | 134 | 114 | 15 | 22 | 285
Net closing balance at 31 Dec 2022 | 18,771 | 29 | 657 | 262 | 19,719 | 58 | 120 | 15 | 49 | 242

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
2 'Other contracts' are those contracts measured by applying IFRS 17 from inception of the contracts. These include contracts measured under the full
retrospective approach at Transition and contracts incepted after Transition.
3 ‘Net finance (income)/expense from insurance contracts’ expense of £1,586m (2022: £3,004m income) comprises expense of £1,184m (2022:
£1,106m income) recognised in the statement of profit or loss and expense of £402m (2022: £1,898m income) recognised in the statement of other
comprehensive income.
Notes on the Financial Statements

136 | HSBC Bank plc Annual Report and Accounts 2023

Effect of contracts initially recognised in the year
| Year ended 31 Dec 2023 | Year ended 31 Dec 2022 1
| Profitable contracts issued | Onerous contracts issued | Total | Profitable contracts issued | Onerous contracts issued | Total
| £m | £m | £m | £m | £m | £m
Life direct participating and investment DPF contracts |  |  |  |  |  |
Estimates of present value of cash outflows | 1,169 | 15 | 1,184 | 1,377 | 12 | 1,389
– Insurance acquisition cash flows | 10 | — | 10 | — | — | —
– Claims and other insurance service expenses payable | 1,159 | 15 | 1,174 | 1,377 | 12 | 1,389
Estimates of present value of cash inflows | (1,222) | (15) | (1,237) | (1,437) | (12) | (1,449)
Risk adjustment for non-financial risk | 5 | — | 5 | 4 | — | 4
Contractual service margin | 48 | — | 48 | 56 | — | 56
Losses recognised on initial recognition | — | — | — | — | — | —
Life other contracts |  |  |  |  |  |
Estimates of present value of cash outflows | 129 | 9 | 138 | 150 | 22 | 172
– Insurance acquisition cash flows | 1 | — | 1 | — | — | —
– Claims and other insurance service expenses payable | 128 | 9 | 137 | 150 | 22 | 172
Estimates of present value of cash inflows | (161) | (8) | (169) | (183) | (20) | (203)
Risk adjustment for non-financial risk | 7 | — | 7 | 7 | 1 | 8
Contractual service margin | 25 | — | 25 | 25 | — | 25
Losses recognised on initial recognition | — | (1) | (1) | — | (2) | (2)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.

Present value of expected future cash flows of insurance contract liabilities and contractual service margin
| Less than 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | 5-10 years | 10-20 years | Over 20 years | Total
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Insurance liability future cash flows |  |  |  |  |  |  |  |  |
Life direct participating and investment DPF contracts | 614 | 660 | 648 | 612 | 555 | 1,809 | (15) | 14,536 | 19,419
Life other contracts | 33 | — | (4) | (5) | (4) | 13 | 28 | 59 | 120
Insurance liability future cash flows at 31 Dec 2023 | 647 | 660 | 644 | 607 | 551 | 1,822 | 13 | 14,595 | 19,539
Remaining contractual service margin |  |  |  |  |  |  |  |  |
Life direct participating and investment DPF contracts | 66 | 62 | 59 | 55 | 51 | 204 | 208 | 67 | 772
Life other contracts | 28 | 24 | 19 | 16 | 14 | 42 | 29 | 3 | 175
Remaining contractual service margin at 31 Dec 2023 | 94 | 86 | 78 | 71 | 65 | 246 | 237 | 70 | 947
Insurance liability future cash flows |  |  |  |  |  |  |  |  |
Life direct participating and investment DPF contracts | 196 | 327 | 343 | 336 | 316 | 1,004 | 7 | 16,148 | 18,677
Life other contracts | 46 | (7) | (8) | (8) | (7) | (9) | 33 | 59 | 99
Insurance liability future cash flows at 31 Dec 2022 1 | 242 | 320 | 335 | 328 | 309 | 995 | 40 | 16,207 | 18,776
Remaining contractual service margin |  |  |  |  |  |  |  |  |
Life direct participating and investment DPF contracts | 78 | 74 | 70 | 66 | 61 | 248 | 261 | 90 | 948
Life other contracts | 28 | 23 | 19 | 16 | 14 | 44 | 31 | 8 | 183
Remaining contractual service margin at 31 Dec 2022 1 | 106 | 97 | 89 | 82 | 75 | 292 | 292 | 98 | 1,131

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Discount rates
The discount rates applied to expected future cash flows are determined through a bottom-up approach as set out in Note 1.2(j) ‘Summary of
material accounting policies – Insurance contracts’ on page 127. The blended average of discount rates used within our most material
manufacturing entities are as follows:

| HSBC Life (UK) Ltd | HSBC Assurances Vie (France)
| £ | €
At 31 Dec 2023 |  |
10 year discount rate (%) | 3.28 | 2.96
20 year discount rate (%) | 3.43 | 2.97
At 31 Dec 2022 |  |
10 year discount rate (%) | 3.71 | 3.66
20 year discount rate (%) | 3.54 | 3.33

HSBC Bank plc Annual Report and Accounts 2023 | 137

5 | Employee compensation and benefits

| 2023 | 2022 | 2021
| £m | £m | £m
Wages and salaries | 1,344 | 1,365 | 1,609
Social security costs | 294 | 278 | 341
Post-employment benefits 1 | 68 | 55 | 73
Year ended 31 Dec | 1,706 | 1,698 | 2,023

1 Includes £52m (2022: £42m; 2021: £37m) in employer contributions to the defined contribution pension plans.

Average number of persons employed by the group during the year by global business 1
| 2023 | 2022 | 2021
MSS | 3,954 | 3,722 | 4,322
GB | 2,125 | 2,155 | 2,458
GBM Other | 27 | 81 | 140
CMB | 2,536 | 2,748 | 3,023
WPB | 6,119 | 6,484 | 6,709
Corporate Centre | 48 | 215 | 171
Year ended 31 Dec | 14,809 | 15,405 | 16,823

1 Average numbers of headcount in corporate centre are allocated in respective businesses on the basis of amounts charged to the respective global
businesses.
Share-based payments
'Wages and salaries’ includes the effect of share-based payments arrangements, of which £58m were equity settled (2022: £45m; 2021: £96m),
as follows:

| 2023 | 2022 | 2021
| £m | £m | £m
Restricted share awards | 58 | 45 | 96
Savings-related and other share award option plans | 1 | 1 | 1
Year ended 31 Dec | 59 | 46 | 97

HSBC share awards
Award | Policy
Deferred share awards (including annual incentive awards, long- term incentive ('LTI') awards delivered in shares) and Group Performance Share Plan ('GPSP') | – An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award to be granted. – Deferred awards generally require employees to remain in employment over the vesting period and are generally not subject to performance conditions after the grant date. An exception to these are the LTI awards, which are subject to performance conditions. – Deferred share awards generally vest over a period of three, four, five or seven years. – Vested shares may be subject to a retention requirement post-vesting. – Awards are subject to malus and clawback.
International Employee Share Purchase Plan (‘ShareMatch’) | – The plan was first introduced in Hong Kong in 2013 and now includes employees based in 31 jurisdictions. – Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency. – Matching awards are added at a ratio of one free share for every three purchased. – Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum period of two years and nine months.

Movement on HSBC share awards
| 2023 | 2022
| Number | Number
| (000s) | (000s)
Restricted share awards outstanding at 1 Jan | 20,454 | 21,828
Additions during the year 1 | 10,998 | 11,651
Released in the year 1 | (11,864) | (12,279)
Forfeited in the year | (383) | (746)
Restricted share awards outstanding at 31 Dec | 19,205 | 20,454
Weighted average fair value of awards granted (£) | 4.74 | 4.96

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

138 | HSBC Bank plc Annual Report and Accounts 2023

HSBC share option plans
Main plans | Policy
Savings-related share option plans (‘Sharesave’) | – From 2014, eligible employees for the UK plan can save up to £500 per month with the option to use the savings to acquire shares. – These are generally exercisable within six months following either the third or fifth anniversary of the commencement of a three years or five years contract, respectively. – The exercise price is set at a 20% (2022: 20%) discount to the market value immediately preceding the date of invitation.

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

Movement on HSBC share option plans
| Savings-related share option plans
| Number | WAEP 1
| (000s) | £
Outstanding at 1 Jan 2023 | 5,782 | 2.91
Granted during the year 2 | 1,348 | 4.57
Exercised during the year | (2,428) | 2.72
Expired during the year | (38) | 4.73
Forfeited during the year | (325) | 2.94
Outstanding at 31 Dec 2023 | 4,339 | 3.51
Weighted average remaining contractual life (years) | 2.37 |
Outstanding at 1 Jan 2022 | 6,936 | 2.87
Granted during the year 2 | (179) | 3.96
Exercised during the year | (173) | 3.36
Expired during the year | (177) | 4.72
Forfeited during the year | (625) | 2.98
Outstanding at 31 Dec 2022 | 5,782 | 2.91
Weighted average remaining contractual life (years) | 2.18 |

1 Weighted average exercise price.
2 Includes a number of share option plans transferred from or to other subsidiaries of HSBC Holdings plc.
Post-employment benefit plans
We operate a number of pension plans throughout Europe for our employees. Some are defined benefit plans, of which HSBC Germany
Pension Plan is the most prominent within the group.
The group’s balance sheet includes the net surplus or deficit, being the difference between the fair value of plan assets and the discounted
value of scheme liabilities at the balance sheet date for each plan. Surpluses are only recognised to the extent that they are recoverable through
reduced contributions in the future, or through potential future refunds from the schemes. In assessing whether a surplus is recoverable, the
group has considered its current right to obtain a future refund or a reduction in future contributions together with the rights of third parties such
as trustees.
HSBC Germany Pension Plan (HSBC Trinkaus & Burkhardt Pension Plan)
HSBC Germany Pension Plan is a final salary scheme and is calculated based on the employee length of service multiplied by a predefined
benefit accrual and earnings. The pension is paid when the benefit falls due and is a specified pension payment, lumpsum or combination
thereof. The plan is overseen by an independent corporate trustee, who has a fiduciary responsibility for the operation of the plan. Its assets are
held separately from the assets of the group.
The strategic aim of the investment is to achieve, as continuously as possible, an increase in value over time. For this purpose, the fund invests
mainly in government bonds, corporate bonds, investment funds and equities. It invests predominantly in developed regions. Overall, emphasis
is placed on having a high degree of diversification.
Plan assets were created to fund the pension obligations and separated through what is known as a contractual trust agreement (CTA). HSBC
Trinkaus Vermögenstreuhänder e.V. and HSBC Trinkaus Mitarbeitertreuhänder e.V. assume the role of trustee. Active members of the trustee
are Bank employees.
The Bank regularly aims to comprehensively finance the committed benefits externally. There is no obligation to allocate contributions to the
CTA. The Bank is entitled to assets that are not needed to fund the committed benefits. No further additions to the plan assets are envisaged at
the present time.
In accordance with the Memorandum and Articles of Association, the revenues may only be used, for example, for pension payments or for
reinvestment. Similarly, withdrawals may only be made in accordance with the Memorandum and Articles of Association.
The latest measurement of the defined benefit obligation of the plan at 31 December 2023 was carried out by Hans-Peter Kieselmann (Fellow of
the German Association of Actuaries ('DAV')) and Helga Bader, at Willis Towers Watson GmbH, using the projected unit credit method. The next
measurement will have an effective date of 31 December 2024.

HSBC Bank plc Annual Report and Accounts 2023 | 139

Net assets/(liabilities) recognised on the balance sheet in respect of defined benefit plans
| Fair value of plan assets | Present value of defined benefit obligations | Total
| £m | £m | £m
Defined benefit pension plans | 459 | (479) | (20)
Defined benefit healthcare plans | — | (46) | (46)
At 31 Dec 2023 | 459 | (525) | (66)
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) |  |  | (117)
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) |  |  | 51
Defined benefit pension plans | 534 | (531) | 3
Defined benefit healthcare plans | — | (51) | (51)
At 31 Dec 2022 | 534 | (582) | (48)
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) |  |  | (121)
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) |  |  | 73

Defined benefit pension plans

Net asset/(liability) under defined benefit pension plans
| Fair value of plan assets | Present value of defined benefit obligations | Net defined benefit asset/ (liability)
| HSBC Germany Pension Plan 2 | Other plans | HSBC Germany Pension Plan 2 | Other plans | HSBC Germany Pension Plan 2 | Other plans
| £m | £m | £m | £m | £m | £m
At 1 Jan 2023 | 405 | 129 | (357) | (174) | 48 | (45)
Service cost | — | — | (7) | (5) | (7) | (5)
– current service cost | — | — | (8) | (6) | (8) | (6)
– past service gains | — | — | 1 | 1 | 1 | 1
Net interest income/(cost) on the net defined benefit asset/(liability) | 11 | 6 | (9) | (9) | 2 | (3)
Remeasurement effects recognised in other comprehensive income | 6 | (6) | (29) | 1 | (23) | (5)
– return on plan assets (excluding interest income) | 6 | (6) | — | — | 6 | (6)
– actuarial losses financial assumptions | — | — | (29) | (8) | (29) | (8)
– actuarial gains demographic assumptions | — | — | — | 2 | — | 2
– actuarial gains experience assumptions | — | — | — | 7 | — | 7
– other changes | — | — | — | — | — | —
Exchange differences | (8) | — | 7 | 1 | (1) | 1
Benefits paid | — | (7) | 12 | 15 | 12 | 8
Other movements 1,3 | (77) | — | 79 | (4) | 2 | (4)
At 31 Dec 2023 | 337 | 122 | (304) | (175) | 33 | (53)

Notes on the Financial Statements

140 | HSBC Bank plc Annual Report and Accounts 2023

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

1 Other movements include contributions by the group, contributions by employees, administrative costs and tax paid by plan.
2 The HSBC Germany Pension Plan and its comparatives have been disclosed as it is considered to be a prominent plan within the group. Figures
disclosed comprise this prominent plan and other plans in Germany.
3 Other movements for HSBC Germany Pension Plan include reclassification of Lebensarbeitszeitkonto (LAZK) plan to long term employee benefits.
HSBC Germany does not expect to make contributions to the HSBC Germany Pension Plan during 2024. Benefits expected to be paid from the
plans to retirees over each of the next five years, and in aggregate for the five years thereafter, are as follows:

Benefits expected to be paid from plans
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029-2033
| £m | £m | £m | £m | £m | £m
HSBC Germany Pension Plan 1 | 12 | 12 | 11 | 12 | 12 | 69

1 The duration of the defined benefit obligation is 14.2 years for the HSBC Germany Pension Plan under the disclosure assumptions adopted (2022: 13.7
years).

Fair value of plan assets by asset classes
| 31 Dec 2023 | 31 Dec 2022
| Value | Quoted market price in active market | No quoted market price in active market | Thereof HSBC | Value | Quoted market price in active market | No quoted market price in active market | Thereof HSBC
| £m | £m | £m | £m | £m | £m | £m | £m
HSBC Germany Pension Plan |  |  |  |  |  |  |  |
Fair value of plan assets | 337 | 312 | 25 | — | 405 | 352 | 53 | —
– equities | 3 | 3 | — | — | 8 | 8 | — | —
– bonds fixed income | 196 | 196 | — | — | 173 | 173 | — | —
– bonds index linked | 6 | 6 | — | — | 26 | 26 | — | —
– bonds other | — | — | — | — | — | — | — | —
– property | 3 | — | 3 | — | — | — | — | —
– pooled investment vehicle | — | — | — | — | — | — | — | —
– other | 129 | 107 | 22 | — | 198 | 145 | 53 | —

HSBC Bank plc Annual Report and Accounts 2023 | 141

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

Key actuarial assumptions
| Discount rate | Inflation rate | Rate of increase for pensions | Rate of pay increase
| % | % | % | %
HSBC Germany Pension Plan |  |  |  |
At 31 Dec 2023 | 3.17 | 2.25 | 2.25 | 2.25
At 31 Dec 2022 | 3.71 | 2.25 | 2.25 | 2.25

Mortality tables and average life expectancy at age 60
| Mortality table | Life expectancy at age 60 for a male member currently: | Life expectancy at age 60 for a female member currently:
|  | Aged 60 | Aged 40 | Aged 60 | Aged 40
HSBC Germany Pension Plan |  |  |  |  |
At 31 Dec 2023 | RT 2018G1 1 | 25.4 | 28.3 | 29.1 | 31.3
At 31 Dec 2022 | RT 2018G1 1 | 25.2 | 28.2 | 28.9 | 31.2

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

The effect of changes in key assumptions
| HSBC Germany Pension Plan Obligation
| Financial impact of increase | Financial impact of decrease
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021
| £m | £m | £m | £m | £m | £m
Discount rate – increase/decrease of 0.25% | (9) | (7) | (13) | 9 | 8 | 13
Inflation rate – increase/decrease of 0.25% | 7 | 7 | 11 | (6) | (5) | (9)
Pension payments and deferred pensions – increase/decrease of 0.25% | 6 | 5 | 9 | (6) | (5) | (8)
Pay – increase/decrease of 0.25% | 1 | 1 | 2 | (1) | (1) | (2)
Change in mortality – increase of 1 Year | 9 | 10 | 16 | N/A | N/A | N/A

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this in unlikely
to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit
method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet. The
methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the prior period.
Directors’ emoluments
The aggregate emoluments of the Directors of the bank, computed in accordance with the Companies Act 2006 as amended by statutory
instrument 2008 No.410, were:

| 2023 | 2022 | 2021
| £000 | £000 | £000
Fees 1 | 1,427 | 1,410 | 1,525
Salaries and other emoluments 2 | 2,792 | 2,294 | 3,569
Annual incentives 3 | 1,163 | 979 | 694
Long-term incentives 4 | 1,193 | 779 | 511
Year ended 31 Dec | 6,575 | 5,462 | 6,299

1 Fees paid to non-executive Directors.
2 Salaries and other emoluments include Fixed Pay Allowances.
3 Discretionary annual incentives for executive D irectors are based on a combination of individual and corporate performance, and are determined by the
Remuneration Committee of the bank’s parent company, HSBC Holdings plc. Incentive awards made to executive directors are delivered in the form
of cash and HSBC Holdings plc shares. The total amount shown is comprised of £581,561 (2022: £489,285) in cash and £581,561 (2022: £489,285) in
Restricted Shares, which is the upfront portion of the annual incentive granted in respect of performance year 2023.
4 The amount shown is comprised of £493,868 (2022: £380,893) in deferred cash, £699,552 (2022: £398,162) in deferred Restricted Shares. These
amounts relate to the portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in
2023. The total vesting period of deferred cash and share awards is no less than three years, with 33% of the award vesting on each of the first and
second anniversaries of the date of the award, and the balance vesting on the third anniversary of the date of the award. The deferred share awards
are subject to at least a six-month retention period upon vesting. Details of the Plans are contained within the Directors’ Remuneration Report of
HSBC Holdings plc. The cost of any awards subject to service conditions under the HSBC Share Plan 2011 are recognised through an annual charge
based on the fair value of the awards, apportioned over the period of service to which the award relates.
5 In addition to the amounts set out above, a payment was also made to a Director relating to compensation for loss of employment. As the payment
related to a longer period of employment with the Group (and not specifically to the Directorship) it is not included in the tables. However, the amount
paid that related (on a time apportioned basis) to the period of Directorship is £169,358.
Notes on the Financial Statements

142 | HSBC Bank plc Annual Report and Accounts 2023

No Director exercised share options over HSBC Holdings plc ordinary shares during the year.
No Director is accruing retirement benefits under a money purchase scheme in respect of Directors’ qualifying services (2022: None).
In addition, there were payments during 2023 under unfunded retirement benefit agreements to former Directors of £410,403 ( 2022: £394,334).
The provision at 31 December 2023 in respect of unfunded pension obligations to former Directors amounted to £3,811,422 (2022: £4,286,951).
Of these aggregate figures, the following amounts are attributable to the highest paid Director:

| 2023 | 2022 | 2021
| £000 | £000 | £000
Salaries and other emoluments | 1,641 | 1,641 | 1,399
Annual incentives 1 | 1,074 | 859 | 558
Long-term incentives 2 | 990 | 677 | 390
Year ended 31 Dec | 3,705 | 3,177 | 2,347

1 Awards made to the highest paid Director are delivered in the form of cash and HSBC Holdings plc shares. The amount shown comprises £537,040
(2022: £429,285) in cash and £537,040 (2022: £429,285) in Restricted Shares.
2 The amount shown comprises £408,439 (2022: £330,687) in deferred cash, £581,165 (2022: £345,818) in deferred Restricted Shares. These amounts
relate to a portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in 2023. The to tal
vesting period of deferred cash and share awards is no less than three years, with 33% of the award vesting on each of the first and second
anniversaries of the date of the award, and the balance vesting on the third anniversary of the date of the award. The share awards are subject to a
six-month retention period upon vesting.
No pension contributions were made by the bank in respect of services by the highest paid Director during the year (2022: £0).

6 | Auditors’ remuneration

| 2023 | 2022 | 2021
| £m | £m | £m
Audit fees payable to PwC | 13.1 | 11.3 | 10.4
Other audit fees payable | 0.6 | 0.7 | 0.4
Year ended 31 Dec | 13.7 | 12.0 | 10.8

Fees payable by the group to PwC
|  | 2023 | 2022 | 2021
|  | £m | £m | £m
Fees for HSBC Bank plc‘s statutory audit 1,5 |  | 5.3 | 5.5 | 4.8
Fees for other services provided to the group |  | 17.5 | 15.6 | 14.3
– audit of the group‘s subsidiaries 2 |  | 7.8 | 5.8 | 5.6
– audit-related assurance services 3 |  | 5.2 | 5.3 | 5.7
– other assurance services 4 |  | 4.5 | 4.5 | 3.0
Year ended 31 Dec |  | 22.8 | 21.1 | 19.1

1 Fees payable to PwC for the statutory audit of the consolidated financial statements of the group and the separate financial statements of HSBC Bank
plc. They exclude amounts payable for the statutory audit of the bank’s subsidiaries which have been included in ‘Fees for other services provided to
the group’.
2 Including fees payable to PwC for the statutory audit of the bank’s subsidiaries.
3 Including services for assurance and other services that relate to statutory and regulatory filings, including interim reviews.
4 Including permitted services relating to attestation reports on internal controls of a service organisation primarily prepared for and used by third-party
end user, including comfort letters.
5 2023 Audit fees payable to PwC includes prior year adjustments after finalisation of the 2022 financial statements.
In addition to the above, the estimated fees paid to PwC by third parties associated with HSBC Bank plc amount to £0.6m. In these cases,
HSBC Bank plc was connected with the contracting party and may therefore have been involved in appointing PwC. These fees arose from
services such as reviewing the financial position of corporate concerns that borrow from HSBC Bank plc.
Fees payable for non-audit services for HSBC Bank plc are not disclosed separately because such fees are disclosed on a consolidated basis for
the group.

7 | Tax

Tax expense |
| 2023 | 2022 1 | 2021 1
| £m | £m | £m
Current tax | 386 | (283) | (187)
– for this year | 359 | (243) | (245)
– adjustments in respect of prior years | 27 | (40) | 58
Deferred tax | 41 | (363) | 164
– origination and reversal of temporary differences | 25 | (529) | 248
– effect of changes in tax rates | — | 33 | (56)
– adjustments in respect of prior years | 16 | 133 | (28)
Year ended 31 Dec 2 | 427 | (646) | (23)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
2 In addition to amounts recorded in the incom e statement, a tax charge of £334m (2022: credit of £393m; 2021 credit of £135m) was recorded directly
to equity.

HSBC Bank plc Annual Report and Accounts 2023 | 143

The group’s profits are taxed at different rates depending on the country in which they arise. The key applicable corporate tax rates in 2023
included the UK and France. The UK tax rate applying to HSBC Bank plc and its banking subsidiaries in 2023 was a blended rate of 27.75%
(2022: 27.00%), comprising 23.50% corporation tax plus 4.25% surcharge on UK banking profits, following an increase in the main rate of UK
corporation tax from 19% to 25% and a reduction in the UK banking surcharge rate from 8% to 3% from 1 April 2023. The applicable tax rate in
France was 26% (2022: 26%). Other overseas subsidiaries and overseas branches provided for taxation at the appropriate rates in the countries
in which they operate.
On 20 June 2023, legislation was substantively enacted in the UK, the jurisdiction of the entity's ultimate parent entity, HSBC Holdings plc, to
introduce the 'Pillar Two' global minimum tax model rules of the OECD's Inclusive Framework on Base Erosion and Profit Shifting (BEPS), as
well as a qualified domestic minimum tax, with effect from 1 January 2024. Under these rules, a top-up tax liability arises where the effective
tax rate of the HSBC Holdings plc operations in a jurisdiction, calculated based on principles set out in the OECD's Pillar Two model rules, is
below 15%.
Based on the group's forecasts, top-up tax liabilities are expected to arise in four jurisdictions, in particular Jersey, due to low statutory tax rates.
During 2023, the government of Bermuda announced the introduction of a corporation tax system to apply to Bermudian entities of large
multinational groups, with a statutory rate of 15%, with effect from 1 January 2025. This is expected to apply to the HSBC Group's operations in
Bermuda.
Tax reconciliation
The tax charged to the income statement differs from the tax expense that would apply if all profits had been taxed at the UK corporation tax
rate as follows:

| 2023 | 2022 1 | 2021 1
| £m | % | £m | % | £m | %
Profit/(loss) before tax | 2,152 |  | (1,199) |  | 1,023 |
Tax expense |  |  |  |  |  |
Taxation at UK corporation tax rate | 506 | 23.5 | (228) | 19.0 | 194 | 19.0
Impact of taxing overseas profits at different rates | (20) | (0.9) | (75) | 6.3 | 7 | 0.7
UK banking surcharge | 5 | 0.2 | (47) | 3.9 | (2) | (0.2)
Items increasing the tax charge in 2023: |  |  |  |  |  |
– UK and European bank levies | 78 | 3.6 | 50 | (4.2) | 72 | 7.0
– adjustments in respect of prior periods | 58 | 2.7 | 93 | (7.8) | 30 | 2.9
– provisions for fines and penalties | 23 | 1.1 | 3 | (0.3) | (2) | (0.2)
– local taxes and overseas withholding taxes | 19 | 0.9 | 4 | (0.3) | (4) | (0.4)
– effect of losses (profits) in associates and joint ventures | 5 | 0.2 | 5 | (0.4) | (43) | (4.2)
– other | 25 | 1.2 | (5) | 0.4 | (32) | 3.0
– impact of changes in tax rates | — | — | 33 | (2.8) | (56) | (5.5)
– impact of temporary differences between French tax and IFRS | — | — | — | — | 324 | 31.7
Items reducing the tax charge in 2023: |  |  |  |  |  |
– movements in unrecognised deferred tax | (81) | (3.8) | (268) | 22.4 | (47) | (4.6)
– non-taxable gain on transfer of Guernsey branch | (74) | (3.4) | — | — | — | —
– deductions for AT1 coupon payments | (60) | (2.8) | (55) | 4.6 | (53) | (5.2)
– impact of held for sale adjustments | (25) | (1.2) | 47 | (3.9) | — | —
– non-taxable income and gains | (21) | (1.0) | (93) | 7.8 | (92) | (9.0)
– movements in provisions for uncertain tax positions | (11) | (0.5) | (110) | 9.2 | 5 | 0.5
– tax impact of sale of French retail banking business | — | — | — | — | (324) | (31.7)
Year ended 31 Dec | 427 | 19.8 | (646) | 53.9 | (23) | (2.2)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
The effective tax rate for the yea r was 19.8% (2022: 53.9%; 2021: (2.2)%). The 2023 effective tax rate of 19.8% reflects the mix of profits and
losses in different jurisdictions and is decreased by the release of provisions for uncertain tax positions, recognition of a deferred tax asset for
prior period excess expenses in HSBC Life (UK) and the non-taxable gain arising on the transfer of the Guernsey branch to PBRS and increased
by non-deductible UK and European bank levy expenses and charges in respect of prior periods.
The effective tax rate for 2022 of 53.9% represented a tax credit on a loss before tax and was increased by non-recurring items, including
recognition of previously unrecognised deferred tax assets in France and a tax credit of £110m from the release of provisions for uncertain tax
positions and reduced by charges in respect of prior periods and non-deductible UK and European bank levy expenses.
In 2021, the signing of a framework agreement for the sale of the French retail banking business resulted in a tax deduction (tax value of
£324m) for a provision for loss on disposal which was recorded in the French tax return. A deferred tax liability of the same amount arose as a
consequence of the temporary difference between the French tax basis and IFRS in respect of this provision. This temporary difference
reversed in 2022 upon application of held for sale accounting for IFRS, resulting in the reversal of this deferred tax liability to the income
statement.
Accounting for taxes involves some estimation because tax law is uncertain and its application requires a degree of judgement, which
authorities may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice where
appropriate. We do not expect significant liabilities to arise in excess of the amounts provided. The current tax asset includes an estimate of tax
recoverable from HMRC with regards to past dividends received from EU resident companies. The ultimate resolution of this matter involves
litigation for which the outcome is uncertain.
Notes on the Financial Statements

144 | HSBC Bank plc Annual Report and Accounts 2023

Movement of deferred tax assets and liabilities
| Cash flow hedges | Loan impairment provisions | Property, plant and equipment | FVOCI investments | Relief for tax losses 3 | Other 2 | Total
| £m | £m | £m | £m | £m | £m | £m
Assets | 391 | 60 | 227 | 474 | 628 | 151 | 1,931
Liabilities | — | — | — | (351) | — | — | (351)
At 1 Jan 2023 | 391 | 60 | 227 | 123 | 628 | 151 | 1,580
Income statement | — | (4) | (36) | 44 | (17) | (28) | (41)
Other comprehensive income | (252) | — | — | (43) | — | 65 | (230)
Foreign exchange and other adjustments | (1) | 3 | — | 8 | (10) | (37) | (37)
At 31 Dec 2023 | 138 | 59 | 191 | 132 | 601 | 151 | 1,272
Assets 4 | 138 | 59 | 191 | 329 | 601 | 204 | 1,522
Liabilities 4 | — | — | — | (197) | — | (53) | (250)
Assets | 40 | 60 | 206 | 40 | 382 | 65 | 793
Liabilities | — | — | — | — | — | — | —
At 1 Jan 2022 1 | 40 | 60 | 206 | 40 | 382 | 65 | 793
Income statement | — | (2) | 22 | (124) | 221 | 246 | 363
Other comprehensive income | 348 | — | — | 190 | — | (151) | 387
Foreign exchange and other adjustments | 3 | 2 | (1) | 17 | 25 | (9) | 37
At 31 Dec 2022 1 | 391 | 60 | 227 | 123 | 628 | 151 | 1,580
Assets 4 | 391 | 60 | 227 | 474 | 628 | 151 | 1,931
Liabilities 4 | — | — | — | (351) | — | — | (351)

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly.
2 Other deferred tax assets and liabilities relate to share-based payments, expense provisions and other temporary differences.
3 The deferred tax asset recognised in respect of tax losses mainly relates to France (£566m) and US State tax losses of the New York branch of HSBC
Bank plc (£28m), both of which are supported by future profit forecasts.
4 After netting off balances within countries, the balances as disclosed in the financial statements are as follows: deferred tax assets £1,278m (2022:
£1,583 m); and deferred tax liabilities £6m (2022: £3m).
Management has assessed the likely availability of future taxable profits against which to recover the deferred tax assets of th e Company and
the group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts of futur e
business performance.
The group’s net deferred tax asset of £1,272m (2022: £1,580m) included a net UK deferred tax asset of £441m (2022: £597m) and a net
deferred asset of £693m (2022: £797m) in France, of which £566m (2022: £588m) related to tax losses which are expected to be substantially
recovered within 12 years.
Management is satisfied that although the Company recorded a UK tax loss in the year, the aforementioned evidence is sufficient to support
recognition of all UK deferred tax assets. These deferred tax assets are supported by future profit forecasts for the whole of HSBC's UK tax
group. This includes a number of companies which are not part of the HSBC Bank plc group, in particular HSBC UK Bank plc and its subsidiaries.

Movement of deferred tax assets and liabilities
| Retirement benefits | Property, plant and equipment | FVOCI | Goodwill and intangibles | Relief for tax losses 2 | Other 1 | Total
The bank | £m | £m | £m | £m | £m | £m | £m
Assets 2 | 14 | 231 | 75 | — | 28 | 260 | 608
Lliabilities 2 | — | — | — | — | — | — | —
At 1 Jan 2023 | 14 | 231 | 75 | — | 28 | 260 | 608
Income statement | (15) | (40) | — | — | — | 38 | (17)
Other comprehensive income | 10 | — | (32) | — | — | (179) | (201)
Foreign exchange and other adjustments | — | — | — | — | — | — | —
At 31 Dec 2023 | 9 | 191 | 43 | — | 28 | 119 | 390
Assets 3 | 9 | 191 | 43 | — | 28 | 120 | 391
Liabilities 3 | — | — | — | — | — | (1) | (1)
Assets | 17 | 207 | — | 191 | 69 | 48 | 532
Liabilities | — | — | (23) | — | — | — | (23)
At 1 Jan 2022 | 17 | 207 | (23) | 191 | 69 | 48 | 509
Income statement | (4) | 24 | — | (191) | (41) | (6) | (218)
Other comprehensive income | 1 | — | 98 | — | — | 210 | 309
Foreign exchange and other adjustments | — | — | — | — | — | 8 | 8
At 31 Dec 2022 | 14 | 231 | 75 | — | 28 | 260 | 608
Assets 3 | 14 | 231 | 75 | — | 28 | 260 | 608
Liabilities 3 | — | — | — | — | — | — | —

1 Other deferred tax assets and liabilities relate to fair value of own debt, loan impairment allowances, share-based payments and cash flow hedges.
2 The deferred tax asset recognised in respect of losses mainly relates to US State tax losses of the New York branch of HSBC Bank plc, which are
supported by future profit forecasts.
3 After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets £391m (2022: £608m) and
deferred tax liabilities £1m (2022: nil).

HSBC Bank plc Annual Report and Accounts 2023 | 145

Unrecognised deferred tax
The group
The amount of temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance sheet was
£673m (2022: £1,017m). These amounts include unused tax losses, tax credits and temporary differences of £668m (2022: £912m) arising in
the New York branch of HSBC Bank plc. The unrecognised losses expire after 10 years or do not expire.
The bank
The amount of temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance sheet was
£668m (2022: £912m). These amounts include unused tax losses, tax credits and temporary differences arising in the New York branch of
HSBC Bank plc of £668m (2022: £912m). The unrecognised losses expire after 10 years or do not expire.
Deferred tax is not recognised in respect of the group’s investments in subsidiaries and branches where HSBC Bank plc is able to control the
timing of remittance or other realisation and where remittance or realisation is not probable in the foreseeable future. The aggregate temporary
differences relating to unrecognised deferred tax liabilities arising on investments in subsidiaries and branches is £3.7b n (2022: £3.3b n) and the
corresponding unrecognised deferred tax liability was £27m (2022: £26m).

8 | Dividends

Dividends to the parent company
| 2023 | 2022 | 2021
| £ per share | £m | £ per share | £m | £ per share | £m
Dividends paid on ordinary shares |  |  |  |  |  |
Current year: |  |  |  |  |  |
– first special dividend 1 | 0.941 | 750 | 1.067 | 850 | — | —
– second special dividend | — | — | — | — | — | —
Total | 0.941 | 750 | 1.067 | 850 | — | —
Dividends on preference shares classified as equity |  |  |  |  |  |
Dividend on HSBC Bank plc non-cumulative third dollar preference shares | 0.001 | — | 0.001 | — | 0.001 | —
Total | 0.001 | — | 0.001 | — | 0.001 | —
Total coupons on capital securities classified as equity | — | 211 | — | 202 | — | 194
Dividends to parent | — | 961 | — | 1,052 | — | 194

1 Special dividend declared/paid on CET1 capital in 2023.

Total coupons on capital securities classified as equity
|  | 2023 | 2022 | 2021
| First call date | £m | £m | £m
Undated Subordinated additional Tier 1 instruments |  |  |  |
Undated Subordinated Resettable Additional Tier 1 instrument 2015 | Dec 2020 | 85 | 87 | 84
Undated Subordinated Resettable Additional Tier 1 instrument 2016 | Jan 2022 | 12 | 11 | 12
Undated Subordinated Resettable Additional Tier 1 instrument 2018 | Mar 2023 | 28 | 28 | 10
Undated Subordinated Resettable Additional Tier 1 instrument 2018 | Mar 2023 | 10 | 10 | 28
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 24 | 24 | 24
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 15 | 8 | 7
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Dec 2024 | 19 | 20 | 20
Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Jan 2025 | 9 | 8 | 9
Undated Subordinated Resettable Additional Tier 1 instrument 2022 | Mar 2027 | 9 | 6 | —
Total |  | 211 | 202 | 194

9 | Segmental analysis

The Chief Executive, supported by the rest of the Executive Committee, is considered the Chief Operating Decision Maker (‘CODM’) for the
purposes of identifying the group’s reportable segments.
Our operations are closely integrated and accordingly, the presentation of data includes internal allocations of certain items of income and
expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully
attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree
of subjectivity. Costs that are not allocated to businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-
business line transactions. All such transactions are undertaken on arm’s length terms. Measurement of segmental assets, liabilities, income
and expenses is in accordance with the group’s accounting policies. Shared costs are included in segments on the basis of actual recharges.
The intra-group elimination items for the global businesses are presented in Corporate Centre.
The types of products and services from which each reportable segment derives its revenue are discussed in the ‘Strategic Report – Our global
businesses’ on page 7.
Notes on the Financial Statements

146 | HSBC Bank plc Annual Report and Accounts 2023

By operating segment:

Profit/(loss) before tax
| 2023
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
Net operating income before change in ECL and other credit impairment charges 1 | 1,996 | 2,092 | 13 | 1,746 | 1,339 | 320 | 7,506
– of which: net interest income/(expense) | 212 | 1,430 | (13) | 1,331 | 946 | (1,755) | 2,151
Change in ECL and other credit impairment charges | (9) | (91) | 3 | (83) | 12 | (1) | (169)
Net operating income/(expense) | 1,987 | 2,001 | 16 | 1,663 | 1,351 | 319 | 7,337
Total operating expenses | (2,131) | (1,013) | (282) | (663) | (894) | (159) | (5,142)
Operating profit/(loss) | (144) | 988 | (266) | 1,000 | 457 | 160 | 2,195
Share of loss in associates and joint ventures | — | — | — | — | — | (43) | (43)
Profit/(loss) before tax | (144) | 988 | (266) | 1,000 | 457 | 117 | 2,152
| % | % | % | % | % |  | %
Cost efficiency ratio | 106.8 | 48.4 | n/a | 38.0 | 66.8 |  | 68.5
| 2022 2
Net operating income/(expense) before change in ECL and other credit impairment charges 1 | 2,446 | 1,571 | (108) | 1,433 | (432) | (606) | 4,304
– of which: net interest income/(expense) | (54) | 903 | (16) | 925 | 710 | (564) | 1,904
Change in ECL and other credit impairment charges | (1) | (153) | (1) | (54) | (7) | (6) | (222)
Net operating income/(expense) | 2,445 | 1,418 | (109) | 1,379 | (439) | (612) | 4,082
Total operating expenses | (1,936) | (932) | (406) | (663) | (834) | (480) | (5,251)
Operating profit/(loss) | 509 | 486 | (515) | 716 | (1,273) | (1,092) | (1,169)
Share of loss in associates and joint ventures | — | — | (2) | — | — | (28) | (30)
Profit/(loss) before tax | 509 | 486 | (517) | 716 | (1,273) | (1,120) | (1,199)
| % | % | % | % | % |  | %
Cost efficiency ratio | 79.1 | 59.3 | n/a | 46.3 | n/a |  | 122.0
| 2021 2
Net operating income before change in ECL other credit impairment charges 1 | 2,042 | 1,367 | 311 | 1,096 | 1,277 | 27 | 6,120
– of which: net interest income/(expense) | (232) | 568 | 224 | 649 | 567 | (22) | 1,754
Change in ECL and other credit impairment charges | 1 | 140 | 5 | 7 | 23 | (2) | 174
Net operating income/(expense) | 2,043 | 1,507 | 316 | 1,103 | 1,300 | 25 | 6,294
Total operating expenses | (2,055) | (918) | (597) | (611) | (981) | (300) | (5,462)
Operating profit/(loss) | (12) | 589 | (281) | 492 | 319 | (275) | 832
Share of profit in associates and joint ventures | — | — | — | — | — | 191 | 191
Profit/(loss) before tax | (12) | 589 | (281) | 492 | 319 | (84) | 1,023
| % | % | % | % | % |  | %
Cost efficiency ratio | 100.6 | 67.2 | 192.0 | 55.7 | 76.8 |  | 89.2

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. It i ncludes in ter-
segment revenue which is eliminated in Corporate centre, amounting to £62 m (2022: £108m; 2021: £127m).
2 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative dat a for the year ended 31 December 2021 is prepared on an IFRS 4 basis.
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:

| 2023 | 2022 1 | 2021
| £m | £m | £m
External net operating income by country | 7,506 | 4,304 | 6,120
– United Kingdom | 3,609 | 3,068 | 2,937
– France | 1,819 | (70) | 1,677
– Germany | 836 | 732 | 887
– Other countries | 1,242 | 574 | 619

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for the year ended 31 December 2021 is prepared on an IFRS 4 basis.

HSBC Bank plc Annual Report and Accounts 2023 | 147

Balance sheet by business
| MSS | GB | GBM Other | CMB | WPB | Corporate Centre | Total
| £m | £m | £m | £m | £m | £m | £m
31 Dec 2023 |  |  |  |  |  |  |
Loans and advances to customers | 2,718 | 34,723 | 67 | 24,226 | 13,666 | 91 | 75,491
Customer accounts | 41,102 | 85,303 | 9,434 | 58,620 | 28,337 | 145 | 222,941
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

10 | Trading assets

| The group | The bank
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Treasury and other eligible bills | 4,808 | 3,712 | 4,353 | 3,061
Debt securities | 27,724 | 21,873 | 16,071 | 13,960
Equity securities | 50,020 | 38,330 | 47,498 | 35,407
Trading securities | 82,552 | 63,915 | 67,922 | 52,428
Loans and advances to banks 1 | 5,094 | 3,987 | 5,060 | 3,872
Loans and advances to customers 1 | 13,050 | 11,976 | 12,784 | 11,323
At 31 Dec | 100,696 | 79,878 | 85,766 | 67,623

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.
Notes on the Financial Statements

148 | HSBC Bank plc Annual Report and Accounts 2023

Financial instruments carried at fair value and bases of valuation
| 2023 | 2022 1
| 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 | 72,164 | 26,482 | 2,050 | 100,696 | 52,493 | 24,647 | 2,738 | 79,878
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 7,008 | 9,178 | 2,882 | 19,068 | 6,183 | 6,380 | 3,318 | 15,881
Derivatives | 428 | 171,865 | 1,823 | 174,116 | 2,296 | 221,205 | 1,737 | 225,238
Financial investments | 25,857 | 10,743 | 907 | 37,507 | 19,007 | 8,902 | 1,447 | 29,356
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 29,791 | 12,233 | 252 | 42,276 | 26,258 | 14,592 | 415 | 41,265
Financial liabilities designated at fair value | 992 | 27,595 | 3,958 | 32,545 | 933 | 23,888 | 2,461 | 27,282
Derivatives | 994 | 168,145 | 2,335 | 171,474 | 1,744 | 214,645 | 2,478 | 218,867

The bank
Recurring fair value measurements at 31 Dec |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Trading assets | 58,152 | 25,772 | 1,842 | 85,766 | 41,524 | 23,940 | 2,159 | 67,623
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 206 | 2,910 | 65 | 3,181 | 252 | 1,094 | 272 | 1,618
Derivatives | 152 | 151,661 | 1,952 | 153,765 | 2,037 | 192,778 | 1,899 | 196,714
Financial investments | 15,074 | 1,233 | 55 | 16,362 | 11,214 | 976 | 71 | 12,261
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 13,177 | 11,503 | 252 | 24,932 | 11,771 | 13,591 | 403 | 25,765
Financial liabilities designated at fair value | — | 20,811 | 2,635 | 23,446 | — | 17,565 | 1,850 | 19,415
Derivatives | 601 | 149,850 | 2,348 | 152,799 | 1,691 | 189,908 | 1,737 | 193,336

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.

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 2023 |  |  |  |  |  |  |
Transfers from Level 1 to Level 2 | 26 | 252 | — | — | 4 | — | —
Transfers from Level 2 to Level 1 | 121 | 408 | — | — | 41 | — | —
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 | — | — | —

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.

HSBC Bank plc Annual Report and Accounts 2023 | 149

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
| 2023 | 2022
| MSS | Corporate Centre | MSS | Corporate Centre
| £m | £m | £m | £m
Type of adjustment |  |  |  |
Risk-related | 327 | 32 | 359 | 33
– bid-offer | 155 | — | 188 | —
– uncertainty | 42 | 2 | 50 | —
– credit valuation adjustment | 61 | 27 | 98 | 29
– debt valuation adjustment | (20) | — | (64) | —
– funding fair value adjustment | 89 | 3 | 87 | 4
– other | — | — | — | —
Model-related | 41 | — | 31 | —
– model limitation | 41 | — | 31 | —
– other | — | — | — | —
Inception profit (Day 1 P&L reserves) | 54 | — | 64 | —
At 31 Dec | 422 | 32 | 454 | 33

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 HSBC 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.
Notes on the Financial Statements

150 | HSBC Bank plc Annual Report and Accounts 2023

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 | 66 | 1 | 2,656 | — | 2,723 | 8 | 1 | — | 9
Asset-backed securities | 160 | 97 | 6 | — | 263 | — | — | — | —
Structured notes | — | — | — | — | — | — | 3,490 | — | 3,490
Derivatives | — | — | — | 1,823 | 1,823 | — | — | 2,335 | 2,335
Other portfolios | 681 | 1,952 | 220 | — | 2,853 | 244 | 467 | — | 711
At 31 Dec 2023 | 907 | 2,050 | 2,882 | 1,823 | 7,662 | 252 | 3,958 | 2,335 | 6,545
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

The bank |  |  |  |  |  |  |  |  |
Private equity including strategic investments | 55 | — | 65 | — | 120 | 8 | — | — | 8
Asset-backed securities | — | 97 | — | — | 97 | — | — | — | —
Structured notes | — | — | — | — | — | — | 2,635 | — | 2,635
Derivatives | — | — | — | 1,952 | 1,952 | — | — | 2,343 | 2,343
Other portfolios | — | 1,745 | — | — | 1,745 | 244 | — | 5 | 249
At 31 Dec 2023 | 55 | 1,842 | 65 | 1,952 | 3,914 | 252 | 2,635 | 2,348 | 5,235
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

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.

HSBC Bank plc Annual Report and Accounts 2023 | 151

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 2023 | 1,447 | 2,738 | 3,318 | 1,737 | 415 | 2,461 | 2,478
Total gains or losses) on assets and total gains or losses on liabilities recognised in profit or loss | (1) | 189 | 8 | 851 | (268) | 60 | 1,008
– net income from financial instruments held for trading or managed on a fair value basis | — | 189 | — | 851 | (268) | — | 1,008
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | 8 | — | — | 60 | —
– gains less losses from financial investments at fair value through other comprehensive income | (1) | — | — | — | — | — | —
Total total gains or losses recognised in other comprehensive income (‘OCI’)1 | (1) | (28) | (92) | (2) | — | (8) | (5)
– financial investments: fair value total gains or losses | 29 | — | — | — | — | — | —
– exchange differences | (30) | (28) | (92) | (2) | — | (8) | (5)
Purchases | 51 | 1,004 | 305 | — | 233 | — | —
New issuances | — | 1 | — | — | 2 | 3,005 | —
Sales | (213) | (1,675) | (484) | — | (253) | (2) | —
Settlements | (38) | (79) | (72) | (1,009) | 138 | (1,169) | (1,295)
Transfers out | (451) | (561) | (120) | (233) | (30) | (660) | (339)
Transfers in | 113 | 461 | 19 | 479 | 15 | 271 | 488
At 31 Dec 2023 | 907 | 2,050 | 2,882 | 1,823 | 252 | 3,958 | 2,335
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2023 | — | — | (75) | 520 | — | (217) | (823)
– trading income/(expense) excluding net interest income | — | — | — | 520 | — | — | (823)
– net income/(expense) from other financial instruments designated at fair value | — | — | (75) | — | — | (217) | —
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 from other financial instruments designated at fair value | — | — | 49 | — | — | 30 | —

1 Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of
comprehensive income.
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of
levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.
Notes on the Financial Statements

152 | HSBC Bank plc Annual Report and Accounts 2023

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 2023 | 71 | 2,159 | 272 | 1,899 | 403 | 1,850 | 1,737
Total gains/(losses) on assets and total (gains)/ losses on liabilities recognised in profit or loss | — | 192 | 22 | 1,025 | (271) | 13 | 1,222
– net income from financial instruments held for trading or managed on a fair value basis | — | 192 | — | 1,025 | (271) | — | 1,222
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | — | — | 22 | — | — | 13 | —
– gains less losses from financial investments at fair value through other comprehensive income | — | — | — | — | — | — | —
Total gains/(losses) recognised in other comprehensive income (‘OCI’) 1 | — | (18) | (7) | — | — | — | —
– financial investments: fair value gains/(losses) | — | — | — | — | — | — | —
– exchange differences | — | (18) | (7) | — | — | — | —
Purchases | — | 930 | — | — | 233 | — | —
New issuances | — | — | — | — | — | 2,548 | —
Sales | — | (1,280) | (154) | — | (252) | — | —
Settlements | (1) | (72) | (69) | (1,192) | 154 | (1,580) | (746)
Transfers out | (15) | (490) | — | (287) | (30) | (449) | (400)
Transfers in | — | 421 | 1 | 507 | 15 | 253 | 535
At 31 Dec 2023 | 55 | 1,842 | 65 | 1,952 | 252 | 2,635 | 2,348
Unrealised gains/(losses) recognised in profit or loss relating to assets and liabilities held at 31 Dec 2023 | — | — | (1) | 511 | — | (180) | (818)
– trading income/(expense) excluding net interest income | — | — | — | 511 | — | — | (818)
– net income/(expense) from other financial instruments designated at fair value | — | — | (1) | — | — | (180) | —
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 from other financial instruments designated at fair value | — | — | — | — | — | 19 | —

1 Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of
comprehensive income.
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of
levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

HSBC Bank plc Annual Report and Accounts 2023 | 153

Effect of changes in significant unobservable assumptions to reasonably possible
alternatives

Sensitivity of Level 3 fair values to reasonably possible alternative assumptions
| 2023 | 2022
| Reflected in profit or loss | Reflected in OCI | Reflected in profit or loss | Reflected in OCI
| Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes | Favourable changes | Un- favourable changes
The group | £m | £m | £m | £m | £m | £m | £m | £m
Derivatives, trading assets and trading liabilities 1 | 478 | (225) | — | — | 201 | (261) | — | —
Designated and otherwise mandatorily measured at fair value through profit or loss | 193 | (194) | — | — | 236 | (235) | — | —
Financial investments | 10 | (9) | 23 | (25) | 9 | (9) | 27 | (19)
Year ended 31 Dec | 681 | (428) | 23 | (25) | 446 | (505) | 27 | (19)

The bank
Derivatives, trading assets and trading liabilities 1 | 478 | (225) | — | — | 193 | (253) | — | —
Designated and otherwise mandatorily measured at fair value through profit or loss | 11 | (11) | — | — | 45 | (45) | — | —
Financial investments | 1 | — | 6 | (6) | 0 | — | 14 | (6)
Year ended 31 Dec | 490 | (236) | 6 | (6) | 238 | (298) | 14 | (6)

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
| 2023 | 2022
| 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 | 182 | (184) | 6 | (6) | 225 | (389) | 8 | (7)
Asset-backed securities | 28 | (16) | 2 | (2) | 28 | (17) | 12 | (5)
Structured notes | 5 | (5) | — | — | 5 | (5) | — | —
Derivatives | 237 | (182) | — | — | 44 | (44) | — | —
Other portfolios | 229 | (41) | 15 | (17) | 144 | (50) | 7 | (7)
Total | 681 | (428) | 23 | (25) | 446 | (505) | 27 | (19)

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.
Notes on the Financial Statements

154 | HSBC Bank plc Annual Report and Accounts 2023

Key unobservable inputs to Level 3 financial instruments

Quantitative information about significant unobservable inputs in Level 3 valuations
| Fair value |  |  | 2023 | 2022
| 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 | 2,723 | 9 | See below | See below | N/A | N/A | N/A | N/A
Asset-backed securities | 263 | — |  |  |  |  |  |
– CLO/CDO 1 | 34 | — | Market proxy | Bid quotes | — | 94 | — | 92
– Other ABSs | 229 | — | Market proxy | Bid quotes |  | 220 | — | 99
Structured notes | — | 3,490 |  |  |  |  |  |
– equity-linked notes | — | 3,050 | Model – Option model | Equity Volatility | 6% | 154% | 6% | 99%
| Equity Correlation | 35% | 100% | 32% | 99%
– fund-linked notes | — | — | Model – Option model | Fund Volatility |  |  |  |
– FX-linked notes | — | 11 | Model – Option model | FX Volatility | 1% | 18% | 3% | 20%
– other | — | 429 |  |  |  |  |  |
Derivatives | 1,823 | 2,335 |  |  |  |  |  |
Interest rate derivatives: | 621 | 616 |  |  |  |  |  |
– securitisation swaps | 114 | 106 | Model – Discounted cash flow | Constant Prepayment Rate | 5% | 10% | 5% | 10%
– long-dated swaptions | 44 | 54 | Model – Option model | IR Volatility | 11% | 34% | 9% | 33%
– other | 463 | 456 |  |  |  |  |  |
FX derivatives: | 299 | 358 |  |  |  |  |  |
– FX options | 250 | 311 | Model – Option model | FX Volatility | 3% | 31% | 3% | 46%
– other | 49 | 47 |  |  |  |  |  |
Equity derivatives: | 658 | 1,044 |  |  |  |  |  |
– long-dated single stock options | 305 | 400 | Model – Option model | Equity Volatility | 7% | 87% | 7% | 153%
– other 2 | 353 | 644 |  |  |  |  |  |
Credit derivatives: | 245 | 317 |  |  |  |  |  |
– other | 245 | 317 |  |  |  |  |  |
Other portfolios | 2,853 | 711 |  |  |  |  |  |
– repurchase agreements | 553 | 243 | Model – Discounted cash flow | IR Curve | 3% | 8% | 1% | 9%
– other 3 | 2,300 | 468 |  |  |  |  |  |
At 31 Dec | 7,662 | 6,545 |  |  |  |  |  |

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.

HSBC Bank plc Annual Report and Accounts 2023 | 155

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 2023 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 14,371 | — | 14,371 | — | 14,371
Loans and advances to customers | 75,491 | — | — | 74,904 | 74,904
Reverse repurchase agreements – non-trading | 73,494 | — | 73,494 | — | 73,494
Financial investments – at amortised cost | 8,861 | 7,173 | 1,660 | 4 | 8,837
Liabilities |  |  |  |  |
Deposits by banks | 22,943 | — | 22,950 | — | 22,950
Customer accounts | 222,941 | — | 223,067 | — | 223,067
Repurchase agreements – non-trading | 53,416 | — | 53,416 | — | 53,416
Debt securities in issue | 13,443 | — | 13,320 | 138 | 13,458
Subordinated liabilities | 14,920 | — | 15,219 | — | 15,219
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 | — | 32,901
Debt securities in issue | 7,268 | — | 7,124 | 132 | 7,256
Subordinated liabilities | 14,528 | — | 14,434 | — | 14,434

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 2023 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 8,103 | — | 8,103 | — | 8,103
Loans and advances to customers | 13,345 | — | — | 12,902 | 12,902
Reverse repurchase agreements – non-trading | — | — | — | — | —
Liabilities |  |  |  |  |
Deposits by banks | — | — | — | — | —
Customer accounts | 17,587 | — | 17,587 | — | 17,587
Debt securities in issue | 1,080 | — | 1,066 | — | 1,066
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

Notes on the Financial Statements

156 | HSBC Bank plc Annual Report and Accounts 2023

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 2023 |  |  |  |  |
Assets |  |  |  |  |
Loans and advances to banks | 11,670 | — | 11,688 | — | 11,688
Loans and advances to customers | 32,443 | — | — | 32,359 | 32,359
Reverse repurchase agreements – non-trading | 56,973 | — | 56,973 | — | 56,973
Financial investments – at amortised cost | 12,029 | 5,738 | 6,328 | — | 12,066
Liabilities |  |  |  |  |
Deposits by banks | 18,775 | — | 18,796 | — | 18,796
Customer accounts | 133,373 | — | 133,373 | — | 133,373
Repurchase agreements – non-trading | 48,842 | — | 48,842 | — | 48,842
Debt securities in issue | 7,353 | — | 7,372 | — | 7,372
Subordinated liabilities | 14,658 | — | 15,015 | — | 15,015
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

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 amount. 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.
Repurchase and reverse repurchase agreements – non-trading
Fair values of repurchase and reverse repurchase agreements that are held on a non-trading basis provide approximate carrying amounts. This is
due to the fact that balances are generally short dated.

HSBC Bank plc Annual Report and Accounts 2023 | 157

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

| The group | The bank
2023 |  | 2022 | 2023 | 2022
| 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 | 16,027 | 14,581 | 162 | 318
– debt securities | 2,131 | 1,975 | 97 | 44
– equity securities | 13,896 | 12,606 | 65 | 274
Loans and advances to banks and customers | 2,814 | 971 | 2,791 | 971
Other | 227 | 329 | 228 | 329
At 31 Dec | 19,068 | 15,881 | 3,181 | 1,618

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 | 6,601,151 | 1,799 | 68,197 | 62 | 68,259 | (66,691) | (17) | (66,708)
Interest rate | 9,113,678 | 75,080 | 154,860 | 856 | 155,716 | (151,077) | (1,116) | (152,193)
Equities | 543,083 | — | 11,503 | — | 11,503 | (13,937) | — | (13,937)
Credit | 115,062 | — | 1,099 | — | 1,099 | (1,356) | — | (1,356)
Commodity and other | 76,435 | — | 1,584 | — | 1,584 | (1,325) | — | (1,325)
Offset (Note 28) |  |  |  |  | (64,045) |  |  | 64,045
At 31 Dec 2023 | 16,449,409 | 76,879 | 237,243 | 918 | 174,116 | (234,386) | (1,133) | (171,474)
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)

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 decreased during 2023, driven by yield curve movements and changes in foreign exchange rates.

Notional contract amounts and fair values of derivatives by product contract type (continued)
| 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 | 6,529,223 | 1,791 | 67,809 | 62 | 67,871 | (66,018) | (17) | (66,035)
Interest rate | 6,726,879 | 47,943 | 118,308 | 728 | 119,036 | (116,658) | (1,051) | (117,709)
Equities | 483,877 | — | 11,312 | — | 11,312 | (13,532) | — | (13,532)
Credit | 112,436 | — | 1,090 | — | 1,090 | (1,328) | — | (1,328)
Commodity and other | 75,871 | — | 1,584 | — | 1,584 | (1,323) | — | (1,323)
Offset |  |  |  |  | (47,128) |  |  | 47,128
At 31 Dec 2023 | 13,928,286 | 49,734 | 200,103 | 790 | 153,765 | (198,859) | (1,068) | (152,799)
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)

Notes on the Financial Statements

158 | HSBC Bank plc Annual Report and Accounts 2023

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 wit h unobservable inpu ts
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
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Unamortised balance at 1 Jan | 64 | 64 | 56 | 64
Deferral on new transactions | 103 | 110 | 96 | 99
Recognised in the income statement during the year: | (113) | (111) | (102) | (107)
– amortisation | (60) | (59) | (51) | (56)
– subsequent to unobservable inputs becoming observable | (6) | — | (6) | —
– maturity, termination or offsetting derivative | (47) | (52) | (45) | (51)
– risk hedged | — | — | — | —
Exchange differences and other | — | 1 | — | —
Unamortised balance at 31 Dec 1 | 54 | 64 | 50 | 56

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

Hedging instrument by hedged risk
| Hedging instrument
|  | Carrying amount |  |
The group | Notional amount 1 | Assets | Liabilities | Balance sheet presentation | Change in fair value 2
Hedged risk | £m | £m | £m | £m
Interest rate 3 | 32,750 | 849 | (1,078) | Derivatives | (359)
At 31 Dec 2023 | 32,750 | 849 | (1,078) |  | (359)

Interest rate 3 | 26,649 | 428 | (799) | Derivatives | 981
At 31 Dec 2022 | 26,649 | 428 | (799) |  | 981

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.

HSBC Bank plc Annual Report and Accounts 2023 | 159

Hedged item by hedged risk
| Hedged item | Ineffectiveness
| Carrying amount | Accumulated fair value hedge adjustments included in carrying amount 2 |  | Change in fair value 1 | Recognised in profit and loss | Profit and loss presentation
The group | Assets | Liabilities | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Interest rate 3 | 22,540 | — | (179) | — | Financial assets at fair value through other comprehensive income | 672 | 21 | Net income from financial instruments held for trading or managed on a fair value basis
— | — | — | — | Loans and advances to banks | —
650 | — | (17) | — | Loans and advances to customers | 19
— | — | — | — | Reverse Repos | 12
— | 1,320 | — | (155) | Debt securities in issue | (51)
— | 6,414 | — | (369) | Subordinated liabilities and deposits by banks 4 | (272)
At 31 Dec 2023 | 23,190 | 7,734 | (196) | (524) |  | 380 | 21 |

Interest rate 3 | 15,446 | — | (1,095) | — | Financial assets at fair value through other comprehensive income | (1,850) | 31 | Net income from financial instruments held for trading or managed on a fair value basis
— | — | — | — | Loans and advances to banks | —
713 | — | (31) | — | Loans and advances to customers | (40)
431 | — | (15) | — | Reverse Repos | (14)
— | 1,576 | — | (169) | Debt securities in issue | 398
— | 5,686 | — | (659) | Subordinated liabilities and deposits by banks 4 | 556
At 31 Dec 2022 | 16,590 | 7,262 | (1,141) | (828) |  | (950) | 31 |

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 £(3)m (2022: £10m) for 'Financial assets at fair value through other comprehensive income', is nil (2022: nil) for
'Deposits by banks' and £7m (2022: £13m) 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 £6,755m (2022: £6,312m) of which the weighted-average maturity is March 2026 and the
weighted average swap rate is 0.39% (2022: 0.06%, negative). £6,755m (2022: £6,312m) of these hedges are internal to HSBC Group and composed
by internal funding between HSBC Holdings and the group.

Hedging instrument by hedged risk
| Hedging instrument
|  | Carrying amount |  | Change in fair value 2
The bank | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m
Interest rate 3 | 22,455 | 724 | (1,033) | Derivatives | (34)
At 31 Dec 2023 | 22,455 | 724 | (1,033) |  | (34)

Interest rate 3 | 18,391 | 242 | (773) | Derivatives | 466
At 31 Dec 2022 | 18,391 | 242 | (773) |  | 466

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

160 | HSBC Bank plc Annual Report and Accounts 2023

Hedged item by hedged risk
| Hedged item | Ineffectiveness
| Carrying amount | Accumulated fair value hedge adjustments included in carrying amount 2 |  | Change in fair value 1 | Recognised in profit and loss |
The bank | Assets | Liabilities | Assets | Liabilities | Balance sheet presentation | Profit and loss presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Interest rate 3 | 13,352 | — | (36) | — | Financial assets at fair value through other comprehensive income | 383 | 28 | Net income from financial instruments held for trading or managed on a fair value basis
71 | — | (2) | — | Loans and advances to customers | 2
|  |  |  | HTC (Amortised Cost) | —
— | — | — | — | Reverse Repos | —
— | 1,292 | — | (150) | Debt securities in issue | (51)
— | 6,414 | — | (369) | Subordinated liabilities and deposits by banks 4 | (272)
At 31 Dec 2023 | 13,423 | 7,706 | (38) | (519) |  | 62 | 28 |

Interest rate 3 | 9,072 | — | (642) | — | Financial assets at fair value through other comprehensive income | (1,389) | 31 | Net income from financial instruments held for trading or managed on a fair value basis
7 | — | 3 | — | Loans and advances to customers | —
— | — | — | — | Reverse Repos | —
— | 1,576 | — | (169) | Debt securities in issue | 398
— | 5,653 | — | (659) | Subordinated liabilities and deposits by banks 4 | 556
At 31 Dec 2022 | 9,079 | 7,229 | (639) | (828) |  | (435) | 31 |

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 £(3)m (2022: £10m) for 'Financial assets at fair value through other comprehensive income', nil (2022: nil) for
'Deposits by banks' and £11m (2022: £13m) 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 £6,755 m (2022: £6,312m), of which the weighted-average maturity is March 2026 and the
weighted average swap rate is 0.39% (2022: 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.

HSBC Bank plc Annual Report and Accounts 2023 | 161

Hedging instrument by hedged risk 4
| Hedging instrument | Hedged item | Ineffectiveness
|  | Carrying amount |  | Change in fair value 2 | Change in fair value 3 | Recognised in profit and loss | Profit and loss presentation
The group | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Foreign exchange | 1,799 | 62 | (17) | Derivatives | 109 | 109 | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 42,332 | 7 | (38) | 522 | 505 | 17
At 31 Dec 2023 | 44,131 | 69 | (55) |  | 631 | 614 | 17 |
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) |

| Hedging instrument | Hedged item | Ineffectiveness
|  | Carrying amount |  | Change in fair value 2 | Change in fair value 3 | Recognised in profit and loss | Profit and loss presentation
The bank | Notional amount 1 | Assets | Liabilities | Balance sheet presentation
Hedged risk | £m | £m | £m | £m | £m | £m
Foreign exchange | 1,791 | 62 | (17) | Derivatives | 108 | 108 | — | Net income from financial instruments held for trading or managed on a fair value basis
Interest rate | 25,488 | 4 | (18) | 310 | 310 | —
At 31 Dec 2023 | 27,279 | 66 | (35) | 418 | 418 | — |
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) | — |

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 2023 | (901) | (49)
Fair value gains | 505 | 109
Fair value losses/(gains) reclassified from cash flow hedge reserve to income statement in respect of: |  |
– hedged items that have affected profit or loss | 382 | (83)
Income taxes | (252) | —
Other | (39) | (2)
Cash flow hedging reserve at 31 Dec 2023 | (305) | (25)

Cash flow hedging reserve at 1 Jan 2022 | 32 | (39)
Fair value losses | (1,334) | (84)
Fair value losses 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)

Notes on the Financial Statements

162 | HSBC Bank plc Annual Report and Accounts 2023

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 in Note 29 on page 177.
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 Amount 1
| EUR 2 | USD | Other 3 | Total
The group | £m | £m | £m | £m | £m | £m
Fair Value Hedges | 7,433 | — | 141 | 7,574 | 25,175 | 32,749
Cash Flow Hedges | 8,508 | — | — | 8,508 | 33,823 | 42,331
At 31 Dec 2023 | 15,941 | — | 141 | 16,082 | 58,998 | 75,080
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
The bank |  |  |  |  |  |
Fair Value Hedges | 5,008 | — | 140 | 5,148 | 17,307 | 22,455
Cash Flow Hedges | — | — | — | — | 25,488 | 25,488
At 31 Dec 2023 | 5,008 | — | 140 | 5,148 | 42,795 | 47,943
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

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 £7,433m (31 Dec 2022: £7,581m) and Cash flow hedges £8,508m (31 Dec 2022: £7,359m).
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
|  | 2023 | 2022 | 2023 | 2022
|  | £m | £m | £m | £m
Financial investments measured at fair value through other comprehensive income |  | 37,507 | 29,356 | 16,362 | 12,261
– treasury and other eligible bills |  | 1,469 | 1,447 | 540 | 693
– debt securities |  | 35,618 | 27,710 | 15,767 | 11,514
– equity securities |  | 80 | 109 | 55 | 54
– other instruments 1 |  | 340 | 90 | — | —
Debt instruments measured at amortised cost |  | 8,861 | 3,248 | 12,029 | 6,378
– treasury and other eligible bills |  | 723 | 1,030 | 719 | 976
– debt securities 2 |  | 8,138 | 2,218 | 11,310 | 5,402
At 31 Dec |  | 46,368 | 32,604 | 28,391 | 18,639

1'Other instruments’ are comprised of loans and advances.
2 The £5.7bn (2022: £4.2bn) of debt securities in the bank relates to Senior Non-Preferred debt issued by HSBC Continental Europe to comply with
Single Resolution Board requirements on Minimum Required Eligible Liabilities.

HSBC Bank plc Annual Report and Accounts 2023 | 163

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 | 68 | 1
Investments required by central institutions | 12 | —
Others | — | —
At 31 Dec 2023 | 80 | 1
Business facilitation | 77 | —
Investments required by central institutions | 31 | —
Others | 1 | —
At 31 Dec 2022 | 109 | —

16 | Assets pledged, collateral received and assets transferred

Assets pledged 1

Financial assets pledged as collateral
| The group | The bank
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Treasury bills and other eligible securities | 1,252 | 1,649 | 720 | 877
Loans and advances to banks | 3,800 | 3,300 | 3,800 | 3,300
Loans and advances to customers | 3,861 | 4,996 | — | —
Debt securities | 21,060 | 17,407 | 10,539 | 9,699
Equity securities | 27,610 | 25,408 | 27,096 | 25,014
Cash collateral | 39,266 | 45,034 | 29,836 | 32,255
Other | 228 | 330 | 228 | 329
Assets pledged at 31 Dec | 97,077 | 98,124 | 72,219 | 71,474

Financial assets pledged as collateral which the counterparty has the right to sell or repledge
| The group | The bank
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Trading assets | 44,072 | 38,896 | 35,168 | 32,371
Financial investments | 2,606 | 3,588 | 902 | 1,974
At 31 Dec | 46,678 | 42,484 | 36,070 | 34,345

Assets pledged as collateral includes all assets categorised as encumbered in the disclosure on page 76 except for assets held for sale.
The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the case of
securitisations and covered bonds, the amount of liabilities issued, plus mandatory over-collateralisation, is less than the book value of the pool
of assets available for use as collateral. This is also the case where assets are placed with a custodian or a settlement agent that has a floating
charge over all the assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant, standard
securities lending and borrowing, repurchase agreements and derivative margining. The group places both cash and non-cash collateral in
relation to derivative transactions.
Collateral received 1
The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and derivative
margining, that the group is permitted to sell or repledge in the absence of default was £224,836m (2022: £180,233m) (the bank: 2023:
£191,832m; 2022: £154,376m). The fair value of any such collateral sold or repledged was £175,100m (2022: £136,777m) (the bank: 2023:
£147,131m; 2022: £113,917m).
The group is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard
securities lending, reverse repurchase agreements and derivative margining.
Assets transferred 1
The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt securities
held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending agreements, as well as
swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be recognised in full and a related
liability, reflecting the group’s obligation to repurchase the assets for a fixed price at a future date is also recognised on the balance sheet.
Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash collateral
received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the duration of these
transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty’s recourse is not limited to the
transferred assets.
Notes on the Financial Statements

164 | HSBC Bank plc Annual Report and Accounts 2023

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 2023 |  |
Repurchase agreements | 16,215 | 16,114
Securities lending agreements | 30,463 | 3,707
At 31 Dec 2022 |  |
Repurchase agreements | 13,349 | 13,371
Securities lending agreements | 29,171 | 3,442

The bank |  |
At 31 Dec 2023 |  |
Repurchase agreements | 5,968 | 5,968
Securities lending agreements | 30,102 | 3,748
At 31 Dec 2022 |  |
Repurchase agreements | 5,795 | 5,795
Securities lending agreements | 28,550 | 3,467

1 The group excludes assets classified as held for sale.

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 2023, the group had a 24.62% interest in the equity capital of BGF. Share of (Loss)/profit in BGF
is £(6)m (2022: £(22)m; 2021: £192m) and carrying amount of interest in BGF is £652m (2022: £673m; 2021: £702m).
Interests in joint ventures
A list of all associates is set out on page 191.

18 | Investments in subsidiaries

Main subsidiaries of HSBC Bank plc 1
| At 31 Dec 2023
| 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 Bank Bermuda Limited 1 | Bermuda | 100.00 | BM$1 Ordinary
HSBC Continental Europe | France | 99.99 | €5 Actions
HSBC Assurances Vie (France) | France | 99.99 | €287.5 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. There has been no material changes in HSBC’s shareholding
% for main existing subsidiaries since 2022.
2 During 2023, HSBC Bank plc acquired HSBC Bank Bermuda Limited ('HBBM') from HOHU.
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 38. 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 ('VIU'), in accordance with the requirements of IAS 36. The VIU 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.
We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:
– Management’s judgement in estimating future cash flows: 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. For the impairment test at 31 December 2023, cash flow projections until the end of 2028 were
considered in line with our internal planning horizon. Our cash flow projections include known and observable climate-related opportunities
and costs associated with our sustainable products and operating model.
– Long-term growth rates: A long term growth rate is used to extrapolate the free cash flows in perpetuity. The growth rate reflects inflation
for the country or territory within which the investment operates, and is based on the long-term average growth rates.

HSBC Bank plc Annual Report and Accounts 2023 | 165

– Discount 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 or territories 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. The impacts from climate risk are included to the extent that
they are observable in discount rates and asset prices.
During 2022, an additional investment of £3.4bn was made in HSBC Continental Europe. Further, an impairment reversal of £2bn was
recognised in the fourth quarter of 2022 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 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 rises in the eurozone.
The increase in carrying amount from £7.7bn to £10.1bn d uring this year is due to £2bn impairment reversal, recognised in 2022. No
investments in subsidiaries is impaired or reversed in 2023.
In October 2023, HSBC Bank plc acquired HBBM from HOHU and invested £1bn.

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 2023 | 10,117 | 11,668 | 9.17 | 1.79 | 1,551
At 31 Dec 2022 1 | 7,743 | 11,507 | 9.95 | 1.56 | 3,764

1 2022 carrying amount does not include impairment reversal of £2bn which was recognised in the fourth quarter of 2022.
Sensitivities of key assumptions in calculating VIU
At 31 December 2023, 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 attached to the key
assumptions underlying cash flow.
The following table presents a summary of the key assumptions underlying the most sensitive inputs to the model for HSBC Continental
Europe, the key risks attaching to each, and details of a reasonably possible change to assumptions where, in the opinion of management, there
is a sufficient headroom to cover the changes which could not result in an impairment.

Reasonably possible changes in key assumptions
| Input | Key assumptions | Associated risks | Reasonably possible change
Investment
HSBC Continental Europe | Free Cash Flows projections | – Level of interest rates and yield curves. – Competitors’ positions within the market. – Level and change in unemployment rates. | – Customer remediation and regulatory actions. – Achievement of strategic actions relating to revenue and costs. | – FCF projections decrease by 10%.
| 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 in key assumptions and changes to current assumptions to reduce headroom to nil
|  |  | Increase/(decrease)
Investments 1 | Carrying amount | Value in use | Discount rate | Free Cash flows
At 31 Dec 2023 | £m | £m | bps | %
HSBC Continental Europe | 10,117 | 11,668 | 143 | (35.1)

1 As at 31 December 2022, An increase of 614 bps in the discount rate and a decrease of 33.3% in the FCF to reduce the headroom to nil.

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 2023 | 2,809 | 180 | 4,272 | 398 | 7,659
At 31 Dec 2022 | 3,479 | 192 | 3,981 | 463 | 8,115

Notes on the Financial Statements

166 | HSBC Bank plc Annual Report and Accounts 2023

Conduits
The group has established and manages two types of conduits: securities investment conduits (‘SICs’) and multi-seller conduits.
Securities investment conduits
The SICs purchase highly rated ABSs to facilitate tailored investment opportunities.
At 31 December 2023, Solitaire, the group's principal SIC held £0.8bn of ABSs (2022: £1.1bn). It is currently funded entirely by commercial
paper (‘CP’) issued to the group. At 31 December 2023, the group held £1.0bn of CP (2022: £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 £4.2bn at 31 December 2023 (2022:
£4.7bn). 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 | 1 | 154 | 977 | 13 | 1,145
400 – 1,500 | 1 | 50 | 874 | 1 | 926
1,500 – 4,000 | — | 34 | 329 | — | 363
4,000 – 20,000 | — | 20 | 149 | — | 169
20,000+ | — | 1 | 8 | — | 9
Number of entities at 31 Dec 2023 | 2 | 259 | 2,337 | 14 | 2,612
| £m | £m | £m | £m | £m
Total assets in relation to the group's interests in the unconsolidated structured entities | 128 | 5,808 | 3,793 | 878 | 10,607
– trading assets | — | 1 | 10 | — | 11
– financial assets designated and otherwise mandatorily measured at fair value | — | 5,802 | 3,296 | — | 9,098
– loans and advances to banks | — | — | — | — | —
– loans and advances to customers | 128 | — | 487 | 471 | 1,086
– financial investments | — | 5 | — | — | 5
– other assets | — | — | — | 407 | 407
Total liabilities in relation to the group’s interests in the unconsolidated structured entities | — | 5 | — | — | 5
Other off-balance sheet commitments | 27 | — | 514 | — | 541
The group's maximum exposure at 31 Dec 2023 | 155 | 5,803 | 4,307 | 878 | 11,143

HSBC Bank plc Annual Report and Accounts 2023 | 167

Nature and risks associated with the group’s interests in unconsolidated structured entities (continued)
| 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 customers | 220 | — | 452 | 497 | 1,169
– financial investments | — | 5 | — | — | 5
– other assets | — | — | — | 428 | 428
Total liabilities in relation to 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

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
amount 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 2023 and 2022 was not significant.

20 | Goodwill and intangible assets

| The group | The bank
| 2023 | 2022 2 | 2023 | 2022 2
| £m | £m | £m | £m
Goodwill | — | — | 2 | 19
Other intangible assets 1 | 203 | 91 | 86 | 22
At 31 Dec | 203 | 91 | 88 | 41

1 Included within the group's other intangible assets is internally generated software with a net carrying amount of £198m (2022: £87m). During 2023,
capitalisation of internally generated software was £120m (2022: £47m), net impairment reversal was £(78)m (2022: £(13)m) and amortisation was
£91m (2022: £34m).
2 Fr om 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Notes on the Financial Statements

168 | HSBC Bank plc Annual Report and Accounts 2023

21 | Prepayments, accrued income and other assets

| The group | The bank
| 2023 | 2022 1 | 2023 | 2022 1
| £m | £m | £m | £m
Cash collateral and margin receivables | 39,125 | 44,932 | 29,835 | 32,255
Settlement accounts | 13,028 | 6,926 | 9,942 | 5,441
Bullion | 4,393 | 3,464 | 4,390 | 3,464
Prepayments and accrued income | 2,521 | 1,769 | 1,556 | 994
Property, plant and equipment | 819 | 761 | 11 | 9
Right-of-use assets | 167 | 166 | 30 | 32
Employee benefit assets (Note 5) | 51 | 73 | 10 | 12
Other accounts | 3,531 | 3,353 | 1,626 | 1,700
At 31 Dec | 63,635 | 61,444 | 47,400 | 43,907

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated
accordingly.
Prepayments, accrued income and other assets include £56,982m (2022: £55,846m) of financial assets, the majority of which are measured at
amortised cost.

22 | Trading liabilities

| The group | The bank
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Deposits by banks 1 | 5,313 | 4,337 | 5,387 | 4,350
Customer accounts 1 | 4,955 | 5,812 | 4,955 | 5,692
Other debt securities in issue | 21 | 812 | 21 | 61
Other liabilities – net short positions in securities | 31,987 | 30,304 | 14,569 | 15,662
At 31 Dec | 42,276 | 41,265 | 24,932 | 25,765

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
| 2023 | 2022¹ | 2023 | 2022
| £m | £m | £m | £m
Deposits by banks and customer accounts | 5,555 | 4,864 | 5,542 | 4,864
Liabilities to customers under investment contracts | 1,002 | 943 | — | —
Debt securities in issue | 25,194 | 20,666 | 17,110 | 13,742
Subordinated liabilities (Note 26) | 794 | 809 | 794 | 809
At 31 Dec | 32,545 | 27,282 | 23,446 | 19,415

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. 2022 comparative data have been
restated.
The group
The carrying amount of financial liabilities designated at fair value was £2,407m less than the contractual amount at maturity
(2022: £3,431m lower). The cumulative amount of change in fair value attributable to changes in credit risk was a gain of £151m (2022: gain of
£292m).
The bank
The carrying amount of financial liabilities designated at fair value was £1,974m less than the contractual amount at maturity (2022 : £2,230m
lower). The cumulative amount of change in fair value attributable to changes in credit risk was a gain of £42m (2022: gain of £139m).

HSBC Bank plc Annual Report and Accounts 2023 | 169

24 | Accruals, deferred income and other liabilities

|  | The group | The bank
|  | 2023 | 2022¹ | 2023 | 2022
|  | £m | £m | £m | £m
Cash collateral and margin payables |  | 43,305 | 55,467 | 31,920 | 40,356
Settlement accounts |  | 9,789 | 4,915 | 9,861 | 4,485
Accruals and deferred income |  | 2,603 | 1,909 | 1,633 | 1,241
Amount due to investors in funds consolidated by the group |  | 1,158 | 991 | — | —
Lease liabilities |  | 227 | 269 | 36 | 45
Employee benefit liabilities (Note 5) |  | 117 | 121 | 48 | 56
Reinsurance contract liabilities |  | 33 | 33 | — | —
Share-based payment liability to HSBC Holdings |  | 107 | 98 | 77 | 72
Endorsements and acceptances |  | 236 | 231 | 227 | 218
Other liabilities |  | 2,869 | 2,986 | 1,120 | 1,509
At 31 Dec |  | 60,444 | 67,020 | 44,922 | 47,982

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. 2022 comparative data have been
restated.
For the group, accruals, deferred income and other liabilities include £59,806m (2022: £66,390m), and for the bank £44,679m (2022: £47,683m)
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 2023 | 126 | 77 | 13 | 103 | 319
Additions | 27 | 99 | 3 | 62 | 191
Amounts utilised | (43) | (54) | (3) | (25) | (125)
Unused amounts reversed | (28) | (16) | (3) | (29) | (76)
Exchange and other movements | (6) | (2) | (1) | 7 | (2)
At 31 Dec 2023 | 76 | 104 | 9 | 118 | 307
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2023 |  |  |  |  | 105
Net change in expected credit loss provision and other movements |  |  |  |  | (22)
At 31 Dec 2023 |  |  |  |  | 83
Total Provisions |  |  |  |  |
At 31 Dec 2022 |  |  |  |  | 424
At 31 Dec 2023 |  |  |  |  | 390

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

Notes on the Financial Statements

170 | HSBC Bank plc Annual Report and Accounts 2023

| 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 2023 | 17 | 57 | 8 | 35 | 117
Additions | 11 | 95 | 2 | 16 | 124
Amounts utilised | (12) | (51) | (2) | (5) | (70)
Unused amounts reversed | (7) | (1) | (2) | (11) | (21)
Exchange and other movements | — | (5) | (1) | — | (6)
At 31 Dec 2023 | 9 | 95 | 5 | 35 | 144
Contractual commitments 1 |  |  |  |  |
At 1 Jan 2023 |  |  |  |  | 50
Net change in expected credit loss provision and other movements |  |  |  |  | (18)
At 31 Dec 2023 |  |  |  |  | 32
Total Provisions |  |  |  |  |
At 31 Dec 2022 |  |  |  |  | 167
At 31 Dec 2023 |  |  |  |  | 176

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

1 The contractual commitments provision includes off-balance sheet loan commitments and guarantees, for which expected credit losses are provided
under IFRS 9. Further analysis of the movement in the expected credit loss is disclosed within the 'Reconciliation of changes in gross carrying/nominal
amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 47.
Restructuring costs
These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during
the year relate to formal restructuring plans made within the group.
Legal proceedings and regulatory matters
Further details of legal proceedings and regulatory matters are set out in Note 33. 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
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
At amortised cost | 14,920 | 14,528 | 14,658 | 14,252
– subordinated liabilities | 14,220 | 13,828 | 14,658 | 14,252
– preferred securities | 700 | 700 | — | —
Designated at fair value (Note 23) | 794 | 809 | 794 | 809
– subordinated liabilities | 794 | 809 | 794 | 809
At 31 Dec | 15,714 | 15,337 | 15,452 | 15,061

Subordinated liabilities rank behind senior obligations and generally count towards the capital base of HSBC. 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 7.650%.
The balance sheet amounts disclosed below are presented on an IFRS basis and do not reflect the amount that the instruments contribute to
regulatory capital due to the inclusion of issuance costs, regulatory amortisation and regulatory eligibility limits.

HSBC Bank plc Annual Report and Accounts 2023 | 171

Subordinated liabilities of the group
|  | Carrying amount
|  | 2023 | 2022
|  | £m | £m
Additional tier 1 instruments guaranteed by the bank |  |
£700m | 5.844% Non-cumulative Step-up Perpetual Preferred Securities 1,5,6 | 605 | 569
Tier 2 instruments |  |
£300m | 6.5% Subordinated Notes 2023 3,7 | — | 134
€1,500m | Floating Rate Subordinated Loan 2032 | 1,299 | 1,326
€1,500m | Floating Rate Subordinated Loan 2024 7 | — | 1,329
$300m | 7.65% Subordinated Notes 2025 2 | 136 | 141
$750m | HSBC Bank plc 4.19% Subordinated Loan 2027 | 571 | 593
£200m | Floating Rate Subordinated Loan 2028 | 200 | 200
€300m | Floating Rate Subordinated Loan 2028 | 261 | 266
€260m | Floating Rate Subordinated Loan 2029 | 226 | 230
£350m | 5.375% Callable Subordinated Step-up Notes 2030 3,4,6 | 61 | 60
$2,000m | HSBC Bank plc 1.625% Subordinated Loan 2031 | 1,462 | 1,497
€2,000m | HSBC Bank plc 0.375% Subordinated Loan 2031 | 1,627 | 1,583
€2,000m | HSBC Bank plc 0.375% Subordinated Loan 2031 | 1,627 | 1,583
€1,250m | HSBC Bank plc 0.25% Subordinated Loan 2031 | 1,017 | 990
£500m | 5.375% Subordinated Notes 2033 3 | 162 | 152
£225m | 6.25% Subordinated Notes 2041 3 | 50 | 47
£600m | 4.75% Subordinated Notes 2046 3 | 191 | 191
$750m | Undated Floating Rate Primary Capital Notes 7 | — | 624
$500m | Undated Floating Rate Primary Capital Notes 7 | — | 415
$300m | Undated Floating Rate Primary Capital Notes (Series 3)7 | — | 249
$1,250m | HSBC Bank plc floating Subordinated Loan 2028 | 978 | 1,035
$1,100m | HSBC Bank plc floating Subordinated Loan 2033 | 860 | 910
€400m | HSBC Bank plc floating Subordinated Loan 2028 | 353 | 362
€400m | HSBC Bank plc floating Subordinated Loan 2027 | 353 | 361
€500m | HSBC Bank plc floating Subordinated Loan 2028 | 433 | 443
€500m | HSBC Bank plc floating Subordinated Loan 2028 | 433 | —
€500m | HSBC Bank plc floating Subordinated Loan 2028 | 433 | —
€85m | HSBC Bank plc 5.15% Subordinated Loan 2030 | 74 | —
€800m | HSBC Bank plc floating Subordinated Loan 2029 | 693 | —
€65m | HSBC Bank plc 5.24% Subordinated Loan 2033 | 56 | —
$800m | HSBC Bank plc 6.79% Subordinated Loan 2028 | 651 | —
€800m | HSBC Bank plc floating Subordinated Loan 2029 | 693 | —
€800m | HSBC Bank plc floating Subordinated Loan 2029 | 173 | —
Other Tier 2 instruments each less than £100m | 36 | 47
At 31 Dec | 15,714 | 15,337

1 The value of the security partially decreased as a result of a fair value hedge gain. The instrument was held at amortised cost in 2021. Also, the
interest rate payable after November 2031 is the sum of the compounded daily Sonia rate plus 2.0366%.
2 The bank tendered for this security in November 2022. T he principal balance is $180m. The original notional value of the security is $300m.
3 The bank tendered for these securities in November 2022. The principal balance is £135m, £61m, £157m, £70m and £237m respectively. The original
notional values of these securities are £300m, £350m, £500m, £225m and £600m respectively.
4 The interest rate payable after November 2025 is the sum of the compounded daily Sonia rate plus 1.6193%.
5 See paragraph below, ‘Guaranteed by HSBC Bank plc’.
6 These securities are ineligible for inclusion in the capital base of the group.
7 Redeemed in 2023.
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.
Notes on the Financial Statements

172 | HSBC Bank plc Annual Report and Accounts 2023

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 | 19,626 | 2,028 | 453 | 700 | 269 | 23,076
Customer accounts | 197,730 | 14,148 | 10,649 | 671 | 81 | 223,279
Repurchase agreements – non-trading | 42,743 | 7,801 | 1,761 | 1,686 | — | 53,991
Trading liabilities | 42,276 | — | — | — | — | 42,276
Financial liabilities designated at fair value | 12,107 | 1,183 | 8,003 | 7,589 | 6,862 | 35,744
Derivatives | 170,391 | 127 | 326 | 798 | 1,198 | 172,840
Debt securities in issue | 3,305 | 2,266 | 6,014 | 1,939 | 1,360 | 14,884
Subordinated liabilities | 31 | 157 | 397 | 6,478 | 13,122 | 20,185
Other financial liabilities 1 | 57,982 | 292 | 691 | 159 | 1,220 | 60,344
| 546,191 | 28,002 | 28,294 | 20,020 | 24,112 | 646,619
Loan and other credit-related commitments | 131,829 | — | — | — | — | 131,829
Financial guarantees 2 | 2,401 | — | — | — | — | 2,401
At 31 Dec 2023 | 680,421 | 28,002 | 28,294 | 20,020 | 24,112 | 780,849
Deposits by banks | 16,178 | 36 | 2,479 | 1,994 | 256 | 20,943
Customer accounts | 197,400 | 11,821 | 6,441 | 127 | 285 | 216,074
Repurchase agreements – non-trading | 30,572 | 1,793 | 203 | 427 | — | 32,995
Trading liabilities | 41,265 | — | — | — | — | 41,265
Financial liabilities designated at fair value | 9,558 | 1,950 | 4,887 | 7,200 | 6,857 | 30,452
Derivatives | 218,015 | 88 | 391 | 1,382 | 437 | 220,313
Debt securities in issue | 832 | 3,047 | 2,352 | 812 | 851 | 7,894
Subordinated liabilities | 9 | 137 | 427 | 3,300 | 14,713 | 18,586
Other financial liabilities 1 | 65,307 | 272 | 827 | 180 | 1,080 | 67,666
| 579,136 | 19,144 | 18,007 | 15,422 | 24,479 | 656,188
Loan and other credit-related commitments | 127,913 | — | — | — | — | 127,913
Financial guarantees 2 | 5,327 | — | — | — | — | 5,327
At 31 Dec 2022 | 712,376 | 19,144 | 18,007 | 15,422 | 24,479 | 789,428

HSBC Bank plc Annual Report and Accounts 2023 | 173

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 | 17,389 | 1,090 | 318 | — | — | 18,797
Customer accounts | 119,019 | 7,694 | 6,759 | 59 | — | 133,531
Repurchase agreements – non-trading | 38,794 | 7,337 | 1,588 | 1,686 | — | 49,405
Trading liabilities | 24,932 | — | — | — | — | 24,932
Financial liabilities designated at fair value | 11,693 | 743 | 5,675 | 3,927 | 4,021 | 26,059
Derivatives | 151,766 | 127 | 326 | 754 | 1,179 | 154,152
Debt securities in issue | 2,328 | 438 | 3,432 | 1,197 | 188 | 7,583
Subordinated liabilities | 31 | 157 | 396 | 6,454 | 13,238 | 20,276
Other financial liabilities 1 | 44,915 | 129 | 408 | 18 | 16 | 45,486
| 410,867 | 17,715 | 18,902 | 14,095 | 18,642 | 480,221
Loan and other credit-related commitments | 35,270 | — | — | — | — | 35,270
Financial guarantees 2 | 1,106 | — | — | — | — | 1,106
At 31 Dec 2023 | 447,243 | 17,715 | 18,902 | 14,095 | 18,642 | 516,597
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 1 | 48,283 | 180 | 297 | 18 | 18 | 48,796
| 446,095 | 14,176 | 11,191 | 9,059 | 19,607 | 500,128
Loan and other credit-related commitments | 36,474 | — | — | — | — | 36,474
Financial guarantees 2 | 1,363 | — | — | — | — | 1,363
At 31 Dec 2022 | 483,932 | 14,176 | 11,191 | 9,059 | 19,607 | 537,965

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

174 | HSBC Bank plc Annual Report and Accounts 2023

Maturity analysis of financial assets and financial liabilities |  |
| 2023 | 2022 1
| 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 | 2,973 | 16,095 | 19,068 | 1,391 | 14,490 | 15,881
Loans and advances to banks | 14,037 | 334 | 14,371 | 15,867 | 1,242 | 17,109
Loans and advances to customers | 34,876 | 40,615 | 75,491 | 38,405 | 34,209 | 72,614
Reverse repurchase agreement – non-trading | 71,676 | 1,818 | 73,494 | 52,324 | 1,625 | 53,949
Financial investments | 7,481 | 38,887 | 46,368 | 7,201 | 25,403 | 32,604
Other financial assets | 56,693 | 288 | 56,981 | 55,414 | 428 | 55,842
Assets held for sale | 10,182 | 10,186 | 20,368 | 4,174 | 17,040 | 21,214
At 31 Dec | 197,918 | 108,223 | 306,141 | 174,776 | 94,437 | 269,213
Liabilities |  |  |  |  |  |
Deposits by banks | 22,069 | 874 | 22,943 | 18,674 | 2,162 | 20,836
Customer accounts | 222,215 | 726 | 222,941 | 215,562 | 386 | 215,948
Repurchase agreements – non-trading | 51,848 | 1,568 | 53,416 | 32,486 | 415 | 32,901
Financial liabilities designated at fair value | 21,163 | 11,382 | 32,545 | 16,281 | 11,001 | 27,282
Debt securities in issue | 11,439 | 2,004 | 13,443 | 6,149 | 1,119 | 7,268
Other financial liabilities | 58,433 | 1,372 | 59,805 | 65,145 | 1,248 | 66,393
Subordinated liabilities | — | 14,920 | 14,920 | 142 | 14,386 | 14,528
Liabilities of disposal groups held for sale | 17,590 | 3,094 | 20,684 | 21,621 | 3,090 | 24,711
At 31 Dec | 404,757 | 35,940 | 440,697 | 376,060 | 33,807 | 409,867

The bank |  |  |  |  |  |
Assets |  |  |  |  |  |
Financial assets designated or otherwise mandatorily measured at fair value | 2,897 | 284 | 3,181 | 1,287 | 331 | 1,618
Loans and advances to banks | 10,673 | 997 | 11,670 | 13,338 | 1,148 | 14,486
Loans and advances to customers | 19,785 | 12,658 | 32,443 | 25,814 | 11,178 | 36,992
Reverse repurchase agreement – non-trading | 55,290 | 1,683 | 56,973 | 41,430 | 1,625 | 43,055
Financial investments | 4,313 | 24,078 | 28,391 | 3,415 | 15,224 | 18,639
Other financial assets | 42,285 | — | 42,285 | 39,605 | 2 | 39,607
Assets held for sale 2 | 160 | — | 160 | — | — | —
At 31 Dec | 135,403 | 39,700 | 175,103 | 124,889 | 29,508 | 154,397
Liabilities |  |  |  |  |  |
Deposits by banks | 18,775 | — | 18,775 | 13,543 | 51 | 13,594
Customer accounts | 133,314 | 59 | 133,373 | 141,712 | 2 | 141,714
Repurchase agreements – non-trading | 47,274 | 1,568 | 48,842 | 29,223 | 415 | 29,638
Financial liabilities designated at fair value | 18,005 | 5,441 | 23,446 | 14,290 | 5,125 | 19,415
Debt securities in issue | 6,077 | 1,276 | 7,353 | 4,341 | 315 | 4,656
Other financial liabilities | 44,646 | 30 | 44,676 | 47,651 | 32 | 47,683
Subordinated liabilities | — | 14,658 | 14,658 | 133 | 14,119 | 14,252
At 31 Dec | 268,091 | 23,032 | 291,123 | 250,893 | 20,059 | 270,952

1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data of the financial year
ended 31 December 2022 have been restated accordingly.
2 Includes planned transfer of hedge fund administration services.

HSBC Bank plc Annual Report and Accounts 2023 | 175

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 arrangements 5 | Total
|  |  |  | Amounts not set off in the balance sheet |
| Gross amounts | Amounts offset | Net amounts in the balance sheet | Financial instruments, including non-cash collateral 6 | Cash collateral | Net amount
| £m | £m | £m | £m | £m | £m | £m | £m
Financial assets |  |  |  |  |  |  |  |
Derivatives (Note 14)1 | 237,360 | (64,045) | 173,315 | (155,398) | (17,674) | 243 | 801 | 174,116
Reverse repos, stock borrowing and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading assets | 17,454 | (473) | 16,981 | (16,981) | — | — | 243 | 17,224
– non-trading assets | 129,243 | (58,972) | 70,271 | (70,204) | (62) | 5 | 3,223 | 73,494
Loans and advances to customers 3 | 20,950 | (10,473) | 10,477 | (9,321) | — | 1,156 | 1 | 10,478
At 31 Dec 2023 | 405,007 | (133,963) | 271,044 | (251,904) | (17,736) | 1,404 | 4,268 | 275,312
Derivatives (Note 14)1 | 303,911 | (79,799) | 224,112 | (193,720) | (29,998) | 394 | 1,126 | 225,238
Reverse repos, stock borrowing and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading assets | 14,490 | (196) | 14,294 | (14,293) | — | 1 | 63 | 14,357
– non-trading assets | 103,839 | (52,268) | 51,571 | (51,310) | (260) | 1 | 2,378 | 53,949
Loans and advances to customers 3 | 17,979 | (8,105) | 9,874 | (8,143) | — | 1,731 | 1 | 9,875
At 31 Dec 2022 | 440,219 | (140,368) | 299,851 | (267,466) | (30,258) | 2,127 | 3,568 | 303,419
Financial liabilities |  |  |  |  |  |  |  |
Derivatives (Note 14)1 | 234,304 | (64,045) | 170,259 | (155,148) | (14,337) | 774 | 1,215 | 171,474
Repos, stock lending and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading liabilities | 10,249 | (135) | 10,114 | (10,112) | — | 2 | 5 | 10,119
– non-trading liabilities | 112,726 | (59,310) | 53,416 | (52,878) | (539) | (1) | — | 53,416
Customer accounts 4 | 26,395 | (10,473) | 15,922 | (9,321) | — | 6,601 | 6 | 15,928
At 31 Dec 2023 | 383,674 | (133,963) | 249,711 | (227,459) | (14,876) | 7,376 | 1,226 | 250,937
Derivatives (Note 14)1 | 297,341 | (79,799) | 217,542 | (197,201) | (19,662) | 679 | 1,325 | 218,867
Repos, stock lending and similar agreements classified as 2: |  |  |  |  |  |  |  |
– trading liabilities | 10,180 | (196) | 9,984 | (9,983) | — | 1 | 2 | 9,986
– non-trading liabilities | 85,168 | (52,268) | 32,900 | (32,719) | (182) | (1) | 1 | 32,901
Customer accounts 4 | 24,082 | (8,105) | 15,977 | (8,143) | — | 7,834 | 10 | 15,987
At 31 Dec 2022 | 416,771 | (140,368) | 276,403 | (248,046) | (19,844) | 8,513 | 1,338 | 277,741

1 At 31 Dec 2023, the amount of cash margin received that had been offset against the gross derivatives assets was £1,508m (2022: £2,373m). The
amount of cash margin paid that had been offset against the gross derivatives liabilities was £4,296m (2022: £7,279m).
2 For the amount of repos, reverse repos, stock lending, stock borrowing and similar agreements recognised on the balance sheet within 'Trading
assets' and 'Trading liabilities', see the 'Funding sources and uses' table on page 75.
3 At 31 Dec 2023, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £75,491m (2022: £72,614m) of which
£10,477m (2022: £9,874m) was subject to offsetting.
4 At 31 Dec 2023, the total amount of 'Customer accounts' recognised on the balance sheet was £222,941m (2022: £215,948m) of which £15,922m
(2022: £15,977m) 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 was enhanced in year 2022 to support consistency across HSBC 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.
Notes on the Financial Statements

176 | HSBC Bank plc Annual Report and Accounts 2023

29 | Interest rate benchmark reform

| Financial instruments yet to transition to alternative benchmarks, by main benchmark
| USD Libor | Others 1
At 31 Dec 2023 | £m | £m
Non-derivative financial assets 2 | 451 | 131
Non-derivative financial liabilities | 4 | —
Derivative notional contract amount | 4,725 | 164,760

At 31 Dec 2022 |  |
Non-derivative financial assets 2 | 5,976 | 136
Non-derivative financial liabilities | 1,847 | —
Derivative notional contract amount | 1,643,433 | 155,951

1 Comprises financial instruments referencing other significant demising benchmark rates yet to transition to alternative benchmarks: Canadian dollar
offered rate (‘CDOR’), GBP libor, Mexican Interbank equilibrium interest rate (‘TIIE’), SOR, THBFIX, MIFOR and Sibor). An announcement was made
by the South African regulator during the first half of 2023 on the cessation of the Johannesburg interbank average rate (‘JIBAR’). Therefore, JIBAR is
also included in ‘Others‘ during the current period.
2 Gross carrying amount excluding allowances for expected credit losses.
The amounts in the above table relate to the group's main operating entities where we have material exposures impacted by Ibor reform,
including in the United Kingdom, France and Germany. The amounts provide an indication of the extent of the group’s exposure to the Ibor
benchmarks that are due to be replaced. Amounts are in respect of financial instruments that:
– contractually reference an interest rate benchmark that is planned to transition to an alternative benchmark;
– have a contractual maturity date beyond the date by which the reference interest rate benchmark is expected to cease; and
– are recognised on the group’s consolidated balance sheet.

30 | Called up share capital and other equity instruments

Issued and fully paid

HSBC Bank plc £1.00 ordinary shares
|  | 2023 | 2022
|  | Number | £m | Number | £m
At 1 Jan |  | 796,969,112 | 797 | 796,969,111 | 797
At 31 Dec |  | 796,969,113 | 797 | 796,969,112 | 797

HSBC Bank plc share premium
|  | 2023 1 | 2022
|  | £m | £m
At 31 Dec |  | 1,004 | 420

1 Increase relates to share premium on issuance of 1 ordinary Share (£1/ per Share) to HSBC Holdings plc ('HGHQ').

Total called up share capital and share premium
|  | 2023 | 2022
|  | £m | £m
At 31 Dec |  | 1,801 | 1,217

HSBC Bank plc $0.01 non-cumulative third dollar preference shares
| 2023 | 2022
| 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 occurred 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

HSBC Bank plc Annual Report and Accounts 2023 | 177

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
|  | First call date | 2023 | 2022
|  | £m | £m
€1,900m | 5.950% Undated Subordinated Resettable Additional Tier 1 instrument 2015 1 | Dec 2020 | 1,388 | 1,388
€235m | 5.650% Undated Subordinated Resettable Additional Tier 1 instrument 2016 1 | Jan 2022 | 197 | 197
€300m | 3.813% Undated Subordinated Resettable Additional Tier 1 instrument 2018 1 | Mar 2023 | 263 | 263
£555m | 5.063% Undated Subordinated Resettable Additional Tier 1 instrument 2018 1 | Mar 2023 | 555 | 555
£500m | 4.750% Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 500 | 500
€250m | 3.500% Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Nov 2024 | 213 | 213
£431m | 4.551% Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Dec 2024 | 431 | 431
€200m | 5.039% Undated Subordinated Resettable Additional Tier 1 instrument 2019 | Jan 2025 | 175 | 175
€250m | FRN Undated Subordinated Resettable Additional Tier 1 instruments 2022 2 | Mar 2027 | 208 | 208
At 31 Dec |  |  | 3,930 | 3,930

1 Instruments are contractually callable on any interest payment date after the first call date. Interest rates reset every five years if not called.
2 Interest is floating, based on 3 month EURIBOR + 4.060%.
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%.

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

| The group | The bank
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Guarantees and other contingent liabilities: |  |  |  |
– financial guarantees | 2,401 | 5,327 | 1,106 | 1,363
– performance and other guarantees | 19,548 | 17,136 | 7,395 | 6,886
– other contingent liabilities | 268 | 353 | 267 | 342
At 31 Dec | 22,217 | 22,816 | 8,768 | 8,591
Commitments:1 |  |  |  |
– documentary credits and short-term trade-related transactions | 1,919 | 2,317 | 908 | 820
– forward asset purchases and forward deposits placed | 38,704 | 33,684 | 4,539 | 3,317
– standby facilities, credit lines and other commitments to lend | 91,206 | 91,912 | 29,823 | 32,337
At 31 Dec | 131,829 | 127,913 | 35,270 | 36,474

1 Includes £125,616m of commitments (2022: £126,457m), 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 has now returned to the First-tier Tax tribunal for determination. 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 £198m 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 33.
Notes on the Financial Statements

178 | HSBC Bank plc Annual Report and Accounts 2023

Financial Services Compensation Scheme
The F SCS provides compensation, up to certain limits, to eligible customers of financial services firms that are unable, or likely to be unable, to
pay claims against them. The FSCS may impose a further levy on the HSBC UK 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.
Guarantees

| The group | The bank
| 2023 | 2022 | 2023 | 2022
| In favour of third parties | By the group in favour of other HSBC Group entities | In favour of third parties | By the group in favour of other HSBC Group entities | In favour of third parties | By the bank in favour of other HSBC Group entities | In favour of third parties | By the bank in favour of other HSBC Group entities
| £m | £m | £m | £m | £m | £m | £m | £m
Financial guarantees 1 | 1,981 | 420 | 4,158 | 1,169 | 919 | 187 | 1,105 | 258
Performance and other guarantees | 17,432 | 2,116 | 15,475 | 1,661 | 5,238 | 2,157 | 5,516 | 1,370
Total | 19,413 | 2,536 | 19,633 | 2,830 | 6,157 | 2,344 | 6,621 | 1,628

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.

32 | 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.

| 2023 | 2022
| 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 | 238 | (27) | 211 | 211 | (24) | 187
One to two years | 231 | (24) | 207 | 214 | (26) | 188
Two to three years | 113 | (15) | 98 | 207 | (21) | 186
Three to four years | 116 | (13) | 103 | 117 | (16) | 101
Four to five years | 65 | (12) | 53 | 100 | (13) | 87
Later than one year and no later than five years | 525 | (64) | 461 | 638 | (76) | 562
Later than five years | 311 | (28) | 283 | 457 | (50) | 407
At 31 Dec | 1,074 | (119) | 955 | 1,306 | (150) | 1,156

33 | 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 2023 (see Note 25: ‘Provisions’). 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 $8.4b n, 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 $4b n. 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 alleged
transfers from Madoff Securities to HSBC in the amount of $543m (plus interest), and these lawsuits remain pending in the US Bankruptcy
Court for the Southern District of New York (the 'US Bankruptcy Court').

HSBC Bank plc Annual Report and Accounts 2023 | 179

Certain Fairfield entities (together, ‘Fairfield’) (in liquidation) 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 the amount of $382m (plus interest). Fairfield's
claims against most of the HSBC companies have been dismissed by the US Bankruptcy Court and the US District Court for the Southern
District of New York, but remain pending on appeal before the US Court of Appeals for the Second Circuit. Fairfield's claims against HSBC
Private Bank (Suisse) SA and HSBC Securities Services Luxembourg ('HSSL') have not been dismissed and their appeals are also pending
before the US Court of Appeals for the Second Circuit. Meanwhile, proceedings before the US Bankruptcy Court with respect to the claims
against HSBC Private Bank (Suisse) SA and HSSL 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) brought an action against HSSL and Bank of Bermuda
(Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming damages.
Following dismissal of Primeo's action by the Grand Court and Court of Appeal of the Cayman Islands, in 2019, Primeo appealed to the Judicial
Committee of the Privy Council. In November 2023, the Privy Council issued a judgment upholding the dismissal of Primeo's claims. This matter
is now closed.
Luxembourg litigation: In 2009, Herald Fund SPC (‘Herald’) (in liquidation) brought an action against HSSL before the Luxembourg District
Court, seeking restitution of cash and securities in the amount of $2.5b n (plus interest), or damages in the amount of $2b n (plus interest). In
2018, HSBC Bank plc was added to the claim and Herald increased the amount of the alleged damages claim to $5.6b n (plus interest). The
Luxembourg District Court has dismissed Herald’s securities restitution claim, but reserved Herald’s cash restitution and damages claims.
Herald has appealed this dismissal to the Luxembourg Court of Appeal, where the matter is pending.
Beginning in 2009, various HSBC companies have been named as defendants in a number of actions brought by Alpha Prime Fund Limited
('Alpha Prime') in the Luxembourg District Court seeking damages for alleged breach of contract and negligence in the amount of $1.16b n (plus
interest). These matters are currently pending before the Luxembourg District Court.
Beginning in 2014, HSSL and the Luxembourg branch of HSBC Bank plc have been named as defendants in a number of actions brought by
Senator Fund SPC ('Senator') before the Luxembourg District Court seeking restitution of securities in the amount of $625m (plus interest), or
damages in the amount of $188m (plus interest). These matters are currently pending before the Luxembourg District Court.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of the pending matters,
including the timing or any possible impact on HSBC Bank plc, which could be significant.
US Anti-Terrorism Act litigation
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, alleged 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, or provided banking services to
customers alleged to have connections to terrorism financing. Seven actions, which seek damages for unspecified amounts, remain pending
and HSBC Bank plc's motions to dismiss have been granted in three of these cases. These dismissals are subject to appeals and/or the plaintiffs
re-pleading their claims. The four other actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of these matters, including the
timing or any possible impact on HSBC Bank plc, which could be significant.
Interbank offered rates investigation 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 individual and putative class
action lawsuits filed in federal and state courts 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’). HSBC has concluded
class settlements with five groups of plaintiffs, and several class action lawsuits brought by other groups of plaintiffs have been voluntarily
dismissed. A number of individual US dollar Libor-related actions seeking damages for unspecified amounts remain pending.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of the pending matters,
including the timing or any possible impact on HSBC Bank plc, which could be significant.
Foreign exchange-related investigations and litigation
Since 2017, HSBC Bank plc, among other financial institutions, has been defending a complaint filed by the Competition Commission of South
Africa before the South African Competition Tribunal for alleged anti-competitive behaviour in the South African foreign exchange market. In
January 2024, the South African Competition Appeal Court denied HSBC Bank plc's application to dismiss the complaint.
In January 2023, HSBC Bank plc and HSBC Holdings plc reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in
the local courts alleging foreign exchange-related misconduct. The settlement remains subject to court approval. Lawsuits alleging foreign
exchange-related misconduct remain pending against HSBC Bank plc and other banks in courts in Brazil.
In February 2024, HSBC Bank plc and HSBC Holdings plc were joined to an existing claim brought in the UK Competition Appeals Tribunal
against various other banks alleging historical anti-competitive behaviour in the foreign exchange market and seeking damages for unspecified
amounts. This matter is at an early stage. It is possible that additional civil actions will be initiated against HSBC Bank plc 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 the pending matters, which could be
significant.
Notes on the Financial Statements

180 | HSBC Bank plc Annual Report and Accounts 2023

Precious metals fix-related litigation
US litigation: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District
Court for the Southern District of New York alleging 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 May
2023, this action, which seeks damages for unspecified amounts, was dismissed but remains pending on appeal.
HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US
District Court for the Southern District of New York alleging 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
February 2023, the court reversed an earlier dismissal of the plaintiffs’ third amended complaint and this action , which seeks damages for
unspecified amounts, is proceeding.
Canada litigation: HSBC and other financial institutions are defending putative class actions filed in the Ontario and Quebec Superior Courts of
Justice alleging that the defendants conspired to manipulate the price of silver, gold and related derivatives in violation of the Canadian
Competition Act and common law. These actions each seek CA$1b n in damages plus CA$250m in punitive damages. Two of the actions are
proceeding and the others have been stayed.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of these matters, including the
timing or any possible impact on HSBC Bank plc, which could be significant.
Tax-related investigations
Various tax administration, regulatory and law enforcement authorities around the world are conducting investigations in connection with
allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation. HSBC continues to cooperate with
these investigations.
In March 2023, the French National Financial Prosecutor announced an investigation into a number of banks, including HSBC Continental Europe
and the Paris branch of HSBC Bank plc, in connection with alleged tax fraud related to the dividend withholding tax treatment of certain trading
activities. HSBC Bank plc and HSBC Germany also continue to cooperate with investigations by the German public prosecutor into numerous
financial institutions and their employees, in connection with the dividend withholding tax treatment of certain trading activities.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of these matters, including the
timing or any possible impact on HSBC Bank plc, which could be significant.
Gilts trading investigation and litigation
Since 2018, the UK Competition and Markets Authority ('CMA') has been investigating HSBC and four other banks for suspected anti-
competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC
Bank plc and HSBC Holdings plc; both HSBC companies are contesting the CMA's allegations.
In June 2023, HSBC Bank plc, among other banks, was named as a defendant in a putative class action filed in the US District Court for the
Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market and seeking damages for unspecified amounts.
In September 2023, the defendants filed a motion to dismiss which remains pending. It is possible that additional civil actions will be initiated
against HSBC Bank plc in relation to its historical gilts trading activities.
Based on the facts currently known, it is not practicable at this time for HSBC Bank plc to predict the resolution of these matters, including the
timing or any possible impact on HSBC Bank plc, which could be significant.
UK depositor protection arrangements investigation
In January 2022, the UK Prudential Regulation Authority ('PRA') commenced an investigation into HSBC Bank plc's and HSBC UK Bank plc's
compliance with depositor protection arrangements under the Financial Services Compensation Scheme in the UK. In January 2024, the PRA
concluded its investigation and imposed a £57m fine on HSBC Bank plc and HSBC UK Bank plc, which has been paid, and this matter is now
closed.
UK collections and recoveries investigation
Since 2019, the FCA has been investigating HSBC Bank plc's, HSBC UK Bank plc's and Marks and Spencer Financial Services plc's compliance
with regulatory standards relating to collections and recoveries operations in the UK between 2017 and 2018. HSBC continues to cooperate
with this investigation.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of this matter, which could be significant.
Stanford litigation
Since 2009, HSBC Bank plc has been named as a defendant in numerous claims filed in courts in the UK and the US arising from the collapse of
Stanford International Bank Ltd, for which it was a correspondent bank from 2003 to 2009. In February 2023, HSBC Bank plc reached
settlements with the plaintiffs to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.
Other regulatory investigations, reviews and litigation
HSBC Bank plc and/or certain of its affiliates are also subject to a number of other enquiries and examinations, requests for information,
investigations and reviews by various regulators and competition and law enforcement authorities, as well as legal proceedings including
litigation, arbitration and other contentious proceedings, in connection with various matters arising out of their ordinary course businesses and
operations.
At the present time, HSBC Bank plc does not expect the ultimate resolution of any of these matters to be material to its financial position;
however, given the uncertainties involved in legal proceedings and regulatory matters, there can be no assurance regarding the eventual
outcome of a particular matter or matters.

HSBC Bank plc Annual Report and Accounts 2023 | 181

34 | 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
| 2023 | 2022 | 2021
| £000 | £000 | £000
Short-term employee benefits 1,2 | 13,003 | 13,487 | 13,678
Post-employment benefits | 29 | 69 | 46
Other long-term employee benefits | 1,081 | 1,152 | 1,378
Share-based payments | 4,699 | 4,234 | 4,331
Year ended 31 Dec | 18,812 | 18,942 | 19,433

1 Includes fees paid to non-executive Directors.
2 2023 includ es payment of £30,000 (2022: £600,000) relating to compensation for loss of employment.

Advances and credits, guarantees and deposit balances during the year with Key Management Personnel
| 2023 | 2022
| Balance at 31 Dec | Highest amounts outstanding during year 2 | Balance at 31 Dec | Highest amounts outstanding during year
| £m | £m | £m | £m
Key Management Personnel 1 |  |  |  |
Advances and credits | — | — | — | —
Deposits | 27 | 83 | 21 | 32

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 2023, 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 2023, 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 2023, there were no transactions and balances with associates and joint ventures, in respect of loans, deposits, guarantees
and commitments.
Notes on the Financial Statements

182 | HSBC Bank plc Annual Report and Accounts 2023

The group’s transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc
| 2023 | 2022
| 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 | 75 | 10 | 2,883 | 78 | 62 | 17 | 7,074 | 848
Derivatives | 7,495 | 4,767 | 27,928 | 23,035 | 7,196 | 5,714 | 39,341 | 27,473
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 5 | 5 | 26 | 26 | 6 | 5 | 28 | 25
Loans and advances to banks | — | — | 5,633 | 4,434 | — | — | 6,237 | 5,585
Loans and advances to customers | 211 | — | 571 | 408 | 183 | — | 496 | 424
Financial investments | 194 | 194 | — | — | 154 | 136 | — | —
Reverse repurchase agreements – non-trading | — | — | 14,561 | 13,538 | — | — | 6,150 | 4,341
Prepayments, accrued income and other assets | 62 | 4 | 12,146 | 6,961 | 1,263 | 21 | 11,591 | 8,389
Total related party assets at 31 Dec | 8,042 | 4,980 | 63,748 | 48,480 | 8,864 | 5,893 | 70,917 | 47,085
Liabilities |  |  |  |  |  |  |  |
Trading liabilities | 83 | 79 | 1,239 | 1,196 | 45 | 21 | 522 | 91
Financial liabilities designated at fair value | 594 | 571 | 242 | 8 | 1,162 | 593 | — | —
Deposits by banks | — | — | 6,230 | 2,073 | — | — | 6,034 | 3,310
Customer accounts | 6,601 | 5,508 | 1,999 | 1,999 | 6,202 | 4,315 | 3,149 | 1,551
Derivatives | 2,824 | 2,062 | 32,126 | 23,373 | 4,345 | 2,680 | 43,384 | 30,997
Subordinated liabilities | 14,444 | 13,902 | — | — | 12,115 | 12,115 | — | —
Repurchase agreements – non-trading | — | — | 9,983 | 8,187 | — | — | 5,811 | 5,738
Provisions, accruals, deferred income and other liabilities | 4,966 | 3,090 | 8,915 | 8,913 | 3,357 | 3,161 | 10,816 | 4,864
Total related party liabilities at 31 Dec | 29,512 | 25,212 | 60,734 | 45,749 | 27,226 | 22,885 | 69,716 | 46,551
Guarantees and commitments | — | — | 6,218 | 4,335 | — | — | 4,762 | 3,383

HSBC Bank plc routinely enters into related party transactions with other entities in the HSBC Group. These include transactions to facilitate
third-party transactions with customers, transactions for internal risk management, and other transactions relevant to HSBC Group processes.
These transactions and 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.

HSBC Bank plc Annual Report and Accounts 2023 | 183

The bank's transactions and balances during the year with HSBC Bank plc subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings plc
| 2023 | 2022
| 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 | 174 | 83 | 73 | 9 | 2,882 | 65 | 264 | 172 | 62 | 17 | 7,074 | 845
Derivatives | 11,332 | 9,135 | 7,495 | 4,767 | 26,740 | 21,668 | 17,187 | 11,332 | 7,196 | 5,714 | 37,475 | 26,170
Loans and advances to banks | 3,246 | 2,572 | — | — | 3,892 | 2,628 | 3,484 | 2,940 | — | — | 5,197 | 3,892
Loans and advances to customers | 4,594 | 4,111 | 211 | — | 387 | 155 | 4,517 | 4,515 | 183 | — | 285 | 247
Financial investments | 5,776 | 5,728 | — | — | — | — | 4,521 | 4,183 | — | — | — | —
Reverse repurchase agreements – non-trading | 4,102 | 4,102 | — | — | 14,314 | 12,768 | 4,683 | 2,332 | — | — | 5,920 | 3,947
Prepayments, accrued income and other assets | 7,134 | 2,297 | 62 | 4 | 10,548 | 6,219 | 4,868 | 2,905 | 1,262 | 21 | 10,096 | 6,818
Investments in subsidiary undertakings | 11,627 | 11,627 | — | — | — | — | 10,646 | 10,646 | — | — | — | —
Total related party assets at 31 Dec | 47,985 | 39,655 | 7,841 | 4,780 | 58,763 | 43,503 | 50,170 | 39,025 | 8,703 | 5,752 | 66,047 | 41,919
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Trading liabilities | 80 | 79 | 83 | 78 | 1,239 | 1,196 | 113 | 32 | 44 | 21 | 508 | 91
Financial liabilities designated at fair value | — | — | 594 | 571 | 242 | 8 | — | — | 1,162 | 593 | — | —
Deposits by banks | 1,978 | 984 | — | — | 4,242 | 1,403 | 3,385 | 960 | — | — | 3,601 | 1,979
Customer accounts | 583 | 405 | 6,601 | 5,508 | 1,877 | 1,877 | 1,095 | 514 | 6,202 | 4,315 | 3,048 | 1,426
Derivatives | 13,361 | 10,388 | 2,824 | 2,062 | 29,977 | 21,869 | 13,479 | 13,361 | 4,345 | 2,680 | 40,460 | 29,001
Subordinated liabilities | 700 | 700 | 14,217 | 13,676 | — | — | 700 | 700 | 11,884 | 11,884 | — | —
Repurchase agreements – non-trading | 2,362 | 1,135 | — | — | 9,983 | 8,142 | 1,279 | 429 | — | — | 5,328 | 5,030
Provisions, accruals, deferred income and other liabilities | 7,397 | 1,250 | 4,951 | 3,087 | 8,202 | 8,186 | 7,596 | 1,015 | 3,349 | 3,167 | 9,511 | 4,437
Total related party liabilities at 31 Dec | 26,461 | 14,941 | 29,270 | 24,982 | 55,762 | 42,681 | 27,647 | 17,011 | 26,986 | 22,660 | 62,456 | 41,964
Guarantees and commitments | 5,315 | 3,321 | — | — | 4,406 | 2,964 | 4,469 | 2,655 | — | — | 2,690 | 1,380

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 2023, the gross notional value of the swaps was £5,574m (2022: £5,449m), the swaps had a
positive fair value of £429m to the bank ( 2022: positive fair value of £424m) and the bank had delivered collateral of £439m (2022: £425m) to the
Scheme in respect of these swaps. All swaps were executed at prevailing market rates and within standard market bid/offer spreads.

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

Held for sale at 31 December
| 2023 | 2022
| £m | £m
Held for sale at 31 Dec |  |
Disposal groups | 21,792 | 23,179
Unallocated impairment losses 1 | (1,548) | (1,978)
Non-current assets held for sale | 124 | 13
Assets held for sale | 20,368 | 21,214
Liabilities of disposal groups held for sale | 20,684 | 24,711

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

184 | HSBC Bank plc Annual Report and Accounts 2023

Disposal groups
Sale of our retail banking operations in France
On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking operations in France to CCF, a subsidiary of Promontoria
MMB SAS (‘My Money Group’). The sale also included HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3%
ownership interest in Crédit Logement.
In the first quarter of 2023, the sale had become less certain, as a result of which we recognised a £1.7 bn partial reversal of the impairment loss
recognised in 2022, when the disposal group was classified as held for sale. In the fourth quarter of 2023, following the receipt of regulatory
approvals and the satisfaction of other relevant conditions, we reclassified the disposal group as held for sale, and it was subsequently
remeasured at the lower of the carrying amount and fair value less costs to sell. This resulted in the reinstatement of a €1.8b n (£1.5b n) pre-tax
impairment loss reflecting the final terms of the sale, giving rise to a net reversal of impairment recognised in other operating income in the year
of £0.2b n.
Upon completion and in accordance with the terms of the sale, HSBC Continental Europe received a €0.1b n (£0.1b n) profit participation interest
in the ultimate holding company of My Money Group. The associated impacts on initial recognition of this stake at fair value were recognised as
part of the pre-tax loss on disposal. In addition, we recognised the reversal of a €0.4b n (£0.4b n) deferred tax liability, which had arisen as a
consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible
in the French tax return in 2021.
In accordance with the terms of the sale, HSBC Continental Europe retained a portfolio of €7.1b n (£6.2b n) consisting of home and certain other
loans, in respect of which it may consider on-sale opportunities at a suitable time, and the CCF brand, which it licensed to the buyer under a
long-term licence agreement. Additionally, HSBC Continental Europe’s subsidiaries, HSBC Assurances Vie (France) and HSBC Global Asset
Management (France), have entered into distribution agreements with the buyer. Ongoing costs associated with the retention of the home and
certain other loans, net of income on distribution agreements and the brand licence, are estimated to have an after-tax loss impact of €0.1b n
(£0.1b n) i n 2024 based on expected funding rates.
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 sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). In 2022, a £0.2bn
impairment loss on the planned sale was recognised, upon classification as held for sale in accordance with IFRS 5. As at 31 December 2023,
following US sanctions designation of the buyer, the outcome of the planned sale became less certain. This resulted in the reversal of £0.2b n of
the previously recognised loss, as the business was no longer classified as held for sale. However, owing to restrictions impacting the
recoverability of assets in Russia, we recognised charges of £0.2b n in other operating income. Completion of the planned sale remains subject
to regulatory approval. On completion, accumulated foreign currency translation reserves will be recycled to the income statement.
At 31 December 2023, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment
losses, were as follows:

| France retail banking operations | Other 1 | Total
| £m | £m | £m
Assets of disposal groups held for sale |  |  |
Cash and balances at central banks 2 | 177 | — | 177
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss | 38 | — | 38
Loans and advances to banks 2 | 8,103 | — | 8,103
Loans and advances to customers | 13,255 | 90 | 13,345
Reverse repurchase agreements | — | — | —
Financial investments 3 | 25 | — | 25
Prepayments, accrued income and other assets | 103 | 1 | 104
Total Assets at 31 Dec 2023 | 21,701 | 91 | 21,792
Liabilities of disposal groups held for sale |  |  |
Customer accounts | 17,492 | 95 | 17,587
Financial liabilities designated at fair value | 1,858 | — | 1,858
Debt securities in issue | 1,080 | — | 1,080
Liabilities under insurance contracts | — | — | —
Accruals, deferred income and other liabilities | 159 | — | 159
Total Liabilities at 31 Dec 2023 | 20,589 | 95 | 20,684
Expected date of completion | 1 January 2024 | Second Half of 2024 |
Operating segment | WPB | CMB, GBM |

1 Includes planned transfer of hedge fund administration services.
2 Under the financial terms of the sale of our retail banking operations in France, HSBC Continental Europe will transfer the business with a net asset
value of €1.7b n (£1.4b n) for a consideration of €1. Any required increase to the net asset value of the business to achieve this will be satisfied by the
inclusion of additional cash. Based upon the net liabilities of the disposal group at 31 December 2023, HSBC would be expected to include a cash
contribution of £8.6b n, of which £8.3b n was reclassified as held for sale at 31 December 2023 (‘Loans and advances to banks’, £8.1b n, ‘Cash and
balances at central bank’, £0.2b n).
3 Includes financial investments measured at fair value through other comprehensive income of £21.7m and debt instruments measured at amortised
cost of £3.8m.

HSBC Bank plc Annual Report and Accounts 2023 | 185

| France retail banking operations | 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
Operating segment | WPB | All global businesses | CMB, GBM |

Business disposals
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. In the second quarter of 2022, we recognised a loss of £0.1bn, upon reclassification as held for sale in accordance with IFRS 5. At
completion on 28 July 2023, the disposal group included £0.2bn of loans and advances to customers and £0.8bn of customer accounts.

36 | Effects of adoption of IFRS 17

On 1 January 2023 the group adopted IFRS 17 ‘Insurance Contracts’ and as required by the standard applied the requirements retrospectively
with comparatives restated from the transition date, 1 January 2022. The tables below provide the transition restatement impact on the group’s
consolidated balance sheet as at 1 January 2022, as well as the group consolidated income statement and the group consolidated statement of
comprehensive income for the year ended 31 December 2022.
Further information about the effect of adoption of IFRS 17 is provided in Note 1: 'Basis of preparation of material accounting policies' on page
118.

IFRS 17 transition impact on the consolidated balance sheet at 1 January 2022
| Under IFRS 4 | Removal of PVIF and IFRS 4 balances | Recognition of IFRS 17 fulfilment cash flows | Recognition of IFRS 17 contractual service margin | Tax effect | Under IFRS 17 | Total movements
| £m | £m | £m | £m | £m | £m | £m
Assets |  |  |  |  |  |  |
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 18,649 | — | — | — | — | 18,649 | —
Loans and advances to banks | 10,784 | — | — | — | — | 10,784 | —
Loans and advances to customers | 91,177 | — | — | — | — | 91,177 | —
Financial investments | 41,300 | — | — | — | — | 41,300 | —
Goodwill and intangible assets | 894 | (811) | — | — | — | 83 | (811)
Deferred tax assets | 599 | — | — | — | 199 | 798 | 199
All other assets | 433,208 | (114) | 142 | — | — | 433,236 | 28
Total assets | 596,611 | (925) | 142 | — | 199 | 596,027 | (584)
Liabilities and equity |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |
Insurance contract liabilities | 22,264 | (22,264) | 21,311 | 890 | — | 22,201 | (63)
Deferred tax liabilities | 15 | — | — | — | (10) | 5 | (10)
All other liabilities | 550,617 | 4 | 68 | (13) | — | 550,676 | 59
Total liabilities | 572,896 | (22,260) | 21,379 | 877 | (10) | 572,882 | (14)
Total shareholders’ equity | 23,584 | 21,335 | (21,237) | (877) | 209 | 23,014 | (570)
Non-controlling interests | 131 | — | — | — | — | 131 | —
Total equity | 23,715 | 21,335 | (21,237) | (877) | 209 | 23,145 | (570)
Total liabilities and equity | 596,611 | (925) | 142 | — | 199 | 596,027 | (584)

Notes on the Financial Statements

186 | HSBC Bank plc Annual Report and Accounts 2023

Transition drivers
Removal of PVIF and IFRS 4 balances
The PVIF intangible asset of £811m previously reported under IFRS 4 within ‘Goodwill and intangible assets’ arose from the upfront recognition
of future profits associated with in-force insurance contracts. PVIF is no longer reported following the transition to IFRS 17, as future profits are
deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within ‘All other assets’) and insurance contract liabilities are
removed on transition, to be replaced with IFRS 17 balances.
Recognition of the IFRS 17 fulfilment cash flows
The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for
fulfilling the insurance contract, such as premiums, expenses, insurance benefits and claims including policyholder returns and the cost of
guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the risk adjustment
for non-financial risk.
Recognition of the IFRS 17 contractual service margin
The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts that
will be released to the profit and loss over the expected coverage period.
Tax effect
The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible, and new deferred tax assets are
reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.

IFRS 17 transition impact on the reported consolidated income statement for the year ended 31 December 2022
| Under IFRS 4 | Removal of PVIF and IFRS 4 balances | Insurance finance income/ expense | Contractual service margin | Onerous contracts | Experience variance and other | Attributable expenses | Tax effect | Under IFRS 17
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Net interest income | 1,904 | — | — | — | — | — | — | — | 1,904
Net fee income | 1,261 | — | — | — | — | — | 34 | — | 1,295
Net income from financial instruments held for trading or managed on a fair value basis | 2,875 | — | — | — | — | — | — | — | 2,875
Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | (1,370) | — | — | — | — | — | — | — | (1,370)
Losses recognised on assets held for sale | (1,947) | — | — | — | — | — | — | — | (1,947)
Net insurance premium income | 1,787 | (1,787) | — | — | — | — | — | — | —
Insurance finance income | — | — | 1,106 | — | — | — | — | — | 1,106
Insurance service result | — | — | — | 126 | (7) | 2 | — | — | 121
– insurance revenue | — | — | — | 126 | — | 235 | — | — | 361
– insurance service expense | — | — | — | — | (7) | (233) | — | — | (240)
Other operating income 1 | 542 | (219) | 10 | — | — | (13) | — | — | 320
Total operating income | 5,052 | (2,006) | 1,116 | 126 | (7) | (11) | 34 | — | 4,304
Net insurance claims and benefits paid and movement in liabilities to policyholders | (406) | 406 | — | — | — | — | — | — | —
Net operating income before change in expected credit losses and other credit impairment charges | 4,646 | (1,600) | 1,116 | 126 | (7) | (11) | 34 | — | 4,304
Change in expected credit losses and other credit impairment charges | (222) | — | — | — | — | — | — | — | (222)
Net operating income | 4,424 | (1,600) | 1,116 | 126 | (7) | (11) | 34 | — | 4,082
Total operating expenses | (5,353) | — | — | — | — | — | 102 | — | (5,251)
Operating loss | (929) | (1,600) | 1,116 | 126 | (7) | (11) | 136 | — | (1,169)
Share of loss in associates and joint ventures | (30) | — | — | — | — | — | — | — | (30)
Loss before tax | (959) | (1,600) | 1,116 | 126 | (7) | (11) | 136 | — | (1,199)
Tax charge | 561 | — | — | — | — | — | — | 85 | 646
Loss for the period | (398) | (1,600) | 1,116 | 126 | (7) | (11) | 136 | 85 | (553)

1 ‘Other operating income’ as shown in the table above is presented inclusive of ‘Changes in fair value of long-term debt and related derivatives’,
‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’, and ‘Net (losses)/gains from financial
investments’.

HSBC Bank plc Annual Report and Accounts 2023 | 187

Transition drivers
Removal of PVIF and IFRS 4 balances
As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of £219m for year ended 31 December 2022
that was previously reported within ‘Other operating income’ is no longer reported under IFRS 17. This includes the removal of the value of new
business and changes to in-force book PVIF from valuation adjustments and experience variances.
On the implementation of IFRS 17 new income statement line items associated with insurance contract accounting were introduced.
Consequently, the previously reported IFRS 4 line items ‘Net insurance premium income’, and ‘Net insurance claims and benefits paid and
movement in liabilities to policyholders’ were also removed.
Introduction of IFRS 17 income statement
Insurance finance income/(expense)
Insurance finance income/(expense) of £1,106m for the year ended 31 December 2022 represents the change in the carrying amount of
insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For VFA contracts, which represent
more than 98% of HSBC’s insurance contracts, the insurance finance income/(expense) includes the changes in the fair value of underlying
items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying assets supporting
insurance contracts. This includes an offsetting impact to the gains and losses on assets held at fair value through profit or loss, and which is
now included in ‘Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through
profit or loss’.
Contractual service margin
Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9%
during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time
primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, changes to
levels of actual returns earned on underlying assets, or changes to assumptions.
Onerous contracts
Losses on onerous contracts are taken to the income statement as incurred.
Experience variance and other
Experience variance and other represents the expected expenses, claims and amortisation of acquisition cash flows which are reported as part
of the insurance service revenue. This is offset with the actual expenses and claims incurred in the period and recovery of acquisition cash
flows.
Attributable expenses
Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs
include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable
overheads which are included within the fulfilment cash flows and are no longer shown on the operating expenses line.

IFRS 17 transition impact on the consolidated statement of comprehensive income |  |
| Year ended 31 Dec 2022
| Under IFRS 17 | Under IFRS 4
| £m | £m
Opening equity for the year | 23,145 | 23,715
of which |  |
– Retained earnings | 24,157 | 24,735
– Financial assets at FVOCI reserve | 1,603 | 1,081
– Insurance finance reserve | (514) | —
Profit for the period | (553) | (398)
Debt instruments at fair value through other comprehensive income | (1,886) | (454)
Equity instruments designated at fair value through other comprehensive income | — | —
Insurance finance income/ (expense) recognised in other comprehensive income | 1,408 | —
Other comprehensive expense for the period, net of tax | 96 | 125
Total comprehensive (expense)/income for the year | (935) | (727)
Other movements | 1,023 | 1,028
Closing equity for the year | 23,233 | 24,016

Transition drivers
Insurance finance reserve
The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in
France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only
the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses,
resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these
insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of £(514)m was recognised and following transition,
gains net of tax of £1,408m w ere recorded in the year ended 31 December 2022. An offsetting fair value through OCI reserve of £522m
recorded on transition represents the accumulated fair value movements on assets supporting these insurance liabilities, with associated losses
net of taxes of £1,506m recorded within the fair value through other comprehensive income reserve during the year ended 31 December 2022.
Notes on the Financial Statements

188 | HSBC Bank plc Annual Report and Accounts 2023

Consolidated balance sheet at transition date and at 31 December 2022.

Consolidated balance sheet |  |
| Under IFRS 17 | Under IFRS 4
| 31 Dec | 1 Jan | 31 Dec | 31 Dec
| 2022 | 2022 | 2022 | 2021
| £m | £m | £m | £m
Assets |  |  |  |
Cash and balances at central banks | 131,433 | 108,482 | 131,433 | 108,482
Items in the course of collection from other banks | 2,285 | 346 | 2,285 | 346
Trading assets | 79,878 | 83,706 | 79,878 | 83,706
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 15,881 | 18,649 | 15,881 | 18,649
Derivatives | 225,238 | 141,221 | 225,238 | 141,221
Loans and advances to banks | 17,109 | 10,784 | 17,109 | 10,784
Loans and advances to customers | 72,614 | 91,177 | 72,614 | 91,177
Reverse repurchase agreements – non-trading | 53,949 | 54,448 | 53,949 | 54,448
Financial investments | 32,604 | 41,300 | 32,604 | 41,300
Assets held for sale | 21,214 | 9 | 21,214 | 9
Prepayments, accrued income and other assets | 61,444 | 43,146 | 61,379 | 43,118
Current tax assets | 595 | 1,135 | 595 | 1,135
Interests in associates and joint ventures | 728 | 743 | 728 | 743
Goodwill and intangible assets | 91 | 83 | 1,167 | 894
Deferred tax assets | 1,583 | 798 | 1,279 | 599
Total assets | 716,646 | 596,027 | 717,353 | 596,611
Liabilities and equity |  |  |  |
Liabilities |  |  |  |
Deposits by banks | 20,836 | 32,188 | 20,836 | 32,188
Customer accounts | 215,948 | 205,241 | 215,948 | 205,241
Repurchase agreements – non-trading | 32,901 | 27,259 | 32,901 | 27,259
Items in the course of transmission to other banks | 2,226 | 489 | 2,226 | 489
Trading liabilities | 41,265 | 46,433 | 41,265 | 46,433
Financial liabilities designated at fair value | 27,282 | 33,608 | 27,287 | 33,608
Derivatives | 218,867 | 139,368 | 218,867 | 139,368
Debt securities in issue | 7,268 | 9,428 | 7,268 | 9,428
Liabilities of disposal groups held for sale | 24,711 | — | 24,711 | —
Accruals, deferred income and other liabilities | 67,020 | 43,515 | 66,945 | 43,456
Current tax liabilities | 130 | 97 | 130 | 97
Insurance contract liabilities | 20,004 | 22,201 | 19,987 | 22,264
Provisions | 424 | 562 | 424 | 562
Deferred tax liabilities | 3 | 5 | 14 | 15
Subordinated liabilities | 14,528 | 12,488 | 14,528 | 12,488
Total liabilities | 693,413 | 572,882 | 693,337 | 572,896
Equity |  |  |  |
Called up share capital | 797 | 797 | 797 | 797
Share premium account | 420 | — | 420 | —
Other equity instruments | 3,930 | 3,722 | 3,930 | 3,722
Other reserves | (6,413) | (5,662) | (6,368) | (5,670)
Retained earnings | 24,368 | 24,157 | 25,096 | 24,735
Total shareholders‘ equity | 23,102 | 23,014 | 23,875 | 23,584
Non-controlling interests | 131 | 131 | 141 | 131
Total equity | 23,233 | 23,145 | 24,016 | 23,715
Total liabilities and equity | 716,646 | 596,027 | 717,353 | 596,611

37 | Events after the balance sheet date

On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking operations in France to CCF, a subsidiary of Promontoria
MMB SAS (‘My Money Group’). The sale also included HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3%
ownership interest in Crédit Logement. In the fourth quarter of 2023, a loss of £1.5b n was recognised upon reclassification to held for sale, in
accordance with IFRS 5, which net of the £1.7b n partial reversal of impairment recognised in the first quarter of 2023, gave rise to a net reversal
of impairment recognised in the year of £0.2b n.
On 30 January 2024, the PRA concluded its investigation into HSBC Bank plc’s and HSBC UK Bank plc’s compliance with depositor protection
arrangements under the Financial Services Compensation Scheme in the UK. The PRA imposed a fine of £57m on these entities, the majority of
which was borne by HSBC Bank plc, was fully provided for at 31 December 2023, and has since been paid.
On 1 February 2024, HSB C Bank plc invested £1.1b n to acquire HSBC Private Bank (Suisse) SA which is owned by HSBC Private Banking
Holdings (Suisse) SA, a subsidiary of HSBC Overseas Holdings (UK) Limited as on 31 December 2023.
On 6 February 2024, HSBC Europe B.V., a direct subsidiary of HSBC Bank plc, signed an agreement to sell HSBC Bank Armenia CJSC, its
wholly-owned subsidiary, to Ardshinbank CJSC subject to regulatory approvals. The transaction is expected to complete within the next 12
months.
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.

HSBC Bank plc Annual Report and Accounts 2023 | 189

38 | 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 2023 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
Sub sidiaries
The undertakings below are consolidated by th e group.

Subsidiaries | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
AI Nominees (UK) One Limited | 100.00 |  | 1, 2, 53
AI Nominees (UK) Two Limited | 100.00 |  | 1, 2, 53
Assetfinance December (H) Limited | 100.00 |  | 53
Assetfinance December (P) Limited | 100.00 |  | 2, 53
Assetfinance December (R) Limited | 100.00 |  | 53
Assetfinance June (A) Limited | 100.00 |  | 53
Assetfinance Limited (In Liquidation) | 100.00 |  | 8
Assetfinance March (B) Limited | 100.00 |  | 9
Assetfinance March (F) Limited | 100.00 |  | 53
Assetfinance September (F) Limited | 100.00 |  | 53
Banco Nominees (Guernsey) Limited | 100.00 |  | 10
Banco Nominees 2 (Guernsey) Limited | 100.00 |  | 10
Banco Nominees 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, 53
Canada Water Nominees (UK) Limited (In Liquidation) | 100.00 |  | 2, 8
CCF & Partners Asset Management Limited | 100.00 | (99.99) | 53
CCF Holding (Liban) S.A.L. (In Liquidation) | 74.99 |  | 14
Charterhouse Administrators ( D.T.) Limited | 100.00 | (99.99) | 53
Charterhouse Management Services Limited | 100.00 | (99.99) | 53
Charterhouse Pensions Limited | 100.00 |  | 2, 53
COIF Nominees Limited | n/a |  | 0, 2, 53
Corsair IV Financial Services Capital Partners - B L.P | n/a |  | 0, 1, 15
Dempar 1 | 100.00 | (99.99) | 3, 16
Eton Corporate Services Limited | 100.00 |  | 10
Flandres Contentieux S.A. | 100.00 | (99.99) | 3, 16
Foncière Elysées | 100.00 | (99.99) | 3, 16
Griffin International Limited | 100.00 |  | 53
HLF | 100.00 | (99.99) | 3, 16
HSBC (BGF) Investments Limited | 100.00 |  | 2, 53
HSBC Asset Finance (UK) Limited | 100.00 |  | 2, 53
HSBC Asset Finance M.O.G. Holdings (UK) Limited | 100.00 |  | 2, 53
HSBC Assurances Vie (France) | 100.00 | (99.99) | 3, 17
HSBC Bank (General Partner) Limited | 100.00 |  | 2, 18
HSBC Bank (RR) (Limited Liability Company) | n/a |  | 0, 6, 19
HSBC Bank Armenia CJSC | 100.00 |  | 20
HSBC Bank Bermuda Limited | 100.00 |  | 2, 11
HSBC Bank Capital Funding (Sterling 1) LP | n/a |  | 0, 18
HSBC Bank Capital Funding (Sterling 2) LP | n/a |  | 0, 18
HSBC Bank Malta p.l.c. | 70.03 |  | 21
HSBC Cayman Limited | 100.00 |  | 26

Subsidiaries | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
HSBC Cayman Services Limited | 100.00 |  | 22
HSBC City Funding Holdings (In Liquidation) | 100.00 |  | 8
HSBC Client Holdings Nominee (UK) Limited | 100.00 |  | 2, 53
HSBC Client Nominee (Jersey) Limited | 100.00 |  | 2, 23
HSBC Continental Europe | 99.99 |  | 3, 16
HSBC Corporate Trustee Company (UK) Limited | 100.00 |  | 2, 53
HSBC Custody Services (Guernsey) Limited | 100.00 |  | 10
HSBC Epargne Entreprise (France) | 100.00 | (99.99) | 3, 17
HSBC Equity (UK) Limited | 100.00 |  | 2, 53
HSBC Europe B.V. | 100.00 |  | 53
HSBC Factoring (France) | 100.00 | (99.99) | 3, 16
HSBC Global Asset Management (Bermuda) Limited | 100.00 |  | 7, 11
HSBC Global Asset Management (Deutschland) GmbH | 100.00 | (99.99) | 4, 24
HSBC Global Asset Management (France) | 100.00 | (99.99) | 3, 17
HSBC Global Asset Management (Malta) Limited | 100.00 | (70.03) | 25
HSBC Global Custody Nominee (UK) Limited | 100.00 |  | 2, 53

HSBC Global Custody Proprietary Nominee (UK) Limited | 100.00 |  | 1, 2, 53
HSBC Infrastructure Limited (In Liquidation) | 100.00 |  | 8
HSBC Institutional Trust Services (Bermuda) Limited | 100.00 |  | 11
HSBC Insurance Services Holdings Limited | 100.00 |  | 2, 53
HSBC Investment Bank Holdings Limited | 100.00 |  | 2, 53
HSBC Issuer Services Common Depositary Nominee (UK) Limited | 100.00 |  | 2, 53
HSBC Issuer Services Depositary Nominee (UK) Limited (In Liquidation) | 100.00 |  | 2, 8
HSBC Life (UK) Limited | 100.00 |  | 2, 53
HSBC Life Assurance (Malta) Limited | 100.00 | (70.03) | 25
HSBC LU Nominees Limited | 100.00 |  | 2, 53
HSBC Marking Name Nominee (UK) Limited | 100.00 |  | 2, 53
HSBC Middle East Leasing Partnership | n/a |  | 0, 27
HSBC Operational Services GmbH | 100.00 | (99.99) | 4, 24
HSBC Overseas Nominee (UK) Limited | 100.00 |  | 2, 53
HSBC PB Corporate Services 1 Limited | 100.00 |  | 28
HSBC Pension Trust (Ireland) DAC | 100.00 |  | 2, 29
HSBC PI Holdings (Mauritius) Limited | 100.00 |  | 30
HSBC Preferential LP (UK) | 100.00 |  | 2, 53
HSBC Private Bank (Luxembourg) S.A. | 100.00 | (99.99) | 31
HSBC Private Banking Nominee 3 (Jersey) Limited | 100.00 |  | 28
HSBC Private Equity Investments (UK) Limited | 100.00 |  | 53

Notes on the Financial Statements

190 | HSBC Bank plc Annual Report and Accounts 2023

Subsidiaries | % of share class held by immediate parent company (or by HSBC Bank plc where this varies) | Footnotes
HSBC Private Markets Management SARL | n/a |  | 0, 1, 32
HSBC Property Funds (Holding) Limited | 100.00 |  | 53
HSBC Real Estate Leasing (France) | 100.00 | (99.99) | 3, 16
HSBC REIM (France) | 100.00 | (99.99) | 3, 17
HSBC Securities (South Africa) (Pty) Limited | 100.00 |  | 2, 34
HSBC Securities Services (Bermuda) Limited | 100.00 |  | 11
HSBC Securities Services (Guernsey) Limited | 100.00 |  | 10
HSBC Securities Services (Ireland) DAC | 100.00 |  | 29
HSBC Securities Services (Luxembourg) S.A. | 100.00 |  | 2, 31
HSBC Securities Services Holdings (Ireland) DAC | 100.00 |  | 29
HSBC Service Company Germany GmbH | 100.00 | (99.99) | 1, 4, 24
HSBC Services (France) | 100.00 | (99.99) | 3, 16
HSBC SFH (France) | 100.00 | (99.99) | 3, 17
HSBC SFT (C.I.) Limited | 100.00 |  | 2, 10
HSBC Specialist Investments Limited | 100.00 |  | 7, 53
HSBC Transaction Services GmbH | 100.00 | (99.99) | 4, 24
HSBC Trinkaus & Burkhardt (International) S.A. | 100.00 | (99.99) | 35
HSBC Trinkaus & Burkhardt Gesellschaft fur Bankbeteiligungen mbH | 100.00 | (99.99) | 24
HSBC Trinkaus & Burkhardt GmbH | 100.00 | (99.99) | 1, 4, 36
HSBC Trinkaus Family Office GmbH | 100.00 | (99.99) | 4, 24
HSBC Trinkaus Real Estate GmbH | 100.00 | (99.99) | 4, 24
HSBC Trustee (C.I.) Limited | 100.00 |  | 2, 28
HSBC Trustee (Guernsey) Limited | 100.00 |  | 2, 10
HSIL Investments Limited | 100.00 |  | 53
INKA Internationale Kapitalanlagegesellschaft mbH | 100.00 | (99.99) | 24
James Capel (Nominees) Limited | 100.00 |  | 2, 53
James Capel (Taiwan) Nominees Limited | 100.00 |  | 2, 53
Keyser Ullmann Limited | 100.00 | (99.99) | 53
Midcorp Limited | 100.00 |  | 2, 53
Prudential Client HSBC GIS Nominee (UK) Limited | 100.00 |  | 2, 53
RLUKREF Nominees (UK) One Limited | 100.00 |  | 1, 2, 53
RLUKREF Nominees (UK) Two Limited | 100.00 |  | 1, 2, 53
S.A.P.C. - Ufipro Recouvrement | 99.99 |  | 5, 16
Saf Baiyun | 100.00 | (99.99) | 3, 16
Saf Guangzhou | 100.00 | (99.99) | 3, 16
SCI HSBC Assurances Immo | 100.00 | (99.99) | 5, 17
SFM | 100.00 | (99.99) | 3, 16
SFSS Nominees (Pty) Limited | 100.00 |  | 34
SNC Les Oliviers D'Antibes | 60.00 | (59.99) | 5, 17
SNCB/M6-2008 A | 100.00 | (99.99) | 3, 16
SNCB/M6-2007 A | 100.00 | (99.99) | 3, 16
SNCB/M6-2007 B | 100.00 | (99.99) | 3, 16
Société Française et Suisse | 100.00 | (99.99) | 3, 16
Somers Dublin DAC | 100.00 | (99.99) | 29
Somers Nominees (Far East) Limited | 100.00 |  | 11
Sopingest | 100.00 | (99.99) | 3, 16
South Yorkshire Light Rail Limited | 100.00 |  | 53
Swan National Limited (In Liquidation) | 100.00 |  | 8
The Venture Catalysts Limited (In Liquidation) | 100.00 |  | 2, 8
Trinkaus Europa Immobilien-Fonds Nr.3 Objekt Utrecht Verwaltungs-GmbH | 100.00 | (99.99) | 4, 24
Trinkaus Immobilien-Fonds Geschaeftsfuehrungs-GmbH | 100.00 | (99.99) | 4, 24
Trinkaus Immobilien-Fonds Verwaltungs- GmbH | 100.00 | (99.99) | 4, 24
Trinkaus Private Equity Management GmbH | 100.00 | (99.99) | 4, 24
Trinkaus Private Equity Verwaltungs GmbH | 100.00 | (99.99) | 4, 24
Valeurs Mobilières Elysées | 100.00 | (99.99) | 3, 16
Woodex Limited | 100.00 |  | 11

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 |  | 8
MK HoldCo Limited | 50.32 |  | 1, 37
ProServe Bermuda Limited | 50.00 |  | 38
The London Silver Market Fixing Limited | n/a |  | 0, 1, 2, 39

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 |  | 40
Bud Financial Limited | 4.84 |  | 1, 41
Contour Pte Ltd | 9.87 |  | 1, 42
Divido Financial Services Limited | 7.70 |  | 1, 43
Episode Six Inc. | 5.69 |  | 1, 44
Euro Secured Notes Issuer | 16.67 |  | 45
LiquidityMatch LLC | n/a |  | 0, 1, 46
London Precious Metals Clearing Limited | 30.00 |  | 1, 2, 47
Monese Ltd | 5.39 |  | 1, 48
Quantexa Limited | 9.36 |  | 49
Services Epargne Entreprise | 14.18 |  | 50
Threadneedle Software Holdings Limited | 7.10 |  | 1, 51
Trade Information Network Limited | 12.76 |  | 1, 52
Trinkaus Europa Immobilien-Fonds Nr. 7 Frankfurt Mertonviertel KG | n/a |  | 0, 24
We Trade Innovation Designated Activity Company (In Liquidation) | 9.88 |  | 1, 33

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 IFRS Accounting Standards. HSBC’s consolidation policy is described in Note 1.2(a).
2 | Directly held by HSBC Bank plc
Description of shares
3 | Actions
4 | GmbH Anteil
5 | Parts
6 | Russian Limited Liability Company Shares
7 | Preference Shares
Registered offices
8 | c/o Teneo Financial Advisory Limited, The Colmore Building, 20 Colmore Circus, Queensway, Birmingham, United Kingdom, B4 6AT
9 | 5 Donegal Square South, Northern Ireland, Belfast, United Kingdom, BT1 5JP

HSBC Bank plc Annual Report and Accounts 2023 | 191

Registered offices
10 | Arnold House, St Julians Avenue, St Peter Port, Guernsey, GY1 3NF
11 | 37 Front Street, Harbourview Centre, Ground Floor, Hamilton, Pembroke, Bermuda, HM 11
12 | HSBC Main Building, 1 Queen's Road Central, Hong Kong
13 | Oak House Hirzel Street, St Peter Port, Guernsey, GY1 2NP
14 | Solidere - Rue Saad Zaghloul Immeuble - 170 Marfaa, P.O. Box 17 5476 Mar Michael, Beyrouth, Lebanon, 11042040
15 | c/o Walkers Corporate Services Limited, Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands, KY1-9005
16 | 38 avenue Kléber, Paris, France, 75116
17 | Immeuble Cœur Défense, 110 esplanade du Général de Gaulle, Courbevoie, France, 92400
18 | HSBC House Esplanade, St. Helier, Jersey, JE4 8UB
19 | 2 Paveletskaya Square Building 2, Moscow, Russia, 115054
20 | 90 Area 42 Paronyan Street, Yerevan, Armenia, 0015
21 | 116 Archbishop Street, Valletta, Malta
22 | P.O. Box 1109, Strathvale House, Ground Floor, 90 North Church Street, George Town, Grand Cayman, Cayman Islands, KY1-1102
23 | HSBC House Esplanade, St. Helier, Jersey, JE1 1HS
24 | Hansaallee 3, Düsseldorf, Germany, 40549
25 | 80 Mill Street, Qormi, Malta, QRM 3101
26 | P.O. Box 309, Ugland House, Grand Cayman, Cayman Islands, KY1-1104
27 | Unit 401, Level 4, Gate Precinct Building 2, Dubai International Financial Centre, P. O. Box 506553, Dubai, United Arab Emirates
28 | HSBC House Esplanade, St. Helier, Jersey, JE1 1GT
29 | 1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland, D02 P820
30 | 6th Floor, HSBC Centre 18, Cybercity, Ebene, Mauritius, 72201
31 | 18 Boulevard de Kockelscheuer, Luxembourg, Luxembourg, 1821
32 | 5 rue Heienhaff, Senningerberg, Luxembourg, L-1736
33 | 10 Earlsfort Terrace, Dublin, Ireland, D02 T380
34 | 1 Mutual Place, 107 Rivonia Road, Sandton, Gauteng, South Africa, 2196
35 | 16 Boulevard d'Avranches, Luxembourg, L-1160
36 | 3 Hansaallee, Düsseldorf, Nordrhein-Westfalen, Germany, 40549
37 | 35 Ballards Lane, London, United Kingdom, N3 1XW
38 | c/o MUFG Fund Services (Bermuda) Limited, Cedar House, 4th Floor North, 41 Cedar Avenue, Hamilton, Bermuda, HM12
39 | 27 Old Gloucester Street, London, United Kingdom, WC1N 3AX
40 | 13-15 York Buildings, London, United Kingdom, WC2N 6JU
41 | 167-169 Great Portland Street, 5th Floor, London, United Kingdom, W1W 5PF
42 | 1 Harbourfront Avenue, #14-07 Keppel Bay Tower, Singapore, 098632
43 | Office 7, 35-37 Ludgate Hill, London, United Kingdom, EC4M 7JN
44 | 251 Little Falls Drive, New Castle, Wilmington, United States of America, 19808
45 | 3 avenue de l'Opera, Paris, France, 75001
46 | 100 Town Square Place, Suite 201, Jersey City, New Jersey, United States of America, 07310
47 | 7th Floor, 62 Threadneedle Street, London, United Kingdom, EC2R 8HP
48 | Eagle House, 163 City Road, London, United Kingdom, EC1V 1NR
49 | Hill House, 1 Little New Street, London, United Kingdom, EC4A 3TR
50 | 32 rue du Champ de Tir, Nantes, France, 44300
51 | 2nd Floor, Regis House, 45 King William Street, London, United Kingdom, EC4R 9AN
52 | 3 More London Riverside, London, United Kingdom, SE1 2AQ
53 | 8 Canada Square, London, United Kingdom, E14 5HQ

Notes on the Financial Statements

192 | HSBC Bank plc Annual Report and Accounts 2023

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