Exchange Commission, summary financial statements to
shareholders, proxy statements, offering circulars and
prospectuses, press releases and other written materials, and in
oral statements made by HSBC’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 we operate, such as new recessions and fluctuations in
employment and creditworthy customers beyond those
factored into consensus forecasts (including, without limitation,
as a result of the Covid-19 pandemic); the Covid-19 pandemic,
which may continue to have adverse impacts on our income
due to lower lending and transaction volumes, lower wealth
and insurance manufacturing revenue, and volatile interest
rates in markets where we operate, as well as, more generally,
the potential for material adverse impacts on our financial
condition, results of operations, prospects, liquidity, capital
position and credit ratings; deviations from the market and
economic assumptions that form the basis for our ECL
measurements (including, without limitation, as a result of the
Covid-19 pandemic); potential changes in HSBC’s dividend
policy; changes in foreign exchange rates and interest rates,
including the accounting impact resulting from financial
reporting in respect of hyperinflationary economies; volatility in
equity markets; lack of liquidity in wholesale funding or capital
markets, which may affect our ability to meet our obligations
under financing facilities or to fund new loans, investments and
businesses; geopolitical tensions or diplomatic developments
producing social instability or legal uncertainty, such as
diplomatic tensions, including between China and the US, the
UK, the EU, India and other countries, and developments in
Hong Kong and Taiwan, alongside other potential areas of
tension, which may affect the Group by creating regulatory,
reputational and market risks; the efficacy of government,
customer, and HSBC's actions in managing and mitigating ESG
risks, in particular climate risk, nature-related risks and human
rights risks, each of which can impact HSBC both directly and
indirectly through our 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 us as a
conduit for illegal activities without our knowledge; the
discontinuation of certain key Ibors and the development of
near risk-free benchmark rates, as well as the transition of
legacy Ibor contracts to near risk free benchmark rates, which
exposes HSBC to material execution risks, and increases some
financial and non-financial risks; and price competition in the
market segments we serve;
•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
we operate and the consequences thereof (including, without
limitation, actions taken as a result of the Covid-19 pandemic);
initiatives to change the size, scope of activities and
interconnectedness of financial institutions in connection with
the implementation of stricter regulation of financial institutions
in key markets worldwide; revised capital and liquidity
benchmarks, which could serve to deleverage bank balance
sheets and lower returns available from the current business
model and portfolio mix; changes to tax laws and tax rates
applicable to HSBC, 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 following
the UK’s withdrawal from the EU, which may continue to be
characterised by uncertainty, particularly with respect to the
regulation of financial services, despite the signing of the
Trade and Cooperation Agreement between the UK and the EU;
passage of the Hong Kong national security law and
restrictions on telecommunications, as well as the US Hong
Kong Autonomy Act, which have caused tensions between
China, the US and the UK; general changes in government
policy that may significantly influence investor decisions; the
costs, effects and outcomes of regulatory reviews, actions or
litigation, including any additional compliance requirements;
and the effects of competition in the markets where we operate
including increased competition from non-bank financial
services companies; and
•factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan
losses or delinquency, and managing those risks (through
account management, hedging and other techniques); our
ability to achieve our financial, investment, capital and ESG
targets, commitments and ambitions (including with respect to
the commitments set forth in our thermal coal phase-out policy
and our targets to reduce our on-balance sheet financed
emissions in the oil and gas and power and utilities sectors),
which may result in our failure to achieve any of the expected
benefits of our strategic priorities; model limitations or failure,
including, without limitation, the impact that the consequences
of the Covid-19 pandemic have had on the performance and
usage of financial models, which may require us 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 we base our financial statements
on; changes in our ability to meet the requirements of
regulatory stress tests; a reduction in the credit ratings
assigned to us or any of our subsidiaries, which could increase
the cost or decrease the availability of our funding and affect
our liquidity position and net interest margin; changes to the
reliability and security of our data management, data privacy,
information and technology infrastructure, including threats
from cyber-attacks, which may impact our ability to service
clients and may result in financial loss, business disruption and/
or loss of customer services and data; changes in insurance
customer behaviour and insurance claim rates; our dependence
on loan payments and dividends from subsidiaries to meet our
obligations; changes in accounting standards, including the
implementation of IFRS 17 ‘Insurance Contracts’, which may
have a material impact on the way we prepare our financial
statements and (with respect to IFRS 17) may negatively affect
the profitability of HSBC’s insurance business; changes in our
ability to manage third-party, fraud and reputational risks
inherent in our 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 our ability to recruit and
retain senior management and diverse and skilled personnel;
and changes in our ability to develop sustainable finance and
climate-related products consistent with the evolving
expectations of our regulators, and our capacity to measure the
climate impact from our financing activity (including as a result
of data limitations and changes in methodologies), which may
affect our ability to achieve our climate ambition, our targets to
reduce financed emissions in our oil and gas and power and
utilities portfolio and the commitments set forth in our thermal
coal phase-out policy, and increase the risk of greenwashing.
Effective risk management depends on, among other things,
our ability through stress testing and other techniques to
prepare for events that cannot be captured by the statistical
models it uses; our success in addressing operational, legal and
regulatory, and litigation challenges; and other risks and
uncertainties we identify in ‘Top and emerging risks’ on pages
124 to 131.